ITEM
10.
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Identity of Directors
Name
|
|
Age
|
|
Year First Elected Director
|
|
Positions/Committees*
|
|
Independent
|
Steven
A. Huey
|
|
52
|
|
2016
|
|
COB,
AC, CC, NCGC
|
|
yes
|
Richard
Carlson
|
|
45
|
|
2015
|
|
CEO,
P
|
|
no
|
David
A. Buckel
|
|
56
|
|
2014
|
|
AC,
FE
|
|
yes
|
Marietta
Davis
|
|
58
|
|
2017
|
|
AC, CC,
NCGC
|
|
yes
|
Daniel
C. Allen*
|
|
43
|
|
2018
|
|
NCGC,
CC
|
|
yes
|
John L.
Troost**
|
|
50
|
|
2010
|
|
|
|
yes
|
Roy W.
Olivier**
|
|
59
|
|
2017
|
|
|
|
yes
|
AC -
Audit Committee
CEO, P
- Chief Executive Officer, President
COB -
Chair of the Board of Directors (non-executive)
CC -
Compensation Committee
FE -
Financial Expert
NCGC -
Nominating/Corporate Governance Committee
*Pursuant
to a certain investors’ rights agreement, an investor has the
right to designate one person for election to our Board of
directors and the Company agreed to use its reasonable best efforts
to cause such person to be elected to the Board at each annual
meeting of the Company’s stockholders. The investor
designated Mr. Allen, who is an affiliate of investor. See
“Transactions with Related Persons” below.
** Mr.
Troost and Mr. Olivier will not stand for re-election after
their term expires at the 2018 Annual Meeting.
Business Experience of Directors
Steven A.
Huey
.
Steven A.
Huey has been a director since December 2016 and the chair of our
Board of Directors since July 2017. Since August 2012, Mr. Huey has
been Chief Executive Officer of Capture Higher Ed, a technology
firm that helps educational institutions meet their enrollment
goals. Prior to that, from November 2007 to August 2012, Mr. Huey
was Chief Operating Officer of The Learning House, Inc. Mr. Huey
received a B.S. in Accounting and Finance from Miami University and
an MBA from Emory University. Mr. Huey’s qualifications to
serve on our Board of Directors include his extensive experience as
a technology company executive, with a focus on growing early
stage companies.
Richard A. Carlson.
Richard Carlson has been a director and has served as the
Company’s Chief Executive Officer and President since October
1, 2015. From August 1, 2015 to October 1, 2015, he served as
President of the Company. From August 15, 2014 until August 1,
2015, he served as the President of SharpSpring Technologies, Inc.,
our wholly owned subsidiary. Mr. Carlson founded RCTW, LLC (fka
SharpSpring, LLC) in December 2011 and served as its President
until it was acquired by the Company on August 15, 2014. From April
2009 to December 2011, he served as the Managing Director of US
Operations for Panda Security, an international internet security
software company. Mr. Carlson’s qualifications to serve on
our Board of Directors include his knowledge of marketing
automation technology, email technology, marketing strategies, as
well as his general leadership skills.
David A. Buckel.
David A. Buckel has been a director since January 2014. Since
November 2007 to present, Mr. Buckel has served as the Managing
Director at BVI Venture Services, a professional services firm that
provides experienced, C-Suite professionals to deliver strategic
and functional consulting services to both private and small public
technology companies. Mr. Buckel has hands-on experience creating
accounting and control systems and processes, financial statements,
financial and operating metrics, dashboards, cash flow forecast,
budget processes, trend analysis and dealing with auditors.
Additionally, Mr. Buckel has been CFO for various NASDAQ and AMEX
Companies leading growth strategy, financial operations and various
fund raising efforts. Mr. Buckel holds an M.B.A in Finance and
Operations Management from Syracuse University and a B.S. in
Accounting from Canisius College. He is also a Certified Management
Accountant (CMA). Mr. Buckel’s qualifications to serve on our
Board of Directors include a strong background and skill set in
areas relating to board service, finance and
management.
Marietta
Davis
.
Marietta
Davis has been a director since July 2017. Ms. Davis is currently
an Advisory Board Member at DataOceans, LLC, a customer
communications management solutions and services company, where she
has served since April 2016. She is also currently a National Board
Member of Youth Villages, a nationally-recognized nonprofit
organization that helps children, young people and families, where
she has served since January 2010. Davis also served as Vice
President – US Dynamic Sales at Microsoft, from 2013 to 2016,
where she helped define marketing strategies for SMB, mid-tier and
enterprise customers for Dynamics CRM Cloud and ERP products and
services. Prior to that time, from 2009 to 2013, Davis served as
General Manager – Enterprise Accounts, Greater Southeast
District at Microsoft, where she led the sales organization and
managed strategic community engagement in the areas of economic
development and innovation for that district. Davis holds a B.S. in
communications from Bradley University. Ms. Davis’
qualifications to serve on our Board of Directors include
experience in sales and marketing leadership roles in the CRM
industry, which is highly-correlated to the Company’s
marketing automation industry segment.
