UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ý ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2013
Commission file number: 000-50302
SILVERSUN TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or
organization)
16-1633636
(I.R.S. Employer Identification No.)
5 Regent Street
Livingston, NJ 07039
(Address of principal executive offices)
(973) 396-1720
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Class A Common Stock, par value $0.00001
Indicate by checkmark if registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No ý
Indicate by checkmark if registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No ý
Indicate by checkmark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such files). Yes ý No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company.
See definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Non-Accelerated Filer
¨
o
Accelerated Filer
Smaller reporting company
o
ý
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Act). Yes ¨ No ý
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant based on a closing price of $.20
on June 30, 2013 was approximately $6,898,216. As of March 20, 2014, the registrant had 117,704,334 shares of its common stock, par value
$0.00001, outstanding.
Documents Incorporated By Reference: None.
Table of Contents
PART I
TABLE OF CONTENTS
Business.
ITEM 1.
ITEM 1A. Risk Factors.
ITEM 1B. Unresolved Staff Comments.
ITEM 2.
ITEM 3.
ITEM.4. Mine Safety Disclosures.
Description of Property.
Legal Proceedings.
PART II
Selected Financial Data.
ITEM 5. Market for Common Equity and Related Stockholder Matters.
ITEM 6.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.
ITEM 7A Quantitative and Qualitative Disclosures about Market Risk.
Financial Statements and Supplementary Data.
ITEM 8.
ITEM 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
ITEM 9A. Controls and Procedures.
ITEM 9B. Other Information.
PART III
ITEM 10. Directors, Executive Officers, and Corporate Governance.
ITEM 11.
ITEM 12.
ITEM 13. Certain Relationships and Related Transactions.
ITEM 14.
Executive Compensation.
Security Ownership of Certain Beneficial Owners and Management.
Principal Accountant Fees and Services.
PART IV
ITEM 15.
Exhibits.
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FORWARD LOOKING STATEMENTS
Included in this 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.
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Item 1. Business.
Background
PART I
SilverSun Technologies, Inc., a Delaware corporation (the “Company” or SilverSun”) is an information technology company, and a value added
reseller and master developer for Sage Software’s Sage 100/500 and ERP X3 financial and accounting software as well as the publisher of its
own proprietary Electronic Data Interchange (“EDI”) software, “MAPADOC”, and 20 other assorted software solutions. The Company focuses
on the business software and information technology consulting market for small and medium-sized businesses, and is looking for other
opportunities to grow its business. The Company sells services and products to various end users, manufacturers, wholesalers and distributor
industry clients located throughout the United States.
In June 2004, our wholly-owned subsidiary, SWK Technologies, Inc., a New Jersey-based information technology company, completed a
merger with SWK, Inc., a value added reseller and master developer for Sage Software’s Sage 100/500 financial accounting software as well as
the publisher of its own proprietary Electronic Data Interchange (EDI) software, “MAPADOC.” Until its acquisition of SWK, Inc. on June 2,
2004, the Company was engaged in the design, manufacture, and marketing of specialized telecommunication equipment. With the acquisition of
SWK and as part of its plan to expand into new markets, the Company transformed into an information technology company, and a value added
reseller and master developer for Sage Software’s Sage 100/500 and ERP X3 financial and accounting software as well as the publisher of its
own proprietary Electronic Data Interchange (EDI) software, “MAPADOC.” The Company focuses on the business software and technology
consulting market.
On June 2, 2006, SWK Technologies, Inc. completed the acquisition of certain assets of AMP-Best Consulting, Inc. of Syracuse, New
York. AMP-Best Consulting, Inc. is an information technology company and value added reseller of licensed accounting software published by
Sage Software. AMP-Best Consulting, Inc. 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 Technologies, Inc. also acquired the Sage software customer accounts of IncorTech, a Southern California-based Sage
business partner. This transaction increased the Company’s geographical influence. The focus in Southern California is to sell and support our
MAPADOC integrated EDI solution and to market Sage ERP X3 to both former IncorTech customers, where suitable, as well as new prospects.
IncorTech has provided professional accounting, technology, and business consulting services to over 300 clients.
In June 2012, the Company completed the purchase of selected assets and obligations of HighTower, Inc., a leading Chicago-based reseller of
Sage software applications and a publisher of proprietary business management enhancements. HighTower’s customers and business products
and services have been integrated into the infrastructure of SWK Technologies, SilverSun’s principal operating subsidiary. In addition to
the strategic benefits that this acquisition affords the Company, it brings SilverSun and SWK additional annual revenues, approximately 870
additional Sage ERP customers, a substantial suite of proprietary enhancement software solutions (with approximately 700 users) and affords the
Company market penetration in the Midwest. Moreover, we hope to leverage Hightower’s established network of independent resellers to further
expand distribution of SWK’s proprietary software solutions, and vice versa.
With acquisitions serving as a key driver of SilverSun’s national expansion strategy, the Company will continue to engage in qualifying and
pursuing opportunities in order to continue its growth and add to shareholder value.
Our principal offices and facilities are located at 5 Regent Street, Suite 520, Livingston, NJ 07039 and our telephone number is (973) 396-1720.
The Company is publicly traded and is currently traded on the OTCQB under the symbol “SSNT.”
General
We are business consultants for small and medium sized businesses and value-added resellers and developers of financial accounting
software. We also publish our own proprietary EDI software, as well as 20 other proprietary solutions utilized for warehousing, time and billing,
and the like. We consider ourselves a leader in marketing financial accounting solutions across a broad spectrum of industries focused on
manufacturing and distribution. We specialize in software integration and deployment, programming, and training and technical support, aimed at
improving the financial reporting and operational efficiencies of small and medium sized companies. The sale of our financial accounting and EDI
software are sold to corporations nationwide.
We differentiate ourselves from traditional software resellers through our wide range of value-added services, consisting primarily of
programming, training, technical support, and other consulting and professional services. We also provide software customization, data
migration, business consulting, and implementation assistance for complex design environments. Our strategic focus is to respond to our
customers’ requests for interoperability and provide solutions that address broad, enterprise-wide initiatives.
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Our product sales are cyclical, and increase when the developer of a specific software product offers new versions, promotions or discontinues
support of an older product.
As is common among software resellers, we purchase our products from our suppliers with a combination of cash and credit extended by the
supplier. We do not carry significant inventory, and generally place an order with the supplier only after receiving a firm commitment from our
customer. Except in unusual situations, we do not allow our customers to return merchandise and rarely offer extended payment terms to our
customers.
Our Products
Substantially all of our initial sales of financial accounting solutions consist of prepackaged software and associated services to customers in the
United States.
Financial Accounting Software
The Company resells accounting software published by Sage Software, Inc. (“Sage”) 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 staff of product and technology consultants assists
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 days per week.
Electronic Data Interchange (“EDI”) Software
We publish our own proprietary EDI software, “MAPADOC.” EDI can be used to automate existing processes, to rationalize procedures and
reduce costs, and to improve the speed and quality of services. Because EDI necessarily involves business partners, it can be used as a catalyst
for gaining efficiencies across organizational boundaries.
Our “MAPADOC” EDI solution is a fully integrated EDI solution that provides users of Sage Software’s market-leading Sage 100/500/ERP X3
software products with a feature rich product that is easy to use. “MAPADOC” provides the user with dramatically decreased data entry time,
elimination of redundant steps, the lowering of paper and postage costs, the reduction of time spent typing, signing, checking and approving
documents and the ability to self-manage EDI and to provide a level of independence that saves time and money.
We market our “MAPADOC” solutions to our existing and new small and medium-sized business customers, and through a network of
resellers. We have a sales team of technical specialists involved in marketing and supporting sales of the “MAPADOC” product and associated
services.
Warehouse Management Systems
We are resellers of the Warehouse Management System (“WMS”) software published by Accellos, Inc (“Accellos”). Accellos 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.
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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 customers.
Network Services and Business Consulting
We provide managed services, 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.
Craft Brewery Business Management Solutions
We provide a proprietary series of cloud-based business management solutions created specifically for the U.S. craft brewery and distribution
industry. Currently, implementations of BeerRun, BrewPub, BrewX ERP (powered by Sage ERP X3) and the Distributor Relationship
Management System – Software-as-a-Service (SaaS) solutions jointly developed SWK Technologies – have been sold to 87 craft breweries
throughout the country and one internationally. These innovative solutions provide brew masters with a single, turnkey database batch/process
solution capable of managing their manufacturing operations – from forecasting and planning to recipe management to inventory control and
traceability, among other critical business functions, including automated TTB reporting.
Markets
Financial Accounting Software.
In the financial accounting software market, we focus on providing enterprise solutions to small- and medium-sized businesses (“SMB”) with
less than $500 million of annual revenue, primarily in the manufacturing and distribution industries.
While several local and regional competitors exist in the various geographic territories where we conduct business, we believe we have a
competitive advantage in terms of geographic reach, comprehensive training and support, and the provision of other products and services. We
are one of the larger Sage resellers in the United States. While there are numerous national, regional, and local competitors that could be
compared to us in scale, size, geographical reach, and target markets for the resale of Sage products, there is no one dominant competitor or
dominant group of competitors with whom we compete for contracts or assignments on a regular basis. There are also numerous competitors
who publish and/or resell competing product lines, such as Microsoft’s Dynamics accounting software.
Electronic Data Interchange Software
We publish and sell both directly and through a network of software resellers our proprietary EDI software, “MAPADOC”. EDI is computer-
to-computer communication of business documents between companies. It is a paperless way to send and receive Purchase Orders, Invoices,
etc. EDI replaces human-readable documents with electronically coded documents. The sending computer creates the document and the receiving
computer interprets the document. Implementation of EDI streamlines the process of exchanging standard business transactions. Companies
save by eliminating people cost as well as the cost due to errors and double entry of data. The transmissions are accomplished by connecting to a
mailbox via a modem or the Internet. The most common mailbox is a Value Added Network's electronic mailbox. Each user, identified by a
unique EDI ID, accesses his mailbox to send and receive all EDI transactions. To standardize the documents communicated between many
companies, the Transportation Data Coordinating Committee, in 1975, published its first set of standards.
