UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2019
or
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-38063
SILVERSUN TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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16-1633636
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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120 Eagle Rock Ave
East Hanover, NJ 07936
(Address of principal executive offices)
(973) 396-1720
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock, par value $0.00001 per share
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SSNT
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The NASDAQ Capital Market
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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 past 12 months, and (2)
has been subject to such filing requirements for the past 90
days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
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 such
files). Yes ☒ No ☐
Indicate by check mark whether the registrant is large accelerated
filer, an accelerated filer, a non-accelerated filer, smaller
reporting company, or an emerging growth company. See definition of
“large accelerated filer,” accelerated filer” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act:
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Large accelerated filer ☐
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Accelerated filer ☐
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Non-accelerated filer ☒
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Smaller Reporting Company ☒
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Emerging growth company ☐
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act. ☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common
equity held by non-affiliates of the registrant on June 30, 2019
based on a closing price of $2.95 was $5,594,244. As of March
25, 2020, the registrant had 4,501,271 shares of its common stock,
par value $0.00001 per share, outstanding.
Documents Incorporated by Reference: None.
TABLE OF CONTENTS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Included in this Annual Report on Form 10-K are “forward-looking”
statements, as well as historical information. Although we believe
that the expectations reflected in these forward-looking statements
are reasonable, we cannot assure you that the expectations
reflected in these forward-looking statements will prove to be
correct. Our actual results could differ materially from those
anticipated in forward-looking statements as a result of certain
factors, including matters described in the section titled “Risk
Factors.” Forward-looking statements include those that use
forward-looking terminology, such as the words “anticipate,”
“believe,” “estimate,” “expect,” “intend,” “may,” “project,”
“plan,” “will,” “shall,” “should,” and similar expressions,
including when used in the negative. Although we believe that the
expectations reflected in these forward-looking statements are
reasonable and achievable, these statements involve risks and
uncertainties and we cannot assure you that actual results will be
consistent with these forward-looking statements. We undertake no
obligation to update or revise these forward-looking statements,
whether to reflect events or circumstances after the date initially
filed or published, to reflect the occurrence of unanticipated
events or otherwise.
We operate in a very competitive and rapidly changing environment.
New risks emerge from time to time. It is not possible for us to
predict all of those risks, nor can we assess the impact of all of
those risks on our business or the extent to which any factor may
cause actual results to differ materially from those contained in
any forward-looking statement. The forward-looking statements in
this Report are based on assumptions management believes are
reasonable. However, due to the uncertainties associated with
forward-looking statements, you should not place undue reliance on
any forward-looking statements. Further, forward-looking statements
speak only as of the date they are made, and unless required by
law, we expressly disclaim any obligation or undertaking to
publicly update any of them in light of new information, future
events, or otherwise.
From time to time, forward-looking statements also are included in
our other periodic reports on Forms 10-Q and 8-K, in our press
releases, in our presentations, on our website and in other
materials released to the public. Any or all of the forward-looking
statements included in this Report and in any other reports or
public statements made by us are not guarantees of future
performance and may turn out to be inaccurate. These
forward-looking statements represent our intentions, plans,
expectations, assumptions and beliefs about future events and are
subject to risks, uncertainties and other factors. Many of those
factors are outside of our control and could cause actual results
to differ materially from the results expressed or implied by those
forward-looking statements. In light of these risks, uncertainties
and assumptions, the events described in the forward-looking
statements might not occur or might occur to a different extent or
at a different time than we have described. You are cautioned not
to place undue reliance on these forward-looking statements, which
speak only as of the date of this Report. All subsequent written
and oral forward-looking statements concerning other matters
addressed in this Report and attributable to us or any person
acting on our behalf are expressly qualified in their entirety by
the cautionary statements contained or referred to in this
Report.
Except to the extent required by law, we undertake no obligation to
update or revise any forward-looking statements, whether as a
result of new information, future events, a change in events,
conditions, circumstances or assumptions underlying such
statements, or otherwise.
For discussion of factors that we believe could cause our actual
results to differ materially from expected and historical results
see “Item 1A — Risk Factors” below.
In this Report, unless otherwise indicated or the context otherwise
requires, “SilverSun”, the “Company”, “we”, “us” or “our” refer to
SilverSun Technologies, Inc., a Delaware corporation, and its
subsidiaries.
PART I
Item 1. Business
Overview
We are a business application, technology and consulting company
providing strategies and solutions to meet our clients’
information, technology and business management needs. Our services
and technologies enable customers to manage, protect and monetize
their enterprise assets whether on-premise or in the “Cloud”. As a
value-added reseller of business application software, we offer
solutions for accounting and business management, financial
reporting, Enterprise Resource Planning (“ERP”), Human Capital
Management (“HCM”), Warehouse Management Systems (“WMS”), Customer
Relationship Management (“CRM”), and Business Intelligence (“BI”).
Additionally, we have our own development staff building software
solutions for various ERP enhancements. Our value-added services
focus on consulting and professional services, specialized
programming, training, and technical support. We have a dedicated
Information Technology (“IT”) network services practice that
provides managed services, cybersecurity, application hosting,
disaster recovery, business continuity, cloud and other services.
Our customers are nationwide, with concentrations in the New
York/New Jersey metropolitan area, Arizona, Southern California,
North Carolina, Washington, Oregon and Illinois.
Our core business is divided into the following practice areas:
ERP (Enterprise Resource Management) and Accounting
Software
We are a value-added reseller for a number of industry-leading ERP
applications. We are a Sage Software Authorized Business Partner
and Sage Certified Gold Development Partner. We believe we are
among the largest Sage partners in North America, with a sales and
implementation presence complemented by a scalable software
development practice for customizations and enhancements. Due to
the growing demand for cloud-based ERP solutions, we also have in
our ERP portfolio Acumatica, a browser-based ERP solution that can
be offered on premise, in the public cloud, or in a private cloud.
We develop and resell a variety of add-on solutions to all our ERP
and accounting packages that help customize the installation to our
customers’ needs and streamline their operations.
Value-Added Services for ERP
We go beyond simply reselling software packages; we have a
consulting and professional services organization that manages the
process as we move from the sales stage into implementation, go
live, and production. We work inside our customers’ organizations
to ensure all software and IT solutions are enhancing their
business needs. A significant portion of our services revenue comes
from continuing to work with existing customers as their business
needs change, upgrading from one version of software to another, or
providing additional software solutions to help them manage their
business and grow their revenue. We have a dedicated help desk team
that fields hundreds of calls every week. Our custom programming
department builds specialized software packages as well as “off the
shelf” enhancements and time and billing software.
Network and Managed Services
We provide comprehensive IT network and managed services designed
to eliminate the IT concerns of our customers. Businesses can focus
on their core strengths rather than technology issues. We adapt our
solutions for virtually any type of business, from large national
and international product and service providers, to small
businesses with local customers. Our business continuity services
provide automatic on-site and off-site backups, complete
encryption, and automatic failure testing. We also provide
application hosting, IT consulting and managed network services.
Our focus in the network and managed services practice is to focus
on industry verticals in order to demonstrate our ability to better
understand our customers’ needs.
Industry Overview
As a value-added reseller of business application software, we
offer solutions for accounting and business management, financial
reporting, managed services, ERP, HCM, WMS, CRM, and BI.
Additionally, we have our own development staff building software
solutions for various ERP enhancements. Our value-added
services focus on consulting and professional services, specialized
programming, training, and technical support. The majority of
our customers are small and medium businesses (“SMBs”).
Potential Competitive Strengths
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Independent Software Vendor. As an independent
software vendor we have published integrations between ERPs and
third-party products which differentiates us from other business
application providers because, as a value-added reseller of the
ERPs that our proprietary products integrate with, we have specific
software solution expertise in the ERPs we resell, which ensures
that our products tightly integrate with the ERPs. We own the
intellectual property related to these integrations and sell the
solutions both directly and through other software resellers within
the Sage network.
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Sage Certified Gold Development Partner. As a Sage
Certified Gold Development Partner, we are licensed to customize
the source code of the Sage ERPs. Very few resellers are master
developers, and in fact, we provide custom programming services for
many other resellers. We have full-time programmers on staff, which
provides us with a depth and breadth of expertise that we believe
very few competitors can match.
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Ability to Recruit, Manage and Retain Quality
Personnel. We have a track record of recruiting, managing
and retaining skilled labor and our ability to do so represents an
important advantage in an industry in which a shortage of skilled
labor is often a key limitation for both clients and competitors
alike. We recruit skilled labor from competitors and from amongst
end users with experience using the various products we sell, whom
we then train as consultants. We believe our ability to hire,
manage and maintain skilled labor gives an edge over our
competitors as we continue to grow.
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Combination of Hardware/Software Expertise. Many
competitors have software solution expertise. Others have
network/hardware expertise. We believe we are among the very few
organizations with an expertise in both software and hardware,
affording us the opportunity to provide turnkey solutions for our
customers without the need to bring in additional vendors on a
project.
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Technical Expertise. Our geographical reach and
substantial technical capabilities afford our clients the ability
to customize and tailor solutions to satisfy all of their business
needs.
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Our Growth Strategy
General
Our strategy is to grow our business through a combination of
intra-company growth of our software applications, technology
solutions and managed services, as well as expansion through
acquisitions. We have established a national presence via our
internal marketing, sales programs, and acquisitions and now have
ERP customers throughout most of the United States.
Intra-Company Growth
Our intra-company growth strategy is to increase our market
penetration and client retention through the upgrade of, and
expanded sales efforts with, our existing products and managed
services and development of new and enhanced software and
technology solutions. Our client retention is sustained by our
providing responsive, ongoing software and technical support and
monitoring and maintenance services for both the solutions we sell
and other client technology needs we provide.
Repeat business from our existing customer base has been key to our
success and we expect it will continue to play a vital role in our
growth. We focus on nurturing long-standing relationships with
existing customers while also establishing relationships with new
customers.
Acquisitions
The markets in which we provide our services are occupied by a
large number of competitors, many substantially larger than us, and
with significantly greater resources and geographic reach. We
believe that to remain competitive, we need to take advantage of
acquisition opportunities that arise which may help us achieve
greater geographic presence and economies both within our existing
footprint and expanded territories. As such, we have completed
33 acquisitions and/or collaborative agreements in the past
sixty (60) months. We may also utilize acquisitions, whenever
appropriate, to expand our technological capabilities and product
offerings. We focus on acquisitions that are profitable and fit
seamlessly with our existing operations.
We believe our markets contain a number of attractive acquisition
candidates. We foresee expanding through acquisitions of one or
more of the following types of software and technology
organizations:
Managed Service Providers (“MSPs”). MSPs provide their small
and medium-sized business clients with a suite of services, which
may include 24/7/365 remote monitoring of networks, disaster
recovery, business continuity, data back-up, cyber-security and the
like. There are hundreds of providers of such services in the U.S.,
most with annual recurring revenue of less than $10 million. We
believe that we may be able to consolidate a number of these MSPs
with our existing operation in an effort to become one of the more
significant providers of these services in the U.S.
Independent Software Vendors (“ISVs”). ISVs are publishers
of both stand-alone software solutions and integrations that
integrate with other third party products. Our interest lies with
ISVs selling into the small and medium-sized business marketplace,
providing applications addressing e-commerce, mobility, security,
and other functionalities. Since we have expertise in both selling
directly to end-users and selling through a sales channel, we
believe we can significantly enhance the sales volume of any
potential acquisition via our existing infrastructure, our sales
channel, and our internal marketing programs. There are many ISVs
in North America, constituting a large and significant target base
for our acquisition efforts.
Value-Added Resellers (“VARs”) of ERP, Human Capital Management
(“HCM”), Warehouse Management Systems (“WMS”), CRM and BI
Software. VAR’s gross margins are a function of the sales
volume they provide a publisher in a twelve (12) month period, and
we are currently operating at the highest margins. Smaller
resellers who sell less and operate at significantly lower margins,
are at a competitive disadvantage to companies such as ours and are
often amenable to creating a liquidity event for themselves by
selling to larger organizations. We have benefitted from completing
such acquisitions in a number of ways, including but not limited
to: (i) garnering new customers to whom we can upsell and
cross-sell our broad range of products and services; (ii) gaining
technical resources that enhance our capabilities; and (iii)
extending our geographic reach.
Our business strategy provides that we will examine the potential
acquisition of businesses within and outside our industry. In
determining a suitable acquisition candidate, we will carefully
analyze a target’s potential to add to and complement our product
mix, expand our existing revenue base, improve our margins, expand
our geographic coverage, strengthen our management team, add
technical resources and expertise, and, above all, improve
stockholder returns. More specifically, we have identified the
criteria listed below, by which we evaluate potential acquisition
targets in an effort to gain the synergies necessary for successful
growth of the Company:
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Access to new customers and geographic markets;
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Recurring revenue of the target;
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Opportunity to gain operating leverage and increased profit
margins;
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Diversification of sales by customer and/or product;
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Improvements in product/service offerings; and
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Ability to attract public capital and increased investor
interest.
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We are unable to predict the nature, size or timing of any
acquisition. We can give no assurance that we will reach agreement
or procure the financial resources necessary to fund any
acquisition, or that we will be able to successfully integrate or
improve returns as a result of any such acquisition.
We continue to seek out and hold preliminary discussions with
various acquisition candidates. However, currently we have not
entered into any agreements or understandings for any acquisitions
that management deems material.
Enterprise Resource Planning Software Strategy
Our ERP software strategy is focused on serving the needs of our
expansive installed base of customers for our Sage 100cloud, Sage
500 ERP, and Sage BusinessWorks practices, while rapidly growing
the number of customers using Sage X3 and Acumatica. We
currently have approximately 8,000 active ERP customers using one
of these six solutions, including customers using certain add-on
support products to these solutions. In the past we, have
focused primarily on on-premise mid-market Sage Software solutions
but in the past three years have focused on larger enterprise-type
offerings and cloud ERP solutions. This has allowed us to
increase our average deal size and also to keep pace with the
changing trends that we see in the industry.
Managed Services Strategy
The IT Managed Services market is broadly segmented by types of
services, for example, managed data-center, managed network,
managed mobility, managed infrastructure, managed communications,
managed information, managed security and other managed
services. In addition, the market is segmented by market verticals,
such as public sector, banking, financial services and insurance,
education, retail, contact centers and service industries, high
tech and telecommunications, healthcare and pharmaceuticals, travel
and logistics, manufacturing, energy and utilities among
others.
The recent trend in the industry shows that there is a high demand
for managed services across every industry vertical. The
implementation of managed services can reduce IT costs by 30% to
40% in such enterprises. This enables organizations to have
flexibility and technical advantage. Enterprises having their
services outsourced look forward to risk sharing and to reduce
their IT costs and IT commitments, so that they are able to
concentrate on their core competencies. Organizations implementing
managed services have reported almost a 50% to 60% increase in the
operational efficiency of their outsourced processes. Enterprises
have accepted outsourcing services as a means to enable them to
reduce their capital expenditure (CapEx) and free up internal
sources. Newer managed services that penetrate almost all the
industry domains, along with aggressive pricing in services, are
being offered. This results in an increase in the overall revenues
of the managed services market. It is observed that there is an
increase in outsourcing of wireless, communications, mobility and
other value-added services, such as content and e-commerce
facilities. With increasing technological advancements and the cost
challenges associated with having the IT services in-house, we
believe the future seems optimistic for managed services
providers.
Our strategy is to continue to expand our product offerings to the
small and medium sized business marketplace, and to increase our
scale and capabilities via acquisition throughout the United
States, but initially in those regions where we currently have
existing offices.
Geographic Expansion
Generally, our technology offerings require some on-premise
implementation and support. When we expand into new geographic
territories, we prefer to find qualified personnel in an area to
augment our current staff of consultants to service our business.
The need for hands-on implementation and support may also require
investment in additional physical offices and other overhead. We
believe our approach is conservative.
We may accelerate expansion if we find complementary businesses
that we are able to acquire in other regions. Our marketing efforts
to expand into new territories have included attendance at trade
shows in addition to personal contact.
Our Products and Services
Enterprise Resource Planning Software
Substantially all our initial sales of ERP financial accounting
solutions consist of pre-packaged software and associated services
to customers in the United States.
The Company resells ERP software published by Sage Software,
Acumatica and other providers for the financial accounting
requirements of small- and medium-sized businesses focused on
manufacturing and distribution, and the delivery of related
services from the sales of these products, including installation,
support and training. The programs perform and support a wide
variety of functions related to accounting, including financial
reporting, accounts payable and accounts receivable, and inventory
management.
We provide a variety of services along with our financial
accounting software sales to assist our customers in maximizing the
benefits from these software applications. These services include
training, technical support, and professional services. We
employ class instructors and have formal, specific training in the
topics they are teaching. We can also provide on-site training
services that are highly tailored to meet the needs of a particular
customer. Our instructors must pass annual subject-matter
examinations required by Sage to retain their product-based
teaching certifications.
We provide end-user technical support services through our
support/help desk. Our product and technology consultants
assist customers calling with questions about product features,
functions, usability issues, and configurations. The support/help
desk offers services in a variety of ways, including prepaid
services, time and materials billed as utilized and annual support
contracts. Customers can communicate with the support/help desk
through e-mail, telephone, and fax channels. Standard support/help
desk services are offered during normal business hours five (5)
days per week.
Warehouse Management Systems
We are resellers of the Accellos Warehouse Management System
software published by High Jump, Inc. (“High Jump”). High Jump
develops warehouse management software for mid-market distributors.
The primary purpose of a WMS is to control the movement and storage
of materials within an operation and process the associated
transactions. Directed picking, directed replenishment, and
directed put-away are the key to WMS. The detailed setup and
processing within a WMS can vary significantly from one software
vendor to another. However, the basic WMS will use a
combination of item, location, quantity, unit of measure, and order
information to determine where to stock, where to pick, and in what
sequence to perform these operations.
The Accellos WMS software improves accuracy and efficiency,
streamlines materials handling, meets retail compliance
requirements, and refines inventory control. Accellos also
works as part of a complete operational solution by integrating
seamlessly with radio frequency hardware, accounting software,
shipping systems and warehouse automation equipment.
We market the Accellos solution to our existing and new
medium-sized business customers.
IT Managed Network Services and Business Consulting
We provide IT managed services, cybersecurity, business continuity,
disaster recovery, data back-up, network maintenance and service
upgrades for our business clients. We are a Microsoft
Solutions Provider. Our staff includes engineers who maintain
certifications from Microsoft and Sage Software. They are
Microsoft Certified Systems Engineers and Microsoft Certified
Professionals, and they provide a host of services for our clients,
including remote network monitoring, server implementation, support
and assistance, operation and maintenance of large central systems,
technical design of network infrastructure, technical
troubleshooting for large scale problems, network and server
security, and backup, archiving, and storage of data from
servers. There are numerous competitors, both larger and
smaller, nationally and locally, with whom we compete in this
market.
Cybersecurity
We provide enterprise level security services to the
mid-market. Our cybersecurity-as-a-service offering includes
a security operations center, incident response, cybersecurity
assessments, and hacking simulations. The service is
particularly well-suited for customers in compliance-driven and
regulated industries, including financial services, pension
administration, insurance, and the land and title sector.
Application Hosting
Through our wholly owned subsidiary, Secure Cloud Services, Inc.,
we acquired the assets of Nellnube, Inc. to further market
application hosting services throughout the country.
