☑
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
|
|
|
For the fiscal year ended December 31,
2019
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
|
|
|
For the transition period from ______________ to
______________
|
Delaware
|
|
05-0502529
|
(State or other jurisdiction of
|
|
(I.R.S. employer
|
incorporation or organization)
|
|
identification number)
|
|
|
|
5001 Celebration Pointe Avenue, Suite 410
Gainesville, FL
|
|
32608
|
(Address of principal executive offices)
|
|
(Zip Code)
|
Title of each class registered
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Common
Stock, $0.001 par value per share
|
SHSP
|
The
NASDAQ Stock Market LLC
|
Large
accelerated filer ☐
|
Accelerated
filer ☑
|
Non-accelerated
filer ☐
|
Smaller
reporting company ☑
|
|
Emerging
growth company ☐
|
|
|
Page
|
|
PART I
|
|
Item 1.
|
Business
|
|
Item 1A.
|
Risk
Factors
|
|
Item 1B.
|
Unresolved
Staff Comments
|
34
|
Item 2.
|
Properties
|
34
|
Item 3.
|
Legal
Proceedings
|
34
|
Item 4
|
Mine
Safety Disclosures
|
34
|
|
PART II
|
|
Item 5.
|
Market
for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
|
35
|
Item 6.
|
Selected
Financial Data
|
36
|
Item 7.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
36
|
Item 7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
41
|
Item 8.
|
Financial
Statements and Supplementary Data
|
41
|
Item 9.
|
Changes
in and Disagreements With Accountants on Accounting and Financial
Disclosure
|
41
|
Item 9A.
|
Controls
and Procedures
|
41
|
Item 9B.
|
Other
Information
|
44
|
|
PART III
|
|
Item 10.
|
Directors,
Executive Officers and Corporate Governance
|
45
|
Item 11.
|
Executive
Compensation
|
45
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
45
|
Item 13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
45
|
Item 14.
|
Principal
Accounting Fees and Services
|
45
|
|
PART IV
|
|
Item 15.
|
Exhibits,
Financial Statement Schedules
|
46
|
Item 16.
|
Form
10-K Summary
|
|
Signatures
|
|
47
|
●
|
the
anticipated 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
ability of our agency partners to resell the SharpSpring platform
to their clients;
|
●
|
security
breaches, cybersecurity attacks and other significant disruptions
in our information technology systems;
|
●
|
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;
|
●
|
the
occurrence of hostilities, political instability or catastrophic
events;
|
●
|
the
novel coronavirus (“COVID-19”) and its potential
impact on our business; and
|
●
|
natural
events such as severe weather, fires, floods and earthquakes or
man-made or other disruptions of our operating systems, structures
or equipment.
|
●
|
the
impact of recessions in economies outside of the United
States
|
●
|
changes
in and differences between regulatory requirements between
countries
|
●
|
The extent of the impact of the novel strain of coronavirus known
as COVID-19 on global commerce
|
●
|
U.S.
and foreign export restrictions, including export controls relating
to encryption technologies
|
●
|
anti-SPAM
laws and other laws that may differ materially from U.S.
laws
|
●
|
reduced
protection for and enforcement of intellectual property rights in
some countries
|
●
|
potentially
adverse tax consequences
|
●
|
difficulties
and costs of staffing and managing foreign operations
|
●
|
political
and economic instability
|
●
|
international
conflicts, wars or terrorism
|
●
|
tariffs
and other trade barriers
|
●
|
seasonal
reductions in business activity
|
●
|
divert
management’s attention;
|
●
|
result
in costly and time-consuming litigation;
|
●
|
require
us to enter into royalty or licensing agreements, which may not be
available on acceptable terms, or at all;
|
●
|
in the
case of open source software-related claims, require us to release
our software code under the terms of an open source license;
or
|
●
|
require
us to redesign our software and services to avoid
infringement.
|
●
|
fund
our operations;
|
●
|
respond
to competitive pressures;
|
●
|
take
advantage of strategic opportunities, including more rapid
expansion of our business or the acquisition of complementary
products, technologies or businesses; and
|
●
|
develop
new products or enhancements to existing products.
