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Share Name | Share Symbol | Market | Type |
---|---|---|---|
SharpSpring Inc | NASDAQ:SHSP | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 17.10 | 17.09 | 17.10 | 0 | 01:00:00 |
(Mark
One)
|
|
☑
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
For the
quarterly period ended: March 31, 2018
|
|
Or
|
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
Large
accelerated filer ☐
|
Accelerated
filer ☐
|
Non-accelerated
filer ☐
|
Smaller
reporting company ☑
|
(Do not check if a smaller reporting company)
|
Emerging
growth company ☐
|
|
Page
|
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2
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3
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4
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5
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19
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23
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23
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24
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24
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24
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25
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25
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25
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25
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26
|
|
27
|
●
|
the
timing of the development of future products;
|
●
|
projections
of costs, revenue, earnings, capital structure and other financial
items;
|
●
|
statements
of our plans and objectives;
|
●
|
statements
regarding the capabilities of our business operations;
|
●
|
statements
of expected future economic performance;
|
●
|
statements
regarding competition in our market; and
|
●
|
assumptions
underlying statements regarding us or our business.
|
●
|
strategic
actions, including acquisitions and dispositions and our success in
integrating acquired businesses;
|
●
|
the
occurrence of hostilities, political instability or catastrophic
events;
|
●
|
changes
in customer demand;
|
●
|
the
extent to which we are successful in gaining new long-term
relationships with customers or retaining existing ones and the
level of service failures that could lead customers to use
competitors' services;
|
●
|
developments
and changes in laws and regulations, including increased regulation
of our industry through legislative action and revised rules and
standards;
|
●
|
security
breaches, cybersecurity attacks and other significant disruptions
in our information technology systems; and
|
●
|
natural
events such as severe weather, fires, floods and earthquakes or
man-made or other disruptions of our operating systems, structures
or equipment.
|
SharpSpring, Inc.
|
||
C
ONSOLIDATED BALANCE
SHEETS
|
||
|
|
|
|
March 31,
|
December 31,
|
|
2018
|
2017
|
|
(unaudited)
|
(audited)
|
Assets
|
|
|
Cash
and cash equivalents
|
$
12,259,169
|
$
5,399,747
|
Accounts
receivable, net of allowance for doubtful accounts of $555,242 and
$526,127 at March 31, 2018 and December 31, 2017,
respectively
|
729,036
|
639,959
|
Income
taxes receivable
|
2,034,668
|
2,132,616
|
Other
current assets
|
957,354
|
899,127
|
Total
current assets
|
15,980,227
|
9,071,449
|
|
|
|
Property
and equipment, net
|
795,982
|
799,145
|
Goodwill
|
8,882,393
|
8,872,898
|
Other
intangible assets, net
|
2,211,000
|
2,326,000
|
Other
long-term assets
|
744,049
|
612,631
|
Total
assets
|
$
28,643,651
|
$
21,682,123
|
|
|
|
Liabilities and Shareholders' Equity
|
|
|
Accounts
payable
|
$
1,263,329
|
$
504,901
|
Accrued
expenses and other current liabilities
|
563,870
|
625,680
|
Deferred
revenue
|
303,004
|
279,818
|
Income
taxes payable
|
180,024
|
171,384
|
Total
current liabilities
|
2,310,227
|
1,581,783
|
|
|
|
Deferred
income taxes
|
188,928
|
168,132
|
Convertible
notes
|
7,862,917
|
-
|
Total
liabilities
|
10,547,942
|
1,749,915
|
Commitments
and contingencies (Note 12)
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
Preferred
stock, $0.001 par value, 5,000,000 shares authorized, no shares
issued or outstanding at March 31, 2018 and December 31,
2017
|
-
|
-
|
Common stock, $0.001 par value, Authorized shares-50,000,000;
issued shares-8,466,740 at March 31, 2018 and 8,456,061 at December
31, 2017; outstanding shares-8,446,740 at March 31, 2018 and
8,436,061 at December 31, 2017
|
8,466
|
8,456
|
Additional
paid in capital
|
28,608,357
|
28,362,397
|
Accumulated
other comprehensive loss
|
(511,289
)
|
(480,762
)
|
Accumulated
deficit
|
(9,925,825
)
|
(7,873,883
)
|
Treasury
stock
|
(84,000
)
|
(84,000
)
|
Total
shareholders' equity
|
18,095,709
|
19,932,208
|
|
|
|
Total
liabilities and shareholders' equity
|
$
28,643,651
|
$
21,682,123
|
SharpSpring, Inc.
