0001013762-11-002222.txt : 20110815 0001013762-11-002222.hdr.sgml : 20110815 20110815165921 ACCESSION NUMBER: 0001013762-11-002222 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 20110630 FILED AS OF DATE: 20110815 DATE AS OF CHANGE: 20110815 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MACROSOLVE INC CENTRAL INDEX KEY: 0001178727 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 000000000 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-150332 FILM NUMBER: 111037448 BUSINESS ADDRESS: STREET 1: 1717 SOUTH BOULDER STREET 2: SUITE 700 CITY: TULSA STATE: OK ZIP: 74119 BUSINESS PHONE: 918-280-8693 MAIL ADDRESS: STREET 1: 1717 SOUTH BOULDER STREET 2: SUITE 700 CITY: TULSA STATE: OK ZIP: 74119 10-Q 1 form10q.htm MACROSOLVE, INC. FORM 10Q form10q.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2011

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _________ to _________

Commission file number: 333-150332

MACROSOLVE, INC.
(Exact name of registrant as specified in its charter)

Oklahoma
73-1518725
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)

1717 South Boulder Ave. Suite 700
Tulsa, Oklahoma 74119
(Address of principal executive offices) (zip code)

(918) 280-8693
(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 o

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 o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
 Large accelerated filer o
 Accelerated filer o
 Non-accelerated filer o
 Smaller reporting company x
(Do not check if a smaller reporting company)
 
                                                                                    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No   x.

As of August 12, 2011, there were 104,273,010 shares of the registrant’s common stock outstanding. 
 

 
1

 
 


 
MACROSOLVE, INC.


INDEX
       
PART I.
FINANCIAL INFORMATION
 
       
 
ITEM 1
Financial Statements
 
   
Balance Sheets as of June 30, 2011 (Unaudited) and December 31, 2010 (Audited)
4
       
   
Statements of Operations for the three and six months ended June 30, 2011 and 2010 (Unaudited)
5
       
   
Statements of Cash Flows for the six months ended June 30, 2011 and 2010 (Unaudited)
6
       
   
Notes to Interim Unaudited Financial Statements
7-12
       
 
ITEM 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
13-20
       
 
ITEM 3.
Quantitative and Qualitative Disclosures about Market Risk
21
       
 
ITEM 4.
Controls and Procedures
21
       
PART II.
OTHER INFORMATION
 
       
 
ITEM 1.
Legal Proceedings
22
 
ITEM 1A.
Risk Factors
22
 
ITEM 2.
Unregistered Sales of Equity Securities and Use of Proceeds
22
 
ITEM 3.
Defaults Upon Senior Securities
23
 
ITEM 4.
(Reserved)
23
 
ITEM 5.
Other Information
23
 
ITEM 6.
Exhibits
23
       
 
SIGNATURES
24

 
 
 
2

 
 
MACROSOLVE, INC.


Interim Unaudited Financial Statements



For the Period Ended June 30, 2011
 
 
3

 
 
 
MACROSOLVE, INC.
 
             
BALANCE SHEETS
 
   
(unaudited)
   
(audited)
 
   
6/30/2011
   
12/31/2010
 
             
ASSETS
           
             
CURRENT ASSETS:
           
     Cash
  $ 212,682     $ 187,025  
     Accounts receivable - trade
    73,276       31,535  
     Prepaid expenses and other
    147,562       50,324  
                 
          Total current assets
    433,520       268,884  
                 
PROPERTY AND EQUIPMENT, at cost:
    264,606       254,088  
     Less - accumulated depreciation and amortization
    (172,331 )     (162,194 )
                 
          Net property and equipment
    92,275       91,894  
                 
OTHER ASSETS:
               
     Note receivable
    135,577       135,577  
     Software development costs, net of accumulated amortization
               
        of $510,653 and $398,715 as of June 30, 2011 and
               
        December 31, 2010, respectively
    1,136,462       938,942  
     Other assets
    70,504       43,999  
                 
                 
          Total other assets
    1,342,543       1,118,518  
                 
TOTAL ASSETS
  $ 1,868,338     $ 1,479,296  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
CURRENT LIABILITIES:
               
     Current maturities of long-term debt
  $ 4,319     $ 34,176  
     Revolving Line of Credit
    100,000       -  
     Note Payable - Shareholder
    50,000       -  
     Accounts payable - trade and accrued liabilities
    185,936       123,022  
     Unearned income
    28,240       8,523  
                 
          Total current liabilities
    368,495       165,721  
                 
LONG-TERM DEBT, less current maturities
               
    Oklahoma Technology Commercialization Center
    237,500       237,500  
    Convertible secured debentures
    1,875,000       925,000  
          Total long-term debt, less current maturities
    2,112,500       1,162,500  
                 
COMMITMENTS AND CONTINGENCIES
               
                 
STOCKHOLDERS' EQUITY:
               
Common stock, $.01 par value; authorized 200,000,000 shares;
         
issued and outstanding 104,320,509 and 98,690,490 shares, at
         
        June 30, 2011 and December 31, 2010, respectively
    1,043,205       986,905  
     Additional paid-in capital
    9,714,005       9,303,920  
     Accumulated deficit
    (11,369,867 )     (10,139,750 )
                 
          Total stockholders' (deficit) equity
    (612,657 )     151,075  
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
  $ 1,868,338     $ 1,479,296  
                 
The accompanying notes are an integral part of these statements.
               
                 
 
 
 
 
4

 
 
 
MACROSOLVE, INC.
                         
STATEMENTS OF OPERATIONS (unaudited)
 
Unaudited
   
Unaudited
 
   
For the Quarters Ended
   
For the Six Months Ended
 
For the Periods Ended June 30,
 
6/30/2011
   
6/30/2010
   
6/30/2011
   
6/30/2010
 
                         
 
                       
SALES:
                       
     Solution services
  $ 167,187     $ 123,509     $ 262,871     $ 290,449  
     Hardware sales
    -       1,117       -       78,036  
     Software and Patent licensing
    52,244       9,706       72,560       40,075  
                                 
     Net sales
    219,431       134,332       335,431       408,560  
                                 
COST OF SALES:
                               
     Solution services
    98,629       66,407       145,413       169,152  
     Hardware sales
    -       890       -       64,743  
     Software licensing
    -       -       -       -  
                                 
     Total cost of sales
    98,629       67,297       145,413       233,895  
                                 
     Gross profit
    120,802       67,035       190,018       174,665  
                                 
OPERATING EXPENSES:
                               
     Solution services
    49,339       12,713       174,797       44,787  
     Depreciation and amortization
    62,047       53,199       123,727       106,491  
     Marketing and sales
    132,668       157,474       162,586       302,331  
     General and administrative
    540,134       242,990       869,421       490,795  
                                 
     Total operating expenses
    784,188       466,376       1,330,531       944,404  
                                 
     Loss from operations
    (663,386 )     (399,341 )     (1,140,513 )     (769,739 )
                                 
OTHER INCOME (EXPENSE):
                               
     Interest income
    61       134       86       486  
     Interest expense
    (30,607 )     (40,965 )     (36,919 )     (79,438 )
     Loss on sale of asset
    (235 )     -       (235 )     (17,944 )
     Stock based compensation
    (28,550 )     (22,089 )     (52,538 )     (41,615 )
                                 
     Total other expense
    (59,331 )     (62,920 )     (89,606 )     (138,511 )
                                 
LOSS BEFORE INCOME TAXES
    (722,717 )     (462,261 )     (1,230,119 )     (908,250 )
                                 
INCOME TAXES
    -       -       -       -  
                                 
NET LOSS
  $ (722,717 )   $ (462,261 )   $ (1,230,119 )   $ (908,250 )
                                 
LOSS ALLOCABLE TO COMMON STOCKHOLDERS:
                               
     Net loss
  $ (722,717 )   $ (462,261 )   $ (1,230,119 )   $ (908,250 )
                                 
     Loss allocable to common stockholders
  $ (722,717 )   $ (462,261 )   $ (1,230,119 )   $ (908,250 )
                                 
Basic and diluted loss per share
  $ (0.01 )   $ (0.01 )   $ (0.01 )   $ (0.01 )
                                 
The accompanying notes are an integral part of these statements.
                         
                                 
 
 
 
 
5

 
 
MACROSOLVE, INC.
 
             
STATEMENTS OF CASH FLOWS (unaudited)
 
             
For the Periods Ended June 30,
 
6/30/2011
   
6/30/2010
 
             
             
OPERATING ACTIVITIES:
           
     Net loss
  $ (1,230,119 )   $ (908,250 )
     Adjustments to reconcile net loss to net cash
               
       (used in) provided by operating activities:
               
          Depreciation and amortization
    123,727       106,491  
          Stock based compensation
    51,386       29,313  
          Issuance of stock for services
    415,000       16,500  
          Changes in current assets and liabilities:
               
            Decrease in accounts receivable - trade
    (41,741 )     68,968  
            Decrease (Increase) in inventory
    11,017       (8,564 )
            (Increase) decrease in prepaid expenses and other
    (108,257 )     22,426  
            Increase (decrease) in accounts payable - trade and
               
                accrued liabilities
    62,915       (80,173 )
            Increase (decrease) in unearned income
    19,717       (55,285 )
                 
          Net cash (used in) provided by operating activities
    (696,355 )     (808,574 )
                 
INVESTING ACTIVITIES:
               
     Purchase of equipment
    (12,405 )     (9,671 )
     Sale of digiTicket assets
    -       416,569  
     Disposal of equipment
    237       616  
     Software development costs
    (309,788 )     (165,280 )
                 
          Net cash provided by (used in) investing activities
    (321,956 )     242,234  
                 
FINANCING ACTIVITIES:
               
     Deferred offering costs
    (26,175 )     -  
     Issuance of stock for debenture interest
    -       65,911  
     Proceeds from debenture financing
    1,675,000       513,744  
     Repayment of debenture financing
    (725,000 )     -  
     Repayments of notes payable
    (29,857 )     (24,744 )
     Proceeds from shareholder loan
    100,224       -  
     Repayment of shareholder loan
    (50,224 )     -  
     Proceeds from bank line of credit
    200,000       -  
     Repayment of bank line of credit
    (100,000 )     -  
                 
          Net cash provided by financing activities
    1,043,968       554,911  
                 
NET INCREASE IN CASH
    25,657       (11,429 )
                 
CASH, beginning of period
    187,025       51,120  
                 
CASH, end of period
  $ 212,682     $ 39,691  
                 
The accompanying notes are an integral part of these statements.
               
 
 
6

 
 
 
MacroSolve, Inc.
Notes to Interim Unaudited Financial Statements

For the Period Ended June 30, 2011


1.  
BASIS OF PRESENTATION

The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial statements and do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.  The information furnished reflects all adjustments, consisting only of normal recurring items which are, in the opinion of management, necessary in order to make the financial statements not misleading.  The financial statements as of December 31, 2010 have been audited by an independent registered public accounting firm. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company’s 10K for the calendar year ended December 31, 2010.
 
2.
DESCRIPTION OF BUSINESS

MacroSolve, Inc. is an Oklahoma corporation formed on January 17, 1997, under the laws of the State of Oklahoma and does business through Anyware Mobile Solutions and Illume Mobile, both divisions of MacroSolve. MacroSolve, Inc. filed a registration statement Form S-1 with the Securities and Exchange Commission which was declared effective on July 25, 2008.
 
3.
NOTE RECEIVABLE

 
Note receivable at June 30, 2011 and December 31, 2010  
Consist of the following:
   June 30, 2011      Dec 31, 2010  
             
Convertible promissory note with a customer negotiated as part of a strategic alliance. Under the Master Services Agreement, customer may borrow up to $150,000 to finance development work with interest accrued monthly at prime rate plus 5% (8.25% at September 30, 2009), due June 30, 2011. The note may be converted to common stock of the borrower prior to the due date at MacroSolve’s discretion.      $ 135,577     $  135,577  
                 
 
4.  
DEBENTURES AND NOTES PAYABLE
 
 
4.  
DEBENTURES AND NOTES PAYABLE
 
 
Notes payable at June 30, 2011 and December 31, 2010 consist of the following:   June 30, 2011     Dec 31, 2010  
             
 On April 11, 2011, the Company began offering its Convertible Debentures Series 2011 and Series A Warrants to purchase common stock to accredited investors. The Debentures mature on December 31, 2016. The Company has not established a minimum or maximum offering size; its goal is $1,000,000 in aggregate subscriptions exclusive of the exchange of previously issued debentures. The proceeds from this offering will be used by the Company for working capital to increase its market share from the sale of mobile apps in dining and other vertical markets and may include working capital for acquired companies. The offering will continue until December 31, 2011 unless terminated by the Company at an earlier date.  The offering was closed on July 13, 2011 with a total of $950,000 in new investments and $725,000 in converted investments.            
 
 
 
 
7

 
 
 
 
             
 The 2011 Debentures will earn interest at the annual rate of 12% which will be paid quarterly exclusively from the Debenture Account. Principal on the Debentures will be prepaid quarterly as the Debenture Account permits. The Debenture Account will be set up with a financial institution for the deposit of 25% of any recover it receives from any judgment or settlement in any infringement case or claim it prosecutes. The Debentures may be converted to common stock by the holder into the number of shares that could have been purchased with 200% of the principal amount of the Debenture, together with accrued and unpaid interest and the shares valued using the weighted average price for a five-day trading period preceding the Debenture investment. The Investors will also acquire Common Stock Series A Warrants in an amount equal to the shares of common stock that could be purchased at 50% of the Debenture conversion price. Each warrant has a term of five years.   $  1,675,000     $ -  
                 
 On November 8, 2010, the Company began selling Convertible Debentures Series 2010 plus Series B Warrants. The Company has not established a minimum or maximum offering size; however, it exceeded its goal of $750,000 in aggregate subscriptions.   The debentures accrue interest at 2.0% per annum with interest paid at maturity. The offering was closed on November 17, 2010.                
                 
The debentures may be prepaid in full for one hundred and fifty percent (150%) of the face amount of the debenture if notice of prepayment is given by the Company before July 1, 2011. Prepayment may be made in cash or shares of common stock at the election of the Company. If the prepayment is made in shares of common stock the shares will be valued at the volume weighted average price of the shares for the five-day trading period before the notice of prepayment.                
                 
The Debentures may be converted into Common Stock by the holders after June 30, 2011, or upon notice of prepayment by the Company if notice is given before that date. Upon conversion the holder will be entitled to receive the number of shares of Common Stock that could be purchased with two hundred percent (200%) of the face amount of the Debentures together with accrued interest and with the Common Stock valued using the weighted average price for the five-day trading period before the notice of conversion.
               
                 
Investors will acquire common stock purchase warrants, designated by the Company as Class B Warrants, in an amount equal to fifty percent (50%) of the shares of common stock that would be issued upon conversion of the Debentures upon issue. The Warrants will have a termination date of December 31, 2015 and have an initial exercise price equal to the weighted average price of the common stock upon grant of the Warrants.                
 
 
 

 
 
8

 
                               
 
                 
After April 11, 2011, eleven of the fifteen investors elected to convert a total of $725,000 Debenture Series 2010 plus Series B Warrants to Debenture Series 2011 and Series A Warrants simultaneously with their purchase of the new offering.   $ 200,000     $ 925,000  
                 
Advancing term loan with a financial institution of up to $125,000 with interest only payable monthly at prime rate plus 2.0% (5.25% at September 30, 2010), until January, 2009, with principal and interest due at prime rate plus 2.0% amortized ratably over 30 months, due August 31, 2011, and secured by substantially all assets of the company.     $  4,319     $ 34,176  
                 
Advancing term loan with a financial institution of up to $200,000 with interest only payable monthly at the greater of 6% or prime rate plus 1.0% (4.25% at June 30, 2011), until September 2011, and secured by substantially all assets of the company and the personal guarantees of two company directors. In exchange for the guarantees, each director receives a $3,000 commitment fee and a five year warrant to purchase $100,000 of stock with a strike price of ten cents ($0.10) per share.   $  100,000     $ -  
                 
Note from the State of Oklahoma Technology Business Finance Program (OTCC loan) represented by a $150,000 refundable award to be repaid at two times the amount of the award.  The balance includes accrued interest (imputed at 14.27%), through September 2007.  The repayment terms were modified in September, 2007 to require 24 equal monthly installments of $12,500, consisting of principal only, beginning May, 2008.  The monthly payments were suspended in October 2008 with resumption anticipated upon significant equity raise.     $  237,500     $ 237,500  
                 
As of June 30, 2011, maturities of long-term debt are:  $4,319 in 2011 and $2,112,500 thereafter.                
 
5.
SHAREHOLDER LOAN

 
In March 2011, the Company placed $100,000 in promissory notes with a shareholder who is a qualified investor. The notes were unsecured and provided for accrued interest of prime plus 3% (6.25% as of June 30, 2011) payable on maturity of June 30, 2011. In April 2011, $50,000 of the amount owed was converted to the terms of the Convertible Debenture Series 2011. The balance of $50,000 was extended under the same terms until September 30, 2011.  Accrued interest of $796 was paid in cash on June 30, 2011.
 