EDI standards are formats and protocols that trading partners agree to use when sending and receiving business documents. Around 1979, The
American National Standards Institute designated an accredited standards committee for EDI. The standards continue to evolve to address the
needs of the member companies. “MAPADOC” complies with all current standards. The market for EDI continues to expand as big box
retailers, such as Wal-Mart, Target, and K-Mart, insist their vendors utilize EDI in their business transactions. There are numerous companies
with whom we compete in the SMB EDI marketplace, including True Commerce and Kissinger Associates.
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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, Inc. (“Sage”) whereby Sage appoints us as a non-
exclusive partner to market, distribute, and support Sage 100/500 and ERP X3. These agreements authorize us to sell these software products to
certain 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, 2013 and 2012, purchases from one supplier were approximately 31% and 47%, respectively, of the
Company’s total cost of revenue. Generally, the Company does not rely on any one specific supplier for all of its purchases and maintains
relationships with other suppliers that could replace its existing supplier should the need arose.
Customers
We market our products throughout North America. For the years ended December 31, 2013 and 2012, our top ten customers accounted for
19% ($3,159,000) and 17% ($2,262,000), 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.
We own several trademarks registered with the U.S. Patent and Trademark Office, including “MAPADOC” and have a number of trademark
applications pending. We have no patents or patent applications pending.
Employees
As of March 12, 2014, we had approximately 80 full time employees with 15 of our employees engaged in sales and marketing activities, 52
employees are engaged in service fulfillment, and 13 employees employed in administrative activities
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 collective
bargaining agreement and we have never experienced a work stoppage.
Available information
We file electronically with the U.S. Securities and Exchange Commission (SEC) our annual reports on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934. The public can obtain materials that we file with the SEC through the SEC’s website at http://www.sec.gov or at the
SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. Information on the operation of the Public Reference Room is
available by calling the SEC at 800-SEC-0330.
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Item 1A. Risk Factors.
You should carefully consider the risks described below, together with all of the other information included in this report, in considering our
business and prospects. The risks and uncertainties described below are not the only ones facing the Company. Additional risks and
uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. The occurrence of any of
the following risks could harm our business, financial condition or results of operations.
Risks Related to Our Business and Industry
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:
·
·
·
·
·
·
·
the timing of sales of our products and services;
the timing of product implementation, particularly large design projects;
unexpected delays in introducing new products and services;
increased expenses, whether related to sales and marketing, product development, or administration;
deferral in the recognition of revenue in accordance with applicable accounting principles, due to the time required to complete projects;
the mix of product license and services revenue; and
costs related to possible acquisitions of technology or businesses.
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 also develop various new technologies, products and product
features and may rely on them to remain competitive. Due to the risks inherent in developing new products and technologies—limited financing,
competition, obsolescence, 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.
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 financial accounting software, EDI software, 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.
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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.
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 PRESIDENT CONTROLS A SIGNIFICANT PERCENTAGE OF OUR CAPITAL STOCK AND HAS SUFFICIENT VOTING
POWER TO CONTROL THE VOTE ON SUBSTANTIALLY ALL CORPORATE MATTERS.
As of December 31, 2013, Mark Meller, our President, beneficially owned approximately 76% of our outstanding shares of our Class A
common stock. Mr. Meller may be able to influence all matters requiring stockholder approval, including the election of directors and approval of
significant corporate transactions. This concentration of ownership, which is not subject to any voting restrictions, could limit the price that
investors might be willing to pay for our Class A common stock. In addition, Mr. Meller is in a position to impede transactions that may be
desirable for other stockholders. Mr. Meller’s majority ownership, for example, could make it more difficult for anyone to take control of us.
On September 23, 2011, SilverSun Technologies, Inc., entered into a Series B preferred stock purchase agreement (the “Preferred Stock
Purchase Agreement”) with Mr. Meller (the “Series B Holder”), pursuant to which the Series B Holder was issued one authorized share of
Series B Preferred Stock (“Series B”), par value $1.00 per share. The Series B Holder was issued one share of Series B as partial consideration
for personally guaranteeing repayment of the Notes.
The one (1) share of the Series B Preferred shall have voting rights equal to (x) the total issued and outstanding Common Stock and preferred
stock eligible to vote at the time of the respective vote divided by (y) forty nine one-hundredths (0.49) minus (z) the total issued and outstanding
Common Stock and preferred stock eligible to vote at the time of the respective vote. For the avoidance of doubt, if the total issued and
outstanding Common Stock eligible to vote at the time of the respective vote is 5,000,000, the voting rights of the Series B Preferred Stock shall
be equal to 5,204,082 (e.g. (5,000,000 / 0.49) – 5,000,000 = 5,204,082). At December 31, 2013 voting rights of 122,480,118 shares are
associated with Series B Preferred Stock andnd are included as part of the beneficial ownership calculation.
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.
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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.
IF WE LOSE THE SERVICES OF ANY OF OUR KEY PERSONNEL, INCLUDING OUR CHAIRMAN OF THE BOARD OF
DIRECTORS OR CHIEF EXECUTIVE OFFICER, OUR BUSINESS MAY SUFFER.
We are dependent on Mark Meller, our Chief Executive Officer and our key employees in our operating subsidiary, specifically Jeffrey
Roth. 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. In an attempt to minimize the effects of such
loss, we presently maintain a $1,000,000 key-man term life insurance policies on Mr. Meller and Mr. Roth.
WE DO NOT EXPECT TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE.
We intend to retain any future earnings to finance the growth and development of our business. Therefore, we do not expect to pay any cash
dividends in the foreseeable future. Any future dividends will depend on our earnings, if any, and our financial requirements.
Risks Related to Our Common Stock
OUR CLASS A COMMON STOCK IS THINLY TRADED AND WE CANNOT PREDICT THE EXTENT TO WHICH A MORE
ACTIVE TRADING MARKET WILL DEVELOP.
Our Class A Common Stock is thinly traded compared to larger more widely known companies. Thinly traded Class A Common Stock can be
more volatile than common stock trading in an active public market. We cannot predict the extent to which an active public market for the Class A
Common Stock will develop or be sustained after this offering.
IF WE NEED ADDITIONAL CAPITAL TO FUND OUR GROWING OPERATIONS, WE MAY NOT BE ABLE TO OBTAIN
SUFFICIENT CAPITAL AND MAY BE FORCED TO LIMIT THE SCOPE OF OUR OPERATIONS.
If adequate additional financing is not available on reasonable terms, we may not be able to continue our marketing efforts and we would have to
modify our business plans accordingly. There is no assurance that additional financing will be available to us.
In connection with our growth strategies and plan of operation, we may experience increased capital needs and accordingly, we may not have
sufficient capital to fund our future operations without additional capital investments. Our capital needs will depend on numerous factors,
including (i) our profitability; (ii) the release of competitive products and services by our competition; (iii) the level of our investment in research
and development; and (iv) the amount of our capital expenditures, including acquisitions. We cannot assure you that we will be able to obtain
capital in the future to meet our needs.
Even if we do find a source of additional capital, we may not be able to negotiate terms and conditions for receiving the additional capital that are
acceptable to us. Any future capital investments could dilute or otherwise materially and adversely affect the holdings or rights of our existing
shareholders. In addition, new equity or convertible debt securities issued by us to obtain financing could have rights, preferences and privileges
senior to our common stock. We cannot give you any assurance that any additional financing will be available to us, or if available, will be on
terms favorable to us.
THE PRICE OF OUR STOCK MAY BE AFFECTED BY A LIMITED TRADING VOLUME AND MAY FLUCTUATE
SIGNIFICANTLY.
There has been a limited public market for our Class A common stock and there can be no assurance that an active trading market for our stock
will continue. An absence of an active trading market could adversely affect our stockholders' ability to sell our Class A common stock in short
time periods, or possibly at all. Our Class A common stock has experienced significant price and volume fluctuations which could adversely
affect the market price of our stock without regard to our operating performance. In addition, we believe that factors such as quarterly
fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our Class
A common stock to fluctuate substantially.
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OUR CLASS A COMMON STOCK IS DEEMED TO BE "PENNY STOCK," WHICH MAY MAKE IT MORE DIFFICULT FOR
INVESTORS TO SELL THEIR SHARES DUE TO SUITABILITY REQUIREMENTS.
Our Class A common stock is deemed to be "penny stock" as that term is defined in Rule 3a51-1 promulgated under the Securities Exchange Act
of 1934. These requirements may reduce the potential market for our Class A common stock by reducing the number of potential investors. This
may make it more difficult for investors in our Class A common stock to sell shares to third parties or to otherwise dispose of them. This could
cause our stock price to decline. Penny stocks are stock:
·
·
·
·
With a price of less than $5.00 per share;
That are not traded on a "recognized" national exchange;
Whose prices are not quoted on the NASDAQ automated quotation system (NASDAQ listed stock must still have a price of not less
than $5.00 per share); or
In issuers with net tangible assets less than $2.0 million (if the issuer has been in continuous operation for at least three years) or $5.0
million (if in continuous operation for less than three years), or with average revenues of less than $6.0 million for the last three years.
Broker/dealers dealing in penny stocks are required to provide potential investors with a document disclosing the risks of penny
stocks. Moreover, broker/dealers are required to determine whether an investment in a penny stock is a suitable investment for a prospective
investor.
AS AN ISSUER OF “PENNY STOCK,” THE PROTECTION PROVIDED BY THE FEDERAL SECURITIES LAWS RELATING TO
FORWARD LOOKING STATEMENTS DOES NOT APPLY TO US.
Although federal securities laws provide a safe harbor for forward-looking statements made by a public company that files reports under the
federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, the Company will not have the benefit of this safe
harbor protection in the event of any legal action based upon a claim that the material provided by the Company contained a material misstatement
of fact or was misleading in any material respect because of the Company’s failure to include any statements necessary to make the statements not
misleading. Such an action could hurt our financial condition.
FUTURE SALES OF OUR CLASS A COMMON STOCK COULD CAUSE OUR STOCK PRICE TO DECLINE.
The sale of a large number of our shares, or the perception that such a sale may occur, could lower our stock price. Such sales could make it
more difficult for us to sell equity securities in the future at a time and price that we consider appropriate.
ISSUANCE OF OUR RESERVED SHARES OF CLASS A COMMON STOCK MAY SIGNIFICANTLY DILUTE THE EQUITY
INTEREST OF EXISTING STOCKHOLDERS.