|
●
|
issue
additional equity securities that would dilute our
stockholders;
|
●
|
use
cash that we may need in the future to operate our
business;
|
●
|
incur
debt on terms unfavorable to us or that we are unable to
repay;
|
●
|
incur
large charges or substantial liabilities;
|
●
|
encounter
difficulties retaining key employees of the acquired company or
integrating diverse business cultures;
|
●
|
become
subject to adverse tax consequences, substantial depreciation, or
deferred compensation charges; and
|
●
|
encounter
unfavorable reactions from investment banking market analysts who
disapprove of our completed acquisitions.
|
●
|
authorize
our board of directors to create and issue, without stockholder
approval, preferred stock, thereby increasing the number of
outstanding shares, which can deter or prevent a takeover
attempt;
|
●
|
prohibit
cumulative voting in the election of directors, which would
otherwise allow less than a majority of stockholders to elect
director candidates;
|
●
|
empower
our board of directors to fill any vacancy on our board of
directors, whether such vacancy occurs as a result of an increase
in the number of directors or otherwise;
|
●
|
provide
that our board of directors is expressly authorized to adopt, amend
or repeal our bylaws; and
|
●
|
provide
that our directors will be elected by a plurality of the votes cast
in the election of directors.
|
●
|
our
ability to retain existing customers, attract new customers and
satisfy our customers’ requirements;
|
●
|
general
economic conditions;
|
●
|
changes
in our pricing policies;
|
●
|
our
ability to expand our business;
|
●
|
our
ability to successfully integrate our acquired
businesses;
|
●
|
new
product and service introductions;
|
●
|
technical
difficulties or interruptions in our services;
|
●
|
the
timing of additional investments in our hardware and software
systems;
|
●
|
regulatory
compliance costs;
|
●
|
costs
associated with future acquisitions of technologies and businesses;
and
|
●
|
extraordinary
expenses such as litigation or other dispute-related settlement
payments.
|
●
|
announcements
or press releases relating to our industry or to our own business
or prospects;
|
●
|
regulatory,
legislative, or other developments affecting us or our industry
generally;
|
●
|
sales
by holders of restricted securities pursuant to effective
registration statements or exemptions from registration;
and
|
●
|
market
conditions specific to our company, our industry and the stock
market generally.
|
|
|
Percent
|
||
|
Year ended
|
Change
|
Change
|
|
|
December 31,
|
from
|
from
|
|
|
2019
|
2018
|
Prior Year
|
Prior Year
|
Operating expenses:
|
|
|
|
|
Sales
and marketing
|
$11,785,227
|
$10,092,691
|
$1,692,536
|
17%
|
Research
and development
|
5,036,613
|
4,298,031
|
738,582
|
17%
|
General
and administrative
|
8,617,073
|
6,358,087
|
2,258,986
|
36%
|
Non-employee
stock issuance expense
|
-
|
508,561
|
(508,561)
|
-100%
|
Intangible
asset amortization
|
381,000
|
460,000
|
(79,000)
|
-17%
|
Total
operating expenses
|
$25,819,913
|
$21,717,370
|
$4,102,543
|
19%
|
|
|
|
|
Percent
|
|
Year ended
|
Change
|
Change
|
|
|
December 31,
|
from
|
from
|
|
|
2019
|
2018
|
Prior Year
|
Prior Year
|
Other
|
|
|
|
|
Other
expenses, net
|
$(147,338)
|
$(545,482)
|
$398,144
|
-73%
|
Loss
on induced conversion
|
(2,162,696)
|
-
|
(2,162,696)
|
n/a
|
Gain
(loss) on embedded derivative
|
214,350
|
(400,220)
|
614,570
|
-154%
|
Provision
(benefit) for income taxes
|
29,349
|
(330,994)
|
360,343
|
-109%
|
|
Operating
Leases
|
2020
|
$742,956
|
2021
|
766,546
|
2022
|
771,278
|
2023
|
794,937
|
2024
|
799,669
|
Thereafter
|
3,221,086
|
Total
Commitments
|
$7,096,472
|
|
SharpSpring, Inc.