6. 
EMPLOYEE STOCK PLANS

A summary of activity under the Employee Stock Plans as of June 30, 2011 and changes during the period then ended is presented below:
 
 
 
 
9

 
 
 

 

                                                                                                                                                                    
                Restricted  
    Stock Options     Stock  
   
 
Options
   
Weighted
Average
Exercise Price
   
 
 Shares
 
Outstanding – March 31, 2011
    5,745,163     $ 0.55       5,932,548  
Exercisable – March 31, 2011
    5,662,563     $ 0.53       -  
Granted
     200,000     $ 0.23       615,714  
Exercised or Vested
     -       -       (3,711,207 )
Forfeited or Expired
    (11,291 )   $ 0.78       (65,000 )
Outstanding – June 30, 2011
    5,933,872     $ 0.54       2,772,055  
Exercisable –  June 30, 2011
    5,854,872     $ 0.51       -  

The weighted-average grant-date calculated value of options granted during the period ended June 30, 2011 is not applicable.  Options outstanding at June 30, 2011 had an aggregate intrinsic value of $0 and a weighted-average remaining contractual term of 3.5 years. Options that were exercisable at June 30, 2011 had an aggregate intrinsic value of $-0- and a weighted-average remaining contractual term of 3.5 years.

A summary of the status of the Company’s nonvested options and restricted stock as of and for the Quarters Ended June 30, 2011 and March 31, 2011 is presented below:
                                  
    Stock Options            
 
 
Nonvested Shares
 
 
 
 Options
   
Weighted-
Average Grant
Date.Calculated Value
   
 
Restricted
Stock
 
Nonvested - Beginning of Year 2011
    153,600     $ -       8,354,801  
Granted
    -     $ -       738,434  
Vested
    (41,400 )   $ -       (3,160,687 )
Forfeited
    (29,600 )   $ -       ( - )
Nonvested–Quarter Ended March 31, 2011
    82,600     $ -       5,932,548  
Granted
    200,000     $ -       615,714  
Vested
    (200,000 )   $ -       (3,711,207 )
Forfeited
    (3,600 )   $ -       ( 65,000 )
Nonvested–Quarter Ended June 30, 2011
    79,000     $ -       2,772,055  

As of June 30, 2011, there was $-0- unrecognized compensation cost related to nonvested share-based compensation arrangements under the stock bonus plan. The weighted-average remaining vesting period is 6 months.
 
 
 
 
10

 

 

7. 
SHAREHOLDERS’ EQUITY

 
The Company issued a total of 843,678 common shares and cancelled a total of 65,000 in the quarter ended June 30, 2011, described further as follows:

 
The Company’s independent directors annual compensation is $16,000 to be paid quarterly in restricted stock. The Company issued the directors 93,895 shares of restricted stock on April 1, 2011 for their first quarter 2011 compensation.
 
 
 
The Company issued 615,714 shares of common stock to management employees in lieu of $112,500 cash compensation for services rendered in the first quarter of 2011, which had been recorded at a value of $616 in stock based compensation based upon individual tax elections made by each recipient. The shares vest six months after issuance and are subject to forfeiture upon voluntary termination of employment. During the second quarter of 2011, 65,000 compensation shares previously issued for services were forfeited.

 
The Company issued 20,000 shares of restricted common stock to its local public relations firm in exchange for $3,000 in services rendered in the first quarter of 2011. The Company issued 47,619 shares of restricted stock to its national public relations firm in exchange for $10,000 in services rendered in the first quarter of 2011.

 
The Company had stock bonus plans for the third and fourth quarters of 2008 and the first quarter of 2009 which fully vested in June 2011, resulting in 66,450 shares of common stock being issued to employees at a value of $7,309 in stock based compensation.
 
8.
EARNINGS (LOSS) PER SHARE
   
 
The Company has calculated the loss allocable to the common shareholders for the periods ended June 30, 2011 and 2010:
 
   
For the Quarters Ended
   
For the Six Months Ended
 
Numerator:
  June 30, 2011    
June 30, 2010
    June 30, 2011    
June 30, 2010
 
Net Loss
  $ (722,716 )   $ (462,261 )     (1,230,118 )     (908,250 )
Numerator for basic and diluted
  $ (722,716 )   $ (462,261 )   $ (1,230,118 )   $ (908,250 )
Denominator:
                               
Weighted-average number of common shares outstanding
    101,116,161       63,480,006       101,116,161       63,480,006  
    $ (0.01 )   $ (0.01 )   $ (0.01 )   $ (0.01 )
 
9.
RELATED PARTY TRANSACTION

 
There were no related party transactions other than the shareholder loan discussed in footnote five.

10.
SUBSEQUENT EVENTS
 
 
The Company issued 945,377 shares of compensation shares to management employees in lieu of $112,500 cash compensation for services rendered during the second quarter of 2011 which had been recorded at a value of $1,891 in stock based compensation based upon individual tax elections made by each recipient. The shares were awarded on Restricted Stock Agreements which have a six month time lapse restriction and are subject to forfeiture upon voluntary termination of employment.  In July 2011, 47,500 compensation shares previously issued for services were forfeited.

 
The Company’s independent directors annual compensation is $16,000 to be paid quarterly in restricted stock. The Company issued the directors 151,515 shares of restricted stock on July 1, 2011 for their second quarter 2011 compensation. The Company recorded $4,000 in stock based compensation for each of its five independent directors.

 
The Company issued 90,909 shares of restricted stock to its national public relations firm as final payment for $12,000 in services.

 
The Company issued 378,788 shares of restricted stock each to two investors in the Convertible Debenture Series 2010 who elected to convert their $25,000 debenture on July 1, 2011 at the weighted average price for the five-day trading period before the notice of conversion which was $.066. Each investor received $308 to settle the accrued interest on their debenture.


 
 
11

 
 
Effective July 26, 2011, certain Company officers and directors granted consent to the Company to take shares of Common Stock that were reserved for issuance upon the exercise and/or conversion of options, warrants and convertible debentures (the “Securities”) and consider them as authorized but unissued shares of common stock to be used for other share issuances.  Currently, there were 39,010,153 shares of Common Stock reserved for issuance pursuant to the Securities.  This consent is effective until October 1, 2011, when the Company is required to reserve such Common Stock issuable upon exercise of the Securities.  Prior to the consent, the number of shares of Common Stock issued and outstanding as well as reserved for issuance upon exercise or conversion of outstanding options, warrants and convertible debentures was close to 200 million, which is the number of shares of Common Stock authorized for issuance by the Company pursuant to the Articles of Incorporation.  This action gives the Company flexibility until it can increase the authorized number of shares of Common Stock that may be issued.

On August 1, 2011, the Board of Directors appointed Steve Signoff as Chief Executive Officer of MacroSolve, Inc. and an 8K was filed August 3, 2011.

On July 17, 2011, the Company began offering its Convertible Debentures Series 2011 and Series B Warrants to purchase common stock to accredited investors. The offering modifies the earlier 2011 debenture by adding a ten cent ($0.10) conversion floor price. No debentures have been purchased as of the date of filing.

The Company is currently in settlement and licensing discussions with several companies against whom we have brought suits alleging infringement of United States Patent #7,822,816.  As of the date of filing, two settlements have been finalized with proceeds payable before the end of the third quarter 2011.
 
11.
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during Six Months ended June 30, 2011 and 2010 are:
 
    2011      2010  
Interest      $  10,579     $  2,494  
Income taxes    $ -     $  -  
 
Noncash activities are as follows for the Six Months ended June 30, 2011 and 2010 are:
 
    2011     2010  
Stock based compensation      $ 52,538      $ 29,313  
Stock issued for services     $ 415,000      $ 16,500  
Stock issued for debenture interest    $ -     $ 65,911  
 

 
12

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain statements in Management's Discussion and Analysis ("MD&A"), other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “would,” “expect,” “intend,” “could,” “estimate,” “should,” “anticipate,” or “believe.” and similar expressions.  Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. These statements are subject to a number of risks, uncertainties and developments beyond our control or foresight including changes in the trends of the mobile computing industry, formation of competitors, changes in governmental regulation or taxation, changes in our personnel and other such factors.  We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.  Readers should carefully review the risk factors and related notes included under Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2010 filed with the Securities and Exchange Commission on March 11, 2011.

Overview

The following MD&A is intended to help the reader understand the results of operations, financial condition, and cash flows of MacroSolve, Inc.  MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and the accompanying notes to the financial statements ("Notes").

Background
 
MacroSolve, Inc. (“MacroSolve,” “we,” “us,” or the “Company”) is an Oklahoma corporation formed on January 17, 1997, under the laws of the State of Oklahoma and does business through Anyware Mobile Solutions and Illume Mobile, both divisions of MacroSolve.  MacroSolve, Inc. filed a registration statement Form S-1 with the Securities and Exchange Commission which was declared effective on July 25, 2008.
 
MacroSolve is a leading developer and marketer of mobile technologies, apps, and solutions. A mobile solution is typically the combination of mobile handheld devices, wireless connectivity, and software that streamlines business operations resulting in improved efficiencies and cost savings. Leveraging its intellectual property portfolio, including its recently issued landmark patent #7,822,816, MacroSolve generates revenues through licensing; development and sales of its patented technologies including the ReForm XT™ rapid mobile app development platform and its apps powered by ReForm XT including ClubInsight™, DineInsight™, and SchoolInsight™, as well as development of customized mobile business apps.
 
The Company operates through its Illume Mobile and Anyware Mobile Solutions divisions to provide mobile business apps, as well as licensing its core patented technology to companies across the mobile ecosystem.

Illume Mobile is our mobile solutions services division that provides solution management, product development, project management, quality assurance and support services to address the needs of a client base seeking to use mobility to improve their process efficiencies and modify software applications so that they can be used in a mobile environment.

Anyware Mobile Solutions maintains a dedicated staff for sales, product development and support for the ReFormXT™ rapid mobile app development platform and its apps Powered by ReFormXT.  

The Company’s principal executive offices are located at 1717 South Boulder, Tulsa, Oklahoma 74119 Currently the Company has ongoing projects across the United States, operates three websites including ‘www.macrosolve.com’, ‘www.illumemobile.com’ and ‘www.goanyware.com’, and maintains multiple social media profiles.
 
 
 
13

 
 
 Plan of Operation

The Illume Mobile division is satisfying a unique set of market demands by providing advanced mobile application development and maintenance services.  With the exploding growth of tablets, such as the iPad, there are also new ideas on the utilization of this type of mobile device.  Companies with internal drivers to use tablets and even individual entrepreneurs wishing to create the next market leading app trust the Illume division and its technical, marketing and business development experience to rapidly create a product to be sold on app stores or in other channels.  Where high demand, untapped markets are emerging, this division creates mobile platforms whereby customer demand can be met more efficiently with tools that enable the distribution and customization of apps to be less costly to the partner and end users. Illume Mobile is expected to contribute more than 60% of the 2011 annual operating revenues.

The Anyware Mobile Solutions division continues to develop, host and maintain our primary product platform, ReFormXT.  From this platform, the division and its customers develop applications that are both branded and enterprise apps, a unique capability in the marketplace.  Branded apps are being adopted by companies to promote their offerings by placing their app for customers to download for free from the app stores.  This type of application is replacing or supplementing the construction and maintenance of websites.  To address the many industries, the platform has been modified and re-branded ‘Insight’.  Currently, this division licenses, markets and sells DineInsight, ClubInsight and SchoolInsight.  Enterprise apps, which are generally used internally in a company’s operations to streamline communications and related efficiencies, leverage the ReFormXT platform as well.  The division is currently licensing this platform for integration into customer systems for rapid development and deployment to employees and even third parties involved in daily operations.  The Company has entered into several reseller arrangements and is actively pursuing additional channels, resellers and licensees for its “powered by ReFormXT” products in specialized vertical markets. DineInsight, ClubInsight and SchoolInsight are expected to contribute less than 35% of the 2011 annual revenues.

In October 2010, the United States Patent and Trademark Office issued U.S. Patent No. 7,822,816 to our company. The patent addresses mobile information collection systems across all wireless networks, smartphones, tablets, and rugged mobile devices, regardless of carrier and manufacturer, and is currently utilized in our ReFormXT™ rapid mobile app development platform.   The patent, a significant intellectual property asset, further advances our position in the mobile solutions market. We are immediately pursuing the monetization of this patent and our other IP assets, including discussions with several companies in the mobile communications market.   We are currently in settlement and licensing discussions with several companies against whom we have brought suits alleging infringement.  As of August 12, 2011, suits have been brought against 30 companies, of which four have been dismissed without prejudice, one has been dismissed with prejudice after execution of a settlement and licensing agreement, and we expect to file a motion to dismiss with prejudice against one more as a settlement and licensing agreement has been executed.  We have executed settlement and license agreements which will provide over $100,000 due before October 1, 2011.  A status conference has been set for September 6, 2011, at which we expect a Markman hearing and trial date to be set on the lawsuits against the remaining companies.

We continuously monitor industry trends and adjust projections about the direction of the business in anticipation of the continuous change in client requirements as the mobile industry evolves.  We believe that our current direction is one that will bring profits, however our ability to maximize sales volume in the short term is limited without additional capital.  There is no expected purchase or sale of capitalized assets, significant equipment or intellectual property in the next three months.
 
Results of Operations

Quarter Ended June 30, 2011 compared to Quarter Ended June 30, 2010 (all references are to the Quarter Ended June 30)

Net Sales: Net sales increased $85,000, or 63%, to $219,000 in the quarter ended June 30, 2011 from $134,000 for the same period in 2010.   Sources of revenue in the second quarter of 2011 were derived from our services business and software and patent licensing.  Services revenue represented the majority of net sales with $167,000, an increase of $43,000 during the second quarter of 2011, from $124,000 in the second quarter of 2010.  This was primarily due to revenue attributable to Illume Mobile, a start up division which began producing revenue in March 2011.  Software and patent licensing revenues increased $42,000, or 438%, for the second quarter of 2011 to $52,000 from $10,000 for the same period in 2010. An exclusive territory license to sell Insight products in northeastern Oklahoma was sold during the second quarter of 2011 for $25,000. The Company recognized $11,000 in patent revenues during the second quarter of 2011 from custom mobile app business generated by the Illume Mobile division. Recurring revenue from ReFormXT and Insight Products increased $6,000, or 60%, to $16,000 from $10,000 for the same period in 2010. At June 30, 2011, Anyware Mobile Solutions division had $7,000 in deferred revenue, a 121% or $8,000 decrease, for the second quarter of 2011 from $15,000 in the second quarter of 2010. This decrease is attributable to customers who chose to pay monthly instead of annually and is not attributable to customer attrition. At June 30, 2011, the Illume Mobile division had $21,500 in deferred revenue. Additionally, Illume Mobile had a backlog of $104,000 at June 30, 2011.  We define backlog as work under contract which had not yet commenced.
 
 
 
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Cost of Sales and Gross Profit:  Cost of sales for the second quarter of 2011 increased $31,000, or 47%, from $67,000 in 2010 to $98,000 in 2011. Cost of sales increased due to expenses related to new hires in support of the custom mobile app business. The resultant gross profit for the second quarter of 2011 of $121,000 is an increase of $54,000, or 80%, over the gross profit for the same period in 2010 of $67,000.   Gross profit margins were 55% and 50% for the second quarters of 2011 and 2010, respectively. The second quarter 2011 profit margin was positively impacted by the exclusive territory license and patent revenues which have no direct associated costs.

Operating, Expenses:  Operating expenses include direct division expenses, marketing and sales expenses, general and administrative expenses and depreciation and amortization expenses.  Operating expenses increased by $318,000, or 68%, in the second quarter of 2011 to $784,000 from $466,000 in 2010.  This increase is primarily due to consulting fees related to public relations and investor relations services in second quarter 2011 which were paid using restricted stock valued at $208,000 and $48,000 in cash and $53,000 of accrued expenses related to a corporate branding and marketing initiative which began in June 2011.

Loss from Operations:  Loss from operations for the second quarter of 2011 was $663,000, an increase of $264,000, or 66%, from the loss from operations in 2010 of $399,000 primarily due to $208,000 public relations and investor relations services in second quarter 2011 which were paid using restricted stock.

Other Income and Expense:  Total other expense of $59,000 for the second quarter of 2011 decreased $4,000, or 6%, from $63,000 in the first quarter of 2010.  Interest expense in the second quarter of 2011 was $31,000, a $10,000, or 25%, decrease from interest expense of $41,000 for the same period in 2010.  The decrease in interest expense was primarily as a result of the conversion of debentures into common stock in November 2010. The Company recorded $29,000 in stock based compensation, a $6,000, or 29%, increase from $22,000 for the same period in 2010. The Company added an additional outside director in November 2010 who earns $4,000 per quarter in stock based compensation.
 
Net Loss: Net loss of $723,000 for the second quarter of 2011 was $261,000, or 56%, greater than the net loss of $462,000 for the same period in 2010, primarily due to consulting fees related to increases expenses for public relations and investor relations services in 2011, which were paid in restricted stock.

Six Months Ended June 30, 2011 compared to Six Months Ended June 30, 2010 (all references are to the Six Months Ended June 30)

Net Sales: Net sales decreased $73,000, or 18%, to $335,000 in the six months ended June 30, 2011 from $408,000 for the same period in 2010.  Sources of revenue were derived from our services business, software licensing and hardware sales.  Services revenue represented the majority of net sales, with a decrease of $27,000 for the first six months of 2011 to $263,000 from $290,000 for the same period in 2010.  This was primarily due to a reduction in work under contract from a single legacy professional services customer. The customer’s maintenance and support agreement decreased from $25,000 per month to $10,000 per month in January 2011 or a reduction of $90,000 total revenue in the first half of 2011 compared to 2010. The decrease was offset in the first half of 2011 by revenues generated by Illume Mobile.  Software and patent licensing revenues increased $33,000, or 81%, for the period to $73,000 from $40,000 for the same period in 2010 primarily attributable to the $25,000 exclusive territory license fee to sell Insight products in northeastern Oklahoma. Software revenues from digiTicket were $26,000 in the first six months of 2010 and included $23,000 in deferred software revenues that were recognized in February 2010 when the division was sold. The Company discontinued hardware sales due to low profit margins after the first half of 2010 when it recognized $78,000 revenues. Hardware sales totaling $54,000 in the first six months of 2010 were attributable to digiTicket, a division which was sold to private investors in February 2010. The Anyware Mobile Solutions division sold $24,000 in hardware during the first six months of 2010.
 
