UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): February 21, 2019
 
SharpSpring, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
 
001-36280
 
05-0502529
(State or other jurisdiction ofIncorporation or Organization)
 
(Commission File Number)
 
(I.R.S. EmployerIdentification No.)
 
5001 Celebration Pointe Avenue, Gainesville, FL
 
32608
(Address of principal executive offices)
 
(Zip Code)
 
Registrant’s telephone number, including area code: 888-428-9605
 
 
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
[  ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
[  ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
[  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Indicate by check mark whether the registrant is an emerging growth company as defined in in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company [  ]
 
If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 
 
 
Item 2.02 Results of Operations and Financial Condition.
 
On February 27, 2019, SharpSpring, Inc. (the “Company”) issued a press release to report its financial results for the fourth quarter and full year ended December 31, 2018. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
 
The information in this Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
 
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
 
Richard Carlson
 
On February 21, 2019, the Company entered into an employee agreement amendment with Richard Carlson, the Company’s Chief Executive Officer and President. The employee agreement amendment amends Mr. Carlson’s previous employee agreement to (i) increase his base salary to $340,000 per year, and (ii) increase his annual bonus opportunity to $119,000. Mr. Carlson was also granted a stock option to purchase 17,500 shares of the Company’s common stock at an exercise price of $13.88 per share. The options vest over a 4-year period, with 1/48 vesting each month. The description of Mr. Carlson’s employee agreement amendment is not complete and is qualified in its entirety by reference to the employee agreement amendment attached hereto as Exhibit 10.1, which is incorporated by reference herein.
 
Additionally, subject to approval by the Company’s Compensation Committee, Mr. Carlson will receive 12,500 restricted stock units from the Company’s contemplated 2019 equity plan. The 2019 equity plan remains subject to review by the Company’s Compensation Committee, and approval by the Board of Directors and stockholders and no awards will be issued from the plan without such review and approval.
 
Travis Whitton
 
On February 21, 2019, the Company entered into an employee agreement amendment with Travis Whitton, the Company’s Chief Technology Officer. The employee agreement amendment amends Mr. Whitton’s previous employee agreement to (i) increase his base salary to $200,000 per year, and (ii) increase his annual bonus opportunity to $50,000. Mr. Whitton was also granted a stock option to purchase 10,294 shares of the Company’s common stock at an exercise price of $13.88 per share. The options vest over a 4-year period, 25% vest after one year with the remaining vesting monthly in equal installments of 1/48 thereafter. The description of Mr. Whitton’s employee agreement amendment is not complete and is qualified in its entirety by reference to the employee agreement amendment attached hereto as Exhibit 10.5, which is incorporated by reference herein.
 
Additionally, subject to review by the Company’s Compensation Committee, Mr. Whitton will receive 7,353 restricted stock units from the Company’s contemplated 2019 equity plan. The 2019 equity plan remains subject to review by the Company’s Compensation Committee, and approval by the Board of Directors and stockholders and no awards will be issued from the plan without such review and approval.
 
 Adoption of 2019 Executive Bonus Plan
 
On February 21, 2019, the Company adopted a 2019 Executive Bonus Plan for its executive officers, which provides for quarterly payouts to executives upon obtaining certain levels of revenue and EBITDA. Payouts shall be based on a grid adopted by the Compensation Committee, with 50% of the bonus payout being determined based on revenue levels compared to plan and 50% of the payout being determined based on EBITDA levels compared to plan. The maximum quarterly payout shall be 100% of target, but annual payouts may be adjusted up to 150% of target based on over-achievement of annual metrics following the year end calculation.
  
Item 9.01 Financial Statements and Exhibits
 
Exhibit No.
 
Description
 
Employee Agreement Amendment – Richard Carlson.*
 
Employee Agreement Amendment – Richard Carlson (incorporated by reference to the Company’s Form 8-K filed 2/12/18).
 
Employee Agreement Amendment – Richard Carlson (incorporated by reference to the Company’s Form 8-K filed 4/15/17).
 
Employee Agreement – Richard Carlson (incorporated by reference to the Company’s Form 8-K filed 9/14/15).
 