We have reserved for issuance shares of our Class A common stock upon exercise or conversion of stock options, warrants, or other convertible
securities that are presently outstanding. Issuance of these shares will have the effect of diluting the equity interest of our existing stockholders
and could have an adverse effect on the market price for our Class A common stock.
WE HAVE NOT PAID DIVIDENDS IN THE PAST AND DO NOT EXPECT TO PAY DIVIDENDS FOR THE FORESEEABLE
FUTURE. ANY RETURN ON INVESTMENT MAY BE LIMITED TO THE VALUE OF OUR COMMON STOCK.
No cash dividends have been paid on the Company’s common stock. We expect that any income received from operations will be devoted to our
future operations and growth. The Company does not expect to pay cash dividends in the near future. Payment of dividends would depend upon
our profitability at the time, cash available for those dividends, and other factors as the Company’s board of directors may consider relevant. If
the Company does not pay dividends, the Company’s common stock may be less valuable because a return on an investor’s investment will only
occur if the Company’s stock price appreciates.
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Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2. Description of Property.
We do not own any real property for use in our operations or otherwise. Our main offices are at 5 Regent Street, Livingston, NJ 07039 where
we have 6,986 square feet of office space at a monthly rent of $7,400. The lease expires December 31, 2016. The Company has a two-year lease,
with a one-year extension, for office space at 6834 Buckley Road, North Syracuse, New York, at a monthly rent of $2,100. The lease expires
May 31, 2015. The Company also leases 2,700 square feet of office space for sales and support in Skokie, IL with a monthly rent of $3,000.
This lease expires April 30, 2018. The Company also leases 500 square feet for sales and support in Minneapolis, MN for $400 a month. This
lease expires August 2014. We use our facilities to house our corporate headquarters and operations and believe our facilities are suitable for such
purpose. We also believe that our insurance coverage adequately covers our interest in our leased space. We have a good relationship with our
landlords and believe that these facilities will adequately serve our business purposes for the foreseeable future.
Item 3. Legal Proceedings.
We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of
operations. 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 or any of our subsidiaries, threatened against or
affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their
capacities as such, in which an adverse decision could have a material adverse effect.
Item 4. Mine Safety Disclosures.
Not applicable.
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Item 5. Market for Common Equity and Related Stockholder Matters.
(a) Market Information
PART II
Our Class A common stock, $0.00001 par value, is quoted on the OTC Bulletin Board under the symbol “SSNT”. The following table shows
the high and low closing prices for the periods indicated.
Quarter ended
High
Low
December 31, 2013
September 30, 2013
June 30, 2013
March 31, 2013
December 31, 2012
September 30, 2012
June 30, 2012
March 31, 2012
(b) Holders of Common Equity.
$
$
$
$
$
$
$
$
0.1400 $
0.1700 $
0.2300 $
0.2000 $
0.2050 $
0.2498 $
0.4000 $
0.1800 $
0.0600
0.0700
0.1100
0.0500
0.1000
0.1300
0.1100
0.0106
As of March 14, 2014, there were approximately 717 holders of record of our common stock. This figure does not take into account those
shareholders whose certificates are held in the name of broker-dealers or other nominees.
(c) Dividend Information.
We have never paid any cash dividends on our common shares, and we do not anticipate that we will pay any dividends with respect to those
securities in the foreseeable future. Our current business plan is to retain any future earnings to finance the expansion development of our
business.
Sales of Unregistered Securities
In the year ending December 31, 2013, the Company issued the following securities pursuant to exemptions from registration provided by
Section 4(2) of the Securities Act of 1933, as amended, and/or Regulation D promulgated thereunder.
· The Company issued 210,526 shares of common stock in a cashless exercise of warrants for 250,000 shares at an exercise price
of $0.03 per share.
· The Company issued 300,000 shares of common stock with a fair market value of $21,000 in exchange for services.
· The Company issued 215,517 shares of common stock with a fair value of $25,000 for repayment of accrued liabilities in the
amount of $25,000.
In the year ending December 31, 2012, the Company issued the following securities pursuant to exemptions from registration provided by
Section 4(2) of the Securities Act of 1933, as amended, and/or Regulation D promulgated thereunder.
· The Company converted $43,946 of the Convertible Promissory Note (as defined herein) at a fixed conversion rate of 1,975
shares per $1 for 86,793,693 shares of the Company’s Class A common stock, par value $0.0001 (the “Common Stock”).
· The Company converted 2 shares of Series A Convertible preferred stock for 2,385,650 shares of Common Stock.
· The Company bought back their 20% interest in SWK Technologies, Inc. for 22,664,678 shares of Common Stock.
· The Company issued 150,000 shares of common stock with a fair market value of $30,000 to Spencer Clark in exchange for
services.
· The Company issued 500,000 shares of common stock with a fair market value of $5,000 to Tri-Point in exchange for services
The securities mentioned above were not registered under the Securities Act of 1933, as amended (the “Securities Act”), and qualified for
exemption under Section 4(2) of the Securities Act because the issuance of the securities did not involve a public offering. The offering was not a
“public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the transaction, size of the offering, manner of
the offering and number of securities offered.
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(d) Securities Authorized For Issuance Under Equity Compensation Plans
During the year ended December 31, 2004, and as subsequently amended, the Company adopted the Stock Option Plan (the “Plan”) in order to
attract and retain qualified employees, directors, independent contractors or agents of SilverSun Technologies, Inc. Under the Plan, the Board of
Directors (the “Board”), in its discretion may grant stock options (either incentive or non-qualified stock options) to employees, directors,
independent contractors or agents to purchase the Company’s common stock at no less than 85% of the market price on the date the option is
granted. Options generally vest over four years and have a maximum term of ten years.
In May 2012, the Company issued approximately 2,875,000 common stock options from the 2004 Stock Incentive Plan with a weighted average
exercise price of $0.16 and an expected life of 5 years. Approximately, 2,257,000 of the common stock options vest immediately. The remaining
618,000 options shall vest 50% at grant date with the balance vested ratably over a three-year period.
In addition, as of December 31, 2013, there were approximately 750,000 warrants to purchase 750,000 shares of Class A common stock
outstanding with an average exercise price of $.1733. During 2013, the Company issued 210,526 shares of common stock in a cashless exercise
of warrants for 250,000 shares at an exercise price of $0.03 per share.
The following table sets forth information as of December 31, 2013 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
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights
(a)
Weighted average
exercise price of
outstanding
options, warrants
and rights
(b)
Plan category
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders.
Total
0 $
2,673,810 $
2,673,810 $
0.00
0.16
0.16
Transfer Agent
Our transfer agent is Fidelity Transfer Company at 8915 South 700 East, Sandy, Utah 84070.
Number of
securities
remaining
available for
future issuance
(c)
0
1,555,690
1,555,690
Item 6. Selected Financial Data.
Not applicable.
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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. (the “Company”) 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 this 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 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 financial
statements as well as the reported amounts of revenues and expenses during the periods presented. Our 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 involved in the acquisition and build-out of technology and software companies engaged in providing
transformational business management applications and professional consulting services to small and medium size companies, primarily in the
manufacturing, distribution and service industries. We are executing a business strategy centered on the design and development of our own
proprietary business management solutions, which now includes our MAPADOC® Electronic Data Interchange (EDI) solution and 20 other
proprietary solutions and enhancements; as well as on the acquisition of application resellers and software publishers of unique and proprietary
solutions in the extensive and expanding, but highly fragmented, business solutions marketplace.
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.
A key tactical strategy for our Company is developing smart, proprietary business management applications that effectively and efficiently
integrate with existing business management systems; and in publishing proprietary solutions for niche markets that address unique
manufacturing and distribution challenges and needs. In this regard, through our wholly-owned subsidiary, SWK Technologies, Inc. (“SWK”),
we publish proprietary EDI software, branded as MAPADOC. MAPADOC is a fully integrated, easy-to use, feature-rich EDI solution for
users of Sage Software, Inc.’s (“Sage”) market leading Sage 100/500/ERP X3 software products. Providing seamless integration and
dramatically decreasing data-entry time and associated costs, it is marketed and distributed worldwide by the Company’s direct sales force, as
well as through its platform partner, SPS Commerce, Inc. and a growing national network of independent software partners and resellers, to
customers largely supplying big-box retailers, including Walmart, Sears, Target and Costco.
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In addition, we have developed a proprietary series of cloud-based, SaaS business management solutions created specifically for the U.S. craft
brewery and distribution industry. Currently, implementations of our proprietary SaaS solutions, marketed and branded as BeerRun, BrewPub,
Brew X ERP (powered by Sage ERP X3) and the Distributor Relationship Management System, have been sold to 87 craft breweries throughout
the United Stated and one internationally. These innovative solutions provide brew masters with a single, turnkey database batch/process
solution capable of managing their manufacturing operations – from forecasting and planning to recipe management to inventory control and
traceability, among other critical business functions, including TTB reporting.
We also provide high margin, managed IT services to our customers. As Microsoft Certified Systems Engineers and Microsoft Certified
Professionals, our staff offers a host of mission critical services, 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 back-up, archiving and storage of data from servers. 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, both on-site at our clients’ facilities and at our corporate offices. 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 Accellos, Inc. (“Accellos”), 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 offer new products and services, 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 seven 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; and SGEN, LLC.
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.
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During 2013 the Company continued to expand its customer base and growth trend which we believe will provide a basis for future growth.
Some of the key highlights for 2013 are as follows:
1) Revenues increased 32% from the prior year.
2) Income from operations increased to $258,604 as compared to a loss of $1,176,432 in the prior year.
3) Net income increased to $322,548 as compared to a loss of $1,235,170 in the prior year.
4) As a result of an increase in sales and marketing expense, we continue to lay the foundation for continued growth.
5) Sales of the Company’s proprietary, cloud-based business management solutions created specifically for the U.S. craft brewery
and distribution industry has continued to increase since its introduction to market in early 2012; and the number of new sales
prospects continues to climb.
6) Continued to book major orders for Sage ERP X3.