Daniel
Allen
. Daniel Allen has been a director since April
2018. Mr. Allen serves as Managing Partner of
Corona Park Investment Partners, a
private investment company that invests and grows profitable
technology enabled companies. He has held that position since
January 2012. Since January 2013, he has also served as CEO of
Evercel
(EVRC)
,
a holding company that manages
its portfolio companies and seeks new opportunities to invest
capital for long term returns. Evercel is
the parent company of Printronix, a
global industrial printing company, where Mr. Allen serves as
Chairman of the Board. From 2001 to 2010, Mr. Allen worked at
Bain Capital, where he also focused on investing in technology
related growth opportunities. Prior to Bain Capital, Mr.
Allen was on the founding team of Fandango, a strategy consultant
at McKinsey and Company, and worked at ABCNews in Moscow, London,
Hong Kong and New York City. Mr. Allen graduated from Harvard
College and Harvard Business School.
Mr. Allen’s
qualifications to serve on our Board of Directors include
experience managing and investing in growth-focused technology
companies.
John L.
Troost
. John L. Troost has been
a director since July 2010. Since April 2010, Mr. Troost has served
as President and Chief Technology Officer at Virtual Clarity, and
from 2003 to February 2010, he was the Head of Platform Design and
Core Technology Architecture at UBS, AG. Previously, he served as
managing partner at Surgam Technology Partners, Chief Technology
Officer at NAME, Inc., Manager of Systems and Network Engineering
at Moore Capital Management and Senior Systems Administrator at
Lehman Brothers. Mr. Troost is a contributor to the development of
the original standards for email attachments (MIME standard RFC).
Mr. Troost has a degree from Columbia University. Mr.
Troost’s qualifications to serve on our Board of Directors
include his previous public company board experience, knowledge of
marketing and cloud technology, and expertise in technology-enabled
business innovation.
Roy W. Olivier.
Roy W. Olivier has been a director
since July 2017. Since June 2008, Mr. Olivier has served as the
President, Chief Executive Officer and Director
of
ARI Network Services,
Inc., which provides website, software, and data solutions to help
dealers, distributors, and OEMs increase their sales online and
in-store.
Mr. Olivier’s
qualifications to serve on our Board of Directors include his
previous public company board experience, management, leadership
and organizational skills, and investor relations
experience.
Identity of Executive Officers
Name
|
|
Age
|
|
Position
|
Richard
A. Carlson
|
|
45
|
|
Director,
Chief Executive Officer and President
|
Edward
S. Lawton
|
|
40
|
|
Chief
Financial Officer
|
Travis
Whitton
|
|
37
|
|
Chief
Technology Officer
|
Business Experience of Executive Officers
Richard A. Carlson
.
Mr. Carlson’s business experience is described above under
the caption “Identity and Business Experience of
Directors.”
Edward S. Lawton
.
Edward S. Lawton has served as our Chief Financial Officer since
September 2014. Mr. Lawton is responsible for overseeing our
Company’s financial reporting, accounting and administrative
functions. Mr. Lawton has
over 18 years of financial and
accounting experience with a focus on financial planning and
analysis and integrating acquisitions for technology
companies.
From 2006 to September 2014, Mr. Lawton
served as the Director of Finance and Senior Director of Finance at
Bottomline Technologies (de), Inc., a publicly-traded
cloud-based payment,
invoice and digital banking solutions software
company
.
Travis Whitton
.
Travis Whitton has served as our Chief Technology Officer since the
acquisition of the SharpSpring assets in August 2014. Mr. Whitton
was a co-founder of RCTW, LLC (fka SharpSpring, LLC) and served as
its Chief Technology Officer from January 2012 until it was
acquired by the Company in August 2014. From September 2007 to
January 2012, Mr. Whitton served as Senior Software Engineer of
Grooveshark, an online streaming music company.
Each
officer is elected annually by the Board of Directors and holds
their office until they resign or are removed by the Board of
Directors or otherwise disqualified to serve, or their successor is
elected and qualified.
During
the past ten years, none of our directors or executive officers
have been involved in any of the proceedings described in Item
401(f) of Regulation S-K.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires
that our executive officers and directors, and persons who own more
than ten percent of a registered class of our equity securities,
file reports of ownership and changes in ownership with the
SEC. Executive officers, directors and greater-than-ten
percent stockholders are required by SEC regulations to furnish us
with all Section 16(a) forms they file. To the best of our
knowledge, based solely upon a review of Forms 3 and 4 and
amendments thereto furnished to our Company during its most recent
fiscal year and Forms 5 and amendments thereto furnished to our
Company with respect to its most recent fiscal year, and any
written representation referred to in paragraph (b)(1) of Item 405
of Regulation S-K, all of our executive officers, directors
and greater-than-ten percent stockholders complied with all Section
16(a) filing requirements.
