UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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[X]
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QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
March 31, 2015
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[ ]
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
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For the transition period from ________ to ________
Commission File Number:
000-52635
ACCELERIZE INC.
(Exact name of registrant as specified in its charter)
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Delaware
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20-3858769
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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20411 SW BIRCH STREET, SUITE 250
NEWPORT BEACH
CALIFORNIA 92660
(Address of principal executive offices)
(949) 515 2141
(Registrant’s Telephone Number, including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is 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.
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Large accelerated filer
☐
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Accelerated filer
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Non-accelerated filer
☐
(Do not check if smaller reporting company)
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Smaller reporting company [X]
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☐
No [X]
The number of shares outstanding of the registrant’s Common Stock, $0.001 par value per share, as of May 8, 2015, was 62,823,458
.
When used in this quarterly report, the terms “Accelerize,” “the Company,” “we,” “our,” and “us” refer to Accelerize Inc., a Delaware corporation.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION
This quarterly report on Form 10-Q contains certain forward-looking statements. Forward-looking statements may include our statements regarding our goals, beliefs, strategies, objectives, plans, including product and service developments, future financial conditions, results or projections or current expectations. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of such terms, or other comparable terminology. For example, when we discuss our expectations that our revenues will increase in 2015, our expansion plans, our new products, our intentions to grow revenues by investing in sales and marketing efforts, our spending on research and development, training, and support personnel, we are using forward-looking statements. These statements are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause actual results to be materially different from those contemplated by the forward-looking statements. These factors include, but are not limited to, our ability to implement our strategic initiatives, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. The business and operations of Accelerize Inc. are subject to substantial risks, which increase the uncertainty inherent in the forward-looking statements contained in this report. Except as required by law, we undertake no obligation to release publicly the result of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Further information on potential factors that could affect our business is described under “Item 1A. Risk Factors” in our annual report on Form 10-K as filed with the Securities and Exchange Commission, or the SEC, on March 19, 2015. Readers are also urged to carefully review and consider the various disclosures we have made in this report and in our annual report on Form 10-K.
ACCELERIZE INC.
INDEX
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Page
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PART I - FINANCIAL INFORMATION:
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1
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Item 1.
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Financial Statements (Unaudited)
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1
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Item 2.
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Management’s Discussion and Analysis of Financial Position And Results of Operations
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15
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Item 4.
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Controls and Procedures
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22
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PART II - OTHER INFORMATION:
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22
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Item 1.
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Legal Proceedings
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22
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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22
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Item 6.
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Exhibits
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23
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SIGNATURES
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24
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ACCELERIZE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
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March 31,
2015
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December 31,
2014
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(Unaudited)
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ASSETS
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Current Assets:
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Cash
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$
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1,488,837
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$
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1,130,667
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Accounts receivable, net of allowance for bad debt of $15,808 and $212,113, respectively
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1,946,622
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1,749,566
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Prepaid expenses and other assets
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218,641
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204,268
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Total current assets
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3,654,100
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3,084,501
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Property and equipment, net of accumulated depreciation of $1,063,158 and $826,802, respectively
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1,446,321
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1,424,858
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Customer relationships, net of accumulated amortization of $870,369 and $703,704, respectively
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129,631
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296,296
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Deferred financing costs, net of accumulated amortization of $26,867 and $19,317, respectively
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68,990
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37,750
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Other assets
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126,814
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132,988
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Total assets
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$
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5,425,856
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$
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4,976,393
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
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Current Liabilities:
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Accounts payable and accrued expenses
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$
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1,700,489
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$
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1,202,495
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Deferred revenues
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75,167
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206,475
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Total current liabilities
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$
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1,775,656
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$
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1,408,970
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Line of credit
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3,900,000
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2,900,000
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Total liabilities
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5,675,656
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4,308,970
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Stockholders' Equity (Deficit)
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Common stock; $.001 par value; 100,000,000 shares authorized; 62,833,244 and 62
,816
,554 shares issued and outstanding, respectively
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62,832
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62,815
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Additional paid-in capital
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20,301,678
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19,618,153
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Accumulated deficit
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(20,596,796
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)
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(19,002,574
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)
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Accumulated other comprehensive income
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(17,514
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)
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(10,971
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)
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Total stockholders’ equity (deficit)
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(249,800
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)
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667,423
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Total liabilities and stockholders’ equity (deficit)
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$
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5,425,856
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$
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4,976,393
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See Notes to Unaudited Condensed Consolidated Financial Statements.
ACCELERIZE INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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Three-month periods ended
March 31,
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2015
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2014
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Revenues:
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$
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5,199,662
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$
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3,427,197
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Cost of revenue
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1,317,766
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789,099
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Gross profit
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3,881,896
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2,638,098
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Operating expenses:
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Research and development
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875,382
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576,786
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Sales and marketing
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2,133,924
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1,622,449
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General and administrative
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2,454,446
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803,168
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Total operating expenses
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5,463,752
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3,002,403
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Operating loss
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(1,581,856
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)
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(364,305
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)
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Other income (expense):
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Interest income
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32,978
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-
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Interest expense
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(45,344
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)
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(3,309
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)
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Total other (expenses)
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(12,366
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)
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(3,309
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)
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Net loss
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$
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(1,594,222
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)
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$
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(367,614
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)
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Net loss per share:
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Basic
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$
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(0.03
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)
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$
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(0.01
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)
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Diluted
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$
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(0.03
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)
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$
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(0.01
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)
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Basic weighted average common shares outstanding
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62,831,019
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58,770,491
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Diluted weighted average common shares outstanding
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62,831,019
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58,770,491
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See Notes to Unaudited Condensed Consolidated Financial Statements.
ACCELERIZE INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
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Three-month periods ended
March 31,
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2015
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2014
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Net (loss) income
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$
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(1,594,222
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)
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$
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(367,614
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)
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Foreign currency translation gain (loss)
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(6,543
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)
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1,330
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Total other comprehensive income (loss)
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(6,543
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)
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1,330
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Comprehensive (loss) income
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$
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(1,600,765
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)
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$
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(366,284
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)
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See Notes to Unaudited Condensed Consolidated Financial Statements.
ACCELERIZE INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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Three-month periods ended
March 31,
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2015
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2014
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Cash flows from operating activities:
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Net loss
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$
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(1,594,222
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)
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$
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(367,614
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)
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Adjustments to reconcile net loss to net cash used in operating activities:
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Depreciation and amortization
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403,021
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257,036
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Amortization of debt discount
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7,550
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3,003
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Provision for bad debt
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(196,305
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)
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(35,951
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)
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Fair value of options
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636,667
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143,777
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Changes in operating assets and liabilities:
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Accounts receivable
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(751
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)
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(336,782
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)
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Prepaid expenses
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(14,373
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)
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8,143
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Accounts payable and accrued expenses
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461,045
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(206,803
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)
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Deferred revenues
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(131,308
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)
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(25,311
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)
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Other assets
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6,174
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(37,148
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)
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Net cash used in operating activities
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(422,502
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)
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(597,650
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)
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Cash flows from investing activities:
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Capitalized software for internal use
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(177,424
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)
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(153,996
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)
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Capital expenditures
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(44,947
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)
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(37,875
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)
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Net cash used in investing activities
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(222,371
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)
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(191,871
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)
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|
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|
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Cash flows from financing activities:
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Proceeds from line of credit
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1,000,000
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|
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500,000
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Payment of financing costs
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|
-
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|
|
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(40,000
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)
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Net proceeds from exercise of options and warrants
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|
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9,586
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|
|
|
301,876
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Net cash provided by financing activities
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|
|
1,009,586
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|
|
|
761,876
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|
|
|
|
|
|
|
|
|
|
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Effect of exchange rate changes on cash
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|
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(6,543
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)
|
|
|
1,200
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|
|
|
|
|
|
|
|
|
|
|
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Net increase (decrease) in cash
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|
|
358,170
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|
|
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(26,445
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)
|
|
|
|
|
|
|
|
|
|
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Cash, beginning of period
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|
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1,130,667
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|
|
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1,157,315
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|
|
|
|
|
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|
|
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Cash, end of period
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$
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1,488,837
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|
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$
|
1,130,870
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|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
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|
|
|
|
|
|
|
|
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Cash paid for interest
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|
$
|
-
|
|
|
$
|
-
|
|
|
Cash paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
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|
|
|
|
|
|
|
|
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Fair value of warrants issued in connection with line of credit
|
|
$
|
37,289
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|
|
$
|
32,067
|
|
|
Capital expenditure included in accounts payable
|
|
$
|
35,448
|
|
|
$
|
-
|
|
See Notes to Unaudited Condensed Consolidated Financial Statements.
ACCELERIZE INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: ORGANIZATION AND DESCRIPTION OF BUSINESS
Accelerize Inc., a Delaware corporation, incorporated on November 22, 2005, owns and operates CAKE, a Software-as-a-Service, or SaaS, platform providing online tracking and analytics solutions for advertisers and online marketers.
The Company provides software solutions for businesses interested in expanding their online advertising spend.
The condensed consolidated balance sheet presented as of December 31, 2014 has been derived from our audited consolidated financial statements. The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been omitted pursuant to those rules and regulations, but we believe that the disclosures are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements and notes included herein should be read in conjunction with the annual financial statements and notes for the year ended December 31, 2014 included in our Annual Report on Form 10-K filed with the SEC on March 19, 2015. In the opinion of management, all adjustments, consisting of normal, recurring adjustments and disclosures necessary for a fair presentation of these interim statements have been included. The results of operations for the three-month period ended March 31, 2015 are not necessarily indicative of the results for the year ending December 31, 2015.
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the results of operations of Cake Marketing UK Ltd., or the Subsidiary. All material intercompany accounts and transactions between the Company and its Subsidiary have been eliminated in consolidation.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of unaudited condensed consolidated 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 reporting amounts of revenues and expenses during the reported period. Actual results will differ from those estimates. Included in these estimates are assumptions about collection of accounts receivable, useful life of fixed assets and intangible assets, and assumptions used in Black-Scholes-Merton, or BSM, valuation methods, such as expected volatility, risk-free interest rate, and expected dividend rate.
Cash and Cash Equivalents
The Company considers all highly liquid temporary cash investments with an original maturity of three months or less when purchased, to be cash equivalents.
Accounts Receivable
The Company’s accounts receivable are due primarily from advertisers and marketers. Collateral is currently not required. The Company also maintains allowances for doubtful accounts for estimated losses resulting from the inability of the Company’s customers to make payments. The Company periodically reviews these estimated allowances, including an analysis of the customers’ payment history and creditworthiness, the age of the trade receivable balances and current economic conditions that may affect a customer’s ability to make payments as well as historical collection trends for its customers as a whole. Based on this review, the Company specifically reserves for those accounts deemed uncollectible or likely to become uncollectible. When receivables are determined to be uncollectible, principal amounts of such receivables outstanding are deducted from the allowance.
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|
|
March 31,
2015
|
|
|
December 31,
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
15,808
|
|
|
$
|
212,113
|
|
Concentration of Credit Risks
The Company is subject to concentrations of credit risk primarily from cash and cash equivalents and accounts receivable.
The Company’s cash and cash equivalents accounts are held at a financial institution and are insured by the Federal Deposit Insurance Corporation, or the FDIC, up to $250,000. During the three-month period ended March 31, 2015, the Company has reached bank balances exceeding the FDIC insurance limit. To reduce its risk associated with the failure of such financial institutions, the Company periodically evaluates the credit quality of the financial institution in which it holds deposits.
The Company's accounts receivable are due from customers, generally located in the United States, Europe, Asia, and Canada. None of the Company’s customers accounted for more than 10% of its accounts receivable at March 31, 2015 or December 31, 2014. The Company does not require any collateral from its customers.
Revenue Recognition
The Company recognizes revenue on arrangements in accordance with ASC Topic 605, Revenue Recognition. Revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed, and collectability of the resulting receivable is reasonably assured.
The Company’s SaaS revenues are generated from implementation and training fees and a monthly license fee, supplemented by per transaction fees paid by customers for monthly platform usage. The initial term of the customer contract is generally one year with one of two general cancellation policies. Each party may cancel the contract within the initial period or after the initial period, with 30-days’ prior notice. The Company does not provide any general right of return for its delivered items. Services associated with the implementation and training fees have standalone value to the Company’s customers, as there are third-party vendors who offer similar services to the Company’s services. Accordingly, they qualify as separate units of accounting. The Company allocates a fair value to each element deliverable at the recognition date and recognizes such value when the services are provided. The Company bases the fair value of the implementation and training fees on third-party evidence and the monthly license fee on vendor-specific objective evidence. Fees charged by third-party vendors for implementation and training services do not vary significantly from the fees charged by the Company. Services associated with implementation and training fees are generally rendered within a month from the initial contract date. The value attributed to the monthly license fees as well as the fees associated with monthly transaction-based platform usage are recognized in the corresponding period.
Product Concentration
The Company generates its revenues from software licensing, usage, and related transaction fees.
Fair Value of Financial Instruments
The Company accounts for assets and liabilities measured at fair value on a recurring basis in accordance with ASC Topic 820, Fair Value Measurements and Disclosures, or ASC 820. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements.
ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:
|
Level 1:
|
Observable inputs such as quoted market prices in active markets for identical assets or liabilities.
|
|
|
|
|
Level 2:
|
Observable market-based inputs or unobservable inputs that are corroborated by market data.
|
|
|
|
|
Level 3:
|
Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.
|
Additional Disclosures Regarding Fair Value Measurements
The carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and lines of credit approximate their fair value due to the short term maturity of these items.
Advertising
The Company expenses advertising costs as incurred.
|
|
|
Three-month periods ended,
|
|
|
|
|
March 31,
2015
|
|
|
March 31,
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising expense
|
|
$
|
151,497
|
|
|
$
|
32,211
|
|
Income Taxes
Income taxes are accounted for in accordance with the provisions of ASC Topic 740, Accounting for Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized, but no less than quarterly.
Foreign Currency Translation
The Company’s reporting currency is U.S. Dollars. The functional currency of the Company’s Subsidiary in the United Kingdom is British Pounds. The translation from British Pounds to U.S. dollars is performed for balance sheet accounts using exchange rates in effect at the balance sheet date and for revenue and expense accounts using the average exchange rate in effect during the period. The resulting translation adjustments are recorded as a component of Accumulated Other Comprehensive Income (Loss). Foreign currency translation gains and losses arising from exchange rate fluctuation on transactions denominated in a currency other than the functional currency are included in the unaudited condensed consolidated statements of operations.
Software Development Costs
Costs incurred in the research and development of software products and significant upgrades and enhancements thereto during the preliminary project stage and the post-implementation operation stage are expensed as incurred. Costs incurred for maintenance and relatively minor upgrades and enhancements are expensed as incurred. Costs associated with the application development stage of new software products and significant upgrades and enhancements thereto are capitalized when 1) management implicitly or explicitly authorizes and commits to funding a software project and 2) it is probable that the project will be completed and the software will be used to perform the function intended. The Company capitalized internal-use software development costs of $177,424 during the three-months ended March 31, 2015. The Company amortizes such costs once the new software products and significant upgrades and enhancements are completed. The unamortized internal-use software development costs amounted to $855,294 and $604,230 at March 31, 2015 and December 31, 2014, respectively. The Company’s amortization expenses associated with capitalized software development costs amounted to approximately $163,854 during the three-month period ended March 31, 2015. Amortization of internal-use software is reflected in cost of revenues.
