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EX-31.2 - CERTIFICATION - SharpSpring, Inc.smtp_ex31z2.htm
EX-31.1 - CERTIFICATION - SharpSpring, Inc.smtp_ex31z1.htm
EX-32.1 - CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 18 U.S.C. SECTION 1350 - SharpSpring, Inc.smtp_ex32z1.htm
EX-32.2 - CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 18 U.S.C. SECTION 1350 - SharpSpring, Inc.smtp_ex32z2.htm

 


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

(Mark One)

þ

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

For the quarterly period ended: June 30, 2015

Or

¨

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


Commission File Number: 001-36280

 

SMTP, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

05-0502529

(State or other jurisdiction of incorporation
or organization)

(I.R.S. Employer Identification No.)

 

 

10 Tara Blvd, Suite 430

Nashua, NH


03062

(Address of principal executive offices)

(Zip Code)

 

 

877-705-9362

(Registrant’s telephone number, including area code)

 

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes þ  No ¨


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes þ  No ¨


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act (Check one):


Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

¨

Smaller reporting company

þ


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)   Yes ¨  No þ


Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date: 6,412,896 shares of common stock as of July 29, 2015.




 


SMTP, INC.


Table of Contents


 

Page

 

 

PART I – FINANCIAL INFORMATION

1

Item 1. Financial Statements:.

2

Consolidated Balance Sheets—June 30, 2015 (unaudited) and December 31, 2014

2

Consolidated Statements of Comprehensive Income (Loss) (unaudited)

3

Consolidated Statements of Cash Flows (unaudited)

4

Notes to Consolidated Financial Statements (unaudited)

5

Item 2. Management's Discussion and Analysis of Financial Condition and Results of  Operations

18

Item 3. Quantitative and Qualitative Disclosure About Market Risk

23

Item 4. Controls and Procedures

23

PART II – OTHER INFORMATION

24

Item 1. Legal Proceedings.

24

Item 1A. Risk Factors.

24

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

24

Item 3. Defaults Upon Senior Securities

24

Item 4. Mine Safety Disclosures

24

Item 5. Other Information.

24

Item 6. Exhibits

25

SIGNATURES

26





i



 


PART I – FINANCIAL INFORMATION


Forward-Looking Information

This report on Form 10-Q contains forward-looking statements. Forward-looking statements involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “we believe,” “we intend,” “may,” “should,” “will,” “could” and similar expressions denoting uncertainty or an action that may, will or is expected to occur in the future. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances or achievements expressed or implied by the forward-looking statements.


Examples of forward-looking statements include:


·

the timing of the development of future products;

·

projections of costs, revenue, earnings, capital structure and other financial items;

·

statements of our plans and objectives;

·

statements regarding the capabilities of our business operations;

·

statements of expected future economic performance;

·

statements regarding competition in our market; and

·

assumptions underlying statements regarding us or our business.


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, among others, the following:


·

the adequacy of our cash flow and earnings and other conditions which may affect our ability to pay our quarterly dividend at the planned level;

·

strategic actions, including acquisitions and dispositions and our success in integrating acquired businesses;

·

the occurrence of hostilities, political instability or catastrophic events;

·

changes in customer demand;

·

the extent to which we are successful in gaining new long-term relationships with customers or retaining existing ones and the level of service failures that could lead customers to use competitors' services;

·

developments and changes in laws and regulations, including increased regulation of our industry through legislative action and revised rules and standards; and

·

disruptions to our technology network including computer systems and software, as well as natural events such as severe weather, fires, floods and earthquakes or man-made or other disruptions of our operating systems, structures or equipment.


The ultimate correctness of these forward-looking statements depends upon a number of known and unknown risks and events. We discuss our known material risks under Item 1.A “Risk Factors” contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. Many factors could cause our actual results to differ materially from the forward-looking statements. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.


The forward-looking statements speak only as of the date on which they are made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.



1



 


Item 1.

Financial Statements.


SMTP, INC.

CONSOLIDATED BALANCE SHEETS


 

 

June 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

 

 

(unaudited)

 

 

(audited)

 

Assets

  

                       

  

  

                       

  

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,817,552

 

 

$

2,825,520

 

Accounts receivable

 

 

520,685

 

 

 

393,922

 

Deferred income taxes

 

 

240,622

 

 

 

240,648

 

Income taxes receivable

 

 

1,234,100

 

 

 

328,807

 

Other current assets

 

 

318,298

 

 

 

197,719

 

Total current assets

 

 

4,131,257

 

 

 

3,986,616

 

Property and equipment, net

 

 

508,917

 

 

 

281,555

 

Goodwill

 

 

8,913,786

 

 

 

8,901,106

 

Other intangible assets, net

 

 

7,232,112

 

 

 

7,895,238

 

Deferred income taxes

 

 

612,941

 

 

 

612,941

 

Deposits and other

 

 

13,434

 

 

 

30,172

 

Total assets

 

$

21,412,447

 

 

$

21,707,628

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

305,527

 

 

$

397,262

 

Accrued expenses and other current liabilities

 

 

272,376

 

 

 

355,796

 

Deferred revenue

 

 

921,522

 

 

 

1,006,031

 

Earn out liabilities

 

 

5,051,036

 

 

 

 

Income taxes payable

 

 

13,897

 

 

 

14,622

 

Deferred income taxes

 

 

6,084

 

 

 

2,119

 

Total current liabilities

 

 

6,570,442

 

 

 

1,775,830

 

 

 

 

 

 

 

 

 

 

Earn out liabilities

 

 

 

 

 

7,679,311

 

Total liabilities

 

$

6,570,442

 

 

$

9,455,141

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 5,000,000 shares authorized, no shares issued or outstanding at June 30, 2015 and December 31, 2014

 

 

 

 

 

 

Common stock, $0.001 par value, 50,000,000 shares authorized, 6,400,796 and 5,447,528 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively

 

 

6,400

 

 

 

5,447

 

Additional paid in capital

 

 

18,741,506

 

 

 

13,248,992

 

Accumulated deficit

 

 

(3,860,873

)

 

 

(824,185

)

Accumulated other comprehensive loss

 

 

(45,028

)

 

 

(177,767

)

Total shareholders' equity

 

 

14,842,005

 

 

 

12,252,487

 

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders' equity

 

$

21,412,447

 

 

$

21,707,628

 







See accompanying notes to the consolidated financial statements.


2



 


SMTP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

  

 

 

 

 

 

 

 

 

 

 

  

Revenue

 

$

3,591,554

 

 

$

1,480,770

 

 

$

6,877,056

 

 

$

2,970,824

 

Cost of services

 

 

924,283

 

 

 

351,153

 

 

 

1,715,249

 

 

 

678,383

 

Gross profit

 

 

2,667,271

 

 

 

1,129,617

 

 

 

5,161,807

 

 

 

2,292,441

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

1,314,839

 

 

 

228,013

 

 

 

2,687,200

 

 

 

396,313

 

Research and development

 

 

537,151

 

 

 

101,387

 

 

 

1,008,365

 

 

 

220,008

 

General and administrative

 

 

1,072,267

 

 

 

563,786

 

 

 

2,156,292

 

 

 

1,047,601

 

Earn out liability adjustment

 

 

1,667,332

 

 

 

 

 

 

2,371,332

 

 

 

 

Amortization of intangible assets

 

 

382,679

 

 

 

 

 

 

761,574

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

4,974,268

 

 

 

893,186

 

 

 

8,984,763

 

 

 

1,663,922

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss):

 

 

(2,306,997

)

 

 

236,431

 

 

 

(3,822,956

)

 

 

628,519

 

Other income (expense)

 

 

(15,623

)

 

 

144

 

 

 

(65,646

)

 

 

153

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 

(2,322,620

)

 

 

236,575

 

 

 

(3,888,602

)

 

 

628,672

 

Provision (benefit) for income tax

 

 

(455,969

)

 

 

85,367

 

 

 

(851,914

)

 

 

254,132

 

Net income (loss)

 

$

(1,866,651

)

 

$

151,208

 

 

$

(3,036,688

)

 

$

374,540

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income (loss) per share

 

$

(0.32

)

 

$

0.03

 

 

$

(0.54

)

 

$

0.08

 

Diluted net income (loss) per share

 

$

(0.32

)

 

$

0.03

 

 

$

(0.54

)

 

$

0.08

 

Shares used in computing basic net income (loss) per share

 

 

5,871,445

 

 

 

5,016,461

 

 

 

5,664,090

 

 

 

4,630,059

 

Shares used in computing diluted net income (loss) per share

 

 

5,871,445

 

 

 

5,063,993

 

 

 

5,664,090

 

 

 

4,688,726

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

196,210

 

 

 

 

 

 

132,739

 

 

 

 

Comprehensive income (loss)

 

$

(1,670,441

)

 

$

151,208

 

 

$

(2,903,949

)

 

$

374,540

 





See accompanying notes to the consolidated financial statements.