Product Development
We are continually looking to improve and develop new products. Our
product initiatives include various new product offerings, which
are either extensions of existing products or newly conceptualized
product offerings. We are using a dual-shore development approach
to keep product development costs at a minimum. All our
product development is led by U.S. based employees. The
project leaders are technical resources who are involved in
developing technical specifications, design decisions, usability
testing, and transferring the project knowledge to our offshore
development team. Several times per week, the product
development leadership team meets with our project leaders and
development teams to discuss project status, development obstacles,
and project timelines.
Arrangements with Principal Suppliers
Our revenues are primarily derived from the resale of vendor
software products and services. These resales are made pursuant to
channel sales agreements whereby we are granted authority to
purchase and resell the vendor products and services. Under
these agreements, we either resell software directly to our
customers or act as a sales agent for various vendors and receive
commissions for our sales efforts.
We are required to enter into an annual Channel Partner Agreement
with Sage Software whereby Sage Software appoints us as a
non-exclusive partner to market, distribute, and support Sage
100cloud, Sage 500 ERP and Sage X3. The Channel Partner Agreement
is for a one-year term, and automatically renews for an additional
one-year term on the anniversary of the agreement’s effective date.
These agreements authorize us to sell these software products to
customers in the United States. There are no clauses in this
agreement that limit or restrict the services that we can offer to
customers. We also operate a Sage Software Authorized Training
Center Agreement and also are party to a Master Developers Program
License Agreement.
For the years ended December 31, 2019 and 2018, purchases from Sage
Software were approximately 24% and 19%, respectively, of the
Company’s total cost of revenue. Generally, the Company does
not rely on any one specific supplier for all its purchases and
maintains relationships with other suppliers that could replace its
existing supplier should the need arise.
Customers
We market our products primarily throughout North America.
For the years ended December 31, 2019 and 2018, our top ten (10)
customers accounted for 10% ($3,903,702) and 14% ($5,219,755),
respectively, of our total revenues. Generally, we do not rely
on any one specific customer for any significant portion of our
revenue base. No single customer accounted for ten percent or more
of our consolidated revenues base.
Intellectual Property
We regard our technology and other proprietary rights as essential
to our business. We rely on copyright, trade secret,
confidentiality procedures, contract provisions, and trademark law
to protect our technology and intellectual property. We have also
entered into confidentiality agreements with our consultants and
corporate partners and intend to control access to, and
distribution of our products, documentation, and other proprietary
information.
Competition
Our markets are highly fragmented, and the business is
characterized by a large number of participants, including several
large companies, as well significant number of small,
privately-held, local competitors. A significant portion of our
revenue is currently derived from requests for proposals (“RFPs”)
and price is often an important factor in awarding such agreements.
Accordingly, our competitors may underbid us if they elect to price
their services aggressively to procure such business. Our
competitors may also develop the expertise, experience and
resources to provide services that are equal or superior in both
price and quality to our services, and we may not be able to
enhance our competitive position. The principal competitive
factors for our professional services include geographic presence,
breadth of service offerings, technical skills, quality of service
and industry reputation. We believe we compete favorably with our
competitors on the basis of these factors.
Employees
As of March 25, 2020, we had approximately 157 full time employees
with 47 of our employees engaged in sales and marketing activities,
75 employees are engaged in service fulfillment, and 35 employees
performing administrative functions.
Our future success depends in significant part upon the continued
services of our key sales, technical, and senior management
personnel and our ability to attract and retain highly qualified
sales, technical, and managerial personnel. None of our employees
are represented by a collective bargaining agreement and we have
never experienced a work stoppage.
Our Corporate History
We were incorporated on October 3, 2002, as a wholly owned
subsidiary of iVoice, Inc. (“iVoice”). On February 11, 2004,
the Company was spun off from iVoice and became an independent
publicly traded company. On September 5, 2003, we changed our
corporate name to Trey Resources, Inc. In March 2004, Trey
Resources, Inc. began trading on the OTCBB under the symbol
TYRIA.OB. In June 2011, we changed our name to SilverSun
Technologies, Inc., trading under the symbol SSNT.
Prior to June 2004, we were engaged in the design, manufacture, and
marketing of specialized telecommunication equipment. On June 2,
2004, our wholly-owned subsidiary, SWK Technologies, Inc. (“SWK”)
completed its acquisition of SWK, Inc. Since the acquisition of
SWK, Inc. we have focused on three (3) core business sectors,
including acting as the following: (i) a managed service provider
for computer networks, providing cybersecurity, 24/7 remote
monitoring of networks, data backup, hosting, and business
continuity and disaster recovery services; and (ii) a value added
reseller and master developer for Sage Software’s Sage 100cloud,
Sage 500 ERP and Sage EM (formerly Sage ERP X3) enterprise resource
planning (“ERP”) financial software. We also publish twenty (20)
other assorted software solutions. We focus on the business
application software and the information technology consulting
market for small and medium-sized businesses (“SMB’s”), selling
services and products to various end users, manufacturers,
wholesalers and distributors located throughout the United
States.
Our strategy is to grow our business through a combination of
intra-company growth of our software applications and technology
solutions, as well as expansion through acquisitions, both within
our existing geographic reach and through geographic expansion. To
that end, since 2006, we have completed a number of acquisitions
that have increased our client base, technical expertise and
geographic footprint.
On June 2, 2006, SWK completed the acquisition of certain assets of
AMP-Best Consulting, Inc. (“AMP”) of Syracuse, New York. AMP
is an information technology company and value-added reseller of
licensed ERP software published by Sage Software. AMP sold
services and products to various end users, manufacturers,
wholesalers and distribution industry clients located throughout
the United States, with special emphasis on companies located in
the upstate New York region.
During 2011, SWK acquired Sage’s Software’s customer accounts in
connection with IncorTech, LLC (“IncorTech”), a Southern
California-based Sage business partner. This transaction increased
our geographical influence in Southern California for the sale and
support of our MAPADOC integrated EDI solution and the marketing of
our Sage EM (formerly Sage ERP X3) to both former IncorTech
customers as well as new consumers. IncorTech had previously
provided professional accounting, technology, and business
consulting services to over 300 clients.
In June 2012, SWK acquired selected assets and obligations of
Hightower, Inc., a Chicago-based reseller of Sage software
applications. In addition to the strategic geographic benefits that
this acquisition brings to SWK, there is also a substantial suite
of proprietary enhancement software solutions.
In May 2014, we completed the purchase of selected assets of ESC
Software (“ESC”), a leading Arizona-based reseller of Sage Software
and Acumatica applications. Founded in 2000, ESC has implemented
technology solutions at prominent companies throughout the
Southwest. In addition to the strategic benefits of this
acquisition, it has given us additional annual
revenues, approximately 300 additional Sage Software ERP
customers and affords us market penetration in the Southwest.
On March 11, 2015 SWK entered into an Asset Purchase Agreement with
2000 SOFT, Inc. d/b/a Accounting Technology Resource (“ATR”), a
California corporation. In addition to the strategic geographic
benefits of this acquisition, it has provided additional revenues
from the approximately 250 additional customers.
On July 6, 2015 SWK entered into an Asset Purchase Agreement with
ProductiveTech, Inc. (“PTI”), a Southern New Jersey corporation. In
addition to the strategic geographic benefits of this acquisition,
it has provided additional revenues from the approximately 85
additional customers.
On October 1, 2015, SWK entered into an Asset Purchase Agreement
with The Macabe Associates, Inc., (“Macabe”) a Washington based
reseller of Sage Software and Acumatica applications. In addition
to the strategic geographic benefits of this acquisition, it has
provided additional revenues from the approximately 180 additional
customers.
On October 19, 2015, SWK entered into an Asset Purchase Agreement
with Oates & Company, (“Oates”) a North Carolina reseller of
Sage Software applications. In addition to the strategic geographic
benefits of this acquisition, it has provided additional revenues
from the approximately 185 additional customers.
On May 31, 2018, SWK entered into an Asset Purchase Agreement with
Info Sys Management, Inc., (“ISM”) an Oregon based reseller of Sage
Software and Acumatica applications. In addition to the strategic
geographic benefits of this acquisition, it has provided additional
revenues from the approximately 700 additional customers.
In May 2018, the Company formed a wholly owned subsidiary, Secure
Cloud Services, Inc. (“SCS”), a Nevada corporation, for the purpose
of providing application hosting services. On May 31, 2018, Secure
Cloud Services entered into an Asset Purchase Agreement with
Nellnube, Inc. (“Nellnube”) an Oregon based application hosting
provider.
In May 2018, the Company formed a wholly owned subsidiary, Critical
Cyber Defense Corp. (“CCD”), a Nevada corporation, for the purpose
of providing cyber defense products and services.
On January 1, 2019, SWK entered into an Asset Purchase Agreement
with Partners in Technology, Inc., (PIT) an Illinois based reseller
of Sage Software. In addition to the strategic geographic benefits
of this acquisition, it has provided additional revenues from the
approximately 170 additional customers.
On August 26, 2019 SWK entered into and closed that certain Asset
Purchase Agreement (the “MAPADOC Asset Purchase Agreement”) by and
among the Company, SPS Commerce, Inc., as buyer (“SPS”), and SWK as
seller, pursuant to which SPS agreed to acquire from SWK
substantially all of the assets related to the MAPADOC
business.
Where You Can Find More Information
Our website address is www.silversuntech.com. We do not
intend our website address to be an active link or to otherwise
incorporate by reference the contents of the website into this
Report. The public may read and copy any materials the Company
files with the U.S. Securities and Exchange Commission (the “SEC”)
at the SEC’s Public Reference Room at 100 F Street, NE, Washington,
DC 20549. The public may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0030. The SEC
maintains an Internet website (http://www.sec.gov) that contains
reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC.
Item 1A. Risk Factors.
Risks Relating to our Business
We have a large accumulated deficit, may incur future losses
and may be unable to maintain profitability.
As of December 31, 2019, and December 31, 2018, we had an
accumulated deficit of $635,584 and $7,429,810, respectively. As of
December 31, 2019, and December 31, 2018 we had stockholders’
equity of $8,894,660 and $4,334,160 respectively. We may incur net
losses in the future. Our ability to achieve and sustain long-term
profitability is largely dependent on our ability to successfully
market and sell our products and services, control our costs, and
effectively manage our growth. We cannot assure you that we will be
able to maintain profitability. In the event we fail to maintain
profitability, our stock price could decline.
We cannot accurately forecast our future revenues and
operating results, which may fluctuate.
Our operating history and the rapidly changing nature of the
markets in which we compete make it difficult to accurately
forecast our revenues and operating results. Furthermore, we
expect our revenues and operating results to fluctuate in the
future due to a number of factors, including the following:
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the timing of sales of our products and services;
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the timing of product implementation, particularly large design
projects;
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unexpected delays in introducing new products and services;
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increased expenses, whether related to sales and marketing, product
development, or administration;
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the mix of product license and services revenue; and
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costs related to possible acquisitions of technology or
businesses.
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We may fail to develop new products, or may incur unexpected
expenses or delays.
Although we currently have fully developed products available for
sale, we may need to develop various new technologies, products and
product features and to remain competitive. Due to the risks
inherent in developing new products and technologies — limited
financing, loss of key personnel, and other factors — we may fail
to develop these technologies and products, or may experience
lengthy and costly delays in doing so. Although we are able to
license some of our technologies in their current stage of
development, we cannot assure that we will be able to develop new
products or enhancements to our existing products in order to
remain competitive.
We may need additional financing which we may not be able to
obtain on acceptable terms. If we are unable to raise additional
capital, as needed, the future growth of our business and
operations could be severely limited.
A limiting factor on our growth is our limited capitalization,
which could impact our ability to execute on our business plan. If
we raise additional capital through the issuance of debt, this will
result in increased interest expense. If we raise additional funds
through the issuance of equity or convertible debt securities, the
percentage ownership of the Company held by existing shareholders
will be reduced and our shareholders may experience significant
dilution. In addition, new securities may contain rights,
preferences or privileges that are senior to those of our Common
Stock. If additional funds are raised by the issuance of debt or
other equity instruments, we may become subject to certain
operational limitations (for example, negative operating
covenants). There can be no assurance that acceptable financing
necessary to further implement our business plan can be obtained on
suitable terms, if at all. Our ability to develop our business,
fund expansion, develop or enhance products or respond to
competitive pressures, could suffer if we are unable to raise the
additional funds on acceptable terms, which would have the effect
of limiting our ability to increase our revenues or possibly attain
profitable operations in the future.
If we fail to maintain an effective system of internal
control, we may not be able to report our financial results
accurately or to reduce probability of fraud occurrence. Any
inability to report and file our financial results accurately and
timely could harm our reputation and adversely impact the trading
price of our Common Stock.
Effective internal control is necessary for us to provide reliable
financial reports and prevent fraud. We may not be able to manage
our business as effectively as we would if an effective control
environment existed, and our business and reputation with investors
may be harmed.
Management has concluded that the Company did maintain effective
internal control over financial reporting as of December 31, 2019,
based on the criteria set forth in 2013 Internal Control—Integrated
Framework issued by the COSO.
We may fail to recruit and retain qualified
personnel.
We expect to rapidly expand our operations and grow our sales,
development and administrative operations. Accordingly, recruiting
and retaining such personnel in the future will be critical to our
success. There is intense competition from other companies for
qualified personnel in the areas of our activities, particularly
sales, marketing and managed services. If we fail to identify,
attract, retain and motivate these highly skilled personnel, we may
be unable to continue our marketing and managed services activities
and service our clients’ needs, and this could have a material
adverse effect on the Company’s business, financial condition,
results of operations and future prospects.
If our technologies and products contain defects or otherwise
do not work as expected, we may incur significant expenses in
attempting to correct these defects or in defending lawsuits over
any such defects.
Software products are not currently accurate in every instance, and
may never be. Furthermore, we could inadvertently release
products and technologies that contain defects. In addition,
third-party technology that we include in our products could
contain defects. We may incur significant expenses to correct
such defects. Clients who are not satisfied with our products
or services could bring claims against us for substantial
damages. Such claims could cause us to incur significant legal
expenses and, if successful, could result in the plaintiffs being
awarded significant damages. Our payment of any such expenses
or damages could prevent us from becoming profitable.
Our success is highly dependent upon our ability to compete
against competitors that have significantly greater resources than
we have.
The ERP software, MSP and business consulting industries are highly
competitive, and we believe that this competition will
intensify. Many of our competitors have longer operating
histories, significantly greater financial, technical, product
development and marketing resources, greater name recognition and
larger client bases than we do. Our competitors could use
these resources to market or develop products or services that are
more effective or less costly than any or all of our products or
services or that could render any or all of our products or
services obsolete. Our competitors could also use their
economic strength to influence the market to continue to buy their
existing products.
If we are not able to protect our trade secrets through
enforcement of our confidentiality and non-competition agreements,
then we may not be able to compete effectively, and we may not be
profitable.
We attempt to protect our trade secrets, including the processes,
concepts, ideas and documentation associated with our technologies,
through the use of confidentiality agreements and non-competition
agreements with our current employees and with other parties to
whom we have divulged such trade secrets. If the employees or
other parties breach our confidentiality agreements and
non-competition agreements or if these agreements are not
sufficient to protect our technology or are found to be
unenforceable, our competitors could acquire and use information
that we consider to be our trade secrets and we may not be able to
compete effectively. Some of our competitors have
substantially greater financial, marketing, technical and
manufacturing resources than we have, and we may not be profitable
if our competitors are also able to take advantage of our trade
secrets.
Our failure to secure trademark registrations could adversely
affect our ability to market our product candidates and our
business.
Our trademark applications in the United States and any other
jurisdictions where we may file may be denied, and we may not be
able to maintain or enforce our registered trademarks. During
trademark registration proceedings, we may receive rejections.
Although we are given an opportunity to respond to those
rejections, we may be unable to overcome such rejections. In
addition, with respect to the United States Patent and Trademark
Office and any corresponding foreign agencies, third parties are
given an opportunity to oppose pending trademark applications and
to seek to cancel registered trademarks. Opposition or cancellation
proceedings may be filed against our applications and/or
registrations, and our applications and/or registrations may not
survive such proceedings. Failure to secure such trademark
registrations in the United States and in foreign jurisdictions
could adversely affect our ability to market our product candidates
and our business.
We may unintentionally infringe on the proprietary rights of
others.
Many lawsuits currently are being brought in the software industry
alleging violation of intellectual property rights. Although
we do not believe that we are infringing on any patent rights,
patent holders may claim that we are doing so. Any such claim
would likely be time-consuming and expensive to defend,
particularly if we are unsuccessful, and could prevent us from
selling our products or services. In addition, we may also be
forced to enter into costly and burdensome royalty and licensing
agreements.
Our industry is characterized by rapid technological change
and failure to adapt our product development to these changes may
cause our products to become obsolete.
We participate in a highly dynamic industry characterized by rapid
change and uncertainty relating to new and emerging technologies
and markets. Future technology or market changes may cause some of
our products to become obsolete more quickly than expected.
The trend toward consolidation in our industry may impede our
ability to compete effectively.
As consolidation in the software industry continues, fewer
companies dominate particular markets, changing the nature of the
market and potentially providing consumers with fewer
choices. Also, many of these companies offer a broader range
of products than us, ranging from desktop to enterprise
solutions. We may not be able to compete effectively against
these competitors. Furthermore, we may use strategic
acquisitions, as necessary, to acquire technology, people and
products for our overall product strategy. The trend toward
consolidation in our industry may result in increased competition
in acquiring these technologies, people or products, resulting in
increased acquisition costs or the inability to acquire the desired
technologies, people or products. Any of these changes may have a
significant adverse effect on our future revenues and operating
results.
We face intense price-based competition for licensing of our
products which could reduce profit margins.
Price competition is often intense in the software market. Price
competition may continue to increase and become even more
significant in the future, resulting in reduced profit margins.
The software and technology industry is highly competitive.
If we cannot develop and market desirable products that the public
is willing to purchase, we will not be able to compete
successfully. Our business may be adversely affected and we may not
be able to generate any revenues.
We have many potential competitors in the software industry. We
consider the competition to be competent, experienced, and may have
greater financial and marketing resources than we do. Our ability
to compete effectively may be adversely affected by the ability of
these competitors to devote greater resources to the development,
sales, and marketing of their products than are available to us.
Some of the Company’s competitors, also, offer a wider range of
software products, have greater name recognition and more extensive
customer bases than the Company. These competitors may be able to
respond more quickly to new or changing opportunities, customer
desires, as well as undertake more extensive promotional
activities, offer terms that are more attractive to customers and
adopt more aggressive pricing policies than the Company. We cannot
provide any assurances that we will be able to compete successfully
against present or future competitors or that the competitive
pressure we may encounter will not force us to cease
operations.
If there are events or circumstances affecting the
reliability or security of the internet, access to our website
and/or the ability to safeguard confidential information could be
impaired causing a negative effect on the financial results of our
business operations.
Despite the implementation of security measures, our website
infrastructure may be vulnerable to computer viruses, hacking or
similar disruptive problems caused by members, other internet
users, other connected internet sites, and the interconnecting
telecommunications networks. Such problems caused by third-parties
could lead to interruptions, delays or cessation of service to our
customers. Inappropriate use of the internet by third-parties could
also potentially jeopardize the security of confidential
information stored in our computer system, which may deter
individuals from becoming customers. Such inappropriate use of the
internet includes attempting to gain unauthorized access to
information or systems, which is commonly known as “cracking” or
“hacking.” Although we have implemented security measures, such
measures have been circumvented in the past by hackers on other
websites on the internet, although our networks have never been
breached, and there can be no assurance that any measures we
implement would not be circumvented in future. Dealing with
problems caused by computer viruses or other inappropriate uses or
security breaches may require interruptions, delays or cessation of
service to our customers, which could have a material adverse
effect on our business, financial condition and results of
operations.