Revenues
Revenues for the year ended December 31, 2013 increased $4,221,066 (32.0%) to $17,400,051 as compared to $13,178,985 for the year ended
December 31, 2012. The increase is in revenues from the existing business related to an increase in maintenance agreements and its software
sales base. Software and consulting revenues have increased primarily due to Sage X3 implementations. Maintenance revenues also continue to
increase as software sales increase. The overall increases are primarily due to the continued marketing efforts and very competitive pricing, and
the Company’s strategy to increase its business by seeking additional opportunities through potential acquisitions, partnerships or investments.
Gross Profit
Gross profit for the year ended December 31, 2013 increased $1,416,041 (26.5%) to $6,750,141 as compared to $5,334,100 for the year ended
December 31, 2012. The increase in gross profit for this period is attributed to the increase in revenues from existing business, including the
revenues from HTI. For the year ended December 31, 2013, the gross profit percentage was 38.8% as compared to 40.5 % for the year ended
December 31, 2012. The mix of products being sold by the Company changes from time to time and sometimes causes the overall gross margin
percentage to vary. The change in sales mix for the year ended December 31, 2013 resulted in gross profit being slightly lower as a percent of
sales as compared to the year ended December 31, 2012, primarily as a result of a higher software sales mix year over year, which sales have a
lower gross profit. In addition, the Company will often enter into revenue sharing agreements entered into with other resellers. The Company
currently has 12 revenue sharing arrangements, which often have the result of reducing the Company’s reported gross margins.
Operating Expenses
Selling and marketing expenses increased $942,079 (40.9%) to $3,244,337 for the year ended December 31, 2013 compared to $2,302,258 for
the year ended December 31, 2012 due to increased sales personnel and travel expenses as a result of the increase in sales activity to provide for
future growth, incremental expenses associated with HTI as well as expenses associated with attending numerous trade shows.
General and administrative expenses increased $51,166 (1.8%) to $2,927,622 for the year ended December 31, 2013 as compared to
$2,876,456 for the year ended December 31, 2012 primarily as a result of increases in payroll related expenses
On January 4, 2012, in accordance with options granted in January 2011, Mr. Meller sold portions of his Convertible Note payable to certain
employees of SWK Technologies, Inc. in the amount of $13,235. On January 4, 2012, Mr. Meller also converted $30,458 of the Convertible
Note into 60,154,178 shares of the Company’s Common Stock, and those certain employees converted their $13,235 into 23,139,523 shares of
the Company’s Common Stock. As a consequence the Company recognized $719,267 of share-based compensation expense in 2012 related to
these transactions. Additionally, during the year ended December 31, 2012, the Company recognized $416,991 of share-based compensation
expense as a result of the granting of stock options to most of its non-executive employees as compared to $17,616 for 2013.
Depreciation and amortization expense increased $106,402 for the year ended December 31, 2013 to $301,962 as compared to $195,560 for the
year ended December 31, 2012. This increase is primarily attributed to the increase in amortization associated with the intangible assets acquired
in the HTI acquisition in 2012.
Income (Loss) from Operations
For the year ended December 31, 2013, the Company had income from operations of $258,604 as compared to a net loss from operations for
$1,176,432 for the year ended December 31, 2012, primarily attributed to non-cash share-based compensation of $1,136,258 in 2012, and other
year over year changes discussed above.
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Other Income (Expense)
For the year ended December 31, 2013, the Company had other expense of $56,056 as compared to $58,738 for the year ended December 31,
2012. This change is primarily attributed lower interest expense offset by the bargain purchase gain associated with the HTI acquisition in 2012.
Income Taxes
For the year ended December 31, 2013, the Company’s Federal and State provision requirements were offset by the reversal of a portion of the
valuation allowance no longer deemed necessary, and recorded a net tax benefit of $120,000, which represents a reduction in its valuation
allowance on tax attributes that are expected to be utilized based on management’s assessment and evaluation of historical and projected income.
Net Income (Loss)
For year ended December 31, 2013, the Company had net income of $322,548 as compared to a net loss of $1,235,170 for the year ended
December 31, 2012 for the reasons mentioned above.
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 market with solid revenue streams, established customer bases that generate positive cash flow.
In October 2011, the Company obtained a line of credit from a bank. The agreement included a borrowing base calculation tied to accounts
receivable with a maximum availability of $750,000. On August 1, 2013, the Company negotiated a new line of credit and term loan from the
bank. The term of the line is for two years and expires on July 31, 2015. The agreement included a borrowing base calculation tied to accounts
receivable with a maximum availability of $750,000 at prime plus 1.75% interest (currently 5%). The line is collateralized by substantially all of
the assets of the Company and is guaranteed by the Company’s Chief Executive Officer, Mr. Meller. The credit facility requires the Company to
pay a monitoring fee of $1,000 monthly. At December 31, 2013, the Company was in compliance with the required financial covenants, the fixed
charge ratio and debt to net worth. As of December 31, 2013, the availability under this line was $750,000.
Under the term loan, the Company borrowed $350,000 in July 2013 from a bank. The term of the loan is for two years and expires on July 31,
2015. Monthly payments are at $15,776 including interest at 8%. The term loan is collateralized by substantially all of the assets of the Company
and is guaranteed by the Company’s Chief Executive Officer, Mr. Meller. At December 31, 2013 the outstanding balance was $279,517.
During the year ended December 31, 2013, the Company had a net increase in cash of $758,409. The Company’s principal sources and uses of
funds were as follows:
Cash provided by operating activities
The Company provided $740,996 in cash from operating activities for the year ended December 31, 2013 as compared to providing $392,803 of
cash for operating activities for the year ended December 31, 2012. This increase in cash provided by operating activities is primarily attributed to
an increase in deferred revenues and a decrease in accounts receivable offset partially by a decrease in accounts payable and accrued expenses.
Cash used in investing activities
Investing activities for the year ended December 31, 2013 used cash of $30,364 as compared to using $744,374 of cash for the year ended
December 31, 2012. This decrease in cash used is attributed to lower purchases of property and equipment, lower software development costs
and intangible assets, including the acquisition of selected assets of HTI in 2012.
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Cash provided by financing activities
Financing activities for the year ended December 31, 2013 provided cash of $47,777 as compared to $122,332 of cash for the year ended
December 31, 2012. This decrease in cash provided from financing activities is mostly attributed to the repayments of the bank line of credit and
the term loan offset partially by the proceeds from the term loan.
The Company believes that as a result of the growth in business, and the availability of its credit line, it has adequate liquidity to fund its operating
plans for at least the next twelve months.
There was no significant impact on the Company’s operations as a result of inflation for the year ended December 31, 2013.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of these 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, inventory
obsolescence, 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, revenue recognition and software costs, 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
Revenue is recognized when products are shipped, or services are rendered, evidence of a contract exists, the price is fixed or reasonably
determinable, and collectability is reasonably assured.
Product Revenue
Software product revenue is recognized when the product is shipped to the customer. The Company treats the software component and the
professional services consulting component as two separate arrangements that represent separate units of accounting. The arrangement
consideration is allocated to each unit of accounting based upon that unit’s proportion of the fair value. In a situation where both components are
present, software sales revenue is recognized when collectability is reasonably assured and the product is delivered and has stand-alone value
based upon vendor specific objective evidence.
Service Revenue
Service revenue is comprised of primarily professional service consulting revenue, maintenance revenue and other ancillary services provided as
described below. Professional service revenue is recognized as service is incurred.
With respect to maintenance services, upon the completion of one year from the date of sale, considered to be the warranty period, the Company
offers customers an optional annual software maintenance and support agreement for subsequent one-year periods. Maintenance and support
agreements are recorded as deferred revenue and recognized over the respective terms of the agreements, which typically range from three months
to one year and are included in service revenue in the Consolidated Statement of Operations
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
The Company performs ongoing credit evaluations of its customers and adjusts credit limits based on customer payment and current credit
worthiness, as determined by review of their current credit information. The Company continuously monitors credits and payments from its
customers and maintains provision for estimated credit losses based on its historical experience and any specific customer issues that have been
identified. While such credit losses have historically been within our expectation and the provision established, the Company cannot guarantee
that it will continue to receive positive results.
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Intangible 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 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 reflects 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 operating loss carryforwards. Deferred tax assets and liabilities are
classified as current or non-current based on the classification of the related assets or liabilities for financial reporting, or according to the
expected reversal dates of the specific temporary differences, if not related to an asset or liability for financial reporting. 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.
Off Balance Sheet Arrangements
During fiscal 2013, 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 financial statements are contained in pages F-1 through F-20 which appear at the end of this Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
(a) Evaluation of Disclosure and Control Procedures
The Company’s disclosure controls and procedures are designed to ensure (i) that information required to be disclosed by the Company in the
reports the Company files or submits under the Exchange Act are recorded, processed, summarized, and reported within the time periods
specified in the SEC’s rules and forms; and (ii) that information required to be disclosed by the Company in the reports it files or submits under
the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer, or persons
performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Our principal executive officer and principal financial officer evaluated the effectiveness of the design and operation of our disclosure controls
and procedures as of December 31, 2013, and concluded that the disclosure controls and procedures were effective as a whole.
(b) Management’s Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining an adequate system of internal control over financial reporting, as
defined in Rule 13a-15(f) under the Exchange Act. 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 in accordance with Generally Accepted
Accounting Principles (“GAAP”).
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Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance of such reliability
and may not prevent or detect misstatements. Also, projection of any evaluation of effectiveness to future periods is subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Management has conducted, with the participation of our Chief Executive Officer and our Principal Accounting Officer, an assessment of the
effectiveness of our internal control over financial reporting as of December 31, 2012. Management’s assessment of internal control over
financial reporting used the criteria set forth in SEC Release 33-8810 based on the 1992 framework established by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”) in Internal Control over Financial Reporting – Guidance for Smaller Public Companies.
Based on this evaluation, Management concluded that our system of internal control over financial reporting was effective as of December 31,
2013, based on these criteria.
(c) Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act,
during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
Item 9B. Other Information.
None.
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Item 10. Directors, Executive Officers, and Corporate Governance.
PART III
The following table and biographical summaries set forth information, including principal occupation and business experience, about our
directors and executive officers at March 14, 2014:
Name
Age
Position
Mark Meller
54
Chairman, President, Chief Executive
Officer, Chief Financial Officer and
Director
Stanley Wunderlich
63
Director
Officer and/or
Director Since
2003
2011
Mark Meller.