3



 


SMTP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2015

 

 

2014

 

Cash flows from operating activities:

  

 

 

 

 

  

 

 

 

 

 

 

 

Net income (loss)

 

$

(3,036,688

)

 

$

374,540

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

854,372

 

 

 

60,134

 

Excess tax benefits from share-based payment arrangements

 

 

 

 

 

(84,264

)

Non-cash stock compensation

 

 

435,327

 

 

 

287,431

 

Allowance for refunds and chargebacks

 

 

 

 

 

(898

)

Non-cash earn out liability adjustment

 

 

2,371,332

 

 

 

 

Deferred income taxes

 

 

3,794

 

 

 

(74,124

)

(Gain)/loss on disposal of property and equipment

 

 

2,491

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(120,488

)

 

 

5,535

 

Other assets

 

 

(103,482

)

 

 

6,353

 

Income taxes receivable and payable

 

 

(904,301

)

 

 

(279,923

)

Accounts payable, accruals and other current liabilities

 

 

(146,046

)

 

 

13,187

 

Deferred revenue

 

 

(109,578

)

 

 

38,737

 

Net cash (used in) provided by operating activities

 

 

(753,267

)

 

 

346,708

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(323,001

)

 

 

(2,116

)

Net cash used in investing activities

 

 

(323,001

)

 

 

(2,116

)

 

 

 

 

 

 

 

 

 

Cash flows provided by financing activities:

 

 

 

 

 

 

 

 

Payment to reduce earn out liability

 

 

(2,000,000

)

 

 

 

Dividends to shareholders

 

 

 

 

 

(1,203,533

)

Proceeds from issuance of common stock

 

 

2,058,142

 

 

 

10,507,801

 

Excess tax benefits from share-based payment arrangements

 

 

 

 

 

73,301

 

Net cash provided by financing activities

 

 

58,142

 

 

 

9,377,569

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate on cash

 

 

10,158

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in cash and cash equivalents

 

 

(1,007,968

)

 

 

9,722,161

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

 

2,825,520

 

 

 

1,731,243

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$

1,817,552

 

 

$

11,453,404

 

 

 

 

 

 

 

 

 

 

Supplemental information on consolidated statements of cash flows:

 

 

 

 

 

 

 

 

Cash paid for income taxes

 

$

38,325

 

 

$

618,500

 

 

 

 

 

 

 

 

 

 

Noncash investing and financing activity:

 

 

 

 

 

 

 

 

Settlement of earn out liability with common stock

 

$

3,000,000

 

 

$

 






See accompanying notes to the consolidated financial statements.


4



 


SMTP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


Note 1:  Organization


SMTP, Inc. and its subsidiaries (the “Company”) is a global provider of cloud-based marketing solutions ranging from sophisticated marketing automation (via subsidiary SharpSpring) to comprehensive email and mobile marketing (via subsidiary GraphicMail) and scalable, cost-effective email deliverability services.


The Company was incorporated in Massachusetts on October 14, 1998 as EMUmail, Inc. and changed its name on April 1, 2010 to SMTP.com, Inc.


On November 23, 2010, the Company formed a Delaware corporation, SMTP, Inc. for the purpose of changing the structure of the Company from a Massachusetts corporation to a Delaware corporation and to increase the number of authorized shares outstanding. Also on November 23, 2010, the Company entered into a Merger agreement between SMTP, Inc. and SMTP.com, Inc. whereby the surviving corporation would be SMTP, Inc. (the “Surviving Corporation”), the newly formed Delaware corporation. The Surviving Corporation has an authorized capital structure of 50,000,000 shares of common stock, par value $0.001 per share and 5,000,000 shares of preferred stock, par value $0.001 per share. Under the terms of the Merger agreement, the Company’s existing 100 shares of ownership (which are held by a sole shareholder) were exchanged for 13,440,000 shares of common stock in the Surviving Corporation. All financial statements have been retroactively restated to show the effects of this recapitalization.


On December 26, 2013, the Company filed a Certificate of Amendment to its Certificate of Incorporation (the "Certificate of Amendment"), with the Secretary of State of the State of Delaware, to effect a 1-for-5 reverse stock split of the its common stock (the "Reverse Stock Split"). As a result of the Reverse Stock Split, every five shares of the Company's pre-Reverse Stock Split common stock was combined and reclassified into one share of its common stock. All data for common stock, options and warrants have been adjusted to reflect the 1-for-5 reverse stock split for all periods presented. In addition, all common stock prices, and per share data for all periods presented have been adjusted to reflect the 1-for-5 reverse stock split.


On August 15, 2014, the Company acquired substantially all the assets and assumed the liabilities of SharpSpring LLC. On October 17, 2014, the Company acquired all of the outstanding equity of the GraphicMail group companies. See Note 4 for details of these acquisitions.


Note 2: Summary of Significant Accounting Policies


Basis of Presentation


Our consolidated financial statements include the accounts of SMTP, Inc. and our subsidiaries (collectively “SMTP”). Our consolidated financial statements reflect the elimination of all significant inter-company accounts and transactions.


In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments, consisting of only normal recurring accruals, necessary for a fair statement of consolidated financial position, results of operations, and cash flows. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and the accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on March 31, 2015. The accounting policies are described in the “Notes to Consolidated Financial Statements” in the 2014 Annual Report on Form 10-K and updated, as necessary, in this Form 10-Q. The year-end consolidated balance sheet data presented for comparative purposes was derived from audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States (U.S. GAAP). The results of operations for the three and six months ended June 30, 2015 are not necessarily indicative of the operating results for the full year or for any other subsequent interim period.




5



 


Use of Estimates


The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.


Foreign Currencies


The Company’s subsidiaries utilize the US Dollar, Swiss Franc, South African Rand and British Pound as their functional currencies. The assets and liabilities of these subsidiaries are translated at ending exchange rates for the respective periods, while revenues and expenses are translated at the average rates in effect for the period. The related translation gains and losses are included in other comprehensive income or loss within the Consolidated Statements of Comprehensive Income (Loss).


Cash and Cash Equivalents


Cash equivalents are short-term, liquid investments with remaining maturities of three months or less when acquired. Cash and cash equivalents are deposited or managed by major financial institutions and at most times are in excess of Federal Deposit Insurance Corporation (FDIC) insurance limits.


Fair Value of Financial Instruments


U.S. GAAP establishes a fair value hierarchy which has three levels based on the reliability of the inputs to determine the fair value. These levels include: Level 1, defined as inputs such as unadjusted quoted prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for use when little or no market data exists, therefore requiring an entity to develop its own assumptions.


The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, deposits and accounts payable. The carrying amount of cash and cash equivalents, accounts receivable and accounts payable approximates fair value because of the short-term nature of these items.


Accounts Receivable


Accounts receivable are carried at the original invoiced amount less an allowance for doubtful accounts based on the probability of future collection.  Management reviews accounts receivable on a periodic basis to determine if any receivables will potentially be uncollectible. The Company reserves for receivables that are determined to be uncollectible, if any, in its allowance for doubtful accounts. After the Company has exhausted all collection efforts, the outstanding receivable is written off against the allowance.