If we lose the services of any of our key personnel our
business may suffer.
We are dependent on Mark Meller, our Chief Executive Officer, and
other key employees in our operating subsidiary SWK. The
loss of any of our key personnel could materially harm our business
because of the cost and time necessary to retain and train a
replacement. Such a loss would also divert management
attention away from operational issues.
To service our debt obligations, we will require a
significant amount of cash. Our ability to generate cash depends on
many factors beyond our control. Any failure to repay our
outstanding indebtedness as it matures, could materially adversely
impact our business, prospects, financial condition, liquidity,
results of operations and cash flows.
Our ability to satisfy our debt obligations and repay or refinance
our maturing indebtedness will depend principally upon our future
operating performance.
As a result, prevailing economic conditions and financial,
business, legislative, regulatory and other factors, many of which
are beyond our control, will affect our ability to make payments on
our debt. If we do not generate sufficient cash flow from
operations to satisfy our debt service obligations, we may have to
undertake alternative financing plans, such as refinancing or
restructuring our debt, incurring additional debt, issuing equity
or convertible securities, reducing discretionary
expenditures and selling certain assets (or combinations thereof).
Our ability to execute such alternative financing plans will depend
on the capital markets and our financial condition at such time. In
addition, our ability to execute such alternative financing plans
may be subject to certain restrictions under our existing
indebtedness. Any refinancing of our debt could be at higher
interest rates and may require us to comply with more onerous
covenants compared to those associated with any debt that is being
refinanced, which could further restrict our business operations.
Our inability to generate sufficient cash flow to satisfy our debt
obligations, or our inability to refinance our debt obligations on
commercially reasonable terms or at all, would have a material
adverse effect on our business, prospects, financial condition,
liquidity, results of operations and cash flows.
Computer Malware, Viruses, Hacking, Phishing Attacks and
Spamming Could Harm Our Business and Results of
Operations.
Computer malware, viruses, physical or electronic break-ins and
similar disruptions could lead to interruption and delays in our
services and operations and loss, misuse or theft of data. Computer
malware, viruses, computer hacking and phishing attacks against
online networking platforms have become more prevalent and may
occur on our systems in the future.
Any attempts by hackers to disrupt our website service or our
internal systems, if successful, could harm our business, be
expensive to remedy and damage our reputation or brand. Our network
security business disruption insurance may not be sufficient to
cover significant expenses and losses related to direct attacks on
our website or internal systems. Efforts to prevent hackers from
entering our computer systems are expensive to implement and may
limit the functionality of our services. Though it is difficult to
determine what, if any, harm may directly result from any specific
interruption or attack, any failure to maintain performance,
reliability, security and availability of our products and services
and technical infrastructure may harm our reputation, brand and our
ability to attract customers. Any significant disruption to our
website or internal computer systems could result in a loss of
customers and could adversely affect our business and results of
operations.
We have previously experienced, and may in the future experience,
service disruptions, outages and other performance problems due to
a variety of factors, including infrastructure changes, third-party
service providers, human or software errors and capacity
constraints. If our services are unavailable when customers attempt
to access them or they do not load as quickly as they expect,
customers may seek other services.
Some errors in our software code may only be discovered after the
code has been deployed. Any errors, bugs, or vulnerabilities
discovered in our code after deployment, inability to identify the
cause or causes of performance problems within an acceptable period
of time or difficultly maintaining and improving the performance of
our platform, particularly during peak usage times, could result in
damage to our reputation or brand, loss of revenues, or liability
for damages, any of which could adversely affect our business and
financial results.
We expect to continue to make significant investments to maintain
and improve our software and to enable rapid releases of new
features and products. To the extent that we do not effectively
address capacity constraints, upgrade our systems as needed and
continually develop our technology and network architecture to
accommodate actual and anticipated changes in technology, our
business and operating results may be harmed.
We have a disaster recovery program to transition our operating
platform and data to a failover location in the event of a
catastrophe and have tested this capability under controlled
circumstances, however, there are several factors ranging from
human error to data corruption that could materially lengthen the
time our platform is partially or fully unavailable to our user
base as a result of the transition. If our platform is unavailable
for a significant period of time as a result of such a transition,
especially during peak periods, we could suffer damage to our
reputation or brand, or loss of revenues any of which could
adversely affect our business and financial results.
We Need to Manage Growth in Operations to Realize Our Growth
Potential and Achieve Our Expected Revenues, and Our Failure to
Manage Growth Will Cause a Disruption of Our Operations Resulting
in the Failure to Generate Revenue and an Impairment of Our
Long-Lived Assets.
In order to take advantage of the growth that we anticipate in our
current and potential markets, we believe that we must expand our
sales and marketing operations. This expansion will place a
significant strain on our management and our operational,
accounting, and information systems. We expect that we will need to
continue to improve our financial controls, operating procedures
and management information systems. We will also need to
effectively train, motivate and manage our employees. Our failure
to manage our growth could disrupt our operations and ultimately
prevent us from generating the revenues we expect.
In order to achieve the above-mentioned targets, the general
strategies of our Company are to maintain and search for
hard-working employees who have innovative initiatives, as well as
to keep a close eye on expansion opportunities through merger
and/or acquisition.
There is a risk associated with COVID-19
The Company’s operations may be affected by the recent and ongoing
outbreak of the coronavirus disease 2019 (COVID-19) which in March
2020, was been declared a pandemic by the World Health
Organization. The ultimate disruption which may be caused by the
outbreak is uncertain; however, it may result in a material adverse
impact on the Company’s financial position, operations and cash
flows. Possible areas that may be affected include, but are not
limited to, disruption to the Company’s customers and revenue,
labor workforce, unavailability of products and supplies used in
operations, and the decline in value of assets held by the Company,
including property and equipment.
We Face Risks Arising From Acquisitions.
We may pursue strategic acquisitions in the future. Risks in
acquisition transactions include difficulties in the integration of
acquired businesses into our operations and control environment,
difficulties in assimilating and retaining employees and
intermediaries, difficulties in retaining the existing clients of
the acquired entities, assumed or unforeseen liabilities that arise
in connection with the acquired businesses, the failure of
counterparties to satisfy any obligations to indemnify us against
liabilities arising from the acquired businesses, and unfavorable
market conditions that could negatively impact our growth
expectations for the acquired businesses. Fully integrating an
acquired company or business into our operations may take a
significant amount of time. We cannot assure you that we will be
successful in overcoming these risks or any other problems
encountered with acquisitions and other strategic transactions.
These risks may prevent us from realizing the expected benefits
from acquisitions and could result in the failure to realize the
full economic value of a strategic transaction or the impairment of
goodwill and/or intangible assets recognized at the time of an
acquisition. These risks could be heightened if we complete a large
acquisition or multiple acquisitions within a short period of
time.
Risks Related To Our Securities
The market price of our common stock is likely to be volatile
and could subject us to litigation.
The market price of our common stock has been and is likely to
continue to be subject to wide fluctuations. Factors affecting the
market price of our common stock include:
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variations in our operating results, earnings per share, cash flows
from operating activities, deferred revenue, and other financial
metrics and non-financial metrics, and how those results compare to
analyst expectations;
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issuances of new stock which dilutes earnings per share;
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forward looking guidance to industry and financial analysts related
to future revenue and earnings per share;
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the net increases in the number of customers and paying
subscriptions, either independently or as compared with published
expectations of industry, financial or other analysts that cover
our company;
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changes in the estimates of our operating results or changes in
recommendations by securities analysts that elect to follow our
common stock;
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announcements of technological innovations, new services or service
enhancements, strategic alliances or significant agreements by us
or by our competitors;
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announcements by us or by our competitors of mergers or other
strategic acquisitions, or rumors of such transactions involving us
or our competitors;
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announcements of customer additions and customer cancellations or
delays in customer purchases;
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recruitment or departure of key personnel;
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trading activity by a limited number of stockholders who together
beneficially own a majority of our outstanding common stock.
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In addition, if the stock market in general experiences uneven
investor confidence, the market price of our common stock could
decline for reasons unrelated to our business, operating results or
financial condition. The market price of our common stock might
also decline in reaction to events that affect other companies
within, or outside, our industries even if these events do not
directly affect us. Some companies that have experienced volatility
in the trading price of their stock have been the subject of
securities class action litigation. If we are to become the subject
of such litigation, it could result in substantial costs and a
diversion of management’s attention and resources.
We currently have a limited trading volume, which results in
higher price volatility for, and reduced liquidity of, our common
stock.
There has been limited trading of our common stock since we began
trading on the NASDAQ Capital Market in April 2017, meaning that
the number of persons interested in purchasing our common stock at
or near ask prices at any given time may be relatively small or
non-existent. This situation is attributable to a number of
factors, including the fact that we are a smaller reporting company
that is relatively unknown to stock analysts, stock brokers,
institutional investors and others in the investment community who
generate or influence sales volume. Even in the event that we come
to the attention of such persons, they would likely be reluctant to
follow an unproven company such as ours or purchase or recommend
the purchase of our shares until such time as we become more
seasoned and viable. As a consequence, our stock price may not
reflect an actual or perceived value. Also, there may be periods of
several days or more when trading activity in our shares is minimal
or non-existent, as is currently the case, as compared to a
seasoned issuer that has a large and steady volume of trading
activity that will generally support continuous sales without an
adverse effect on share price. A broader or more active public
trading market for our common shares may not develop or if
developed, may not be sustained. Due to these conditions, you may
not be able to sell your shares at or near ask prices or at all if
you need money or otherwise desire to liquidate your shares.
Although our shares have been approved for listing on the
NASDAQ Capital Market, our shares may be subject to potential
delisting if we do not meet or continue to maintain the listing
requirements of the NASDAQ Capital Market.
Our shares have been approved for and currently trading on The
Nasdaq Capital Market (“Nasdaq”); however Nasdaq has rules for
continued listing, including, without limitation, minimum market
capitalization and other requirements. Failure to maintain our
listing, or delisting from Nasdaq, would make it more difficult for
shareholders to dispose of our common stock and more difficult to
obtain accurate price quotations on our common stock. This could
have an adverse effect on the price of our common stock. Our
ability to issue additional securities for financing or other
purposes, or otherwise to arrange for any financing we may need in
the future, may also be materially and adversely affected if our
common stock is not traded on a national securities exchange.
In order to raise sufficient funds to expand our operations,
we may have to issue additional securities at prices which may
result in substantial dilution to our shareholders.
If we raise additional funds through the sale of equity or
convertible debt, our current stockholders’ percentage ownership
will be reduced. In addition, these transactions may dilute the
value of our common shares outstanding. We may also have to issue
securities that may have rights, preferences and privileges senior
to our common stock.
Possible adverse effect of issuance of preferred
stock.
Our Certificate of Incorporation authorizes the issuance of
1,000,000 shares of preferred stock, of which all shares are
available for issuance, with designations, rights and preferences
as determined from time to time by the Board of Directors. As a
result of the foregoing, the Board of Directors can issue, without
further shareholder approval, preferred stock with dividend,
liquidation, conversion, voting or other rights that could
adversely affect the voting power or other rights of the holders of
Common Stock. The issuance of preferred stock could, under certain
circumstances, discourage, delay or prevent a change in control of
the Company.
Our stock price could fall and we could be delisted from the
NASDAQ in which case U.S. Broker-Dealers may be discouraged from
effecting transactions in shares of our common stock because they
may be considered penny stocks and thus be subject to the penny
stock rules.
The SEC has adopted a number of rules to regulate “penny stock”
that restricts transactions involving stock which is deemed to be
penny stock. Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3,
15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities and
Exchange Act of 1934, as amended. These rules may have the effect
of reducing the liquidity of penny stocks. “Penny stocks” generally
are equity securities with a price of less than $5.00 per share
(other than securities registered on certain national securities
exchanges or quoted on the NASDAQ Stock Market if current price and
volume information with respect to transactions in such securities
is provided by the exchange or system). Our securities have in the
past constituted, and may again in the future constitute, “penny
stock” within the meaning of the rules. The additional sales
practice and disclosure requirements imposed upon U.S.
broker-dealers may discourage such broker-dealers from effecting
transactions in shares of our common stock, which could severely
limit the market liquidity of such shares and impede their sale in
the secondary market.
A U.S. broker-dealer selling penny stock to anyone other than an
established customer or “accredited investor” (generally, an
individual with net worth in excess of $1,000,000 or an annual
income exceeding $200,000, or $300,000 together with his or her
spouse) must make a special suitability determination for the
purchaser and must receive the purchaser’s written consent to the
transaction prior to sale, unless the broker-dealer or the
transaction is otherwise exempt. In addition, the “penny stock”
regulations require the U.S. broker-dealer to deliver, prior to any
transaction involving a “penny stock”, a disclosure schedule
prepared in accordance with SEC standards relating to the “penny
stock” market, unless the broker-dealer or the transaction is
otherwise exempt. A U.S. broker-dealer is also required to disclose
commissions payable to the U.S. broker-dealer and the registered
representative and current quotations for the securities. Finally,
a U.S. broker-dealer is required to submit monthly statements
disclosing recent price information with respect to the “penny
stock” held in a customer’s account and information with respect to
the limited market in “penny stocks”.
Stockholders should be aware that, according to SEC, the market for
“penny stocks” has suffered in recent years from patterns of fraud
and abuse. Such patterns include (i) control of the market for the
security by one or a few broker-dealers that are often related to
the promoter or issuer; (ii) manipulation of prices through
prearranged matching of purchases and sales and false and
misleading press releases; (iii) “boiler room” practices involving
high-pressure sales tactics and unrealistic price projections by
inexperienced sales persons; (iv) excessive and undisclosed bid-ask
differentials and markups by selling broker-dealers; and (v) the
wholesale dumping of the same securities by promoters and
broker-dealers after prices have been manipulated to a desired
level, resulting in investor losses. Our management is aware of the
abuses that have occurred historically in the penny stock market.
Although we do not expect to be in a position to dictate the
behavior of the market or of broker-dealers who participate in the
market, management will strive within the confines of practical
limitations to prevent the described patterns from being
established with respect to our securities.
Item 1B. Unresolved Staff
Comments.
Not applicable.
Item 2. Properties.
On March 1, 2017, the Company entered into a new operating lease
agreement for its main office located at 120 Eagle Rock Avenue,
East Hanover, NJ 07936. The main office premises consist of 5,129
square feet of office space at a monthly rent starting at $8,762
and escalating to $10,044 per month by the end of the term April
30, 2024. On September 11, 2017, the Company entered into an
operating lease agreement for an additional 1,870 square feet of
office space at 120 Eagle Rock Ave, East Hanover, NJ (suite 302)
commencing October 1, 2017 with a monthly rent of $3,506 for a
period of one year. This lease was extended for a period of one
month at $4,675.
On October 24, 2017 the Company entered into a lease for $3,584 per
month for one year beginning November 1, 2018 for the additional
space at 120 Eagle Rock Ave (suite 302). It was subsequently
extended on February 1, 2020 for five years starting while
extending the rental space to 3,516 square feet at $6,153 per month
and escalating to $ 6,886 per month by the end of the term.
The Company leases office space in Syracuse, NY, at a monthly rent
of $2,300. The lease expired on May 31, 2018 and was
subsequently extended for a three-year term commencing June 1, 2018
and ending May 31, 2021.
The Company leases 2,105 square feet of office space in Phoenix, AZ
starting at $1,271 and escalating to $2,982 per month by the end of
the term September 30, 2020.
The Company leased 3,422 square feet of office space in Greensboro,
NC with a monthly rent of $4,182 a month. The lease expired
February 28, 2017 and was extended after reducing the rental space
to 2,267 square feet at a monthly rent of $2,765 per month. The
extension expired February 28, 2020 and was renewed for a term of
three years at a rate of $3,022 per month.
The Company leases 6,115 square feet of office space in Thorofare,
NJ starting at $4,591 per month and escalating to $5,168 per month
by the end of the term February 28, 2022.
The Company leases office space in Seattle, WA with a monthly
rent of $2,066. The lease expires May 31, 2020.
The Company leases office space in Chicago, IL with a monthly rent
of $582. The lease expires May 31, 2020.
The Company leases office space in Sisters, OR with a monthly rent
of $720. The lease expired on November 30, 2019 and is being rented
on a month to month basis.
The Company leases 1,107 square feet of office space in San Diego,
CA with a monthly rent of $4,184 escalating to $4,461 per month at
the end of the lease term, February 28, 2021.
On February 25, 2019, the Company signed a lease for 1,180 square
feet of office space in Lisle, IL. The lease begins April 1,
2019 with a monthly rent of $1,942 escalating to $2,040 by the end
of the lease term March 31, 2022.
Our leased space is utilized for office purposes and it us our
belief that the space is adequate for our immediate needs.
Additional space may be required as we expand our business
activities. We do not foresee any significant difficulties in
obtaining additional facilities if deemed necessary.
Item 3. Legal
Proceedings.
Other than indicated below, we are not currently involved in any
litigation that we believe could have a material adverse effect on
our financial condition or results of operations. Other than
indicated below, to our knowledge, there is no action, suit,
proceeding, inquiry or investigation before or by any court, public
board, government agency, self-regulatory organization or body
pending or, to the knowledge of the executive officers of our
Company our subsidiaries, threatened against or affecting our
Company, our common stock, our subsidiaries or of our Company’s or
our Company’s subsidiaries’ officers or directors in their
capacities as such, in which an adverse decision could have a
material adverse effect.
On March 4, 2019, plaintiff John Solak (“Plaintiff”) commenced a
direct and derivative action in the Delaware Court of Chancery (the
“Action”): both on his own behalf as a stockholder of Silversun and
derivatively on behalf of Silversun against the Company’s officers
and directors relating to stockholder voting rights granted to the
Company’s Chairman and Chief Executive Officer, Mark Meller in the
form of Series B Preferred Stock.
On or about April 22, 2019, the Company determined to undertake
certain actions relating to the Series B Preferred Stock challenged
in Plaintiff’s complaint, as well as certain changes to the
Company’s governance policies.
The Company’s officers and directors have at all relevant times
denied, and continue to deny, any alleged violations of Delaware
law. Plaintiff’s counsel believe that the remedial measures by
SilverSun in response to the Action render the Action moot, and
give rise only to a claim for attorney’s fees. The Company and the
Plaintiff agreed that the Company shall pay $115,000 to Plaintiff’s
counsel for fees and expenses. The Court of Chancery of the State
of Delaware has not been asked to review, and will pass no judgment
on, this payment of fees and expenses or its reasonableness.
The Stipulation and Order Regarding Notice to Stockholders was
entered into by Plaintiff, the Company and the Company’s officers
and directors on August 2, 2019 and resolved this matter.
Item 4. Mine Safety
Disclosures.
Not applicable.
PART II
Item 5. Market for Registrant’s
Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
(a) Market Information
The Company has been listed and is traded on the NASDAQ Capital
Market under the symbol “SSNT”.
(b) Holders of Common Equity
As of March 25, 2020, there were 858 stockholders of record.
An additional number of stockholders are beneficial holders of our
Common Stock in “street name” through banks, brokers and other
financial institutions that are the record holders.
(c) Dividend Information
On December 24, 2018, the Company announced the payment of a $0.05
special cash dividend per share of Common Stock. The dividend
payments announced in December were paid out on January 14, 2019
for an aggregate amount of approximately $225,038, which was
applied against additional paid in capital.
On December 24, 2019, the Company announced the payment of a $0.50
special cash dividend per share of Common Stock payable on January
14, 2020 for an aggregate amount of $2,250,636, which was applied
against paid in capital.