Share-Based Payment
The Company accounts for stock-based compensation in accordance with ASC Topic 718, Compensation-Stock Compensation, or ASC 718. Under the fair value recognition provisions of this topic, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense on a straight-line basis over the requisite service period, which is the vesting period.
The Company has elected to use the BSM option-pricing model to estimate the fair value of its options, which incorporates various subjective assumptions including volatility, risk-free interest rate, expected life, and dividend yield to calculate the fair value of stock option awards. Compensation expense recognized in the statements of operations is based on awards ultimately expected to vest and reflects estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
Segment Reporting
The Company generated revenues from one source, its SaaS business, during the three-month periods ended March 31, 2015 and 2014. The Company's chief operating decision maker evaluates the performance of the Company based upon revenues and expenses by functional areas as disclosed in the Company's statements of operations.
Recent Accounting Pronouncements
Recent accounting pronouncements have been issued but deemed by management to be outside the scope of relevance to the Company.
Basic and Diluted Earnings Per Share
Basic earnings per share are calculated by dividing income available to stockholders by the weighted-average number of common shares outstanding during each period. Diluted earnings per share are computed using the weighted average number of common and dilutive common share equivalents outstanding during the period. Dilutive common share equivalents consist of shares issuable upon the exercise of stock options and warrants (calculated using the modified-treasury stock method).
|
|
|
Three-months ended
March 31,
|
|
|
|
|
2015
|
|
|
2014
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,594,222
|
)
|
|
$
|
(367,614
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per share-weighted average shares
|
|
|
62,831,019
|
|
|
|
58,770,491
|
|
|
Effect of dilutive securities-when applicable:
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
-
|
|
|
|
-
|
|
|
Warrants
|
|
|
-
|
|
|
|
-
|
|
|
Denominator for diluted earnings per share-adjusted weighted-average shares and assumed conversions
|
|
|
62,831,019
|
|
|
|
58,770,491
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.03
|
)
|
|
$
|
(0.01
|
)
|
|
Diluted
|
|
$
|
(0.03
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average anti-dilutive common share equivalents
|
|
|
19,752,825
|
|
|
|
24,496,668
|
|
Property and Equipment
Property and equipment are recorded at cost and are depreciated on a straight-line basis over their estimated useful lives of three years. Maintenance and repairs are charged to expense as incurred. Significant renewals and betterments are capitalized.
Property and equipment consist of the following at:
|
|
|
March 31,
2015
|
|
|
December 31,
2014
|
|
|
Internal use software costs
|
|
$
|
1,466,791
|
|
|
$
|
1,289,367
|
|
|
Computer equipment and software
|
|
|
534,951
|
|
|
|
476,963
|
|
|
Office furniture and equipment
|
|
|
204,965
|
|
|
|
187,263
|
|
|
Leasehold improvements
|
|
|
302,772
|
|
|
|
298,067
|
|
|
|
|
|
2,509,479
|
|
|
|
2,251,660
|
|
|
Accumulated depreciation
|
|
|
(1,063,158
|
)
|
|
|
(826,802
|
)
|
|
|
|
$
|
1,446,321
|
|
|
$
|
1,424,858
|
|
|
|
|
Three-month periods ended
|
|
|
|
|
March 31,
2015
|
|
|
March 31,
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense
|
|
$
|
72,502
|
|
|
$
|
32,347
|
|
|
Amortization expense on internal software
|
|
$
|
163,854
|
|
|
$
|
58,023
|
|
NOTE 3: PREPAID EXPENSES
At March 31, 2015 and December 31, 2014, the Company’s prepaid expenses consisted primarily of prepaid insurance and rent.
NOTE 4: CUSTOMER RELATIONSHIPS
During November 2013, the Company completed its acquisition of certain customer relationships of a former competitor. Pursuant to the acquisition, the Company paid $1 million payable in four installments of $250,000 every quarter, beginning March 2014. The Company paid the final installment of $250,000 in December 2014 and has no outstanding balance under this arrangement. The Company has capitalized the acquisition cost, which approximates fair value of the customer relationships, which amounts to $1,000,000 at March 31, 2015. The Company amortizes such customer relationships over a period of 18 months. The Company incurred amortization expense related to the customer relationships of $166,665 during the three-month period ended March 31, 2015. The amortization amount for the Customer relationships over the remaining useful life is as follows:
|
Remainder of 2015
|
|
$
|
129,631
|
|
|
Total Remaining Unamortized Customer Relationship Expense
|
|
$
|
129,631
|
|
NOTE 5: DEFERRED REVENUES
The Company’s deferred revenues consist of prepayments made by certain of the Company’s customers and undelivered implementation and training fees. The Company decreases the deferred revenues by the amount of the services it renders to such clients when provided.
|
|
|
March 31,
2015
|
|
|
December 31,
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenues
|
|
$
|
75,167
|
|
|
$
|
206,475
|
|
NOTE 6: LINE OF CREDIT
On September 30, 2014, the Company entered into an amendment of its line of credit, or the Line of Credit, with Square 1 Bank, or the Lender, to borrow up to a maximum of $6,000,000 at the Company’s discretion, an increase from up to $3,000,000 that the Company was permitted to borrow under the original Line of Credit entered into on March 17, 2014. Amounts borrowed will accrue interest at the prime rate in effect from time to time plus 1.25%, not to be less than 5.5% per annum, provided that in no event shall the accrued interest payable with respect to any month be less than $10,000. Accrued interest on amounts borrowed is payable monthly and all other amounts borrowed will be payable in full on the maturity date of March 17, 2016, which maturity date may be extended to March 17, 2017 if the Company provides the Lender with a fully-funded business plan acceptable to the Lender by January 15, 2016 and no event of default has occurred. The Line of Credit may be earlier terminated without a prepayment fee.
The Line of Credit, as amended, contains covenants including, but not limited to, covenants to achieve specified Adjusted EBITDA levels, as defined, and customer renewal levels, limiting capital expenditures, requiring minimum liquidity and restricting the Company’s ability to pay dividends, purchase and sell assets outside the ordinary course and incur additional indebtedness. As of March 31, 2015, the Company was in compliance with these covenants. The occurrence of a material adverse change, as defined, will be an event of default under the Line of Credit, in addition to other customary events of default. The Company granted the Lender a security interest in all of the Company’s personal property and intellectual property.
The Company borrowed $1,000,000 from the Line of Credit during the three-month period ended March 31, 2015. The Company owed $3,900,000 under the Line of Credit at March 31, 2015. The interest rate for the amount borrowed was 5.5% per annum.
In connection with the original Line of Credit, the Company issued to the Lender a warrant to purchase up to 46,875 shares of the Company's Common Stock at an exercise price of $1.60 per share. The warrant expires on March 17, 2017. The fair value of the warrant amounted to $32,067. On March 27, 2015, in connection with an obligation under the Line of Credit when borrowings thereunder exceed $3,000,000, the Company issued to the Lender a warrant to purchase 58,824 shares of the Company’s Common Stock at an exercise price of $1.53 per share. This warrant expires on March 27, 2018. The fair value of the warrant amounted to $37,289.
Additionally, the Company paid $1,200 to the Lender in financing costs. The fair value of the warrants as well as the financing costs not expensed, which amounted to $1,500, were capitalized as deferred financing costs at March 31, 2015. The Company recognized an amortization expense of $7,550 in connection with such deferred financing costs at March 31, 2015.
|
|
|
Three-month periods ended
|
|
|
|
|
March 31,
2015
|
|
|
March 31,
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense associated with line of credit
|
|
$
|
7,550
|
|
|
$
|
3,309
|
|
|
Interest expense associated with line of credit
|
|
$
|
37,455
|
|
|
$
|
-
|
|
NOTE 7: STOCKHOLDERS’ EQUITY
Common Stock
During the three-month periods ended March 31, 2015 and 2014, the Company generated proceeds of $9,586 and $301,876 from the exercise of 11,457 options and 862,500 warrants, respectively.
During the three-month periods ended March 31, 2015 and 2014, the Company issued 5,233 and 519,252 shares of its Common Stock pursuant to the cashless exercise of 11,458 and 600,000 options and warrants, respectively.
Warrants
During the three-month period ended March 31, 2015, the Company issued 58,824 warrants to the Lender. The warrants are exercisable at the price of $1.53 per share and expire on March 27, 2018. The fair value of these warrants which amounted to $37,289, has been recognized as deferred financing fees and is amortized using the effective interest method over the terms of the associated Line of Credit.
The fair value of the warrants granted during the three-month period ended March 31, 2015 is based on the BSM model using the following assumptions:
|
Effective Exercise price
|
|
$
|
1.60
|
|
|
Effective Market price
|
|
$
|
1.60
|
|
|
Volatility
|
|
|
64
|
%
|
|
Risk-free interest
|
|
|
0.9
|
%
|
|
Term (years)
|
|
|
3
|
|
|
Expected dividend rate
|
|
|
0
|
%
|
During the three months ended March 31, 2015 and 2014, the Company recorded expenses of $284,093 and $0, respectively, related to warrants granted to employees in prior years.
Stock Option Plan
On December 15, 2006, the Company's Board of Directors and stockholders approved the Company’s Stock Option Plan, or the Plan. The total number of shares of capital stock of the Company that may be subject to options under the Plan is 22,500,000 shares of Common Stock, following an increase from 10,000,000 shares to 15,000,000 shares of Common Stock in May 2011, and from 15,000,000 shares to 22,500,000 shares of Common Stock on March 27, 2012, from either authorized but unissued shares or treasury shares. The individuals who are eligible to receive option grants under the Plan are employees, directors and other individuals who render services to the management, operation or development of the Company or its subsidiaries and who have contributed or may be expected to contribute to the success of the Company or a subsidiary. Every option granted under the Plan shall be evidenced by a written stock option agreement in such form as the Board shall approve from time to time, specifying the number of shares of Common Stock that may be purchased pursuant to the option, the time or times at which the option shall become exercisable in whole or in part, whether the option is intended to be an incentive stock option or a non-incentive stock option, and such other terms and conditions as the Board shall approve.
The share-based payment is based on the fair value of the outstanding options amortized over the requisite period of service for option holders, which is generally the vesting period of the options. The fair value of the options granted during the three-month periods ended March 31, 2015 and 2014 is based on the BSM model using the following assumptions:
|
|
|
March 31, 2015
|
|
|
March 31, 2014
|
|
|
Effective Exercise price
|
|
$
|
|
1.40
|
|
|
|
$
|
1.43
|
-
|
1.60
|
|
|
Effective Market price
|
|
$
|
|
1.40
|
|
|
|
$
|
1.43
|
-
|
1.60
|
|
|
Volatility
|
|
|
|
62%
|
|
|
|
|
|
64%
|
|
|
|
Risk-free interest
|
|
|
|
0.9%
|
|
|
|
|
|
0.9%
|
|
|
|
Terms (years)
|
|
|
3
|
-
|
4
|
|
|
|
|
4
|
|
|
|
Expected dividend rate
|
|
|
|
0%
|
|
|
|
|
|
0%
|
|
|
The Company generally recognizes its share-based payment over the vesting terms of the underlying options.
|
|
|
Three-month periods ended
|
|
|
|
|
March 31,
2015
|
|
|
March 31,
2014
|
|
|
Weighted-average grant date fair value
|
|
$
|
0.66
|
|
|
$
|
0.73
|
|
|
Fair value of options, recognized as selling, general, and administrative expenses
|
|
$
|
352,574
|
|
|
$
|
143,777
|
|
|
Number of options granted
|
|
|
22,500
|
|
|
|
907,500
|
|
The total compensation cost related to non-vested awards not yet recognized amounted to approximately $1,664,000 at March 31, 2015 and the Company expects that it will be recognized over the following weighted-average period of 48 months.
If any options granted under the Plan expire or terminate without having been exercised or cease to be exercisable, such options will be available again under the Plan. All employees of the Company and its subsidiaries are eligible to receive incentive stock options and non-qualified stock options. Non-employee directors and outside consultants who provided bona-fide services not in connection with the offer or sale of securities in a capital raising transaction are eligible to receive non-qualified stock options. Incentive stock options may not be granted below their fair market value at the time of grant or, if to an individual who beneficially owns more than 10% of the total combined voting power of all stock classes of the Company or a subsidiary, the option price may not be less than 110% of the fair value of the Common Stock at the time of grant. The expiration date of an incentive stock option may not be longer than ten years from the date of grant. Option holders, or their representatives, may exercise their vested options up to three months after their employment termination or one year after their death or permanent and total disability. The Plan provides for adjustments upon changes in capitalization.
The Company’s policy is to issue shares pursuant to the exercise of stock options from its available authorized but unissued shares of Common Stock. It does not issue shares pursuant to the exercise of stock options from its treasury shares.
NOTE 8: COMPREHENSIVE (LOSS) INCOME
Comprehensive (loss) income includes changes in equity related to foreign currency translation adjustments. The following table sets forth the reconciliation from net (loss) income to comprehensive (loss) income for the three-month periods ended March 31, 2015 and 2014:
|
|
|
Three months ended
March 31,
|
|
|
|
|
2015
|
|
|
2014
|
|
|
Net loss
|
|
$
|
(1,594,222
|
)
|
|
$
|
(367,614
|
)
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
(6,543
|
)
|
|
|
1,330
|
|
|
Comprehensive loss
|
|
$
|
(1,600,765
|
)
|
|
$
|
(366,284
|
)
|
The following table sets forth the balance in accumulated other comprehensive loss as of March 31, 2015 and December 31, 2014, respectively:
|
|
|
March 31,
2015
|
|
|
December 31,
2014
|
|
|
Accumulated other comprehensive income loss
|
|
$
|
(17,514
|
)
|
|
$
|
(10,971
|
)
|
NOTE 9: SEGMENTS
The Company operates in one business segment. Percentages of sales by geographic region for the three-month periods ended March 31, 2015 and 2014 were approximately as follows:
|
|
|
Three-month periods ended
March 31,
|
|
|
|
|
2015
|
|
|
2014
|
|
|
United States
|
|
|
74
|
%
|
|
|
81
|
%
|
|
Europe
|
|
|
18
|
%
|
|
|
15
|
%
|
|
Other
|
|
|
8
|
%
|
|
|
4
|
%
|
NOTE 10: COMMITMENTS AND SUBSEQUENT EVENTS
During January 2014, the Company entered into a 4-year lease for certain office space in Newport Beach, effective February 1, 2014. Under the terms of the lease, the Company initially pays monthly base rent of approximately $22,000 increasing incrementally to approximately $25,000.
During May 2014, the Company entered into a one year sublease in Newport Beach, effective May 1, 2014. The Company initially pays monthly base rent of approximately $10,000 per month, increasing to approximately $11,000 per month by the end of the lease term.
During July 2014, the Company entered into a five year lease for certain office space in a business center in London, England, which commenced on July 30, 2014. The base rent is GBP 89,667 per year and the estimated service charges for the lease are GBP 45,658 per year. The Company will pay an estimated GBP 60,000 for furniture, cabling and build out of the office space.