Intangibles


Finite-lived intangible assets include trade names, developed technologies and customer relationships and are amortized on a straight-line basis over their estimated useful lives, for periods ranging from 5 to 11 years. We continually evaluate the reasonableness of the useful lives of these assets. Finite-lived intangibles are tested for recoverability whenever events or changes in circumstances indicate the carrying amounts may not be recoverable. An impairment loss, if any, would be measured as the excess of the carrying value over the fair value determined by discounted future cash flows.




6



 


Goodwill and Impairment


As of June 30, 2015 and December 31, 2014, we had recorded goodwill of $8,913,786 and $8,901,106, respectively. Goodwill consists of the excess of the purchase price over the fair value of tangible and identifiable intangible net assets acquired in the SharpSpring and GraphicMail acquisitions (See Note 5). Under FASB ASC 350, “Intangibles - Goodwill and Other” deemed to have indefinite lives are no longer amortized but are subject to annual impairment tests, and tests between annual tests in certain circumstances, based on estimated fair value in accordance with FASB ASC 350-10, and written down when impaired.


Income Taxes


Provision for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax bases of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled as prescribed in FASB ASC 740, Accounting for Income Taxes. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that a deferred tax asset will not be realized.


The Company applies the authoritative guidance in accounting for uncertainty in income taxes recognized in the consolidated financial statements. This guidance prescribes a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination. If the tax position is deemed “more-likely-than-not” to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. There are no uncertain tax positions taken by the Company on its tax returns. Tax years subsequent to 2010 remain open to examination by U.S. federal and state tax jurisdictions.


In determining the provision for income taxes, the Company uses statutory tax rates and tax planning opportunities available to the Company in the jurisdictions in which it operates.  This includes recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns to the extent pervasive evidence exists that they will be realized in future periods. The deferred tax balances are adjusted to reflect tax rates by tax jurisdiction, based on currently enacted tax laws, which are expected to be in effect in the years in which the temporary differences are expected to reverse. In accordance with the Company’s income tax policy, significant or unusual items are separately recognized in the period in which they occur. The Company is subject to routine examination by domestic and foreign tax authorities and frequently faces challenges regarding the amount of taxes due.  These challenges include positions taken by the Company related to the timing, nature and amount of deductions and the allocation of income among various tax jurisdictions. As of June 30, 2015, the Company is not being examined by domestic or foreign tax authorities.


Property and Equipment


Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful life of the assets. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is credited or charged to operations. Repairs and maintenance costs are expensed as incurred.




7



 


Property and equipment is as follows:


 

 

June 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

Property and equipment, net:

 

 

 

 

 

 

Leasehold improvements

 

$

18,154

 

 

$

18,154

 

Furniture and fixtures

 

 

116,097

 

 

 

84,377

 

Computer equipment and software

 

 

779,778

 

 

 

496,429

 

Total

 

 

914,029

 

 

 

598,960

 

Less: Accumulated depreciation and amortization

 

 

(405,112

)

 

 

(317,405

)

 

 

$

508,917

 

 

$

281,555

 


Estimated useful lives are as follows:


Leasehold improvements

 

 

3-5 years

Furniture and fixtures

 

 

3-5 years

Computer equipment

 

 

3 years

Software

 

 

3-5 years


Revenue Recognition


The Company recognizes revenue from its services when it is probable that the economic benefits associated with the transactions will flow to the Company and the amount of revenue can be measured reliably. This is normally demonstrated when: (i) persuasive evidence of an arrangement exists; (ii) the fee is fixed or determinable; (iii) performance of service has been delivered; and (iv) collection is reasonably assured.


For the Company’s internet-based SMTP email delivery product and GraphicMail email product, the services are offered over various contractual periods for a fixed fee that varies based on a maximum volume of transactions. Revenues are typically paid by clients via credit card, check or wire payments at the inception of the contractual period. Revenue is recognized on a straight-line basis over the contractual period. If the customer’s transactions exceed contractual volume limitations, overages are charged and recorded in the periods in which the transaction overages occur.


Certain of the Company’s GraphicMail customers are sold through third party resellers. In some cases, we allow the third party resellers to collect the funds directly from the customer, withhold their own reseller fee, and remit the net amount owed back to the Company. In those situations, because the Company is the primary obligor in the arrangement, the Company records the gross revenue and expenses such that 100% of the end customer revenue is reported by the Company and a corresponding expense is recorded for the reseller fee.


For the Company’s internet-based SharpSpring marketing automation solution, the services are typically offered on a month-to-month basis with a fixed fee charged each month depending on the size of the engagement with the customer. Monthly fees are recorded as revenue during the month they are earned. Some customers are charged annually, for which revenues are deferred and recorded ratably over the subscription period. Additionally, during part of 2014, some customers were charged an up-front prepayment that is credited back over the course of the first year, which is recorded as revenue ratably over the first year of service. Starting in the fourth quarter of 2014, customers were charged an upfront implementation and training fee. The upfront implementation and training fees represent short-term “use it or lose it” services offered for a flat fee. Such flat fees are recognized over the service period, which is 60 days.


The Company offers refunds on a pro-rata basis at any time during the contractual period. The Company also experiences credit card chargebacks relating to cardholder disputes that are commonly experienced by businesses that accept credit cards. The Company makes estimates for refunds and credit card chargebacks based on historical experience.




8



 


Deferred Revenue


Some of the Company’s customers pay for services in advance on a periodic basis (such as monthly, quarterly, annually or bi-annually). Also, the Company charges an upfront implementation and training fee for its SharpSpring marketing automation solution that is paid in advance, for which services are performed over a 60-day period.  Deferred revenue consists of payments received in advance of the Company’s providing the services. Deferred revenues are amortized on a straight-line basis in connection with the contractual period or recorded when the services are used.


Accrued Revenue


In cases where our customers pay for services in arrears, we accrue for revenue in advance of billings as long as the criteria for revenue recognition is met.


Concentration of Credit Risk and Significant Customers


Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents. At June 30, 2015 and December 31, 2014, the Company had cash balances at financial institutions that exceed federally insured limits. The Company maintains its cash balances with accredited financial institutions. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.


For the periods ended June 30, 2015, and 2014, there were no customers that accounted for more than 10% of total revenue.


Cost of Services


Cost of services consists primarily of the direct labor costs, software costs, and fees paid to resellers of the Company’s product.


Credit Card Processing Fees


Credit card processing fees are included as a component of general and administrative expenses and are expensed as incurred.


Advertising Costs


The Company expenses advertising costs as incurred.


Research and Development Costs and Capitalized Software Costs

We capitalize certain costs associated with internal use software during the application development stage, mostly related to software that we use in providing our hosted solutions. We expense costs associated with preliminary project phase activities, training, maintenance and any post-implementation period costs as incurred. For the six months ended June 30, 2015, we capitalized $101,072 in software development costs. There were no material costs capitalized in prior periods. We amortize capitalized software costs over the estimated useful life of the software, which has been estimated to be 3 years, once the related project has been completed and deployed for customer use. At June 30, 2015, the net carrying value of capitalized software was $99,235.


All other software development costs are charged to expenses when incurred, and generally consist of salaries and related cost of personnel engaged in research and development activities.


Net Income (Loss) Per Share


Basic net income (loss) per share is computed using the weighted average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period.




9



 


Recently Issued Accounting Standards


Effective January 1, 2016, the Company will be required to adopt the amended guidance of Accounting Standards Codification (ASC) Topic 718, Compensation - Stock Compensation, which seeks to resolve the diversity in practice that exists when accounting for share-based payments. The amended guidance requires a performance target that affects vesting and that could be achieved after the requisite service period to be treated as a performance condition. The Company will be required to adopt the amended guidance either prospectively to all awards granted or modified after the effective date or retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the consolidated financial statements and to all new or modified awards thereafter. The Company does not expect the adoption of this amended guidance to impact financial results.


Effective January 1, 2016, the Company will be required to adopt the amended guidance of ASC Topic 810, Consolidation (Topic 810), which seeks to improve targeted areas of the consolidation guidance for legal entities such as limited partnerships, limited liability corporations, and securitization structures. The amended guidance changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. The changes include, among others, modification of the evaluation whether limited partnerships and similar legal entities are variable interest entities or voting interest entities and elimination of the presumption that a general partner should consolidate a limited partnership. The Company will be required to adopt Topic 810 either on a full retrospective basis to each prior reporting period presented or on a modified retrospective basis with the cumulative effect of initially applying the new guidance recognized at the date of initial application. The Company has not yet completed its assessment of the impact of the amended guidance on its consolidated financial statements but does not expect the adoption of this amended guidance to have a significant impact on financial results.