 
 
15

 

 
Cost of Sales and Gross Profit: Cost of sales for the first six months of 2011 decreased $89,000, or 38%, from $234,000 in 2010 to $145,000 in 2011. The majority of this decrease was associated with discontinuance of hardware sales.  The resulting gross profit for the first six months of 2011 of $190,000 was up $15,000, or 9%, over the Gross Profit for the same period in 2010 of $175,000.  The digiTicket hardware sales did not contribute significantly to profit margins as the initial customers were allowed substantial price incentives in exchange for serving as reference accounts. Gross profit margins were 57% and 43% for the first six months of 2011 and 2010, respectively.

Operating, Expenses:  Operating expenses include direct division expenses, marketing and sales expenses, general and administrative expenses and depreciation and amortization expenses  Operating expenses increased by $386,000, or 41% in the first half of 2011 to $1,330,000 from $944,000 in 2010,  primarily due to $285,000 public relations and investor relations services in the first half of 2011 which were paid using restricted stock and $60,000 in cash and $53,000 accrued expenses related to a corporate branding and marketing initiative which began in June 2011.

Loss from Operations:  Loss from operations for the first six months of 2011 was $1,140,000, an increase of $370,000, or 48%, from the loss from operations in 2010 of $770,000 as a result of the aforementioned increase in public relations and investors relations services and marketing initiatives.

Other Income and Expense:  Total other expense of $89,000 in 2011 represented a decrease of 35%, or $49,000, from $138,000 in 2010 primarily due to a decrease of $43,000 in interest expense on 2010 debentures which were converted to common stock in the second half of 2010.
  
Net Loss:  Net loss of $1,230,000 for the first six months of 2011 was $322,000, or 35% higher than the net loss of $908,000 for the same period in 2010, primarily attributable to the aforementioned increase in public relations and investors relations services and marketing initiatives.

Liquidity and Capital Resources

We finance our operations primarily through operating revenues, proceeds from bank loans, shareholder loans and sales of equity and debt securities to accredited investors. 

In November 2010, the Company sold Convertible Debentures Series 2010 (the “2010 Debentures”) for gross proceeds of $925,000, which were used for general corporate purposes. The 2010 Debentures accrue interest at 2.0% per annum with interest paid at maturity on December 31, 2015. The 2010 Debentures may not be prepaid before the maturity date. Repayment of the 2010 Debentures may be made in cash or shares of Common Stock at the option of the Company.

The 2010 Debentures may be converted into shares of Common Stock at the option of the holder. Upon conversion, the holder will be entitled to receive the number of shares of Common Stock that equal to two hundred percent (200%) of the face amount of the Debentures, together with accrued but unpaid interest, divided by the conversion price, which is the weighted average price for the five-day trading period before the notice of conversion. On July 1, 2011, two investors converted an aggregate of $50,000 in 2010 Debentures into 757,576 shares of restricted common stock. As of August 12, 2011, there is $150,000 principal amount of 2010 Debentures outstanding that are convertible into approximately 2,416,955 shares of common stock.

The 2010 Debenture investors also received common stock purchase warrants, designated by the Company as Class B Warrants, which expire on December 31, 2015.  As of August 12, 2011, there were Class B Warrants outstanding to purchase an aggregate of 343,591 shares of common stock at exercise prices ranging between $0.2618 and $0.3276.
 
 
 
16

 

 
Between April and July 2011, the Company sold Convertible Debentures Series 2011 (the “2011 Debentures”) for gross proceeds of $950,000, the conversion of $725,000 of 2010 Debentures into 2011 Debentures and the conversion of a $50,000 promissory note into 2011 Debentures.

The 2011 Debentures earn interest at an annual rate of 12%, which will be paid quarterly exclusively from the Debenture Account. Principal on the Debentures will be paid quarterly as the Debenture Account permits, but only after all accrued interest has been paid. The Debenture Account will be established with a financial institution for the deposit of 25% of any funds the Company receives from any judgment or settlement in any patent infringement cases involving United States Patent Number 7,822,816.

The 2011 Debentures may be converted into shares of Common Stock at the option of the holder. Upon conversion, the holder will be entitled to receive the number of shares of Common Stock that equal to two hundred percent (200%) of the face amount of the Debentures, together with accrued and unpaid interest, divided by the conversion price, which is the weighted average price for the five-day trading period before the notice of conversion. Any 2011 Debentures that are outstanding on the maturity date that have not been repaid from the Debenture Account will be repaid by the issuance of shares of Common Stock at the conversion price. As of August 12, 2011, there is $1,675,000 principal amount of 2011 Debentures outstanding that are convertible into approximately 18,475,827 shares of common stock.

The 2011 Debenture investors also received common stock purchase warrants, designated by the Company as Class A Warrants, which expire on December 31, 2016.  As of August 12, 2011, there were Class A Warrants outstanding to purchase an aggregate of 18,475,827 shares of common stock at exercise prices ranging between $0.063 and $0.109.

           The 2011 Debentures, line of credit loan from investors and cash generated from current operations and patent license fees is expected to provide adequate capital to fund the Company’s operations through 2011.

During the second quarter of 2011, the Company repaid $100,000 on its $200,000 line of credit agreement with a financial institution which was guaranteed by two directors. The line of credit agreement, which bears interest at the greater of 6% or prime rate plus 1.0% (4.25% at June 30, 2011), matures on September 22, 2011. The Company anticipates renewal of that agreement under similar terms and conditions.

In March 2011, the Company placed $100,000 in promissory notes with a shareholder who is also an accredited investor. The notes were unsecured and provided for accrued interest of prime plus 3% (6.25% as of June 30, 2011) payable at maturity on June 30, 2011. In April 2011, $50,000 of the amount due to the shareholder was converted into the 2011 Debentures. The balance of $50,000 was extended under the same terms until September 30, 2011.  Accrued interest of $796 was paid in cash on June 30, 2011.

The Company lacks growth capital and anticipates that approximately $5 million in additional investment capital will be required within the next twenty four months to execute our growth strategy. The $5 million is expected to be raised from operating revenues, patent infringement suit settlements, exercise of warrants held by current investors, and the sale of equity and/or debt securities.  The Company is currently working with two investment firms to facilitate the raising of additional capital. There is no assurance that capital in any form will be available to us and, if available, on terms and conditions that are acceptable. If we are unable to obtain sufficient funds, we will not be able to implement our growth strategy.

As of June 30, 2011, the Company had total current assets of $433,520 and total current liabilities of $368,495. As of June 30, 2011, the Company had cash and cash equivalents of $212,682. As of June 30, 2011, the Company had borrowed $100,000 on a $200,000 line of credit with a financial institution which was guaranteed by two directors. It is the Company’s intention to raise additional working capital from licensing revenues and the sale of equity or debt securities.
 
 
17

 
 
Since operations commenced in 1997, the Company has incurred $11,369,867 in cumulative total losses from inception through June 30, 2011. The Company's independent registered public accounting firm's audit report for the year ended December 31, 2010, included in the Company's Form 10-K, contained a qualified opinion and an explanatory paragraph regarding the Company's ability to continue as a going concern.  The accompanying financial statements have been prepared assuming that the Company continues as a going concern and contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The ability of the Company to continue as a going concern on a long-term basis will be dependent upon its ability to create and market innovative products and services and sustain adequate working capital to finance its operations.
To lower our required cash expenditures, the Company issues shares of common stock to employees and vendors for compensation for services.  The Company issued a total of 843,678 shares in the quarter ended June 30, 2011, described further in Part II, Item 2.

Sources and Uses of Cash

   
Six Months ended June 30,
 
(In thousands)
 
 
2011
   
2010
 
Cash flow data:
           
Net cash (used in) operating activities
 
$
(695
)
 
$
$(808
)
Net cash provided by (used in) investing activities
   
(322
)
   
242
 
Net cash provided by financing activities
   
1,044
     
555
 
Net (decrease) increase in cash and cash equivalents
   
27
     
(11
)
Cash and cash equivalents, beginning of period
   
 187
     
51
 
Cash and cash equivalents, end of period
 
$
214
   
$
$40
 

Operating Activities

Net cash used in operating activities for the six months ended June 30, 2011 was $695,000, a decrease of $113,000 from the same period in 2010. Less cash was used in operating activities as a result of issuing common stock, in lieu of cash, for vendor services and employee compensation.

Investing Activities

Cash used in investing activities for the six months ended June 30, 2011 was $322,000, an increase of $564,000 from the same period in 2010, resulting primarily from the $416,000 in proceeds of selling digiTicket to private investors in February 2010 and $144,000 increase in software development costs during the first six months of 2011.

Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2011 was $1,044,000 as compared with $555,000 for the same period last year, an increase of $489,000.  Cash provided by financing activities in first half of 2011 was primarily from $950,000 of net proceeds from debenture sales and secondarily from $100,000 net proceeds in revolving line of credit with a financial institution.   Cash provided by financing activities in first half of 2010 was primarily from $514,000 of net proceeds from the sale of debentures.
 
 
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Critical Accounting Policies

Accounts Receivable and Credit Policies:

Trade accounts receivable consist of amounts due from the sale of solution services, software and hardware.  Accounts receivable are uncollateralized customer obligations due under normal trade terms requiring payment within 30 days of receipt of the invoice.  The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts based on historical collection experience and a review of the current status of trade accounts receivable.  In many instances, customers make a substantial prepayment for services before rendered; therefore the Company is extending trade terms to customers who have already proven to be credit worthy. The Company has not taken any direct write offs of bad debts in the past five years.

At the quarter ending June 30, 2011 and at fiscal year ending December 31, 2010, the Company deems all amounts recorded as collectible and, thus has not provided an allowance for uncollectible amounts.

Property and Equipment:

Property and equipment are recorded at cost.  Depreciation is computed using straight-line methods applied to individual property items based on estimated useful lives.

Revenue Recognition and Unearned Revenue:

Revenue from Illume Mobile Products division consists primarily of professional services contracted to third party customers under contract for specific projects. Contracted projects that are fixed price are accounted for under the percentage-of-completion method of accounting. Revenue from contracted projects that are for provision of services is recognized at the time the service is provided.
 
Revenue from Anyware Mobile Solutions division consists of license fees for ReFormXT and the Insight product line, setup fees for customer apps, other services including marketing and graphic arts and custom programming. Revenue from license fees is recognized ratably over the license period. Revenue from setup fees, marketing and other services is recognized at the time the service is provided.
 
Revenue from patent license fees is recognized upon receipt. In the event a non-exclusive patent license is granted within the scope of a contracted project, ten percent (10%) of the contract amount is deemed to be payment for the patent license.

Software Development Costs:

The Company accounts for software development costs in accordance with ASC 985-10, “Costs of Computer Software to be Sold, Leased, or Otherwise Marketed”.  Costs incurred prior to the establishment of technological feasibility are expensed as incurred as research and development costs.  Costs incurred after establishing technological feasibility and before the product is released for sale to customers are capitalized.  These costs are amortized over three years and are reviewed for impairment at each period end.

Long-Lived Assets:

The Company accounts for long-lived assets in accordance with the provisions of ASC 360-10-35, “Impairment or Disposal of Long-lived Assets”.  This Statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset.  If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.  No impairment charges were incurred during the periods ended June 30, 2011 and December 31, 2010.
 
 
 
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Stock-Based Compensation:

The Company accounts for stock-based compensation in accordance with ASC 718, “Compensation-Stock Compensation”. ASC 718 requires companies to measure the cost of employee services received in exchange for an award of equity instruments, including stock options, based on the grant-date fair value of the award and to recognize it as compensation expense over the period the employee is required to provide service in exchange for the award, usually the vesting period.

The Company uses the Black-Sholes model for determining the value of the options. One of the factors required to compute the options price is volatility of the stock price. The Company’s own stock commenced public trading in August, 2008; however due to initially thin trading activity, management determined that the technology sector fund XLK and its standard deviation would continue to be used to provide the volatility factor required to compute the option value.

Effect of Recently Issued Accounting Pronouncements
 
In June 2011, the FASB issued Accounting Standards Update No. 2011-05, “Presentation of Comprehensive Income”. ASU 2011-05 amends the guidance in ASC 220 “Comprehensive Income” by eliminating the option to present components of other comprehensive income (OCI) in the statement of stockholders’ equity. Instead, the new guidance now requires entities to present all non owner changes in stockholders’ equity either as a single continuous statement of comprehensive income or as two separate but consecutive statements. The Company does not have other comprehensive income and therefore does not expect the adoption of ASU 2011-05 to have a material effect on our financial statements.

In May 2011, the FASB issued Accounting Standards Update No. 2011-04, “Fair Value Measurement”. This guidance amends the application of the “highest and best use” concept to be used only in the measurement of fair value of nonfinancial assets, clarifies that the measurement of the fair value of equity-classified financial instruments should be performed from the perspective of a market participant who holds the instrument as an asset, clarifies that an entity that manages a group of financial assets and liabilities on the basis of its net risk exposure can measure those financial instruments on the basis of its net exposure to those risks, and clarifies when premiums and discounts should be taken into account when measuring fair value. The fair value disclosure requirements also were amended. The Company is in the process of evaluating the impact the amended guidance will have on its financial statements.

In August 2010, the FASB issued Accounting Standards Update No. 2010-22, “Accounting for Various Topics”. ASU 2010-22 addresses technical corrections to various SEC paragraphs. The Company is currently evaluating the effect that ASU 2010-21 will have on its financial statements.

In August 2010, the FASB issued Accounting Standards Update No. 2010-21, “Accounting for Technical Amendments to Various SEC Rules and Schedules. ASU 2010-21 amends various SEC paragraphs pursuant to the issuance of Release No. 33-9026: Technical Amendments to Rules, Forms, Schedules and Codification of Financial Reporting Policies. The Company is currently evaluating the effect that ASU 2010-21 will have on its financial statements.


 
 
20

 
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required under Regulation S-K for “smaller reporting companies.”

ITEM 4 - CONTROLS AND PROCEDURES

a) Evaluation of disclosure controls and procedures.
 
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 as of June 30, 2011. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
 
Based on our evaluation, our chief executive officer and chief financial officer concluded that, as of June 30, 2011, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

(b) Changes in internal control over financial reporting.
 
We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes. There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
 
 
21

 

PART II - OTHER INFORMATION
 
Item 1. Legal Proceedings
 
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business.  We are not currently aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results. We are currently a party to three legal proceedings we initiated in the United States District Court Eastern District of Texas against alleged infringers of our United States Patent #7,822,816.

On March 15, 2011, we filed suit against Blue Shoe Mobile Solutions, LLC, Brazos Technology Corporation, On The Spot Systems,Inc., and Formstack, LLC pursuant to Civil Action No. 6:11-CV-101.

On April 26, 2011, we filed suit against Canvas Solutions, Inc., GeoAge, Inc., Kony Solutions, Inc., Widget Press, Inc., Pogo Corporation, and SWD Interactive, LLC pursuant to Civil Action No. 6:11-CV-194.

On June 8, 2011, we filed suit against Agilis Systems, LLC, Antenna Software, Inc., Cengea Solutions, Inc., Data Systems International, Inc., Environmental Systems Research Institute, Inc., Invensys Systems, Inc. (d/b/a Invensys Operations Management), TrueContext Mobile Solutions Corporation, Spring Wireless USA, Inc., Zerion Software, Inc., BizSpeed, Inc., Syclo, LLC, Xora, Inc., Spira Data Corp., Survey Analytics LLC, The DataMax Software Group Inc., Ventyx Inc., Air2Web Inc., General Data Company, Inc., RealTime Results, LLC, Millennium Information Technology, Inc. (d/b/a MIT Systems, Inc.) pursuant to Civil Action No. 6:11-CV-287.

In each action, we claimed that each of defendants, either directly or through intermediaries, made, has made, used, imported, provided, supplied, distributed, sold, and/or offered for sale products and/or systems that infringed one or more claims of our Patent #7,822,816. We asked the Court for relief, including permanent injunctions, damages and costs we incurred because of the infringing activities, including interest and attorney fees. Any resulting litigation, however, will be subject to inherent uncertainties and the favorable outcome of any litigation is inestimable.

On June 30, 2011, the lawsuits against GeoAge, Inc. and Pogo Corporation were dismissed without prejudice.  On July 6, 2011, the lawsuit against Widget Press, Inc. was dismissed without prejudice. On July 19, 2011, the lawsuit against On the Spot Systems, Inc. was dismissed with prejudice pursuant to a settlement agreement. On August 11, 2011, the lawsuit against SWD Interactive LLC was dismissed without prejudice.  We anticipate filing this week a motion to dismiss with prejudice the lawsuit against Blue Shoe Mobile Solutions, LLC pursuant to a settlement agreement.
 
Item 1A. Risk Factors
 
Not required under Regulation S-K for “smaller reporting companies.”

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 
 
The Company issued a total of 843,678 common shares and cancelled a total of 65,000 in the quarter ended June 30, 2011, described further as follows:

The Company issued the independent directors 93,895 shares of common stock on April 1, 2011 for their first quarter 2011 compensation, which is $4,000 per quarter per independent director.
 
The Company issued 615,714 shares of common stock to management employees in lieu of $112,500 cash compensation for services rendered in the first quarter of 2011. The shares vest six months after issuance and are subject to forfeiture prior to vesting upon voluntary termination of employment. During the second quarter of 2011, 65,000 compensation shares previously issued for services were forfeited.
 