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and related notes included elsewhere in this report and our Annual Report on Form 10-K for the year ended December 31, 2014. Certain statements in this discussion and elsewhere in this report constitute forward-looking statements. See “Cautionary Statement Regarding Forward Looking Information’’ elsewhere in this report. Because this discussion involves risk and uncertainties, our actual results may differ materially from those anticipated in these forward-looking statements
.
Overview
We own and operate CAKE, and getcake.com, a marketing technology that provides a comprehensive suite of innovative marketing intelligence tools. Our powerful software-as-a service, or SaaS, is an enterprise solution that has been an industry standard for affiliate networks, advertisers, publishers and agencies to measurably improve and optimize digital spend. We currently have over 500 customers driving billions of consumer actions monthly through the CAKE enterprise platform.
Our revenue model is based on a monthly license fee, a usage fee (based on volume of clicks, impressions, or leads), a training and implementation fee, and in certain cases, professional services fees and royalties. Clients purchase annual or monthly subscriptions with an additional usage fee. A majority of our revenue is derived from clients in the United States but we have seen a 37% growth in our client base outside of the United States during the three-month period ended March 31, 2015 when compared to the same period in 2014.
Our training, support personnel, hosting and cloud-based infrastructure contribute to our cost of operating the business. We anticipate more spending in these areas while we continue to grow and could foresee some savings in infrastructure cost due to economies of scale. However, we want to continue to invest in these areas to support our growth. To go-to-market with our recently released new product, CAKE for Advertisers, enterprise sales representatives were added and marketing programs were created to properly launch and market the product to global advertisers. In addition, development resources were required to design and develop CAKE for Advertisers.
We experienced 52% year over year growth in revenue during the three-month period ended March 31, 2015 when compared to the same period in 2014. The organic growth has been a result of providing the marketing technology industry a comprehensive suite of marketing intelligence tools through innovation and what we believe to be a superior product and customer experience.
We intend to grow revenues by investing in sales, marketing, and product development and innovation. We are currently hiring and will continue to hire sales executives globally to target specific verticals and accounts with both agencies and advertisers. We will allocate a significant portion of our marketing budget to being present at tradeshows, industry publications, and providing the support documentation required by sales initiatives. Additional efforts will be made to speak at industry events and write for online publications, increasing awareness of the CAKE suite of products and the thought leadership driving product development.
Our principal offices are located at 20411 SW Birch Street, Suite 250, Newport Beach, CA 92660. Our telephone number there is: (949) 515-2141. Our corporate website is: www.accelerize.com, the contents of which are not part of this quarterly report.
Our Common Stock is quoted on the OTCQB Marketplace under the symbol "ACLZ."
Results of Operations
ACCELERIZE INC.
UNAUDITED CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
|
|
|
|
|
|
Increase/
|
|
|
Increase/
|
|
|
|
|
Three-month periods ended
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
|
|
March 31,
|
|
|
in $ 2015
|
|
|
in % 2015
|
|
|
|
|
2015
|
|
|
2014
|
|
|
vs 2014
|
|
|
vs 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
5,199,662
|
|
|
$
|
3,427,197
|
|
|
$
|
1,772,465
|
|
|
|
51.7
|
%
|
|
Cost of revenues
|
|
|
1,317,766
|
|
|
|
789,099
|
|
|
|
528,667
|
|
|
|
67.0
|
%
|
|
Gross Profit
|
|
|
3,881,896
|
|
|
|
2,638,098
|
|
|
|
1,243,798
|
|
|
|
47.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
875,382
|
|
|
|
576,786
|
|
|
|
298,596
|
|
|
|
51.8
|
%
|
|
Sales and marketing
|
|
|
2,133,924
|
|
|
|
1,622,449
|
|
|
|
511,475
|
|
|
|
31.5
|
%
|
|
General and administrative
|
|
|
2,454,446
|
|
|
|
803,168
|
|
|
|
1,651,278
|
|
|
|
205.6
|
%
|
|
Total operating expenses
|
|
|
5,463,752
|
|
|
|
3,002,403
|
|
|
|
2,461,349
|
|
|
|
82.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(1,581,856
|
)
|
|
|
(364,305
|
)
|
|
|
(1,217,551
|
)
|
|
|
334.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
32,978
|
|
|
|
-
|
|
|
|
32,978
|
|
|
|
100
|
%
|
|
Interest expense
|
|
|
(45,344
|
)
|
|
|
(3,309
|
)
|
|
|
(42,035
|
)
|
|
|
1270.3
|
%
|
|
Total other expenses
|
|
|
(12,366
|
)
|
|
|
(3,309
|
)
|
|
|
(9,057
|
)
|
|
|
273.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,594,222
|
)
|
|
$
|
(367,614
|
)
|
|
$
|
(1,226,608
|
)
|
|
|
333.7
|
%
|
Discussion of Results for Three-Month Periods Ended March 31, 2015 and 2014
Revenues
|
|
|
Three Months Ended
March 31,
|
|
|
%
Change
|
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
5,199,662
|
|
|
$
|
3,427,197
|
|
|
|
51.7
|
%
|
We generate revenues from a training and implementation (also known as on-boarding) fee and a monthly licensing fee, supplemented by per-transaction fees paid by customers for monthly platform usage. In certain cases we also generate professional service fees and royalties.
The increase in our software licensing revenues during the three-month period ended March 31, 2015, when compared to the prior year period, is due to the increased number of customers using our SaaS products and services, as well as increased monthly revenues from our existing customers resulting from higher usage of our SaaS platform. Our number of average clients increased 19% during the three-month period ended March 31, 2015, when compared to the prior year period, and our average monthly fee per customer increased 14% during the three-month period ended March 31, 2015, when compared to the prior year period. The increase in the number of customers using our SaaS products and services during the three-month period ended March 31, 2015 is primarily due to the increased resources we have devoted to customer acquisition for our SaaS products. The higher usage by our existing customers of the same products is primarily due to higher market acceptance among our larger users who generate a higher volume of transactions.
We believe that our SaaS revenues will continue to increase during the remainder of 2015 when compared to 2014.
Cost of Revenues
|
|
|
Three Months Ended
|
|
|
%
|
|
|
|
|
March 31,
|
|
|
Change
|
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Revenues
|
|
$
|
1,317,766
|
|
|
$
|
789,099
|
|
|
|
67.0
|
%
|
Cost of revenues consists primarily of web hosting and personnel costs associated with supporting customer on-boarding and training activities, consisting of salaries, benefits, and related infrastructure costs. Web hosting fees are partially correlated to our revenues, depending on each specific agreement we have with our clients. The majority of our clients’ services are hosted on non-dedicated servers, on which capacity can be maximized by server, while certain customers prefer to have their services hosted on dedicated servers, on which capacity can only be maximized by customer and by server. Additionally, our resources associated with on-boarding are usually allocated at the beginning of the relationship with the new customer (usually, the first two months). Accordingly, our personnel costs associated with supporting customer on-boarding activities are not necessarily correlated with our revenues.
During the three-month period ended March 31, 2015, when compared to the prior year period, cost of revenues significantly increased reflecting the higher number of employees we hired to support customer on-boarding and training activities, which increased our personnel costs by approximately $494,000, when compared to the same period in 2014, as well as web hosting fees incurred to support our increased number of clients and platform usage, which increased by approximately $451,000, when compared to the same period in 2014.
We believe that our cost of revenues will continue to increase, at lower percentages than our anticipated increase in revenues, during the remainder of 2015, when compared to 2014.
Research and Development Expenses
|
|
|
Three Months Ended
|
|
|
%
|
|
|
|
|
March 31,
|
|
|
Change
|
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and Development
|
|
$
|
875,382
|
|
|
$
|
576,786
|
|
|
|
51.8
|
%
|
Research and development expenses consist primarily of personnel costs associated with the enhancement and the maintenance of our SaaS product offerings, consisting of salaries, benefits, and related infrastructure costs, offset by capitalized software development costs.
Our research and development expenses increased during the three-month period ended March 31, 2015, when compared to the prior year period, due to increased staff assigned to the enhancement and maintenance of our software services, which translated into increased personnel costs, offset by the capitalization of software development costs which amounted to $177,424 during the three-month period ended March 31, 2015.
We believe that our research and development expenses will continue to increase during the remainder of 2015, when compared to 2014, as we continue to enhance the features of our SaaS platform.
Sales and Marketing Expenses
|
|
|
Three Months Ended
|
|
|
%
|
|
|
|
|
March 31,
|
|
|
Change
|
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and Marketing
|
|
$
|
2,133,924
|
|
|
$
|
1,622,449
|
|
|
|
31.5
|
%
|
Sales and marketing expenses primarily consist of personnel costs associated with the sale and the marketing of our SaaS products, including salaries, benefits, and related infrastructure, as well as the costs of related marketing programs, such as trade shows and public relations.
The increase in sales and marketing expenses during the three-month period ended March 31, 2015, when compared to the prior year period, is primarily due to the increased number of employees associated with the sale of our products as well as increased expenditures in our marketing programs, primarily trade shows. Additionally, we amortized intangible assets and customer relationships of $166,665 during the three-month period ended March 31, 2015.
We believe that our sales and marketing expenses will continue to increase in 2015 as we continue to hire more sales and marketing personnel in the U.S. and in Europe in anticipation of increased revenues and as we increase our expenditures in certain marketing programs, such as trade shows. Additionally, the remaining amortization expense of the customer relationships we acquired from our former competitor in November 2013 will amount to $129,631 during the remainder of 2015.
General and Administrative Expenses
|
|
|
Three Months Ended
|
|
|
%
|
|
|
|
|
March 31,
|
|
|
Change
|
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
$
|
2,454,446
|
|
|
$
|
803,168
|
|
|
|
205.6
|
%
|
General and administrative expenses primarily consist of personnel costs associated with the support of our operations consisting of salaries, benefits, and related infrastructure. Also included are non-personnel costs, such as audit fees, accounting services and legal fees, as well as professional fees, insurance and other corporate expenses such as investor relations.
The increase in general and administrative expenses during the three-month period ended March 31, 2015, when compared with the prior year period, is primarily due to the increased number of employees hired to support our organization, mostly in HR, recruiting, and accounting functions which were not present during the first quarter of 2014. Increased legal, investor relations, rent, and stock-based compensation expenses contributed to the overall increase when compared to the same period last year. Furthermore, as we continued to expand in Europe in the first quarter of 2015, we incurred increased up-front expenses related to developing and integrating our operations in Europe prior to a commensurate increase in revenues.
We believe that our general and administrative expenses will continue to increase during the remainder of 2015 as we expect that the scope of our operations will continue to increase.
Other Income/Interest Income
|
|
|
Three Months Ended
|
|
|
%
|
|
|
|
|
March 31,
|
|
|
Change
|
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income/Interest Income
|
|
$
|
32,978
|
|
|
$
|
-
|
|
|
|
100
|
%
|
Other Income during the three-month period ended March 31, 2015 consisted of rent income from a sublease of our Santa Monica office space and profit from sale of non-inventory assets.
Other Expense/Interest Expense
|
|
|
Three Months Ended
|
|
|
%
|
|
|
|
|
March 31,
|
|
|
Change
|
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Expense/Interest Expense
|
|
$
|
(45,344
|
)
|
|
$
|
(3,309
|
)
|
|
|
1270.3
|
%
|
Other expense consists of interest charges and amortization of deferred financing costs associated with our Line of Credit with the Lender.
The increase in interest expenses during the three-month period ended March 31, 2015 is primarily due to borrowings we have made from time to time under the Line of Credit. Our interest expense may change during the remainder of 2015 depending on our liquidity needs and we may choose to further finance our working capital needs through our operations, from our Line of Credit, or by issuing equity securities.
Liquidity and Capital Resources
|
|
|
Ending balance at
|
|
|
Average balance during
|
|
|
|
|
March 31,
|
|
|
three months ended March 31,
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
Cash
|
|
$
|
1,488,837
|
|
|
$
|
1,130,870
|
|
|
$
|
1,309,752
|
|
|
$
|
1,144,093
|
|
|
Accounts receivable
|
|
|
1,946,622
|
|
|
|
1,414,404
|
|
|
|
1,848,094
|
|
|
|
1,228,038
|
|
|
Accounts payable and accrued expenses
|
|
|
1,700,489
|
|
|
|
1,495,774
|
|
|
|
1,451,492
|
|
|
|
1,599,391
|
|
|
Convertible notes payable excluding debt discount
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Notes payable, excluding debt discount
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Line of Credit
|
|
|
3,900,000
|
|
|
|
500,000
|
|
|
|
3,400,000
|
|
|
|
250,000
|
|
At March 31, 2015 and 2014, 63% and 58%, respectively, of our total assets consisted of cash and cash equivalents and accounts receivable.
We extend unsecured credit in the normal course of business to our customers. The determination of the appropriate amount of the reserve for uncollectible accounts is based upon a review of the amount of credit extended, the length of time each receivable has been outstanding, and the specific customers from whom the receivables are due.
The objective of liquidity management is to ensure that we have ready access to sufficient funds to meet commitments while implementing our growth strategy. Our primary sources of liquidity historically include the sale of our securities and other financing activities. Most recently, we have entered into the Line of Credit.
We do not have any material commitments for capital expenditures of tangible items. We routinely purchase computer equipment and technology to maintain or enhance the productivity of our employees and such capital expenditures were $37,875 and $47,806, respectively, during the three-month period ended March 31, 2015 and 2014.
On September 30, 2014, we entered into an amendment of our Line of Credit with the Lender to borrow up to a maximum of $6,000,000 at our discretion, an increase from up to $3,000,000 that we were permitted to borrow under the original Line of Credit entered into on March 17, 2014. Amounts borrowed will accrue interest at the prime rate in effect from time to time plus 1.25%, not to be less than 5.5% per annum, provided that in no event shall the accrued interest payable with respect to any month be less than $10,000. Accrued interest on amounts borrowed is payable monthly and all other amounts borrowed will be payable in full on the maturity date of March 17, 2016, which maturity date may be extended to March 17, 2017 if we provide the Lender with a fully-funded business plan acceptable to the Lender by January 15, 2016 and no event of default has occurred. The Line of Credit may be earlier terminated without a prepayment fee.
The Line of Credit, as amended, contains covenants including, but not limited to, covenants to achieve specified Adjusted EBITDA levels and customer renewal levels, limiting capital expenditures, requiring minimum liquidity and restricting our ability to pay dividends, purchase and sell assets outside the ordinary course and incur additional indebtedness. As of March 31, 2015, we were in compliance with these covenants. The occurrence of a material adverse change, as defined, will be an event of default under the Line of Credit, in addition to other customary events of default. We granted the Lender a security interest in all of our personal property and intellectual property.
We owed $3,900,000 under the Line of Credit at March 31, 2015. The interest rate for the amount borrowed was 5.5% per annum.
We believe we have sufficient cash to fund our operations for the next 12 months. We currently expect to use cash balances, borrowings under the Line of Credit, and net proceeds from offerings of our equity securities to fund our future operations, capital expenditures and other expenses. We currently have an effective shelf registration statement that allows us to issue public securities on an expedited basis, but it does not assure that there will be buyers for such securities. Our ability to obtain, and the costs of, any future financings will depend primarily on our success, profitability and market conditions, among other factors.
