EX-10.7 11 s117350_ex10-7.htm EXHIBIT 10.7

  

Exhibit 10.7 

 

FIRST AMENDMENT
TO
LOAN AND SECURITY AGREEMENT

 

This First Amendment to Loan and Security Agreement is entered into as of February 17, 2017 (the "Amendment"), by and between SellPoints, Inc. ("Borrower"), Montage Capital II, L.P. ("Montage") and Partners for Growth IV, L.P. ("PFG"). Each of Montage and PFG are also referred to as a "Lender" and collectively referred to as the "Lenders".

 

RECITALS

 

Borrower and Lender are parties to that certain Loan and Security Agreement dated as of September 28, 2016 and as amended from time to time (the "Agreement"). The parties desire to amend the Agreement in accordance with the terms of this Amendment.

 

NOW, THEREFORE, the parties agree as follows:

 

1.Section 1.1 of the Agreement is amended and restated in its entirety to read as follows:

 

1.1           Advances. Subject to the terms and conditions of this Agreement, Lenders will make its Pro Rata Share of Advances to Borrower in the aggregate principal amount of $5,000,000.

 

(a)          On or around the date of this Agreement, an Advance in the principal amount of $3,600,000 (the "First Tranche Advance") shall be made to Borrower.

 

(b)          An additional Advance in the principal amount of $400,000 (the "Second Tranche Advance") shall be made to Borrower on or after February 17, 2017.

 

(c)          A third Advance of up to $500,000 may be made to Borrower on or after March 31, 2017 but before June 30, 2017 (the "Third Tranche Advance") upon Borrower's request and subject to the terms of this Agreement, so long as no Event of Default has occurred and is continuing, and Borrower's Total Net Revenue for the three month period ending March 31, 2017 is at least 85% of its projected Total Net Revenue for such period as set forth in Borrower's board approved financial projections attached hereto as Exhibit C.

 

(d)          A fourth Advance of up to $500,000 may be made to Borrower on or after June 30, 2017 but before August 31, 2017 (the "Fourth Tranche Advance") upon Borrower's request and subject to the terms of this Agreement, so long as no Event of Default has occurred and is continuing, and Borrower's Total Net Revenue for the six month period ending June 30, 2017 is at least 85% of its projected Total Net Revenue for such period as set forth in Borrower's board approved financial projections attached hereto as Exhibit C and Borrower has received at least $500,000 in cash proceeds from the sale and issuance of its equity securities or convertible notes that constitute Subordinated Debt.

 

 

 

 

(e)          To request any Advance after the Closing Date, Borrower shall notify Lenders by 3:00 p.m. Pacific time at least three business days before the date of the Advance, which will be a business day. Lenders will transfer the amount of each Advance to Borrower's account subject to a control agreement in favor of Lenders. The proceeds of the initial Advance shall be used to repay all outstanding amounts under Borrower's existing secured loan facility owing to Pacific Western Bank (successor by acquisition of Square 1 Bank); with any remaining Advances used for general corporate purposes and working capital purposes.

 

2.          The third sentence in Section 1.2(a) of the Agreement is amended and restated in its entirety to read as follows:

 

In addition to such interest payments, beginning on the earlier of (i) September 1, 2017 or (ii) the first day of the first month following the Amortization Trigger, Borrower shall make principal payments to Lenders in an amount equal to $117,000, plus (y) $19,230.77 if Borrower has received the Third Tranche Advance, and plus (z) $19,230.77, if Borrower has received the Fourth Tranche Advance.

 

3.          The following is added to the end of Section 1.3 of the Agreement:

 

On the date the Third Tranche Advance is loaned to Borrower, Borrower shall pay to Lenders a fee in the amount of $12,500, to be allocated between the Lenders in accordance with their respective Pro Rata Share.

 

4.          Section 5.3(b) of the Agreement is amended and restated in its entirety to read as follows

 

(b)          Adjusted EBITDA. Borrower's maximum Adjusted EBITDA loss for the trailing three month period ending on March 31, 2017 and April 30, 2017 shall not exceed $130,000 and $30,000 respectively. Borrower's minimum trailing three month Adjusted EBITDA (measured as of the last day of each month beginning with period ending May 31, 2017) shall be at least $1.

 

5.          The following definition is added to Section 14 of the Agreement:

 

"Adjusted EBITDA" means Borrower's earnings before interest, taxes, depreciation and amortization expenses, less capitalized software development expenses, as determined in accordance with GAAP, provided that the following shall be added back to Borrower's earnings: (i) all non-cash charges and expenses, including employee stock compensation expenses and (ii) all non-recurring expenses of Borrower as approved by Lenders on a case by case basis.