Mr. Mark Meller has been the President, Chief Financial Officer 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. From October 2004 until
February 2007, Mr. Meller was the President, Chief Executive Officer, Chief Financial Officer and Director of Deep Field Technologies, Inc.
Since December 15, 2004, Mr. Meller has been 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. Since 1988, Mr. Meller has been 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.
Stanley Wunderlich
Mr. Stanley Wunderlich has over 40 years of experience in 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. Mr. Wunderlich
has a Bachelor’s degree from Brooklyn College.
Board of Directors
Directors are elected at our annual meeting of shareholders and serve for one year until the next annual meeting of shareholders or until their
successors are elected and qualified.
Nominating Committee
The Company does not have a standing nominating committee or a committee performing similar functions.
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There are no agreements or understandings for the officer or director to resign at the request of another person and the above-named officers are
not acting on behalf of nor will act at the direction of any other person. As of the fiscal year ended December 31, 2013, the Company’s Audit
Committee has two members, one of which is independent.
For the year ended December 31, 2013, the Board held no meetings but acted by Unanimous Written Consent.
Audit Committee
During 2013, the Audit Committee consisted of Mr. Mark Meller, the Company’s Chief Executive Officer and President and Mr. Stanley
Wunderlich. The Audit Committee has one independent member and no member that may deemed a financial expert as defined in §228.401(e) of
the regulations promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as amended. Due to the Company's limited resources, it
cannot attract a financial expert to sit on its Board of Directors. Management is responsible for the Company's internal controls and the financial
reporting process. The Audit Committee's responsibility is to monitor corporate financial reporting and external audits, although the member of
the Audit Committee is not engaged in the practice of auditing or accounting. The Audit committee did not meet in 2013. The Board of Directors
approved an Audit Committee Charter. As of this date, the Audit Committee operates pursuant to this Audit Committee Charter.
AUDIT COMMITTEE REPORT
The following is the Audit Committee’s report submitted to the Board of Directors for the fiscal year ended December 31, 2013. The Audit
Committee has:
·
·
·
reviewed and discussed the Company’s audited financial statements with Friedman LLP, the Company’s independent registered
accounting firm;
discussed with Friedman LLP the matters required to be discussed by Statement on Auditing Standards No. 114, as may be modified
or supplemented; and
received from Friedman the written disclosures and the letter regarding their independence as required by Independence Standards
Board Standard No. 1, as may be modified or supplemented, and discussed the auditors’ independence with them.
Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial
statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, for filing with the
Securities and Exchange Commission.
AUDIT COMMITTEE
Mark Meller, CEO and President
The Audit Committee report shall not be deemed incorporated by reference by any general statement incorporating by reference this Annual
Report on Form 10-K into any filing under the Securities Act of 1933, as amended or the Securities Exchange Act of 1934, as amended, and
shall not otherwise be deemed filed under these acts.
Family Relationships
There are no family relationships among our directors, executive officers, or persons nominated or chosen by the Company to become directors
or executive officers.
Subsequent Executive Relationships
No director or executive officer has been a director or executive officer of any business which has filed a bankruptcy petition or had a bankruptcy
petition filed against it during the past five years. No director or executive officer has been convicted of a criminal offense or is the subject of a
pending criminal proceeding during the past five years. No director or executive officer has been the subject of any order, judgment or decree of
any court permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or
banking activities during the past five years. No director or officer has been found by a court to have violated a federal or state securities or
commodities law during the past five years.
None of our directors or executive officers or their respective immediate family members or affiliates are indebted to us.
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Legal Proceedings
None of the members of the board of directors or other executives has been involved in any bankruptcy proceedings, criminal proceedings, any
proceeding involving any possibility of enjoining or suspending members of our board of directors or other executives from engaging in any
business, securities or banking activities, and have not been found to have violated, nor been accused of having violated, any Federal or State
securities or commodities laws.
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 on our review of certain reports filed with the Securities and Exchange Commission pursuant to Section 16(a) of the Securities
Exchange Act of 1934, as amended, the reports required to be filed with respect to transactions in our common stock during the fiscal year ended
December 31, 2013, were timely.
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.
Item 11. Executive Compensation.
The following table sets forth compensation information for services rendered by certain of our executive officers in all capacities during the last
two completed fiscal years. The following information includes the dollar value of base salaries and certain other compensation, if any, whether
paid or deferred. The executive officers of the company did not receive any stock award, option award, non-equity incentive plan compensation,
or nonqualified deferred compensation earnings during the last two completed fiscal years.
Summary Compensation Table
Name and Position(s)
Year
Salary($)
Bonus
Stock
Awards
All Other
Compensation
Total
Compensation
Mark Meller
President, Chief Executive
Officer, Chief Financial
Officer and Director
2013 $
426,506 $
2012 $
370,489 $
0 $
0 $
0 $
0 $
0 $
426,506
0 $
370,489
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
The Company had no outstanding equity awards at the end of the most recent completed fiscal year.
Compensation of Directors
Pursuant to the Agreement with Mr. Wunderlich, Director, he is to be paid a stipend of one thousand dollars ($1,000) per month, payable at the
end of each fiscal quarter.
Employment Contracts
The Company has an Employment Agreement with Mark Meller, President and Chief Executive Officer of the Company, which began on
September 15, 2003 and expires on September 15, 2017. As consideration, the Company agreed to pay Mr. Meller the sum of $180,000 the first
year with a 10% increase every year thereafter, as well as a monthly travel expense allowance of $600 and an auto allowance of $800. Based on
this agreement Mr. Meller’s salary is $466,874. As of December 31, 2013, Mr. Meller agreed to accept a salary of $426,500 for 2013. The
employment agreement with Mr. Meller also provides for a severance payment to him 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 employment agreement.
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Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following tables set forth certain information regarding the beneficial ownership of our voting securities as of March 14, 2014 of (i) each
person known to us to beneficially own more than 5% of the applicable class of voting securities, (ii) our directors, (iii) and each named executive
officer and (iv) all directors and executive officers as a group. As of March 14, 2014 there were a total of 117,704,334 shares of Class A
common stock outstanding. Each share of Class A common stock is entitled to one vote on matters on which holders of common stock are
eligible to vote. The column entitled “Percentage of Total Voting Stock” shows the percentage of total voting stock beneficially owned by each
listed party.
The number of shares beneficially owned is determined under rules promulgated by the Securities and Exchange Commission, and the
information is not necessarily indicative of beneficial ownership for any other purpose. Under those rules, beneficial ownership includes any
shares as to which the individual has sole or shared voting power or investment power and also any shares which the individual has the right to
acquire within 60 days of March 14, 2014, through the exercise or conversion of any stock option, convertible security, warrant or other
right. Unless otherwise indicated, each person or entity named in the table has sole voting power and investment power (or shares that power
with that person’s spouse) with respect to all shares of capital stock listed as owned by that person or entity.
Name and Address (1)
Mark Meller
Stanley Wunderlich
Officers and Directors (2)persons)
Jeffrey Roth (1)
Beneficial
Relationship to Company
Chief Executive Officer, Chief Financial Officer,
President and Chairman
Director
-
Outstanding
Class A
Common Stock
Percentage of
Ownership of
Common Stock
(3)
182,676,115 (2)
76.06 %
500,000
183,676,115
- %
76.06 %
32,015,429
27.2%
(1) Mr. Roth is Chief Executive Officer of SWK, Technologies, Inc., a wholly-owned subsidiary of SilverSun Technologies, Inc.
(2) Includes voting rights of 122,480,118 shares associated with Series B Preferred Stock.
Description of Securities
On May 17, 2011, the Board of Directors (the “Board”) of the Company and the stockholders holding in the aggregate a majority of the
outstanding capital stock of the Company entitled to vote (the “Majority”), approved by written consent: (i) the decrease in the number of
authorized shares of Class A common stock, par value $.0001 per share (the Class A Common Stock”), of the Company from ten billion
(10,000,000,000) shares of Class A Common Stock to seven hundred and fifty million (750,000,000) shares of Class A Common Stock (the
“Authorized Class A Share Decrease”); (ii) the change in the conversion ratio at which the Class B common stock, par value $.0001 per share
(the “Class B Common Stock”), of the Company converts into Class A Common Stock from (A) fifty percent (50%) of the lowest price ever
paid for the issuance of Class A Common Stock for each one share of Class B Common Stock being converted to (B) one thousand nine
hundred seventy five (1,975) shares of Class A Common Stock for each one (1) share of Class B Common Stock (the “Ratio Change”); (iii) the
cancellation (the “Cancellation”) of the entire class of Class C Common Stock, par value $.00001 per share (the “Class C Common Stock”); and
(iv) the change in the name of the Company from “Trey Resources, Inc.” to “SilverSun Technologies, Inc.” (the “Name Change”).
Upon receiving the consent of the Board and the Majority, filed on June 27, 2011, the Company filed the Fourth Amended and Restated
Certificate of Incorporation (the “Amended Certificate”) with the Secretary of State of the State of Delaware to reflect the (i) Authorized Class A
Share Decrease, (ii) Ratio Change, (iii) Cancellation and (iv) the Name Change.
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On June 28, 2011, the Board of the Company adopted by resolution an amendment (the “Amendment”) to the Bylaws of the Company to allow
the Company, in the event that fractional equity interests are created, to issue one (1) full share of capital stock of the Company in lieu of a
fractional share of capital stock in the event that fractional equity interests are created. Prior to the Amendment, the Bylaws only allowed the
Company to: (i) arrange for the disposition of fractional interests by those entitled thereto; (ii) pay in cash the fair value of a fraction of a share as
of the time when those entitled to receive such fractional shares are determined; or (iii) issue scrip or warrants in registered form (represented by a
certificate or uncertificated) or bearer form (represented by a certificate) which entitles the holder to receive one (1) full share of capital stock upon
the surrender of such scrip or warrant.
Pursuant to our certificate of incorporation, as amended, we are authorized to issue up to: 750,000,000 shares of Class A common stock, par
value $0.0001 per share; 50,000,000 shares of Class B common stock, par value $.0001 per share and 1,000,000 shares of preferred stock, par
value of $1.00 per share. Below is a description of SilverSun Technologies’ outstanding securities, including Class A common stock, Class B
common stock, options, warrants and debt.