The Company issued 20,000 shares of common stock to its local public relations firm in exchange for $3,000 in services rendered in the first quarter of 2011. The Company issued 47,619 shares of common stock to its national public relations firm in exchange for $10,000 in services rendered in the first quarter of 2011.
 
The Company had stock bonus plans which fully vested in June 2011, resulting in 66,450 shares of common stock being issued to employees at a value of $7,309 in stock based compensation.

* All of the above offerings and sales were deemed to be exempt under either rule 506 of Regulation D and Section 4(2) or Rule 902 of Regulation S of the Securities Act of 1933, as amended. No advertising or general solicitation was employed in offering the securities. The offerings and sales were made to a limited number of persons, all of whom were accredited investors, business associates of MacroSolve or executive officers of MacroSolve, and transfer was restricted by MacroSolve in accordance with the requirements of the Securities Act of 1933. In addition to representations by the above-referenced persons, we have made independent determinations that all of the above-referenced persons were accredited or sophisticated investors, and that they were capable of analyzing the merits and risks of their investment, and that they understood the speculative nature of their investment. Except as expressly set forth above, the individuals and entities to which we issued securities as indicated in this section are unaffiliated with us.
 
 
 
22

 
 
Item 3. Defaults Upon Senior Securities
 
None.

Item 4. Reserved

Item 5. Other Information.
 
(a) Form 8-K Information
 
2011 Debenture Financing

Between April and July 2011, the Company sold the 2011 Debentures for gross proceeds of $950,000, the conversion of $725,000 of 2010 Debentures into 2011 Debentures and the conversion of a $50,000 promissory note into 2011 Debentures. The 2011 Debentures earn interest at an annual rate of 12%, which will be paid quarterly exclusively from the Debenture Account. Principal on the Debentures will be paid quarterly as the Debenture Account permits, but only after all accrued interest has been paid.

The 2011 Debentures may be converted into shares of Common Stock at the option of the holder. Upon conversion, the holder will be entitled to receive the number of shares of Common Stock that equal to two hundred percent (200%) of the face amount of the Debentures, together with accrued and unpaid interest, divided by the conversion price, which is the weighted average price for the five-day trading period before the notice of conversion. Any 2011 Debentures that are outstanding on the maturity date that have not been repaid from the Debenture Account will be repaid by the issuance of shares of Common Stock at the conversion price. The 2011 Debenture investors also received common stock purchase warrants, designated by the Company as Class A Warrants, which expire on December 31, 2016.
 
(b) Director Nomination Procedures
 
We do not have a standing nominating committee nor are we required to have one. We do not have any established procedures by which security holders may recommend nominees to our Board of Directors, however, any suggestions on directors, and discussions of board nominees in general, is handled by the entire Board of Directors.

Item 6. Exhibits
 
10.01 Form of 2010 Convertible Debenture Subscription Agreement
   
10.02 Form of 2010 Debenture
   
10.03 Form of Class B Warrant
   
10.04 Form of 2011 Convertible Debenture Subscription Agreement
   
10.05 Form of 2011 Debenture
   
10.06 Form of Class A Warrant
   
31.01 Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
31.02 Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
32.01 Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
101 INS XBRL Instance Document*
   
101 SCH XBRL Schema Document*
   
101 CAL XBRL Calculation Linkbase Document*
   
101 LAB XBRL Labels Linkbase Document*
   
101 PRE XBRL Presentation Linkbase Document*
   
101 DEF XBRL Definition Linkbase Document*
_________________________
*
Submitted electronically herewith.  Attached as Exhibit 101 are the following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, formatted in XBRL (eXtensible Business Reporting Language) and tagged as blocks of text: (i) Balance Sheets at June 30, 2011 and December 31, 2010; (ii) Statements of Operations for the Three and Six Months Ended June 30, 2011 and 2010; and (iii) Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010.  Pursuant to Rule 406T of Regulation S-T this data is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities and Exchange Act of 1934, and otherwise is not subject to liability under these sections.

 
 
23

 
 
SIGNATURES

 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
MACROSOLVE, INC.
 
       
Date: August 15, 2011
By:
/s/ STEVE SIGNOFF
 
   
Steve Signoff
 
   
Chief Executive Officer (Principal Executive Officer)
 
       
       
Date: August 15, 2011
By:
 /s/ KENDALL CARPENTER
 
   
Kendall Carpenter
 
   
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
 

 
 
24
EX-10.01 2 ex1001.htm EXHIBIT 10.01 ex1001.htm
Exhibit 10.01
 
 
 
 
 
SUBSCRIPTION AGREEMENT AND QUESTIONNAIRE
 
Gentlemen:
 
1.  
Subscription.  The undersigned, desiring to purchase Convertible Debentures Series 2010 and Series B Warrants to purchase common stock, par value $0.01 per share (the “Debentures” and “Warrants,” respectively, and collectively, the “Securities”) of MacroSolve, Inc., an Oklahoma corporation (the “Company”), hereby subscribes for and agrees to purchase Debentures and Warrants upon acceptance of this Subscription Agreement and Questionnaire (“Subscription Agreement”) by the Company.  The undersigned is delivering with this Subscription Agreement a check payable to the order of the Company in the amount of $_______.
 
2.  
Representations and Warranties.  By executing this Subscription Agreement, the undersigned further:
 
 
 
(a)
Acknowledges that the undersigned (i) has received the Term Sheet, Debenture and Warrant and (ii) is familiar with and understands each of the foregoing including the risk factors and other considerations referred to in the Term Sheet and in the reports filed by the Company with the SEC as described in the Term Sheet;
 
 
(b)
Represents and warrants that the undersigned in determining to purchase the Securities has relied solely upon the documents described herein and the advice of the undersigned’s legal counsel, accountants and other financial advisers with respect to the legal, tax, investment and other consequences involved in purchasing the Securities;
 
 
(c)
Acknowledges that the Securities being acquired will be governed by the terms and conditions therein, which the undersigned accepts and by which the undersigned agrees to be legally bound;
 
 
(d)
Represents and warrants that the Securities being acquired will be acquired for the undersigned’s own account without a view to public distribution or resale and that the undersigned has no contract, undertaking, agreement or arrangement to sell or otherwise transfer or dispose of any Securities or any portion thereof;
 
 
(e)
Represents and warrants that the undersigned (i) can bear the economic risk of the purchase of the Securities including the total loss of the undersigned’s investment and (ii) has such knowledge and experience in business and financial matters, including the analysis of or participation in offerings of privately issued investments, as to be capable of evaluating the merits and risks of an investment in the Securities, or that the undersigned is being advised by others (acknowledged by the undersigned as being the “Purchaser Representative(s)” of the undersigned) such that they and the undersigned together are capable of making such evaluation;
 
 
 
1

 
 
 
(f)
Represents and warrants, if subject to the Employee Retirement Income Security Act (“ERISA”), that the undersigned is aware of and has taken into consideration the diversification requirements of Section 404(a)(3) of ERISA in determining to purchase the Securities and that the undersigned has concluded that the purchase of Securities is prudent;
 
 
(g)
Understands that the Securities have not been registered under the Securities Act of 1933, as amended (the “Act”), or the securities laws of any state and are subject to substantial restrictions on transfer;
 
 
(h)
Agrees that the undersigned will not sell or otherwise transfer or dispose of any Securities or any portion thereof unless such Securities are registered under the Act and any applicable state securities laws or, if required by the Company, the undersigned obtains an opinion of counsel that it is satisfactory to the Company that such Securities may be sold in reliance on an exemption from such registration requirements;
 
 
(i)
Understands that (i) the Company has no obligation or intention to register any Securities for resale or transfer under the Act or any state securities laws or to take any action (including the filing of reports or the publication of information as required by Rule 144 under the Act) which would make available any exemption from the registration requirements of any such laws and (ii) the undersigned therefore may be precluded from selling or otherwise transferring or disposing of any Securities or any portion thereof for an indefinite period of time or at any particular time;
 
 
(j)
Acknowledges that the undersigned has been encouraged to rely upon the advice of the undersigned’s legal counsel, accountants, investment or other financial advisers with respect to the tax and other considerations relating to the purchase of the Securities and has been offered, during the course of discussions concerning the purchase of the Securities the opportunity to ask such questions and inspect such documents concerning the Company and its business and affairs as the undersigned has requested so as to understand more fully the nature of the investment and to verify the accuracy of the information supplied;
 
 
(k)
Acknowledges that the undersigned has not relied on any information, disclosures or statements by the Company in making this investment except for those in the Term Sheet, the Debentures, the Warrants and the Company’s reports filed with the Securities and Exchange Commission (“SEC”);
 
 
 
2

 
 
 
(l)
Represents and warrants that (i) if an individual, the undersigned is at least 21 years of age; (ii) the undersigned has adequate means of providing for the undersigned’s current needs and personal contingencies; (iii) the undersigned has no need for liquidity in the undersigned’s investment; (iv) the undersigned maintains the undersigned’s principal residence at the address shown below; (v) all investments in and commitments to non-liquid investments are, and after the purchase of the Securities will be, reasonable in relation to the undersigned’s net worth and current needs; and (vi) any financial information that is provided herewith by the undersigned, or is subsequently submitted by the undersigned at the request of the Company, does or will accurately reflect the undersigned’s financial condition with respect to which the undersigned does not anticipate any material adverse change;
 
 
(m)
Understands that no Securities commission or authority has approved or disapproved the Securities passed upon or endorsed the merits of this offering or the accuracy or adequacy of the documents delivered by the Company, or made any finding or determination as to the fairness of the Securities for public investment;
 
 
(n)
Acknowledges that the Company has the unconditional right to accept or reject this subscription;
 
 
(o)
Understands that the Securities are being offered and sold in reliance on specific exemptions from the registration requirements of federal and state laws and that the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings set forth herein in order to determine the suitability of the undersigned to acquire the Securities;
 
 
(p)
Represents and warrants that the information set forth in this Subscription Agreement and Questionnaire concerning the undersigned is true and correct;
 
 
(q)
Represents, warrants and agrees that, if the undersigned is acquiring the Securities in a fiduciary capacity, (i) the above representations, warranties, agreements, acknowledgments and understandings shall be deemed to have been made on behalf of the person or persons for whose benefit such Securities are being acquired, (ii) the name of such person or persons is indicated below under the subscriber’s name and (iii) such further information as the Company deems appropriate shall be furnished regarding such person or persons;
 
 
(r)
Agrees that the Company may present the information contained herein to such persons as it deems appropriate if called upon to verify the information provided or to establish the availability of an exemption from registration under Section 4(2) of the Act, Regulation D or any state or other securities statutes or regulations or if the contents are relevant to any issue in any action, suit or proceeding which it is or may be bound; and
 
 
(s)
Agrees that any dispute concerning this investment, the Securities, the Term Sheet or this Subscription Agreement and Questionnaire, including the issue of whether the dispute is subject to arbitration, will be resolved by arbitration as described in the Debenture and Warrant.  The undersigned acknowledges that arbitration will not involve a trial by jury or discovery available in a civil court case and that an appeal from a decision by the arbitrator is limited.
 
 
 
3

 
 
IN WITNESS WHEREOF, intending to irrevocably bind the undersigned and the personal representatives, successors and assigns of the undersigned and to be bound by this Subscription Agreement and Questionnaire, the undersigned is executing the Signature Page included herein on the date indicated.
 
The undersigned is subscribing for Debentures and has enclosed a check payable to the order of MacroSolve, Inc. in the amount of $__________.
 
 
Dated:        
      Signature of Investor (Additional Signature if required)  
         
         
      Print Name of Individual, Corporation, Partnership, Plan Or Trust  
         
         
     
Social Security Number or Tax I.D. Number under which Interest(s) shall be registered
 
         
         
      Mailing Address  
         
         
      City                        State                                           Zip Code  
         
         
     
Home Telephone Number                          Business Telephone Number
 
 
 
 
4

 
 
Investor Questionnaire
 
Please complete the portion of the questionnaire applicable to the type of Investor.
 
I.           Investor Accreditation for Individual Investors.
 
1. Accredited Investor Status.  Please complete each of the following certifications:      
         
(a)  I certify that I have an individual net worth (or a joint net worth with my spouse) in excess of $1,000,000 (excluding homes, home furnishings and automobiles.      
 
  Yes   No    
 
(b) I certify that I had individual income (excluding any income of my spouse) of more than $200,000 in each of the previous two calendar years or joint income with my spouse in excess of $300,000 in each of those years and I reasonably expect to reach the same income level in the current year.  
 
  Yes   No    
 
II.           Accredited Investor Status for Trust Investors.

Please complete each of the following certifications.
 
1. The undersigned Trust has as its trustee a bank as defined in Section 3(a)(2)      
         
 
of the Securities Act of 1933.
     
 
  Yes   No    
 
2.
The undersigned Trust certifies that it has total assets in excess of $5,000,000, was not formed for the specific purpose of acquiring the Securities and is directed by a sophisticated person as defined in Rule 506(b)(2)ii) under the Securities Act of 1933.
     
 
  Yes   No    
 
 
III.
Accreditation for Corporate, Partnership or Limited Liability Company Investors.
 
Please complete each of the following certifications:

 
1.
The undersigned Corporation, Partnership or Limited Liability Company certifies that EACH of its shareholders, partners, or members meets at least ONE of the following conditions:
 
 
 
5

 

 
 
(a)
Each shareholder, partners, or member is a natural person whose individual net worth (or joint net worth with his/her spouse) exceeds $1,000,000 (excluding home, home furnishings and personal property).

 
o  Yes    o No

 
(b)
Each shareholder, partner, or member is a natural person who had an individual income in excess of $200,000 in each of the previous two calendar years or joint income with such person’s spouse in excess of $300,000 in each of those years and who reasonably expects to reach the same income level for the current calendar year.

 
o  Yes    o No

 
(c)
The shareholder, partner, or member of the Investor is a corporation, partnership, or limited liability company and all of the shareholders, partners, or members (a “beneficial owner”), respectively, of such corporation, partnership, or limited liability company can answer yes to statement III.1(a) or (b) above.

 
o  Yes    o No

 
2.
The undersigned Corporation, Partnership or Limited Liability Company certifies that it has total assets in excess of $5,000,000 and that it was not formed for the specific purpose of investing in the Securities.

 
o  Yes    o No

 
3.
The undersigned Corporation, Partnership or Limited Liability Company certifies that it is a broker, or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934 and purchasing the Securities for its own account.

 
o  Yes    o No

 
4.
The undersigned Corporation, Partnership or Limited Liability Company certifies that is it an organization described in Section 501(c)(3) of the Internal Revenue Code with total assets in excess of $5,000,000.

 
o  Yes    o No


 
6
EX-10.02 3 ex1002.htm EXHIBIT 10.02 ex1002.htm
EXHIBIT 10.02


THIS DEBENTURE AND THE SHARES ISSUABLE HEREUNDER HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT FOR DISTRIBUTION, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NEITHER THE DEBENTURE NOR THE SHARES MAY BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE MACROSOLVE, INC. AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.  THIS DEBENTURE MUST BE SURRENDERED TO MACROSOLVE, INC. OR ITS TRANSFER AGENT AS A CONDITION PRECEDENT TO THE SALE, PLEDGE OR OTHER TRANSFER OF ANY INTEREST IN THIS DEBENTURE OR THE SHARES ISSUABLE HEREUNDER.

MacroSolve, Inc.

Convertible Debenture Series 2010
Due December 31, 2015
 
$  
Registered Debentureholder:
 
 
 
  MacroSolve, Inc., a corporation duly organized and existing under the laws of the State of Oklahoma (hereinafter referred to as the "Company"), for value received, hereby promises to pay to the registered holder hereof, the principal sum stated above (“Principal Amount”) on the 31st day of December, 2015, together with interest accrued upon the unpaid principal sum from the date hereof, upon presentation and surrender of this Convertible Debenture Series 2010 (“Debenture”) at the principal corporate office of the Company at 1717 South Boulder Ave., Suite 700, Tulsa, Oklahoma  74119, or at such other place as the Company may designate, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts.

              Interest shall accrue on a daily basis on the outstanding principal amount of this Debenture from and including the date hereof at the rate equal to two percent (2%) per annum computed on the basis of a year of 365 or 366 days, as applicable, for the actual number of days elapsed. Interest shall be accrued until and paid upon maturity.
             
1.       Payment and Prepayment.

a.              The Company may prepay all, but not less than all, of the Principal Amount, together with accrued interest through the date of prepayment, by tendering to the Debentureholder a payment equal to one hundred and fifty percent (150%) of the Principal Amount. If the Company elects to prepay this debenture it shall give the Debentureholder notice of prepayment on or before June 30, 2011, and shall tender payment to the Debentureholder on the first business day that is more than 30 days after such notice.
 
b.              The Company may elect in its sole discretion to satisfy its obligation to pay principal and interest upon prepayment or at maturity either by the timely issuance and delivery to the Debentureholder of whole shares (“PIK Shares”) of common stock of the Company, or par value $0.01 per share (“Common Stock”), by cash or by a combination of the two.  The Company shall deliver a written irrevocable notice of its election to pay interest by either PIK Shares or cash and PIK Shares at least ten (10) days before the payment date (“Notice Date”). If such notice is not delivered at least ten (10) days before the Notice Date, then the interest shall be paid in PIK Shares

The PIK Shares issued and delivered shall be equal to the number of shares of Common Stock that could have been purchased for the principal and interest obligation (less any cash paid as interest in combination with the PIK Shares) if the shares were valued at the volume weighted average price of the Common Stock on the last five (5) days of trading before the payment date.  For purposes hereof, the volume weighted average price shall be the dollars traded in every transaction in the Common Stock for the five-day trading period as reported on the OTC Bulletin Board (“OTCBB”) (or any other recognized securities market on which the Common Stock is traded, if not then quoted, on the OTCBB) divided by the total number of shares traded during that five-day period.  If the Common Stock is not quoted on the OTCBB or traded on any recognized market, the Company may not elect to pay in PIK Shares.
 