Code of Ethics and Business Conduct
Our
Company has adopted a Code of Ethics and Business Conduct which
constitutes a “code of ethics” as defined by applicable
SEC rules and a “code of conduct” as defined by
applicable NASDAQ rules. Our Code of Ethics and Business
Conduct applies to all of the Company’s employees, including
its principal executive officer, principal accounting officer, and
our Board of Directors. A copy of this Code is available for review
on the “
Investors
” page of the
Company’s website at
http://sharpspring.com/
.
Requests for a copy of the Code of Ethics and Business Conduct
should be directed to Investor Relations, SharpSpring, Inc., 550 SW
2nd Avenue, Gainesville, FL 32601. The Company intends to disclose
any changes in or waivers from its Code of Ethics and Business
Conduct by posting such information on its website or by filing a
Form 8-K.
Audit Committee
We have
a separately designated standing Audit Committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act. Our
Audit Committee is comprised of David A. Buckel, Steven A. Huey,
and Marietta Davis. Mr. Buckel is the chairperson of the committee.
Each member of the Audit Committee is “independent”
within the meaning of Rule 10A-3 under the Exchange Act and the
NASDAQ Stock Market Rules. Our Board of Directors has designated
David A. Buckel as an “audit committee financial
expert,” as such term is defined in Item 407(d)(5) of
Regulation S-K. The Audit Committee’s purpose and power are
to (a) retain, oversee and terminate, as necessary, the auditors of
the Company, (b) oversee the Company's accounting and financial
reporting processes and the audit and preparation of the Company's
financial statements, (c) exercise such other powers and authority
as are set forth in the Charter of the Audit Committee of the Board
of Directors, and (d) exercise such other powers and authority as
shall from time to time be assigned thereto by resolution of the
Board of Directors.
The
Audit Committee also has the power to investigate any matter
brought to its attention within the scope of its duties and to
retain counsel and advisors to fulfill its responsibilities and
duties. During our last fiscal year, our Audit Committee held four
meetings and acted by unanimous consent one time.
ITEM
11.
EXECUTIVE
COMPENSATION
Compensation Discussion and Analysis
The
compensation committee of our Board of Directors oversees, reviews
and approves all compensation decisions relating to our named
executive officers. In the discussion that follows,
“executives” refers to our 2017 named executive
officers, Messrs. Carlson, Lawton and Whitton.
Objectives and Philosophy of Our Executive Compensation
Program
The
primary objectives of the compensation committee with respect to
executive compensation are to:
●
enable us to
attract, retain and motivate the best possible executive talent by
ensuring that our compensation packages are competitive with those
offered by similarly situated companies;
●
align our executive
compensation with our corporate strategies and business
objectives;
●
promote the
achievement of key strategic and financial performance measures;
and
●
align
executives’ incentives with the creation of stockholder
value.
To
achieve these objectives, the compensation committee evaluates our
executive compensation program with the goal of setting
compensation at levels the committee believes are competitive with
those of other companies of a comparable size within our industry.
Executives are also evaluated on their professional growth and
individual contributions to the Company’s success. We provide
a portion of our executive compensation in the form of stock option
awards that vest over time, typically four years, which we believe
promotes the retention of our executives and aligns their interests
with those of our stockholders since this form of compensation
allows our executives to participate in the long-term success of
our Company as reflected in stock price appreciation.
Compensation Challenges
We face
challenges in hiring and retaining our executives and other key
employees due to several factors. These challenges are similar to
those faced by other high-growth technology companies and make
recruiting and retaining our executives and other key employees
difficult. Specifically, we face challenges related to the pace of
our operations, the high growth rate of our businesses, the fact
that we are in a competitive industry and the fact that many of our
executives and key employees are targeted by other
companies.
Components of our Executive Compensation Program
The
primary elements of our current executive compensation program
are:
●
stock option
awards; and
●
retirement and
other employee benefits
We do
not have any formal or informal policy or target for allocating
compensation between long-term and short-term compensation, between
cash and non-cash compensation or among the different forms of
non-cash compensation. Instead, the Compensation Committee
determines what it believes to be the appropriate level and mix of
the various compensation components based on recommendations from
our chief executive officer, Company performance against stated
objectives and individual performance.
Base Salary
Base
salary is used to recognize the experience, skills, knowledge and
responsibilities required of all our employees, including our
executives. When establishing base salaries, the compensation
committee considers a variety of other factors such as the
executive’s scope of responsibility, individual performance,
prior employment experience and salary history, relative pay
adjustments within the Company and our overall financial
performance. Base salaries are reviewed at least annually by our
compensation committee and may be adjusted from time to time based
upon market conditions, individual responsibilities and Company and
individual performance.
Mr.
Whitton became a named executive officer during 2016, after his
employment with the Company had commenced. Accordingly, his
existing base salary in effect for 2016 prior to becoming a named
executive officer was authorized in accordance with standard
employee policies.
Mr.