 

6.          Exhibit A to the Agreement is replaced in its entirety with the Exhibit A attached hereto.

 

7.          The Exhibit C attached hereto, which the parties acknowledge and agree are Borrower's board approved financial projections for 2017, is incorporated in its entirety as the Exhibit C to the Agreement.

 

8.          Unless otherwise defined, all initially capitalized terms in this Amendment shall be as defined in the Agreement. The Agreement, as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects. Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver of, or as an amendment of, any right, power, or remedy of Lender under the Agreement, as in effect prior to the date hereof. Borrower ratifies and reaffirms the continuing effectiveness of all agreements entered into in connection with the Agreement.

 

 2 

 

 

9.          Borrower represents and warrants that the representations and warranties contained in the Agreement are true and correct as of the date of this Amendment, and that no Event of Default has occurred and is continuing.

 

10.         This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a ".pdf' format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or ".pdf' signature page were an original hereof.

 

11.         As a condition to the effectiveness of this Amendment, Lender shall have received, in form and substance satisfactory to Lender, the following:

 

(a)          this Amendment, duly executed by Borrower;

 

(b)          warrants to purchase Borrower's stock issued to Lenders and its affiliates;

 

(c)          an amendment fee equal to $12,500 (to be allocated between the Lenders in accordance with their respective Pro Rata Share), plus an amount equal to all Lender Expenses incurred through the date of this Amendment; and

 

(d)          such other documents, and completion of such other matters, as Lender may reasonably deem necessary or appropriate.

 

[SIGNATURE PAGE FOLLOWS]

 

 3 

 

 

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first date above written.

 

  SELLPOINTS, INC.
   
  By:  /s/ Brian O’ Keefe        
   
  Name: Brian O’ Keefe
   
  Title: CEO

 

  MONTAGE CAPITAL II, L.P.
   
  By: /s/ Michael J. Rose    
   
  Name: Michael J. Rose
   
  Title: Managing Director

 

  PARTNERS FOR GROWTH IV, L.P.
   
  By: /s/ Andrew Kahn 
   
  Name: Andrew Kahn
   
  Title:  

 

 

 

 

EXHIBIT A
COMPLIANCE CERTIFICATE

 

Note: Please send all required reporting to:

 

Montage Capital II, L.P. and Partners For Growth IV, L.P.
900 East Hamilton Avenue, Suite 100   150 Pacific Avenue
Campbell, CA 95008   San Francisco, CA 94111
Fax: (408) 659-2318   Attn: Chief Financial Officer
Email: mrose@montagecapital.com   Fax (415) 781-0510; email: notices@pfgrowth.com

 

BORROWER: SellPoints Inc.

 

The undersigned authorized officer of SellPoints Inc. hereby certifies that in accordance with the terms and conditions of the Loan and Security Agreement between Borrower and Lenders (the “Agreement”). Borrower is in complete compliance for the period ending __________________ with all required covenants, except as noted below; and all representations and warranties of Borrower stated in the Agreement are true and correct in all material respects as of the date hereof (provided that any representations and warranties expressly referring to a specific date shall be true and correct in all material respects as of such specific date), except as noted below.

 

Attached herewith are the required documents supporting the above certification. The authorized officer further certifies that these are prepared in accordance with Generally Accepted Accounting Principles (GAAP) and are consistently applied from one period to the next except (i) as explained in an accompanying letter or footnotes and (ii) with respect to unaudited financial statements, for the absence of footnotes and subject to year-end audit adjustments.

 

Please indicate compliance status by circling Yes/No under “Complies” column.

 

REPORTING COVENANT   REQUIRED   COMPLIES
Monthly financial statements   Monthly within 30 days   Yes No
A/R & A/P Agings   Monthly within 30 days   Yes No
Deferred revenue schedule   Monthly within 30 days   Yes No
Compliance Certificate   Monthly within 30 days   Yes No
Annual financial statements (CPA Audited)   FYE within 180 days   Yes No
Annual financial projections for upcoming year   Within 30 days of FYE   Yes No
Tax returns   Within 15 days of filing   Yes No

 

 

 

 

FINANCIAL COVENANTS  REQUIRED   ACTUAL   COMPLIES 
                 
Minimum Unrestricted Cash  $500,000   $    Yes    No 
                     
Maximum Adjusted EBITDA Loss for trailing three months ending 3/31/17  $(130,000)  $    Yes    No 
Maximum Adjusted EBITDA Loss for trailing three months ending 4/30/17  $(30,000)  $    Yes    No 
Minimum trailing 3 month Adjusted EBITDA (measured monthly) beginning with period ending 5/31/17  $1   $    Yes    No 

  

Please attach any comments as additional pages.