The Company will be required to adopt the new guidance of ASC Topic 606, Revenue from Contracts with Customers (Topic 606), which will supersede the revenue recognition requirements in ASC Topic 605, Revenue Recognition. Topic 606 requires the Company to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance requires the Company to apply the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the Company satisfies a performance obligation. The Company will be required to adopt Topic 606 either on a full retrospective basis to each prior reporting period presented or on a modified retrospective basis with the cumulative effect of initially applying the new guidance recognized at the date of initial application. If the Company elects the modified retrospective approach, it will be required to provide additional disclosures of the amount by which each financial statement line item is affected in the current reporting period, as compared to the guidance that was in effect before the change, and an explanation of the reasons for significant changes. The Company has not yet completed its assessment of the impact of the new guidance on its consolidated financial statements. On April 29, 2015, the Financial Accounting Standards Board issued a proposed Accounting Standards Update (FASB) to defer the effective date of Topic 606 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. If the FASB proceeds with the deferral of the effective date as proposed, this will mean the Company will be required to adopt the new guidance of ASC 606 effective January 1, 2018.


Note 3:  Commitments and Contingencies


Litigation


The Company may from time to time be involved in legal proceedings arising from the normal course of business.


The Company is not a party to any litigation of a material nature.




10



 


Operating Leases and Service Contracts


The Company rents its facilities with leases ranging from month-to-month to several years in duration. Most of its service contracts are on a month-to-month basis, however, the Company entered into several non-cancelable service contracts during the year ended December 31, 2014. Future minimum lease payments and payments due under non-cancelable service contracts are as follows as of June 30, 2015:


Remainder of 2015

 

$

130,879

 

2016

 

 

218,756

 

2017

 

 

97,134

 

2018

 

 

5,948

 

2019

 

 

 

Thereafter

 

 

 

 

 

$

452,717

 


Employment Agreements


The Company has employment agreements with several members of its leadership team and executive officers.


Note 4:  Acquisitions


The Company pursues strategic acquisitions from time to time to leverage its existing capabilities and further build its business. Such acquisitions are accounted for as business combinations pursuant to ASC 805 “Business Combinations.” Under this ASC, acquisition and integration costs are not included as components of consideration transferred, but are accounted for as expenses in the period in which the costs are incurred.


SharpSpring


On August 15, 2014, the Company acquired substantially all the assets and assumed the liabilities of SharpSpring LLC, a Delaware limited liability company for a cash payment of $5,000,000 plus potential earn out consideration of $10,000,000 that was contingent on the SharpSpring product achieving certain levels of revenue in 2015. The earn out consideration, was scheduled to be paid 60% in cash and 40% in stock following the audit of the 2015 consolidated financial statements. However, during May 2015, the Company and RCTW, LLC (“RCTW”), the former owner of the SharpSpring assets, agreed that the earn out consideration would be paid in its entirety, with a portion of the cash-based earn out paid early in a cash and stock transaction. During this May 2015 transaction, the Company paid $2,000,000 in cash to RCTW and issued RCTW 545,455 shares in lieu of cash to settle an additional $3,000,000 of the cash-based earn out liability.  As of June 30, 2015, the remaining payment due for the SharpSpring  assets is $5,000,000, of which $1,000,000 will be paid in cash and $4,000,000 will be paid in stock during April 2016. The SharpSpring assets and liabilities were assigned to SMTP’s wholly owned subsidiary SharpSpring, Inc. (“SharpSpring”). SharpSpring is a cloud-based marketing automation platform that enables users to connect with customers and build relationships to drive revenue through marketing automation, call tracking and customer relationship management.


The following table presents the components of the initial purchase price consideration:


Cash consideration

 

$

5,000,000

 

Earn out liability

 

 

6,963,000

 

Liabilities assumed

 

 

149,841

 

Total purchase price

 

$

12,112,841

 




11



 


The initial allocation of the purchase price is based on management estimates and assumptions, and other information compiled by management, which utilized established valuation techniques appropriate for the industry; these techniques were the income approach, cost approach or market approach, depending upon which was the most appropriate based on the nature and reliability of the data available. These amounts are provisional and subject to finalization in the next accounting period. The income approach is predicated upon the value of the future cash flows that an asset is expected to generate over its economic life. The cost approach takes into account the cost to replace (or reproduce) the asset and the effects on the assets value of physical, functional and/or economic obsolescence that has occurred with respect to the asset. The market approach is a technique used to estimate value from an analysis of actual transactions or offerings for economically comparable assets available as of the valuation date.


The following represents the initial allocation of the purchase price to the acquired net tangible and intangible assets acquired and liabilities assumed of SharpSpring:


Total purchase price

 

$

12,112,841

 

Less:

 

 

 

 

Net tangible assets acquired

 

 

(135,614

)

Intangible assets acquired:

 

 

 

 

Trade Name

 

 

(120,000

)

Developed Technologies

 

 

(2,130,000

)

Customer Relationships

 

 

(1,320,000

)

Total intangible assets

 

 

(3,570,000

)

Goodwill

 

$

8,407,227

 


Acquired intangible assets include trade names which are to be amortized over the useful life of five years, and technology and customer relationships which are to be amortized over the useful life of 11 years.


Goodwill of $8,407,227 was recorded. Goodwill will not be amortized but instead tested for impairment at least annually (more frequently if certain indicators are present). Goodwill arose primarily as a result of the expected future growth of the SharpSpring product and the assembled workforce.


Pursuant to the asset purchase agreement, the Company was originally liable for an earn out of up to $10,000,000, payable 60% in cash and 40% in stock, depending on SharpSpring achieving certain revenue levels in 2015. At the time of the acquisition, the Company utilized the income approach to estimate the fair value of the earn out. The Company analyzed scenarios and determined a probability weighting for each scenario. The Company calculated the earn out payments based on the respective revenues for each scenario and then weighted the resulting payment by the probabilities of achieving each scenario. In order to calculate an appropriate risk-adjusted discount rate for the earn out, the Company calculated the weighted average cash-flows of the business based on the three scenarios and their respective weightings. The Company then calculated an implied internal rate of return (“IRR”) of 18.9%, which is the discount rate necessary in order to reconcile the weighed cash-flows of the three scenarios to the total purchase price including the earn out payment. The earn out payment was then discounted by the 18.9% IRR. Based on these methods and the Company’s assessment of meeting those revenue levels in 2015, an earn out liability of $6,963,000 was originally recorded as a liability during purchase accounting. This was re-measured in each subsequent quarter since the transaction, resulting in additional charges of $682,000 in the quarter ended December 31, 2014, $704,000 in the quarter ended March 31, 2015 and $1,030,000 in the quarter ended June 30, 2015.  These earn out adjustments have been recorded on the consolidated statement of comprehensive income (loss) for the respective periods. As noted above, the Company entered into a transaction with RCTW during May 2015 to pay a portion of the cash-based earn out early, as well as to agree that the future earn out for the SharpSpring assets would be paid in its entirety. Although we are obligated to pay the full earn out for the SharpSpring assets, the earn out liability value will continue to increase over time as a result of the discount factor applied to the liability, with ultimate payment occurring in April 2016. As of June 30, 2015, the earn out liability for the $5,000,000 remaining earn out payment is recorded as $4,379,000 as a result of this discount factor. The Company will continue to increase the earn out liability over time as we get close to the ultimate payment date of April 2016 and record the expense related to those adjustments through the consolidated statements of comprehensive income (loss).


As of June 30, 2015, management had completed its evaluation of the fair value of certain intangible and other net assets acquired and does not expect future changes except for future changes to the earn out liability.