|
||
C
ONSOLIDATED STATEMENTS OF
OPERATIONS
|
||
|
|
|
|
Three Months Ended
|
|
|
March 31,
|
|
|
2018
|
2017
|
Revenue
|
$
4,184,663
|
$
3,023,433
|
|
|
|
Cost
of services
|
1,400,297
|
1,271,321
|
Gross
profit
|
2,784,366
|
1,752,112
|
|
|
|
Operating
expenses:
|
|
|
Sales
and marketing
|
2,371,030
|
1,549,522
|
Research
and development
|
950,675
|
659,731
|
General
and administrative
|
1,426,234
|
1,356,198
|
Intangible
asset amortization
|
115,000
|
131,523
|
|
|
|
Total
operating expenses
|
4,862,939
|
3,696,974
|
|
|
|
Operating
loss
|
(2,078,573
)
|
(1,944,862
)
|
Other
income (expense), net
|
68,628
|
66,844
|
|
|
|
Loss
before income taxes
|
(2,009,945
)
|
(1,878,018
)
|
Provision
(benefit) for income tax
|
41,997
|
(498,746
)
|
Net
loss
|
$
(2,051,942
)
|
$
(1,379,272
)
|
|
|
|
Basic
net loss per share
|
$
(0.24
)
|
$
(0.16
)
|
Diluted
net loss per share
|
$
(0.24
)
|
$
(0.16
)
|
|
|
|
Shares
used in computing basic net (loss) income per share
|
8,443,455
|
8,369,249
|
Shares
used in computing diluted net (loss) income per share
|
8,443,455
|
8,369,249
|
|
|
|
Other
comprehensive income (loss):
|
|
|
Foreign
currency translation adjustment
|
(30,527
)
|
(9,393
)
|
Comprehensive
loss
|
$
(2,082,469
)
|
$
(1,388,665
)
|
|
Three Months Ended
|
|
|
March 31,
|
|
|
2018
|
2017
|
Cash
flows from operating activities:
|
|
|
Net
loss
|
$
(2,051,942
)
|
$
(1,379,272
)
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
Depreciation
and amortization
|
190,983
|
196,606
|
Non-cash
stock compensation
|
237,415
|
184,346
|
Deferred
income taxes
|
20,796
|
(29,558
)
|
Non-cash
interest expense
|
4,301
|
-
|
Amortization
of debt issuance costs
|
274
|
-
|
Unearned
foreign currency gain/loss
|
(49,397
)
|
(33,865
)
|
Changes
in operating assets and liabilities:
|
|
|
Accounts
receivable
|
(84,896
)
|
214,873
|
Other
assets
|
(32,991
)
|
(40,440
)
|
Income
taxes, net
|
104,070
|
(75,294
)
|
Accounts
payable
|
751,502
|
155,471
|
Accrued
expenses and other current liabilities
|
(61,837
)
|
(41,091
)
|
Deferred
revenue
|
20,623
|
(339
)
|
Net
cash used in operating activities
|
(951,099
)
|
(848,563
)
|
|
|
|
Cash
flows from investing activities:
|
|
|
Purchases
of property and equipment
|
(72,820
)
|
(83,787
)
|
Acquisitions
of customer assets from resellers
|
-
|
(3,116
)
|
Net
cash used in investing activities
|
(72,820
)
|
(86,903
)
|
|
|
|
Cash
flows from financing activities:
|
|
|
Proceeds
from issuance of convertible note
|
8,000,000
|
-
|
Debt
issuance costs
|
(141,657
)
|
-
|
Proceeds
from exercise of stock options
|
8,555
|
-
|
Net
cash provided by financing activities
|
7,866,898
|
-
|
|
|
|
Effect
of exchange rate on cash
|
16,443
|
13,011
|
|
|
|
Change
in cash and cash equivalents
|
6,859,422
|
(922,455
)
|
|
|
|
Cash
and cash equivalents, beginning of period
|
5,399,747
|
8,651,374
|
|
|
|
Cash
and cash equivalents, end of period
|
$
12,259,169
|
$
7,728,919
|
|
|
|
Supplemental
information on consolidated statements of cash flows:
|
|
|
Cash
paid (received) for income taxes
|
$
(82,869
)
|
$
54,582
|
|