Class A Common Stock
Each holder of our Class A Common Stock is entitled to one vote for each share held of record. Holders of our Class A Common Stock have no
preemptive, subscription, conversion, or redemption rights. There are 750,000,000 shares authorized and 117,704,334 issued and outstanding at
March 14, 2014. Upon liquidation, dissolution or winding-up, the holders of Class A Common Stock are entitled to receive our net assets pro
rata. Each holder of Class A Common Stock is entitled to receive ratably any dividends declared by our board of directors out of funds legally
available for the payment of dividends. We have not paid any dividends on our Common Stock and do not contemplate doing so in the
foreseeable future. We anticipate that any earnings generated from operations will be used to finance our growth.
Class B Common Stock
Each share of Class B Common Stock has voting rights equal to 100 shares of Class A Common Stock. Holders of Class B Common Stock are
entitled to receive dividends in the same proportion as the Class B Common Stock conversion and voting rights have to Class A Common Stock.
There are 50,000,000 shares authorized and there were no shares issued and outstanding as of March 14, 2014, nor does the Company have any
plans to issue Class B Common Stock in the immediate future. Upon our liquidation, dissolution, or winding-up, holders of Class B Common
Stock will be entitled to receive distributions. The Class B common stock, par value $.0001 per converts to one thousand nine hundred seventy
five (1,975) shares of Class A Common Stock for each one (1) share of Class B Common Stock.
Preferred Stock
The Company’s certificate of incorporation authorizes the issuance of 1,000,000 shares of Preferred Stock, par value $1.00 per share.
Our board of directors is authorized (by resolution and by filing an amendment to our certificate of incorporation and subject to limitations
prescribed by the General Corporation Law of the State of Delaware) to issue, from to time, shares of Preferred Stock in one or more series, to
establish from time to time the number of shares to be included in each series, and to fix the designation, powers, preferences and other rights of
the shares of each such series and to fix the qualifications, limitations and restrictions thereon, including, but without limiting the generality of the
foregoing, the following:
·
·
·
·
·
·
·
·
the number of shares constituting that series and the distinctive designation of that series;
the dividend rate on the shares of that series, whether dividends are cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that series;
whether that series has voting rights, in addition to voting rights provided by law, and, if so, the terms of those voting rights;
whether that series has conversion privileges, and, if so, the terms and conditions of conversion, including provisions for adjusting the
conversion rate in such events as our board of directors determines;
whether or not the shares of that series are redeemable, and, if so, the terms and conditions of redemption, including the dates upon or
after which they are redeemable, and the amount per share payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
whether that series has a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of that
sinking fund;
the rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Company,
and the relative rights of priority, if any, of payment of shares of that series; and
any other relative powers, preferences and rights of that series, and qualifications, limitations or restrictions on that series.
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If we liquidate, dissolve or wind up our affairs, whether voluntarily or involuntarily, the holders of Preferred Stock of each series will be entitled
to receive only that amount or those amounts as are fixed by the certificate of designations or by resolution of the board of directors providing for
the issuance of that series.
Series A Preferred Stock
As of December 31, 2013, the Company has issued the following shares of Preferred Stock:
The Company issued to the each holder of the Notes one (1) share of Series A Convertible Preferred Stock (“Series A”), having the rights,
preferences, privileges, powers and restrictions set forth in the Certificate of Designation filed with the Secretary of State of Delaware. The
Company has the right to convert, at its sole option, each share of Series A into Class A Common Stock equal to 1% of the outstanding shares of
Class A Common Stock at the time of conversion. The Company valued the Series A Convertible Preferred Stock at $22,886 representing 1% of
the outstanding shares deliverable multiplied by the fair market value of the stock on the date of issuance and recorded as debt discount, which
has been amortized to interest expense during 2011. Each one share of Series A shall entitle the Series A Holder to voting rights equal to
2,666,667 votes of Class A Common Stock.
On January 12, 2012, the Series A Convertible Preferred Stock was converted into 2,385,650 shares of Common Stock. As of December 31,
2013, no shares of Series A Convertible Preferred Stock were outstanding.
Series B Preferred Stock
The Series B Preferred Stock has the rights, privileges, preferences and restrictions set for in the Certificate of Designation (the “Certificate of
Designation”) filed by the Corporation with the Secretary of State of the State of Delaware (“Delaware Secretary of State”) on September 23,
2011.
The one (1) share of the Series B Preferred shall have voting rights equal to (x) the total issued and outstanding Common Stock and preferred
stock eligible to vote at the time of the respective vote divided by (y) forty nine one-hundredths (0.49) minus (z) the total issued and outstanding
Common Stock and preferred stock eligible to vote at the time of the respective vote. For the avoidance of doubt, if the total issued and
outstanding Common Stock eligible to vote at the time of the respective vote is 5,000,000, the voting rights of the Series B Preferred Stock shall
be equal to 5,204,082 (e.g. (5,000,000 / 0.49) – 5,000,000 = 5,204,082).
On September 23, 2011, SilverSun Technologies, Inc., entered into a Series B preferred stock purchase agreement (the “Preferred Stock
Purchase Agreement”) with Mr. Meller (the “Series B Holder”), pursuant to which the Series B Holder was issued one authorized share of
Series B Preferred Stock (“Series B”), par value $0.001 per share. The Series B Holder was issued one share of Series B as partial consideration
for personally guaranteeing repayment of the Notes.
Options and Stock Awards
2004 Stock Incentive Plan
The Company adopted the 2004 Stock Incentive as amended Plan (the “2004 Plan”) which reserves for issuance up to 3,482,000 shares of the
Company’s Common Stock in order to attract and retain qualified employees, directors, independent contractors or agents of the
Company. Under the Plan, the Board of Directors (the “Board”), in its discretion may grant stock options (including non-statutory stock options
and incentive stock options qualifying under Section 422 of the Code), stock appreciation rights (including free-standing, tandem and limited
stock appreciation rights), warrants, dividend equivalents, stock awards, restricted stock, phantom stock, performance shares or other securities
or rights that the Board determines to be consistent with the objectives and limitations of the plan at a price to be equal to or greater than 50% of
the fair market value of such shares on the date of grant of such award. The Board may determine that all or a portion of a payment to a
participant under the Plan, whether it is to be made in cash, shares of the Company common stock or a combination thereof, shall be vested at
such times and upon such terms as may be selected by it in its sole discretion. The Plan (but not the awards theretofore granted under the Plan)
shall terminate on and no awards shall be granted after September 29, 2014.
In May 2012, the Company issued approximately 2,875,000 common stock options from the 2004 Stock Incentive Plan with a weighted average
exercise price of $0.16 and an expected life of 5 years. Approximately, 2,257,000 of the common stock options vest immediately. The remaining
618,000 options shall vest 50% at grant date with the balance vested ratably over a three-year period.
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2007 Consultant Stock Incentive Plan
The Company adopted the 2007 Consultant Stock Incentive Plan (the “2007 Plan”) to: (i) provide long-term incentives, payment in stock in lieu
of cash and rewards to consultants, advisors, attorneys, independent contractors or agents ("Eligible Participants") of the Company; (ii) assist the
Company in attracting and retaining independent contractors or agents with experience and/or ability on a basis competitive with industry
practices; and (iii) associate the interests of such independent contractors or agents with those of the Company's stockholders. The Company has
reserved 581,800 shares for issuance under this plan. Awards under the Plan may include, but need not be limited to, stock options (including
non-statutory stock options and incentive stock options qualifying under Section 422 of the Code), stock appreciation rights (including free-
standing, tandem and limited stock appreciation rights), warrants, dividend equivalents, stock awards, restricted stock, phantom stock,
performance shares or other securities or rights that the Board determines to be consistent with the objectives and limitations of the Plan. The
price shall be equal to or greater than 50% of the fair market value of such shares on the date of grant of such award. The Board shall determine
the extent to which awards shall be payable in cash, shares of the Company common stock or any combination thereof. The Board may
determine that all or a portion of a payment to a participant under the Plan, whether it is to be made in cash, shares of the Company common stock
or a combination thereof shall be deferred. Deferrals shall be for such periods and upon such terms as the Board may determine in its sole
discretion. The Plan (but not the awards theretofore granted under the Plan) shall terminate on and no awards shall be granted after January 22,
2017. No securities were issued pursuant to this Plan for the year ended December 31, 2013.
2004 Directors’ and Officers’ Stock Incentive Plan
The Company adopted the 2004 Directors’ and Officers’ Stock Incentive Plan (the “2004 D&O Plan”) which reserves for issuance up to
165,600 shares of the Company’s Common Stock in order to provide long-term incentive and rewards to officers and directors of the Company
and subsidiaries and to attract and retain qualified employees, directors, independent contractors or agents of the Company. Awards under the
Plan may include, but need not be limited to, stock options (including non-statutory stock options and incentive stock options qualifying under
Section 422 of the Code), stock appreciation rights (including free-standing, tandem and limited stock appreciation rights), warrants, dividend
equivalents, stock awards, restricted stock, phantom stock, performance shares or other securities or rights that the Board determines to be
consistent with the objectives and limitations of the Plan. The price shall be equal to or greater than 50% of the fair market value of such shares
on the date of grant of such award. The Board shall determine the extent to which awards shall be payable in cash, shares of the Company
common stock or any combination thereof. The Board may determine that all or a portion of a payment to a participant under the Plan, whether it
is to be made in cash, shares of the Company common stock or a combination thereof shall be deferred. Deferrals shall be for such periods and
upon such terms as the Board may determine in its sole discretion. The Plan (but not the awards theretofore granted under the Plan) shall
terminate on and no awards shall be granted after September 29, 2014. No securities were issued pursuant to this Plan for the year ended
December 31, 2013.
Item 13. Certain Relationships and Related Transactions.
Related Party Notes and Accounts Due
The Company has an Employment Agreement with Mark Meller, President and Chief Executive Officer of the Company, which began on
September 15, 2003, which was extended on September 1, 2010 and expires on September 15, 2017. As consideration, the Company agreed to
pay Mr. Meller the sum of $180,000 the first year with a 10% increase every year thereafter, as well as a monthly travel expense allowance of
$600 and an auto allowance of $800. Based on this agreement Mr. Meller’s salary is $466,874. As of December 31, 2013, Mr. Meller agreed to
accept a salary of $426,500 for 2013. The employment agreement with Mr. Meller also provides for a severance payment to him 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 employment agreement
Total amounts owed to Mr. Meller as of December 31, 2013 and December 31, 2012, representing accrued interest totaled $2,672 and $5,942,
respectively.