12



 


GraphicMail


On October 17, 2014, we acquired 100% of the equity interest owned, directly or indirectly, in GraphicMail group companies (“GraphicMail”) consisting of InterInbox SA, a Swiss corporation, InterCloud Limited, a Gibraltar limited company, ERNEPH 2012A (Pty) Ltd. dba ISMS, a South African limited company, ERNEPH 2012B (Pty) Ltd. dba GraphicMail South Africa, a South African limited company, and Quattro Hosting LLC, a Delaware limited liability company. The acquisition consideration consisted of $5.3 million, $2.6 million of which was paid in cash and $2.7 million of which was paid in stock, plus potential earn out consideration of $0.8 million based on achieving certain revenue levels in 2015 (paid 50% in cash and 50% in stock). On October 17, 2014, the Company issued 423,426 unregistered shares of common stock which represents the $2.7 million portion of the consideration. GraphicMail operates as a campaign management solution, enabling customers to create content and manage emails being sent to customers and distribution lists.


The following table presents the components of the initial purchase price consideration:


Cash consideration

 

$

2,636,830

 

Stock consideration

 

 

2,684,138

 

Earn out liability

 

 

36,000

 

Liabilities assumed

 

 

663,704

 

Total purchase price

 

$

6,020,672

 


The initial allocation of the purchase price is based on management estimates and assumptions, and other information compiled by management, which utilized established valuation techniques appropriate for the industry; these techniques were the income approach, cost approach or market approach, depending upon which was the most appropriate based on the nature and reliability of the data available. These amounts are provisional and subject to finalization in the next accounting period. The income approach is predicated upon the value of the future cash flows that an asset is expected to generate over its economic life. The cost approach takes into account the cost to replace (or reproduce) the asset and the effects on the assets value of physical, functional and/or economic obsolescence that has occurred with respect to the asset. The market approach is a technique used to estimate value from an analysis of actual transactions or offerings for economically comparable assets available as of the valuation date.


The following represents the initial allocation of the purchase price to the acquired net tangible and intangible assets acquired and liabilities assumed of GraphicMail. These amounts are provisional and subject to finalization in future accounting periods.


Total purchase price

 

$

6,020,672

 

Less:

 

 

 

 

Net tangible assets acquired

 

 

(730,276

)

Net intangible assets acquired

 

 

(4,779,000

)

Goodwill

 

$

511,396

 


Acquired intangible assets include trade names which are to be amortized over its estimated useful life of five years, and technology and customer relationships which are to be amortized over its estimated useful life of 11 years.


Goodwill will not be amortized but instead tested for impairment at least annually (more frequently if certain indicators are present). Goodwill arose primarily as a result of the expected future growth of the GraphicMail product and the assembled workforce.




13



 


Pursuant to the equity interest purchase agreement, the Company is liable for an earn out of up to $0.8 million, on GraphicMail achieving certain revenue levels in 2015. The Company utilized the income approach to estimate the fair value of the earn out. The Company analyzed scenarios and determined a probability weighting for each scenario. The Company calculated the earn out payments based on the respective revenues for each scenario and then weighted the resulting payment by the probabilities of achieving each scenario. In order to calculate an appropriate risk-adjusted discount rate for the earn out, the Company calculated the weighted average cash-flows of the business based on the three scenarios and their respective weightings. The Company then calculated an implied internal rate of return (“IRR”) of 29.8%, which is the discount rate necessary in order to reconcile the weighed cash-flows of the three scenarios to the total purchase price including the earn out payment. The earn out payment was then discounted by the 29.8% IRR. Based on these methods and the Company’s assessment of meeting those revenue levels in 2015, an earn out liability of $36,000 was recorded as a liability during purchase accounting. This was re-measured in the quarter ended June 30, 2015, resulting in an additional charge of $637,332. The company will continue to refine the projection of GraphicMail revenue levels in 2015 compared to the earn out revenue levels and adjust the liability accordingly through the consolidated statement of comprehensive income (loss).


As of June 30, 2015, management had completed its evaluation of the fair value of certain intangible and other net assets acquired and does not expect future changes except for future changes to the earn out liability.


Note 5: Intangible Assets


Intangible assets are as follows:


 

 

June 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

Intangible assets:

  

 

 

 

 

  

Trade names

 

$

383,923

 

 

$

381,473

 

Technology

 

 

4,114,747

 

 

 

4,095,892

 

Customer relationships

 

 

3,792,479

 

 

 

3,699,237

 

Total

 

 

8,291,149

 

 

 

8,176,602

 

Less: Accumulated amortization

 

 

(1,059,037

)

 

 

(281,364

)

 

 

$

7,232,112

 

 

$

7,895,238

 


Estimated amortization expense for the remainder of 2015 and subsequent years is as follows:


2015

 

$

773,762

 

2016

 

 

1,425,389

 

2017

 

 

1,177,124

 

2018

 

 

1,001,184

 

2019

 

 

780,781

 

2020

 

 

600,446

 

Thereafter

 

 

1,473,426

 

Total

 

$

7,232,112

 


Amortization expense for the three and six months ended June 30, 2015 was $382,679 and $761,574, respectively.  Amortization expense for the three and six months ended June 30, 2014 was $0.


Note 6:  Shareholders’ Equity


For the three and six months ending June 30, 2014, the Company paid quarterly dividends of $601,766 and $1,203,533, respectively. In February 2015, the Company suspended its quarterly dividends with no dividends being paid during 2015.


On December 26, 2013, the Company filed with the Securities Exchange Commission a Form S-1 registration statement. Pursuant to the Form S-1, the Company registered and sold 1,840,000 shares of common stock, $0.001 par value, in exchange for $11,500,000 in gross proceeds. The S-1 became effective on January 30, 2014.




14



 


On, January 28, 2015, the Company transferred 30,000 warrants issued on August 1, 2013 in connection with a consulting agreement in exchange for the Company issuing 5,000 shares of Company common stock.


On May 18, 2015, the Company entered into a subscription agreement with investors for the sale of an aggregate of 363,909 shares of the Company’s common stock, at a price of $5.50 per share, which shares have been registered with the Securities and Exchange Commission on the Company’s registration statement on Form S-3. The closing occurred on May 21, 2015.


On May 18, 2015, the Company entered into a subscription agreement with RCTW, LLC, a Delaware limited liability company, f/k/a SharpSpring, LLC (“RCTW”), for the issuance of 545,455 shares of common stock to RCTW for an aggregate value of $3,000,000, which is in satisfaction of an equal amount of the earn-out due and payable by the Company to RCTW under that certain Asset Purchase Agreement dated August 12, 2014 between the Company and RCTW. The closing occurred on May 21, 2015.


Note 7: Changes in Accumulated Other Comprehensive (Income) Loss


 

 

Foreign Currency

 

 

 

Translation

 

 

 

Adjustment

 

Balance as of December 31, 2014

 

$

(177,767

)

Other comprehensive income (loss) prior to reclassifications

 

 

 

Amounts reclassified from accumulated other comprehensive income

 

 

 

Tax effect

 

 

 

Net current period other comprehensive loss

 

 

132,739

 

Balance as of June 30, 2015

 

$

(45,028

)


Note 8: Net Income (Loss) Per Share


Computation of net income (loss) per share is as follows:


 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(1,866,651

)

 

$

151,208

 

 

$

(3,036,688

)

 

$

374,540

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

 

5,871,445

 

 

 

5,016,461

 

 

 

5,664,090

 

 

 

4,630,059

 

Add incremental shares for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrants

 

 

 

 

 

23,625

 

 

 

 

 

 

28,319

 

Stock options

 

 

 

 

 

23,907

 

 

 

 

 

 

30,348

 

Diluted weighted average common shares outstanding

 

 

5,871,445

 

 

 

5,063,993

 

 

 

5,664,090

 

 

 

4,688,726

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.32

)

 

$

0.03

 

 

$

(0.54

)

 

$

0.08

 

Diluted

 

$

(0.32

)

 

$

0.03

 

 

$

(0.54

)

 

$

0.08

 


For the three and six months ended June 30, 2015, 984,490 stock options and 170,973 warrants were excluded from diluted net loss per share, because the effect of including these potential shares was anti-dilutive.


Note 9: Income Taxes


During the quarter ended June 30, 2015, the Company recorded an income tax benefit of $455,969. The effective tax rate for the three months ending June 30, 2015 and 2014 was 20% and 36%, respectively. The effective rate for the six months ending June 30, 2015 and 2014 was 22% and 40%, respectively.