Valuation Date
|
|
March 31,
|
|
2018
|
Total
value of embedded derivative asset
|
$
185,870
|
Starting
Stock Price
|
$
5.52
|
Expected
Annual Volatility
|
50.00
%
|
Risk
Free Rate
|
2.59
%
|
Expected
annual dividend yield
|
0.00
%
|
Recovery
rate
|
30.00
%
|
Bond
Yield
|
15.99
%
|
Remainder
of 2018
|
$
19,077
|
2019
|
26,455
|
2020
|
27,855
|
2021
|
29,322
|
2022
|
30,862
|
2023
|
7,813
|
Total
|
$
141,384
|
Leasehold
improvements
|
3-5
years
|
Furniture
and fixtures
|
3-5
years
|
Computing
equipment
|
3
years
|
Software
|
3-5
years
|
|
Historical Accounting Method
|
Effect of Adoption of New ASU
|
As Adjusted
|
Three Months Ended March 31, 2018
|
|
|
|
Sales
and Marketing Expense
|
2,360,953
|
10,077
|
2,371,030
|
Total
operating expense
|
4,852,862
|
10,077
|
4,862,939
|
Operating
loss
|
(2,068,496
)
|
(10,077
)
|
(2,078,573
)
|
Loss
before income taxes
|
(1,999,868
)
|
(10,077
)
|
(2,009,945
)
|
Provision
(benefit) for income tax
|
41,781
|
216
|
41,997
|
Net
loss
|
(2,041,649
)
|
(10,293
)
|
(2,051,942
)
|
Basic
net loss per share
|
(0.24
)
|
-
|
(0.24
)
|
Diluted
net loss per share
|
(0.24
)
|
-
|
(0.24
)
|
|
|
|
|
Balance, March 31, 2018
|
|
|
|
Other
current assets
|
311,777
|
645,577
|
957,354
|
Other
long-term assets
|
210,869
|
563,180
|
744,049
|
Total
assets
|
27,434,894
|
1,208,757
|
28,643,651
|
Accumulated
deficit
|
(11,134,582
)
|
1,208,757
|
(9,925,825
)
|
|
Historical Accounting Method
|
Effect of Adoption of New ASU
|
As Adjusted
|
Three Months Ended March 31, 2017
|
|
|
|
Sales
and Marketing Expense
|
1,645,870
|
(96,348
)
|
1,549,522
|
Total
operating expense
|
3,793,322
|
(96,348
)
|
3,696,974
|
Operating
loss
|
(2,041,210
)
|
96,348
|
(1,944,862
)
|
Loss
before income taxes
|
(1,974,366
)
|
96,348
|
(1,878,018
)
|
Provision
(benefit) for income tax
|
(499,693
)
|
947
|
(498,746
)
|
Net
loss
|
(1,474,673
)
|
95,401
|
(1,379,272
)
|
Basic
net loss per share
|
(0.18
)
|
0.02
|
(0.16
)
|
Diluted
net loss per share
|
(0.18
)
|
0.02
|
(0.16
)
|
|
|
|
|
Balance, December 31, 2017
|
|
|
|
Other
current assets
|
267,924
|
631,203
|
899,127
|
Other
long-term assets
|
25,000
|
587,631
|
612,631
|
Total
assets
|
20,463,289
|
1,218,834
|
21,682,123
|
Accumulated
deficit
|
(9,092,717
)
|
1,218,834
|
(7,873,883
)
|
Remainder
of 2018
|
$
345,000
|
2019
|
381,000
|
2020
|
332,000
|
2021
|
280,000
|
2022
|
228,000
|
2023
|
180,000
|
Thereafter
|
465,000
|
Total
|
$
2,211,000
|
Principal
amount
|
$
8,000,000
|
Accrued
interest paid-in-kind
|
4,301
|
Unamortized
debt issuance costs
|
(141,384
)
|
Embedded
conversion feature derivative
|
185,870
|
Net
carrying value
|
$
8,048,787
|
Contractual
interest paid-in-kind expense (non-cash)
|
4,301
|
Amortization
of debt issuance costs (non-cash)
|
274
|
Total
interest expense
|
4,575
|
Effective
interest rate
|
5.4
%
|
|
Foreign Currency
|
|
Translation
|
|
Adjustment
|
Balance
as of December 31, 2017
|
$
(480,762
)
|
Other
comprehensive income (loss) prior to reclassifications
|
-
|
Amounts
reclassified from accumulated other comprehensive
income
|
-
|
Tax
effect
|
-
|
Net