Changes in Cash Flows
|
|
|
Three-month periods ended
March 31,
|
|
|
|
|
2015
|
|
|
2014
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,594,222
|
)
|
|
$
|
(367,614
|
)
|
|
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
403,021
|
|
|
|
257,036
|
|
|
Amortization of debt discount
|
|
|
7,550
|
|
|
|
3,003
|
|
|
Provision for bad debt
|
|
|
(196,305
|
)
|
|
|
(35,951
|
)
|
|
Fair value of options
|
|
|
636,667
|
|
|
|
143,777
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(751
|
)
|
|
|
(336,782
|
)
|
|
Prepaid expenses
|
|
|
(14,373
|
)
|
|
|
8,143
|
|
|
Accounts payable and accrued expenses
|
|
|
461,045
|
|
|
|
(206,803
|
)
|
|
Deferred revenues
|
|
|
(131,308
|
)
|
|
|
(25,311
|
)
|
|
Other assets
|
|
|
6,174
|
|
|
|
(37,148
|
)
|
|
Net cash used in operating activities
|
|
|
(422,502
|
)
|
|
|
(597,650
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Capitalized software for internal use
|
|
|
(177,424
|
)
|
|
|
(153,996
|
)
|
|
Capital expenditures
|
|
|
(44,947
|
)
|
|
|
(37,875
|
)
|
|
Net cash used in investing activities
|
|
|
(222,371
|
)
|
|
|
(191,871
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from line of credit
|
|
|
1,000,000
|
|
|
|
500,000
|
|
|
Payment of financing costs
|
|
|
-
|
|
|
|
(40,000
|
)
|
|
Net proceeds from exercise of options and warrants
|
|
|
9,586
|
|
|
|
301,876
|
|
|
Net cash provided by financing activities
|
|
|
1,009,586
|
|
|
|
761,876
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
(6,543
|
)
|
|
|
1,200
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
358,170
|
|
|
|
(26,445
|
)
|
Three months ended March 31, 2015
The increase in accounts receivable as of March 31, 2015 is primarily due to a commensurate increase in revenues. The increase in accounts payable and accrued expenses during the three-month period ended March 31, 2015 is primarily due to the accrual of commission payments of approximately $115,000 and certain scheduled bonuses totaling approximately $110,000.
Cash used in investing activities during the three-month period ended March 31, 2015 consists of recurring purchases of computer equipment and other capital expenditures of approximately $45,000, and capitalization of development costs for internal-use software of approximately $177,000.
Cash provided by financing activities during the three-month period ended March 31, 2015 resulted primarily from a $1,000,000 draw down on the Line of Credit during the three-month period ended March 31, 2015.
The increase in net cash flows during the three-month period ended March 31, 2015 was due primarily to proceeds from the Line of Credit necessary to support our existing and anticipated growth.
Three months ended March 31, 2014
The increase in accounts receivable as of March 31, 2014 is primarily due to a commensurate increase in revenues. The decrease in accounts payable and accrued expenses during the three-month period ended March 31, 2014 is primarily due to a payment of $250,000 to our former competitor, following the purchase of customer relationships.
Cash used in investing activities during the three-month period ended March 31, 2014 consists of recurring purchases of computer equipment and other capital expenditures of approximately $38,000, and capitalization of development costs for internal-use software of approximately $154,000.
Cash provided by financing activities during the three-month period ended March 31, 2014 resulted from the proceeds from the exercise of warrants of approximately $302,000 and a $500,000 draw down on the Line of Credit on March 17, 2014. This amount was offset by $40,000 in financing costs.
Despite an increase in revenues, the decrease in net cash flows during the three-month period ended March 31, 2014 was due to a higher increase in web-hosting and payroll costs, as well as an increase in accounts receivable and a decrease in accounts payable and accrued expenses due primarily to higher operating costs necessary to support our growth.
Capital Raising Transactions
Exercise of warrants
There were no proceeds generated from the exercise of warrants during the three-month period ended March 31, 2015.
Other outstanding obligations at March 31, 2015
Line of Credit
During the three months ended March 31, 2015, we borrowed an additional $1,000,000 under the Line of Credit. As of March 31, 2015, we owed $3,900,000 under the Line of Credit.
Warrants
As of March 31, 2015, 5,400,699 shares of our Common Stock are issuable pursuant to the exercise of warrants.
Options
As of March 31, 2015, 14,375
,836 shares of our Common Stock are issuable pursuant to the exercise of options.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer, who is our principal executive officer, and our Chief Financial Officer, who is our principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of March 31, 2015, our disclosure controls and procedures are effective in ensuring that material information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including ensuring that such material information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
During the quarter ended March 31, 2015, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not presently a party to any legal proceedings, including the following, that we currently believe, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition or cash flows.
On February 22, 2015, we commenced an action against Jeff McCollum, the former President of our CAKE division, by filing a complaint in the Superior Court of the State of California, County of Orange, Central District, asserting claims against Mr. McCollum for fraud, breach of contract, and breach of fiduciary duty, among others. Our complaint asserts that, during Mr. McCollum’s employment, he engaged in fraud, breached his fiduciary duties to us and our shareholders, and breached the terms of his employment contract in connection with his duties to us. We terminated Mr. McCollum’s employment on September 8, 2014 for cause as defined in Mr. McCollum’s employment agreement as a result of, among other things, Mr. McCollum having abandoned his position and professional responsibilities. Our complaint additionally asserts that following our termination of Mr. McCollum, he illegally accessed and downloaded our proprietary and confidential information, converted our property, and destroyed relevant evidence. In addition to a temporary restraining order, preliminary injunction, and permanent injunction, all enjoining Mr. McCollum from further breaching his employment agreement, we seek general and special damages, pre- and post-judgment interest, and costs of suit according to proof, plus any other legal or equitable relief as the court may deem just and proper.
On March 26, 2015, we filed a First Amended Complaint clarifying the trade secret cause of action. Mr. McCollum filed a motion to strike Portions of that First Amended Complaint but, on April 29, 2015, the court denied that motion in its entirety.
On February 23, 2015, Mr. McCollum commenced a separate action by filing a complaint in the Superior Court of the State of California, County of Orange, Central District, asserting claims against us for violation of California Commercial Code §8401 and breach of fiduciary duty arising from Mr. McCollum’s request to have the restrictive legend removed from his share certificate representing shares of our Common Stock owned by him. Mr. McCollum alleges that we contend that the restriction should remain on his share certificate. Mr. McCollum has requested a judicial determination as to his rights to have the restrictive legend removed from his share certificate, and an order compelling the Company to issue him a new certificate without a restrictive legend. He also seeks compensatory and punitive damages, pre-judgment interest, an award of costs, and any other relief the court may deem proper. On March 26, 2015 we filed a demurrer to this action, asserting that Mr. McCollum’s complaint fails to state facts sufficient to constitute a cause of action against us.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On March 27, 2015, in connection with an obligation under the Line of Credit when borrowings thereunder exceed $3,000,000, we issued to the Lender a warrant to purchase 58,824 shares of our Common Stock at an exercise price of $1.53 per share. This warrant expires on March 27, 2018. This warrant was exempt from registration pursuant to Section 4(a)(2) under the Securities Act of 1933, as amended, as not involving any public offering.
Ite
m
6
. Exhibits
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4.1
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Warrant to Purchase Stock issued March 27, 2015.*
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10.1
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Second Amendment to Loan Agreement, dated March 5, 2015, between Accelerize Inc. and Square1 Bank.*
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10.2
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Third Amendment to Loan Agreement, dated March 19, 2015, between Accelerize Inc. and Square1 Bank.*
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10.3
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Form of Stock Option Agreement.*
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10.4
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Form of Stock Option Agreement.*
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10.5
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Amendment No. 4 to Employment Agreement, dated May 6, 2015, between Accelerize Inc. and Santi Pierini.*
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31.1
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Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) and15d-14(a).*
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31.2
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Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a).*
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32.1
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Certification of Principal Executive Officer Pursuant to 18 U.S.C. 1350.**
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32.2
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Certification of Principal Financial Officer Pursuant to 18 U.S.C. 1350.**
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101.
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The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Comprehensive (Loss) Income, (iv) the Statements of Cash Flows, and (v) related notes to these financial statements.*
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*
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Filed herewith.
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**
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Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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ACCELERIZE INC.
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Dated: May 11, 2015
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By:
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/s/ Brian Ross
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Brian Ross
President and Chief Executive Officer
(Principal Executive Officer)
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Dated: May 11, 2015
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By:
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/s/ Michael Lin
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Michael Lin
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Chief Financial Officer
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(Principal Financial Officer)
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24
Exhibit 4.1
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH APPLICABLE LAW.
WARRANT TO PURCHASE STOCK
|
|
Corporation:
|
Accelerize New Media Inc.
|
|
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Number of Shares:
|
58,824 [= $90,000 / $1.53]
|
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Initial Exercise Price:
|
$1.53 per share
|
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|
Issue Date:
|
March 27, 2015
|
|
|
Expiration Date:
|
March 27, 2018
|
This Warrant Certifies That,
for good and valuable consideration, the receipt of which is hereby acknowledged,
Square 1 Bank
or its assignee (“
Holder
”) is entitled to purchase the number of fully paid and nonassessable shares of the class of securities (the “
Shares
”) of the corporation (the “
Company
”) at the initial exercise price per Share (the “
Warrant Price
”) all as set forth above and as adjusted pursuant to Article 2 of this warrant, subject to the provisions and upon the terms and conditions set forth in this warrant.
ARTICLE 1
EXERCISE
1.1
Method of Exercise.
Holder may exercise this warrant by delivering this warrant and a duly executed Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company. Unless Holder is exercising the conversion right set forth in Section 1.2, Holder shall also deliver to the Company a check for the aggregate Warrant Price for the Shares being purchased.
1.2
Conversion Right.
In lieu of exercising this warrant as specified in Section 1.1, Holder may from time to time convert this warrant, in whole or in part, into a number of Shares determined by dividing (a) the aggregate fair market value of the Shares or other securities otherwise issuable upon exercise of this warrant minus the aggregate Warrant Price of such Shares by (b) the fair market value of one Share. The fair market value of the Shares shall be determined pursuant to Section 1.3.
1.3
Fair Market Value.
If the Shares are traded regularly in a public market, the fair market value of the Shares shall be the closing price of the Shares (or the closing price of the Company’s stock into which the Shares are convertible) reported for the business day immediately before Holder delivers its Notice of Exercise to the Company. If the Shares are not regularly traded in a public market, the Board of Directors of the Company shall determine fair market value in its reasonable good faith judgment.
1.4
Delivery of Certificate and New Warrant.
Promptly after Holder exercises or converts this warrant, the Company shall deliver to Holder certificates for the Shares acquired and, if this warrant has not been fully exercised or converted and has not expired, a new warrant representing the Shares not so acquired.
1.5
Replacement of Warrants.
On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation, on surrender and cancellation of this warrant, the Company at its expense shall execute and deliver, in lieu of this warrant, a new warrant of like tenor.
1.6
Acquisition of the Company.
1.6.1
“
Acquisition
.
” For the purpose of this warrant, “Acquisition” means (a) any sale, license, or other disposition of all or substantially all of the assets (including intellectual property) of the Company, or (b) any reorganization, consolidation, merger or sale of the voting securities of the Company or any other transaction where the holders of the Company’s securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity after the transaction.
1.6.2
Assumption of Warrant.
Upon the closing of any Acquisition, the successor entity shall assume the obligations of this warrant, and this warrant shall be exercisable for the same securities, cash, and property as would be payable for or the Shares issuable upon exercise of the unexercised portion of this warrant as if such Shares were outstanding on the record date for the Acquisition and subsequent closing. The Warrant Price shall be adjusted accordingly.
ARTICLE 2
ADJUSTMENTS TO THE SHARES
2.1
Stock Dividends, Splits, Etc.
If the Company declares or pays a dividend on its common stock payable in common stock, or other securities, or subdivides the outstanding common stock into a greater amount of common stock, then upon exercise of this warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend or subdivision occurred.
2.2
Reclassification, Exchange or Substitution.
Upon any reclassification, exchange, substitution, or other event that results in a change of the number and/or class of the securities issuable upon exercise or conversion of this warrant, Holder shall be entitled to receive, upon exercise or conversion of this warrant, the number and kind of securities and property that Holder would have received for the Shares if this warrant had been exercised immediately before such reclassification, exchange, substitution, or other event. Such an event shall include any automatic conversion of the outstanding or issuable securities of the Company of the same class or series as the Shares to common stock pursuant to the terms of the Company’s Articles of Incorporation upon the closing of a registered public offering of the Company’s common stock. The Company or its successor shall promptly issue to Holder a new warrant for such new securities or other property. The new warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 2 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the new warrant. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, substitutions, or other events.
2.3
Adjustments for Combinations, Etc.
If the outstanding Shares are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased. If the outstanding Shares are combined or consolidated, by reclassification or otherwise, into a greater number of shares, the Warrant Price shall be proportionately decreased.
2.4
Adjustments for Diluting Issuances.
[Omitted].
2.5
Certificate as to Adjustments.
Upon each adjustment of the Warrant Price, the Company at its expense shall promptly compute such adjustment, and furnish Holder with a certificate of its Chief Financial Officer setting forth such adjustment and the facts upon which such adjustment is based. The Company shall, upon written request, furnish Holder a certificate setting forth the Warrant Price in effect upon the date thereof and the series of adjustments leading to such Warrant Price.
2.6
Fractional Shares.
No fractional Shares shall be issuable upon exercise or conversion of the Warrant and the Number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional share interest arises upon any exercise or conversion of the Warrant, the Company shall eliminate such fractional share interest by paying Holder amount computed by multiplying the fractional interest by the fair market value of a full Share.
ARTICLE 3
REPRESENTATIONS AND COVENANTS OF THE COMPANY
3.1
Representations and Warranties.
The Company hereby represents and warrants to the Holder as follows:
(a)
[Omitted].
(b)
All Shares which may be issued upon the exercise of the purchase right represented by this warrant, and all securities, if any, issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws.
(c)
[Omitted].
3.2
Notice of Certain Events.
The Company shall provide Holder with not less than 10 days prior written notice, including a description of the material facts surrounding, any of the following events: (a) declaration of any dividend or distribution upon its common stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) offering for subscription pro rata to the holders of any class or series of its stock any additional shares of stock of any class or series or other rights; (c) effecting any reclassification or recapitalization of common stock; or (d) the merger or consolidation with or into any other corporation, or sale, lease, license, or conveyance of all or substantially all of its assets, or liquidation, dissolution or winding up.
3.3
Information Rights.
So long as the Holder holds this warrant and/or any of the Shares, the Company shall deliver to the Holder (a) promptly after mailing, copies of all communiques to the shareholders of the Company, (b) within one hundred eighty (180) days after the end of each fiscal year of the Company, the annual audited financial statements of the Company certified by independent public accountants of recognized standing and (c) within forty-five (45) days after the end of each of the first three quarters of each fiscal year, the Company’s quarterly, unaudited financial statements; provided, however, that the Company shall not be required to deliver any such documents under subclause (b) or (c) above during such time as the Company is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended; provided, further, that the foregoing does not limit any requirements of the Company to provide such documents to Holder pursuant to the terms of any loan agreement between the Company and Holder.