 
1

 

2.       Conversion.

         a.       Rights of Conversion.

                  The Debentureholder shall have a right of conversion of the face amount of this Debenture into shares of Common Stock after June 30, 2011, and upon notice of prepayment by the Company pursuant to Section 1, on the terms hereinafter provided.  For conversion upon notice of prepayment by the Company to be effective, notice must be given by the Debentureolder to the Company before prepayment is tendered to the Debentureholder by the Company.

                  The basis for such conversion is, for convenience, herein expressed in terms of a dollar conversion price (the "conversion price") per share. The number of shares of Common Stock issuable upon any conversion of this Debenture at any given time shall be determined by dividing the principal amount to be converted at the given time by the conversion price then in effect.

                  The Debentureholder, by purchasing this Debenture, understands that the Common Stock to be issued pursuant to the conversion rights granted hereunder has not been registered under the Securities Act of 1933, as amended (“Securities Act”), that it is not the intention of the Company to so register said Common Stock and that the certificates evidencing said Common Stock will bear a legend indicating that said shares are “restricted securities” within the meaning of Rule 144 under the Securities Act.  The Debentureholder further understands that unless said Common Stock is registered under the Securities Act, the Securities Act may be construed to prohibit any public sale or transfer of any of the Common Stock unless such public sale or transfer is effected in compliance with all applicable laws and regulations.

         b.       Method of Exercise.

                  In order to exercise such conversion privilege, the holder of this Debenture shall present and surrender this Debenture during usual business hours at the principal corporate office of the Company and shall deliver a written notice, in the form of Exhibit A attached hereto, of the election of the holder to convert this Debenture or any portion thereof specified in such notice.  The certificate or certificates for Common Stock which shall be issuable on such conversion shall be issued in the name of the registered holder hereof.

                  This Debenture, when surrendered for conversion, shall be endorsed in such manner, or accompanied by such instruments of transfer, as the Company may prescribe. The conversion shall be deemed to have been effected on the date (the "conversion date") on which this Debenture shall have been surrendered and such notice and any required instruments of transfer received as aforesaid, and the person or persons in whose name or names any certificate or certificates for Common Stock shall be issuable on such conversion shall be deemed to have become on the conversion date the holder or holders of record of the Common Stock represented thereby.

                  As promptly as practicable after the presentation and surrender for conversion, of this Debenture, as herein provided, the Company shall issue and deliver at such office to or upon the written order of the holder, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion. No fractional shares, or scrip representing fractional shares, shall be issued upon any conversion, but in lieu thereof the Company shall pay in cash the fair value of such fractional shares as of the conversion date. The issuance of certificates for Common Stock issuable upon the conversion of this Debenture shall be made without charge to the converting holder for any tax in respect of the issue thereof.
 
 
 
2

 

          c.       Common Stock Conversion.
 
(1)      Initial Conversion Price.

 
Until and unless it shall be changed in accordance with a subsequent  provision in this subsection 2.c., the Conversion Price for the Common Stock shall be the number of shares of Common Stock that could have been purchased for the Principal Amount and accrued interest, or in the event of conversion upon notice of prepayment pursuant to Section 1, on two hundred percent (200%) of the Principal Amount and accrued interest if the shares were valued at volume weighted average price of the Common Stock on the last five (5) days of trading before conversion.  For purposes hereof, the volume weighted average price shall be the dollars traded in every transaction in the Common Stock for the five-day trading period as reported on the OTCBB (or any other recognized securities market on which the Common Stock is traded, if not then quoted, on the OTCBB) divided by the total number of shares traded during that five-day period.  If the Common Stock is not quoted on the OTCBB or traded on any recognized market, the Company shall determine the conversion price in good faith.
 
(2)      Definitions.

 
Each term listed in this subsection 2.c. shall have the meaning given in this subsection 2.c.(2) whenever it is used in this Agreement.

Adjustment  Fraction:  The  Adjustment  Fraction applicable  with  respect to any Stock Dividend or Reverse Stock Split shall have (i) a numerator equal to the number of shares of Common Stock outstanding immediately prior to the effective time of such Stock Dividend or Reverse Stock Split and (ii) a denominator equal to the number of shares of Common Stock outstanding immediately after giving effect to such Stock Dividend or Reverse Stock Split.

 
Reverse  Stock  Split:  Any  of  the  following occurrences  shall  be  deemed  to be a "Reverse Stock Split": (i) any amendment to the Company's Certificate of Incorporation which shall have the effect of reducing the number of shares of Common Stock held by every holder of the Common Stock by the same proportion without providing for any distribution of anything of value to such holders in exchange for the shares lost by reason of such occurrence and (ii) any other occurrence which shall be similar in its substantive effect to the occurrence specified in clause (i) of this sentence.

 
Stock  Dividend:  Any of the following  occurrences shall  be  deemed  to be a  "Stock Dividend": (i) any distribution of shares of Common Stock pro rata to the holders of outstanding Common Stock in order to effect a stock dividend or stock split, (ii) any stock split or other subdivision of the Common Stock effected by means of an amendment to the Company's Certificate of Incorporation or otherwise, or (iii) any other occurrence which (A) shall have the effect of increasing by the same proportion the number of shares of Common Stock held by every holder of Common Stock issued in connection with such occurrence or (B) shall otherwise be similar in substantive effect to any of the occurrences specified in clause (i) or clause (ii) of this sentence.
 
(3)      Conversion Price Adjustment.

 
Immediately after the  effective  time for any Stock Dividend or Reverse  Stock Split, the Conversion Price shall change to the product derived by multiplying (i) the Conversion Price in effect immediately prior to such effective time by (ii) the Adjustment Fraction applicable with respect to such Stock Dividend or Reverse Stock Split.
 
 
 
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         d.       Fundamental Change.

                  (1)      Definition.

 
For  purposes  of this  Debenture,  a  "Fundamental Change"  shall  be  deemed  to have occurred if there shall be: (i) any consolidation to which the Company shall be a party, (ii) any merger in which the Company shall not survive, (iii) any merger in which the Common Stock outstanding immediately prior to such merger shall be exchanged for or converted into any cash, securities or other property, (iv) any complete liquidation of the Company, or (v) any partial liquidation of the Company for which the approval of the holders of Common Stock is required or which is involuntary.

                  (2)      Conditional Conversion Election.

In connection with any Fundamental Change, the Debentureholder  shall have the right at any time before such event shall actually occur to make a conditional election (i) to convert all or such portion of this Debenture as the holder shall desire into Common Stock if such event shall actually be consummated and to participate in such event as if the holder had held such Common Stock on the date as of which the holders of Common Stock entitled to participate in such event shall be selected but (ii) not to convert this Debenture if such event shall not be consummated. This Debenture converted pursuant to any conditional election made pursuant to rights granted in this subsection 2.d.(2) shall be deemed to have been converted on the record date (or if there be no record date, the point in time) used to determine the holders of Common Stock entitled to participate in the Fundamental Change or other event giving rise to such conditional election.

                  (3)      Fundamental Change Adjustment.

 
As a condition  to the  consummation  of any Fundamental  Change,  lawful and  adequate provision shall be made whereby the Debentureholder, if such holder shall not make a conditional conversion election pursuant to Section 2.d.(2), will immediately after the consummation of such Fundamental Change have the right to convert this Debenture into such shares of stock, securities or assets which such holder could have received in such Fundamental Change if such holder had made a conditional conversion of this Debenture pursuant to Subsection 2.d.(2). In each such case appropriate provision will be made with respect to such holder's rights and interests to the end that the provisions of Section 2 shall thereafter be applicable in relation to any shares of stock, securities or assets thereafter deliverable upon the conversion of this Debenture to provide such holder with protections after such Fundamental Change substantially equivalent to the protections provided by Section 2 prior to such Fundamental Change.

      e.       Purchase Rights.

                  If at any time the Company grants, issues or sells any options, convertible securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of Common Stock (the "Purchase Rights"), then the holder of this Debenture shall be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the holder could have acquired if the holder had held the number of shares of Common Stock acquirable upon conversion of this Debenture immediately before the date on which a record shall be taken for the grant, issuance or sale of such Purchase Rights or, if no such record shall be taken, the date as of which the record holders of Common Stock shall be determined for the grant, issue or sale of such Purchase Rights.

       f.       Distribution Rights.

                  If at any time the Company makes any distribution pro rata to the record holders of Common Stock in property other than cash ("Distribution Rights"), then the holder of this Debenture shall be entitled to acquire, upon the terms applicable to such Distribution Rights, the aggregate Distribution Rights which the holder could have acquired if the holder had held the number of shares of Common Stock acquirable upon conversion of this Debenture immediately before the date on which a record shall be taken for the grant, issuance or sale of such Distribution Rights, or, if no such record shall be taken, the date as of which the record holders of Common Stock shall be determined for the grant, issue or sale of such Distribution Rights.

      g.       Notices.  Immediately upon any adjustment of the Conversion Price, the  Company  shall send written notice thereof to the holder of this Debenture.
 
 
 
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3.       Remedies.

         a.       Events of Default.

                  A "Default" shall be deemed to exist for purposes of this Debenture so long as:
 
                  (1)       the principal and interest owed on this Debenture shall be past due; or

 
(2)
the Company shall be in breach of any other covenant or warranty of the Company in this Debenture for at least thirty (30) days after there has been given to the Company by the holder, a written notice specifying such breach and requiring it to be remedied and stating that such notice is a "notice of default" hereunder; or

                  (3)
a decree or order by a court having jurisdiction in the premises shall have been entered adjudicating the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization of the Company under the Bankruptcy Code or any other similar applicable federal or state law, and such decree or order shall have been in effect for a period of sixty (60) days; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of the Company or of any property of the Company or for the winding up or liquidation of its affairs shall be in effect and shall have been in effect for a period of sixty (60) days; or

 
(4)
the Company or any subsidiary shall have instituted proceedings to be adjudicated a voluntary bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall have filed a petition or answer or consent seeking reorganization under the Bankruptcy Code or any other applicable federal or state law, or shall have consented to the filing of any such petition, or shall consent to the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of it or of its property, or shall have made an assignment for the benefit of creditors, or shall have admitted in writing its inability to pay its debts generally as they become due, or corporate action shall be taken by the Company or any subsidiary in furtherance of any of the aforesaid purposes.

A default shall be deemed to exist whenever prescribed by the terms of this Section 3.a. regardless of whether such Default shall be voluntary or involuntary or shall result from compliance with any legal requirement or any other circumstance of any kind.

        b.       Acceleration of Maturity.

                  Whenever a Default exists, the holder may declare the principal and interest of this Debenture to be due and payable immediately, by a notice in writing to the Company, and upon any such declaration such principal shall become immediately due and payable.

         c.       Unconditional Right of Debentureholder to Receive Principal
                   and Interest.

                  Notwithstanding any other provision in this Debenture, the holder shall have the right which is absolute and unconditional to receive payment of the principal of and  interest on maturity and to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of the holder.

         d.       Rights and Remedies Cumulative; Governing Law.

                  No right or remedy herein conferred upon or reserved to the Debentureholder is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment or any other appropriate right or remedy. This Debenture and all rights hereunder shall be governed by the internal laws, not the laws of conflicts, of the State of Oklahoma.
 
 
 
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         e.       Delay or Omission Not Waiver.

                  No delay or omission of any holder to exercise any right or remedy accruing upon any Default shall impair any such right or remedy or constitute a waiver of any such Default or an acquiescence therein. Every right and remedy given by this Debenture or by law to the Debentureholder may be exercised from time to time, and as often as may be deemed expedient, by the Debentureholder.

         f.       Undertaking for Costs.

                  The parties to this Debenture agree that any court or arbitrator, as the case may be, may in its discretion require, in any suit for the enforcement of any right or remedy under this Debenture, any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant.

4.       Covenants.

           a.       Reports.

                  So long as this Debenture is outstanding, the Company will furnish to the holder as soon as practicable after the end of each fiscal year, the Annual Report of the Company on Form 10-K as filed with the SEC and any other reports or communications by the Company to the shareholders.

           b.       Reservation of Shares.

                  The Company agrees to reserve from its authorized and unissued Common Stock, until this Debenture shall cease to be convertible or shall be fully converted, shares of Common Stock in a number which at any given time shall be equal to all of the number of shares which may be issuable on or at the given time by reason of the conversion of this Debenture.
 
c.       No Short Positions.

While holding the Debentures the Debentureholder will not sell shares of Common Stock short, buy puts to sell the Common Stock, or buy or sell any security that is substantially equivalent to a short position.
 
d.      Use of proceeds.

The Company shall use the proceeds from the sale of this Debenture to meet its operating cash requirements and to repay $110,000 of a $160,000 loan from a shareholder.
 
 
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5.              General.

            a.       Registration, Transfer and Exchange.

                 The Company shall cause to be kept at its principal corporate office a register (herein sometimes referred to as the "Debenture register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of this Debenture and of transfers of this Debenture. The Secretary of the Company is hereby appointed "Debenture registrar" for the purpose of registering this Debenture and transfers of this Debenture as herein provided.

                  Upon surrender for transfer of any part of this Debenture at the principal corporate office of the Company, which transfer complies with all applicable securities laws, the Company shall execute and deliver, in the name of the designated transferee or transferees, one or more new debentures of any authorized denominations, of a like aggregate principal amount.

                  A Debenture issued upon any transfer or exchange of this Debenture shall be a valid obligation of the Company, evidencing the same debt, and entitled to the same benefits as this Debenture.

                  The Debentureholder understands that: (i) this Debenture has not been registered under the Securities Act or any other federal or state law governing the issuance or transfer of securities (which are herein collectively called the "securities laws"), (ii) the securities laws impose substantial restrictions upon the transfer of any interest in this Debenture, and (iii) the Company is not obligated to register this Debenture or the securities acquired upon conversion of this Debenture under the securities laws or otherwise take any action to facilitate or make possible any transfer of any interest in this Debenture.

                  No service charge shall be made for the transfer or exchange of this Debenture, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with the transfer or exchange of this Debenture.

         b.       Mutilated, Destroyed, Lost and Stolen Debentures.

                  If (i) any mutilated Debenture is surrendered to the Company and the Debenture registrar receives evidence to its satisfaction of the destruction, loss or theft of any Debenture, and (ii) there is delivered to the Company such security or indemnity as may be required by the Company to save the Company harmless, then the Company shall execute and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Debenture, a new Debenture of like tenor and principal amount, bearing a number not contemporaneously outstanding.

                 In case any such mutilated, destroyed, lost or stolen Debenture has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Debenture, pay such Debenture.

                 Upon the issuance of any new Debenture under this section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith.

                Every new Debenture issued pursuant to this section in lieu of any destroyed, lost or stolen Debenture shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Debenture shall be at any time enforceable by anyone, and shall be entitled to all the benefits hereof equally and proportionately with any and all other Debentures duly issued.

                  The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Debentures.

         c.       Payment of Interest; Interest Rights Preserved.

                  Interest on this Debenture shall be paid to the person in whose name this Debenture (or one or more predecessor Debenture) is registered at the close of business on the business day immediately prior to such payment date.

         d.       Persons Deemed Owners.

                  The Company, and any agent of the Company, may treat the person in whose name this Debenture is registered as the owner of this Debenture for the purpose of receiving payment of principal interest on this Debenture and for all other purposes whatsoever, whether or not this Debenture be overdue, and neither the Company nor any agent of the Company shall be affected by notice to the contrary.

         e.       Cancellation.
 
                  This Debenture when surrendered for payment, redemption, transfer, exchange or conversion shall be delivered to the Debenture registrar for cancellation. The Company may at any time deliver to the Debenture registrar for cancellation any Debentures previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Debentures so delivered shall be promptly cancelled by the Debenture registrar. No Debentures shall be issued in lieu of or in exchange for any Debentures cancelled as provided in this section, except as expressly permitted. All cancelled Debentures held by the Debenture registrar shall be disposed of as directed by the Company.
 
6.           Governing Law; Dispute Resolution.
 
This Debenture shall be governed by and construed in accordance with the laws of the State of Oklahoma without giving effect to its principles regarding conflicts of law. Any dispute concerning this Debenture or the investment of Debentureholder in the securities of the Company, including a dispute about whether the dispute is subject to arbitration, shall be resolved by arbitration in Tulsa, Oklahoma, under the Commercial Arbitration Rules of the American Arbitration Association (“AAA”) by a single arbitrator selected by the Company from the AAA’s panel of arbitrators.

 
 
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            IN WITNESS WHEREOF, the Company has caused this Debenture to be signed in its name by the signature of its Chief Executive Officer.
 
  MacroSolve, Inc.  
       
Date:
By:
/s/   
    Name: Clint H. Parr  
    Title: Chief Executive Officer  
       
 
 
 
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Title:    Exhibit A

ELECTION TO CONVERT DEBENTURE

Reference is made to that certain Convertible Debenture Series 2010 due December 31st, 2015 (the "Debenture") issued on __________ by MacroSolve, Inc. (the “Company”) to ______________.  Capitalized terms used but not otherwise defined in this Exhibit A shall have the meanings assigned to them in the Debenture.

The Debentureholder hereby irrevocably elects to convert the Debenture and any accrued interest thereunder into shares of Common Stock.  The Debentureholder shall be entitled to convert the Debenture only in accordance with Section 2 thereof.

The Debentureholder directs the Company to record in the stockholder register of the Company the Common Stock (or other securities) issuable upon this conversion of the Debenture in the name of the Debentureholder.