current period other comprehensive loss
|
(30,527
)
|
Balance
as of March 31, 2018
|
$
(511,289
)
|
|
Three Months
Ended
March
31
,
|
||
|
2018
|
|
2017
|
|
|
|
|
Volatility
|
48 – 49%
|
|
49%
|
Risk-free interest rate
|
2.34% - 2.7%
|
|
2.04% - 2.26%
|
Expected term
|
6.25 years
|
|
6.25 years
|
|
|
Weighted
|
Weighted
|
Aggregate
|
|
Number of
|
Average
|
Average Remaining
|
Intrinsic
|
|
Options
|
Exercise Price
|
Contractual Life
|
Value
|
Outstanding
at December 31, 2017
|
1,069,330
|
$
5.11
|
7.0
|
$
36,693
|
|
|
|
|
|
Granted
|
465,850
|
4.56
|
|
|
Exercised
|
(1,724
)
|
4.96
|
|
|
Forfeited
|
(8,006
)
|
4.11
|
|
|
Outstanding
at March 31, 2018
|
1,525,450
|
$
4.95
|
8.2
|
$
2,241,770
|
|
|
|
|
|
Exercisable
at March 31, 2018
|
569,155
|
$
5.39
|
7.0
|
$
627,707
|
|
|
Weighted
|
Weighted
|
|
|
Number of
|
Average
|
Average Remaining
|
Intrinsic
|
|
Units
|
Exercise Price
|
Contractual Term
|
Value
|
Outstanding
at December 31, 2017
|
80,000
|
$
7.81
|
2.1
|
$
33,660
|
|
|
|
|
|
Granted
|
-
|
-
|
|
|
Cancelled
|
-
|
-
|
|
|
Outstanding
at March 31, 2018
|
80,000
|
$
7.81
|
1.8
|
$
-
|
|
|
|
|
|
Exercisable
at March 31, 2018
|
80,000
|
$
7.81
|
1.8
|
$
-
|
Remainder
of 2018
|
$
375,546
|
2019
|
374,071
|
2020
|
383,967
|
2021
|
293,672
|
2022
|
-
|
2023
|
-
|
Thereafter
|
-
|
Total
|
$
1,427,256
|
Revenue
by product:
|
March 31,
|
March 31,
|
|
2018
|
2017
|
Marketing
Automation revenue
|
$
4,063,500
|
$
2,845,173
|
Mail
+ revenue
|
121,163
|
178,260
|
Total
revenue
|
$
4,184,663
|
$
3,023,433
|
|
|
|
Revenue
by type:
|
March 31,
|
March 31,
|
|
2018
|
2017
|
Recurring
revenue
|
$
3,846,953
|
$
2,795,384
|
Upfront
and other fees
|
337,710
|
228,049
|
Total
revenue
|
$
4,184,663
|
$
3,023,433
|
|
|
|
|
|
|
|
Percent
|
|
Three Months Ended
|
Change
|
Change
|
|
|
March 31,
|
from
|
from
|
|
|
2018
|
2017
|
Prior Year
|
Prior Year
|
Revenues and Cost of Sales:
|
|
|
|
|
Revenues
|
$
4,184,663
|
$
3,023,433
|
$
1,161,230
|
38
%
|
Cost
of Sales
|
1,400,297
|
1,271,321
|
128,976
|
10
%
|
Gross
Profit
|
$
2,784,366
|
$
1,752,112
|
$
1,032,254
|
59
%
|
|
|
|
|
Percent
|
|
Three Months Ended
|
Change
|
Change
|
|
|
March 31,
|
from
|
from
|
|
|
2018
|
2017
|
Prior Year
|
Prior Year
|
Operating expenses:
|
|
|
|
|
Sales
and marketing
|
$
2,371,030
|
$
1,549,522
|
$
821,508
|
53
%
|
Research
and development
|
950,675
|
659,731
|
290,944
|
44
%
|
General
and administrative
|
1,426,234
|
1,356,198
|
70,036
|
5
%
|
Intangible
asset amortization
|
115,000
|
131,523
|
(16,523
)
|
-13
%
|
|
$
4,862,939
|
$
3,696,974
|
$
1,165,965
|
32
%
|
|
|
|
|
Percent
|
|
Three Months Ended
|
Change
|
Change
|
|
|
March 31,
|
from
|
from
|
|
|
2018
|
2017
|
Prior Year
|
Prior Year
|
Other
|
|
|
|
|
Other
income (expense), net
|
$
68,628
|
$
66,844
|
$
1,784
|
3
%
|
Provision
(benefit) for income tax
|
$
41,997
|
$
(498,746
)
|
$
540,743
|
-108
%
|
Remainder
of 2018
|
$
375,546
|
2019
|
374,071
|
2020
|
383,967
|
2021
|
293,672
|
2022
|
-
|
2023
|
-
|
Thereafter
|
-
|
Total
|
$
1,427,256
|
SEC Reference
Number
|
|
Title of
Document
|
|
Location