The declaration of any future cash dividends is at the discretion
of our board of directors and depends upon our earnings, if any,
our capital requirements and financial position, our general
economic conditions, and other pertinent conditions.
Unregistered Equity Securities
There were no unregistered sales of the Company’s equity securities
during 2019 that were not previously disclosed in a Quarterly
Report on Form 10-Q or in a Current Report on Form 8-K.
Transfer Agent
Our transfer agent is Pacific Stock Transfer Company at 6725
Via Austi Pkwy, Suite 300, Las Vegas, NV 89119.
Item 6. Selected Financial
Data.
Not applicable.
Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of
Operations
This annual report on Form 10-K and other reports filed by
SilverSun Technologies, Inc. and its wholly owned subsidiaries, SWK
Technologies, Inc., Secure Cloud Services, Inc., and Critical Cyber
Defense Corp. (together the “Company”, “we”, “our”, and “us”) from
time to time with the U.S. Securities and Exchange Commission (the
“SEC”) contain or may contain forward-looking statements and
information that are based upon beliefs of, and information
currently available to, the Company’s management as well as
estimates and assumptions made by Company’s
management. Readers are cautioned not to place undue
reliance on these forward-looking statements, which are only
predictions and speak only as of the date hereof. When
used in the filings, the words “anticipate,” “believe,” “estimate,”
“expect,” “future,” “intend,” “plan,” or the negative of these
terms and similar expressions as they relate to the Company or the
Company’s management identify forward-looking
statements. Such statements reflect the current view of
the Company with respect to future events and are subject to risks,
uncertainties, assumptions, and other factors, including the risks
contained in the “Risk Factors” section of the Annual Report on
Form 10-K, relating to the Company’s industry, the Company’s
operations and results of operations, and any businesses that the
Company may acquire. Should one or more of these risks
or uncertainties materialize, or should the underlying assumptions
prove incorrect, actual results may differ significantly from those
anticipated, believed, estimated, expected, intended, or
planned.
Although the Company believes that the expectations reflected in
the forward-looking statements are reasonable, the Company cannot
guarantee future results, levels of activity, performance, or
achievements. Except as required by applicable law,
including the securities laws of the United States, the Company
does not intend to update any of the forward-looking statements to
conform these statements to actual results.
Our consolidated financial statements are prepared in accordance
with accounting principles generally accepted in the United States
(“GAAP”). These accounting principles require us to make certain
estimates, judgments and assumptions. We believe that the
estimates, judgments and assumptions upon which we rely are
reasonable based upon information available to us at the time that
these estimates, judgments and assumptions are
made. These estimates, judgments and assumptions can
affect the reported amounts of assets and liabilities as of the
date of the consolidated financial statements as well as the
reported amounts of revenues and expenses during the periods
presented. Our consolidated financial statements would be affected
to the extent there are material differences between these
estimates and actual results. In many cases, the accounting
treatment of a particular transaction is specifically dictated by
GAAP and does not require management’s judgment in its application.
There are also areas in which management’s judgment in selecting
any available alternative would not produce a materially different
result. The following discussion should be read in
conjunction with our consolidated financial statements and notes
thereto appearing elsewhere in this report.
Overview
SilverSun Technologies, Inc. is engaged in providing
transformational business management applications and technologies
and professional consulting services to small and medium size
companies, primarily in the manufacturing, distribution and service
industries.
We are executing a multi-pronged business strategy centered on
recurring revenue, customer retention and on rapidly increasing the
size of our installed customer base. The growth of our customer
base is accomplished via our traditional marketing programs, via
our Sage Partner Success Program and via acquisitions. After a
customer is secured, our strategy is to up-sell and cross-sell,
providing the customer with advanced technologies and third-party
add-ons that help them transform their business. These add-on
products could include application hosting, cybersecurity,
warehouse management, human capital management, payment automation,
sales tax compliance or any number of other products that we
represent. Many of these incremental products and services are
billed on a subscription basis, often paying monthly for the
service, which increases our monthly recurring revenue (“MRR”).
This strategy increases the average revenue per customer, which
facilitates our continued growth, and reduces our cost of customer
acquisition, which enhances our profitability profile.
Our core strength is rooted in our ability to discover and identify
the driving forces of change that are affecting – or will affect –
businesses in a wide range of industries. We invest
valuable time and resources to fully understand how technology is
transforming the business management landscape and what current or
emerging innovations are deserving of a clients’
attention. By leveraging this knowledge and foresight,
our growing list of clients are empowered with the means to more
effectively manage their businesses; to capitalize on real-time
insight drawn from their data resources; and to materially profit
from enhanced operational functionality, process flexibility and
expedited process execution.
As Microsoft Certified Systems Engineers and Microsoft Certified
Professionals, our staff offers a host of mission critical
services, including cybersecurity, business continuity, disaster
recovery, application hosting, remote network monitoring, server
implementation, support and assistance, and technical design of
network infrastructure, among other services. We compete with
numerous large and small companies in this market sector, both
nationally and locally.
Distinguished as one of the largest Sage ERP X3 practices in North
America, we resell enterprise resource planning software published
by Sage, which addresses the financial accounting requirements of
small- and medium-size businesses focused on manufacturing and
distribution. We also offer services related to these
sales, including installation, support and
training. These product sales are primarily packaged
software programs installed on a user workstation, on a local area
network server, or in a hosted environment. The programs
perform and support a wide variety of functions related to
accounting, including financial reporting, accounts payable,
accounts receivable and inventory management.
We employ class instructors and host formal, topic-specific,
training classes, typically on-site at our clients’ facilities. Our
instructors must pass annual subject matter examinations required
by Sage to retain their product-based teaching
certifications. We also provide end-user technical
support services through our support/help desk, which is available
during normal business hours, Monday through Friday. Our
team of qualified product and technology consultants assist
customers that contact us with questions about product features,
functions, usability issues and configurations. The
support/help desk offers services in a variety of ways, including
prepaid services, time and materials billed as utilized and annual
support contracts. Our customers can communicate with
our support/help desk through email, telephone and fax
channels.
Led by specialized project managers, we provide professional
services ranging from software customization to data migration to
small- and medium-size business consulting.
We also are resellers of the Warehouse Management System (“WMS”)
software published by High Jump, Inc. (“High Jump”), which develops
warehouse management software for middle market
distributors. The primary purpose of a WMS is to
control the movement and storage of materials within an operation
and process the associated transactions. Directed picking, directed
replenishment, and directed put-away are the key to WMS. The
detailed setup and processing within a WMS can vary significantly
from one software vendor to another. However, the basic WMS will
use a combination of item, location, quantity, unit of measure and
order information to determine where to stock, where to pick, and
in what sequence to perform these operations. The Accellos WMS
software improves accuracy and efficiency, streamlines materials
handling, meets retail compliance requirements, and refines
inventory control. Accellos also works as part of a complete
operational solution by integrating seamlessly with RF hardware,
accounting software, shipping systems and warehouse automation
equipment. We market the Accellos solution to our
existing and new medium-sized business clients.
Investing in the acquisition of other companies and proprietary
business management solutions has been an important growth strategy
for our Company, allowing us to rapidly expand into new geographic
markets and create new and exciting profit centers. To
date, we have completed a series of strategic ventures that have
served to fundamentally strengthen our Company’s operating platform
and materially expand our footprint to nearly every U.S.
state. More specifically, over the past fifteen years,
we have outright acquired, acquired select assets of or entered
into revenue sharing agreements with Business Tech Solutions Group,
Inc.; Wolen Katz Associates; AMP-BEST Consulting, Inc.; IncorTech;
Micro-Point, Inc.; HighTower, Inc.; Point Solutions, LLC; SGEN,
LLC., ESC, Inc., 2000 SOFT, Inc., Productive Tech Inc., The Macabe
Associates, Oates & Co; Pinsight Technology, Inc.; Info Sys
Management, Inc., Nellnube, Inc. and Partners in Technology
Inc.
Additionally, it is our intention to continue to increase our
business by seeking additional opportunities through potential
acquisitions, revenue sharing arrangements, partnerships or
investments. Such acquisitions, revenue sharing arrangements,
partnerships or investments may consume cash reserves or require
additional cash or equity. Our working capital and additional
funding requirements will depend upon numerous factors, including:
(i) strategic acquisitions or investments; (ii) an increase to
current company personnel; (iii) the level of resources that we
devote to sales and marketing capabilities; (iv) technological
advances; and (v) the activities of competitors.
During 2019 the Company continued to expand its customer base and
growth trend which we believe will provide a basis for future
growth.
In addition, the Company successfully completed the sale of its
Mapadoc EDI in the third quarter, selling all Intellectual Property
and consulting practices related to the product to SPS Commerce for
$11.5 million cash on August 26, 2019. The Company, which had not
previously been seeking to sell the division, decided to move
forward with the transaction after evaluating the following
variables:
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The rate of growth of the ERP products with which Mapadoc
integrates;
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The rate of growth, year over year, of Mapadoc itself;
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The cost of developing
new integrations, with other ERP solutions and funding new
go-to-market strategies for these integrations once developed; |
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The valuation offered for the sale, and how that valuation compared
to other consummated transactions for similarly situated business
applications.
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After evaluating these and other variables and engaging an
investment bank to provide guidance on the valuation, the Company
subsequently closed the transaction. The Company now intends
to use the proceeds of the transaction to further enhance its
business and to maximize shareholder value. The actions under
consideration, which are illustrative and not exhaustive,
include:
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Acquisitions – The Company has engaged an investment bank to
identify potential acquisitions for the Company which will enhance
and accelerate its growth profile.
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Mergers – The Company will evaluate potential mergers with larger
companies that seek to become part of a publicly-traded entity and
which could enhance the rate of growth and profitability of the
Company.
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On September 6, 2019, the Company filed a Certificate of
Elimination of Certificate of Designations (the “Certificate of
Elimination”) with the Secretary of State of the State of Delaware.
The Certificate of Withdrawal eliminated the Company’s Series B
Preferred Stock, par value $.001 per share (the “Series B
Preferred”), from the Company’s Certificate of Incorporation. Prior
to filing the Certificate of Elimination, Mark Meller, the
Company’s Chief Executive Officer and Chairman and owner of the
only share of Series B Preferred, cancelled the only share of
Series B Preferred issued and outstanding.
On October 10, 2019, the Company’s Board of Directors authorized a
new stock repurchase program, under which the Company may
repurchase up to $2 million of its outstanding common stock.
Under this new stock repurchase program, the Company may repurchase
shares in accordance with all applicable securities laws and
regulations, including Rule 10b-18 of the Securities Exchange Act
of 1934, as amended. The extent to which the Company repurchases
its shares, and the timing of such repurchases, will depend upon a
variety of factors, including market conditions, regulatory
requirements and other corporate considerations, as determined by
the Company’s management. The repurchase program may be extended,
suspended or discontinued at any time. The Company expects to
finance the program from existing cash resources. As of March
25, 2020, no repurchases have been made.
On December 24, 2019, the Company announced the payment of a $0.50
special cash dividend per share of Common Stock payable on January
14, 2020 for an aggregate amount of $2,250,636.
Revenues
Revenues for the year ended December 31, 2019 increased $2,398,664
(6.64%) to $38,502,482 as compared to $36,103,818 for the year
ended December 31, 2018.
Software sales increased by $1,554,860 to $6,876,682 in 2019 from
$5,321,822 in 2018 for an overall increase of
29.22%. This increase was primarily due to an increase
in sales of cloud based ERP.
Service revenue increased by $843,804 to $31,625,800 in 2019 from
$30,781,996 in 2018 for an overall increase of 2.70%. The overall
increases are primarily due to increase in services related to
increase volume of sales of software.
Gross Profit
Gross profit for the year ended December 31, 2019 increased
$823,604 (5.94%) to $14,678,454 as compared to $13,854,850 for the
year ended December 31, 2018. The increase in overall gross profit
for this period is largely attributable to the increase in revenues
from software sales. For the year ended December 31, 2019, the
overall gross profit percentage was 38.1% as compared to 38.4 % for
the year ended December 31, 2018.
The gross profit attributed to software sales increased $696,774 to
$2,697,090 for 2019 from $2,000,316 in 2018 which resulted in an
increase in the gross profit percentage from 37.60% in 2018 to
39.2% for 2019. The mix of products being sold by the Company
changes from time to time which causes the overall gross margin
percentage to vary.
The gross profit attributed to services increased $126,830 to
$11,981,364 for 2019 from $11,854,534 due to increased software
sales. The gross profit percentage attributed to services decreased
to 37.90% in 2019 from 38.50% in 2018. This is due to a
slight decrease in the gross profit of some of the recent
acquisitions.
Operating Expenses
Selling and marketing expenses increased $526,441 (8.34%) to
$6,838,745 for the year ended December 31, 2019 compared to
$6,312,304 for the year ended December 31, 2018. This is due to
increased sales personnel expense as well as an increase in both
outside sales expense and professional development.
General and administrative expenses increased $792,048 (9.90%) to
$8,772,965 for the year ended December 31, 2019 as compared to
$7,980,917 for the year ended December 31, 2018. This is primarily
as a result of increases in payroll and related expenses associated
with the addition of management personnel, reclassification of
employees to general and administrative from other departments, as
well as an increase in bad debt expense. In addition, the
Company incurred extraordinary one-time legal expenses of
approximately $115,000 associated with the cost of defense of the
previously announced and settled shareholder derivative suit.
Depreciation and amortization expense for the year ended December
31, 2019 was $720,035 as compared to $649,427 for the year ended
December 31, 2018. This increase is primarily due to the
amortization of the 2019 acquisition and the internally developed
software what was placed into service during 2019 and well as the
addition of three capital leases.
Impairment for intangible asset expense for the year ended December
31, 2019 was $ 236,860 as compared to $0 for the year ended
December 31, 2018. The increase is due to the write off of
software that will no longer be marketed.
Income Taxes
For the year ended December 31, 2019, the Company’s Federal and
State provision requirements were calculated based on the estimated
tax rate. The Federal effective rate is higher than the statutory
rate primarily due to Incentive Stock Options (ISO) and 50% of
general meal and 100% of general entertainment expense which are
not tax deductible. The total benefit for the year ended December
31, 2019 was $444,006.
For the year ended December 31, 2018, the Company’s Federal and
State provision requirements were calculated based on the estimated
tax rate. The Federal effective rate is higher than the statutory
rate primarily due to change in federal statutory rate described
above and Incentive Stock Options (ISO) and 50% of general meal and
100% of general entertainment expense which are not tax deductible.
The total benefit for the year ended December 31, 2018 was
$281,212.
Liquidity and Capital Resources
We are currently seeking additional operating income opportunities
through potential acquisitions or investments. Such acquisitions or
investments may consume cash reserves or require additional cash or
equity. Our working capital and additional funding
requirements will depend upon numerous factors, including: (i)
strategic acquisitions or investments; (ii) an increase to current
company personnel; (iii) the level of resources that we devote to
sales and marketing capabilities; (iv) technological advances; and
(v) the activities of competitors.
In addition to developing new products, obtaining new customers and
increasing sales to existing customers, management plans to
increase its business and profitability by entering into
collaboration agreements, buying assets, and acquiring companies in
the business software and information technology consulting and
other markets with solid revenue streams and established customer
bases that generate positive cash flow.
On May 6, 2014, SWK acquired certain assets of ESC, Inc. pursuant
to an Asset Purchase Agreement for a promissory note in the
aggregate principal amount of $350,000 (the “ESC Note”). The ESC
Note matures on April 1, 2019. Monthly payments are $6,135
including interest at 2% per year. At December 31, 2019 and
December 31, 2018, the outstanding balance was $0 and $30,521,
respectively.
On July 6, 2015, SWK acquired certain assets of ProductiveTech Inc.
(PTI) pursuant to an Asset Purchase Agreement for cash of $500,000
and a promissory note for $600,000 (the “PTI Note”). The
PTI Note is due in 60 months from the closing date and bears
interest at a rate of two and one half (2.5%)
percent. Monthly payments including interest are
$10,645. At December 31, 2019 and December 31, 2018, the
outstanding balance on the PTI Note was $73,899 and $198,106,
respectively.
On May 31, 2018, SWK acquired certain assets of Info Sys
Management, Inc. (“ISM”) pursuant to an Asset Purchase Agreement
for cash of $300,000 and a promissory note issued in the aggregate
principal amount of $1,000,000 (the “ISM Note”). The ISM
Note is due five years from the closing date and bears interest at
a rate of two percent (2%) per annum. Monthly payments
including interest are $17,528. The ISM Note has an optional
conversion feature where the holder may, at its sole and exclusive
option, elect to convert, at any time and from time to time, until
payment in full of the ISM Note, all of the outstanding principal
amount of the ISM Note, plus accrued interest, into shares (the
“Conversion Shares”) of the Company’s Common Stock, (“Common
Stock”) at per share price equal to $4.03, a price equal to the
average closing price of its Common Stock for the five (5) trading
days immediately preceding the issuance date of the ISM Note (the
“Fixed Conversion Price”). At December 31, 2019 and December 31,
2018 the outstanding balance on the ISM Note was $710,420 and
$904,436 respectively.
On May 31, 2018, Secure Cloud Services acquired certain assets of
Nellnube, Inc. (“Nellnube”) pursuant to an Asset Purchase Agreement
for a promissory note issued in the aggregate principal amount of
$400,000 (the “Nellnube Note”). The Nellnube Note is due
five years from the closing date and bears interest at a rate of
two percent (2%) per annum. Monthly payments including
interest are $7,011. The Nellnube Note has an optional conversion
feature where the holder may, at its sole and exclusive option,
elect to convert, at any time and from time to time, until payment
in full of the Nellnube Note, all of the outstanding principal
amount of the Nellnube Note, plus accrued interest, into shares
(the “Conversion Shares”) of the Company’s Common Stock, (“Common
Stock”) at per share price equal to $4.03, a price equal to the
average closing price of its Common Stock for the five (5) trading
days immediately preceding the issuance date of the Nellnube Note
(the “Fixed Conversion Price”). At December 31, 2019 and December
31, 2018 the outstanding balance on the Nellnube Note was $284,168
and $361,774 respectively.
On January 1, 2019, SWK acquired certain assets of Partners in
Technology, Inc. (“PIT”) pursuant to an Asset Purchase Agreement
for cash of $60,000 and the issuance of a promissory note in the
aggregate principal amount of $174,000 (the “PIT
Note”). The PIT Note is due in 36 months from the
closing date and bears interest at a rate of two percent (2.0%) per
annum. Monthly payments including interest are
$4,984. At December 31, 2019 the outstanding balance was
$121,968.
During the year ended December 31, 2019, the Company had a net
increase in cash of $6,757,544. The Company’s principal sources and
uses of funds were as follows:
Cash used in operating activities of continuing
operations
The Company used $903,307 in cash from continuing operating
activities for the year ended December 31, 2019 as compared to
using $267,486 of cash for continuing operating activities for the
year ended December 31, 2018. This increase is primarily due the
increase in accounts receivable and the decrease in income tax
payable.
Cash provided by investing activities of continuing
operations
Investing activities for the year ended December 31, 2019 provided
cash of $8,152,790 as compared to using $697,822 of cash for the
year ended December 31, 2018. This increase is due to the sale of
Mapadoc EDI.
Cash used in financing activities of continuing
operations
Financing activities for the year ended December 31, 2019 used cash
of $870,170 as compared to using cash of $565,507 for the year
ended December 31, 2018. This increase in cash used in financing
activities is mostly attributed to the payment of a cash dividend
in January 2019 as well as additional loan payments for 2018 and
2019 acquisitions.