15



 


Note 10:  Stock-Based Compensation


From time to time, the Company grants stock option awards to officers and employees under the 2010 Stock Incentive Plan ("the Plan") which, as amended, provides us with the ability to issue options on up to 1,350,000 common shares. At June 30, 2015, the Company had 984,490 outstanding options issued under the plan.


Such awards are valued based on the grant date fair value of the instruments, net of estimated forfeitures, using a Black-Scholes option pricing model with the following assumptions:


 

Six Months Ended June 30,

 

2015

 

2014

 

 

 

 

Volatility

68% - 76%

 

73%

Risk-free interest rate

1.34% - 2.00%

 

1.93%

Expected term

6.25 years - 6.7 years

 

 6.25 years


The volatility used was based on historical volatility of similar sized companies due to lack of historical data of the Company’s stock price. The risk free interest rate was determined based on treasury securities with maturities equal to the expected term of the underlying award. The expected term was determined based on the simplified method outlined in Staff Accounting Bulletin No. 110.


Stock option awards are expensed on a straight-line basis over the requisite service period.  During the three and six months ended June 30, 2015, the Company recognized expense of $188,459 and $345,327, respectively, associated with stock option awards. During the three and six months ended June 30, 2014, the Company recognized expense of $123,879 and $274,931, respectively, associated with stock option awards. At June 30, 2015, future stock compensation expense (net of estimated forfeitures) not yet recognized was $1,737,832 and will be recognized over a weighted average remaining vesting period of 3.0 years. The following summarizes stock option activity for the six months ended June 30, 2015:


 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

Weighted

 

 

Weighted

 

 

Average

 

 

 

 

 

 

Average

 

 

Average

 

 

Remaining

 

 

 

Number of

 

 

Exercise

 

 

Fair

 

 

Contractual

 

 

 

Shares

 

 

Price

 

 

Value

 

 

Life

 

Outstanding at December 31, 2014

 

 

805,840

 

 

$

5.51

 

 

$

3.47

 

 

 

8.6

 

Granted at market price

 

 

272,000

 

 

 

5.79

 

 

 

 

 

 

 

 

 

Exercised

 

 

(35,075

)

 

 

0.83

 

 

 

 

 

 

 

 

 

Forfeited

 

 

(58,275

)

 

 

5.66

 

 

 

 

 

 

 

 

 

Outstanding at June 30, 2015

 

 

984,490

 

 

 

5.63

 

 

 

3.57

 

 

 

8.5

 

Exercisable at June 30, 2015

 

 

301,535

 

 

$

5.28

 

 

$

3.21

 

 

 

7.6

 


The intrinsic value of the Company’s stock options outstanding was $194,812 at June 30, 2015.


Note 11: Warrants


On January 30, 2014, in connection with an $11.5 million financing transaction, the Company issued 80,000 warrants to purchase common stock at an exercise price of $7.81 per share with a term of 5 years. During the three months ended March 31, 2014, the Company recognized an expense of $0, associated with these awards. The fair value of the warrants was determined using the Black-Scholes option valuation model. The warrants expire on January 30, 2020 and have a remaining contractual life of 4.6 years as of June 30, 2015. These warrants became exercisable on January 30, 2015.


On, January 28, 2015, the Company cancelled 30,000 warrants issued on August 1, 2013 in connection with a consulting agreement in exchange for the Company issuing 5,000 shares of restricted Company common stock.




16



 


The following table summarizes information about the Company’s warrants at June 30, 2015:


 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

 

 

Weighted

 

 

Remaining

 

 

 

 

 

 

 

 

 

Average

 

 

Contractual

 

 

 

 

 

 

Number

 

 

Exercise

 

 

Term

 

 

Intrinsic

 

 

 

of Units

 

 

Price

 

 

(in years)

 

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2014

 

 

200,973

 

 

$

6.07

 

 

  

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

Granted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancelled

 

 

(30,000

)

 

 

5.00

 

 

 

 

 

 

 

 

 

Outstanding at June 30, 2015

 

 

170,973

 

 

$

6.26

 

 

 

3.4

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable at June 30, 2015

 

 

170,973

 

 

$

6.26

 

 

 

3.4

 

 

$

 



The warrants were valued using the Black-Scholes pricing model with the following assumptions:


 

Six Months Ended June 30,

 

2015

 

2014

 

 

 

 

Volatility

-

 

72%

Risk-free interest rate

-

 

0.54%

Expected term

-

 

2.5 years


Note 12: Subsequent Events


On August 3, 2015 the Company announced its intentions to commence an underwritten registered public offering to raise approximately $4.5 million by offering shares of common stock for sale.











17



 


Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations.


The following discussion and analysis should be read in conjunction with our consolidated financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management. This information should also be read in conjunction with our audited historical consolidated financial statements which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, filed with the Securities and Exchange Commission on March 31, 2015.


Overview


We provide SaaS based marketing technologies, ranging from advanced marketing automation tools to email delivery services. Our marketing automation solution (SharpSpring) allows customers to track a potential customer from an early stage and nurture that potential customer using marketing automation techniques until it becomes a qualified sales lead or customer. Our email marketing solution (GraphicMail) allows customers to conduct email marketing campaigns using template-driven tools with easy-to-use graphical interfaces and associated analytics. Our SMTP relay service provides customers with the ability to increase the deliverability of email with less time, cost and complexity than handling it themselves.


We believe our growth since inception has been driven by the strategic acquisitions we completed in 2014 and by the combination of our technological offering with our excellent service and support, all offered at competitive pricing. We currently have customers in over 100 countries worldwide, with approximately half of our revenues coming from the United States and half of our revenues being derived overseas. We employ a subscription-based revenue model. We also earn revenues from additional usage charges that may come into effect when a customer exceeds its quota, as well as fees earned for related products and services.


On August 15, 2014, we acquired substantially all the assets and assumed certain liabilities of SharpSpring LLC, a Delaware limited liability company, which were assigned to our wholly owned subsidiary SharpSpring, Inc. (“SharpSpring”). SharpSpring engages in the business of creating, marketing, and selling software that provides marketing automation, call tracking, and website traffic analysis and customer relationship management. It is a cloud-based marketing automation platform that enables users to connect with customers and build relationships to drive revenue.


On October 17, 2014, we acquired the GraphicMail group companies (“GraphicMail”) consisting of InterInbox SA, a Swiss corporation, InterCloud Limited, a Gibraltar limited company, ERNEPH 2012A (Pty) Ltd. dba ISMS, a South African limited company, ERNEPH 2012B (Pty) Ltd. dba GraphicMail South Africa, a South African limited company, and Quattro Hosting LLC, a Delaware limited liability company. GraphicMail operates as an email service provider, enabling customers to create content and manage emails being sent to customers and distribution lists.


Unless the context otherwise requires, all references to “SMTP,” “our Company,” “we,” “our” or “us” and other similar terms means SMTP, Inc., a Delaware corporation, inclusive of SharpSpring, Inc., a Delaware corporation and GraphicMail group companies as of the dates of their respective acquisitions.




18



 


Results of Operations


Three Months Ended June 30, 2015


 

 

 

 

 

Change

from

Prior Year

 

 

Percent

Change

from

Prior Year

 

 

 

Three Months Ended

 

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

 

2015

 

 

2014

 

 

 

 

 

Revenues and Cost of Sales:

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

3,591,554

 

 

$

1,480,770

 

 

$

2,110,784

 

 

 

143

%

Cost of Sales

 

 

924,283

 

 

 

351,153

 

 

 

573,130

 

 

 

163

%

Gross Profit

 

$

2,667,271

 

 

$

1,129,617

 

 

$

1,537,654

 

 

 

136

%


Revenues increased for the three months ended June 30, 2015 as compared to the three months ended June 30, 2014, primarily due to the acquisitions of GraphicMail and SharpSpring. Additionally, revenues have increased for our SharpSpring product since its acquisition in August 2014.