3.4
Investor Rights Agreement.
[Omitted].
ARTICLE 4
MISCELLANEOUS
4.1
Term: Exercise Upon Expiration.
This warrant is exercisable in whole or in part, at any time and from time to time on or before the Expiration Date set forth above. If this warrant has not been exercised prior to the Expiration Date, this warrant shall be deemed to have been automatically exercised on the Expiration Date by “cashless” conversion pursuant to Section 1.2.
4.2
Legends.
This warrant and the Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH APPLICABLE LAW.
4.3
Compliance with Securities Laws on Transfer.
This warrant and the Shares issuable upon exercise of this warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee. The Company shall not require Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder or if there is no material question as to the availability of current information as referenced in Rule 144(c), Holder represents that it has complied with Rule 144 (d) and (e) in reasonable detail, the selling broker represents that it has complied with Rule 144(f), and the Company is provided with a copy of Holder’s notice of proposed sale.
4.4
Transfer Procedure.
Subject to the provisions of Section 4.3, Holder may transfer all or part of this warrant or the Shares issuable upon exercise of this warrant (or the securities issuable, directly or indirectly, upon conversion of the Shares, if any) by giving the Company notice of the portion of the warrant being transferred setting forth the name, address and taxpayer identification number of the transferee and surrendering this warrant to the Company for reissuance to the transferee(s) (and Holder, if applicable). No surrender or reissuance shall be required if the transfer is to an affiliate of Holder.
4.5
Notices.
All notices and other communications from the Company to the Holder, or vice versa, shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company or the Holder, as the case may be, in writing by the Company or such Holder from time to time. All notices to the Holder shall be addressed as follows:
Square 1 Bank
Attn: Warrant Administrator
406 Blackwell Street, Suite 240
Crowe Building
Durham, NC 27701
4.6
Amendments.
This warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.
4.7
Attorneys’ Fees.
In the event of any dispute between the parties concerning the terms and provisions of this warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.
4.8
Governing Law.
This warrant shall be governed by and construed in accordance with the laws of the State of California, without giving effect to its principles regarding conflicts of law.
[Signature Page Follows]
IN WITNESS WHEREOF, the undersigned has executed this Warrant to Purchase Stock as of the date set forth above.
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Accelerize New Media Inc.
|
|
|
|
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By:
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/s/ Michael Lin
|
|
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Name:
|
Michael Lin
|
|
|
Title:
|
CFO
|
[Signature Page
to Warrant to Purchase Stock]
Appendix 1
NOTICE OF EXERCISE
1.
The undersigned hereby elects to purchase ______________ shares of the ______________ stock of
Accelerize New Media Inc.
pursuant to the terms of the attached warrant, and tenders herewith payment of the purchase price of such shares in full.
1.
The undersigned hereby elects to convert the attached warrant into shares in the manner specified in the warrant. This conversion is exercised with respect to ______________ of the shares covered by the warrant.
[Strike paragraph that does not apply.]
2.
Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name as is specified below:
Square 1 Bank
Attn: Warrant Administrator
406 Blackwell Street, Suite 240
Fowler Building
Durham, NC 27701
3.
The undersigned represents it is acquiring the shares solely for its own account and not as a nominee for any other party and not with a view toward the resale or distribution thereof except in compliance with applicable securities laws.
Square 1 Bank
or Registered Assignee
(Signature)
(Date)
Exhibit 10.1
2
nd
Amendment to Loan Agreement
Borrower: Accelerize Inc.
Date:
March 5, 2015
THIS
SECOND
AMENDMENT TO LOAN AGREEMENT
is entered into between SQUARE 1 BANK (“Lender”) and the borrower named above (“Borrower”).
The Parties agree to amend the Loan and Security Agreement between them, dated March 17, 2014 (as amended, the “Loan Agreement”), as follows, effective as of the date hereof. (Capitalized terms used but not defined in this Amendment shall have the meanings set forth in the Loan Agreement.)
1.
Ancillary Services Sublimit
. That portion of Section 1 of the Schedule which now reads:
“Ancillary Services Sublimit: $180,000.”
is hereby amended to read:
“Ancillary Services Sublimit: $500,000.”
2.
Additional Warrants
. In Section 8 of the Schedule, subsection (f) is hereby amended in its entirety to read:
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|
“
(f)
|
Additional Warrants
.
Upon the date (the ‘Warrant Trigger Date’) that the amount of the monetary Obligations outstanding under this Agreement first exceeds $3,000,000, not including any amounts outstanding under the Ancillary Services Sublimit, Lender shall thereby earn, and Borrower shall issue to Lender, within 30 days following the Warrant Trigger Date, three-year warrants (the ‘Additional Warrants’) to purchase the following number of shares of common stock of Borrower, at the Additional Warrant Price: 90,000 divided by the Additional Warrant Price. For the purposes hereof: the ‘Additional Warrant Price’ shall be equal to the price per share at which Borrower’s common stock was last traded on the Warrant Trigger Date. The Additional Warrants shall be issued upon the terms and conditions set forth in Lender’s standard form Warrant to Purchase Stock in effect at such time.”
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Square 1 Bank
|
Second Amendment to Loan Agreement
|
3.
Fee.
[Intentionally omitted.]
4.
Representations True.
Borrower represents and warrants to Lender that all representations and warranties set forth in the Loan Agreement, as amended hereby, are true and correct, other than any representations or warranties which Borrower, prior to the date of this Amendment, has advised Lender in writing (including via electronic communication) are no longer true and correct, including but not limited to: (i) with respect to Section 3.2 of the Loan Agreement, the change of Borrower’s name, effective October 10, 2014; and (ii) with respect to Section 3.10 of the Loan Agreement, that certain letter from Lewis Silkin dated February 19, 2015 in regards to Cake Marketing UK Ltd., that certain Complaint by Jeff McCollum against Accelerize Inc., filed on February 23, 2015 in Orange County Superior Court and that certain Complaint by Accelerize Inc. against Jeff McCollum, filed on February 23, 2015 in Orange County Superior Court.
5.
General Release.
In consideration for Lender entering into this Amendment, Borrower hereby irrevocably releases and forever discharges Lender, and its successors, assigns, agents, shareholders, directors, officers, employees, agents, attorneys, parent corporations, subsidiary corporations, affiliated corporations, affiliates, participants, and each of them (collectively, the “Releasees”), from any and all claims, debts, liabilities, demands, obligations, costs, expenses, actions and causes of action, of every nature and description, known and unknown, which Borrower now has or at any time may hold, by reason of any matter, cause or thing occurred, done, omitted or suffered to be done prior to the date of this Amendment (collectively, the “Released Claims”). Borrower hereby irrevocably waives the benefits of any and all statutes and rules of law to the extent the same provide in substance that a general release does not extend to claims which the creditor does not know or suspect to exist in its favor at the time of executing the release, and, without limiting the foregoing, and without limiting the stipulation to governing law in Section 9.19 of the Loan Agreement, Borrower irrevocably waives any benefits it may have under California Civil Code Section 1542 which provides: "A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.” Borrower represents and warrants that it has not assigned to any other Person any Released Claim, and agrees to indemnify Lender against any and all actions, demands, obligations, causes of action, decrees, awards, claims, liabilities, losses and costs, including but not limited to reasonable attorneys' fees of counsel of Lender’s choice and costs, which Lender may sustain or incur as a result of a breach or purported breach of the foregoing representation and warranty.
6.
No Waiver.
Nothing herein constitutes a waiver of any default or Event of Default under the Loan Agreement or any other Loan Documents, whether or not known to Bank.
|
Square 1 Bank
|
Second Amendment to Loan Agreement
|
7.
Governing Law; Jurisdiction; Venue.
This Amendment and all acts, transactions, disputes and controversies arising hereunder or relating hereto, and all rights and obligations of the parties shall be governed by, and construed in accordance with, the internal laws (and not the conflict of laws rules) of the State of California. All disputes, controversies, claims, actions and other proceedings involving, directly or indirectly, any matter in any way arising out of, related to, or connected with, this Amendment or the relationship between Borrower and Lender, and any and all other claims of Borrower against Lender of any kind, shall be brought only in a court located in Los Angeles County, California, and each party consents to the jurisdiction of any such court and the referee referred to in Section 9.20 of the Loan Agreement, and waives any and all rights the party may have to object to the jurisdiction of any such court, or to transfer or change the venue of any such action or proceeding, including, without limitation, any objection to venue or request for change in venue based on the doctrine of forum non conveniens; provided that, notwithstanding the foregoing, nothing herein shall limit the right of Lender to bring proceedings against Borrower in the courts of any other jurisdiction. Borrower consents to service of process in any action or proceeding brought against it by Lender, by personal delivery, or by mail addressed as set forth in the Loan Agreement or by any other method permitted by law.
8.
Dispute Resolution.
The provisions of Section 9.20 of the Loan Agreement relating to dispute resolution shall apply to this Amendment, and the terms thereof are incorporated herein by this reference.
9.
General Provisions.
Borrower hereby ratifies and confirms the continuing validity, enforceability and effectiveness of the Loan Agreement and all other Loan Documents.
T
his Amendment, the Loan Agreement, any prior written amendments to the Loan Agreement signed by Lender and Borrower, and the other written documents and agreements between Lender and Borrower set forth in full all of the representations and agreements of the parties with respect to the subject matter hereof and supersede all prior discussions, representations, agreements and understandings between the parties with respect to the subject hereof. Except as herein expressly amended, all of the terms and provisions of the Loan Agreement, and all other documents and agreements between Lender and Borrower shall continue in full force and effect and the same are hereby ratified and confirmed. This Amendment may be executed in multiple counterparts, by different parties signing separate counterparts, and all of the same taken together shall constitute one and the same agreement.
10.
Mutual Waiver of Jury Trial. LENDER AND BORROWER EACH ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL RIGHT, BUT THAT IT MAY BE WAIVED. EACH OF THE PARTIES, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT, WITH COUNSEL OF THEIR CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS AMENDMENT OR ANY RELATED INSTRUMENT OR LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AMENDMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), ACTION OR INACTION OF ANY OF THEM. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY LENDER OR BORROWER, EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY EACH OF THEM. IF FOR ANY REASON THE PROVISIONS OF THIS SECTION ARE VOID, INVALID OR UNENFORCEABLE, THE SAME SHALL NOT AFFECT ANY OTHER TERM OR PROVISION OF THIS AMENDMENT, AND ALL OTHER TERMS AND PROVISIONS OF THIS AMENDMENT SHALL BE UNAFFECTED BY THE SAME AND CONTINUE IN FULL FORCE AND EFFECT.
[Signatures on Next Page]
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Square 1 Bank
|
Second Amendment to Loan Agreement
|
|
Borrower:
ACCELERIZE INC.
By_
/s/ Michael Lin
_______________
Title__
CFO
_____________________
|
Bank:
SQUARE 1 BANK
By_
/s/ Mike Griffin
______________
Title__
SVP
_____________________
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|
|
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[Signature Page—
Second
Amendment to Loan Agreement]
-4-
Exhibit 10.2
3
rd
Amendment to Loan Agreement
Borrower: Accelerize Inc.
Date:
March 31, 2015
THIS
THIRD
AMENDMENT TO LOAN AGREEMENT
is entered into between SQUARE 1 BANK (“Lender”) and the borrower named above (“Borrower”).
The Parties agree to amend the Loan and Security Agreement between them, dated March 17, 2014 (as amended, the “Loan Agreement”), as follows, effective as of the date hereof. (Capitalized terms used but not defined in this Amendment shall have the meanings set forth in the Loan Agreement.)
1.
Minimum Adjusted EBITDA
. The following is added to the end of the chart set forth in Section 5 of the Schedule, in the portion thereof titled “Minimum Adjusted EBITDA,” immediately following the period shown as “12 months ended 12/31/14”
:
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Period
|
Minimum Adjusted
EBITDA
|
|
1 month ending Jan 31, 2015
|
($200,000)
|
|
2 months ending Feb 28, 2015
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($500,000)
|
|
3 months ending Mar 31, 2015
|
($850,000)
|
|
4 months ending Apr 30, 2015
|
($1,250,000)
|
|
5 months ending May 31, 2015
|
($1,400,000)
|
|
6 months ending Jun 30, 2015
|
($1,800,000)
|
|
7 months ending Jul 31, 2015
|
($2,100,000)
|
|
8 months ending Aug 31, 2015
|
($2,300,000)
|
|
9 months ending Sep 30, 2015
|
($2,500,000)
|
|
10 months ending Oct 31, 2015
|
($2,750,000)
|
|
11 months ending Nov 30, 2015
|
($3,000,000)
|
|
12 months ending Dec 31, 2015
|
($3,000,000)
|
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Square 1 Bank
|
Third Amendment to Loan Agreement
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2.
Fee.
In consideration for Lender entering into this Amendment, Borrower shall concurrently pay Lender a fee in the amount of $1,500, which shall be non-refundable and in addition to all interest and other fees payable to Lender under the Loan Documents. Lender is authorized to charge said fee to Borrower’s loan account or any of Borrower’s deposit accounts with Lender.
3.
Representations True.
Borrower represents and warrants to Lender that all representations and warranties set forth in the Loan Agreement, as amended hereby, are true and correct, other than any representations or warranties which Borrower, prior to the date of this Amendment, has advised Lender in writing (including via electronic communication) are no longer true and correct, including but not limited to: (i) with respect to Section 3.2 of the Loan Agreement, the change of Borrower’s name, effective October 10, 2014; and (ii) with respect to Section 3.10 of the Loan Agreement, that certain letter from Lewis Silkin dated February 19, 2015 in regards to Cake Marketing UK Ltd., that certain Complaint by Jeff McCollum against Accelerize Inc., filed on February 23, 2015 in Orange County Superior Court and that certain Complaint by Accelerize Inc. against Jeff McCollum, filed on February 23, 2015 in Orange County Superior Court.
4.
General Release.
In consideration for Lender entering into this Amendment, Borrower hereby irrevocably releases and forever discharges Lender, and its successors, assigns, agents, shareholders, directors, officers, employees, agents, attorneys, parent corporations, subsidiary corporations, affiliated corporations, affiliates, participants, and each of them (collectively, the “Releasees”), from any and all claims, debts, liabilities, demands, obligations, costs, expenses, actions and causes of action, of every nature and description, known and unknown, which Borrower now has or at any time may hold, by reason of any matter, cause or thing occurred, done, omitted or suffered to be done prior to the date of this Amendment (collectively, the “Released Claims”). Borrower hereby irrevocably waives the benefits of any and all statutes and rules of law to the extent the same provide in substance that a general release does not extend to claims which the creditor does not know or suspect to exist in its favor at the time of executing the release, and, without limiting the foregoing, and without limiting the stipulation to governing law in Section 9.19 of the Loan Agreement, Borrower irrevocably waives any benefits it may have under California Civil Code Section 1542 which provides: "A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.” Borrower represents and warrants that it has not assigned to any other Person any Released Claim, and agrees to indemnify Lender against any and all actions, demands, obligations, causes of action, decrees, awards, claims, liabilities, losses and costs, including but not limited to reasonable attorneys' fees of counsel of Lender’s choice and costs, which Lender may sustain or incur as a result of a breach or purported breach of the foregoing representation and warranty.