Cash flows from discontinued operations
Operating activities for discontinued operations for the year ended
December 31, 2019 provided cash of $505,910 as compared to
$1,562,048 for the same period in 2018. This is due to the
fact that Mapadoc EDI was sold in August 2019, providing eight
months of operating activities in 2019 as compared to the twelve
months in 2018.
Investing activities of discontinued operations for the year ended
December 31, 2019 used cash of $127,679 as compared to $365,723 for
the same period in 2018. This was due to less software being put
into production in 2019.
The Company believes that as a result of funds available from the
sale of its Mapadoc division, it has adequate liquidity to fund its
operating plans for at least the next twelve months from the date
of issuance of these financial statements.
There was no significant impact on the Company’s operations because
of inflation for the year ended December 31, 2019.
Critical Accounting Policies
The 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 of America (GAAP). 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 on-going basis, we
evaluate these estimates, including those related to bad debts,
intangible assets, and litigation. We base our estimates on
historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying values
of certain assets and liabilities. Actual results may differ from
these estimates under different assumptions or conditions.
We have identified below the accounting policies, related to
what we believe are most critical to our business operations and
are discussed throughout Management’s Discussion and Analysis of
Financial Condition or Plan of Operation where such policies affect
our reported and expected financial results.
Revenue Recognition
The Financial Accounting Standards Board “FASB” issued ASU 2014-09,
Revenue from Contracts with Customers: Topic 606 which
superseded nearly all existing revenue recognition guidance under
GAAP. The core principle of Topic 606 is to recognize revenues when
promised goods or services are transferred to customers in an
amount that reflects the consideration that is expected to be
received for those goods or services. Topic 606 defines a five-step
process to achieve this core principle and, in doing so, it is
possible more judgment and estimates may be required within the
revenue recognition process than are required under existing GAAP,
including identifying performance obligations in the contract,
estimating the amount of variable consideration to include in the
transaction price and allocating the transaction price to each
separate performance obligation, among others. Topic 606 also
provides guidance on the recognition of costs related to obtaining
customer contracts.
With the adoption of ASC 606, the Company has elected the
significant financing component practical expedient. In
determining the transaction price, the Company does not adjust the
promised amount of consideration for the effects of a significant
financing component as the Company expects, at contract inception,
that the period between when the entity transfers a promised good
or service to a customer and when the customer pays for that good
or service will be one year or less.
Software product revenue is recognized when the product is
delivered to the customer and the Company’s performance obligation
is fulfilled.
Service revenue is recognized when the professional consulting,
maintenance or other ancillary services are provided to the
customer. Shipping and handling costs charged to customers are
classified as revenue, and the shipping and handling costs incurred
are included in cost of sales.
Accounts Receivable
Accounts receivable consist primarily of invoices for maintenance
and professional services. Full payment for software ordered by
customers is primarily due in advance of ordering from the software
supplier. Payments for maintenance and support plan renewals are
due before the beginning of the maintenance period. Terms under our
professional service agreements are generally 50% due in advance
and the balance on completion of the services.
The Company maintains an allowance for bad debt estimated by
considering a number of factors, including the length of time the
amounts are past due, the Company’s previous loss history and the
customer’s current ability to pay its
obligations. Accounts are written off against the
allowance when deemed uncollectable.
Unbilled Services
The Company recognizes revenue on its professional services as
those services are performed. Unbilled services represent the
revenue recognized but not yet invoiced.
Goodwill
Goodwill is the excess of acquisition cost of an acquired entity
over the fair value of the identifiable net assets acquired.
Goodwill is not amortized, but tested for impairment annually or
whenever indicators of impairment exist. These indicators may
include a significant change in the business climate, legal
factors, operating performance indicators, competition, sale or
disposition of a significant portion of the business or other
factors.
Definite Lived Intangible Assets and Long-Lived Assets
The values assigned to intangible assets were based on an
independent valuation. Purchased intangible assets are amortized
over the useful lives based on the estimate of the use of economic
benefit of the asset using the straight-line amortization
method.
The Company assesses potential impairment of its intangible assets
and other long-lived assets when there is evidence that recent
events or changes in circumstances have made recovery of an asset’s
carrying value unlikely. Factors the Company considers important,
which may cause impairment include, among others, significant
changes in the manner of use of the acquired asset, negative
industry or economic trends, and significant underperformance
relative to historical or projected operating results.
Income Taxes
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income
tax purposes, as well as net operating loss carryforwards. Based on
ASU 2015-17, all deferred tax assets or liabilities are classified
as long-term. Valuation allowances are established against deferred
tax assets if it is more likely than not that the assets will not
be realized. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of a
change in tax rates or laws is recognized in operations in the
period that includes the enactment date.
The Company has federal net operating loss (“NOL”) carryforwards
which are subject to limitations under Section 382 of the Internal
Revenue Code.
The 2017 Tax Cuts and Jobs Act (“Tax Reform”) was enacted on
December 22, 2017. The Tax Reform includes a number of changes in
existing tax law impacting businesses including a permanent
reduction in the U.S. federal statutory rate from 34% to 21%,
effective on January 1, 2018. Under U.S. GAAP, changes in tax rates
and tax law are accounted for in the period of enactment and
deferred tax assets and liabilities are measured at the enacted tax
rate. The rate reconciliation includes the Company’s assessment of
the accounting under the Tax Reform and is based on information
that was available to management at the time the consolidated
financial statements were prepared.
The Company files income tax returns in the U.S. federal and state
jurisdictions. Tax years 2016 to 2019 remain open to
examination for both the U.S. federal and state jurisdictions.
Off Balance Sheet Arrangements
During fiscal 2019, we did not engage in any material off-balance
sheet activities or have any relationships or arrangements with
unconsolidated entities established for the purpose of facilitating
off-balance sheet arrangements or other contractually narrow or
limited purposes. Further, we have not guaranteed any obligations
of unconsolidated entities nor do we have any commitment or intent
to provide additional funding to any such entities.
Item 7A. Quantitative and
Qualitative Disclosures About Market Risk.
We do not hold any derivative instruments and do not engage in any
hedging activities.
Item 8. Financial
Statements.
Our consolidated financial statements are contained in pages F-1
through F-26 which appear at the end of this Annual Report on
Form 10-K.
Item 9. Changes in and
Disagreements with Accountants on Accounting and Financial
Disclosure.
There are no reportable events under this item for the year ended
December 31, 2019.
Item 9A. Controls and
Procedures.
(a) Evaluation of Disclosure and Control Procedures
As of the end of the period covered by this Annual Report on Form
10-K, the Company’s management evaluated, with the participation of
the Company’s principal executive officer and principal financial
officer, 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). Based upon that evaluation, the
Company’s principal executive officer and principal financial
officer concluded that the Company’s disclosure controls and
procedures are effective in ensuring that information required to
be disclosed by the company in the reports that we file or submit
under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the
SEC’s rules and forms and is accumulated and communicated to our
management, including the Company’s principal executive officer and
principal financial officer, as appropriate to allow timely
decisions regarding required disclosure.
(b) Management’s Report on Internal Control over Financial
Reporting
The Company’s management is responsible for establishing and
maintaining adequate internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Securities
Exchange Act of 1934). The Company’s internal control over
financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with GAAP and includes those policies and procedures
that:
•
Pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of
the Company’s assets;
•
Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with GAAP, and that the Company’s receipts and
expenditures are being made only in accordance with authorizations
of the Company’s management and directors; and
•
Provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the
Company’s assets that could have a material effect on our financial
statements.
As of the end of the period covered by this Annual Report on Form
10-K, the Company’s management evaluated, with the participation of
its principal executive officer and principal financial officer,
the effectiveness of the Company’s internal control over financial
reporting. This evaluation was conducted using the framework in
Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission 2013. Based
upon that evaluation, the Company’s management concluded that its
internal control over financial reporting was effective as of
December 31, 2019.
Pursuant to the rules of the SEC, the Company’s management’s report
on internal control over financial reporting is furnished with this
Annual Report on Form 10-K and shall not be deemed to be “filed”
for purposes of Section 18 of the Securities Exchange Act of 1934
or otherwise subject to the liabilities of that section, nor shall
it be deemed to be incorporated by reference in any filing under
the Securities Act of 1933 or Securities Exchange Act of 1934.
This Annual Report on Form 10-K does not include an attestation
report of the Company’s independent registered public accounting
firm regarding the Company's internal control over financial
reporting. The Company’s management’s report on internal control
over financial reporting was not subject to attestation by the
Company’s independent registered public accounting firm pursuant to
temporary rules of the Securities and Exchange Commission that
permits the Company to provide only the Company’s management’s
report on internal control over financial reporting in this Annual
Report on Form 10-K.
(c) Changes to Internal Controls over Financial
Reporting
There were no changes in our internal control over financial
reporting during our fourth quarter ended December 31, 2019, or in
other factors that could significantly affect these controls, that
materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
Item 9B. Other
Information.
None.
PART III
Item 10. Directors, Executive
Officers and Corporate Governance.
Directors and Executive Officers
The following table and biographical summaries set forth
information, including principal occupation and business
experience, about our directors and executive officers at March 25,
2020:
|
Name
|
|
Age
|
|
Position
|
|
Officer and/or Director Since
|
|
|
|
|
|
|
|
|
|
|
|
Mark Meller
|
|
60
|
|
Chairman, President, Chief Executive Officer and Director
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
Christine Dye
|
|
47
|
|
Chief Financial Officer
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Stanley Wunderlich
|
|
68
|
|
Director
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
Joseph Macaluso
|
|
68
|
|
Director
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
John Schachtel
|
|
58
|
|
Director
|
|
2017
|
|
Mark Meller, Chief Executive Officer, President,
Director
Mr. Mark Meller has been the President and Director of the Company
since September 15, 2003, and was further appointed Chief Executive
Officer on September 1, 2004. He became Chairman of the Board on
May 10, 2009. Mr. Meller is currently the President, Chief
Executive Officer and Chairman of the Board of Directors. From
September 2003 through January 2015, he was Chief Financial Officer
of the Company. From October 2004 until February 2007, Mr. Meller
was the President, Chief Executive Officer, Chief Financial Officer
and Director of Deep Field Technologies, Inc. From December 15,
2004 until September 2009, Mr. Meller was the President, Chief
Executive Officer, Chief Financial Officer and Director of MM2
Group, Inc. From August 29, 2005 until August 2006, Mr. Meller was
the President, Chief Executive Officer and Chief Financial Officer
of iVoice Technology, Inc. From 1988 until 2003, Mr. Meller was
Chief Executive Officer of Bristol Townsend and Co., Inc., a New
Jersey based consulting firm providing merger and acquisition
advisory services to middle market companies. From 1986 to 1988,
Mr. Meller was Vice President of Corporate Finance and General
Counsel of Crown Capital Group, Inc, a New Jersey based consulting
firm providing advisory services for middle market leveraged
buy-outs (LBO’s). Prior to 1986, Mr. Meller was a financial
consultant and practiced law in New York City. He is a member of
the New York State Bar.
Mr. Meller has a B.A. from the State University of New York at
Binghamton and a J.D. from the Boston University School of Law.
In evaluating Mr. Meller’s specific experience, qualifications,
attributes and skills in connection with his appointment to our
board, we took into account his experience in the industry and his
knowledge of running and managing the Company.
Christine Dye, Chief Financial Officer
Ms. Dye has over 20 years of financial management experience within
technology solution organizations, including serving as Chief
Financial Officer at three previous companies. As CFO of Send Word
Now, Inc., and later as CFO at On-Net Surveillance Systems, both
private-equity sponsored companies, she assisted in the sale of
both businesses. In addition, she was previously Finance Director
at Citrix Systems, Inc., where she also served as part of the
leadership team for GoToAssist™ and the Audio Conferencing
division.
Ms. Dye earned her B.S. in Accounting from the University of
North Carolina at Charlotte, and is a Certified Public Accountant
in New Jersey.
Stanley Wunderlich, Director
Mr. Stanley Wunderlich has over 40 years of experience on Wall
Street as a business owner and consultant. Mr. Wunderlich is a
founding partner and has been Chairman and Chief Executive Officer
of Consulting for Strategic Growth 1, specializing in investor and
media relations and the formation of capital for early-growth stage
companies both domestic and international, from 2000 through the
present. Since 1987, he has been the Chief Executive Officer of
Consulting for Strategic Growth 1, Ltd.
Mr. Wunderlich has a Bachelor’s degree from Brooklyn
College.
In evaluating Mr. Wunderlich’s experience, qualifications,
attributes and skills in connection with his appointment to our
Board, we took into account his experience in finance and investor
relations.
Joseph Macaluso, Director
Joseph Macaluso has over 30 years of experience in financial
management. Mr. Macaluso has been the Principal Accounting Officer
of Tel-Instrument Electronics Corp., a developer and manufacturer
of avionics test equipment for both the commercial and military
markets since 2002. Previously, he had been involved in companies
in the medical device and technology industries holding positions
including Chief Financial Officer, Treasurer and Controller.
Mr. Macaluso has a Bachelor of Science degree in Accounting from
Fairfield University.
In evaluating Mr. Macaluso’s specific experience, qualifications,
attributes and skills in connection with his appointment to Board,
we took into account his expertise in general management, finance,
corporate governance and strategic planning, as well as his
experience in operations and mergers and acquisitions.
John Schachtel, Director
On March 27, 2017, Mr. Schachtel was appointed to the Board. Since
May 2017, Mr. Schachtel has been the Executive Vice President and
Chief Operating Officer of Regional Management Corp., one of the
leading consumer finance installment loan companies in the United
States. Prior to assuming his current position, Mr. Schachtel was
the Chief Operating Officer of OneMain Financial Holdings, Inc. and
served 11 years as the Executive Vice President, Northeast &
Midwest Division for OneMain Financial Holdings, Inc.
Mr. Schachtel has a Bachelor of Science degree from Northwestern
University and an MBA in Finance from New York University.
In evaluating Mr. Schachtel’s specific experience, qualifications,
attributes and skills in connection with his appointment to Board,
we took into account his expertise in general management, finance,
corporate governance and strategic planning, as well as his
experience in operations and mergers and acquisitions.
Family Relationships
There are no family relationships among any of our directors or
executive officers.
Board Composition and Director Independence
Our board of directors consists of four members: Mr. Mark Meller,
Mr. Stanley Wunderlich, Mr. Joseph Macaluso, and Mr. John
Schachtel. The directors will serve until our next
annual meeting and until their successors are duly elected and
qualified. The Company defines “independent” as that term is
defined in Rule 5605(a)(2) of the NASDAQ listing standards.
In making the determination of whether a member of the board is
independent, our board considers, among other things, transactions
and relationships between each director and his immediate family
and the Company, including those reported under the caption
“Certain Relationships and Related-Party Transactions”. The
purpose of this review is to determine whether any such
relationships or transactions are material and, therefore,
inconsistent with a determination that the directors are
independent. On the basis of such review and its understanding of
such relationships and transactions, our board affirmatively
determined that Mr. Wunderlich, Mr. Macaluso, and Mr. Schachtel
have qualified as independent and that they have no material
relationship with us that might interfere with his or her exercise
of independent judgment.
Board Committees
The Audit Committee was established in accordance with Section
3(a)(58)(A) of the Securities Exchange Act of 1934.
Currently, the Audit Committee consists of Mr. Joseph Macaluso, Mr.
Stanley Wunderlich and Mr. John Schachtel. Mr. Macaluso,
Chairman of the Audit Committee, may be deemed a financial expert
as defined in Item 407(d)(5) of Regulation S-K.
The Audit Committee operates pursuant to a written charter (the
“Audit Committee Charter”), a current copy of which is
publicly available on the investor relations portion of the
Company’s website at www.silversuntech.com.
Currently, the Compensation Committee consists of Mr. Joseph
Macaluso, Mr. Stanley Wunderlich and Mr. John Schachtel.
Mr. Schachtel serves as Chairman. The Compensation
Committee operates pursuant to a written charter, a current copy of
which is publicly available on the investor relations portion of
our website.
Currently, the Nominating and Corporate Governance Committee
consists of Mr. Joseph Macaluso, Mr. Stanley Wunderlich and Mr.
John Schachtel. Mr. Wunderlich serves as Chairman. The
Nominating and Corporate Governance Committee operates pursuant to
a written charter, a current copy of which is publicly available on
the investor relations portion of our website.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires the Company’s directors,
executive officers and persons who beneficially own 10% or more of
a class of securities registered under Section 12 of the Exchange
Act to file reports of beneficial ownership and changes in
beneficial ownership with the SEC. Directors, executive officers
and greater than 10% stockholders are required by the rules and
regulations of the SEC to furnish the Company with copies of all
reports filed by them in compliance with Section 16(a).
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company during the fiscal year ended December 31,
2019, including those reports that we have filed on behalf of our
directors and Section 16 officers, no director, Section 16 officer,
beneficial owner of more than 10% of the outstanding common stock,
or any other person subject to Section 16 of the Exchange Act,
failed to file with the SEC on a timely basis during the fiscal
year ended December 31, 2019.
Code of Ethics
The Company has adopted a Code of Ethics for adherence by its Chief
Executive Officer, Chief Financial Officer, Chief Accounting
Officer and Controller to ensure honest and ethical conduct; full,
fair and proper disclosure of financial information in the
Company’s periodic reports filed pursuant to the Securities
Exchange Act of 1934; and compliance with applicable laws, rules,
and regulations. Any person may obtain a copy of our Code of Ethics
by mailing a request to the Company at the address appearing on the
front page of this Annual Report on Form 10-K.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive
officers has, during the past ten years:
|
|
●
|
been convicted in a criminal proceeding or been subject to a
pending criminal proceeding (excluding traffic violations and other
minor offenses);
|
|
|
|
|
|
|
●
|
had any bankruptcy petition filed by or against the business or
property of the person, or of any partnership, corporation or
business association of which he was a general partner or executive
officer, either at the time of the bankruptcy filing or within two
years prior to that time;
|
|
|
|
|
|
|
●
|
been subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction or federal or state authority, permanently or
temporarily enjoining, barring, suspending or otherwise limiting,
his involvement in any type of business, securities, futures,
commodities, investment, banking, savings and loan, or insurance
activities, or to be associated with persons engaged in any such
activity;
|
|
|
●
|
been found by a court of competent jurisdiction in a civil action
or by the Securities and Exchange Commission or the Commodity
Futures Trading Commission to have violated a federal or state
securities or commodities law, and the judgment has not been
reversed, suspended, or vacated;
|
|
|
|
|
|
|
●
|
been the subject of, or a party to, any federal or state judicial
or administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated (not including any
settlement of a civil proceeding among private litigants), relating
to an alleged violation of any federal or state securities or
commodities law or regulation, any law or regulation respecting
financial institutions or insurance companies including, but not
limited to, a temporary or permanent injunction, order of
disgorgement or restitution, civil money penalty or temporary or
permanent cease-and-desist order, or removal or prohibition order,
or any law or regulation prohibiting mail or wire fraud or fraud in
connection with any business entity; or
|
|
|
|
|
|
|
●
|
been the subject of, or a party to, any sanction or order, not
subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Exchange Act),
any registered entity (as defined in Section 1(a)(29) of the
Commodity Exchange Act), or any equivalent exchange, association,
entity or organization that has disciplinary authority over its
members or persons associated with a member.
|
Except as set forth in our discussion below in “Certain
Relationships and Related Transactions,” none of our directors or
executive officers has been involved in any transactions with us or
any of our directors, executive officers, affiliates or associates
which are required to be disclosed pursuant to the rules and
regulations of the Commission.
Item 11. Executive
Compensation.