Carlson’s salary was increased from $200,000 to $250,000 on
March 16, 2017. During 2016, Mr. Carlson received a base salary of
$200,000.
Mr.
Lawton’s salary was increased from $165,000 to $185,000 on
December 1, 2016. From the time Mr. Lawton joined the Company in
September 2014 until December 1, 2016, Mr. Lawton received a base
salary of $165,000.
Mr.
Whitton has received a base salary of $160,000 since September 1,
2015.
Effective as of the
start of 2018, executive salaries were increased as follows: Mr.
Carlson’s salary was increased to $300,000, Mr.
Lawton’s salary was increased to $200,000 and Mr.
Whitton’s salary was increased to $175,000.
Cash Bonuses
Cash
bonuses are used to compensate and align our executives toward
certain financial, strategic and operational goals. The
Compensation Committee approves payment of quarterly or annual cash
bonuses as part of the overall compensation packages of our
executive officers, and retains the authority to review and adjust
the overall bonus at year-end. During the last three years, the
executive cash bonuses have been based on revenue and EBITDA
targets for the year, as determined by the Compensation Committee,
with payments varying between annual and quarterly. For the
performance during the year ended December 31, 2015, executive
bonuses were paid annually during February 2016. For the
performance during the year ended December 31, 2016, executive
bonuses were paid quarterly following the financial reporting of
each quarter. For the performance during the year ended December
31, 2017, executive bonuses were paid annually during February
2018. The following summarizes the executive cash bonus awards,
separated based on both the timing of the payment and the
performance year for which the bonus was earned:
|
|
|
|
|
|
|
|
Name
|
|
|
|
|
|
|
|
|
|
Richard A.
Carlson
|
2017
|
$
-
|
$
-
|
$
37,500
|
|
2016
|
$
26,250
|
$
-
|
$
-
|
|
2015
|
$
40,000
|
$
-
|
$
-
|
|
|
$
66,250
|
$
-
|
$
37,500
|
|
|
|
|
|
Edward
Lawton
|
2017
|
$
-
|
$
-
|
$
45,000
|
|
2016
|
$
15,750
|
$
-
|
$
-
|
|
2015
|
$
24,000
|
$
-
|
$
-
|
|
|
$
39,750
|
$
-
|
$
45,000
|
|
|
|
|
Travis
Whitton
|
2017
|
$
-
|
$
-
|
$
15,000
|
|
2016
|
$
5,550
|
$
7,550
|
$
-
|
|
2015
|
$
8,000
|
$
-
|
$
-
|
|
|
$
13,550
|
$
7,550
|
$
15,000
|
Stock Option Awards
Stock
option awards are the primary vehicle for long-term retention of
our executives. Our compensation committee believes that stock
options promote, create and reward long term stockholder value
creation, as well as provide a strong incentive for the executive
to remain employed by the Company.
The
following table shows stock option grants made to executives during
2017.
|
|
|
|
|
|
|
|
|
|
Name
|
|
|
|
|
|
|
|
|
|
Richard
Carlson
(1)
|
3/17/2017
|
100,000
|
$
4.74
|
$
233,861
|
|
|
|
|
Edward
Lawton
(2)
|
3/17/2017
|
50,000
|
$
4.74
|
$
116,931
|
|
|
|
|
Travis
Whitton
(2)
|
3/17/2017
|
35,000
|
$
4.74
|
$
81,851
|
___________
1.
The options expire
ten years from the grant date and
vest over a 4-year period, with 1/48 of
the original number of options vesting every
month.
2.
The options expire
ten years from the grant date and
vest over a 4-year period, with 25%
vesting on the first anniversary of the grant date and an
additional 1/48 of the original number of options vesting every
month thereafter, until becoming fully vested on the fourth
anniversary of the grant date.
Benefits and Other Compensation
We
maintain broad-based benefits that are provided to all of our
employees, including (for U.S. resources) health and dental
insurance, life insurance and a retirement plan. Executives are
eligible to participate in all of our employee benefit plans, in
each case on the same terms as our other employees. No employee
benefit plans are in place solely for the benefit of our
executives.
Severance and Change in Control Benefits
Pursuant to
employment agreements we have entered into with our executives and
the terms of our 2010 Stock Incentive Plan, our executives are
entitled to certain benefits in the event of a change in control of
our Company or the termination of their employment under specified
circumstances, including termination following a change in control.
We believe these benefits help us compete for and retain executive
talent and are generally in line with severance packages offered to
executives by the companies in our peer group. We also believe that
these benefits would serve to minimize the distraction caused by
any change in control scenario and reduce the risk that key talent
would leave the Company before any such transaction closes, which
could reduce the value of the Company if such transaction failed to
close.