The Debenture is herewith being surrendered by the Debentureholder. The Debentureholder hereby acknowledges and approves of the cancellation of the Debenture by the Company.
 
 
    Debentureholder:      
    Address:    
Dated:        
         
 
 
 
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EX-10.03 4 ex1003.htm EXHIBIT 10.03 ex1003.htm
EXHIBIT 10.03
 
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT FOR DISTRIBUTION, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NEITHER THE WARRANT NOR THE SHARES MAY BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.  THIS WARRANT MUST BE SURRENDERED TO THE COMPANY OR ITS TRANSFER AGENT AS A CONDITION PRECEDENT TO THE SALE, PLEDGE OR OTHER TRANSFER OF ANY INTEREST IN THIS WARRANT OR THE SHARES ISSUABLE HEREUNDER.

MacroSolve, Inc.

Series B Warrant to Purchase Common Stock
 
Issuer:   MacroSolve, Inc.    
Class of Stock: Common Stock    
Issue Date: ,2010    
Expiration Date:  December 31, 2015    
Holder:       
 
THIS WARRANT TO PURCHASE COMMON STOCK, $0.01 par value per share, of MacroSolve, Inc. (the “Company”) is being issued in conjunction with the Convertible Debentures Series 2010 (“Debentures”) issued the Company to the holder named above (“Holder”).

1.           Warrant.

The Company hereby grants to Holder the right to purchase _________ [calculate and insert 50% of conversion shares for Debenture upon issue] shares of the Company’s Common Stock (the “Shares” or “Warrant Shares”).  This Warrant shall expire and Holder shall no longer be able to purchase the Warrant Shares on the Expiration Date provided above.

2.           Exercise.
 
a.           Method of Exercise.  Holder may exercise this Warrant in whole and not in part, by delivering a duly executed Warrant Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company.
 
b.           Delivery of Certificate.  As promptly as practicable after the receipt of the Warrant Notice of Exercise, but in any event not more than three (3) business days after the Company’s receipt of the Warrant Notice of Exercise, the Company shall issue the Shares and cause to be mailed for delivery by overnight courier.
 
c.           Replacement of Warrant.  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, or 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.
 
d.           Exercise Price.  The Exercise Price of this Warrant shall be $_____ [volume weighted average price for 5 days before issue to be calculated and inserted] for each Warrant Share. The Exercise Price shall be changed in accordance with Section III.
 
 
 
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3.              Adjustment to the Shares.

              The number of Warrant Shares purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows:

           a.           Definitions.  The capitalized terms in this Section 3 shall have the meaning hereinafter provided.

Adjustment  Fraction:  The  Adjustment  Fraction applicable  with  respect to any Stock Dividend or Reverse Stock Split shall have (i) a numerator equal to the number of shares of Common Stock outstanding immediately prior to the effective time of such Stock Dividend or Reverse Stock Split and (ii) a denominator equal to the number of shares of Common Stock outstanding immediately after giving effect to such Stock Dividend or Reverse Stock Split.

 Reverse  Stock  Split:  Any  of  the  following occurrences  shall  be  deemed  to be a "Reverse Stock Split": (i) any amendment to the Company's Certificate of Incorporation which shall have the effect of reducing the number of shares of Common Stock held by every holder of the Common Stock by the same proportion without providing for any distribution of anything of value to such holders in exchange for the shares lost by reason of such occurrence and (ii) any other occurrence which shall be similar in its substantive effect to the occurrence specified in clause (i) of this sentence.

Stock  Dividend:  Any of the following  occurrences shall  be  deemed  to be a  "Stock Dividend": (i) any distribution of shares of Common Stock pro rata to the holders of outstanding Common Stock in order to effect a stock dividend or stock split, (ii) any stock split or other subdivision of the Common Stock effected by means of an amendment to the Company's Certificate of Incorporation or otherwise, or (iii) any other occurrence which (A) shall have the effect of increasing by the same proportion the number of shares of Common Stock held by every holder of Common Stock issued in connection with such occurrence or (B) shall otherwise be similar in substantive effect to any of the occurrences specified in clause (i) or clause (ii) of this sentence.
 
b.         Exercise Price Adjustment.    Immediately after the effective time for any Stock Dividend or Reverse  Stock Split, the Exercise Price shall change to the product derived by multiplying (i) the Conversion Price in effect immediately prior to such effective time by (ii) the Adjustment Fraction applicable with respect to such Stock Dividend or Reverse Stock Split.

            c.         Fundamental Change,
 
(1)    Definition.   For  purposes  of this Warrant,  a  "Fundamental Change"  shall  be  deemed  to have occurred if there shall be: (i) any consolidation to which the Company shall be a party, (ii) any merger in which the Company shall not survive, (iii) any merger in which the Common Stock outstanding immediately prior to such merger shall be exchanged for or converted into any cash, securities or other property shall be issued with respect to the Common Stock outstanding immediately prior to such merger, (iv) any complete liquidation of the Company or (v) any partial liquidation of the Company for which the approval of the Holder of Common Stock is required or which is involuntary.

                         (2)  Conditional Conversion Election. In connection with any Fundamental Change, the Holder shall have the right at any time before such event shall actually occur to make a conditional election (i) to exercise this Warrant as the Holder shall desire into Common Stock if such event shall actually be consummated and to participate in such event as if the holder had held such Common Stock on the date as of which the Holders of Common Stock entitled to participate in such event shall be selected but (ii) not to exercise this Warrant if such event shall not be consummated. This Warrant converted pursuant to any conditional election made pursuant to rights granted in this subsection 3.c.2 shall be deemed to have been converted on the record date (or if there be no record date, the point in time) used to determine the holders of Common Stock entitled to participate in the Fundamental Change or other event giving rise to such conditional election.
 
(3)   Fundamental Change Adjustment.  As a condition  to the  consummation  of any Fundamental  Change,  lawful and  adequate provision shall be made whereby the Holder, if such Holder shall not make a conditional conversion election pursuant to subsection 3.c.2, will immediately after the consummation of such Fundamental Change have the right to exercise this Warrant into such shares of stock, securities or assets which such Holder could have received in such Fundamental Change if such Holder had made a conditional exercise of this Warrant pursuant to subsection 3.c.2. In each such case appropriate provision will be made with respect to such Holder's rights and interests to the end that the provisions of Section 3 shall thereafter be applicable in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise of this Warrant to provide such Holder with protections after such Fundamental Change substantially equivalent to the protections provided by this Section III prior to such Fundamental Change.
 
 
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d.     Purchase Rights.  If at any time the Company grants, issues or sells any options, convertible securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of Common Stock, except for the sale of the Convertible Debentures and Warrants (the "Purchase Rights"), then the Holder of this Warrant shall be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon exercise of this Warrant immediately before the date on which a record shall be taken for the grant, issuance or sale of such Purchase Rights or, if no such record shall be taken, the date as of which the record Holders of Common Stock shall be determined for the grant, issue or sale of such Purchase Rights.

             e.        Distribution Rights.  If at any time the Company makes any distribution pro rata to the record Holders of Common Stock in property other than cash ("Distribution Rights"), then the holder of this Warrant shall be entitled to acquire, upon the terms applicable to such Distribution Rights, the aggregate Distribution Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon exercise of this Warrant immediately before the date on which a record shall be taken for the grant, issuance or sale of such Distribution Rights, or, if no such record shall be taken, the date as of which the record Holders of Common Stock shall be determined for the grant, issue or sale of such Distribution Rights.

             f.           No Impairment.  The Company shall not, by amendment of its articles of incorporation or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this Warrant by the Company, but shall at all times in good faith assist in carrying out all of the provisions of this Warrant and in taking all such action as may be reasonably necessary or appropriate to protect Holder's rights hereunder against impairment.  If the Company takes any action affecting its Common Stock other than as described above that adversely affects Holder's rights under this Warrant, the Exercise Price shall be adjusted downward and the number of Shares issuable upon exercise of this Warrant shall be adjusted upward in such a manner that the aggregate Exercise Price of this Warrant is unchanged.
 
g.          Fractional Shares.  No fractional Shares shall be issuable upon the exercise of this Warrant, and the number of Shares to be issued shall be rounded down to the nearest whole Share.

           h.           Certificate as to Adjustments.  Upon any adjustment of the Exercise Price, the Company, at its expense, shall 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 Exercise Price in effect upon the date thereof and the series of adjustments leading to such Exercise Price.

           i.           No Rights of Shareholders.  This Warrant does not entitle Holder to any voting rights or any other rights as a shareholder of the Company prior to the exercise of Holder’s right to purchase Shares as provided herein.

4.              Representations and Covenants of the Company.

a.      Representations and Warranties.  The Company hereby represents and warrants to Holder that all Warrant Shares which may be issued upon the exercise of the purchase right represented by this Warrant shall, upon issuance, be duly authorized, validly issued, fully paid and nonasessable, and free of any liens and encumbrances.

 b.     Information Rights.  So long as Holder holds this Warrant, the Company shall deliver to Holder (a) promptly after mailing, copies of all notices or other written communications to the shareholders of the Company, (b) within ninety (90) days of their availability, the Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”), and (c) within forty-five (45) days after the end of each fiscal quarter or each fiscal year, the Company's quarterly report to Form 10-Q filed with the SEC.

           c.           Reservation of Warrant Shares.  The Company has reserved and will keep available, out of the authorized and unissued shares of Common Stock, the full number of shares sufficient to provide for the exercise of the rights of purchase represented by this Warrant.

5.              Representations and Covenants of the Holder.

a.      Private Issue.  Holder understands (i) that the Shares issuable upon exercise of Holder's rights contained in the Warrant are not registered under the Securities Act of 1933, as amended, (the “Act”) or qualified under applicable state securities laws on the ground that the issuance contemplated by the Warrant will be exempt from the registration and qualifications requirements thereof, and (ii) that the Company's reliance on such exemption is predicated on Holder's representations set forth in this Article V.

 b.     Financial Risk.  Holder has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment and has the ability to bear the economic risks of its investment.

 c.     Risk of No Registration.  Holder understands that if the Company does not register with the SEC pursuant to Section 12 of the Act, file reports pursuant to Section 15(d) of the Securities Exchange Act of 1934 (the "1934 Act"), or if a registration statement covering the securities under the Act is not in effect when it desires to sell the Warrant Shares may be limited and the Holder therefore required to hold such securities for an indefinite period.

 d.     Accredited Investor.  Holder is an “accredited investor,” as such term is defined in the federal securities laws.  The representations and warranties in the Subscription Agreement executed by the Holder in connection with this investment (“Subscription Agreement”) are true and correct.
 

 
 
3

 
 
6.              Miscellaenous.

 a.     Term.  This Warrant is exercisable, in whole or in part, at any time and from time to time on or after the Conversion Date and on or before the Expiration Date set forth above.

 b.     Compliance with Securities Laws on Transfer.  This Warrant 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 (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder.

c.      Transfer Procedure.  Holder shall have the right without the consent of the Company to transfer or assign in whole or in part this Warrant and the Warrant Shares. Holder agrees that unless there is in effect a registration statement under the Act covering the proposed transfer of all or part of this Warrant, prior to any such proposed transfer the Holder shall give written notice thereof to the Company (a "Transfer Notice").  Each Transfer Notice shall describe the manner and circumstances of the proposed transfer in reasonable detail and, if the company so requests, shall be accompanied by an opinion of legal counsel, in a form reasonably satisfactory to the Company, to the effect that the proposed transfer may be effected without registration under the Act.

 d.     Notices, Etc.  All notices and other communications required or permitted hereunder shall be in writing and shall be delivered personally or by a nationally recognized overnight courier service, and shall be deemed given when so delivered personally, or by overnight courier service as follows:
 
if to the Company, to: MacroSolve, Inc.
  1717 South Boulder Ave.
  Suite 700
  Tulsa, OK  74119
  Attention: Chief Executive Officer
   
if to the Holder, to:
The address shown in the Holder’s Buyer Signature Page to the               
Subscription Agreement
 
or at such other address as the Company shall have furnished to the Holder.  Each such notice or other communication shall for all purposes of this agreement be treated as effective or having been given when delivered if delivered personally, or, if sent by mail, at the earlier of its receipt or five (5) days after the same has been deposited in a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid.

 e.     Counterparts.  This agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument. Facsimile execution shall be deemed originals.

 f.      Waiver.  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.

g.      Attorney’s 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 attorney’s fees.

 h.     Governing Law; Dispute Resolution.  This Warrant shall be governed by and construed in accordance with the laws of the State of Oklahoma, without giving effect to its principles regarding conflicts of law. Any dispute concerning this Warrant, the Warrant Shares or the investment of Holder in the securities of the Company, including a dispute about whether the dispute is subject to arbitration, shall be resolved in arbitration in Tulsa, Oklahoma, under the Commercial Arbitration Rules of the American Arbitration Association (“AAA”) by a single arbitrator selected by the Company from the AAA’s panel of arbitrators.

 IN WITNESS WHEREOF, the parties hereto have duly caused this Warrant to Purchase Common Stock to be executed and delivered on the date first above written.
 
 
MacroSolve, Inc.
 
       
 
By:
/s/   
    Clint H. Parr  
    Chief Executive Officer  
       
 
 
 
 
4

 
 
 
APPENDIX 1
WARRANT NOTICE OF EXERCISE

              1.              The undersigned hereby elects to purchase _____ shares of the Common Stock of MacroSolve, Inc. pursuant to the terms of the Warrant issued by MacroSolve, Inc. on ­­­­­­______, 2010.

              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:
 
 
       
       
       
    (Name and Address)  

 
              3.              The undersigned restates and affirms the representations and covenants set forth in Section 5 of the Warrant effective as of the date of exercise of the Warrant.
 
 
     
(Signature)    
     
(Date)    
 

 


5
EX-10.04 5 ex1004.htm EXHIBIT 10.04 ex1004.htm
EXHIBIT 10.04
 
 
 
SUBSCRIPTION AGREEMENT AND QUESTIONNAIRE
FOR CONVERTIBLE DEBENTURES SERIES [2011] AND
SERIES [A] WARRANTS

 
Gentlemen:
 
1.  
Subscription.  The undersigned, desiring to purchase Convertible Debentures Series [2011] and Series [A] Warrants to purchase common stock, par value $0.01 per share (the “Debentures” and “Warrants,” respectively, and collectively, the “Securities”) of MacroSolve, Inc., an Oklahoma corporation (the “Company”), hereby subscribes for and agrees to purchase Debentures and Warrants upon acceptance of this Subscription Agreement and Questionnaire (“Subscription Agreement”) by the Company.  The undersigned is delivering with this Subscription Agreement a check payable to the order of the Company in the amount shown at page 4 below.
 
2.  
Representations and Warranties.  By executing this Subscription Agreement, the undersigned further:
 
 
(a)
Acknowledges that the undersigned (i) has received the Summary of Terms (“Summary”), the form of Debenture and Warrant and (ii) is familiar with and understands each of the foregoing including the risk factors and other considerations referred to in the Summary and in the reports filed by the Company with the Securities and Exchange Commission (“SEC”) as described in the Summary;
 
 
(b)
Represents and warrants that the undersigned in determining to purchase the Securities has relied solely upon the documents described herein and the advice of the undersigned’s legal counsel, accountants and other financial advisers with respect to the legal, tax, investment and other consequences involved in purchasing the Securities;
 
 
(c)
Acknowledges that the Securities being acquired will be governed by the terms and conditions therein, which the undersigned accepts and by which the undersigned agrees to be legally bound;
 
 
(d)
Represents and warrants that the Securities being acquired will be acquired for the undersigned’s own account without a view to public distribution or resale and that the undersigned has no contract, undertaking, agreement or arrangement to sell or otherwise transfer or dispose of any Securities or any portion thereof;
 
 
(e)
Represents and warrants that the undersigned (i) can bear the economic risk of the purchase of the Securities including the total loss of the undersigned’s investment and (ii) has such knowledge and experience in business and financial matters, including the analysis of or participation in offerings of privately issued investments, as to be capable of evaluating the merits and risks of an investment in the Securities, or that the undersigned is being advised by others (acknowledged by the undersigned as being the “Purchaser Representative(s)” of the undersigned) such that they and the undersigned together are capable of making such evaluation;
 
 
(f)
Represents and warrants, if subject to the Employee Retirement Income Security Act (“ERISA”), that the undersigned is aware of and has taken into consideration the diversification requirements of Section 404(a)(3) of ERISA in determining to purchase the Securities and that the undersigned has concluded that the purchase of Securities is prudent;
 
 
 
1

 
 
 
(g)
Understands that the Securities have not been registered under the Securities Act of 1933, as amended (the “Act”), or the securities laws of any state and are subject to substantial restrictions on transfer;
 
 
(h)
Agrees that the undersigned will not sell or otherwise transfer or dispose of any Securities or any portion thereof unless such Securities are registered under the Act and any other applicable state securities laws or, if sold or transferred under an exemption from registration, the undersigned obtains an opinion of counsel that it is satisfactory to the Company that the Securities may be sold in reliance on an exemption from the registration requirements;
 
 
(i)
Understands that (i) the Company has no obligation or intention to register any Securities for resale or transfer under the Act or any state securities laws or to take any action (including the filing of reports or the publication of information as required by Rule 144 under the Act) which would make available any exemption from the registration requirements of any such laws and (ii) the undersigned therefore may be precluded from selling or otherwise transferring or disposing of the Securities for an indefinite period of time or at any particular time;
 
 
(j)
Acknowledges that the undersigned has been encouraged to rely upon the advice of the undersigned’s legal counsel, accountants, investment or other financial advisers with respect to the tax and other considerations relating to the purchase of the Securities and has been offered, during the course of discussions concerning the purchase of the Securities the opportunity to ask such questions and inspect such documents concerning the Company and its business and affairs as the undersigned has requested so as to understand more fully the nature of the investment and to verify the accuracy of the information supplied;
 
 
(k)
Acknowledges that the undersigned has not relied on any information, disclosures or statements by the Company in making this investment except for those in the Summary, the Debenture, the Warrant and the Company’s reports filed with the SEC;
 
 
(l)
Represents and warrants that (i) if an individual, the undersigned is at least 21 years of age; (ii) the undersigned has adequate means of providing for the undersigned’s current needs and personal contingencies; (iii) the undersigned has no need for liquidity in the undersigned’s investment; (iv) the undersigned maintains the undersigned’s principal residence at the address shown below; (v) all investments in and commitments to non-liquid investments are, and after the purchase of the Securities will be, reasonable in relation to the undersigned’s net worth and current needs; and (vi) any financial information that is provided herewith by the undersigned, or is subsequently submitted by the undersigned at the request of the Company, does or will accurately reflect the undersigned’s financial condition with respect to which the undersigned does not anticipate any material adverse change;
 
 
(m)
Understands that no Securities commission or authority has approved or disapproved the Securities passed upon or endorsed the merits of this offering or the accuracy or adequacy of the documents delivered by the Company, or made any finding or determination as to the fairness of the Securities for public investment;
 
 
(n)
Acknowledges that the Company has the unconditional right to accept or reject this subscription;
 
 
(o)
Understands that the Securities are being offered and sold in reliance on specific exemptions from the registration requirements of federal and state laws and that the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings set forth herein in order to determine the suitability of the undersigned to acquire the Securities;
 
 
(p)
Represents and warrants that the information set forth in this Subscription Agreement and Questionnaire concerning the undersigned is true and correct;
 
 
(q)
Represents, warrants and agrees that, if the undersigned is acquiring the Securities in a fiduciary capacity, (i) the above representations, warranties, agreements, acknowledgments and understandings shall be deemed to have been made on behalf of the person or persons for whose benefit such Securities are being acquired, (ii) the name of such person or persons is indicated below under the subscriber’s name and (iii) such further information as the Company deems appropriate shall be furnished regarding such person or persons;
 
 
(r)
Agrees to refrain from entering into a short position in the common stock of the Company, or a position through derivatives or other means that is the equivalent of a short position, while holding the Debentures.
 