The following summary compensation table sets forth all
compensation awarded to, earned by, or paid to the named executive
officers paid by us during the years ended December 31, 2019 and
2018.
|
Name and Position(s)
|
|
Year
|
|
Salary ($)
|
|
|
Bonus ($)
|
|
|
Stock
Awards ($)
|
|
|
Option
Awards ($)
|
|
|
Non-Equity Incentive Plan Compensation ($)
|
|
|
Nonqualified Deferred Compensation Earnings ($)
|
|
|
All Other
Compensation ($)
|
|
|
Total
Compensation ($)
|
|
|
Mark Meller
|
|
2019
|
|
$
|
777,986 |
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
777,986 |
|
|
President, Chief Executive Officer,
and Director
|
|
2018
|
|
$
|
704,685
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
704,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christine Dye,
|
|
2019
|
|
$
|
213,692
|
|
|
$
|
53,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
266,692
|
|
|
Chief Financial Officer
|
|
2018
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Mark Meller, Chief Executive Officer
The Company’s Chief Executive Officer and President has had an
Employment Agreement with the Company since September 15,
2003. On February 4, 2016 (the “Effective Date”), the Company
entered into an amended and restated employment agreement (the
“Meller Employment Agreement”) with Mark Meller, pursuant to which
Mr. Meller will continue to serve as the Company’s President and
Chief Executive Officer.
The Meller Employment Agreement was entered into by the Company and
Mr. Meller primarily to extend the term of Mr. Meller’s
employment. The term of the Meller Employment Agreement
runs through September of 2023 (the “Term”) and shall automatically
renew for additional periods of one year unless otherwise
terminated in accordance with the employment
agreement. The Company will pay Mr. Meller an annual
salary of $565,000 per annum, with a ten percent (10%) increase on
September 1 and every anniversary of such date for the duration of
the Term.
Potential Payments upon Termination or Change in Control
The Meller Employment Agreement provides for a severance payment to
Mr. Meller of three hundred percent (300%), less $100,000 of his
gross income for services rendered to the Company in each of the
five prior calendar years should his employment be terminated
following a change in control (as defined in the Meller Employment
Agreement).
Outstanding Equity Awards at Fiscal Year-End 2019
The Company had no outstanding equity awards to the executives
named above at the end of the most recent completed fiscal
year.
Director Compensation
The following Director Compensation Table sets forth the
compensation of our directors for the fiscal year ending on
December 31, 2019.
Director Compensation for Fiscal 2019
|
Name
|
|
Fees Earned
or Paid in Cash
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
|
Non-Qualified
Deferred
Compensation
Earnings
($)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
|
Stanley Wunderlich
|
|
|
12,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,000
|
|
|
|
32,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph Macaluso
|
|
|
18,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,000
|
|
|
|
38,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Schachtel
|
|
|
18,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,000
|
|
|
|
38,000
|
|
We pay only our independent directors for their service on our
board of directors. Mr. Wunderlich is paid $1,000 per month,
payable quarterly for his service as a member of the board and as
Chairman of the Nominating and Governance Committee. Mr. Macaluso
is paid $1,500 per month, payable quarterly for his service as a
member of the board and as Chairman of the Audit Committee. Mr.
Schachtel is paid $1,500 per month, payable quarterly for his
service as a member of the board and as Chairman of the
Compensation Committee. In 2019, the directors were each paid
a bonus of $20,000 as a result of the Mapadoc sale.
Director Agreements
On July 26, 2011, we entered into a director agreement with Stanley
Wunderlich, pursuant to which Mr. Wunderlich was appointed to the
Board effective July 26, 2011. On August 3, 2011 the
Company entered into an amended and restated director agreement
(the “Amended Agreement”). The term of the Amended Agreement is one
year from August 3, 2011. The Amended Agreement may, at the option
of the Board, be automatically renewed on such date that Mr.
Wunderlich is re-elected to the Board. In connection with a
recapitalization of the Company in 2012, Mr. Wunderlich and the
Company agreed to amend the Amended Director Agreement to (i)
change the Stipend to $1,000 per month, payable quarterly; (ii) to
forego the issuance of any warrants due to Wunderlich under the
Amended Agreement; and (iii) to cancel the future issuance of any
warrants due to Mr. Wunderlich under the Amended Agreement. To date
no warrants have been issued pursuant to this agreement.
On January 29, 2015, we entered into a director agreement
(“Macaluso Director Agreement”) with Joseph Macaluso, pursuant to
which Mr. Macaluso was appointed to the Board effective January 29,
2015 (the “Effective Date”). The Macaluso Director Agreement may,
at the option of the Board, be automatically renewed on such date
that Mr. Macaluso is re-elected to the Board. Under the Macaluso
Director Agreement, Mr. Macaluso is to be paid a stipend of one
thousand five hundred dollars ($1,500) (the “Stipend”) per month,
payable quarterly. Additionally, Mr. Macaluso shall receive
warrants (the “Warrants”) to purchase such number of shares of the
Company’s Common Stock, as shall equal (the “Formula”) (A) $20,000
divided by (B) the closing price of the Common Stock on the date of
grant of the Warrant. The exercise price of the Warrant shall
be the closing price on the date of the grant of such Warrant (the
“Grant Date”) plus $0.01. The Warrant shall be fully vested upon
receipt thereof (the “Vesting Date”).
On March 27, 2017, we entered into a director agreement (“Schachtel
Director Agreement”) with John Schachtel, pursuant to which Mr.
Schachtel was appointed to the Board effective March 27, 2017 (the
“Effective Date”). The Schachtel Director Agreement may, at the
option of the Board, be automatically renewed on such date that Mr.
Schachtel is re-elected to the Board. Under the Schachtel Director
Agreement, Mr. Schachtel is to be paid a stipend of one thousand
five hundred dollars ($1,500) (the “Stipend”) per month, payable
quarterly. Additionally, Mr. Schachtel shall receive warrants (the
“Warrants”) to purchase such number of shares of the Company’s
Common Stock, as shall equal (the “Formula”) (A) $20,000 divided by
(B) the closing price of the Common Stock on the date of grant of
the Warrant. The exercise price of the Warrant shall be the
closing price on the date of the grant of such Warrant (the “Grant
Date”) plus $0.01. The Warrant shall be fully vested upon receipt
thereof (the “Vesting Date”).
Item 12. Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder
Matters.
The following table sets forth certain information regarding the
beneficial ownership of our Common Stock as of March 25, 2020 by
(a) each stockholder who is known to us to own beneficially 5% or
more of our outstanding Common Stock; (b) all directors; (c) our
executive officers, and (d) all executive officers and directors as
a group. Except as otherwise indicated, all persons listed below
have (i) sole voting power and investment power with respect to
their shares of Common Stock, except to the extent that authority
is shared by spouses under applicable law, and (ii) record and
beneficial ownership with respect to their shares of Common
Stock.
For purposes of this table, a person or group of persons is deemed
to have “beneficial ownership” of any shares of Common Stock that
such person has the right to acquire within 60 days of March 25,
2020. For purposes of computing the percentage of outstanding
shares of our Common Stock held by each person or group of persons
named above, any shares that such person or persons has the right
to acquire within 60 days of March 25, 2020 is deemed to be
outstanding, but is not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person. The
inclusion herein of any shares listed as beneficially owned does
not constitute an admission of beneficial ownership. Unless
otherwise identified, the address of our directors and officers is
c/o SilverSun Technologies, Inc. at 120 Eagle Rock Ave, Suite
330, East Hanover, NJ 07936.
|
|
|
Number of Shares of
Common Stock
Beneficially Owned
|
|
|
Percentage of Ownership
of Common Stock (1)
|
|
| |
|
|
|
|
|
|
|
|
|
Officers and Directors
|
|
|
|
|
|
|
|
|
|
Mark Meller
Chief Executive Officer, President and Chairman
|
|
|
2,006,534 |
|
|
|
44.58 |
%
|
| |
|
|
|
|
|
|
|
|
|
Christine Dye (3)
|
|
|
|
|
|
|
|
|
|
Chief Financial Officer
|
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
Joseph Macaluso
Director
|
|
|
- |
|
|
|
* |
|
| |
|
|
|
|
|
|
|
|
|
Stanley Wunderlich
Director
|
|
|
5,450 |
|
|
|
* |
|
| |
|
|
|
|
|
|
|
|
|
John Schachtel
|
|
|
|
|
|
|
|
|
|
Director
|
|
|
11,031 |
|
|
|
* |
|
| |
|
|
|
|
|
|
|
|
|
Officers and Directors as a Group
|
|
|
2,023,015 |
|
|
|
44.94 |
%
|
| |
|
|
|
|
|
|
|
|
|
5% Beneficial Shareholders
|
|
|
|
|
|
|
|
|
|
Jeffrey Roth (2)
|
|
|
581,384 |
|
|
|
12.92 |
%
|
| |
|
|
|
|
|
|
|
|
|
Poplar Point Capital Management LLC (4)
|
|
|
293,814 |
|
|
|
6.53 |
%
|
| |
|
|
|
|
|
|
|
|
|
Bard Associates (5)
|
|
|
285,655 |
|
|
|
6.30 |
% |
* denotes less than
1%
|
(1)
|
Based on 4,501,271 shares of Common Stock outstanding as of March
25, 2020. Shares of Common Stock subject to options or warrants
currently exercisable or exercisable within 60 days, are deemed
outstanding for purposes of computing the percentage of the person
holding such options or warrants, but are not deemed outstanding
for purposes of computing the percentage of any other person.
|
|
(2)
|
Mr. Roth is a former employee of SWK Technologies, Inc, a
wholly-owned subsidiary of SilverSun Technologies, Inc.
|
|
(3)
|
Ms. Dye became Chief Financial Officer effective February 11,
2019.
|
|
(4)
|
All information about Poplar Point Capital Management, LLC, and
related parties, is based on a Schedule 13G filed with the SEC on
January 14, 2020.
|
|
(5)
|
All information about Bard Associates, Inc. is based on a Schedule
13G filed with the SEC on February 7, 2020.
|
Securities Authorized For Issuance Under Equity Compensation
Plans
There are 26,280 outstanding options to purchase our
securities.
The following table sets forth information as of December 31, 2019
with respect to compensation plans (including individual
compensation arrangements) under which our common shares are
authorized for issuance, aggregated as follows:
|
|
|
All compensation plans previously approved by security holders;
and
All compensation plans not previously approved by security
holders
|
|
|
Plan category
|
|
Number of securities to be issued upon exercise of outstanding
options, warrants and rights
|
|
|
Weighted average exercise price of outstanding options, warrants
and rights
|
|
|
Number of securities remaining available for future
issuance
|
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
Equity compensation plans approved by security holders
|
|
|
-
|
|
|
$
|
-
|
|
|
|
675,000
|
|
|
Equity compensation plans not approved by security holders.
|
|
|
26,280
|
|
|
$
|
3.71
|
|
|
|
-
|
|
|
Total
|
|
|
26,280
|
|
|
$
|
3.71
|
|
|
|
-
|
|
2004 Stock Incentive Plan
The Company adopted the 2004 Stock Incentive as the amended Plan
(the “2004 Plan”) in order to attract and retain qualified
employees, directors, independent contractors or agents of the
Company. The 2004 Plan terminated on September 29, 2014;
options granted before that date were not affected by plan
termination. At December 31, 2019 and 2018, 26,280 and 56,280
options remained outstanding under the 2004 Plan, respectively.
2019 Equity and Incentive Plan
The Company adopted the 2019 Equity and Incentive Plan (the “2019
Plan”) to order provide long-term incentives for employees and
non-employees to contribute to the growth of the Company and attain
specific performance goals. The 675,000 shares available under the
2019 Plan represent approximately 15% of the Company’s 4,501,201
currently outstanding shares (the “Share Reserve”). The Share
Reserve will automatically increase on January 1st of each year,
for a period of not more than ten years, commencing on January 1,
2020 and ending on (and including) January 1, 2029, in an amount
equal to 180,030 shares (which is the equivalent of 4.0% of the
4,500,755 shares of common stock outstanding as of September 30,
2019). As of March 25, 2020, no securities were issued.
Item 13. Certain Relationships
and Related Transactions.
The Company leased its Seattle office space from Mary Abdian, an
employee of SWK, which expired September 30, 2018, however, this
lease was terminated on May 31, 2018 by mutual consent. The
monthly rent for this office space was $3,090 and increased 3% each
year. Total rent paid for 2018 and 2017 was $15,915 and
$37,357 respectively under this lease.
Director Independence
On an annual basis, each director and executive officer will be
obligated to disclose any transactions with the Company in which a
director or executive officer, or any member of his or her
immediate family, have a direct or indirect material interest in
accordance with Item 407(a) of Regulation S-K. Following completion
of these disclosures, the Board will make an annual determination
as to the independence of each director using the current standards
for “independence” that satisfy the criteria for the Nasdaq Capital
Markets.
As of December 31, 2019, the Board determined that Mr. Wunderlich,
Mr. Macaluso, and Mr. Schachtel were independent.
Item 14. Principal Accountant
Fees and Services.
The following table sets forth fees billed to the Company by the
Company’s independent auditors for (i) services rendered for the
audit of the Company’s annual financial statements and the review
of the Company’s quarterly financial statements, (ii) services
rendered that are reasonably related to the performance of the
audit or review of the Company’s financial statements that are not
reported as Audit Fees, and (iii) services rendered in connection
with tax preparation, compliance, advice and assistance.
|
Services
|
|
2019
|
|
|
2018
|
|
|
Audit Fees
|
|
$ |
95,000 |
|
|
$ |
90,000 |
|
| |
|
|
|
|
|
|
|
|
|
Audit - Related Fees
|
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
Tax fees
|
|
$ |
30,000 |
|
|
|
30,000 |
|
| |
|
|
|
|
|
|
|
|
|
All Other Fees (a)
|
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
125,000 |
|
|
$ |
120,000 |
|
(a) All other fees include fees primarily for review and
other services related to securities registration documents,
assistance with other document reviews and assistance with revenue
agent examination.
Prior to engaging our accountants to perform a particular service,
our Audit Committee obtains an estimate for the service to be
performed. All of the services described above were approved by the
Audit Committee in accordance with its procedures.
PART IV
Item 15. Exhibits.
(a)
|
Exhibit No.
|
|
Description
|
|
|
|
|
|
2.1
|
|
Asset Purchase Agreement, dated March
11, 2015, by and among SWK Technologies, Inc., 2000Soft, Inc. d/b/a
Accounting Technology Resources and Karen Espinoza
McGarrigle (incorporated by reference to Exhibit 2.1 on the
Company’s current report on Form 8-K filed with the SEC on March
17, 2015).
|
|
2.2
|
|
Form of Asset Purchase Agreement,
dated July 6, 2015, by and among SWK Technologies, Inc.,
ProductiveTech, Inc. a New Jersey corporation John McPoyle and
Kevin Snyder (incorporated herein by reference to Exhibit 2.1 on
Form 8-K, filed with the SEC on July 10, 2015).
|
|
2.2
|
|
Form of Asset Purchase Agreement,
dated May 18, 2018, by and among SWK Technologies, Inc., InfoSys
Management, Inc. and three individuals (incorporated herein by
reference to Exhibit 2.1 on the Company’s Form 8-K, filed with the
SEC on May 24, 2018).
|
|
2.3
|
|
Form of Asset Purchase Agreement,
dated May 18, 2018, by and among Secure Cloud Services, Inc.,
SilverSun Technologies, Inc., Nellnube, Inc. and Info Sys
Management, Inc. (incorporated herein by reference to Exhibit 2.2
on the Company’s Form 8-K, filed with the SEC on May 24,
2018).
|
| 2.4 |
|
Asset Purchase Agreement, dated
August 26, 2019, by and among SilverSun Technologies, Inc. SWK
Technologies, Inc., and SPS Commerce, Inc. (incorporated herein by
reference to Exhibit 10.1 on Form 8-K, filed with the SEC on August
27, 2019). |
|
3.1
|
|
Second Amended Certificate of
incorporation of SilverSun Technologies, Inc., filed September 5,
2003 (incorporated herein by reference to Exhibit 3.1 of the
registration statement on Form SB-2, filed with the SEC on November
25, 2003).
|
|
3.2
|
|
By-laws of iVoice, Inc., a New Jersey
corporation (incorporated herein by reference to Exhibit 3.2
of the Registrant’s Form 10-QSB for the period ended March 31,
2003).
|
|
3.3
|
|
Fourth Amended and Restated
Certificate of incorporation of SilverSun Technologies, Inc.,
(incorporated herein by reference to Exhibit 3.1 on Form 8-K, dated
June 27, 2011, filed with the SEC on June 30, 2011).
|
|
3.4
|
|
Amendment to the Bylaws of the
Company (incorporated herein by reference to Exhibit 3.2 on Form
8-K, dated June 27, 2011, filed with the SEC on June 30,
2011).
|
| 3.5 |
|
Certificate of Elimination of Series
B Preferred Stock (incorporated herein by reference to Exhibit 3.1
on Form 8-K, dated September 13, 2019). |
|
4.1
|
|
iVoice Acquisition 1, Inc. 5%
Convertible Debenture due March 20, 2005 issued to Elma S. Foin
(incorporated herein by reference to Exhibit 4.2 of the
registration statement on Form SB-2, filed with the SEC on December
22, 2003).
|
|
4.2
|
|
iVoice Acquisition 1, Inc. 5%
Convertible Debenture due March 20, 2005 issued to Darryl A. Moy
(incorporated herein by reference to Exhibit 4.3 of the
registration statement on Form SB-2, filed with the SEC on December
22, 2003).
|
|
4.3
|
|
iVoice Acquisition 1, Inc. 5%
Convertible Debenture due March 20, 2005 issued to Henry Tyler
(incorporated herein by reference to Exhibit 4.4 of the
registration statement on Form SB-2, filed with the SEC on December
22, 2003).
|
|
4.4
|
|
SilverSun Technologies, Inc. 7.5% Secured Convertible Debenture,
for a value of $600,000, due December 30, 2007 to YA Global (f/k/a/
Cornell Capital Partners, LP).
|
|
4.5
|
|
SilverSun Technologies, Inc. 7.5% Secured Convertible Debenture,
for a value of $1,159,047, due December 30, 2007 to YA Global
(f/k/a/ Cornell Capital Partners, LP).
|
|
4.6
|
|
Certificate of Designation of Series
A Convertible Preferred Stock (incorporated herein by reference to
Exhibit 4.1 on Form 8-K, dated May 4, 2011, filed with the SEC on
May 12, 2011).
|
|
4.7
|
|
Certificate of Designation of Series
B Preferred Stock (incorporated herein by reference to Exhibit
4.1 on Form 8-K, dated September 23, 2011, filed with the SEC on
September 27, 2011).
|
|
10.1
|
|
Employment Agreement, dated January
1, 2003, between iVoice Acquisition 1, Inc. and Jerome
Mahoney (incorporated herein by reference to Exhibit 10.8 of
the Registration Statement on Form SB-2 filed on November 25,
2003).
|
|
10.2
|
|
Employment Agreement, dated September
15, 2003, between SilverSun Technologies, Inc. and Mark
Meller (incorporated herein by reference to Exhibit 10.9 of
the Registration Statement on Form SB-2 filed on November 25,
2003).
|
|
10.3
|
|
Equity Line of Credit Agreement dated
January 24, 2003 between Cornell Capital Partners, LP, and iVoice
Acquisition 1, Inc. (incorporated herein by reference to Exhibit
10.1 of the Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2003, filed with the SEC on May 12, 2003).
|
|
10.4
|
|
Registration Rights Agreement dated
January 24, 2003 between Cornell Capital Partners, LP, and iVoice
Acquisition 1, Inc. (incorporated herein by reference to Exhibit
10.2 of the Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2003, filed with the SEC on May 12, 2003).
|
|
10.5
|
|
Stock Purchase Agreement dated
January 24, 2003 between iVoice Acquisition 1, Inc. and listed
Buyers (incorporated herein by reference to Exhibit 10.3 of the
Quarterly Report on Form 10-Q for the quarterly period ended March
31, 2003, filed with the SEC on May 12, 2003).
|
|
10.6
|
|
Placement Agreement dated January 24,
2003 between iVoice Acquisition 1, Inc. and Cornell Capital
Partners LP. (incorporated herein by reference to Exhibit 10.5 of
the Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2003, filed with the SEC on May 12, 2003).
|
|
10.7
|
|
Termination Agreement dated December 30, 2005 between YA Global
(f/k/a/ Cornell Capital Partners, LP). and SilverSun Technologies,
Inc.
|
|
10.8
|
|
Escrow Agreement dated December 30, 2005 between David Gonzalez,
Esq. And SilverSun Technologies, Inc.
|
|
10.9
|
|
Securities Purchase Agreement dated December 30, 2005 between YA
Global (f/k/a/ Cornell Capital Partners, LP). and SilverSun
Technologies, Inc.
|
|
10.10
|
|
Investor Rights Agreement dated December 30, 2005 between YA Global
(f/k/a/ Cornell Capital Partners, LP). and SilverSun Technologies,
Inc.
|
|
10.11
|
|
Amended and Restated Security Agreement dated December 30, 2005
between YA Global (f/k/a/ Cornell Capital Partners, LP). and
SilverSun Technologies, Inc.
|
|
10.12
|
|
Securities Purchase Agreement dated
May 6, 2009 by and among SilverSun Technologies, SWK Technologies,
Inc., Jeffrey D. Roth and Jerome R. Mahoney (incorporated
herein by reference to Exhibit 10.1 on Form 10-K, dated May 9,
2009, filed with the SEC on May 26, 2009).
|
|
10.13
|
|
Termination Settlement Agreement
dated May 6, 2009 by and among SilverSun Technologies, SWK
Technologies, Inc., Jeffrey D. Roth and Jerome R.