5.
No Waiver.
Nothing herein constitutes a waiver of any default or Event of Default under the Loan Agreement or any other Loan Documents, whether or not known to Bank.
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Square 1 Bank
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Third Amendment to Loan Agreement
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6.
Governing Law; Jurisdiction; Venue.
This Amendment and all acts, transactions, disputes and controversies arising hereunder or relating hereto, and all rights and obligations of the parties shall be governed by, and construed in accordance with, the internal laws (and not the conflict of laws rules) of the State of California. All disputes, controversies, claims, actions and other proceedings involving, directly or indirectly, any matter in any way arising out of, related to, or connected with, this Amendment or the relationship between Borrower and Lender, and any and all other claims of Borrower against Lender of any kind, shall be brought only in a court located in Los Angeles County, California, and each party consents to the jurisdiction of any such court and the referee referred to in Section 9.20 of the Loan Agreement, and waives any and all rights the party may have to object to the jurisdiction of any such court, or to transfer or change the venue of any such action or proceeding, including, without limitation, any objection to venue or request for change in venue based on the doctrine of forum non conveniens; provided that, notwithstanding the foregoing, nothing herein shall limit the right of Lender to bring proceedings against Borrower in the courts of any other jurisdiction. Borrower consents to service of process in any action or proceeding brought against it by Lender, by personal delivery, or by mail addressed as set forth in the Loan Agreement or by any other method permitted by law.
7.
Dispute Resolution.
The provisions of Section 9.20 of the Loan Agreement relating to dispute resolution shall apply to this Amendment, and the terms thereof are incorporated herein by this reference.
8.
General Provisions.
Borrower hereby ratifies and confirms the continuing validity, enforceability and effectiveness of the Loan Agreement and all other Loan Documents.
T
his Amendment, the Loan Agreement, any prior written amendments to the Loan Agreement signed by Lender and Borrower, and the other written documents and agreements between Lender and Borrower set forth in full all of the representations and agreements of the parties with respect to the subject matter hereof and supersede all prior discussions, representations, agreements and understandings between the parties with respect to the subject hereof. Except as herein expressly amended, all of the terms and provisions of the Loan Agreement, and all other documents and agreements between Lender and Borrower shall continue in full force and effect and the same are hereby ratified and confirmed. This Amendment may be executed in multiple counterparts, by different parties signing separate counterparts, and all of the same taken together shall constitute one and the same agreement.
9.
Mutual Waiver of Jury Trial. LENDER AND BORROWER EACH ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL RIGHT, BUT THAT IT MAY BE WAIVED. EACH OF THE PARTIES, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT, WITH COUNSEL OF THEIR CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS AMENDMENT OR ANY RELATED INSTRUMENT OR LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AMENDMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), ACTION OR INACTION OF ANY OF THEM. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY LENDER OR BORROWER, EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY EACH OF THEM. IF FOR ANY REASON THE PROVISIONS OF THIS SECTION ARE VOID, INVALID OR UNENFORCEABLE, THE SAME SHALL NOT AFFECT ANY OTHER TERM OR PROVISION OF THIS AMENDMENT, AND ALL OTHER TERMS AND PROVISIONS OF THIS AMENDMENT SHALL BE UNAFFECTED BY THE SAME AND CONTINUE IN FULL FORCE AND EFFECT.
[Signatures on Next Page]
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Square 1 Bank
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Third Amendment to Loan Agreement
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Borrower:
ACCELERIZE INC.
By_
/s/ Michael Lin
______________
Title__
CFO
_____________________
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Bank:
SQUARE 1 BANK
By_
/s/ Mike Griffin
_____________
Title__
SVP
____________________
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[Signature Page—
Third
Amendment to Loan Agreement]
-4-
Exhibit 10.3
ACCELERIZE INC.
Accelerize Inc. Stock Option Plan
Stock Option Agreement
This Stock Option Agreement (this “Agreement”) is made as of the date shown as the “Date of Grant of Option” on Schedule 1 attached hereto and is between Accelerize Inc., a Delaware corporation
(the “Company”), and the individual identified on Schedule 1 (the “Optionee”).
WITNESSETH THAT:
WHEREAS, the Company has instituted the “Accelerize Inc. Stock Option Plan,” as amended and in effect from time to time (the “Plan”); and
WHEREAS, the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of the Company has granted to the Optionee a stock option upon the terms and subject to the conditions of this Agreement and of the Plan (which is hereby incorporated herein).
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, the Company and the Optionee agree as follows:
1.
Grant
. Subject to the terms and conditions hereinafter set forth and the terms and conditions of the Plan, the Company hereby grants to the Optionee an option (the “Option”) to purchase from the Company the “Number of Shares of Common Stock” as specified on Schedule 1 of the Common Stock, $.001 par value per share (the “Common Stock”), of the Company. If so provided in the “Type of Option” shown on Schedule 1, this Option is intended to constitute an incentive stock option and to qualify for special federal income tax treatment under Section 422 of the Code.
2.
Exercise Price and Further Conditions
.
(a) This Option may be exercised at the “Exercise Price (per share)” as specified on Schedule 1, subject to adjustment as provided herein and in the Plan.
(b) The exercise of this Option shall, if so requested by the Committee at the time of exercise, be conditioned on the Optionee’s execution of certain letter agreements or other documents as provided in Section 10(b) of the Plan.
3.
Term and Exercisability of Option
.
(a) The Option may be exercised only to the extent vested, as provided under “Vesting” on Schedule 1; provided, however, that the Optionee’s employment, contractual or other service relationship with the Company (the “Relationship”) must be in effect on a given date in order for any scheduled increment in vesting to become effective.
An Option that is otherwise exercisable under the Plan and this Agreement must be exercised within three months of the termination of the Relationship; provided, however, that if the Relationship terminates by reason of the Optionee’s death or disability (as defined in the Plan), the unexercised portion of the Option that is otherwise exercisable on the date of termination of the Relationship shall remain exercisable thereafter for one year.
(b) This Option, if determined by the Board in its sole and absolute discretion, shall fully vest and become exercisable immediately prior to the effective date of a Change in Control. For purposes of this Agreement, the term “Change in Control” shall mean (i) the sale of all or substantially all of the assets of the Company, (ii) the sale of more than fifty percent of the outstanding capital stock of the Company in a non-public sale, (iii) the dissolution or liquidation of the Company or (iv) any merger, share exchange, consolidation or other reorganization or business combination of the Company if immediately after such transaction either (A) persons who were directors of the Company immediately prior to such transaction do not constitute at least a majority of the directors of the surviving entity or (B) persons who hold a majority of the voting capital stock of the surviving entity are not persons who held a majority of the voting capital stock of the Company immediately prior to the transaction; provided, however, that the term “Change in Control” shall not include a public offering of capital stock of the Company that is effected pursuant to a registration statement filed with, and declared effective by, the Securities and Exchange Commission under the Securities Act of 1933, as amended.
(c) Notwithstanding Sections 3(a) and 3(b) above, if the Relationship terminates without cause (as defined in an applicable employment agreement), the Committee may, in its sole discretion, (i) accelerate vesting or provide that vesting shall continue and/or (ii) extend the exercisability of the Option.
(d) For purposes of this Section 3, the term “Company” refers to the Company and all Subsidiaries.
4.
Method of Exercise
. Prior to its expiration and to the extent that the right to purchase shares of Common Stock is exercisable hereunder, this Option may be exercised from time to time by notice acceptable to the Company substantially in the form attached hereto as Exhibit A or in such other form as the Company may from time to time announce, stating the number of shares with respect to which this Option is being exercised and accompanied by either (a) payment in full of the exercise price for the number of shares to be delivered by any method described in Section 5(c) of the Plan, including, without limitation, payment in whole or in part by delivery of shares already owned by the Optionee or by delivery of a recourse promissory note to the Company in the form and on the terms specified by the Company or (b) a description of a “cashless exercise” procedure and such other documents and undertakings as are necessary to satisfy that procedure. Any exercise of less than all vested shares must be for a minimum of ten shares. If the Optionee (or other person entitled to exercise this Option) fails to pay for and accept delivery of all of the shares specified in such notice upon tender of delivery thereof, his or her right to exercise this Option with respect to such shares not paid for may be terminated by the Company.
As soon as practicable after its receipt of such notice, the Company shall, without transfer or issue tax to the Optionee (or other person entitled to exercise this Option), deliver to the Optionee (or other person entitled to exercise this Option), at the principal executive offices of the Company or such other place as shall be mutually acceptable, a stock certificate or certificates for such shares out of theretofore authorized but unissued shares or reacquired shares of its Common Stock as the Company may elect; provided, however, that the time of such delivery may be postponed by the Company for such period as may be required for it with reasonable diligence to comply with any applicable requirements of law.
5.
Nonassignability of Option
. This Option shall not be assignable or transferable by the Optionee except by will or by the laws of descent and distribution or as permitted by the Committee in its discretion pursuant to the first sentence of Section 5(g) of the Plan. During the life of the Optionee, this Option shall be exercisable only by him or her, by a conservator or guardian duly appointed for him or her by reason of the Optionee’s incapacity or by the person appointed by the Optionee in a durable power of attorney acceptable to the Company’s counsel.
6.
Forfeiture for Dishonesty or Termination for Cause
. Notwithstanding any provision of this Agreement to the contrary, if the Board determines, after full consideration of the facts, that:
(a) the Optionee has been engaged in fraud, embezzlement or theft in the course of his or her employment by or involvement with the Company, has made unauthorized disclosure of trade secrets or other proprietary information of the Company or of a third party who has entrusted such information to the Company or has been convicted of a felony or any crime that reflects negatively upon the Company; or
(b) the Optionee has violated the terms of any employment, noncompetition, nonsolicitation, confidentiality, nondisclosure or other agreement with the Company to which he or she is a party; or
(c) the employment or involvement with the Company of the Optionee was terminated for “cause,” as defined in any agreement with the Optionee governing his or her Relationship, or if there is no such agreement, as determined by the Board, which may determine that “cause” includes among other matters the willful failure or refusal of the Optionee to perform and carry out his or her assigned duties and responsibilities diligently and in a manner satisfactory to the Board;
then the Optionee’s right to exercise this Option shall terminate as of the date of such act (in the case of (a) or (b)) or such termination (in the case of (c)), the Optionee shall forfeit the unexercised portion of this Option and the Company shall have the right to repurchase all or any part of the shares of Common Stock acquired by the Optionee upon any previous exercise of this Option, at a price equal to the lower of (x) the amount paid to the Company upon such exercise, or (y) the Fair Market Value of such shares at the time of repurchase. If the Company asserts that the Optionee’s behavior falls within the provisions of the clauses above and the Optionee has exercised or attempts to exercise this Option prior to consideration of the application of this Section 6 or prior to a decision of the Board, the Company shall not be required to recognize such exercise until the Board has made its decision and, in the event any exercise shall have taken place, it shall be of no force and effect (and shall be void
ab
initio
) if the Board makes an adverse determination; provided, however, that if the Board finds in favor of the Optionee then the Optionee will be deemed to have exercised this Option retroactively as of the date he or she originally gave notice of his or her attempt to exercise or actual exercise, as the case may be. The decision of the Board as to the cause of the Optionee’s discharge and the damage done to the Company shall be final, binding and conclusive. No decision of the Board, however, shall affect in any manner the finality of the discharge of the Optionee by the Company. For purposes of this Section 6, reference to the “Company” shall include any Subsidiary.
7.
Right of Repurchase
. The provisions of Section 10(a) of the Plan shall not apply to shares acquired on the exercise of this Option as long as shares of the Company’s Common Stock are publicly traded.
8.
Confidentiality
. The Optionee hereby agrees that the entire contents of this Agreement are confidential at all times, and that the Option’s exercisability is conditioned on his or her compliance with this covenant; provided, however, that the Optionee may disclose the contents of this Agreement to his or her spouse and to his or her legal and financial advisors.
9.
Compliance with Securities Act
. The Company shall not be obligated to sell or issue any shares of Common Stock or other securities pursuant to the exercise of this Option unless the shares of Common Stock or other securities with respect to which this Option is being exercised are at that time effectively registered or exempt from registration under the Securities Act and applicable state securities laws. In the event shares or other securities shall be issued that shall not be so registered, the Optionee hereby represents, warrants and agrees that he or she will receive such shares or other securities for investment and not with a view to their resale or distribution, and will execute an appropriate investment letter satisfactory to the Company and its counsel.
The Optionee further hereby agrees that as a condition to the purchase of shares upon exercise of this Option, he or she will, if requested, execute an agreement in a form acceptable to the Company to the effect that the shares shall be subject to any underwriter’s lock-up agreement in connection with a public offering of any securities of the Company that may from time to time apply to shares held by officers and employees of the Company.
10.
Legends
. The Optionee hereby acknowledges that the stock certificate or certificates evidencing shares of Common Stock or other securities issued pursuant to any exercise of this Option may bear a legend setting forth the restrictions on their transferability described in Section 9 hereof, if such restrictions are then in effect.
11.
Rights as Stockholder
. The Optionee shall have no rights as a stockholder with respect to any shares of Common Stock or other securities covered by this Option until the date of issuance of a certificate to him or her for such shares or other securities. No adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued, except as required or permitted by Section 8 of the Plan.
12.
Withholding Taxes
. The Optionee hereby agrees, as a condition to any exercise of this Option, to provide to the Company an amount sufficient to satisfy its obligation to withhold certain federal, state or local taxes arising by reason of such exercise (the “Withholding Amount”), if any, by (a) authorizing the Company and/or a Subsidiary to withhold the Withholding Amount from his or her cash compensation or (b) remitting the Withholding Amount to the Company in cash; provided, however, that to the extent that the Withholding Amount is not provided by one or a combination of such methods, the Company in its sole and absolute discretion may refuse to issue such shares of Common Stock or may withhold from the shares of Common Stock delivered upon exercise of this Option that number of shares having a Fair Market Value, on the date of exercise, sufficient to eliminate any deficiency in the Withholding Amount; and provided, further, that the Fair Market Value of Common Stock withheld shall not exceed an amount in excess of the minimum required withholding.
13.
Notice of Disqualifying Disposition
. If this Option is intended to constitute an incentive stock option, the Optionee agrees to notify the Company promptly in the event that he or she sells, transfers, exchanges or otherwise disposes of any shares of Common Stock issued upon exercise of the Option before the later of (a) the second anniversary of the date of grant of the Option and (b) the first anniversary of the date the shares were issued upon his or her exercise of the Option.
14.
Termination or Amendment of Plan
. The Board may in its sole and absolute discretion at any time terminate or from time to time modify and amend the Plan, but no such termination or amendment will adversely affect rights or impose new obligations under this Option, to the extent it is then in effect and unexercised without the consent of the Optionee.
15.
Effect Upon Employment and Performance of Services
. Nothing in this Option or the Plan shall be construed to impose any obligation upon the Company or any Subsidiary to employ or utilize the services of the Optionee or to retain the Optionee in its employ or to engage or retain the services of, or continue its involvement with, the Optionee.