|
|
Form of
Convertible Promissory Note, attached as Exhibit A to Convertible
Note Purchase Agreement among SharpSpring, Inc. and SHSP Holdings,
LLC dated March 28, 2018
|
|
Incorporated by reference to our Form 8-K filed March 28,
2018
|
|
|
Form of
Investors Rights Agreement by and among SharpSpring, Inc., SHSP
Holdings, LLC et al. dated March 28, 2018
|
|
Incorporated by reference to our Form 8-K filed March 28,
2018
|
|
|
Form of
Subordination Agreement by and between SHSP Holdings, LLC and
Western Alliance Bank dated March 28, 2018
|
|
Incorporated by reference to our Form 8-K filed March 28,
2018
|
|
|
Employee Agreement Amendment – Richard Carlson
|
|
Incorporated
by reference to the Company’s Form 8-K filed
on 2/12/18
|
|
|
Employee Agreement Amendment – Richard Carlson
|
|
Incorporated
by reference to the Company’s Form 8-K filed
on 4/15/17
|
|
|
Employee Agreement – Richard Carlson
|
|
Incorporated
by reference to the Company’s Form 8-K filed
on 9/14/15
|
|
|
Employee Agreement Amendment – Edward S. Lawton
|
|
Incorporated
by reference to the Company’s Form 8-K filed
on 2/12/18
|
|
|
Employee Agreement Amendment – Edward S. Lawton
|
|
Incorporated
by reference to the Company’s Form 8-K filed
on 8/1/17
|
|
|
Employee Agreement Amendment – Edward S. Lawton
|
|
Incorporated
by reference to the Company’s Form 8-K filed
on 6/24/15
|
|
|
Employee Agreement – Edward Lawton
|
|
Incorporated
by reference to the Company’s Form 8-K filed
on 8/18/14
|
|
|
Employee Agreement Amendment – Travis Whitton
|
|
Incorporated
by reference to the Company’s Form 8-K filed
on 2/12/18
|
|
|
Employee Agreement Amendment – Travis Whitton
|
|
Incorporated
by reference to the Company’s Form 8-K filed
on 8/1/17
|
|
|
Employee Agreement Amendment – Travis Whitton
|
|
Incorporated
by reference to the Company’s Form 8-K filed
on 7/8/16
|
|
|
Employee Agreement – Travis Whitton
|
|
Incorporated
by reference to the Company’s Form 8-K filed
on 7/8/16
|
|
|
Convertible Note Purchase Agreement among SharpSpring, Inc. and
SHSP Holdings, LLC dated March 28, 2018
|
|
Incorporated by reference to our Form 8-K filed March 28,
2018
|
|
|
Certification
of Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
Filed
herewith
|
|
|
Certification
of Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
Filed
herewith
|
|
|
Certification
of Principal Executive Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
Filed
herewith
|
|
|
Certification
of Principal Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
Filed
herewith
|
|
101
|
|
XBRL
|
|
|
|
|
|
|
|
SharpSpring,
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/Richard
A. Carlson
|
|
|
|
|
|
|
Richard
A. Carlson
|
|
|
|
|
|
|
Chief
Executive Officer and President
(Principal
Executive Officer)
Date: May 15, 2018
|
|
|
|
|
|
SharpSpring,
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/
Edward Lawton
|
|
|
|
|
|
|
Edward
Lawton
Chief
Financial Officer
|
|
|
|
|
|
|
(Principal
Financial Officer)
Date: May 15, 2018
|
1 Year SharpSpring Chart |
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