Employee Agreement Amendment – Travis Whitton.*
 
 
Employee Agreement Amendment – Travis Whitton (incorporated by reference to the Company’s Form 8-K filed 2/12/18).
 
Employee Agreement Amendment – Travis Whitton (incorporated by reference to the Company’s Form 8-K filed 8/1/17).
 
Employee Agreement Amendment – Travis Whitton (incorporated by reference to the Company’s Form 8-K filed 7/8/16).
 
Employee Agreement – Travis Whitton (incorporated by reference to the Company’s Form 8-K filed 7/8/16).
 
Press Release dated February 27, 2019 –Fourth Quarter and Full Year 2018 Results*
 
*    Included herewith.
  
 
2
 
 
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 hereunto duly authorized.
 
 
 
SHARPSPRING, INC.
 
 
 
 
 
Dated: February 27, 2019
By:  
/s/ Bradley M. Stanczak  
 
 
 
Bradley M. Stanczak,
 
 
 
Chief Financial Officer
 
 
 

 
 
 
3
 
Exhibit 10.1
 
EMPLOYEE AGREEMENT AMENDMENT
 
THIS AGREEMENT (the “Agreement”) is made and entered into on February 21, 2019 by and between SharpSpring, Inc., a Delaware corporation (the “Company”); and Richard Carlson (“Employee”).
 
1. 
This Agreement amends that certain Employee Agreement dated September 13, 2015 made and entered into by the parties hereto, as amended from time to time (the “Employee Agreement”). Capitalized terms herein have the same meaning as used in the Employee Agreement, unless otherwise noted.
 
2. 
Paragraph 4.1 of Article Four – Compensation of Employee is deleted and replaced with the following:
 
4.1. Base Compensation. For all services rendered by Employee under this Employee Agreement, the Company agrees to pay Employee the rate of $340,000 per year (the “base salary”), which shall be payable to Employee not less frequently than bi-monthly, or as is consistent with the Company’s practice for its other employees.
 
3. 
The section titled “Other Compensation - Bonus” of Appendix B of the Employee Agreement is deleted and replaced with the following:
 
I.            
Quarterly Bonus Compensation:
 
Employee shall be eligible for bonus compensation that will be paid on a quarterly basis (the “Quarterly Bonus”) that will be earned and payable as follows:
 
The annual bonus target amount is $119,000 (the Quarterly Bonus target amount is $29,750), and will be based on the Company achieving specified revenue and EBITDA performance targets as set by the Board of Directors.
 
The Quarterly Bonus is earned at the close of the applicable quarter and is intended to be paid shortly after the Company reports its financials publicly each quarter.
 
If Employee’s employment is terminated for any reason, Employee shall be paid (a) the full Quarterly Bonus earned, as determined solely by the Company’s Board of Directors, for the most recently completed quarter and if Employee’s employment is terminated by the Company or by mutual agreement, Employee shall be paid (b) a pro-rated Quarterly Bonus, as determined solely by the Company’s Board of Directors, for the calendar quarter in which termination occurs.
 
4. 
The following shall be added to Appendix B of the Employment Agreement:
 
Other Compensation shall also include other compensation to be determined by the Board of Directors from time to time.
 
5. 
All other provisions of the Employee Agreement remain in full force and effect, other than any provision that conflicts with the terms and spirit of this Agreement.
 
Signature Page Attached
 
 
 
 
IN WITNESS WHEREOF, the Parties have executed this Agreement on the date first written above.
 
 
 
SHARPSPRING, INC.    
 
 
 
____________________________
By:
_____________________
(Witness signature)
 
Bradley Stanczak, CFO
 
 
 
 
 
EMPLOYEE
 
 
 
 
 
 
________________________
 
_____________________
(Witness signature)
 
Richard Carlson
 
 
Exhibit 10.5
 
EMPLOYEE AGREEMENT AMENDMENT
 
THIS AGREEMENT (the “Agreement”) is made and entered into on February 15, 2019 by and between SharpSpring Technologies, Inc., a Delaware corporation (the “Company”); and Travis Whitton (“Employee”).
 