|
|
|
|
|
|
By:
|
/s/
Richard A. Carlson
|
|
|
Richard
A. Carlson
|
|
|
Chief
Executive Officer and President
(Principal
Executive Officer)
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/
Richard A. Carlson
|
|
Chief
Executive Officer and President (Principal Executive Officer),
Director
|
|
March
16, 2020
|
Richard
A. Carlson
|
|
|||
|
|
|
|
|
/s/
Michael Power
|
|
Chief
Financial Officer (Principal Financial Officer)
|
|
March
16, 2020
|
Michael
Power
|
|
|
|
|
|
|
|
|
|
/s/
Steven A. Huey
|
|
Chair
of the Board of Directors
|
|
March
16, 2020
|
Steven
A. Huey
|
|
|
|
|
|
|
|
|
|
/s/
Marietta Davis
|
|
Director
|
|
March
16, 2020
|
Marietta
Davis
|
|
|
|
|
|
|
|
|
|
/s/
David A. Buckel
|
|
Director
|
|
March
16, 2020
|
David
A. Buckel
|
|
|
|
|
|
|
|
|
|
/s/
Scott Miller
|
|
Director
|
|
March
16, 2020
|
Scott
Miller
|
|
|
|
|
|
Page
|
|
December 31,
|
December 31,
|
|
2019
|
2018
|
Assets
|
|
|
Cash
and cash equivalents
|
$11,881,949
|
$9,320,866
|
Accounts
receivable, net of allowance for doubtful accounts of $12,455 and
$127,516 at December 31, 2019 and December 31, 2018,
respectively
|
340,344
|
80,521
|
Unbilled
receivables
|
998,048
|
740,425
|
Income
taxes receivable
|
15,010
|
22,913
|
Other
current assets
|
1,363,366
|
1,184,217
|
Total
current assets
|
14,598,717
|
11,348,942
|
|
|
|
Property
and equipment, net
|
1,996,722
|
1,260,798
|
Goodwill
|
10,922,814
|
8,866,413
|
Intangibles,
net
|
4,658,000
|
1,866,000
|
Right-of-use
assets
|
5,281,530
|
-
|
Other
long-term assets
|
549,022
|
665,123
|
Total
assets
|
$38,006,805
|
$24,007,276
|
|
|
|
Liabilities and Shareholders' Equity
|
|
|
Accounts
payable
|
$2,052,538
|
$1,613,477
|
Accrued
expenses and other current liabilities
|
919,089
|
774,944
|
Deferred
revenue
|
860,820
|
250,656
|
Income
taxes payable
|
13,944
|
23,705
|
Lease
liability, current portion
|
370,340
|
-
|
Total
current liabilities
|
4,216,731
|
2,662,782
|
|
|
|
Convertible
notes, including accrued interest
|
-
|
8,342,426
|
Convertible
notes embedded derivative
|
-
|
214,350
|
Lease
liability, net of current portion
|
4,976,727
|
-
|
Total
liabilities
|
9,193,458
|
11,219,558
|
Commitments
and contingencies (Note 13)
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
Preferred
stock, $0.001 par value, 5,000,000 shares authorized, no shares
issued or outstanding at December 31, 2019 and December 31,
2018
|
-
|
-
|
Common
stock, $0.001 par value, Authorized shares-50,000,000; issued
shares- 11,537,163 at December 31, 2019 and 8,639,139 at December
31, 2018; outstanding shares- 11,517,163 at December 31, 2019 and
8,619,139 at December 31, 2018
|
11,537
|
8,639
|
Additional
paid in capital
|
58,851,285
|
30,446,838
|
Accumulated
other comprehensive loss
|
(224,793)
|
(231,053)
|
Accumulated
deficit
|
(29,740,682)
|
(17,352,706)
|
Treasury
stock
|
(84,000)
|
(84,000)
|
Total
shareholders' equity
|
28,813,347
|
12,787,718
|
|
|
|
Total
liabilities and shareholders' equity
|
$38,006,805
|
$24,007,276
|
|
|
|
|
Year
ended
|
|
|
December
31,
|
|
|
2019
|
2018
|
|
|
|
Revenue,
net
|
$22,699,386
|
$18,651,525
|
|
|
|
Cost
of services
|
7,142,416
|
5,798,269
|
Gross
profit