Cost of services increased for the three months ended June 30, 2015 as compared to the three months ended June 30, 2014 primarily due to costs to support increased revenues and incremental business from the acquisitions of GraphicMail and SharpSpring. Additionally, we have added to SharpSpring resources to support its business growth since acquiring the business in August 2014.  As a percentage of revenues, cost of services were 26% and 24% of revenues for the three months ended June 30, 2015 and 2014, respectively. This reflects a lower gross margin for our newly acquired SharpSpring product as we invest in resources to support the future growth of that product.


 

 

 

 

 

 

 

 

 

 

 

Percent

 

 

 

Three Months Ended

 

 

Change

 

 

Change

 

 

 

June 30,

 

 

from

 

 

from

 

 

 

2015

 

 

2014

 

 

Prior Year

 

 

Prior Year

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

$

1,314,839

 

 

$

228,013

 

 

$

1,086,826

 

 

 

477

%

Research and development

 

 

537,151

 

 

 

101,387

 

 

 

435,764

 

 

 

430

%

General and administrative

 

 

1,072,267

 

 

 

563,786

 

 

 

508,481

 

 

 

90

%

Earn out liability adjustment

 

 

1,667,332

 

 

 

 

 

 

1,667,332

 

 

 

100

%

Amortization of intangible assets

 

 

382,679

 

 

 

 

 

 

382,679

 

 

 

100

%

 

 

$

4,974,268

 

 

$

893,186

 

 

$

4,081,082

 

 

 

457

%


Sales and marketing expenses increased for the three months ended June 30, 2015 as compared to the three months ended June 30, 2014 primarily due to acquisitions of GraphicMail and SharpSpring and due to the increase in sales and marketing wages due to recent hires following the acquisitions.


Research and development expenses increased for the three months ended June 30, 2015 as compared to the three months ended June 30, 2014 primarily due to additional expenses relating to our acquisitions of SharpSpring and GraphicMail, each of which had product development groups.


General and administrative expenses increased for the three months ended June 30, 2015 as compared to the three months ended June 30, 2014 primarily due to the acquisitions of SharpSpring and GraphicMail, and the addition of new resources hired to support general business growth.


The acquisitions of SharpSpring and GraphicMail included liability-based contingent consideration which is re-measured during each reporting period until ultimate settlement in April 2016.  These re-measurements resulted in additional charges that are recorded on the consolidated statements of comprehensive income (loss).  During the three months ended June 30, 2015, we incurred charges of $1,030,000 related to an adjustment to the earn out liability for SharpSpring and $637,332 related to an adjustment to the earn out liability for GraphicMail.




19



 


Amortization of intangible assets increased for the three months ended June 30, 2015 as compared to the three months ended June 30, 2014 due to the intangibles acquired as part of the acquisitions of SharpSpring and GraphicMail.


 

 

 

 

 

 

 

 

 

 

 

Percent

 

 

 

Three Months Ended

 

 

Change

 

 

Change

 

 

 

June 30,

 

 

from

 

 

from

 

 

 

2015

 

 

2014

 

 

Prior Year

 

 

Prior Year

 

Other:

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

$

(15,623

)

 

$

144

 

 

$

(15,767

)

 

 

(10949

)%

Provision (benefit) for income tax

 

 

(455,969

)

 

 

85,367

 

 

 

(541,336

)

 

 

(634

)%

Net income (loss)

 

 

(1,866,651

)

 

 

151,208

 

 

 

(2,017,859

)

 

 

(1334

)%


Other income (expense) is related to the impact of foreign exchange rates on the settlement and revaluation of our receivable and payable balances that are denominated in currencies other than our functional currencies.


Changes in our income tax expense related primarily to differences in pretax (loss) income during the three months ended June 30, 2015 and June 30, 2014.


Changes in net income (loss) for the three months ended June 30, 2015 as compared to the three months ended June 30, 2014 was due to the items described above.


Six Months Ended June 30, 2015


 

 

 

 

 

 

 

 

 

 

 

Percent

 

 

 

Six Months Ended

 

 

Change

 

 

Change

 

 

 

June 30,

 

 

from

 

 

from

 

 

 

2015

 

 

2014

 

 

Prior Year

 

 

Prior Year

 

Revenues and Cost of Sales:

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

6,877,056

 

 

$

2,970,824

 

 

$

3,906,232

 

 

 

131

%

Cost of Sales

 

 

1,715,249

 

 

 

678,383

 

 

 

1,036,866

 

 

 

153

%

Gross Profit

 

$

5,161,807

 

 

$

2,292,441

 

 

$

2,869,366

 

 

 

125

%


Revenues increased for the six months ended June 30, 2015 as compared to the six months ended June 30, 2014, primarily due to the acquisitions of GraphicMail and SharpSpring. Additionally, revenues have increased for our SharpSpring product since its acquisition in August 2014.


Cost of services increased for the six months ended June 30, 2015 as compared to the six months ended June 30, 2014 primarily due to increased revenues and incremental business from the acquisitions of GraphicMail and SharpSpring. Additionally, we have added to SharpSpring resources to support its business growth since acquiring the business in August 2014. As a percentage of revenues, cost of services were 25% and 23% of   revenues for the six months ended June 30, 2015 and 2014, respectively. This reflects a lower gross margin for our newly acquired SharpSpring product as we invest in resources to support the future growth of that product.


 

 

 

 

 

 

 

 

 

 

 

Percent

 

 

 

Six Months Ended

 

 

Change

 

 

Change

 

 

 

June 30,

 

 

from

 

 

from

 

 

 

2015

 

 

2014

 

 

Prior Year

 

 

Prior Year

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

$

2,687,200

 

 

$

396,313

 

 

$

2,290,887

 

 

 

578

%

Research and development

 

 

1,008,365

 

 

 

220,008

 

 

 

788,357

 

 

 

358

%

General and administrative

 

 

2,156,292

 

 

 

1,047,601

 

 

 

1,108,691

 

 

 

106

%

Earn out liability adjustment

 

 

2,371,332

 

 

 

 

 

 

2,371,332

 

 

 

100

%

Amortization of intangible assets

 

 

761,574

 

 

 

 

 

 

761,574

 

 

 

100

%

 

 

$

8,984,763

 

 

$

1,663,922

 

 

$

7,320,841

 

 

 

440

%





20



 


Sales and marketing expenses increased for the six months ended June 30, 2015 as compared to the six months ended June 30, 2014 primarily due to acquisitions of GraphicMail and SharpSpring and due to the increase in sales and marketing wages due to recent hires following the acquisitions.


Research and development expenses increased for the six months ended June 30, 2015 as compared to the six months ended June 30, 2014 primarily due to additional expenses relating to our acquisitions of SharpSpring and GraphicMail, each of which had product development groups.


General and administrative expenses increased for the six months ended June 30, 2015 as compared to the six months ended June 30, 2014 primarily due to the acquisitions of SharpSpring and GraphicMail, and the addition of new resources hired to support general business growth.


The acquisitions of SharpSpring and GraphicMail included liability-based contingent consideration which is re-measured during each reporting period until ultimate settlement in April 2016.  These re-measurements resulted in additional charges that are recorded on the consolidated statements of comprehensive income (loss).  During the six months ended June 30, 2015, we incurred charges of $1,734,000 related to an adjustment to the earn out liability for SharpSpring and $637,332 related to an adjustment to the earn out liability for GraphicMail.


Amortization of intangible assets increased for the six months ended June 30, 2015 as compared to the six months ended June 30, 2014 due to the intangibles acquired as part of the acquisitions of SharpSpring and GraphicMail.


 

 

 

 

 

 

 

 

 

 

 

Percent

 

 

 

Six Months Ended

 

 

Change

 

 

Change

 

 

 

June 30,

 

 

from

 

 

from

 

 

 

2015

 

 

2014

 

 

Prior Year

 

 

Prior Year

 

Other:

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

$

(65,646

)

 

$

153

 

 

$

(65,799

)

 

 

(43006

)%

Provision (benefit) for income tax

 

 

(851,914

)

 

 

254,132

 

 

 

(1,106,046

)

 

 

(435

)%

Net income (loss)

 

 

(3,036,688

)

 

 

374,540

 

 

 

(3,411,228

)

 

 

(911

)%


Other income (expense) is related to the impact of foreign exchange rate revaluation for our receivable and payable balances that are denominated in currencies other than our functional currencies.