 
(s)
Agrees that the Company may present the information contained herein to such persons as it deems appropriate if called upon to verify the information provided or to establish the availability of an exemption from registration under Section 4(2) of the Act, Regulation D or any state or other securities statutes or regulations or if the contents are relevant to any issue in any action, suit or proceeding which it is or may be bound; and
 
 
(t)
Agrees that any dispute concerning this investment, the Securities, the Summary or this Subscription Agreement and Questionnaire, including the issue of whether the dispute is subject to arbitration, will be resolved by arbitration in Tulsa, Oklahoma, under the Commercial Arbitration Rules of the American Arbitration Association (“AAA”) by a single arbitrator selected by the Company from the AAA’s panel of arbitrators.
 
 
 
2

 
 
 
IN WITNESS WHEREOF, intending to irrevocably bind the undersigned and the personal representatives, successors and assigns of the undersigned and to be bound by this Subscription Agreement and Questionnaire, the undersigned is executing this Subscription Agreement on the date indicated.
 
The undersigned is subscribing for Debentures and has enclosed a check payable to the order of MacroSolve, Inc. in the amount of $___________________.
 
 
Dated:        
      Signature of Investor (Additional Signature if required)  
         
         
      Print Name of Individual, Corporation, Partnership, Plan Or Trust  
         
         
     
Social Security Number or Tax I.D. Number under which securities shall be registered
 
         
         
      Mailing Address  
         
         
      City                        State                                           Zip Code  
         
         
     
Home Telephone Number                          Business Telephone Number
 
 
 
3

 

Investor Questionnaire
 
Please complete the portion of the questionnaire applicable to the type of Investor.
 
I.           Investor Accreditation for Individual Investors.
 
1. Accredited Investor Status.  Please complete each of the following certifications:      
         
(a)  I certify that I have an individual net worth (or a joint net worth with my spouse) in excess of $1,000,000 (excluding homes, home furnishings and automobiles.      
 
  Yes   No    
 
(b) I certify that I had individual income (excluding any income of my spouse) of more than $200,000 in each of the previous two calendar years or joint income with my spouse in excess of $300,000 in each of those years and I reasonably expect to reach the same income level in the current year.  
 
  Yes   No    
 
II.           Accredited Investor Status for Trust Investors.
 
 
Please complete each of the following certifications.
     
         
1. The undersigned Trust has as its trustee a bank as defined in Section 3(a)(2) of the Securities Act of 1933.      
 
  Yes   No    
 
2.
The undersigned Trust certifies that it has total assets in excess of $5,000,000, was not formed for the specific purpose of acquiring the Securities and is directed by a sophisticated person as defined in Rule 506(b)(2)ii) under the Securities Act of 1933.
 
 
  Yes   No    
 
 
III.
Accreditation for Corporate, Partnership or Limited Liability Company Investors.
 
Please complete each of the following certifications:

 
1.
The undersigned Corporation, Partnership or Limited Liability Company certifies that EACH of its shareholders, partners, or members meets at least ONE of the following conditions:

 
(a)
Each shareholder, partners, or member is a natural person whose individual net worth (or joint net worth with his/her spouse) exceeds $1,000,000 (excluding home, home furnishings and personal property).

 
¨  Yes    ¨ No

 
(b)
Each shareholder, partner, or member is a natural person who had an individual income in excess of $200,000 in each of the previous two calendar years or joint income with such person’s spouse in excess of $300,000 in each of those years and who reasonably expects to reach the same income level for the current calendar year.

 
¨  Yes    ¨ No

 
(c)
The shareholder, partner, or member is a corporation, partnership, or limited liability company and all of the shareholders, partners, or members of such corporation, partnership, or limited liability company can answer yes to statement III.1(a) or (b) above.

 
¨  Yes    ¨ No

 
2.
The undersigned Corporation, Partnership or Limited Liability Company certifies that it has total assets in excess of $5,000,000 and that it was not formed for the specific purpose of investing in the Securities.

 
¨  Yes    ¨ No

 
3.
The undersigned Corporation, Partnership or Limited Liability Company certifies that it is a broker, or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934 and purchasing the Securities for its own account.

 
¨  Yes    ¨ No

 
4.
The undersigned Corporation, Partnership or Limited Liability Company certifies that is it an organization described in Section 501(c)(3) of the Internal Revenue Code with total assets in excess of $5,000,000.

 
¨  Yes    ¨ No


4

EX-10.05 6 ex1005.htm EXHIBIT 10.05 ex1005.htm
EXHIBIT 10.05

 
THIS DEBENTURE AND THE SHARES OF COMMON STOCK ISSUABLE HEREUNDER HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT FOR DISTRIBUTION, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NEITHER THE DEBENTURE NOR THE SHARES OF COMMON STOCK MAY BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE MACROSOLVE, INC. AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.  THIS DEBENTURE MUST BE SURRENDERED TO MACROSOLVE, INC. OR ITS TRANSFER AGENT AS A CONDITION PRECEDENT TO THE SALE OR OTHER TRANSFER.

MacroSolve, Inc.

Convertible Debenture Series 2011
Due December 31, 2016
 
$  
Registered Debentureholder:
 
 
       
Date:      
 
  MacroSolve, Inc., a corporation duly organized and existing under the laws of the State of Oklahoma (hereinafter referred to as the "Company"), for value received, hereby promises to pay to the registered holder hereof, the principal sum stated above (“Principal Amount”) on the 31st day of December, 2016 (“Maturity Date”), together with interest accrued upon the unpaid Principal Amount from the date hereof, upon presentation and surrender of this Convertible Debenture Series 2011 (“Debenture”) at the principal corporate office of the Company at 1717 South Boulder Ave., Suite 700, Tulsa, Oklahoma  74119, or at such other place as the Company may designate, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts.

              Interest shall accrue on a daily basis on the outstanding principal amount of this Debenture from and including the date hereof at the rate equal to twelve percent (12%) per annum computed on the basis of a year of 365 or 366 days, as applicable, for the actual number of days elapsed.  Subject to the terms of this Debenture, interest shall be paid quarterly beginning on the first day of January, April, July, and October.
              
1.       Payment and Prepayment.
 
a.              The Company shall pay the Principal Amount and any accrued and unpaid interest on the Maturity Date.  However, the Company shall prepay the Principal Amount of this Debenture as the balance in the Debenture Account (as defined in Section 5) permits on a quarterly basis in accordance with the terms in Section 5. In the event the Company prepays its obligation hereunder in part, the payment shall first be applied to accrued and unpaid interest and then to the Principal Amount.
 
b.              In the event the Company does not prepay this Debenture in full before the Maturity Date, the Company shall satisfy its obligation to pay principal and interest on the Maturity Date out of the Debenture Account, and to the extent the obligation of the Company cannot be satisfied in full therefrom, by the issuance and delivery to the holder of this Debenture of whole shares (“PIK Shares”) of common stock of the Company, par value $0.01 per share (“Common Stock”) for the balance.

c.              The Company shall deliver a written notice (“Payment Notice”) at least ten (10) days before the quarterly payment, or at least ten (10) days before the Maturity Date if any of the Principal Amount remains outstanding, of its intention to make a prepayment of any part of the Principal Amount or to pay on the Maturity Date by PIK Shares, as the case may be.  The Payment Notice shall specify the amount of the prepayment and its allocation between interest and the Principal Amount, the number of PIK Shares to be issued, if applicable, and the amount of the Company’s obligation that will be satisfied with cash.

d.              The PIK Shares issued and delivered at maturity shall be equal to the number of shares of Common Stock that could have been purchased for the principal and interest obligation (less any cash paid in combination with the PIK Shares) if the shares were valued at 50% the volume weighted average price of the Common Stock on the last five (5) days of trading before the payment date.  For purposes hereof, the volume weighted average price shall be the dollars traded in every transaction in the Common Stock for the five-day trading period as reported on the OTC Bulletin Board (“OTCBB”) (or any other recognized securities market on which the Common Stock is traded, if not then quoted, on the OTCBB divided by the total number of shares traded during that five-day period.  If the Common Stock is not quoted on the OTCBB or traded on any recognized market, the Company may not elect to pay in PIK Shares.


 
1

 
 
2.       Conversion.

         a.       Rights of Conversion.

                  The holder of this Debenture shall have a right to convert this Debenture into shares of Common Stock at any time except as provided hereafter.  This Debenture shall not be convertible beginning ten (10) days after a Payment Notice by the Company until thirty (30) days after the Payment Notice.

                  The basis for such conversion is, for convenience, herein expressed in terms of a dollar conversion price per share. The number of shares of Common Stock issuable upon any conversion of this Debenture at any given time shall be determined by multiplying the Principal Amount by two (2) and adding to the product the accrued but unpaid interest (“Conversion Value”) and then dividing the Conversion Value by the Conversion Price then in effect in accordance with Section 2.c.

                  The holder of the Debenture, by purchasing this Debenture, understands that the Common Stock to be issued pursuant to the conversion rights granted hereunder has not been registered under the Securities Act of 1933, as amended (“Securities Act”), that it is not the intention of the Company to so register said Common Stock and that the certificates evidencing said Common Stock will bear a legend indicating that said shares are “restricted securities” within the meaning of Rule 144 under the Securities Act.  The holder of the Debenture further understands that unless said Common Stock is registered under the Securities Act, the Securities Act may be construed to prohibit any public sale or transfer of any of the Common Stock unless such public sale or transfer is effected in compliance with all applicable laws and regulations.

         b.       Method of Exercise.

                  In order to exercise the conversion privilege, the holder of this Debenture shall present and surrender this Debenture during usual business hours at the principal corporate office of the Company and shall deliver a written notice in person or by overnight delivery service, in the form of Exhibit A attached hereto, of the election of the holder to convert this Debenture (“Conversion Notice”) before the suspension of the conversion privilege as specified in the first paragraph of Section 2.a.  The certificate or certificates for Common Stock which shall be issuable on such conversion shall be issued in the name of the registered holder hereof.

                  This Debenture, when surrendered for conversion, shall be endorsed in such manner, or accompanied by such instruments of transfer, as the Company may prescribe. The conversion shall be deemed to have been effected on the date (the "conversion date") on which this Debenture shall have been surrendered and such notice and any required instruments of transfer received as aforesaid, and the person or persons in whose name or names any certificate or certificates for Common Stock shall be issuable on such conversion shall be deemed to have become on the conversion date the holder or holders of record of the Common Stock represented thereby.

                  As promptly as practicable after the presentation and surrender for conversion, of this Debenture, as herein provided, the Company shall issue and deliver at such office to or upon the written order of the holder, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion. No fractional shares, or scrip representing fractional shares, shall be issued upon any conversion, but in lieu thereof the Company shall pay in cash the fair value of such fractional shares as of the conversion date. The issuance of certificates for Common Stock issuable upon the conversion of this Debenture shall be made without charge to the converting holder for any tax in respect of the issue thereof.

         c.       Conversion Price.

              The Conversion Price shall be the volume weighted average price of the Common Stock on the last five (5) days of trading before the date of purchase of this Debenture.  For purposes hereof, the volume weighted average price shall be the dollars traded in every transaction in the Common Stock for the five-day trading period as reported on the OTCBB (or any other recognized securities market on which the Common Stock is traded, if not then quoted, on the OTCBB) divided by the total number of shares traded during that five-day period.  If the Common Stock is not quoted on the OTCBB or traded on any recognized market, the Company shall determine the conversion price in good faith.
 

 
 
2

 
 
 
         d.       Fundamental Change.

                  (1)      Definition.

 
For  purposes  of this  Debenture,  a  "Fundamental Change"  shall  be  deemed  to have occurred if there shall be: (i) any consolidation to which the Company shall be a party, (ii) any merger in which the Company shall not survive, (iii) any merger in which the Common Stock outstanding immediately prior to such merger shall be exchanged for or converted into any cash, securities or other property, (iv) any complete liquidation of the Company, or (v) any partial liquidation of the Company for which the approval of the holders of Common Stock is required or which is involuntary.

                  (2)      Conditional Conversion Election.
 
 In connection with any Fundamental Change, the holder of this Debenture shall have the right at any time before such event shall actually occur to make a conditional election (i) to convert all or such portion of this Debenture as the holder shall desire into Common Stock if such event shall actually be consummated and to participate in such event as if the holder had held such Common Stock on the date as of which the holders of Common Stock entitled to participate in such event shall be selected but (ii) not to convert this Debenture if such event shall not be consummated. This Debenture converted pursuant to any conditional election made pursuant to rights granted in this Section 2.d.(2) shall be deemed to have been converted on the record date (or if there be no record date, the point in time) used to determine the holders of Common Stock entitled to participate in the Fundamental Change or other event giving rise to such conditional election.
 
         e.       Purchase Rights.

 
(1)
If at any time the Company grants, issues or sells any options, convertible securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of Common Stock (the "Purchase Rights"), then the holder of this Debenture shall be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the holder could have acquired if the holder had held the number of shares of Common Stock acquirable upon conversion of this Debenture immediately before the date on which a record shall be taken for the grant, issuance or sale of such Purchase Rights or, if no such record shall be taken, the date as of which the record holders of Common Stock shall be determined for the grant, issue or sale of such Purchase Rights.

 
(2)
Except as provided herein, in addition to the Purchase Rights if at any time during 2011 the Company offers, issues or sells any shares of Common Stock or securities convertible into shares of Common Stock, the Company will offer the holder of this Debenture the right to purchase a portion of such securities equivalent to the percentage of Debentures in this offering acquired by the holder of this Debenture.  This provision shall apply to securities offered, issued and sold by the Company for cash consideration and shall not apply to offers and sales of the Debentures of this series or to securities of the Company outstanding on the date of this Debenture, securities issued upon the exercise, conversion or payment of other securities, or options issued pursuant to existing option plans adopted by the Company.
 
   f.    Distribution Rights.

                  If at any time the Company makes any distribution pro rata to the record holders of Common Stock in property other than cash ("Distribution Rights"), then the holder of this Debenture shall be entitled to acquire, upon the terms applicable to such Distribution Rights, the aggregate Distribution Rights which the holder could have acquired if the holder had held the number of shares of Common Stock acquirable upon conversion of this Debenture immediately before the date on which a record shall be taken for the grant, issuance or sale of such Distribution Rights, or, if no such record shall be taken, the date as of which the record holders of Common Stock shall be determined for the grant, issue or sale of such Distribution Rights.

3.       Representations and Covenants of the Company.

a. Information Rights.  The Company shall deliver to the holder of the Debenture (a) promptly after mailing, copies of all notices or other written communications to the shareholders of the Company, (b) within ninety (90) days of their availability, the Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”), and (c) within forty-five (45) days after the end of each fiscal quarter or each fiscal year, the Company's quarterly report to Form 10-Q filed with the SEC.

           b.     Reservation of Shares.  The Company agrees to reserve from its authorized and unissued Common Stock, until this Debenture shall be paid in full or fully converted, shares of Common Stock in a number which at any given time shall be equal to all of the number of shares which may be issuable on or at the given time by reason of the conversion of this Debenture.

 
c.No Short Positions.  While holding the Debentures the holder of the Debenture will not sell shares of Common Stock short, buy puts to sell the Common Stock, or buy or sell any security that is substantially equivalent to a short position in the Common Stock.
 
 
3

 
 
d.Common Stock.  The Company hereby represents and warrants that all shares of Common Stock which may be issued upon the conversion or as PIK Shares shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances.
 