|
15,556,970
|
12,853,256
|
|
|
|
Operating
expenses:
|
|
|
Sales
and marketing
|
11,785,227
|
10,092,691
|
Research
and development
|
5,036,613
|
4,298,031
|
General
and administrative
|
8,617,073
|
6,358,087
|
Non-employee
stock issuance expense
|
-
|
508,561
|
Intangible
asset amortization
|
381,000
|
460,000
|
|
|
|
Total
operating expenses
|
25,819,913
|
21,717,370
|
|
|
|
Operating
loss
|
(10,262,943)
|
(8,864,114)
|
|
|
|
Other
expenses, net
|
(147,338)
|
(545,482)
|
Loss
on induced conversion
|
(2,162,696)
|
-
|
Gain
(loss) on embedded derivative
|
214,350
|
(400,220)
|
|
|
|
Loss
before income taxes
|
(12,358,627)
|
(9,809,816)
|
Provision
(benefit) for income taxes
|
29,349
|
(330,994)
|
Net
loss
|
$(12,387,976)
|
$(9,478,822)
|
|
|
|
Basic
net loss per share
|
$(1.20)
|
$(1.11)
|
Diluted
net loss per share
|
$(1.20)
|
$(1.11)
|
|
|
|
Shares
used in computing basic net loss per share
|
10,323,889
|
8,512,297
|
Shares
used in computing diluted net loss per share
|
10,323,889
|
8,512,297
|
|
|
|
Other
comprehensive income (loss):
|
|
|
Foreign
currency translation adjustment, net
|
6,260
|
249,709
|
Comprehensive
loss
|
$(12,381,716)
|
$(9,229,113)
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
Additional
|
Other
|
|
|
|
|
|
Common Stock
|
Paid in
|
Comprehensive
|
Treasury Stock
|
Accumulated
|
|
||
|
Shares
|
Amount
|
Capital
|
Loss
|
Shares
|
Amount
|
Deficit
|
Total
|
Balance,
December 31, 2017
|
8,456,061
|
$8,456
|
$28,362,397
|
$(480,762)
|
20,000
|
$(84,000)
|
$(7,873,883)
|
$19,932,208
|
Stock
based compensation - stock options
|
-
|
-
|
801,655
|
-
|
-
|
-
|
-
|
801,655
|
Issuance
of common stock for cash
|
113,090
|
113
|
596,274
|
-
|
-
|
-
|
-
|
596,387
|
Issuance
of common stock for director services
|
23,302
|
24
|
177,998
|
-
|
-
|
-
|
-
|
178,022
|
Issuance
of common stock for other non-employee services
|
36,274
|
36
|
508,525
|
-
|
-
|
-
|
-
|
508,561
|
Issuance
of common stock for warrant conversions
|
10,412
|
10
|
(10)
|
-
|
-
|
-
|
-
|
-
|
Foreign
currency translation adjustment, net
|
-
|
-
|
-
|
249,709
|
-
|
-
|
-
|
249,709
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(9,478,823)
|
(9,478,823)
|
Balance,
December 31, 2018
|
8,639,139
|
$8,639
|
$30,446,838
|
$(231,053)
|
20,000
|
$(84,000)
|
$(17,352,706)
|
$12,787,718
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2018
|
8,639,139
|
$8,639
|
$30,446,838
|
$(231,053)
|
20,000
|
$(84,000)
|
$(17,352,706)
|
$12,787,718
|
Stock
based compensation - stock options
|
-
|
-
|
1,076,324
|
-
|
-
|
-
|
-
|
1,076,324
|
Issuance
of common stock for cash
|
1,631,331
|
1,631
|
16,578,784
|
-
|
-
|
-
|
-
|
16,580,415
|
Issuance
of common stock for director services
|
10,286
|
10
|
127,878
|
-
|
-
|
-
|
-
|
127,888
|
Issuance
of common stock for warrant conversions
|
14,772
|
15
|
(15)
|
-
|
-
|
-
|
-
|
-
|
Issance
of commons stock for settlement of notes
|
1,241,635
|
1,242
|
10,621,474
|
-
|
-
|
-
|
-
|
10,622,716
|
Foreign
currency translation adjustment, net
|
-
|
-
|
-
|
6,260
|
-
|
-
|
-
|
6,260
|
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(12,387,976)
|
(12,387,976)
|
Balance,
December 31, 2019