Mahoney (incorporated herein by reference to Exhibit 10.2 on
Form 10-K, dated May 9, 2009, filed with the SEC on May 26,
2009).
|
|
10.14
|
|
Promissory notes, dated April 11,
2011 among SilverSun Technologies, Inc and accredited investors
(incorporated herein by reference to Exhibit 10.1 on Form 8-K,
dated April 11, 2011, filed with the SEC on April 15,
2011).
|
|
10.15
|
|
Form of Preferred Stock Purchase
Agreement (incorporated by reference to Exhibit 10.2 on the
Company’s current report on Form 8-K filed with the SEC on May 12,
2011).
|
|
10.16
|
|
Amended Agreement by and between the
Company and Mr. Stanley Wunderlich (incorporated by reference to
Exhibit 10.1 to the Company’s current report on Form 8-K filed with
the SEC on August 3, 2011).
|
|
10.17
|
|
Form of Warrant (incorporated by
reference to Exhibit 10.2 to the Company’s current report on Form
8-K filed with the SEC on August 3, 2011).
|
|
10.18
|
|
Loan and Security Agreement by and
between the Company, its subsidiary SWK Technologies, Inc and a
commercial lender (incorporated herein by reference to Exhibit
10.18 of the Annual Report on Form 10-K for the period ended
December 31, 2011, filed with the SEC on March 29, 2012).
|
|
10.19
|
|
Audit Committee Charter (incorporated
herein by reference to Exhibit 10.19 of the Annual Report on Form
10-K for the period ended December 31, 2011, filed with the
SEC on March 29, 2012).
|
|
10.20
|
|
Form of Purchase Agreement, dated
June 14, 2012, by and among SWK Technologies, the Company’s
wholly-owned subsidiary, Neil Wolf, Esq., not individually, but
solely in his capacity as Trustee-Assignee of the Trust
Agreement and Assignment for the Benefit of the Creditors of
Hightower, Inc., Hightower, Inc., and the Stockholders of
Hightower, Inc. (incorporated by reference to Exhibit 2.1 on the
Company’s current report on Form 8-K filed with the SEC on June 20,
2012).
|
|
10.21
|
|
Promissory Note, dated March 11,
2015, issued in favor of 2000Soft, Inc. d/b/a Accounting Technology
Resources, a California corporation (incorporated by reference to
Exhibit 10.2 on the Company’s current report on Form 8-K filed with
the SEC on March 17, 2015).
|
|
10.22
|
|
Form of Promissory Note, dated July
6, 2015, issued in favor of ProductiveTech, Inc., a New Jersey
corporation (incorporated herein by reference to Exhibit 10.1 on
Form 8-K, filed with the SEC on July 10, 2015)
|
|
10.23
|
|
Amended and Restated Employment
Agreement, dated February 4, 2016, between Mark Meller and
Silversun Technologies, Inc. (incorporated herein by reference to
Exhibit 10.1 on Form 8-K, filed with the SEC on February 5,
2016).
|
|
10.24
|
|
Form of $1,000,000 Convertible
Promissory Note, dated May 18, 2018, issued in favor of Info Sys
Management, Inc. (incorporated herein by reference to Exhibit 10.1
on Form 8-K, filed with the SEC on May 24, 2018).
|
|
10.25
|
|
Form of $400,000 Convertible
Promissory Note, May 18, 2018, issued in favor of Info Sys
Management, Inc. (incorporated herein by reference to Exhibit 10.2
on Form 8-K, filed with the SEC on May 24, 2018).
|
|
10.26
|
|
Form of Employment Agreement, dated
May 18, 2018 by and between SWK Technologies, Inc. and Brian James
O’Reilly (incorporated herein by reference to Exhibit 10.3 on Form
8-K, filed with the SEC on May 24, 2018).
|
|
10.27 |
|
Form of Escrow Agreement, dated
August 26, 2019, by and among SWK Technologies, Inc., SPS Commerce,
Inc. and Wells Fargo Bank, National Association (incorporated
herein by reference to Exhibit 10.2 on Form 8-K, filed with the SEC
on August 27, 2019). |
|
14.1
|
|
Code of Ethics (incorporated by
reference to Exhibit 14.1 filed with the Registrant’s Form 10-KSB
for the fiscal year ended December 31, 2003).
|
* Filed herewith
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
|
|
SILVERSUN TECHNOLOGIES, INC.
|
|
|
|
|
|
|
|
Date: March 26, 2020
|
By:
|
/s/ Mark Meller
|
|
|
|
|
Mark Meller
|
|
|
|
|
Principal Executive Officer
|
|
|
Date: March 26, 2020
|
By:
|
/s/ Christine Dye
|
|
|
|
|
Christine Dye
|
|
|
|
|
Principal Financial Officer
|
|
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
|
Name
|
|
Position
|
|
Date
|
|
|
|
|
|
|
|
/s/ Mark Meller
|
|
Principal Executive Officer
|
|
March 26, 2020
|
|
Mark Meller
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Stanley Wunderlich
|
|
Director
|
|
March 26, 2020
|
|
Stanley Wunderlich
|
|
|
|
|
|
/s/ Joseph Macaluso
|
|
Director
|
|
March 26, 2020
|
|
Joseph Macaluso
|
|
|
|
|
|
|
|
|
|
|
|
/s/ John Schachtel
|
|
Director
|
|
March 26, 2020
|
|
John Schachtel
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Christine Dye
|
|
Principal Financial Officer
|
|
March 26, 2020
|
|
Christine Dye
|
|
|
|
|
PART F/S
INDEX TO FINANCIAL STATEMENTS
AUDITED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of SilverSun Technologies, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of
SilverSun Technologies, Inc. and Subsidiaries (the “Company”) as of
December 31, 2019 and 2018, and the related consolidated statements
of operations, stockholders’ equity, and cash flows for each of the
years in the two-year period ended December 31, 2019, and the
related notes (collectively referred to as the “financial
statements”). In our opinion, the financial statements present
fairly, in all material respects, the financial position of the
Company as of December 31, 2019 and 2018, and the results of its
operations and its cash flows for each of the years in the two-year
period ended December 31, 2019, in conformity with accounting
principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting
Oversight Board (United States) (“PCAOB”) and are required to be
independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting. As part of our audits, we are required to obtain an
understanding of internal control over financial reporting, but not
for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
|
/s/ Friedman LLP
|
|
|
|
|
We have served as the Company’s auditor since 2004.
|
|
|
|
|
Marlton, New Jersey
|
|
March 26, 2020
|
|
SILVERSUN TECHNOLOGIES, INC. AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
|
|
|
2019
|
|
|
2018
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$ |
8,658,401 |
|
|
$ |
1,900,857 |
|
|
Escrow accounts receivable
|
|
|
1,150,000 |
|
|
|
- |
|
|
Accounts receivable, net of allowance of $375,000
|
|
|
2,529,545 |
|
|
|
1,900,336 |
|
|
Unbilled services
|
|
|
183,484 |
|
|
|
166,593 |
|
|
Prepaid expenses and other current assets
|
|
|
455,434 |
|
|
|
433,727 |
|
|
Current assets held for sale
|
|
|
- |
|
|
|
484,242 |
|
| |
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
12,976,864 |
|
|
|
4,885,755 |
|
| |
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
712,627 |
|
|
|
688,122 |
|
|
Operating lease right-of-use assets
|
|
|
698,840 |
|
|
|
- |
|
|
Intangible assets, net
|
|
|
2,607,301 |
|
|
|
2,916,367 |
|
|
Goodwill
|
|
|
891,000 |
|
|
|
885,000 |
|
|
Deferred tax assets
|
|
|
874,482 |
|
|
|
1,292,055 |
|
|
Deposits and other assets
|
|
|
192,158 |
|
|
|
39,791 |
|
|
Other assets held for sale
|
|
|
- |
|
|
|
1,037,295 |
|
| |
|
|
|
|
|
|
|
|
|
Total assets
|
|
$ |
18,953,272 |
|
|
$ |
11,744,385 |
|
| |
|
|
|
|
|
|
|
|
|
LIABILITIES & STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$ |
2,210,618 |
|
|
$ |
2,028,218 |
|
|
Accrued expenses
|
|
|
1,189,746 |
|
|
|
1,422,555 |
|
|
Accrued dividend
|
|
|
2,250,636 |
|
|
|
225,038 |
|
|
Accrued interest
|
|
|
15,378 |
|
|
|
14,628 |
|
|
Income taxes payable
|
|
|
152,355 |
|
|
|
20,000 |
|
|
Contingent consideration – current portion
|
|
|
- |
|
|
|
22,548 |
|
|
Long term debt – current portion
|
|
|
131,795 |
|
|
|
154,727 |
|
|
Long term convertible debt – current portion
|
|
|
277,106 |
|
|
|
271,623 |
|
|
Finance lease obligations – current portion
|
|
|
162,625 |
|
|
|
87,355 |
|
|
Operating lease liabilities – current portion
|
|
|
262,020 |
|
|
|
- |
|
|
Deferred revenue
|
|
|
2,006,983 |
|
|
|
1,386,618 |
|
|
Current liabilities held for sale
|
|
|
- |
|
|
|
599,916 |
|
| |
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
8,659,262 |
|
|
|
6,233,226 |
|
| |
|
|
|
|
|
|
|
|
|
Long term debt net of current portion
|
|
|
64,072 |
|
|
|
73,900 |
|
|
Long term convertible debt net of current portion
|
|
|
717,482 |
|
|
|
994,587 |
|
|
Finance lease obligations net of current portion
|
|
|
180,976 |
|
|
|
108,512 |
|
|
Operating lease liabilities net of current portion
|
|
|
436,820 |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
10,058,612 |
|
|
|
7,410,225 |
|
| |
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
Preferred Stock, $0.001 par value; authorized 1,000,000 shares
|
|
|
|
|
|
|
|
|
|
Series A Preferred Stock, $0.001 par value; authorized 2 shares
No shares issued and outstanding
|
|
|
- |
|
|
|
- |
|
|
Series B Preferred Stock, $0.001 par value; cancelled
none and 1 share issued and outstanding as of December
31, 2019 and 2018 respectively
|
|
|
- |
|
|
|
1 |
|
|
Common stock, $0.00001 par value; authorized 75,000,000 shares
4,501,271 and 4,500,755 issued and outstanding as of
December 31, 2019 and 2018, respectively
|
|
|
46 |
|
|
|
46 |
|
|
Additional paid-in capital
|
|
|
9,530,198 |
|
|
|
11,763,923 |
|
|
Accumulated deficit
|
|
|
(635,584 |
)
|
|
|
(7,429,810 |
)
|
| |
|
|
|
|
|
|
|
|
|
Total stockholders’ equity
|
|
|
8,894,660 |
|
|
|
4,334,160 |
|
| |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity
|
|
$ |
18,953,272 |
|
|
$ |
11,744,385 |
|
The accompanying notes are an integral part of these consolidated
financial statements.
SILVERSUN TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
For the Years Ended
|
|
|
|
|
December 31, 2019
|
|
|
December 31, 2018
|
|
| |
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Software product, net
|
|
$ |
6,876,682 |
|
|
$ |
5,321,822 |
|
|
Service, net
|
|
|
31,625,800 |
|
|
|
30,781,996 |
|
|
Total revenues, net
|
|
|
38,502,482 |
|
|
|
36,103,818 |
|
| |
|
|
|
|
|
|
|
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
Product
|
|
|
4,179,592 |
|
|
|
3,321,506 |
|
|
Service
|
|
|
19,644,436 |
|
|
|
18,927,462 |
|
|
Total cost of revenues
|
|
|
23,824,028 |
|
|
|
22,248,968 |
|
| |
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
14,678,454 |
|
|
|
13,854,850 |
|
| |
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
Selling and marketing expenses
|
|
|
6,838,745 |
|
|
|
6,312,304 |
|
|
General and administrative expenses
|
|
|
8,772,965 |
|
|
|
7,980,917 |
|
|
Share-based compensation expenses
|
|
|
16,910 |
|
|
|
73,305 |
|
|
Impairment of intangible assets
|
|
|
236,860 |
|
|
|
- |
|
|
Depreciation and amortization expenses
|
|
|
720,035 |
|
|
|
649,427 |
|
|
Total selling, general and administrative expenses
|
|
|
16,585,515 |
|
|
|
15,015,953 |
|
| |
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(1,907,061 |
)
|
|
|
(1,161,103 |
)
|
| |
|
|
|
|
|
|
|
|
|
Other (expense) income:
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
24,005 |
|
|
|
- |
|
|
Interest expense, net
|
|
|
(39,814 |
)
|
|
|
(41,682 |
)
|
|
Total other (expense) income
|
|
|
(15,809 |
)
|
|
|
(41,682 |
)
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before taxes
|
|
|
(1,922,870 |
)
|
|
|
(1,202,785 |
)
|
| |
|
|
|
|
|
|
|
|
|
Benefit (Provision) for income tax
|
|
|
455,006 |
|
|
|
281,212 |
|
|
|
|
|
|
|
|
|
- |
|
|
Loss from continuing operations
|
|
|
(1,467,864 |
)
|
|
|
(921,573 |
)
|
| |
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
Income
from discontinued operations
|
|
|
988,525 |
|
|
|
1,573,863 |
|
|
Gain
on sale of discontinued operations
|
|
|
10,307,155 |
|
|
|
- |
|
|
Provision
for income taxes
|
|
|
(3,033,590 |
)
|
|
|
(389,858 |
)
|
|
Income from discontinued operations
|
|
|
8,262,090 |
|
|
|
1,184,005 |
|
| |
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
6,794,226 |
|
|
$ |
262,432 |
|
| |
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share applicable to common
shareholders:
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
(0.33 |
)
|
|
|
(0.20 |
)
|
|
Discontinued operations
|
|
|
1.84 |
|
|
|
0.26 |
|
|
Net income
|
|
|
1.51 |
|
|
|
0.06 |
|
| |
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share applicable to common
shareholders:
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
(0.33 |
)
|
|
|
(0.20 |
)
|
|
Discontinued operations
|
|
|
1.84 |
|
|
|
0.26 |
|
|
Net income
|
|
|
1.51 |
|
|
|
0.06 |
|
| |
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
4,500,827 |
|
|
|
4,499,559 |
|
|
Diluted
|
|
|
4,500,827 |
|
|
|
4,499,559 |
|
The accompanying notes are an integral part of these consolidated
financial statements.