1. 
This Agreement amends that certain Employee Agreement dated August 15, 2014 made and entered into by the parties hereto, as amended from time to time (the “Employee Agreement”). Capitalized terms herein have the same meaning as used in the Employee Agreement, unless otherwise noted.
 
2. 
Paragraph 4.1 of Article Four – Compensation of Employee is deleted and replaced with the following:
 
4.1. Base Compensation. For all services rendered by Employee under this Employee Agreement, the Company agrees to pay Employee the rate of $200,000 per year (the “base salary”), which shall be payable to Employee not less frequently than bi-monthly, or as is consistent with the Company’s practice for its other employees.
 
3. 
The provisions contained in Appendix B – Other Compensation - Item I. Quarterly Bonus Compensation is deleted and replaced with the following:
 
I.            
Quarterly Bonus Compensation:
 
Employee shall be eligible for bonus compensation that will be paid on a quarterly basis (the “Quarterly Bonus”) that will be earned and payable as follows:
 
The annual bonus target amount is $50,000 (the Quarterly Bonus target amount is $12,500) and will be based on the Company achieving specified revenue and EBITDA performance targets as set by the Board of Directors.
 
The Quarterly Bonus is earned at the close of the applicable quarter and is intended to be paid shortly after the Company reports its financials publicly each quarter.
 
If Employee’s employment is terminated for any reason, Employee shall be paid (a) the full Quarterly Bonus earned, as determined solely by the Company’s Board of Directors, for the most recently completed quarter and if Employee’s employment is terminated by the Company or by mutual agreement, Employee shall be paid (b) a pro-rated Quarterly Bonus, as determined solely by the Company’s Board of Directors, for the calendar quarter in which termination occurs.
 
4. 
The following shall be inserted to Appendix B of the Employment Agreement:
 
III. 
Other Compensation:
 
Such other compensation as may be determined by the Board of Directors from time to time.
 
5. 
All other provisions of the Employee Agreement remain in full force and effect, other than any provision that conflicts with the terms and spirit of this Agreement.
 
Signature Page Attached
 
 
 
 
IN WITNESS WHEREOF, the Parties have executed this Agreement on the date first written above.
 
 
 
 
SHARPSPRING
TECHNOLOGIES, INC.   
 
 
 
____________________________
By:
_____________________
(Witness signature)
 
Bradley Stanczak, CFO
 
 
 
 
 
EMPLOYEE
 
 
 
 
 
 
________________________
 
_____________________
(Witness signature)
 
Travis Whitton
 
 
Exhibit 99.1
 
SharpSpring Reports Fourth Quarter and Full Year 2018 Results
 
Breakthrough Year Driven by Record Quarterly and Annual Revenues, Continued Operational Excellence
 
GAINESVILLE, FL – February 27, 2018 – SharpSpring, Inc. (NASDAQ: SHSP), a leading cloud-based marketing automation platform, reported financial results for the fourth quarter and full year ended December 31, 2018.
 
Fourth Quarter 2018 Operational Highlights
●
Added a record 379 new SharpSpring customers, who selected the platform to generate leads, convert more leads to sales and measure the ROI of their marketing campaigns.
 
●
Finished the quarter with 1,709 agency customers and surpassed 7,000 businesses using the SharpSpring Marketing Automation platform.
 
●
Received “When Work Works” Award from the Society for Human Resource Management for innovative and exemplary workplace practices.
 
●
Recognized by the Greater Gainesville Chamber of Commerce as the “Tech Company of the Year” at the 2018 Chamber Business Awards.
 
●
Expanded corporate headquarters into new 26,000 square foot facility, nearly doubling the area previously occupied, to support long-term growth plans.
 
Fourth Quarter 2018 Financial Results
●
SharpSpring Marketing Automation revenues grew 41% to a record $5.1 million from $3.6 million in the same year-ago period.
 
●
Total revenue (which includes legacy products) increased 37% to a record $5.2 million from $3.8 million in the same year-ago period.
 