|
11,537,163
|
$11,537
|
$58,851,285
|
$(224,793)
|
20,000
|
$(84,000)
|
$(29,740,682)
|
$28,813,347
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
December 31,
|
|
|
2019
|
2018
|
Cash
flows from operating activities:
|
|
|
Net
loss
|
$(12,387,976)
|
$(9,478,822)
|
Adjustments
to reconcile loss from operations:
|
|
|
Depreciation
and amortization
|
1,010,123
|
892,233
|
Amortization
of costs to acquire contracts
|
804,780
|
758,014
|
Non-cash
stock compensation
|
1,204,213
|
964,676
|
Non-employee
stock issuance expense
|
-
|
508,561
|
Deferred
income taxes
|
-
|
(168,119)
|
Gain
on disposal of property and equipment
|
(617)
|
(4,700)
|
Non-cash
interest
|
139,372
|
304,301
|
Amortization
of debt issuance costs and embedded derivative
|
2,903
|
(6,088)
|
(Gain)/loss
on embedded derivative
|
(214,350)
|
400,220
|
Loss
on induced conversion
|
2,162,696
|
-
|
Unrealized
foreign currency loss
|
25,425
|
289,339
|
Changes
in assets and liabilities:
|
|
|
Accounts
receivable
|
(204,217)
|
3,896
|
Unbilled
receivables
|
(254,987)
|
(187,246)
|
Right-of-use
assets
|
433,980
|
-
|
Other
assets
|
(837,082)
|
(1,097,683)
|
Income
taxes, net
|
(2,094)
|
1,966,648
|
Accounts
payable
|
439,028
|
1,094,281
|
Lease
liabilities
|
(377,264)
|
-
|
Other
liabilities
|
(392,480)
|
162,984
|
Deferred
revenue
|
421,405
|
(27,283)
|
Net
cash used in operating activities
|
(8,027,142)
|
(3,624,788)
|
|
|
|
Cash
flows from investing activities
|
|
|
Acquisition
of business
|
(4,566,402)
|
-
|
Purchases
of property and equipment
|
(1,365,048)
|
(893,886)
|
Proceeds
from the sale of property and equipment
|
617
|
4,700
|
Net
cash used in investing activities
|
(5,930,833)
|
(889,186)
|
|
|
|
Cash
flows used in financing activities:
|
|
|
Proceeds
from issuance of convertible note
|
-
|
8,000,000
|
Debt
issuance costs
|
-
|
(141,657)
|
Proceeds
from exercise of stock options
|
968,986
|
596,387
|
Proceeds
(cost) from issuance of common stock, net
|
15,587,990
|
-
|
Net
cash provided by financing activities
|
16,556,976
|
8,454,730
|
|
|
|
Effect
of exchange rate on cash
|
(37,918)
|
(19,637)
|
|
|
|
Change
in cash and cash equivalents
|
2,561,083
|
3,921,119
|
|
|
|
Cash
and cash equivalents, beginning of period
|
9,320,866
|
5,399,747
|
|
|
|
Cash
and cash equivalents, end of period
|
$11,881,949
|
$9,320,866
|
|
|
|
Supplemental
information on consolidated statements of cash flows:
|
|
|
Cash
paid during the period for
|
|
|
Income
taxes, net
|
$11,013
|
$(2,099,762)
|
Non-cash
activities
|
|
|
Right-of-use
asset obtained for lease liability
|
$5,715,510
|
$-
|
Convertible
notes liability relieved upon conversion
|
$8,484,701
|
$-
|
Embedded
derivative liability relieved upon conversion
|
$189,776
|
$-
|
|
|
|
|
|
|
Leasehold
improvements
|
5
years
|
Furniture
and fixtures
|
3-5
years
|
Computing
equipment
|
3
years
|
Software
|
3-5
years
|
●
|
Identify
the customer contract;
|
●
|
Identify
performance obligations that are distinct;
|
●
|
Determine
the transaction price;
|
●
|
Allocate
the transaction price to the distinct performance obligations;
and
|
●
|
Recognize
revenue as the performance obligations are satisfied.