 

  SellPoints Inc.
   
  Signature
   
  Name
   
  Title
   
  Date

 

 

 

 

EXHIBIT C

2017 Financial Projections

 

Sellpoints, Inc.

Financial Statements 2017 ———

 

    Jan     Feb     Mar     April     May     June     July     Aug     Sep     Oct     Nov     Dec     2017  
    Fcst     Fcst     Fcst     Fcst     Fcst     Fcst     Fcst     Fcst     Fcst     Fcst     Fcst     Fcst     Fcst  
                                                                               
Total Gross Revenue     3,473       3,482       3,490       3,504       3,517       3,530       3,543       3,556       3,568       3,579       3,590       3,601       42,433  
Syndication Revenue     205       206       206       206       206       207       207       207       207       208       208       208       2,481  
Retargeter     383       386       389       398       407       415       423       431       439       446       454       461       5,032  
PMA     145       150       155       160       164       169       173       177       181       185       189       192       2,039  
Recurring Revenues     733       742       750       764       777       790       803       816       828       839       850       861       9,553  
                                                                                                         
Creative Services     70       70       70       70       70       70       70       70       70       70       70       70       840  
ReTargeter Legacy     -       -       -       -       -       -     -       -       -       -       -       -       -  
PEEPs     170       170       170       170       170       170       170       170       170       170       170       170       2,040  
Hotelier Programs     300       300       300       300       300       300       300       300       300       300       300       300       3,600  
Total Net Revenues     1,273       1,282       1,290       1,304       1,317       1,330       1,343       1,356       1,368       1,379       1.390       1,401       16,033  
                                                                                                         
Syndication     140       139       137       135       133       132       130       128       126       125       123       121       1,569  
Retargeter     172       174       175       179       183       187       191       194       198       201       204       207       2,265  
PMA     138       143       147       152       156       160       164       168       172       176       179       183       1,938  
Creative Services     33       34       34       34       40       40       40       40       40       40       40       40       454  
Retailer Programs     290       290       290       290       290       290       290       290       290       290       290       290       3,480  
Gross Profit     773       779       783       790       802       809       815       820       826       832       837       841       9,706  
                                                                                                         
Sales     130       116       120       116       115       114       114       116       114       114       113       114       1,397  
Marketing     30       10       10       10       10       10       10       10       10       10       10       10       140  
PMA     105       104       106       107       107       108       109       111       108       108       108       111       1,291  
Engineering     63       61       56       44       44       44       44       44       44       43       43       44       573  
Creative Services     23       22       22       22       16       16       16       16       16       16       16       16       218  
Account Management     177       171       166       163       163       162       162       164       162       163       162       163       1,977  
Retargeter     85       85       96       98       98       99       102       110       109       111       112       114       1,21B
G&A     136       116       118       142       118       153       118       120       133       117       117       126       1,514  
Total SG&A Expenses     750       684       694       703       671       705       674       691       695       682       681       698       8,328  
                                                                                                         
EBITDA     23       95       89       87       131       104       141       130       131       149       155       143       1,378  
                                                                                                         
Interest Expense     (45 )     (45 )     (49 )     (53 )     (55 )     (53 )     (60 )     (60 )     (57 )     (57 )     (53 )     (53 )     (641 )
Depreciation and Amortization     (28 )     (26 )     (26 )     (28 )     (28 )     (28 )     (29 )     (29 )     (29 )     (30 )     (30 )     (30 )     (339 )
Other / Extraordinary     (25 )     (75                                                                                     (100 )
Net Income     (73)       (5T )     14       6       49       23       52       41       46       62       71       59       298  
                                                                                                         
Headcount     59       58       52       51       50       50       50       51       51       51       51       51          
                                                                                                         
Administration     4       4       3       3       3       3       3       3       3       3       3       3          
Engineering     12       12       8       7       7       7       7       7       7       7       7       7          
Perf Mktg & Analytics     10       11       11       11       11       11       11       11       11       11       11       11          
Sales & Marketing     11       10       9       9       9       9       9       9       9       9       9       9          
Creative Services     4       4       4       4       3       3       3       3       3       3       3       3          
Retargeter     4       4       5       5       5       5       5       6       6       6       6       6          
Account Management     14       13       12       12       12       12       12       12       12       12       12       12          
Total     59       58       52       51       50       50       50       51       51       51       51       51          
                                                                                                         