●
Gross profit increased 47% to $3.7 million (72% of total revenue) from $2.5 million (68% of total revenue) in the same year-ago period.
 
●
Net loss was $2.3 million, or $0.26 per share, compared to net loss of $436,000, or $0.05 per share, in the fourth quarter of 2017.
 
●
Adjusted EBITDA loss (a non-GAAP metric reconciled below) totaled $1.6 million, compared to an adjusted EBITDA loss of $1.3 million in the same year-ago period.
 
●
Core net loss (a non-GAAP metric reconciled below) totaled $1.7 million, or $0.19 per share, compared to core net loss of $318,000, or $0.04 per share, in the same year-ago period.
 
●
At quarter-end, the company had $9.3 million in cash, compared to $5.4 million at December 31, 2017.
 
 
 
 
Full Year 2018 Financial Results
●
SharpSpring Marketing Automation revenue grew 43% to a record $18.3 million from $12.8 million in 2017.
 
●
Total revenue (which includes legacy products) increased 39% to $18.7 million from $13.4 million in 2017.
 
●
Gross profit increased 52% to $12.9 million, or 69% of total revenue, from $8.5 million, or 63% of total revenue, in 2017.
 
●
Net loss totaled $9.5 million, or $1.11 per share, compared to a net loss of $4.7 million, or $0.56 per share, in 2017.
 
●
Adjusted EBITDA loss (a non-GAAP metric reconciled below) totaled $6.2 million, compared to an adjusted EBITDA loss of $5.3 million in 2017.
 
●
Core net loss (a non-GAAP metric reconciled below) totaled $7.0 million, or $0.82 per share, compared to core net loss of $3.7 million, or $0.44 per share, in 2017.
 
Management Commentary
“2018 was a breakthrough year for our company," said SharpSpring CEO Rick Carlson. “In a relatively brief amount of time, we’ve successfully gone from an upstart marketing automation company to a significant player within our industry with over 1,700 agency customers and over 7,000 businesses using our platform. Additionally, our results in the fourth quarter highlighted a still-continuing period of strong, consistent and improving performance. Financially, we grew our topline another 37% to $5.2 million, leading to our seventh straight quarter of record revenues. As a business, SharpSpring is continuing to attract top talent to our Gainesville home, winning awards for the quality of our work and workplace culture, and constantly challenging ourselves to make our processes more efficient, our strategies more effective, and our customers more valuable over the long term. As a product, SharpSpring continues to get better, more useful and more powerful, all while remaining a fraction of the cost of the competition.
 
“Looking back, 2018 was about expanding our outreach to increase our share of the market. Looking ahead to 2019, we’re going to continue and even increase these efforts, given the almost directly correlated results from our sales and marketing spend to our new customer win count. However, this year will also be focused on improving processes internally to make sure that our new customers, as well as many of our longtime agency partners, are maximizing the value they can derive from SharpSpring. In turn, we expect the increased expense from these changes this year will ultimately translate into increased expansion revenue and overall lifetime value, shorter payback times on acquisition costs, accelerated customer acquisition growth and reduced revenue attrition rates in the many years ahead. Going forward, we're taking the necessary steps to make sure that SharpSpring is built to last and will continue drive new customer growth as well as maximize the value both we and our customers are getting from our business.”
 
Conference Call
SharpSpring management will hold a conference call today, February 27, 2019 at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss these results.
 
Company CEO Rick Carlson and CFO Brad Stanczak will host the call, followed by a question and answer period.
 
U.S. dial-in number: 866-682-6100
International number: 862-298-0702
 
Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios at 949-574-3860.
 
The conference call will be broadcast live and available for replay here and via the investor relations section of the company’s website at investors.sharpspring.com.
 
A replay of the conference call will be available after 7:30 p.m. Eastern time on the same day through March 13, 2019.
 