SILVERSUN TECHNOLOGIES, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
|
|
|
Series A
Preferred
Stock
|
|
|
Series B
Preferred
Stock
|
|
|
Common Stock
Class A
|
|
|
Additional
Paid in
|
|
|
Accumulated
|
|
|
Total
Stockholders’
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
(Deficit)
|
|
|
Equity
|
|
|
Balance at January 1, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
1
|
|
|
$
|
1
|
|
|
|
4,489,903
|
|
|
$
|
46
|
|
|
$
|
11,919,316
|
|
|
$
|
(7,692,242
|
)
|
|
$
|
4,227,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,852
|
|
|
|
-
|
|
|
|
45,306
|
|
|
|
-
|
|
|
|
45,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividend
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(225,038
|
)
|
|
|
-
|
|
|
|
(225,038
|
)
|
|
Cancelled Stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,000
|
)
|
|
|
-
|
|
|
|
(3,661
|
)
|
|
|
-
|
|
|
|
(3,661)
|
|
|
Share-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
28,000
|
|
|
|
-
|
|
|
|
28,000
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
262,432
|
|
|
|
262,432
|
|
|
Balance at December 31, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
1
|
|
|
$
|
1
|
|
|
|
4,500,755
|
|
|
$
|
46
|
|
|
$
|
11,763,923
|
|
|
$
|
(7,429,810
|
)
|
|
$
|
4,334,160
|
|
|
Cancellation of Series B stock
|
|
|
-
|
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
Exercised stock warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
516
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Cash dividend declared
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,250,636
|
)
|
|
|
-
|
|
|
|
(2,250,636
|
)
|
|
Share-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,910
|
|
|
|
-
|
|
|
|
16,910
|
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,794,226
|
|
|
|
6,794,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
- |
|
|
|
4,501,271
|
|
|
$
|
46
|
|
|
$
|
9,530,198
|
|
|
$
|
(635,584
|
)
|
|
$
|
8,894,660
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
SILVERSUN TECHNOLOGIES, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
|
|
|
2019
|
|
|
2018
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
6,794,226 |
|
|
$ |
262,432 |
|
|
Net income from discontinued operations
|
|
|
8,262,090 |
|
|
|
1,184,005 |
|
|
Net loss from continuing operations
|
|
|
(1,467,864 |
)
|
|
|
(921,573 |
)
|
|
Adjustments to reconcile net (loss) income to net
cash
used in operating activities:
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
(455,006 |
) |
|
|
(281,212 |
) |
|
Depreciation and amortization
|
|
|
338,103 |
|
|
|
326,285 |
|
|
Amortization of intangibles
|
|
|
381,933 |
|
|
|
322,126 |
|
|
Amortization of right of use assets
|
|
|
212,164 |
|
|
|
- |
|
|
Bad debt expense
|
|
|
139,270 |
|
|
|
96,024 |
|
|
Share-based compensation
|
|
|
16,910 |
|
|
|
28,000 |
|
|
Impairment of intangible asset
|
|
|
236,860 |
|
|
|
- |
|
|
Common stock for services
|
|
|
- |
|
|
|
45,307 |
|
| |
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(605,611 |
)
|
|
|
61,748 |
|
|
Unbilled services
|
|
|
(16,888 |
)
|
|
|
170,894 |
|
|
Prepaid expenses and other current assets
|
|
|
(21,707 |
)
|
|
|
(76,859 |
)
|
|
Deposits and other assets
|
|
|
(152,368 |
)
|
|
|
3,757 |
|
|
Accounts payable
|
|
|
182,400 |
|
|
|
(66,078 |
)
|
|
Accrued expenses
|
|
|
(232,808 |
) |
|
|
468,410 |
|
|
Income tax payable
|
|
|
132,350 |
|
|
|
(77,097 |
)
|
|
Accrued interest
|
|
|
750 |
|
|
|
750 |
|
|
Deferred revenues
|
|
|
620,365 |
|
|
|
(367,968 |
)
|
|
Operating lease obligations
|
|
|
(212,160 |
)
|
|
|
- |
|
|
Net cash used in operating activities of continuing
operations
|
|
|
(903,307 |
)
|
|
|
(267,486 |
)
|
| |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(70,672 |
)
|
|
|
(146,001 |
)
|
|
Acquisition of business
|
|
|
(60,000 |
)
|
|
|
(300,000 |
)
|
|
Proceeds from sale of EDI practice, net of fees and taxes
|
|
|
8,365,192 |
|
|
|
- |
|
|
Software development costs
|
|
|
(81,730 |
)
|
|
|
(251,821 |
)
|
|
Net cash provided by (used in) investing activities of continuing
operations
|
|
|
8,152,790 |
|
|
|
(697,822 |
)
|
| |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Payment of cash dividend
|
|
|
(225,038 |
)
|
|
|
- |
|
|
Payment of contingent consideration
|
|
|
(22,548 |
)
|
|
|
(83,087 |
)
|
|
Payment for repurchase of common stock
|
|
|
- |
|
|
|
(3,661 |
)
|
|
Payment of long term debt
|
|
|
(206,760 |
)
|
|
|
(213,307 |
)
|
|
Payment of long term convertible debt
|
|
|
(271,622 |
) |
|
|
(133,690 |
) |
|
Payment of capital lease obligations
|
|
|
(144,202 |
)
|
|
|
(131,762 |
)
|
|
Net cash used in financing activities of continuing operations
|
|
|
(870,170 |
)
|
|
|
(565,507 |
)
|
| |
|
|
|
|
|
|
|
|
|
Cash flows from discontinued operations
|
|
|
|
|
|
|
|
|
|
Operating activities of discontinued operations
|
|
|
505,910 |
|
|
|
1,562,048 |
|
|
Investing activities of discontinued operations
|
|
|
(127,679 |
)
|
|
|
(365,723 |
)
|
|
Net cash provided by discontinued operations
|
|
|
378,231 |
|
|
|
1,196,325 |
|
| |
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
6,757,544 |
|
|
|
(334,490 |
)
|
|
Cash, beginning of year
|
|
|
1,900,857 |
|
|
|
2,235,347 |
|
| |
|
|
|
|
|
|
|
|
|
Cash, end of year
|
|
$ |
8,658,401 |
|
|
$ |
1,900,857 |
|
| |
|
|
|
|
|
|
|
|
|
Supplemental Schedule of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
During the year, cash was paid for the following:
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$ |
1,907,382 |
|
|
$ |
217,210 |
|
|
Interest
|
|
$ |
39,814 |
|
|
$ |
43,337 |
|
The accompanying notes are an integral part of these consolidated
financial statements.
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS (Continued)
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
For the Year Ended December 31, 2019:
The Company acquired certain assets of Partners in Technology, Inc.
(“PIT”) for a $174,000 promissory note in addition to a cash
payment of $60,000. (see Note 10).
Operating lease right of use assets and operating lease liabilities
were recognized in the amount of $911,000 at January 1, 2019.
On April 1, 2019 the Company entered into an operating lease in
Lisle, IL. Accordingly, operating lease right of use assets and
operating lease liabilities were recognized in the amount of
$71,685.
The Company incurred approximately $291,936 in finance lease
obligations for the purchase of equipment.
On September 6, 2019, the Company filed a Certificate of
Elimination of Certificate of Designations (the “Certificate of
Elimination”) with the Secretary of State of the State of Delaware.
The Certificate of Withdrawal eliminated the Company’s Series B
Preferred Stock, par value $.001 per share (the “Series B
Preferred”), from the Company’s Certificate of Incorporation. Prior
to filing the Certificate of Elimination, Mark Meller, the
Company’s Chief Executive Officer and Chairman and owner of the
only share of Series B Preferred, cancelled the only share of
Series B Preferred issued and outstanding.
On August 26, 2019 the Company sold the EDI practice and $1,150,000
of the proceeds were put in an escrow receivable account (see Note
14). There was also an adjustment to the Working Capital and
an additional $162,868 was added to the gain on the sale of
Mapadoc.
On October 10, 2019, the Company’s Board of Directors authorized a
new stock repurchase program, under which the Company may
repurchase up to $2 million of its outstanding common stock.
Under this new stock repurchase program, the Company may repurchase
shares in accordance with all applicable securities laws and
regulations, including Rule 10b-18 of the Securities Exchange Act
of 1934, as amended. The extent to which the Company repurchases
its shares, and the timing of such repurchases, will depend upon a
variety of factors, including market conditions, regulatory
requirements and other corporate considerations, as determined by
the Company’s management. The repurchase program may be extended,
suspended or discontinued at any time. The Company expects to
finance the program from existing cash resources. As of
December 31, 2019, no repurchases have been made.
On December 24, 2019, the Company announced the payment of a $0.50
special cash dividend per share of Common Stock payable on January
14, 2020 for an aggregate amount of $2,250,636, which was applied
against paid in capital.
For the Year Ended December 31, 2018:
On March 31, 2018, the remaining principal and accrued interest on
the note payable to Oates & Company, LLC. was offset against a
related party receivable of $47,043.
The Company acquired certain assets of Info Management Systems,
Inc. (“ISM”) for a $1,000,000 promissory note in addition to a cash
payment of $300,000 and the assumption of certain capital lease
obligations of approximately $25,734 (see Note 10).
The Company acquired certain assets of Nellnube, Inc (“NNB”) for a
$400,000 promissory note and the assumption of certain capital
lease obligations of approximately $57,964 (see Note 10).
On December 24, 2018, the Company announced the payment of a $0.05
special cash dividend per share of Common Stock payable on January
14, 2019 for an aggregate amount of $225,038, which was applied
against paid in capital.
The Company incurred approximately $80,875 in capital lease
obligations for purchases of equipment.
The accompanying notes are an integral part of these consolidated
financial statements.
SILVERSUN TECHNOLOGIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019 AND 2018
NOTE 1 – DESCRIPTION OF BUSINESS
“SilverSun Technologies, Inc. (“SilverSun”) through our wholly
owned subsidiaries SWK Technologies, Inc. (“SWK”), Secure Cloud
Services, Inc. (“SCS”) and Critical Cyber Defense Corp. (“CCD”)
together with SWK, SCS and SilverSun, the “Company” is a business
application, technology and consulting company providing strategies
and solutions to meet our clients’ information, technology and
business management needs. Our services and technologies enable
customers to manage, protect and monetize their enterprise assets
whether on-premise or in the “Cloud”. As a value-added reseller of
business application software, we offer solutions for accounting
and business management, financial reporting, Enterprise Resource
Planning (“ERP”), Human Capital Management (“HCM”)Warehouse
Management Systems (“WMS”), Customer Relationship Management
(“CRM”), and Business Intelligence (“BI”). Additionally, we have
our own development staff building software solutions for time and
billing, and various ERP enhancements. Our value-added services
focus on consulting and professional services, specialized
programming, training, and technical support. We have a dedicated
network services practice that provides managed services,
cybersecurity, application hosting, disaster recovery business
continuity, cloud and other services. Our customers are nationwide,
with concentrations in the New York/New Jersey metropolitan area,
Arizona, Southern California, North Carolina, Washington, Oregon
and Illinois.”
On August 26, 2019 SWK entered into and closed that certain Asset
Purchase Agreement (the “MAPADOC Asset Purchase Agreement”) by and
among the Company, SPS Commerce, Inc., as buyer (“SPS”), and SWK as
seller, pursuant to which SPS agreed to acquire from SWK
substantially all of the assets related to the MAPADOC business
(See footnote 14).
The Company is publicly traded and was quoted on the
Over-the-Counter Market Place (“OTCQB”) under the symbol “SSNT”
until April 18, 2017. Since April 19, 2017, the Company has been
listed and is traded on the NASDAQ Capital Market under the symbol
“SSNT”.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the “Company” and its wholly-owned subsidiaries. These
consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States.
All significant inter-company transactions and accounts have been
eliminated in consolidation.
Use of Estimates and Classifications
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America (“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 financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual
results could differ from those estimates. Certain amounts
previously reported may have been reclassified to conform to the
current year financial statement presentation. Such
reclassifications did not affect net income or stockholders’
equity.
Goodwill
Goodwill is the excess of acquisition cost of an acquired entity
over the fair value of the identifiable net assets acquired.
Goodwill is not amortized, but tested for impairment annually or
whenever indicators of impairment exist. These indicators may
include a significant change in the business climate, legal
factors, operating performance indicators, competition, sale or
disposition of a significant portion of the business or other
factors. No impairment losses were identified or recorded for the
years ended December 31, 2019 and 2018.
Capitalization of proprietary developed software
Software development costs are accounted for in accordance with ASC
985-20, Software — Costs of Software to be Sold, Leased or
Marketed. Costs associated with the planning and designing
phase of software development are expensed as incurred. Once
technological feasibility has been determined, a portion of the
costs incurred in development, including coding, testing and
quality assurance, are capitalized until available for general
release to clients, and subsequently reported at the lower of
unamortized cost or net realizable value. Amortization is
calculated on a solution-by-solution basis and is over the
estimated economic life of the software. Amortization commences
when a solution is available for general release to clients.
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019 AND 2018
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Definite Lived Intangible Assets and Long-lived
Assets
Purchased intangible assets are recorded at fair value using an
independent valuation at the date of acquisition and are amortized
over the useful lives of the asset using the straight-line
amortization method.
The Company assesses potential impairment of its intangible assets
and other long-lived assets when there is evidence that recent
events or changes in circumstances have made recovery of an asset’s
carrying value unlikely. A triggering event occurred with the sale
of Mapadoc EDI and an analysis was prepared by management. Factors
the Company considers important, which may cause impairment
include, among others, significant changes in the manner of use of
the acquired asset, negative industry or economic trends, and
significant underperformance relative to historical or projected
operating results. Impairment losses of $ 236,860 and $0, were
identified and recorded for the year ended December 31, 2019 and
2018 respectively.
Revenue Recognition
The Financial Accounting Standards Board “FASB” issued ASU 2014-09,
Revenue from Contracts with Customers: Topic 606 which
superseded nearly all existing revenue recognition guidance under
GAAP. The core principle of Topic 606 is to recognize revenues when
promised goods or services are transferred to customers in an
amount that reflects the consideration that is expected to be
received for those goods or services. Topic 606 defines a five-step
process to achieve this core principle and, in doing so, it is
possible more judgment and estimates may be required within the
revenue recognition process than are required under existing GAAP,
including identifying performance obligations in the contract,
estimating the amount of variable consideration to include in the
transaction price and allocating the transaction price to each
separate performance obligation, among others. Topic 606 also
provides guidance on the recognition of costs related to obtaining
customer contracts.
With the adoption of ASC 606, the Company has elected the
significant financing component practical expedient. In
determining the transaction price, the Company does not adjust the
promised amount of consideration for the effects of a significant
financing component as the Company expects, at contract inception,
that the period between when the entity transfers a promised good
or service to a customer and when the customer pays for that good
or service will be one year or less.
Software product revenue is recognized when the product is
delivered to the customer and the Company’s performance obligation
is fulfilled.
Service revenue is recognized when the professional consulting,
maintenance or other ancillary services are provided to the
customer. Shipping and handling costs charged to customers are
classified as revenue, and the shipping and handling costs incurred
are included in cost of sales.
|
|
|
For the Year Ended December 31
|
|
|
|
|
2019
|
|
|
2018
|
|
|
Professional Consulting
|
|
$ |
12,055,878 |
|
|
$ |
12,486,995 |
|
|
Maintenance Revenue
|
|
|
7,722,181 |
|
|
|
8,330,125 |
|
|
Ancillary Service Revenue
|
|
|
11,847,741 |
|
|
|
9,964,876 |
|
Unbilled Services
The Company recognizes revenue on its professional services as
those services are performed. Unbilled services (contract assets)
represent the revenue recognized but not yet invoiced.
Deferred Revenues
Deferred revenues consist of maintenance on proprietary products
(contract liabilities), customer telephone support services
(contract liabilities) and deposits for future consulting services
which will be earned as services are performed over the contractual
or stated period, which generally ranges from three to twelve
months. As of December 31, 2019, there was $145,977 in deferred
maintenance, $159,165 in deferred support services, and
$1,701,841 in deposits for future consulting services. As of
December 31, 2018, there was $198,727 in deferred maintenance,
$95,550 in deferred support services, and $1,092,341 in
deposits for future consulting services.
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019 AND 2018
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Commissions
Sales commissions relating to service revenues are considered
incremental and recoverable costs of obtaining a project with our
customer. These commissions are calculated based on estimated
revenue to be generated over the life of the
project. These costs are deferred and expensed as the
service revenue is earned. Commission expense is
included in selling and marketing expenses in the accompanying
consolidated statements of operations.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with
original maturities of three months or less to be cash equivalents.
The Company maintains cash balances at financial institutions that
are insured by the Federal Deposit Insurance Corporation (“FDIC”)
up to federally insured limits. At times balances may exceed FDIC
insured limits. The Company has not experienced any losses in such
accounts.
Concentrations
The Company maintains its cash with various institutions, which
exceed federally insured limits throughout the year. At
December 31, 2019, the Company had cash on deposit of approximately
$8,016,900 in excess of the federally insured limits of
$250,000.
As of December 31, 2019, one customer represented 14% of the total
accounts receivable and unbilled services. As of December 31, 2018,
no one customer represented more than 10% of the total accounts
receivable and unbilled services.
For the years ended December 31, 2019 and 2018, the top ten
customers accounted for 10% ($3,903,702) and 14% ($5,219,755),
respectively, of total revenues. The Company does not rely on any
one specific customer for any significant portion of its revenue
base.
For both the years ended December 31, 2019 and 2018, purchases from
one supplier through a “channel partner” agreement were
approximately 19% and 24% respectively. This channel partner
agreement is for a one year term and automatically renews for an
additional one year term on the anniversary of the agreements
effective date.
For the years ended December 31, 2019 and 2018, one supplier
represented approximately 15% and 40% of total accounts payable,
respectively.
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of trade accounts
receivable and cash and cash equivalents. As of December
31, 2019, the Company believes it has no significant risk related
to its concentration of accounts receivable.
Accounts Receivable
Accounts receivable consist primarily of invoices for maintenance
and professional services. Full payment for software ordered by
customers is primarily due in advance of ordering from the software
supplier. Payments for maintenance and support plan renewals are
due before the beginning of the maintenance period. Terms under our
professional service agreements are generally 50% due in advance
and the balance on completion of the services.
The Company maintains an allowance for bad debt estimated by
considering a number of factors, including the length of time the
amounts are past due, the Company’s previous loss history and the
customer’s current ability to pay its
obligations. Accounts are written off against the
allowance when deemed uncollectable.
Property and Equipment
Property and equipment is stated at cost, net of accumulated
depreciation. Depreciation is computed using the
straight-line method based upon the estimated useful lives of the
assets, generally three to seven years. Maintenance and
repairs that do not materially add to the value of the equipment
nor appreciably prolong its life are charged to expense as
incurred.
When assets are retired or otherwise disposed of, the cost and
related accumulated depreciation are removed from the accounts and
the resulting gain or loss is included in the consolidated
statements of operations.
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019 AND 2018
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Income Taxes
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income
tax purposes, as well as net operating loss carryforwards. Based on
ASU 2015-17, all deferred tax assets or liabilities are classified
as long-term. Valuation allowances are established against deferred
tax assets if it is more likely than not that the assets will not
be realized. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of a
change in tax rates or laws is recognized in operations in the
period that includes the enactment date.
The Company has federal net operating loss (“NOL”) carryforwards
which are subject to limitations under Section 382 of the Internal
Revenue Code.
The 2017 Tax Cuts and Jobs Act (“Tax Reform”) was enacted on
December 22, 2017. The Tax Reform includes a number of changes in
existing tax law impacting businesses including a permanent
reduction in the U.S. federal statutory rate from 34% to 21%,
effective on January 1, 2018. Under U.S. GAAP, changes in tax rates
and tax law are accounted for in the period of enactment and
deferred tax assets and liabilities are measured at the enacted tax
rate. The rate reconciliation includes the Company’s assessment of
the accounting under the Tax Reform and is based on information
that was available to management at the time the consolidated
financial statements were prepared.
The Company files income tax returns in the U.S. federal and state
jurisdictions. Tax years 2016 to 2019 remain open to
examination for both the U.S. federal and state jurisdictions.
There were no liabilities for uncertain tax positions at December
31, 2019 and 2018.
Fair Value Measurement
The accounting standards define fair value and establish a
hierarchy for inputs used in measuring fair value that maximizes
the use of observable inputs and minimizes the use on unobservable
inputs by requiring that the most observable inputs be used when
available. Observable inputs are inputs that market participants
would use in pricing the asset or liability developed based on
market data obtained from sources independent of the Company.
Unobservable inputs are inputs that reflect the Company’s
assumptions about the assumptions market participants would use in
pricing the asset or liability developed based on the best
information available in the circumstances. The hierarchy is as
follows:
Level 1: Quoted prices (unadjusted) in active markets that are
accessible at the measurement date for assets or liabilities. The
fair value hierarchy gives the highest priority to Level 1
inputs.
Level 2: Observable prices that are based on inputs not quoted on
active markets, but corroborated by market data.
Level 3: Unobservable inputs are used when little or no market data
is available. The fair value hierarchy gives the lowest priority to
Level 3 inputs.
The Company’s current financial assets and liabilities approximate
fair value due to their short term nature and include cash,
accounts receivable, accounts payable, and accrued
liabilities. The carrying value of longer term lease,
contingent consideration and debt obligations approximate fair
value as their stated interest rates approximate the rates
currently available. The Company’s goodwill and intangibles are
measured at fair-value on a non-recurring basis using Level 3
inputs, as discussed in Note 5 and 9.
Stock-Based Compensation
Compensation expense related to share-based transactions, including
employee stock options, is measured and recognized in the financial
statements based on a determination of the fair value. The grant
date fair value is determined using the Black-Scholes-Merton
(“Black-Scholes”) pricing model. For employee stock options, the
Company recognizes expense over the requisite service period on a
straight-line basis (generally the vesting period of the equity
grant). The Company’s option pricing model requires the input of
highly subjective assumptions, including the expected stock price
volatility and expected term. Any changes in these highly
subjective assumptions significantly impact stock-based
compensation expense.
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019 AND 2018
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Recently Adopted Authoritative Pronouncements
In February 2016, the FASB established Topic 842, Leases, by
issuing Accounting Standards Update (ASU) No. 2016-02, which
requires lessees to recognize leases on-balance sheet and disclose
key information about leasing arrangements. Topic 842 was
subsequently amended by ASU No. 2018-01, Land Easement Practical
Expedient for Transition to Topic 842; ASU No. 2018-10,
Codification Improvements to Topic 842, Leases; and ASU No.
2018-11, Targeted Improveme