On October 19, 2010, the Company borrowed $45,000 in exchange for issuing a Note payable to Mr. Meller. The Note Payable is not
collateralized, and carries an interest rate of 3% per annum on the unpaid balance. In January 2013, Mr. Meller extended the due date of the Note
Payable to January 2014. The outstanding balance at December 31, 2013 and 2012 was $20,000.
28
Table of Contents
Director Independence
The common stock of the Company is currently quoted on the OTCBB, an exchange which currently does not have director independence
requirements. 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 both the criteria for the Nasdaq and the American Stock Exchange.
As of December 31, 2013, the Board determined that Mr. Wunderlich is 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
Audit Fees
Audit - Related Fees
Tax fees
All Other Fees
Total
2013
2012
$
52,500 $
51,000
16,500
31,000
$
18,000 $
16,500
-
-
$
87,000 $
98,500
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.
29
Table of Contents
Item 15. Exhibits.
(a)
PART IV
Exhibit No.
3.1
Description
Second Amended Certificate of incorporation of SilverSun Technologies, Inc., filed September 5, 2003 (incorporated herein
3.2
3.3
3.4
4.1
4.2
4.3
4.4
4.5
4.6
4.7
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
by reference to Exhibit 3.1 of the registration statement on Form SB-2, filed with the SEC on November 25, 2003).
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.
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).
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)
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).
iVoice Acquisition 1, Inc. 5% Convertible Debenture due March 20, 2005 issued to Darryl A. Moy (incorporated herein by
reference to Exhibit 4.2 of the registration statement on Form SB-2, filed with the SEC on December 22, 2003).
iVoice Acquisition 1, Inc. 5% Convertible Debenture due March 20, 2005 issued to Henry Tyler (incorporated herein by
reference to Exhibit 4.2 of the registration statement on Form SB-2, filed with the SEC on December 22, 2003).
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).
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).
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.
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.
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).
Employment Agreement, dated September 15, 2003, between SilverSun Technologies, Inc. and Mark Meller. (incorporated
herein by reference to Exhibit 10.8 of the Registration Statement on Form SB-2 filed on November 25, 2003).
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)
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).
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).
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).
Termination Agreement dated December 30, 2005 between YA Global (f/k/a/ Cornell Capital Partners, LP). and SilverSun
Technologies, Inc.
Escrow Agreement dated December 30, 2005 between David Gonzalez, Esq. And SilverSun Technologies, Inc.
Securities Purchase Agreement dated December 30, 2005 between YA Global (f/k/a/ Cornell Capital Partners, LP). and
SilverSun Technologies, Inc.
Investor Rights Agreement dated December 30, 2005 between YA Global (f/k/a/ Cornell Capital Partners, LP). and
SilverSun Technologies, Inc.
Amended and Restated Security Agreement dated December 30, 2005 between YA Global (f/k/a/ Cornell Capital Partners,
LP). and SilverSun Technologies, Inc.
30
Table of Contents
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
14.1
31.1 *
32.1 *
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).
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 10.1 on Form 10-K, dated May 9,
2009, filed with the SEC on May 26, 2009).
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).
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 commission on May 12, 2011).
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 commission on August 3, 2011).
Form of Warrant (incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K filed with
commission on August 3, 2011).
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).
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).
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 commission on June
20, 2012).
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.
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herein.
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 filed herein.
101.INS *
101.SCH *
101.CAL *
101.DEF *
101.LAB *
101.PRE *
XBRL Instance Document
XBRL Taxonomy Extension Schema
XBRL Taxonomy Extension Calculation Linkbase
XBRL Taxonomy Extension Definition Linkbase
XBRL Taxonomy Extension Label Linkbase
XBRL Taxonomy Extension Presentation Linkbase
* Filed herewith
31
Table of Contents
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.
SIGNATURES
Dated: March 31, 2014
By: /s/ Mark Meller
SILVERSUN TECHNOLOGIES, INC.
Chief Executive Officer
(Principal Executive Officer)
Chief Financial Officer
(Principal Accounting 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
/s/ Mark Meller
Mark Meller
/s/ Stanley Wunderlich
Stanley Wunderlich
Position
Date
Chief Executive Officer, Chief Financial Officer, President, and
Chairman
March 31, 2014
Director
March 31, 2014
32
Table of Contents
PART F/S
INDEX TO FINANCIAL STATEMENTS
AUDITED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets
Statements of Operations
Statements of Stockholders' Deficit
Statements of Cash Flows
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
Page (s)
F-2
F-3
F-4
F-5
F-6
F-8
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
SilverSun Technologies, Inc.
We have audited the accompanying consolidated balance sheets of SilverSun Technologies, Inc. and Subsidiaries (the “Company”) as of
December 31, 2013 and 2012, and the related consolidated statements of operations, stockholders' deficit, and cash flows for each of the two
years in the period ended December 31, 2013. The Company’s management is responsible for these consolidated financial statements. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards established by the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, 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. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of
the Company as of December 31, 2013 and 2012, and the consolidated results of its operations and its cash flows for each of the two years in the
period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America.
/s/Friedman LLP
East Hanover, NJ
March 31, 2014
F-2
Table of Contents
ASSETS
Current assets:
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
Cash and cash equivalents
Accounts receivable, net of allowance for bad debts of $80,000 and $80,000
Deferred tax asset – current
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Intangible assets, net
Deferred tax asset
Deposits and other assets
Total assets
LIABILITIES & STOCKHOLDERS’ DEFICIT
Current liabilities:
Bank line of credit
Note payable to related party
Current portion of long-term debt
Accounts payable and accrued expenses
Accrued interest
Due to related party
Capital lease obligations – current portion
Deferred revenue
Total current liabilities
Capital lease obligations – long-term
Long-term debt
Total liabilities
Commitments and Contingencies
Stockholders' deficit:
Preferred Stock, $1.00 par value; authorized 1,000,000 shares;
no shares issued and outstanding
Series A Preferred Stock, $1.00 par value; authorized 2 shares
No shares issued and outstanding
Series B Preferred Stock, $1.00 par value; authorized 1 share
1 share issued and outstanding
Common stock:
Class A – par value $.00001, authorized 750,000,000 shares;
117,676,976 and 116,950,933 shares issued and outstanding
Class B – par value $.00001, authorized 50,000,000 shares; -0- issued and outstanding
Additional paid-in capital
Accumulated deficit
Total stockholders' deficit
2013
2012
$
762,892 $
1,574,996
40,000
159,276
4,483
1,509,532
-
131,520
2,537,164
1,645,535
241,895
687,880
80,000
22,836
250,233
884,513
-
21,996
$
3,569,775 $
2,802,277
$
- $
20,000
175,000
1,836,229
13,291
2,672
53,726
1,715,555
178,633
20,000
-
1,953,182
12,422
5,942
88,829
1,357,800
3,816,473
3,616,808
48,624
104,517
-
-
3,969,614
3,616,808
-
-
1
-
-
1
1,177
-
10,808,361
(11,209,378 )
1,170
-
10,716,224
(11,531,926 )
(399,839 )
(814,531 )
Total liabilities and stockholders' deficit
$
3,569,775 $
2,802,277
The accompanying notes are an integral part of these consolidated financial statements.
F-3
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Table of Contents
Revenues:
Software product, net
Service, net
Total revenues, net
Cost of revenues:
Product
Service
Total cost of revenues
Gross profit
Operating expenses:
Selling and marketing expenses
General and administrative expenses
Share-based compensation
Depreciation and amortization
Total operating expenses
Income (loss) from operations
Other income (expense):
Gain from bargain purchase
Interest expense, net
Total other income (expense)
Income (loss) from operations before income taxes
Income tax benefit
Net income (loss)
Basic and diluted net income (loss) per share attributable
to SilverSun Technologies, Inc. shareholders:
Basic income (loss) per common share
Diluted income (loss) per common share
Weighted average shares outstanding:
Basic
Diluted
For the Years Ended
December 31,
2013
December 31,
2012
$
3,419,154 $
13,980,897
17,400,051
2,432,187
10,746,798
13,178,985
1,707,142
8,942,768
10,649,910
1,173,510
6,671,375
7,844,885
6,750,141
5,334,100
3,244,337
2,927,622
17,616
301,962
6,491,537
2,302,258
2,876,456
1,136,258
195,560
6,510,532
258,604
(1,176,432 )
-
(56,056 )
(56,056 )
17,932
(76,670 )
(58,738 )
202,548
(1,235,170 )
(120,000 )
-
$
322,548 $
(1,235,170 )
$
$
0.00 $
0.00 $
(0.01 )
(0.01 )
117,060,232
117,060,232
115,395,550
115,395,550
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
Series A
Preferred
Stock
Series B
Preferred
Stock
Shares Amount Shares Amount
Shares
Common Stock
Class A
Additional
Paid in
Amount Capital
Noncontrolling
Interest in
SWK
Technologies,
Inc.