Toll-free replay number: 877-481-4010
International replay number: 919-882-2331
Replay ID: 41962
 
 
 
 
About SharpSpring, Inc.
SharpSpring, Inc. (NASDAQ: SHSP) is a rapidly growing, highly-rated global provider of affordable marketing automation delivered via a cloud-based Software-as-a Service (SaaS) platform. Thousands of businesses around the world rely on SharpSpring to generate leads, improve conversions to sales, and drive higher returns on marketing investments. Known for its innovation, open architecture and free customer support, SharpSpring offers flexible monthly contracts at a fraction of the price of competitors making it an easy choice for growing businesses and digital marketing agencies. Learn more at www.sharpspring.com.
 
Non-GAAP Financial Measures
Adjusted EBITDA, core net loss and core net loss per share are "non-GAAP financial measures" presented as supplemental measures of the company’s performance. These metrics are not presented in accordance with United States generally accepted accounting principles, or GAAP. The company believes these measures provide additional meaningful information in evaluating its performance over time. However, the measures have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of the company’s results as reported under GAAP. A reconciliation of net loss to these measures is included for your reference in the financial section of this earnings press release.
 
Important Cautions Regarding Forward-Looking Statements
The information posted in this release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify these statements by use of the words “may,” “will,” “should,” “plans,” “explores,” “expects,” “anticipates,” “continues,” “estimates,” “projects,” “intends,” and similar expressions. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, but are not limited to, general economic and business conditions, effects of continued geopolitical unrest and regional conflicts, competition, changes in technology and methods of marketing, delays in completing new customer offerings, changes in customer order patterns, changes in customer offering mix, continued success in technological advances and delivering technological innovations, our ability to successfully utilize our cash to develop current and future products, delays due to issues with outsourced service providers, those events and factors described by us in Item 1. A “Risk Factors” in our most recent Forms 10-K and 10-Q and other risks to which our company is subject, and various other factors beyond the company’s control. Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.
 
Company Contact:
Brad Stanczak
Chief Financial Officer
352-448-0967
IR@sharpspring.com
 
Investor Relations:
Liolios
Matt Glover or Tom Colton
949-574-3860
SHSP@liolios.com
 
 
3
 
 
SharpSpring, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
 
Three Months Ended
 
 
Year Ended    
 
 
 
December 31,    
 
 
December 31,    
 
 
 
2018
 
 
2017
 
 
2018
 
 
2017
 
Revenue
 $5,151,244 
 $3,767,319 
 $18,651,525 
 $13,448,752 
 
    
    
    
    
Cost of services
  1,418,201 
  1,220,392 
  5,798,269 
  4,996,745 
Gross profit
  3,733,043 
  2,546,927 
  12,853,256 
  8,452,007 
 
    
    
    
    
Operating expenses:
    
    
    
    
Sales and marketing
  2,724,563 
  1,889,775 
  10,092,691 
  6,677,807 
Research and development
  1,232,342 
  789,404 
  4,298,031 
  2,883,714 
General and administrative
  1,480,782 
  1,404,258 
  6,358,087 
  5,346,136 
Non-employee stock issuance expense
  508,561 
  - 
  508,561 
  - 
Intangible asset amortization
  115,000 
  131,778 
  460,000 
  527,468 
 
    
    
    
    
Total operating expenses
  6,061,248 
  4,215,215 
  21,717,370 
  15,435,125 
 
    
    
    
    
Operating loss
  (2,328,205)
  (1,668,288)
  (8,864,114)
  (6,983,118)
 
    
    
    
    
Other (expense) income, net
  (31,723)
  133,278 
  (545,482)
  209,175 
Gain (loss) on embedded derivative
  25,934 
  - 
  (400,220)
  - 
 
    
    
    
    
Loss before income taxes
  (2,333,994)
  (1,535,010)
  (9,809,816)
  (6,773,943)
Benefit from income taxes
  (83,579)
  (1,099,209)
  (330,994)
  (2,104,108)
 
    
    
    
    
Net loss
 $(2,250,415)
 $(435,801)
 $(9,478,822)
 $(4,669,835)
 
    
    
    
    
Basic net loss per share
 $(0.26)
 $(0.05)
 $(1.11)
 $(0.56)
Diluted net loss per share
 $(0.26)
 $(0.05)
 $(1.11)
 $(0.56)
 
    
    
    
    
Weighted average common shares outstanding
    
    
    