2017 Summary Compensation Table
The
table below summarizes all compensation awarded to, earned by, or
paid to our named executive officers that earned more than $100,000
for the fiscal years ended December 31, 2017 and
2016:
|
|
|
|
|
|
|
Name
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
Carlson
|
2017
|
$
239,586
|
$
-
|
$
233,861
|
$
7,188
|
$
480,635
|
Chief Executive Officer and President (Principal Executive
Officer), Director
|
2016
|
$
200,000
|
$
66,250
|
$
-
|
$
7,950
|
$
274,200
|
|
|
|
|
|
|
Edward
Lawton
|
2017
|
$
185,000
|
$
-
|
$
116,931
|
$
5,550
|
$
307,481
|
Chief Financial Officer (Principal Financial Officer)
|
2016
|
$
166,667
|
$
39,750
|
$
17,707
|
$
6,193
|
$
230,317
|
|
|
|
|
|
|
Travis
Whitton (1)
|
2017
|
$
160,000
|
$
-
|
$
81,851
|
$
5,027
|
$
246,878
|
Chief Technology Officer
|
2016
|
$
160,000
|
$
13,550
|
$
37,911
|
$
3,758
|
$
215,219
|
_________
(a)
The amounts in this
column represent the dollar value of cash bonus earned by the named
executive officer during the fiscal year.
(b)
The amounts in this
column represent the grant date fair values of option grants as
computed based on the Black-Scholes methodology.
(c)
These amounts
consist primarily of our matching contributions to each
executive’s retirement savings plan account.
(1)
Mr.
Whitton became an executive officer of the Company on July 2,
2016.
During
2017 and 2016, we provided our U.S. employees the ability to
contribute to a 401(k) retirement plan. Under the plan, eligible
employees may elect to defer part of their compensation to the plan
each year. The amount of compensation an employee can elect to
defer is generally expressed as a percentage of the
employee’s compensation up to a maximum of $18,000 for 2017
and 2016. The Company provides a matching contribution of 100% of
employee deferrals up to 3% of total compensation. We have no other
annuity, pension, retirement or similar benefit plans in place on
behalf of our executive officers.
We
grant stock awards and stock options to our executive officers
based on their level of experience and contributions to our
Company. The aggregate fair value of awards and options are
computed in accordance with FASB ASC 718 and options are reported
in the Summary Compensation Table above in columns (a).
The assumptions made in the
computation may be found in
Note 15: Stock-Based
Compensation to
our
financial statements contained in our latest Form 10-K Annual
Report.
At no
time during the last fiscal year was any outstanding option
otherwise modified or re-priced, and there was no tandem feature,
reload feature, or tax-reimbursement feature associated with any of
the stock options we granted to our executive officers or
otherwise.
The
table below summarizes all of the outstanding equity awards for our
named executive officers as of December 31, 2017, our latest
fiscal year end:
Outstanding Equity Awards At Fiscal Year-End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
Initial
|
|
|
|
expiration
|
vesting
|
Name
|
|
|
|
|
|
|
|
|
|
|
|
Richard
A. Carlson
|
18,750
|
81,250
|
$
4.74
|
03/17/27
|
04/17/17
(1)
|
|
135,417
|
114,583
|
$
4.80
|
10/01/25
|
11/01/15
(1)
|
|
45,000
|
15,000
|
$
6.29
|
06/01/25
|
12/31/16
(2)
|
|
|
|
|
|
|
Edward
Lawton
|
-
|
50,000
|
$
4.74
|
03/17/27
|
03/17/18
(3)
|
|
2,480
|
4,520
|
$
5.15
|
07/12/26
|
07/12/17
(3)
|
|
14,063
|
10,937
|
$
4.82
|
09/13/25
|
09/13/16
(3)
|
|
41,667
|
8,333
|
$
6.29
|
08/14/24
|
08/14/15
(3)
|
|
|
|
|
|
|
Travis
Whitton
|
-
|
35,000
|
$
4.74
|
03/17/27
|
03/17/18
(3)
|
|
11,459
|
13,541
|
$
3.34
|
02/17/26
|
02/17/17
(3)
|
|
18,750
|
6,250
|
$
6.29
|
06/01/25
|
12/31/16
(2)
|
_________________________
1.
Vests monthly over
four years, with 1/48 vesting each month.
2.
Vests 50% on
December 31, 2016, 25% on December 31, 2017 and 25% on December 31,
2018.
3.
Vests over four
years, with 25% vesting on the first anniversary and 1/48 of the
grant vesting each month thereafter.
Compensation of Non-Employee Directors
Compensation for
our directors is discretionary and is reviewed from time to time by
our Board of Directors. Any determinations with respect to Board
compensation are made by our Board of Directors. Since our second
quarter of 2017, we have compensated all non-employee directors
with a stipend of $7,500 per quarter ($30,000 per year), payable
quarterly in stock. Prior to this, all non-employee directors with
the exception of our chairman received $5,000 per quarter ($20,000
per year), payable quarterly in stock. From November 2014 until his
departure in the third quarter of 2017, our former Chair of the
Board of Directors received a stipend of $150,000 per year, payable
quarterly in stock. Typically, newly elected non-employee directors
receive 16,000 stock options upon joining the board, which vest
over four years. All directors are also entitled to reimbursement
for travel expenses for attending director meetings.