Net Change                                                                                                        
Administration     -               (1 )     (1 )     (1 )     (1 )     (1 )     (1 )     (1 )     (1 )     (1 )     (1 )        
Engineering     -       -        (4 )     (5 )     (5 )     (5 )     (5 )     (5 )     (5 )     (5 )     (5 )     (5 )        
Perf Mktg & Analytics     2       3       3       3       3       3       3       3       3       3       3       3          
Sales & Marketing     (2 )     (3 )     (0 )     (4 )     (4 )     (4 )     (4 )     (4 )     (4 )     (4 )     (4 )     (4 )        
Creative Services                                     (1 )     (1 )     (1 )     (1 )     (1 )     (1 )     (1 )     (1 )        
Retargeter     -       -       1       1       1       1       1       2       2       2       2       2          
Account Management     -       (1 )     (2 )     (2 )     (2 )     (2 )     (2     (2 )     (2 )     (2     (2 )     (2 )        
Total             (1 )     (7 )     (8 )     (9 )     (9 )     (9 )     (8 )     (8 )     (8 )     (8 )     (8 )        

 

 

 

 

   Jan   Feb   Mar   April   May   June   Jul   Aug   Sept   Oct   Nov   Dec 
   Feet   Fcst   Fcst   Fcst   Fcst   Fcst   Fcst   Fcst   Fcsl   Fcst   Fcst   Fcst 
                                                 
ASSETS                                                
Cash   750    805    615    1,158    1,075    1,120    2,111    2,114    2,018    1,873    1,766    1,667 
Accounts receivable   1,834    2,022    2,182    2,200    2,226    2,253    2,279    2,304    2,328    2,352    2,374    2,397 
Other   462    461    433    390    430    391    353    350    306    281    273    229 
Total Current Assets   3,046    3,288    3,230    3,748    3,732    3,764    4,742    4,767    4,652    4,506    4,413    4,293 
                                                             
Fixed Assets   132    132    132    132    132    132    132    132    132    132    132    132 

Accumulated

Depreciation

   87    90    93    96    99    102    105    108    111    114    117    120 
Fixed Assets, Net   45    42    39    36    33    30    27    24    21    18    15    12 
                                                             
Intangible Assets, net   737    730    722    715    707    700    692    685    677    670    662    654 
Software Development Costs   2,879    2,969    3,038    3,105    3,172    3,238    3,303    3,368    3,433    3,495    3,558    3,621 
Deposits & other assets   20    20    20    20    20    20    20    20    20    20    20    20 
TOTAL ASSETS   6,727    7,048    7,049    7,623    7,663    7,752    8,784    8,864    8,802    8,708    8,667    8600 
                                                             
LIABILITIES                                                            
Accounts payable   972    917    927    959    941    983    954    971    983    974    980    1,001 
Accrued Liabilities   360    348    364    380    396    412    428    444    460    476    492    508 
Deferred Rent   56    54    52    50    48    46    44    42    40    38    36    33 
Accrued Interest Payable   37    37    37    37    37    37    37    37    37    37    37    37 
Montage Financing   3,515    3,905    3,907    4,409    4,411    4,401    4,903    4,906    4,752    4,599    4,446    4,293 
New Equity/sub-Debt (Montage)   0    0    0    0    0    0    500    500    500    500    500    500 
Deferred Revenue   422    467    423    437    424    439    425    425    440    427    441    428 
Total Current
Liabilities
   5,362    5,729    5,710    6,273    6,258    6,318    7,292    7,325    7,213    7,050    6,932    6,800 
                                                             
Promissory Note on Bridge Loan   2,258    2,264    2,270    2,276    2,282    2,288    2,293    2,299    2,305    2,311    2,317    2,323 
Warrant Liability   231    231    231    231    231    231    231    231    231    231    231    231 
Total Long Term
Liabilities
   2,489    2,495    2,501    2,507    2,513    2,519    2,525    2,530    2,536    2,542    2,548    2,554 
TOTAL LIABILITIES   7,851    8,224    8,211    8,780    8,770    8,836    9,817    9,856    9,749    9,593    9,480    9,354 
                                                             