    
Basic
  8,600,259 
  8,430,360 
  8,512,297 
  8,395,319 
Diluted
  8,600,259 
  8,430,360 
  8,512,297 
  8,395,319 
  
 
4
 
 
SharpSpring, Inc.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
 
December 31,
 
 
December 31,
 
 
 
2018
 
 
2017
 
Assets
 
 
 
 
 
 
Cash and cash equivalents
 $9,320,866 
 $5,399,747 
Accounts receivable
  820,946 
  639,959 
Income taxes receivable
  22,913 
  2,132,616 
Other current assets
  1,184,217 
  899,127 
Total current assets
  11,348,942 
  9,071,449 
 
    
    
Property and equipment, net
  1,260,798 
  799,145 
Goodwill
  8,866,413 
  8,872,898 
Intangibles, net
  1,866,000 
  2,326,000 
Other long-term assets
  665,123 
  612,631 
Total assets
 $24,007,276 
 $21,682,123 
 
    
    
Liabilities and Shareholders' Equity
    
    
Accounts payable
 $1,613,477 
 $504,901 
Accrued expenses and other current liabilities
  774,944 
  625,680 
Deferred revenue
  250,656 
  279,818 
Income taxes payable
  23,705 
  171,384 
Total current liabilities
  2,662,782 
  1,581,783 
 
    
    
Deferred income taxes
  - 
  168,132 
Convertible notes, including accrued interest
  8,342,426 
  - 
Convertible notes embedded derivative
  214,350 
  - 
Total liabilities
  11,219,558 
  1,749,915 
 
    
    
Shareholders' equity:
    
    
Preferred stock, $0.001 par value
  - 
  - 
Common stock, $0.001 par value
  8,639 
  8,456 
Additional paid in capital
  30,446,838 
  28,362,397 
Accumulated other comprehensive loss
  (231,053)
  (480,762)
Accumulated deficit
  (17,352,706)
  (7,873,883)
Treasury stock
  (84,000)
  (84,000)
Total shareholders' equity
  12,787,718 
  19,932,208 
 
    
    
Total liabilities and shareholders' equity
 $24,007,276 
 $21,682,123 
 
 
5
 
 
SharpSpring, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
 
Three Months Ended
 
 
Year Ended    
 
 
 
December 31,    
 
 
December 31,    
 
 
 
2018
 
 
2017
 
 
2018
 
 
2017
 
Net loss
 $(2,250,415)
 $(435,801)
 $(9,478,822)
 $(4,669,835)
 
    
    
    
    
Adjustments to reconcile loss from operations:
    
    
    
    
Depreciation and amortization
  260,101 
  204,794 
  892,233 
  807,574 
Amortization of costs to acquire contracts
  (43,814)
  (67,894)
  (106,696)
  (305,401)
Non-cash stock compensation
  253,797 
  209,340 
  964,676 
  768,778 
Non-employee stock issuance expense
  - 
  - 
  508,561 
  - 
Deferred income taxes
  (14,229)
  (19,156)
  (168,119)
  5,618 
Loss/(gain) on disposal of property and equipment
  (4,700)
  - 
  (4,700)
  3,481 
Non-cash interest
  100,000 
  - 
  304,301 
  - 
Change in fair value of embedded derivative features
  (25,934)
  - 
  400,220 
  - 
Amortization of debt issuance costs
  (19,078)
  - 
  (6,088)
  - 
Unearned foreign currency gain/loss
  (1,047)
  (123,115)
  289,339 
  (70,769)
Changes in assets and liabilities:
    
    
    
    
Accounts receivable
  (79,888)
  47,156 
  (183,350)
  665,296 
Other assets
  (79,965)
  33,425 
  (232,973)
  136,769 
Income taxes, net
  (83,643)
  (425,474)
  1,966,648 
  (1,105,771)
Accounts payable
  424,807 
  (389,330)
  1,094,281 
  (22,860)
Accrued expenses and other current liabilities
  135,200 
  66,409 
  162,984 
  (256,969)
Deferred revenue
  (87,255)
  4,298 
  (27,283)
  (8,795)
Net cash used in operating activities
  (1,516,063)
  (895,348)
  (3,624,788)
  (4,052,884)
 