Set
forth below is a summary of the compensation of our directors
during our December 31, 2017 fiscal year.
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Name
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Semyon
Dukach (1)
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-
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$
158,388
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-
|
-
|
-
|
$
19,498
|
$
177,886
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John
L. Troost (2)
|
-
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$
26,787
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-
|
-
|
-
|
-
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$
26,787
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David
A. Buckel (2)
|
-
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$
26,787
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-
|
-
|
-
|
-
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$
26,787
|
Steven
A. Huey (2)(3)
|
-
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$
26,787
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$
35,832
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-
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-
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-
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$
62,619
|
Marietta
Davis (2)(3)
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-
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$
9,833
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$
33,164
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-
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-
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-
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$
42,997
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Roy
W. Olivier (2)(3)
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-
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$
9,833
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$
33,164
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-
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-
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-
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$
42,997
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Vadim
Yasinovsky (4)
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-
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$
14,570
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-
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-
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-
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-
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$
14,570
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1.
Mr. Dukach was
Chair of the Board of Directors until July 28, 2017. For his
service, Mr. Dukach received a $150,000 per year stipend, payable
quarterly in stock. During 2017, Mr. Dukach received 34,719 shares
of fully-vested Company stock related to this stipend. The
quarterly stock stipend was issued in arrears shortly after quarter
end, and the amount above represents the values on the date of
issuance related to his service from our fourth quarter of 2016 to
our third quarter of 2017. Mr. Dukach’s other compensation
relates to participation in our Company’s health
plan.
2.
During 2017,
SharpSpring’s non-employee directors received a quarterly
stipend, payable in stock issued in arrears. The stipend paid in
the first and second quarters of 2017 (for services in the fourth
quarter of 2016 and the first quarter of 2017, respectively) was
$5,000. The stipend paid in the third and fourth quarters of 2017
(for services in the second and third quarters of 2017,
respectively) was $7,500. Quarterly stock stipends are issued
shortly after quarter end, and the amount above represents the
values on the dates of issuance.
3.
Ms. Davis and Mr.
Olivier joined the Board of Directors on July 1, 2017. Each
received an option grant during 2017 of 16,000 options, vesting
over four years, with 25% vesting on the first anniversary and 1/48
of the grant vesting each month thereafter.
4.
Mr. Huey joined the
Board of Directors on December 19, 2016. During March 2017, Mr.
received an option grant of 16,000 options, vesting over four
years, with 1/48 of the grant vesting each month.
5.
Mr. Yasinovsky
ceased being a director on June 1, 2017.
The
aggregate fair value of option awards are computed in accordance
with FASB ASC 718.
The
assumptions made in the computation may be found
in
Note 15: Stock-Based Compensation
to
our financial
statements contained in our latest Form 10-K Annual
Report.
Compensation Policies and Practices as They Relate to Our Risk
Management
Our
compensation program for employees does not create incentives for
excessive risk taking by our employees or involve risks that are
reasonably likely to have a material adverse effect on us. Our
compensation has the following risk-limiting
characteristics:
●
Our base pay
consists of competitive salary rates that represent a reasonable
portion of total compensation and provide a reliable level of
income on a regular basis, which decreases incentive on the part of
our executives to take unnecessary or imprudent risks;
●
Option awards are
not tied to formulas that could focus executives on specific
short-term outcomes; and
●
Option awards,
generally, have multi-year vesting which aligns the long-term
interests of our executives with those of our shareholders and,
again, discourages the taking of short-term risk at the expense of
long-term performance.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
AND RELATED
STOCKHOLDER MATTERS
The
following table sets forth, as of April 27, 2018, the names,
addresses, amount and nature of beneficial ownership and percent of
such ownership of (i) each person or group known to our Company to
be the beneficial owner of more than five percent (5%) of our
common stock; and (ii) each of our officers and directors, and
officers and directors as a group:
Security Ownership of Certain Beneficial Owners and
Management
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Name and Address
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Shares Beneficially Owned
|
|
of Beneficial Owner (1)(2)
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5%
Stockholders
(5)
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Richard
H. Witmer, Jr.
|
728,881
|
8.63
%
|
-
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16
Fort Hills Lane, Greenwich, CT 06831
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Inlight
Wealth Management, LLC
|
651,585
|
7.71
%
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-
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1175
Peachtree Street NE, 100 Colony Square, Suite 760, Atlanta, GA
30361
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Greenhaven
Road Capital Fund 1
|
541,550
|
6.41
%
|
-
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c/o
Royce & Associates LLC, 8 Sound Shore Drive, Suite 190,
Greenwich, CT 06830
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AWM
Investment Company, Inc.