Changes in our income tax expense related primarily to differences in pretax (loss) income during the six months ended June 30, 2015 and June 30, 2014.


Changes in net income (loss) for the six months ended June 30, 2015 as compared to the six months ended June 30, 2014 was due to the items described above.


Liquidity and Capital Resources


Sources and Uses of Cash


Our primary source of cash inflows are net remittances from customers for our services. Such payments are sometimes received in advance of providing the services, yielding a deferred revenue liability on our consolidated balance sheet. In addition, we raised nearly $2.0 million (net of expenses) from a stock offering to outside investors in the second quarter of 2015 and we raised approximately $10.5 million (net of expenses) during a stock offering in the first quarter of 2014.


Our primary sources of cash outflows include payroll, income tax payments and payments to vendors and third party service providers. With the exception of income taxes, which occur on a periodic basis, cash outflows typically occur in close proximity of expense recognition.  




21



 


Analysis of Cash Flows


Net cash (used in) provided by operating activities decreased by $1,099,975 or 317%, to $(753,267) for the six months ended June 30, 2015, compared to $346,708 for the six months ended June 30, 2014.  The decrease in cash provided by operating activities was attributable primarily to a reduction in net income, partially offset by changes in net working capital and other adjustments.


Net cash used in investing activities was $323,001 and $2,116 during the six months ended June 30, 2015, and 2014, respectively. For the six months ending June 30, 2015 and 2014, this includes purchases of property and equipment consisting of acquisitions in software, computers, servers, furniture and other equipment.


Net cash provided by financing activities was $58,142 and $9,377,569 during the six months ended June 30, 2015 and 2014, respectively.  For the six months ending June 30, 2015, this includes $2,000,000 related to the May 2015 early settlement of the cash-based earn out liability for SharpSpring.  We also received $2,058,142 from the issuance of common stock primarily related to nearly $2 million (net of expenses) raised in our May 2015 financing plus funds received associated with stock option exercises.   During the six months ended June 30, 2014, we distributed $1,203,533 in cash to our shareholders in the form of a quarterly dividend which was offset by proceeds of $10,507,801 received from the issuance of common stock and excess tax benefits from share-based payment arrangements of $73,301. We announced a suspension of our dividend in February 2015, and did not pay a dividend during the six months ended June 30, 2015.

We had net working capital of $(2,439,185) and $2,210,786 as of June 30, 2015 and December 31, 2014, respectively.  Our decrease in net working capital as of June 30, 2015 was primarily attributable to a decrease in cash of $1,007,968 and the shift of our earn-out liabilities to current liabilities as of June 30, 2015 since the payment is within one year.


Contractual Obligations


We rent our facilities with leases ranging from month-to-month to several years in duration. Most of our service contracts are also on a month-to-month basis. However, we entered into several non-cancelable service contracts during 2013 and 2014. Future minimum lease payments and payments due under non-cancelable service contracts are as follows as of June 30:


Remainder of 2015

 

$

130,879

 

2016

 

 

218,756

 

2017

 

 

97,134

 

2018

 

 

5,948

 

2019

 

 

 

Thereafter

 

 

 

 

 

$

452,717

 


Significant Accounting Policies


Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates based upon historical experience and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ materially from these estimates.


We do not believe that our operations to date have involved uncertainty of accounting treatment, subjective judgment, or estimates, to any significant degree. Our Annual Report on Form 10-K for the year ended December 31, 2014 contains a discussion of these significant accounting policies. There have been no significant changes in our significant accounting policies during the quarter ended June 30, 2015. See our Note 1 in our unaudited financial statements for the three and six months ended June 30, 2015 as set forth herein.



22



 


Off-balance sheet arrangements


We did not have any off-balance sheet arrangements at June 30, 2015.


Item 3.

Quantitative and Qualitative Disclosure About Market Risk


Not applicable.


Item 4. 

Controls and Procedures


Evaluation of Disclosure Controls and Procedures. The Company’s management, with the participation of the Company’s principal executive officer and principal financial officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of June 30, 2015. Based on this evaluation, the Company’s principal executive officer and principal financial officer concluded that, as of June 30, 2015 the Company’s disclosure controls and procedures were effective, in that they provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to the Company’s management, including the Company’s principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.


Changes in Internal Controls Over Financial Reporting. We disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014 that management had concluded that our internal control over financial reporting was not effective as of December 31, 2014 due to gaps in segregation of duties and documentation of management’s assessment of internal controls. During the six months ended June 30, 2015, management implemented and improved certain secondary reviews to address the issues related to gaps in segregation of duties. However, as of the six months ended June 30, 2015, our documentation of management’s assessment of internal controls is not yet effective. We are working to improve such documentation in order to render our internal controls effective.






23



 


PART II – OTHER INFORMATION


Item 1.

Legal Proceedings.


Not applicable.


Item 1A.

Risk Factors.


Not Applicable.


Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.


Securities issued for exchange


Date

 

Security/Value

 

 

 

May 2015

 

Common stock – 545,455 shares of common stock issued to satisfy earn out liability valued at $3,000,000 or $5.50 per share.


Securities issued for services


Date

 

Security/Value

 

 

 

May 2015

 

Common stock – 8,546 shares of common stock.  The common stock was valued at $45,000 or $5.26 per share.


Securities issued pursuant to our Employee Stock Plan


Date

 

Security/Value

 

 

 

April 2015

 

Stock options – right to buy 4,000 shares of common stock at $5.05 per share and 3,000 shares at $5.17 per share.

 

 

 

May 2015

 

Stock options – right to buy 120,000 shares of common stock at $6.29 per share.

 

 

 

June 2015

 

Stock options – right to buy 12,000 shares of common stock at $5.95 per share.


No underwriters were utilized and no commissions or fees were paid with respect to any of the above transactions. We relied on Section 4(2) of the Securities Act of 1933, as amended, since the transactions did not involve any public offering.


Item 3.

Defaults Upon Senior Securities.


Not Applicable.


Item 4.

Mine Safety Disclosures.


Not Applicable.


Item 5.

Other Information.


Not Applicable.



24



 


Item 6.

Exhibits.


INDEX TO EXHIBITS


SEC Reference
Number

 

Title of Document

 

Location

10.1

 

Form of Subscription Agreement

 

Incorporated by reference to the Company’s Form 8-K filed on 5/21/15

10.2

 

Subscription Agreement

 

Incorporated by reference to the Company’s Form 8-K filed on 5/21/15

10.3

 

Employee Agreement Amendment – Edward Lawton

 

Incorporated by reference to the Company’s Form 8-K filed on 6/24/15

10.4

 

Employee Agreement – Edward Lawton

 

Incorporated by reference to the Company’s Form 8-K filed 8/18/14

10.5

 

Employee Agreement Amendment – Nicholas Eckert

 

Incorporated by reference to the Company’s Form 8-K filed on 6/24/15

10.6

 

Employee Agreement – Nicholas Eckert

 

Incorporated by reference to the Company’s Form 8-K filed 11/12/14

10.7

 

Employee Agreement Amendment – Richard Carlson

 

Incorporated by reference to the Company’s Form 8-K filed on 7/31/15

10.8

 

Employee Agreement Amendment – Richard Carlson

 

Incorporated by reference to the Company’s Form 8-K filed 6/24/15

10.9

 

Employee Agreement – Richard Carlson

 

Incorporated by reference to the Company’s Form 8-K filed on 11/12/14

31.1

 

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

Filed herewith

31.2

 

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

Filed herewith

32.1

 

Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

Filed herewith

32.2

 

Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

Filed herewith

101

 

XBRL

 

Furnished herewith






25



 


SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


SMTP, INC.

 

 

By:

/s/Jonathan M. Strimling

 

Jonathan M. Strimling

 

Chief Executive Officer

(Principal Executive Officer)

Date: August 4, 2015



SMTP, INC.

 

 

By:

/s/ Edward Lawton

 

Edward Lawton

Chief Financial Officer

 

(Principal Financial Officer)

Date: August 4, 2015












26