16.
Time for Acceptance
. Unless the Optionee shall evidence his or her acceptance of this Option by executing this Agreement and returning it to the Company within thirty days after its delivery to him or her, the Option and this Agreement shall, in the discretion of the Company, be null and void.
17.
General Provisions
.
(a)
Amendment; Waivers
. This Agreement, including the Plan, contains the full and complete understanding and agreement of the parties hereto as to the subject matter hereof and, except as otherwise permitted by the express terms of the Plan and this Agreement, it may not be modified or amended, nor may any provision hereof be waived, except by a further written agreement duly signed by each of the parties; provided, however, that a modification or amendment that does not adversely affect the rights of the Optionee hereunder, as they may exist immediately before the effective date of the modification or amendment, shall be effective upon written notice of its provisions to the Optionee. The waiver by either of the parties hereto of any provision hereof in any instance shall not operate as a waiver of any other provision hereof or in any other instance.
(b)
Binding Effect
. This Agreement shall inure to the benefit of and be binding upon the parties hereto and, to the extent provided herein and in the Plan, their respective heirs, executors, administrators, representatives, successors and assigns.
(c)
Construction
. This Agreement is to be construed in accordance with the terms of the Plan. In case of any conflict between the Plan and this Agreement, the Plan shall control. The titles of the sections of this Agreement are included for convenience only and shall not be construed as modifying or affecting their provisions. The masculine gender shall include both sexes; the singular shall include the plural and the plural the singular unless the context otherwise requires. Capitalized terms not defined herein shall have the meanings given to them in the Plan.
(d)
Governing Law
. This Agreement shall be governed by and construed and enforced in accordance with the applicable laws of the State of New York (other than the law governing conflict of law questions) except to the extent the laws of any other jurisdiction are mandatorily applicable.
(e)
Data Privacy
. By entering into this Agreement and except as otherwise provided in any data transfer agreement entered into by the Company, the Optionee: (i) authorizes the Company, and any agent of the Company administering the Plan or providing Plan recordkeeping services, to disclose to the Company such information and data as the Company shall request in order to facilitate the grant of options and the administration of the Plan; (ii) waives any data privacy rights he or she may have with respect to such information; and (iii) authorizes the Company to store and transmit such information in electronic form. For purposes of this Section 17(e), the term “Company” refers to the Company and each of its Subsidiaries.
(f)
Notices
. Unless otherwise provided or permitted by the Company or the Committee, as applicable, any notice in connection with this Agreement shall be deemed to have been properly delivered if it is in writing and is delivered by hand or facsimile or sent by registered mail to the party addressed as follows, unless another address has been substituted by notice so given:
To the Optionee: To his or her address as listed on the books of the Company
To the Company: 1431 7
th
Street
Suite 203
Santa Monica, CA 90401
Attention: Damon Stein
Facsimile: (310) 496-2436
(g)
Version Number
. This document is Version 2 of the Accelerize Inc. Stock Option Plan Stock Option Agreement.
Schedule 1 to Stock Option Agreement
Name of Optionee:
Date of Grant of Option:
Version: 2
Number of shares of Common Stock:
Type of Option: Nonqualified Stock Option
Exercise Price (per share): $
|
Term:
|
Subject to Section 3 of the Stock Option Agreement and Section 5 of the Plan, this Option expires at 5:00 p.m. Eastern Time on ____________, 202__.
|
Vesting: Quarterly over 4 years (No options vest until ____________, 2016):
|
January 1, 2016
|
25.00%
|
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April 1, 2016
|
31.25%
|
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July 1, 2016
|
37.50%
|
|
October 1, 2016
|
43.75%
|
|
January 1, 2017
|
50.00%
|
|
April 1, 2017
|
56.25%
|
|
July 1, 2017
|
62.50%
|
|
October 1, 2017
|
68.75%
|
|
January 1, 2018
|
75.00%
|
|
April 1, 2018
|
81.25%
|
|
July 1, 2018
|
87.50%
|
|
October 1, 2018
|
93.75%
|
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January 1, 2019
|
100.00%
|
* * * * *
IN WITNESS WHEREOF, the Optionee has executed this Agreement and the Company has caused this Agreement to be executed by its officer thereunto duly authorized, all as of the date first set forth above.
ACCELERIZE INC.
By:________________________
Brian Ross, CEO
Exhibit A to Stock Option Agreement
[FORM FOR EXERCISE OF STOCK OPTION]
Accelerize Inc.
20411 SW Birch Ste. 250
Newport Beach, CA 92660
Attention: Brian Ross
Re: Exercise of Option under the Accelerize Inc. Stock Option Plan
Gentlemen:
I hereby elect to exercise the stock option granted to me pursuant and subject to the terms and conditions of the Stock Option Agreement between the Company and me dated as of _______, 20__ (the “
Option Agreement
”) by and to the extent of purchasing _____ shares of Common Stock, $.001 par value per share, of Accelerize Inc. (the “
Company
”) for the exercise price of $_____ per share.
Enclosed please find payment, in cash or in such other property as is permitted under the Option Agreement and the Accelerize Inc. Stock Option Plan (the “
Plan
”), of the purchase price for said shares. If I am making payment of any part of the purchase price by delivery of shares of Common Stock of the Company, I hereby confirm that I have investigated and considered the possible income tax consequences of making payments in that form. I agree to provide the Company an amount sufficient to satisfy the obligation of the Company to withhold certain taxes, as provided in Section 12 of the Option Agreement.
Also enclosed are executed letters concerning my investment intent representations.
I specifically confirm to the Company that the shares shall be held subject to all of the terms and conditions of the Option Agreement.
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Very truly yours,
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Date
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(Signed by the Employee or other
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party duly exercising option)
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[Date]
Accelerize Inc.
20411 SW Birch Ste. 250
Newport Beach, CA 92660
Attention: Brian Ross
Gentlemen:
In connection with my acquisition of [Number] shares of the Common Stock, $.001 par value per share (the “
Shares
”), of Accelerize Inc. (the “
Company
”), [from the Company at a price of [Amount] per share/from [Name of Seller] for a purchase price of [Amount] per share]/upon the exercise of a stock option at an exercise price of [Amount] per share], I hereby represent to the Company that I am acquiring the Shares to be purchased for my own account for investment and not with a view to, or for resale in connection with, any distribution thereof or the grant of any participation therein, and that I have no present intention of distributing or reselling any thereof, or granting any participation therein. My acquisition of the Shares will be a representation by me to the Company that I am then acquiring the Shares for my own account for investment with no intention of making any distribution thereof. I represent that I understand that there is no trading market for shares of the Company Common Stock, there is no assurance that such market will ever develop, and that any routine resales of the Shares made in reliance upon Rule 144 under the Securities Act of 1933, as amended (the “
Act
”), if Rule 144 becomes available with respect to shares of the Company’s Common Stock, can be made only in limited amounts in accordance with the terms and conditions of that Rule, and as long as Rule 144 is not available with respect to the Shares, absent registration, compliance with Regulation A under the Act or some other exemption will be required for any resale. The Company is under no obligation to me to register the Shares under the Act, to comply with any exemption under the Act or to furnish me with any information necessary to enable me to sell shares of the Company’s Common Stock under Rule 144.
I represent that I fully understand the nature of the risks involved in purchasing the Shares, I am qualified by my own experience to evaluate investments of this type and I am able to bear the economic risks of this investment which may include a total loss of the investment or holding the shares indefinitely. I represent and warrant that I have determined that my investment is a suitable one for me to make in light of all the circumstances, further represent that I have had the opportunity to ask questions of and receive answers from the officers and other employees of the Company regarding the terms and conditions of this purchase as well as the affairs of the Company and related matters and that I have had the opportunity to obtain additional information necessary to verify the accuracy of the information so obtained.
I further represent that I have full authority to carry out this transaction without the consent of any other person.
- 3 -
Exhibit 10.4
ACCELERIZE INC.
Accelerize Inc. Stock Option Plan
Stock Option Agreement
This Stock Option Agreement (this “Agreement”) is made as of the date shown as the “Date of Grant of Option” on Schedule 1 attached hereto and is between Accelerize Inc., a Delaware corporation
(the “Company”), and the individual identified on Schedule 1 (the “Optionee”).
WITNESSETH THAT:
WHEREAS, the Company has instituted the “Accelerize Inc. Stock Option Plan,” as amended and in effect from time to time (the “Plan”); and
WHEREAS, the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of the Company has granted to the Optionee a stock option upon the terms and subject to the conditions of this Agreement and of the Plan (which is hereby incorporated herein).
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, the Company and the Optionee agree as follows:
1.
Grant
. Subject to the terms and conditions hereinafter set forth and the terms and conditions of the Plan, the Company hereby grants to the Optionee an option (the “Option”) to purchase from the Company the “Number of Shares of Common Stock” as specified on Schedule 1 of the Common Stock, $.001 par value per share (the “Common Stock”), of the Company. If so provided in the “Type of Option” shown on Schedule 1, this Option is intended to constitute an incentive stock option and to qualify for special federal income tax treatment under Section 422 of the Code.
2.
Exercise Price and Further Conditions
.
(a) This Option may be exercised at the “Exercise Price (per share)” as specified on Schedule 1, subject to adjustment as provided herein and in the Plan.
(b) The exercise of this Option shall, if so requested by the Committee at the time of exercise, be conditioned on the Optionee’s execution of certain letter agreements or other documents as provided in Section 10(b) of the Plan.
3.
Term and Exercisability of Option
.
(a) The Option may be exercised only to the extent vested, as provided under “Vesting” on Schedule 1; provided, however, that the Optionee’s employment, contractual or other service relationship with the Company (the “Relationship”) must be in effect on a given date in order for any scheduled increment in vesting to become effective.
An Option that is otherwise exercisable under the Plan and this Agreement must be exercised within three months of the termination of the Relationship; provided, however, that if the Relationship terminates by reason of the Optionee’s death or disability (as defined in the Plan), the unexercised portion of the Option that is otherwise exercisable on the date of termination of the Relationship shall remain exercisable thereafter for one year.
(b) This Option shall fully vest and become exercisable immediately prior to the effective date of a Change in Control. For purposes of this Agreement, the term “Change in Control” shall mean (i) the sale of all or substantially all of the assets of the Company, (ii) the sale of more than fifty percent of the outstanding capital stock of the Company in a non-public sale, (iii) the dissolution or liquidation of the Company or (iv) any merger, share exchange, consolidation or other reorganization or business combination of the Company if immediately after such transaction either (A) persons who were directors of the Company immediately prior to such transaction do not constitute at least a majority of the directors of the surviving entity or (B) persons who hold a majority of the voting capital stock of the surviving entity are not persons who held a majority of the voting capital stock of the Company immediately prior to the transaction; provided, however, that the term “Change in Control” shall not include a public offering of capital stock of the Company that is effected pursuant to a registration statement filed with, and declared effective by, the Securities and Exchange Commission under the Securities Act of 1933, as amended.
(c) Notwithstanding Sections 3(a) and 3(b) above, if the Relationship terminates without cause (as defined in an applicable employment agreement), the Committee may, in its sole discretion, (i) accelerate vesting or provide that vesting shall continue and/or (ii) extend the exercisability of the Option.
(d) For purposes of this Section 3, the term “Company” refers to the Company and all Subsidiaries.
4.
Method of Exercise
. Prior to its expiration and to the extent that the right to purchase shares of Common Stock is exercisable hereunder, this Option may be exercised from time to time by notice acceptable to the Company substantially in the form attached hereto as Exhibit A or in such other form as the Company may from time to time announce, stating the number of shares with respect to which this Option is being exercised and accompanied by either (a) payment in full of the exercise price for the number of shares to be delivered by any method described in Section 5(c) of the Plan, including, without limitation, payment in whole or in part by delivery of shares already owned by the Optionee or by delivery of a recourse promissory note to the Company in the form and on the terms specified by the Company or (b) a description of a “cashless exercise” procedure and such other documents and undertakings as are necessary to satisfy that procedure. Any exercise of less than all vested shares must be for a minimum of ten shares. If the Optionee (or other person entitled to exercise this Option) fails to pay for and accept delivery of all of the shares specified in such notice upon tender of delivery thereof, his or her right to exercise this Option with respect to such shares not paid for may be terminated by the Company.
As soon as practicable after its receipt of such notice, the Company shall, without transfer or issue tax to the Optionee (or other person entitled to exercise this Option), deliver to the Optionee (or other person entitled to exercise this Option), at the principal executive offices of the Company or such other place as shall be mutually acceptable, a stock certificate or certificates for such shares out of theretofore authorized but unissued shares or reacquired shares of its Common Stock as the Company may elect; provided, however, that the time of such delivery may be postponed by the Company for such period as may be required for it with reasonable diligence to comply with any applicable requirements of law.
5.
Nonassignability of Option
. This Option shall not be assignable or transferable by the Optionee except by will or by the laws of descent and distribution or as permitted by the Committee in its discretion pursuant to the first sentence of Section 5(g) of the Plan. During the life of the Optionee, this Option shall be exercisable only by him or her, by a conservator or guardian duly appointed for him or her by reason of the Optionee’s incapacity or by the person appointed by the Optionee in a durable power of attorney acceptable to the Company’s counsel.
6.
Forfeiture for Dishonesty or Termination for Cause
. Notwithstanding any provision of this Agreement to the contrary, if the Board determines, after full consideration of the facts, that:
(a) the Optionee has been engaged in fraud, embezzlement or theft in the course of his or her employment by or involvement with the Company, has made unauthorized disclosure of trade secrets or other proprietary information of the Company or of a third party who has entrusted such information to the Company or has been convicted of a felony or any crime that reflects negatively upon the Company; or
(b) the Optionee has violated the terms of any employment, noncompetition, nonsolicitation, confidentiality, nondisclosure or other agreement with the Company to which he or she is a party; or
(c) the employment or involvement with the Company of the Optionee was terminated for “cause,” as defined in any agreement with the Optionee governing his or her Relationship, or if there is no such agreement, as determined by the Board, which may determine that “cause” includes among other matters the willful failure or refusal of the Optionee to perform and carry out his or her assigned duties and responsibilities diligently and in a manner satisfactory to the Board;
then the Optionee’s right to exercise this Option shall terminate as of the date of such act (in the case of (a) or (b)) or such termination (in the case of (c)), the Optionee shall forfeit the unexercised portion of this Option and the Company shall have the right to repurchase all or any part of the shares of Common Stock acquired by the Optionee upon any previous exercise of this Option, at a price equal to the lower of (x) the amount paid to the Company upon such exercise, or (y) the Fair Market Value of such shares at the time of repurchase. If the Company asserts that the Optionee’s behavior falls within the provisions of the clauses above and the Optionee has exercised or attempts to exercise this Option prior to consideration of the application of this Section 6 or prior to a decision of the Board, the Company shall not be required to recognize such exercise until the Board has made its decision and, in the event any exercise shall have taken place, it shall be of no force and effect (and shall be void
ab
initio
) if the Board makes an adverse determination; provided, however, that if the Board finds in favor of the Optionee then the Optionee will be deemed to have exercised this Option retroactively as of the date he or she originally gave notice of his or her attempt to exercise or actual exercise, as the case may be. The decision of the Board as to the cause of the Optionee’s discharge and the damage done to the Company shall be final, binding and conclusive. No decision of the Board, however, shall affect in any manner the finality of the discharge of the Optionee by the Company. For purposes of this Section 6, reference to the “Company” shall include any Subsidiary.