    
    
    
    
Cash flows from investing activities
    
    
    
    
Purchases of property and equipment
  (497,733)
  (28,555)
  (893,886)
  (177,110)
Proceeds from the sale of property and equipment
  4,700 
  - 
  4,700 
  - 
Acquisitions of customer assets from resellers
  - 
  - 
  - 
  (64,268)
Proceeds from the sale of discontinued operations
  - 
  - 
  - 
  1,000,000 
Net cash (used in) provided by investing activities
  (493,033)
  (28,555)
  (889,186)
  758,622 
 
    
    
    
    
Cash flows used in financing activities:
    
    
    
    
Proceeds from issance of convertible note
  - 
  - 
  8,000,000 
  - 
Debt issuance costs
  - 
  - 
  (141,657)
  - 
Proceeds from exercise of stock options
  147,128 
  3,274 
  596,387 
  22,133 
Net cash provided by financing activities
  147,128 
  3,274 
  8,454,730 
  22,133 
 
    
    
    
    
Effect of exchange rate on cash
  (950)
  3,493 
  (19,637)
  20,502 
 
    
    
    
    
Change in cash and cash equivalents
 $(1,862,918)
 $(917,136)
 $3,921,119 
 $(3,251,627)
 
    
    
    
    
Cash and cash equivalents, beginning of period
 $11,183,784 
 $6,316,883 
 $5,399,747 
 $8,651,374 
 
    
    
    
    
Cash and cash equivalents, end of period
 $9,320,866 
 $5,399,747 
 $9,320,866 
 $5,399,747 
 
 
6
 

SharpSpring, Inc.
RECONCILIATION TO ADJUSTED EBITDA
(Unaudited, in Thousands)
 
 
 
 
Three Months Ended
 
 
Year Ended    
 
 
 
December 31,    
 
 
December 31,    
 
 
 
2018
 
 
2017
 
 
2018
 
 
2017
 
Net loss
 $(2,250)
 $(436)
 $(9,479)
 $(4,670)
Benefit from income taxes
  (84)
  (1,099)
  (331)
  (2,104)
Other (expense) income, net
  32 
  (133)
  545 
  (209)
Gain (loss) on embedded derivative
  (26)
  - 
  400 
  - 
Depreciation & amortization
  260 
  205 
  892 
  808 
Non-cash stock compensation
  254 
  209 
  965 
  769 
Non-employee stock issuance expense
  - 
  - 
  509 
  - 
Acquisition-related charges
  - 
  2 
  - 
  69 
Restructuring
  252 
  - 
  252 
  - 
Adjusted EBITDA
  (1,562)
  (1,252)
  (6,247)
  (5,337)
 
SharpSpring, Inc.
RECONCILIATION TO CORE NET LOSS AND CORE NET LOSS PER SHARE
(Unaudited, in Thousands)
 
 
 
Three Months Ended
 
 
Year Ended    
 
 
 
December 31,    
 
 
December 31,    
 
 
 
2018
 
 
2017
 
 
2018
 
 
2017
 
Net loss
 $(2,250)
 $(436)
 $(9,479)
 $(4,670)
Amortization of intangible assets
  115 
  132 
  460 
  527 
Non-cash stock compensation
  254 
  209 
  965 
  769 
Non-employee stock issuance expense
  - 
  - 
  509 
  - 
Gain (loss) on embedded derivative
  (26)
  - 
  400 
  - 
Acquisition-related charges
  - 
  2 
  - 
  69 
Restructuring
  252 
  - 
  252 
  - 
Tax adjustment
  (10)
  (225)
  (87)
  (406)
Core net loss
 $(1,665)
 $(318)
 $(6,980)
 $(3,711)
 
    
    
    
    
Core net loss per share
 $(0.19)
 $(0.04)
 $(0.82)
 $(0.44)
Weighted average common shares outstanding
  8,600 
  8,430 
  8,512 
  8,395 
  
 
7