|
Cash
Consideration
|
$4,566,402
|
Add:
|
|
Net
tangible assets acquired
|
|
Deferred
Revenue
|
$186,500
|
Accrued
expenses and other current liabilities
|
$545,473
|
Total
liabilities
|
$731,973
|
Less:
|
|
Net
tangible assets acquired
|
|
Accounts
receivable
|
$(55,236)
|
Other
current assets
|
$(20,719)
|
Total
tangible assets
|
$(75,955)
|
Intangible
assets acquired:
|
|
Trade
names
|
$(381,000)
|
Technology
|
$(979,000)
|
Vendor
relationships
|
$(1,813,000)
|
Total
intangible assets
|
$(3,173,000)
|
Goodwill
|
$2,049,420
|
|
Year ended
|
|
|
December 31,
|
|
|
2019
|
2018
|
Net
revenues
|
$2,980,148
|
$4,423,069
|
Gross
profit
|
$1,649,482
|
$3,120,694
|
Net
income
|
$257,154
|
$1,140,637
|
Net
income per share:
|
|
|
Basic
|
$0.02
|
$0.13
|
Diluted
|
$0.02
|
$0.13
|
2020
|
611,200
|
2021
|
559,200
|
2022
|
507,200
|
2023
|
459,200
|
2024
|
420,200
|
Thereafter
|
1,720,000
|
Total
Amortizable Intangible Assets
|
$4,277,000
|
Indefinite
Lived
|
381,000
|
Total
intangible assets
|
4,658,000
|
|
December 31,
|
December 31,
|
|
2019
|
2018
|
Principal
amount
|
$-
|
$8,000,000
|
Accrued
interest paid-in-kind
|
-
|
304,301
|
Unamortized
debt issuance costs
|
-
|
(122,153)
|
Unamortized
embedded derivative
|
-
|
160,278
|
Net
carrying value
|
$-
|
$8,342,426
|
|
Year Ended
|
|
|
December 31,
|
|
|
2019
|
2018
|
Warrants
|
-
|
30,000
|
Stock
options
|
1,470,406
|
1,654,522
|
Restricted
Stock Units
|
50,494
|
-
|
Convertible
notes
|
-
|
1,107,240
|
Total
|
1,520,900
|
2,791,762
|
|
Year Ended
|
Year Ended
|
||
|
December 31,
|
December 31,
|
||
|
2019
|
2018
|
||
|
Amount
|
Percent
|
Amount
|
Percent
|
|
|
|
|
|
Federal
statutory rates
|
$(2,594,415)
|
21%
|
$(2,058,172)
|
21%
|
State
income taxes, net of federal benefit
|
(68,162)
|
1%
|
(194,244)
|
2%
|
Permanent
differences
|
(46,592)
|
0%
|
66,068
|
-1%
|
Perm
Differences - Debt Conversion
|
454,166
|
-4%
|
0
|
0%
|
Other
|
(85,997)
|
1%
|
(69,968)
|
1%
|
Credits
|
(227,213)
|
2%
|
(147,727)
|
2%
|
Foreign
|
(22,820)
|
0%
|
(80,534)
|
1%
|
Valuation
Allowance
|
2,620,382
|
-21%
|
2,153,583
|
-22%
|
Effective
rate
|
$29,349
|
0%
|
$(330,994)
|
3%
|
|
Year Ended
December 31,
|
|
|
2019
|
2018
|
|
|
|
Volatility
|
49% - 52%
|
48% - 49%
|
Risk-free
interest rate
|
1.45%- 2.59%
|
2.34% - 3.11%
|
|
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, 2018
|
1,654,522
|
$6.07
|
8.2
|
$10,866,658
|
|
|
|
|
|
Granted
|
226,294
|
12.37
|
|
|
Exercised
|
(191,150)
|
5.11
|
|
|
Expired
|
(1,198)
|
5.18
|
|
|
Forfeited
|
(218,062)
|
5.19
|
|
|
Outstanding
at December 31, 2019
|
1,470,406
|
$7.30
|
7.5
|
$6,604,461
|
|
|
|
|
|
Exercisable
at December 31, 2019
|
815,978
|
$5.62
|
6.6
|
$4,847,227
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
Grant Date
|
|
Number of
|
Fair Value
|
|
Units
|
Per Share
|
Unvested
at December 31, 2018
|
-
|
$-
|
|
|
|
Granted
|
50,494
|
11.82
|
Vested
|
-
|
-
|
Cancelled
|
-
|
-
|
Unvested
at December 31, 2019
|
50,494
|
$11.82
|
|
|
Weighted
|
Weighted
|
|
|
Number of
|
Average
|
Average Remaining
|
Intrinsic
|
|
Units
|
Exercise Price
|
Contractual Term
|
Value
|
Outstanding
at December 31, 2018
|
30,000
|
$7.81
|
1.1
|
$144,525
|
|
|
|
|
|
Granted
|
-
|
-
|
|
|
Exercised
|
(30,000)
|
7.81
|
|
|
Cancelled
|
-
|
-
|
|
|
Outstanding
at December 31, 2019
|
-
|
$-
|
-
|
$-
|
|
|
|
|
|
Exercisable
at December 31, 2019
|
-
|
$-
|
-
|
$-
|
|
Operating Leases
|
2020
|
742,956
|
2021
|
766,546
|
2022
|
771,278
|
2023
|
794,937
|
2024
|
799,669
|
Thereafter
|
3,221,086
|
Total
undiscounted cash flows
|
$7,096,472
|
Less
imputed interest
|
(1,749,405)
|
Present
value of lease liability
|
$5,347,067
|
Exhibit
Number
|
|
Title of Document
|
|
Location
|
|
|
|
|
|
|
Certificate of Incorporation
|
|
Incorporated by reference to our Form S-1 filed on December 2,
2010
|
|
|
Amendment to Certificate of Incorporation
|
|
Incorporated by reference to our Form 8-K filed on December 17,
2013
|
|
|
Amendment to Certificate of Incorporation
|
|
Incorporated by reference to our Form 8-K filed December 1,
2015
|
|
|
Bylaws
|
|
Incorporated by reference to our Form S-1 filed on December 2,
2010
|
|
|
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
|
|
|
Securities registered under Section 12 of the Exchange
Act
|
|
Filed herewith
|
|
|
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
|
|
|
Note
Conversion Agreement, dated May 9, 2019, by and among SharpSpring,
Inc., SHSP Holdings, LLC, and Evercel Holdings, LLC.