EQUITY                                                            
Common   2    2    2    2    2    2    2    2    2    2    2    2 
Preferred   20,993    20,993    20,993    20,993    20,993    20,993    20,993    20,993    20,993    20,993    20,993    20,993 
Warrants / APIC   1,814    1,814    1,814    1,814    1,814    1,814    1,814    1,814    1,814    1,814    1,814    1,814 
Retained Earnings   (23,861)   (23,861)   (23,861)   (23,861)   (23,861)   (23,861)   (23,861)   (23,861)   (23,861)   (23,861)   (23,861)   (23,861)
Current Year   73    (124)   (111)   (105)   (56)   33    19    60    105    168    239    298 
Total Equity   (1,125   (1,176)   (1,162)   (1,157)   (1,108)   (1,085)   (1,033)   (992)   (947)   (884)   (813)   (754)
TOTAL LIABILITIES &
EQUITY
   8,727    7,048    7,049    7,623    7,663    7,752    8,784    8,864    8,802    8,708    8,667    8,600 
Check   0    0    0    0    0    0    0    0    0    0    0    0 
DSO   45    44    52    51    52    51    53    53    51    53    51    53 

 

 

 

 

   Jan   Feb   Mar   April   May   June   Julne   July   Sept   Oct   Nov   Dec   2017 
   Fcst   Fcst   Fcst   Fcst   Fcst   Fcst   Fcst   Fcst   Fcst   Fcst   Fcst   Fcst   Fcst 
                                                     
Cash Flow from
Operating Activities:
                                                                 
Net income   (73)   (51)   14    6    49    23    52    41    46    62    71    59    298 
Reconcile to cash used by operations:                                                                 
Depreciation   26    26    26    28    28    28    29    29    29    30    30    30    339 
Changes in assets and liabilities:                                                                 
Accounts receivable   (240)   (188)   (160)   (18)   (26)   (27)   (26)   (25)   (24)   (24)   (23)   (22)   (803)
Other assets   37    2    27    44    (40)   39    38    4    44    25    9    44    270 
Accounts payable   (6)   (54)   10    32    (18)   42    (28)   17    12    (9)   6    21    23 
Deferred Revenue   16    46    (45)   15    (14)   15    (14)   1    15    (14)   15    (14)   22 
Deferred Rent   (2)   (2)   (2)   (2)   (2)   (2)   (2)   (2)   (2)   (2)   (2)   (2)   (25)
Accrued Interest
Payable
   -    -    -    -    -    -    -    -    -    -    -    -    - 
Accrued liabilities   (19)   (12)   16    16    16    16    16    16    16    16    16    16    129 
Software Development                                                                 
Costs   (119)   (105)   (84)   (84)   (84)   (84)   (83)   (84)   (83)   (83)   (82)   (83)   (1,058)
Net Cash From
Operations
   (380)   (340)   (199)   35    (91)   49    (18)   (5)   52    2    40    49    (805)
                                                                  
Cash Flow from
Investing Activities:
                                                                 
Acquisition excluding capital assets   (0)   (0)   (0)   (0)   (0)   (0)   (0)   (0)   (0)   (0)   (0)   (0)   (0)
Caplet expenditures        -                                                        
Net Cash Used by
Investing Activities
   (0)   (0)   (0)   (0)   (0)   (0)   (0)   (0)   (0)   (0)   (0)   (0)   (0)
                                                                  
Cash Flow from
Financing Activities
                                                                 
Montage Financing   2    390    2    502    2    (10)   502    2    (153)   (153)   (153)   (153)   780 
Proceeds from New Equity        -    -    -    -    -    500    -    -         -    -    500 
Proceeds from
Convertible Bridge Loan
   6    6    6    6    6    6    6    6    6    6    6    6    71 
Proceeds from equity financing   (0   (0)   (0)   (0)   (0)   (0)   (0)   (0)   (0)   (0)   (0)   (0)   (0)
Net Cash Prov. by Financing Activities   8    396    8    508    8    (4)   1,008    8    (147)   (147)   (147)   (147)   1,351 
                                                                  
Net Increase in Cash   (372)   56    (191)   543    (83)   45    990    3    (96)   (145)   (107)   (98)   545 
Cash at Beginning of
Period
   1,122    750    805    615    1,158    1,075    1,120    2,111    2,114    2,018    1,873    1,766    1,122 
CASH AT END OF
PERIOD
   750    805    615    1,158    1,075    1,120    2,111    2,114    2,018    1,873    1,766    1,667    1,667