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530,734
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6.28
%
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-
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c/o
Special Situations Funds, 527 Madison Avenue, Suite 2600, New York,
NY
|
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Evercel
Holdings, LLC
|
519,000
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6.14
%
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-
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228
Park Avenue South; Suite 90959, New York, NY 10003
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Directors and Executive
Officers
(6)
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Daniel
C. Allen, Director (7)
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1,585,667
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16.67
%
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-
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Richard
A. Carlson, Chief Executive Officer and President,
Director
|
791,079
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9.09
%
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251,251
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Travis
Whitton, Chief Technology Officer
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250,732
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2.95
%
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44,272
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Edward
Lawton, Chief Financial Officer
|
91,585
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1.07
%
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84,085
|
John
L. Troost, Director (8)
|
37,359
|
*
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16,000
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David
A. Buckel, Director
|
34,566
|
*
|
16,000
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Steven
A. Huey, Director
|
14,090
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*
|
5,000
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Marietta
Davis, Director
|
5,359
|
*
|
-
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Roy
W. Olivier, Director
|
5,359
|
*
|
-
|
All
executive officers and directors as a group (9
persons)
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2,815,796
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28.36
%
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416,608
|
———————
*
Represents less
than 1% of the outstanding shares of common stock.
(1)
To our best
knowledge, as of the date hereof, such holders had the sole voting
and investment power with respect to the voting securities
beneficially owned by them, unless otherwise indicated herein.
Includes the person's right to obtain additional shares of common
stock within 60 days from April 27, 2018.
(2)
Unless otherwise
noted, in care of SharpSpring, Inc., 550 SW 2nd Avenue,
Gainesville, FL 32601.
(3)
Based on
8,446,740
shares of
common stock outstanding on April 27, 2018. Does not include shares
underlying: (i) options to purchase shares of our common stock
under our 2010 Employee Stock Plan, (ii) outstanding warrants to
purchase shares of our common stock, or (iii) shares issuable upon
conversion of convertible notes.
(4)
Represents options
exercisable within 60 days from April 27, 2018.
(5)
Based solely upon a review of Schedule 13G filings with the
SEC.
(6)
If a person listed
on this table has the right to obtain additional shares of common
stock within 60 days from April 27, 2018, the additional shares are
deemed to be outstanding for the purpose of computing the
percentage of class owned by such person, but are not deemed to be
outstanding for the purpose of computing the percentage of any
other person.
(7)
Consists of (i)
519,000 shares of common stock held directly by Evercel Holdings
LLC, a subsidiary of Evercel, Inc. and (ii) 1,066,667 shares of
common stock issuable upon conversion of a convertible note held
directly by SHSP Holdings, LLC that is convertible within 60 days
from April 27, 2018.
Mr. Allen is the
founder and manager of
Corona Park Investment Partners, LLC
(“CPIP”). CPIP is a member
of Evercel Holdings LLC and is a member and sole manager of SHSP
Holdings, LLC. Evercel, Inc. is a member and the manager of Evercel
Holdings LLC and is a member of SHSP Holdings.
(8)
Includes 1,600
shares held by Mr. Troost’s wife, for which Mr. Troost
disclaims beneficial ownership.
We are
not aware of any arrangements that could result in a change of
control.
Securities Authorized for Issuance under Equity Compensation
Plans
Equity
Compensation Plans as of December 31, 2017.
Equity Compensation Plan Information
Plan
category
|
Number of
securities
to be issued
upon
exercise of
outstanding
options,
warrants and
rights
(a)
|
Weighted-average
exercise price
of
outstanding
options,
warrants and
rights
(b)
|
Number of
securities
remaining
available for
future
issuance under
equity
compensation plans
(excluding
securities reflected
in column
(a))
(c)
|
Equity compensation
plans approved by security holders (1)
|
1,069,330
|
$
5.11
|
523,236
|
Equity compensation
plans not approved by security holders (2)
|
80,000
|
$
7.81
|
-
|
Total
|
1,149,330
|
$
5.30
|
523,236
|
(1)
|
Reflects
our 2010 Employee Stock Plan, as amended for the benefit of our
directors, officers, employees and consultants. We currently have
reserved 1,950,000 shares of common stock for such persons pursuant
to that plan.
|
(2)
|
Comprised
of common stock purchase warrants we issued for
services.
|
ITEM
13.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
On
August 15, 2014, the Company acquired substantially all the assets
and assumed the liabilities of RTCW, LLC (f/k/a SharpSpring LLC), a
Delaware limited liability company. The consideration for the
transaction, as amended, consisted of a closing cash payment of $5
million in August 2014 and earn out consideration of (i) $2 million
in cash and $3 million in Company common stock paid in May 2015,
(ii) $1 million in cash paid in April 2016, and (iii) $4 million in
Company common stock paid in May 2016. Mr. Richard A. Carlson, our
Chief Executive Officer and President and a director, served
throughout this time as RCTW’s president, and held a 33.8%
ownership stake in RCTW, and Mr. Travis Whitton, our Chief
Technology Officer, held a 13.0% ownership stake in RCTW. Mr.