|
|
Incorporated
by reference to our Form 8-K filed May 9, 2019
|
|
|
Share
Purchase Agreement among SharpSpring, Inc., Special Situations
Private Equity Fund, L.P., Special Situations Technology Fund,
L.P., Special Situations Technology Fund II, L.P., Greenhaven Road
Capital Fund 1, L.P., and Greenhaven Road Capital Fund 2,
L.P.
|
|
Incorporated
by reference to our Form 8-K filed November 22, 2019
|
|
Registration
Rights Agreement among SharpSpring, Inc., Special Situations
Private Equity Fund, L.P., Special Situations Technology Fund,
L.P., Special Situations Technology Fund II, L.P., Greenhaven Road
Capital Fund 1, L.P., and Greenhaven Road Capital Fund 2,
L.P.
|
|
Incorporated
by reference to our Form 8-K filed November 22, 2019
|
|
|
Loan Agreement dated March 21, 2016, by and
among SharpSpring, Inc., Quattro Hosting LLC, SharpSpring
Technologies, Inc. and Western Alliance Bank
|
|
Incorporated by reference to our Form 8-K filed on March 22,
2016
|
|
|
Intellectual Property Security Agreement dated March 21, 2016,
by and among SharpSpring, Inc., Quattro Hosting LLC,
SharpSpring Technologies, Inc. and Western Alliance
Bank
|
|
Incorporated by reference to our Form 8-K filed on March 22,
2016
|
|
|
Loan and Security Modification Agreement dated June 24, 2016, by
and among SharpSpring, Inc., Quattro Hosting LLC, SharpSpring
Technologies, Inc. and Western Alliance Bank
|
|
Incorporated by reference to our Form 8-K filed on June 28,
2016
|
|
|
Loan
and Security Modification Agreement dated October 25, 2017, by and
among SharpSpring, Inc., Quattro Hosting LLC, SharpSpring
Technologies, Inc. and Western Alliance Bank
|
|
Incorporated
by reference to our Form 8-K filed on October 30, 2017
|
|
|
Loan
and Security Modification Agreement dated April 30,
2018, by and among SharpSpring, Inc., Quattro Hosting
LLC, SharpSpring Technologies, Inc. and Western Alliance
Bank
|
|
Incorporated
by reference to the Company’s Form 8-K filed on May 1,
2018
|
|
|
Loan
and Security Modification Agreement dated March 21,
2019, by and among SharpSpring, Inc., SharpSpring
Technologies, Inc. and Western Alliance Bank
|
|
Incorporated
by reference to the Company’s Form 8-K filed on March 26,
2019
|
|
|
SharpSpring, Inc. 2010 Restated Employee Stock Plan
|
|
Incorporated
by reference to the Company’s Form 10-Q filed on August 13,
2018
|
|
|
SharpSpring, Inc. 2019 Equity Incentive Plan
|
|
Incorporated
by reference to the Company’s Definitive Schedule 14A filed
on April 30, 2019
|
|
10.13
|
|
2019
Executive Bonus Plan
|
|
Incorporated
by reference to the Company’s Form 8-K filed on February 27,
2019
|
10.14
|
|
Richard
Carlson Employee Agreement Amendment dated January 29, 2020
|
|
Filed
herewith
|
|
Richard
Carlson Employee Agreement Amendment dated February 21, 2019
|
|
Incorporated
by reference to the Company’s Form 8-K filed on February 27,
2019
|
|
|
Richard
Carlson Employee Agreement Amendment dated February 8, 2018
|
|
Incorporated
by reference to the Company’s Form 8-K filed on February 12,
2018
|
|
|
Richard
Carlson Employee Agreement Amendment dated March 30,
2017
|
|
Incorporated
by reference to the Company’s Form 8-K filed on April 5,
2017
|
|
Richard
Carlson Employee Agreement dated September 13, 2015
|
|
Incorporated
by reference to our Form 8-K filed on September 14,
2015
|
|
10.19
|
|
Travis Whitton Employee Agreement Amendment dated January 29,
2020
|
|
Filed
herewith