 
4.
Representations and Covenants of the Holder of the Debenture.

a. Private Issue.  The holder of the Debenture represents and warrants that (i) that the Debentures are not registered under the Securities Act of 1933, as amended, (the “Act”) or qualified under applicable state securities laws under an exemption from the registration thereof, and (ii) that the Company's reliance on such exemption is predicated on Holder's representations set forth herein.

 b Financial Risk.  The holder of the Debenture has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of this investment and has the ability to bear the economic risks of this investment.

5.       Redemption Account.

a. Establish and Maintain Account. The Company shall establish and maintain an account at a federally-insured financial institution separate from the other bank accounts of the Company (the “Redemption Account”). The Company shall promptly deposit into that account twenty-five percent (25%) of the net proceeds received by the Company from any award, judgment or settlement arising from any case or claim prosecuted by the Company for infringement of the Company’s patent for a mobile information collection system. The Company shall maintain the account and deposit net proceeds therein for so long as the Debentures are outstanding.  The Company shall not make withdrawals from the Debenture Account for any purpose other than the payment of the Principal Amount and interest on the Debentures.

b. Payments.  The Company shall make payments from the Debenture Account to satisfy its obligation to pay the Principal Amount and interest in accordance with Section 1 hereof.  The Company shall have satisfied its obligation to make payments from this account if it accumulates funds in the account and makes payments from the account on a quarterly basis as funds in the account permit.  In the event the balance in the account is not sufficient to satisfy all of the Company’s obligations to all of the holders of the Series 2011 Debentures, the Company, in satisfaction of its obligations hereunder, may allocate funds available in the Debenture Account to all of the Series 2011 Debentures on a proportionate basis or it may pay some but not all of holders of the Series 2011 Debentures as determined by the Company in its discretion.

6.       Remedies.

         a.       Events of Default.

                  A "Default" shall be deemed to exist for purposes of this Debenture so long as:
 
(1)
Interest shall not be paid when the balance in the Debenture Account was sufficient for payment in accordance with the terms of this Debenture;

 
(2)
Principal shall not be prepaid to the extent of the available balance in the Debenture Account in accordance with the terms of this Debenture;
 
 
 
                  (3)     the principal or interest owed on this Debenture shall not be paid at maturity;

 
(4)
The Company shall not establish or maintain the Debenture Account in accordance with Section 5;

 
(5)
the Company shall be in breach of any other covenant or warranty of the Company in this Debenture for at least thirty (30) days after there has been given to the Company by the holder, a written notice specifying such breach and requiring it to be remedied and stating that such notice is a "notice of default" hereunder; or

                        (6)
a decree or order by a court having jurisdiction in the premises shall have been entered adjudicating the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization of the Company under the Bankruptcy Code or any other similar applicable federal or state law, and such decree or order shall have been in effect for a period of sixty (60) days; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of the Company or of any property of the Company or for the winding up or liquidation of its affairs shall be in effect and shall have been in effect for a period of sixty (60) days.
 
 
A default shall be deemed to exist whenever prescribed by the terms of this Section 6.a. regardless of whether such Default shall be voluntary or involuntary or shall result from compliance with any legal requirement or any other circumstance of any kind.
 
 
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        b.       Acceleration of Maturity.

                  Whenever a Default exists, the holder may declare the principal and interest of this Debenture to be due and payable immediately, by a notice in writing to the Company, and upon any such declaration such principal shall become immediately due and payable.

         c.       Unconditional Right of Holder of the Debenture to Receive Principal
                   and Interest.

                  Notwithstanding any other provision in this Debenture, the holder of this Debenture shall have the right which is absolute and unconditional to receive payment the principal of and interest on maturity and to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of the holder.

         d.       Rights and Remedies Cumulative; Governing Law.

                  No right or remedy herein conferred upon or reserved to the holder of this Debenture is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment or any other appropriate right or remedy. This Debenture and all rights hereunder shall be governed by the internal laws, not the laws of conflicts, of the State of Oklahoma.

         e.       Delay or Omission Not Waiver.

                  No delay or omission of any holder to exercise any right or remedy accruing upon any Default shall impair any such right or remedy or constitute a waiver of any such Default or acquiescence therein. Every right and remedy given by this Debenture or by law to the holder of the Debenture may be exercised from time to time, and as often as may be deemed expedient, by the holder of the Debenture.

  f.               Undertaking for Costs.

                  The parties to this Debenture agree that any court or arbitrator, as the case may be, may in its discretion require, in any suit for the enforcement of any right or remedy under this Debenture, any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant.

7.              General.

            a.    Registration, Transfer and Exchange.

                 The Company shall cause to be kept at its principal corporate office a register (herein sometimes referred to as the "Debenture register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of this Debenture and of transfers of this Debenture. The Secretary of the Company is hereby appointed "Debenture registrar" for the purpose of registering this Debenture and transfers of this Debenture as herein provided.

                  Upon surrender for transfer of any part of this Debenture at the principal corporate office of the Company, which transfer complies with all applicable securities laws, the Company shall execute and deliver, in the name of the designated transferee or transferees, one or more new Debentures of any authorized denominations, of a like aggregate principal amount.

                  A Debenture issued upon any transfer or exchange of this Debenture shall be a valid obligation of the Company, evidencing the same debt, and entitled to the same benefits as this Debenture.

                  The holder of the Debenture understands that: (i) this Debenture has not been registered under the Securities Act or any other federal or state law governing the issuance or transfer of securities (which are herein collectively called the "securities laws"), (ii) the securities laws impose substantial restrictions upon the transfer of any interest in this Debenture, and (iii) the Company is not obligated to register this Debenture or the securities acquired upon conversion of this Debenture under the securities laws or otherwise take any action to facilitate or make possible any transfer of any interest in this Debenture.

                  No service charge shall be made for the transfer or exchange of this Debenture, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with the transfer or exchange of this Debenture.
 
 
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  b. Mutilated, Destroyed, Lost and Stolen Debentures.

                  If (i) any mutilated Debenture is surrendered to the Company and the Debenture registrar receives evidence to its satisfaction of the destruction, loss or theft of any Debenture, and (ii) there is delivered to the Company such security or indemnity as may be required by the Company to save the Company harmless, then the Company shall execute and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Debenture, a new Debenture of like tenor and principal amount, bearing a number not contemporaneously outstanding.

                  In case any such mutilated, destroyed, lost or stolen Debenture has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Debenture, pay such Debenture.

                  Upon the issuance of any new Debenture under this section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith.

                Every new Debenture issued pursuant to this section in lieu of any destroyed, lost or stolen Debenture shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Debenture shall be at any time enforceable by anyone, and shall be entitled to all the benefits hereof equally and proportionately with any and all other Debentures duly issued.

                  The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Debentures.

         c.       Payment of Interest; Interest Rights Preserved.

                  Interest on this Debenture shall be paid to the person in whose name this Debenture (or one or more predecessor Debenture) is registered at the close of business on the business day immediately prior to such payment date.

         d.       Persons Deemed Owners.

                  The Company, and any agent of the Company, may treat the person in whose name this Debenture is registered as the owner of this Debenture for the purpose of receiving payment of principal interest on this Debenture and for all other purposes whatsoever, whether or not this Debenture be overdue, and neither the Company nor any agent of the Company shall be affected by notice to the contrary.

         e.       Cancellation.
 
                  This Debenture when surrendered for payment, redemption, transfer, exchange or conversion shall be delivered to the Debenture registrar for cancellation. The Company may at any time deliver to the Debenture registrar for cancellation any Debentures previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Debentures so delivered shall be promptly cancelled by the Debenture registrar. No Debentures shall be issued in lieu of or in exchange for any Debentures cancelled as provided in this section, except as expressly permitted. All cancelled Debentures held by the Debenture registrar shall be disposed of as directed by the Company.
 
8.           Governing Law; Dispute Resolution.
 
This Debenture shall be governed by and construed in accordance with the laws of the State of Oklahoma without giving effect to its principles regarding conflicts of law. Any dispute concerning this Debenture or the investment of holder of the Debenture in the securities of the Company, including a dispute about whether the dispute is subject to arbitration, shall be resolved by arbitration in Tulsa, Oklahoma, under the Commercial Arbitration Rules of the American Arbitration Association (“AAA”) by a single arbitrator selected by the Company from the AAA’s panel of arbitrators.
 
 
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                  IN WITNESS WHEREOF, the Company has caused this Debenture to be signed in its name by the signature of its Chief Executive Officer.
 
  MacroSolve, Inc.  
       
Dated:
By:
/s/   
    Name: Clint H. Parr  
    Title: Chief Executive Officer  
       

  
 
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Exhibit A

ELECTION TO CONVERT DEBENTURE

Reference is made to that certain Convertible Debenture Series [2011] due December 31st, 2016 (the "Debenture") issued on __________ by MacroSolve, Inc. (the “Company”) to ______________.  Capitalized terms used but not otherwise defined in this Exhibit A shall have the meanings assigned to them in the Debenture.

The holder of the Debenture hereby irrevocably elects to convert the Debenture and any accrued and unpaid interest thereunder into shares of Common Stock.  The holder of the Debenture shall be entitled to convert the Debenture only in accordance with Section 2 thereof.

The holder of the Debenture directs the Company to record in the stockholder register of the Company the Common Stock (or other securities) issuable upon this conversion of the Debenture in the name of the holder of the Debenture.

The Debenture is herewith being surrendered by the holder of the Debenture. The holder of the Debenture hereby acknowledges and approves of the cancellation of the Debenture by the Company.
 
 
    Holder of the Debenture:    
    Address:    
Dated:        
         
 
 
 
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EX-10.06 7 ex1006.htm EXHIBIT 10.06 ex1006.htm
EXHIBIT 10.06
 
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT FOR DISTRIBUTION, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NEITHER THE WARRANT NOR THE SHARES MAY BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.  THIS WARRANT MUST BE SURRENDERED TO THE COMPANY OR ITS TRANSFER AGENT AS A CONDITION PRECEDENT TO THE SALE, PLEDGE OR OTHER TRANSFER OF ANY INTEREST IN THIS WARRANT OR THE SHARES ISSUABLE HEREUNDER.

MacroSolve, Inc.

Series A Warrant to Purchase Common Stock
 
Issuer:   MacroSolve, Inc.    
Class of Stock: Common Stock    
Issue Date: ,2011    
Expiration Date:  December 31, 2016    
 Holder      
               
THIS WARRANT TO PURCHASE COMMON STOCK, $0.01 par value per share (“Common Stock”), of MacroSolve, Inc. (the “Company”) is being issued in conjunction with the Convertible Debenture Series 2011 and Series A Warrants each of even date herewith.  Defined terms not defined herein shall have the meanings ascribed to them in the Warrant or the Purchase Agreement.

1.           Warrants.

The Company hereby grants to Holder the right to purchase ____________ shares of the Company’s Common Stock (the “Shares” or “Warrant Shares”).  This Warrant shall expire and Holder shall no longer be able to purchase the Warrant Shares on the Expiration Date.

2.           Exercise.

a.           Method of Exercise.  Holder may exercise this Warrant in whole or in part by delivering a duly executed Warrant Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company.

b.           Delivery of Certificate and New Warrant.  As promptly as practicable after the receipt of the Warrant Notice of Exercise, but in any event not more than three (3) business days after the Company’s receipt of the Warrant Notice of Exercise, the Company shall issue the Shares and cause to be mailed for delivery by overnight courier, or if a Registration Statement covering the Shares has been declared effective by the SEC cause to be electronically transferred, to Holder a certificate representing the Shares acquired.

c.           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, or 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.

d.           Exercise Price.  The exercise price (“Exercise Price”) of this Warrant shall be $_________ [TBD -- 50% VWAP on warrant date] for each Warrant Share. It shall be changed in accordance with Section 3.
 

 
 
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3.              Adjustment to the Shares.

            a.               Stock Splits and Dividends.  If after the date hereof the Company shall subdivide the Common Stock, by stock split or otherwise, or combine the Common Stock, or issue additional shares of Common Stock in payment of a stock dividend on the Common Stock, the number of Warrant Shares shall forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination, and the Exercise Price shall be proportionately decreased, in the case of a subdivision or stock dividend, or proportionately increased in the case of a combination.

b.          Mergers and Reclassifications.    If after the date hereof the Company shall enter into any Reorganization (as hereinafter defined), then, as a condition of such Reorganization, lawful provisions shall be made, and duly executed documents evidencing the same from the Company or its successor shall be delivered to the Holder, so that the Holder shall thereafter have the right to purchase, at a total price not to exceed that payable upon the Exercise Price, the kind and amount of shares of stock and other securities and property receivable upon such Reorganization by a holder of the number of shares of Common Stock which might have been purchased by the Holder immediately prior to such Reorganization, and in any such case appropriate provisions shall be made with respect to the rights and interest of the Holder to the end that the provisions hereof (including without limitation, provisions for the adjustment of the Exercise Price and the number of shares issuable hereunder) shall thereafter be applicable in relation to any shares of stock or other securities and property thereafter deliverable upon exercise hereof.  For the purposes of this Section 3.b., the term “Reorganization” shall include without limitation any reclassification, capital reorganization or change of the Common Stock (other than as a result of a subdivision, combination or stock dividend provided for in Section 3.a. hereof), or any consolidation of the Company with, or merger of the Company into, another corporation or other business organization  (other than a merger in which the Company is the surviving corporation and which does not result in any reclassification or change of the outstanding Common Stock), or any sale or conveyance to another corporation or other business organization of all or substantially all of the assets of the Company.

c.           Certificate as to Adjustments.  Upon any adjustment of the Exercise Price, the Company, at its expense, shall 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 Exercise Price in effect upon the date thereof and the series of adjustments leading to such Exercise Price.

           d.                No Voting or Dividend Rights.  Nothing contained in this Warrant shall be construed as conferring upon the Holder hereof the right to vote or to consent or to receive notice as a shareholder of the Company or any other matters or any rights whatsoever as a shareholder of the Company prior to the exercise of the Holder’s rights to purchase shares of Common Stock as provided for herein.  No dividends or interest shall be payable or accrued in respect of this Warrant or the interest represented hereby or the shares purchasable hereunder until, and only to the extent that, this Warrant shall have been exercised.

4.              Representation and Covenant of the Company.

a.           Representations and Warranties.  The Company hereby represents and warrants to Holder that all Shares which may be issued upon the exercise of the purchase right represented by this Warrant, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances.

b.           Reservation of Warrant Shares.  The Company has reserved and will keep available, out of the authorized and unissued shares of Common Stock, the full number of shares sufficient to provide for the exercise of the rights of purchase represented by this Warrant.

5.              Representations and Covenants of the Holder.

a.           Private Issue.  Holder understands (i) that the Shares issuable upon exercise of Holder's rights contained in the Warrant are not registered under the Securities Act of 1933 (the “Act”) or qualified under applicable state securities laws on the ground that the issuance contemplated by the Warrant will be exempt from the registration and qualifications requirements thereof, and (ii) that the Company's reliance on such exemption is predicated on Holder's representations set forth in this Article 5.

 b.          Financial Risk.  Holder has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment and has the ability to bear the economic risks of its investment.

 c.          Risk of No Registration.  Holder understands that if the Company does not register with the Securities and Exchange Commission pursuant to Section 12 of the Act, or file reports pursuant to Section 15(d), of the Securities Exchange Act of 1934 (the "1934 Act"), or if a registration statement covering the securities under the Act is not in effect when it desires to sell (i) the right to purchase Shares pursuant to the Warrant, or (ii) the Shares issuable upon exercise of the right to purchase, it may be required to hold such securities for an indefinite period.

 d.          Accredited Investor.  Holder is an “accredited investor,” as such term is defined by the federal securities laws.
 

 
 
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6.              Miscellaneous.

 a.          Term.  This Warrant is exercisable, in whole or in part, at any time and from time to time on or after the date hereof and on or before the Expiration Date set forth above.

 b.          Compliance with Securities Laws on Transfer.  This Warrant 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 (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder.

c.           Notices, Etc.  All notices and other communications required or permitted hereunder shall be in writing and shall be delivered personally or by a nationally recognized overnight courier service, and shall be deemed given when so delivered personally, or by overnight courier service as follows:
 
 
if to the Company, to: MacroSolve, Inc.
  1717 South Boulder Ave.
  Suite 700
  Tulsa, OK  74119
  Attention: Chief Executive Officer
   
if to the Holder, to:
The address shown in the Holder’s Buyer Signature Page to the               
Subscription Agreement
 
or at such other address as the Company shall have furnished to the Holder.  Each such notice or other communication shall for all purposes of this agreement be treated as effective or having been given when delivered if delivered personally, or, if sent by mail, at the earlier of its receipt or five (5) days after the same has been deposited in a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid.

 d.          Counterparts.  This agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument. Facsimile execution shall be deemed originals.

 e.          Waiver.  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.

 f.           Attorney’s 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 attorney’s fees.

 g.          Governing Law; Jurisdiction.  This Warrant shall be governed by and construed in accordance with the laws of the State of Oklahoma, without giving effect to its principles regarding conflicts of law. Any dispute concerning this Warrant or the investment of the holder of the Warrant in the securities of the Company, including a dispute about whether the dispute is subject to arbitration, shall be resolved by arbitration in Tulsa, Oklahoma, under the Commercial Arbitration Rules of the American Arbitration Association (“AAA”) by a single arbitrator selected by the Company from the AAA’s panel of arbitrators.

 
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 IN WITNESS WHEREOF, the parties hereto have duly caused this Warrant to Purchase Common Stock to be executed and delivered on the date first above written.
 
 
MacroSolve, Inc.
 
       
Date
By:
/s/   
    Clint H. Parr  
    Title: Chief Executive Officer