7.
Right of Repurchase
. The provisions of Section 10(a) of the Plan shall not apply to shares acquired on the exercise of this Option as long as shares of the Company’s Common Stock are publicly traded.
8.
Confidentiality
. The Optionee hereby agrees that the entire contents of this Agreement are confidential at all times, and that the Option’s exercisability is conditioned on his or her compliance with this covenant; provided, however, that the Optionee may disclose the contents of this Agreement to his or her spouse and to his or her legal and financial advisors.
9.
Compliance with Securities Act
. The Company shall not be obligated to sell or issue any shares of Common Stock or other securities pursuant to the exercise of this Option unless the shares of Common Stock or other securities with respect to which this Option is being exercised are at that time effectively registered or exempt from registration under the Securities Act and applicable state securities laws. In the event shares or other securities shall be issued that shall not be so registered, the Optionee hereby represents, warrants and agrees that he or she will receive such shares or other securities for investment and not with a view to their resale or distribution, and will execute an appropriate investment letter satisfactory to the Company and its counsel.
The Optionee further hereby agrees that as a condition to the purchase of shares upon exercise of this Option, he or she will, if requested, execute an agreement in a form acceptable to the Company to the effect that the shares shall be subject to any underwriter’s lock-up agreement in connection with a public offering of any securities of the Company that may from time to time apply to shares held by officers and employees of the Company.
10.
Legends
. The Optionee hereby acknowledges that the stock certificate or certificates evidencing shares of Common Stock or other securities issued pursuant to any exercise of this Option may bear a legend setting forth the restrictions on their transferability described in Section 9 hereof, if such restrictions are then in effect.
11.
Rights as Stockholder
. The Optionee shall have no rights as a stockholder with respect to any shares of Common Stock or other securities covered by this Option until the date of issuance of a certificate to him or her for such shares or other securities. No adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued, except as required or permitted by Section 8 of the Plan.
12.
Withholding Taxes
. The Optionee hereby agrees, as a condition to any exercise of this Option, to provide to the Company an amount sufficient to satisfy its obligation to withhold certain federal, state or local taxes arising by reason of such exercise (the “Withholding Amount”), if any, by (a) authorizing the Company and/or a Subsidiary to withhold the Withholding Amount from his or her cash compensation or (b) remitting the Withholding Amount to the Company in cash; provided, however, that to the extent that the Withholding Amount is not provided by one or a combination of such methods, the Company in its sole and absolute discretion may refuse to issue such shares of Common Stock or may withhold from the shares of Common Stock delivered upon exercise of this Option that number of shares having a Fair Market Value, on the date of exercise, sufficient to eliminate any deficiency in the Withholding Amount; and provided, further, that the Fair Market Value of Common Stock withheld shall not exceed an amount in excess of the minimum required withholding.
13.
Notice of Disqualifying Disposition
. If this Option is intended to constitute an incentive stock option, the Optionee agrees to notify the Company promptly in the event that he or she sells, transfers, exchanges or otherwise disposes of any shares of Common Stock issued upon exercise of the Option before the later of (a) the second anniversary of the date of grant of the Option and (b) the first anniversary of the date the shares were issued upon his or her exercise of the Option.
14.
Termination or Amendment of Plan
. The Board may in its sole and absolute discretion at any time terminate or from time to time modify and amend the Plan, but no such termination or amendment will adversely affect rights or impose new obligations under this Option, to the extent it is then in effect and unexercised without the consent of the Optionee.
15.
Effect Upon Employment and Performance of Services
. Nothing in this Option or the Plan shall be construed to impose any obligation upon the Company or any Subsidiary to employ or utilize the services of the Optionee or to retain the Optionee in its employ or to engage or retain the services of, or continue its involvement with, the Optionee.
16.
Time for Acceptance
. Unless the Optionee shall evidence his or her acceptance of this Option by executing this Agreement and returning it to the Company within thirty days after its delivery to him or her, the Option and this Agreement shall, in the discretion of the Company, be null and void.
17.
General Provisions
.
(a)
Amendment; Waivers
. This Agreement, including the Plan, contains the full and complete understanding and agreement of the parties hereto as to the subject matter hereof and, except as otherwise permitted by the express terms of the Plan and this Agreement, it may not be modified or amended, nor may any provision hereof be waived, except by a further written agreement duly signed by each of the parties; provided, however, that a modification or amendment that does not adversely affect the rights of the Optionee hereunder, as they may exist immediately before the effective date of the modification or amendment, shall be effective upon written notice of its provisions to the Optionee. The waiver by either of the parties hereto of any provision hereof in any instance shall not operate as a waiver of any other provision hereof or in any other instance.
(b)
Binding Effect
. This Agreement shall inure to the benefit of and be binding upon the parties hereto and, to the extent provided herein and in the Plan, their respective heirs, executors, administrators, representatives, successors and assigns.
(c)
Construction
. This Agreement is to be construed in accordance with the terms of the Plan. In case of any conflict between the Plan and this Agreement, the Plan shall control. The titles of the sections of this Agreement are included for convenience only and shall not be construed as modifying or affecting their provisions. The masculine gender shall include both sexes; the singular shall include the plural and the plural the singular unless the context otherwise requires. Capitalized terms not defined herein shall have the meanings given to them in the Plan.
(d)
Governing Law
. This Agreement shall be governed by and construed and enforced in accordance with the applicable laws of the State of New York (other than the law governing conflict of law questions) except to the extent the laws of any other jurisdiction are mandatorily applicable.
(e)
Data Privacy
. By entering into this Agreement and except as otherwise provided in any data transfer agreement entered into by the Company, the Optionee: (i) authorizes the Company, and any agent of the Company administering the Plan or providing Plan recordkeeping services, to disclose to the Company such information and data as the Company shall request in order to facilitate the grant of options and the administration of the Plan; (ii) waives any data privacy rights he or she may have with respect to such information; and (iii) authorizes the Company to store and transmit such information in electronic form. For purposes of this Section 17(e), the term “Company” refers to the Company and each of its Subsidiaries.
(f)
Notices
. Unless otherwise provided or permitted by the Company or the Committee, as applicable, any notice in connection with this Agreement shall be deemed to have been properly delivered if it is in writing and is delivered by hand or facsimile or sent by registered mail to the party addressed as follows, unless another address has been substituted by notice so given:
To the Optionee: To his or her address as listed on the books of the Company
To the Company: 1431 7
th
Street
Suite 203
Santa Monica, CA 90401
Attention: Damon Stein
Facsimile: (310) 496-2436
(g)
Version Number
. This document is Version 2 of the Accelerize Inc. Stock Option Plan Stock Option Agreement.
Schedule 1 to Stock Option Agreement
Name of Optionee:
Date of Grant of Option:
Version: 2
Number of shares of Common Stock:
Type of Option: Nonqualified Stock Option
Exercise Price (per share): $
|
Term:
|
Subject to Section 3 of the Stock Option Agreement and Section 5 of the Plan, this Option expires at 5:00 p.m. Eastern Time on _________, 202_.
|
Vesting: Quarterly over 4 years (No options vest until __________, 2016):
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April 1, 2016
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25.00%
|
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July 1, 2016
|
31.25%
|
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October 1, 2016
|
37.50%
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January 1, 2017
|
43.75%
|
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April 1, 2017
|
50.00%
|
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July 1, 2017
|
56.25%
|
|
October 1, 2017
|
62.50%
|
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January 1, 2018
|
68.75%
|
|
April 1, 2018
|
75.00%
|
|
July 1, 2018
|
81.25%
|
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October 1, 2018
|
87.50%
|
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January 1, 2019
|
93.75%
|
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April 1, 2019
|
100.00%
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* * * * *
IN WITNESS WHEREOF, the Optionee has executed this Agreement and the Company has caused this Agreement to be executed by its officer thereunto duly authorized, all as of the date first set forth above.
ACCELERIZE INC.
By:________________________
Brian Ross, CEO
Exhibit A to Stock Option Agreement
[FORM FOR EXERCISE OF STOCK OPTION]
Accelerize Inc.
20411 SW Birch Ste. 250
Newport Beach, CA 92660
Attention: Brian Ross
Re: Exercise of Option under the Accelerize Inc. Stock Option Plan
Gentlemen:
I hereby elect to exercise the stock option granted to me pursuant and subject to the terms and conditions of the Stock Option Agreement between the Company and me dated as of _______, 20__ (the “
Option Agreement
”) by and to the extent of purchasing _____ shares of Common Stock, $.001 par value per share, of Accelerize Inc. (the “
Company
”) for the exercise price of $_____ per share.
Enclosed please find payment, in cash or in such other property as is permitted under the Option Agreement and the Accelerize Inc. Stock Option Plan (the “
Plan
”), of the purchase price for said shares. If I am making payment of any part of the purchase price by delivery of shares of Common Stock of the Company, I hereby confirm that I have investigated and considered the possible income tax consequences of making payments in that form. I agree to provide the Company an amount sufficient to satisfy the obligation of the Company to withhold certain taxes, as provided in Section 12 of the Option Agreement.
Also enclosed are executed letters concerning my investment intent representations.
I specifically confirm to the Company that the shares shall be held subject to all of the terms and conditions of the Option Agreement.
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Very truly yours,
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Date
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(Signed by the Employee or other
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party duly exercising option)
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[Date]
Accelerize Inc.
20411 SW Birch Ste. 250
Newport Beach, CA 92660
Attention: Brian Ross
Gentlemen:
In connection with my acquisition of [Number] shares of the Common Stock, $.001 par value per share (the “
Shares
”), of Accelerize Inc. (the “
Company
”), [from the Company at a price of [Amount] per share/from [Name of Seller] for a purchase price of [Amount] per share]/upon the exercise of a stock option at an exercise price of [Amount] per share], I hereby represent to the Company that I am acquiring the Shares to be purchased for my own account for investment and not with a view to, or for resale in connection with, any distribution thereof or the grant of any participation therein, and that I have no present intention of distributing or reselling any thereof, or granting any participation therein. My acquisition of the Shares will be a representation by me to the Company that I am then acquiring the Shares for my own account for investment with no intention of making any distribution thereof. I represent that I understand that there is no trading market for shares of the Company Common Stock, there is no assurance that such market will ever develop, and that any routine resales of the Shares made in reliance upon Rule 144 under the Securities Act of 1933, as amended (the “
Act
”), if Rule 144 becomes available with respect to shares of the Company’s Common Stock, can be made only in limited amounts in accordance with the terms and conditions of that Rule, and as long as Rule 144 is not available with respect to the Shares, absent registration, compliance with Regulation A under the Act or some other exemption will be required for any resale. The Company is under no obligation to me to register the Shares under the Act, to comply with any exemption under the Act or to furnish me with any information necessary to enable me to sell shares of the Company’s Common Stock under Rule 144.
I represent that I fully understand the nature of the risks involved in purchasing the Shares, I am qualified by my own experience to evaluate investments of this type and I am able to bear the economic risks of this investment which may include a total loss of the investment or holding the shares indefinitely. I represent and warrant that I have determined that my investment is a suitable one for me to make in light of all the circumstances, further represent that I have had the opportunity to ask questions of and receive answers from the officers and other employees of the Company regarding the terms and conditions of this purchase as well as the affairs of the Company and related matters and that I have had the opportunity to obtain additional information necessary to verify the accuracy of the information so obtained.
I further represent that I have full authority to carry out this transaction without the consent of any other person.
- 3 -
Exhibit 10.5
AMENDMENT NO. 4
TO
EMPLOYMENT AGREEMENT
This Amendment No. 4 (this "Amendment") to an Employment Agreement (the "Employment Agreement") entered as of February 10, 2014, by and between Accelerize Inc., a Delaware corporation with headquarters at 20411 SW Birch St. Ste. 250, Newport Beach, CA 92660 (the “Company”), and Santi Pierini, a natural person, residing at 1224 Morningside D, Laguna Beach, CA 92651 (the “Employee”), is entered as of this 6th day of May 2015. Each of the Company and the Employee may be referred to hereinafter as a "Party" and collectively, the "Parties".
WHEREAS, the Parties have entered the Employment Agreement as of February 10, 2014; and
WHEREAS, the Parties now wish to adjust Section 6 Termination of Employment by increasing the Employee severance payment.
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:
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1.
|
Section 6 (a) of the Employment Agreement is hereby replaced in its entirety with the following:
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Termination Without Cause
. During the Term, this Agreement and Employee’s employment may be terminated by Company without Cause (as hereinafter defined) by giving written notice of such termination to Employee. In the event that the Company terminates Employee’s employment without Cause during the Term, the Company shall, subject to Employee’s execution and delivery of a general release in favor of the Company and its affiliates substantially in the form attached hereto as Exhibit A, and Employee’s compliance with the terms of this Agreement, pay to Employee a severance payment equal to One Hundred percent (100%) of the Annual Base Salary, payable in accordance with the Company’s normal payroll practices (or, at the Company's option, in one lump sum payment, payable within 45 days, discounted to present value using a 5% discount rate). Notwithstanding anything in the foregoing to the contrary, Employee will be entitled to such payments only if Employee has complied in full with the terms of this Agreement following Employee’s termination (
e.g.
, Confidentiality, Return of Property obligations, etc.). In addition, in the event that the Company terminates Employee’s employment without Cause during the Term Employee shall be entitled to receive all Payable Amounts (which shall become due and payable on the date of termination).
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2.
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All other terms and conditions of the Employment Agreement shall remain in full force and effect.
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IN WITNESS WHEREOF, the Parties hereto have executed or caused to be executed this Agreement as of the date first above written.
- 2 -
EMPLOYEE:
/s/ Santi Pierini
___________________
Santi Pierini
ACCELERIZE INC.
By:
/s/ Brian Ross
_________________
Name: Brian Ross
Title: Chief Executive Officer
Exhibit 31.1
CERTIFICATION
Pursuant to Rule 13a-14(a) and 15d-14(a)
Under the Securities Exchange Act of 1934, as Amended
I, Brian Ross, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2015 of Accelerize Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 11, 2015
/s/ Brian Ross
Brian Ross
President and Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATION
Pursuant to Rule 13a-14(a) and 15d-14(a)
Under the Securities Exchange Act of 1934, as Amended
I, Michael Lin, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2015 of Accelerize Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 11, 2015
/s/ Michael Lin
Michael Lin
Chief Financial Officer
(Principal Financial Officer)
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report (the “Report”) of Accelerize Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2015 as filed with the Securities and Exchange Commission on the date hereof, I, Brian Ross, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
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1.
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
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2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: May 11, 2015
|
By:
/s/ Brian Ross
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Brian Ross
President and Chief Executive Officer
(Principal Executive Officer)
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Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report (the “Report”) of Accelerize Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2015 as filed with the Securities and Exchange Commission on the date hereof, I, Michael Lin, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
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Date: May 11, 2015
|
By:
/s/ Michael Lin
|
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Michael Lin
Chief Financial Officer
(Principal Financial Officer)
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