|
|
Travis Whitton Employee Agreement Amendment dated February 15,
2019
|
|
Incorporated
by reference to the Company’s Form 8-K filed on February 27,
2019
|
|
|
Travis Whitton Employee Agreement Amendment dated February 8,
2018
|
|
Incorporated
by reference to the Company’s Form 8-K filed on February 12,
2018
|
|
10.22
|
|
Travis Whitton Employee Agreement Amendment dated July 28,
2017
|
|
Incorporated
by reference to the Company’s Form 8-K filed on February 12,
2018
|
|
Travis
Whitton Employee Agreement dated June 19, 2015
|
|
Incorporated
by reference to our Form 8-K filed on July 8, 2016
|
|
|
Michael
Power Employment Agreement dated December 2, 2019
|
|
Incorporated
by reference to our Form 8-K filed November 22, 2019
|
|
|
Office
Lease Agreement with Celebration Pointe Office Partners II, LLC
dated April 18, 2018
|
|
Incorporated
by reference to our Form 8-K filed on April 19, 2018
|
|
|
Office
Lease Agreement Addendum with Celebration Pointe Office Partners
II, LLC dated June 20, 2019.
|
|
Incorporated
by reference to our Form 8-K filed on June 26, 2019
|
|
|
Code of Ethics and Business Standards
|
|
Filed herewith
|
|
21.1
|
|
Subsidiaries of the registrant
|
|
Incorporated by reference to Part I – Item 1. Business -
Overview of this Form 10-K
|
|
Consent of Independent Registered Public Accounting Firm –
Cherry Bekaert LLP
|
|
Filed herewith
|
|
|
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
|
|
Furnished 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
|
|
Furnished herewith
|
|
|
Asset
Purchase Agreement dated November 21, 2019 by and between
SharpSpring Inc., and Marin Software Inc.
|
|
Incorporated
by reference to our Form 8-K filed November 22, 2019
|
|
101.1
|
|
XBRL
|
|
Filed herewith
|
|
|
|
________________________
Signature
________________________
Printed
Name
________________________
Date
|
Date:
March 16, 2020
|
Signature:
|
/s/ Richard A. Carlson
|
|
|
Richard
A. Carlson
|
|
|
Principal
Executive Officer
|
Date:
March 16, 2020
|
Signature:
|
/s/ Michael Power
|
|
|
Michael
Power
|
|
|
Chief
Financial Officer
(Principal
Financial Officer)
|
|
1.
|
The
Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
|
|
|
|
|
2.
|
To my
knowledge, the information contained in the Report fairly presents,
in all material respects, the financial condition and results of
operations of the Company.
|
Date:
March 16, 2020
|
/s/ Richard A. Carlson
|
|
Richard
A. Carlson
|
|
Chief
Executive Officer
(Principal
Executive Officer)
|
The foregoing certification is being furnished solely pursuant to
section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and
(b) of section 1350, Chapter 63 of Title 18, United States Code)
and is not being filed as part of the Report or as a separate
disclosure document.
|
|
|
1.
|
The
Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
|
|
2.
|
To my
knowledge, the information contained in the Report fairly presents,
in all material respects, the financial condition and results of
operations of the Company.
|
Date:
March 16, 2020
|
/s/ Michael Power
|
|
Michael
Power
|
|
Chief
Financial Officer
(Principal
Financial Officer)
|
The foregoing certification is being furnished solely pursuant to
section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and
(b) of section 1350, Chapter 63 of Title 18, United States Code)
and is not being filed as part of the Report or as a separate
disclosure document.
|