Steven A. Huey, one of our directors, held a 5.7% ownership stake
in RCTW. Each of Mr. Carlson, Mr. Whitton and Mr. Huey were
entitled to that proportionate amount of the earn-out consideration
paid in connection with our Company’s acquisition of the RCTW
assets. At no time prior to August 15, 2014, was Mr. Carlson, Mr.
Whitton or Mr. Huey a “related person” as defined in
Item 404 of Regulation S-K.
James
Morgan, Richard Carlson’s brother-in-law, serves as our Vice
President of Sales. During 2017 and 2016, Mr. Morgan’s total
compensation, including base salary, commissions, bonus and equity
compensation approximated $158,000 and $219,000, respectively. Mr.
Morgan’s 2016 compensation included a one-time $78,000
payment related to the RCTW earn out that was required to be
treated as compensation expense. Mr. Morgan’s compensation
package is highly variable based on new sales and is comparable to
industry standards. Mr. Morgan also participates in standard
Company employment benefits that are available all Company
employees.
On
March 28, 2018, the Company entered into a convertible note
purchase agreement (the “Note Purchase Agreement”) with
SHSP Holdings, LLC (“SHSP Holdings”), pursuant to which
the Company issued to SHSP Holdings an unsecured 5% convertible
promissory note in the aggregate principal amount of $8,000,000
(the “Note”). As of the date of the report on Form
10-K/A, no principal or interest has been paid to SHSP Holdings,
and approximately $36,200 in interest has accrued on the Note.
Simultaneously with the execution of the Note Purchase Agreement
and the issuance of the Note, the Company entered into the
Investors’ Rights Agreement (the “Investors’
Rights Agreement”) by and among the Company, SHSP Holdings,
Richard Carlson, the Company’s CEO, and Travis Whitton, the
Company’s CTO. Under the Investors’ Rights Agreement,
among other things, SHSP Holdings will have the right to designate
one person for election to the Company’s Board of Directors
for as long as SHSP Holdings continues to hold any of the Notes,
and the Company agreed to use its reasonable best efforts to cause
such person to be elected to the Board of Directors at each annual
meeting of the Company’s stockholders. SHSP Holdings
designated Daniel C. Allen, an affiliate of SHSP Holdings, who was
appointed to our Board of Directors on April 3, 2018.
Mr. Allen is the founder and manager of
Corona Park Investment Partners, LLC
(“CPIP”). CPIP is a member of Evercel
Holdings LLC and is a member and sole manager of
SHSP
Holdings
. Evercel, Inc. is a member
and the manager of Evercel Holdings LLC and is a member of SHSP
Holdings.
Additionally, under the Investor Rights Agreement,
SHSP Holdings has customary demand and
piggyback registration rights with respect to the shares of common
stock issued or issuable upon conversion of the Note and, under
specified conditions, held by members of SHSP
Holdings.
Policies and Procedures for Related-Party Transactions
Our
Audit Committee considers and approves or disapproves any related
person transaction as required by NASDAQ regulations.
Director Independence Standards
Applicable NASDAQ
rules require a majority of a listed company’s board of
directors to be comprised of independent directors. In addition,
the NASDAQ rules require that, subject to specified exceptions,
each member of a listed company’s audit, compensation and
nominating and corporate governance committees be independent and
that audit committee members also satisfy independence criteria set
forth in Rule 10A-3 under the Exchange Act. Under applicable NASDAQ
rules, a director will only qualify as an “independent
director” if, in the opinion of the listed company’s
board of directors, that person does not have a relationship that
would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director. In order to be
considered independent for purposes of Rule 10A-3, a member of an
audit committee of a listed company may not, other than in his or
her capacity as a member of the audit committee, the board of
directors, or any other board committee, accept, directly or
indirectly, any consulting, advisory, or other compensatory fee
from the listed company or any of its subsidiaries or otherwise be
an affiliated person of the listed company or any of its
subsidiaries.
Director Independence
In
April 2018, our Board of Directors undertook a review of the
composition of our Board of Directors and its committees and the
independence of each of our present directors and each director
standing for reelection. Based upon information requested from and
provided by each director concerning his background, employment and
affiliations, including family relationships, our Board of
Directors has determined that each of David A. Buckel, Steven A.
Huey, Marietta Davis, Daniel C. Allen,
John L. Troost and Roy W. Olivier
are
“independent directors” as defined under applicable
NASDAQ Stock Market Rules and Exchange Act Rules. In making such
determination, our Board of Directors considered the relationships
that each such non-employee director has with our Company and all
other facts and circumstances that our Board of Directors deemed
relevant in determining his independence, including the beneficial
ownership of our capital stock by each non-employee director. The
one member of our Board of Directors who is not an
“independent director” is Richard Carlson as a result
of his executive officer status with our Company.
There
are no family relationships
between any director, executive
officer, or person nominated or chosen by the Company to become a
director or executive officer.