Total
Stockholders’
Deficit
Accumulated
Deficit
Balance at
January 1,
2012
Exchange of
shares of
SWK for
shares of
SilverSun
Technologies,
Inc
Conversion
of Series A
Preferred
Stock to
common
stock
Conversion
of convertible
promissory
note to
common
stock
Share-Based
Compensation
Issuance of
warrant for
services
Issuance of
common
stock for
services
Net loss
Balance at
December 31,
2012
Issuance of
warrant for
services
Common
stock issued
in a cashless
exercise of
warrants
Issuance of
common
stock for
repayment of
accrued
liabilities
Share-Based
Compensation
Issuance of
common
stock for
services
Net income
Balance at
2 $ 22,886
1 $
1 4,456,912 $
45 $ 9,326,973 $ (10,296,756 ) $
47,206 $
(899,645 )
-
-
-
- 22,664,678
227
46,979
-
(47,206 )
(2 ) (22,886)
-
- 2,385,650
24
22,862
-
-
-
-
-
-
-
- 86,793,693
868
43,708
-
-
-
-
-
- 1,136,258
-
-
-
43,946
-
1,136,258
-
-
-
-
-
-
105,080
-
-
105,080
-
-
-
-
-
-
-
-
650,000
-
6
-
34,994
--
-
(1,235,170 )
-
-
35,000
(1,235,170 )
- $
-
1 $
1 116,950,933 $ 1,170 $10,716,224 $ (11,531,926 ) $
- $
(814,531 )
-
-
-
-
-
-
28,528
-
-
28,528
-
-
-
-
210,526
2
(2 )
-
-
-
-
-
-
-
215,517
2
24,998
-
-
-
-
-
-
17,616
-
-
-
-
25,000
17,616
-
-
-
-
-
-
-
-
300,000
-
3
-
20,997
--
-
322,548
-
-
21,000
322,548
Balance at
December 31,
2013
- $
-
1 $
1 117,676,976 $ 1,177 $10,808,361 $ (11,209,378 ) $
- $
(399,839 )
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,
Cash flows from operating activities:
Net income (loss)
Adjustments to reconcile net loss to net cash
used in operating activities:
Deferred income taxes
Depreciation and amortization
Amortization of intangibles
Amortization of debt discount
Provision for bad debts
Share-based compensation
Gain from bargain purchase
Common stock issued for services
Warrant issued in exchange for services
Changes in certain assets and liabilities:
Accounts receivable
Prepaid expenses and other assets
Deposits and other assets
Accounts payable and accrued liabilities
Accrued interest
Due to related parties
Deferred revenues
Net cash provided by operating activities
Cash flows from investing activities:
Acquisition of new business
Software development costs
Purchases of equipment
Net cash used in investing activities
Cash flows from financing activities:
Repayment of notes payable to related parties
Proceeds from (repayment of) line of credit, net
Proceed from term loan
Repayment of term loan
Principal payment under capital lease obligations
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
2013
2012
$
322,548 $
(1,235,170 )
(120,000 )
105,330
196,633
-
-
17,616
-
21,000
28,528
(65,464 )
(27,756 )
(840 )
(91,953 )
869
(3,270 )
357,755
740,996
-
-
(30,364 )
(30,364 )
-
(178,633)
350,000
(70,483 )
(53,107 )
47,777
-
92,037
103,523
4,250
39,000
1,136,258
(17,932 )
35,000
105,080
(667,315 )
22,240
35,925
693,137
4,747
(393 )
42,416
392,803
(441,964 )
(198,591 )
(103,819 )
(744,374 )
(7,054 )
178,633
-
-
(49,247 )
122,332
758,409
4,483
(229,239 )
233,722
Cash and cash equivalents, end of year
$
762,892 $
4,483
Supplemental Schedule of Cash Flow Information::
During the year, cash was paid for the following:
Income taxes
Interest
$
$
- $
69,134 $
-
66,776
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Table of Contents
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, 2013:
a) The Company incurred approximately $66,628 in capital lease obligations.
b) The Company issued 210,526 shares of common stock in a cashless exercise of warrants for 250,000 shares at an exercise
price of $0.03 per share.
c) The Company issued 215,517 shares of common stock with a fair value of $25,000 for repayment of accrued liabilities in the amount of
$25,000.
d) The Company issued 300,000 shares of common stock with a fair value of $21,000 in exchange for services.
For the Year Ended December 31, 2012:
a)
b)
c)
d)
The Company converted $43,946 of the Convertible Promissory Note (as defined herein) at a fixed conversion rate of 1,975 shares per
$1 for 86,793,693 shares of the Company’s Class A common stock, par value $0.00001 (the “Common Stock”).
The Company converted 2 shares of Series A Convertible preferred stock for 2,385,650 shares of Common Stock.
The Company bought back their 20% interest in SWK Technologies, Inc. for 22,664,678 shares of Common Stock.
The Company incurred approximately $73,709 in capital lease obligations.
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 1 - DESCRIPTION OF BUSINESS
Description of Business
SilverSun Technologies, Inc. (the “Company”) is an information technology company, and a value added reseller and master developer
for Sage Software’s Sage100/500 and ERP X3 financial and accounting software as well as the publisher of its own proprietary
Electronic Data Interchange (EDI) software, “MAPADOC.” The Company focuses on the business software and information
technology consulting market, and is looking for other opportunities to grow its business. The Company sells services and products to
various end users, manufacturers, wholesalers and distributor industry clients located throughout the United States. In June 2011, the
Company changed its name from Trey Resources, Inc. to SilverSun Technologies, Inc. The Company is publicly traded and is currently
quoted on the Over-the-Counter Bulletin Board (“OTCBB”) under the symbol “SSNT.”
In June 2012 the Company completed the purchase of selected assets and obligations of HighTower, Inc., a leading Chicago-based
reseller of Sage software applications and a publisher of proprietary business management enhancements.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements include the accounts of SilverSun Technologies, Inc. (the “Company”) and its
wholly-owned subsidiary, SWK Technologies, Inc. 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.
Noncontrolling interest had represented third party ownership in the net assets of our consolidated subsidiaries. For financial reporting
purposes, the assets and liabilities of our majority owned subsidiaries are consolidated with those of our own, with any third party
investor’s interest shown as noncontrolling interest.
On May 6, 2009, the Company sold twenty-five (25) newly issued shares or 20% of the stock of SWK Technologies, Inc. (“SWK”), a
subsidiary of SilverSun Technologies, Inc., for a purchase price of $150,000 to the President of SWK.
On January 12, 2012, SilverSun Technologies, Inc. entered into a share exchange agreement (the “Agreement”) with certain shareholders
and the President (the “SWK Shareholders”) of SWK Technologies, Inc. Pursuant to the terms of the Agreement, the SWK Shareholders
exchanged an aggregate of 25 shares of SWK to the Company for a total of 22,664,678 shares (the “Exchange Shares”) of the
Company’s common stock (the “Exchange”). The shares had a fair value of approximately $612,000 ($0.027 per share) at the time of
exchange. The transaction was recorded as an equity transaction. SWK is now a wholly-owned subsidiary of the Company.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
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. The most significant estimates include:
1. Revenue recognition of software sales
2. Allowance for doubtful accounts
3. Fair market value of share based payments and other equity instruments
4. Valuation of intangible assets
5. Valuation of deferred tax assets and liabilities
F-8
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition
Revenue is recognized when products are shipped, or services are rendered, evidence of a contract exists, the price is fixed or reasonably
determinable, and collectability is reasonably assured.
Product Revenue
Software product revenue is recognized when the product is shipped to the customer. The Company treats the software component and
the professional services consulting component as two separate arrangements that represent separate units of accounting. The arrangement
consideration is allocated to each unit of accounting based upon that unit’s proportion of the fair value. In a situation where both
components are present, software sales revenue is recognized when collectability is reasonably assured and the product is delivered and
has stand-alone value based upon vendor specific objective evidence (see below for recognition of professional service revenue).
Service Revenue
Service revenue is comprised of primarily professional service consulting revenue, maintenance revenue and other ancillary services
provided as described below. Professional service revenue is recognized as service time is incurred.
With respect to maintenance services, upon the completion of one year from the date of sale, considered to be the warranty period, the
Company offers customers an optional annual software maintenance and support agreement for subsequent one-year periods.
Maintenance and support agreements are recorded as deferred revenue and recognized over the respective terms of the agreements, which
typically range from three months to one year and are included in services revenue in the Consolidated Statements of Operations
Shipping and handling costs charged to customers are classified as revenue, and the shipping and handling costs incurred are included in
cost of sales.
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.
Concentration of Credit Risk
For the years ended December 31, 2013 and 2012, our top ten customers accounted for 19% ($3,159,000) and 17% ($2,262,000),
respectively, of our total revenues. The Company does not rely on any one specific customer for any significant portion of our revenue
base.
For the years ended December 31 2013 and 2012, purchases from one supplier were approximately 31% and 47% of cost of revenues,
respectively.
For the years ended December 31, 2013 and 2012, one supplier represented approximately 52% and 43% 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, 2013 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 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, the customer’s current ability to pay its obligations and the condition of the general
economy and the industry as a whole.
F-9
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 five 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 Statements of Operations.
Deferred Revenues
Deferred revenues consist of maintenance service, customer support services, including telephone support 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.
Deferred Income Taxes
Deferred income taxes reflects 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. Deferred tax
assets and liabilities are classified as current or non-current based on the classification of the related assets or liabilities for financial
reporting, or according to the expected reversal dates of the specific temporary differences, if not related to an asset or liability for
financial reporting. 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.
Income Tax Uncertainties
The calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax regulations. The
Company recognizes liabilities for uncertain tax positions based on the two-step process prescribed by applicable accounting principles.
The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more
likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The
second step requires the Company to estimate and measure the tax benefit as the largest amount that is more than 50% likely of being
realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as this requires the Company to
determine the probability of various possible outcomes. The Company reevaluates these uncertain tax positions, based on factors
including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and new audit
activity. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax
provision in the period. The Company recognizes interest and penalties as incurred in finance income (expense), net in the Consolidated
Statements of Operations.
There were no liabilities for uncertain tax positions at December 31, 2013 and 2012.
F-10
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair Value Measurement
The Company adopted the provisions of the accounting pronouncement which defines fair value, establishes a framework for measuring
fair value and enhances fair value measurement disclosure. Under the provisions of the pronouncement, fair value is defined as the price
that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market
participants at the measurement date.
The pronouncement establishes 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 described below:
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, capital leases and line of credit.
See also Notes 4, 5 and 13.
Definite Lived Intangible Assets
The values assigned to purchased intangible assets were based on an independent valuation. Purchased intangible assets are amortized
over the useful lives of the asset using the straight-line amortization method.
The Company assesses potential impairment of its intangible 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.
Long-Lived Assets
Long-lived assets are reviewed for impairment when circumstances indicate that the carrying value of an asset may not be recoverable.
Recoverability of such assets is measured by a comparison of the carrying amount of the assets to the future net cash flows estimated by
the Company to be generated by such assets. If such assets are considered to be impaired, the impairment to be recognized is the amount
by which the carrying amount of the assets exceeds the fair value of the assets. No impairment losses were identified or recorded in the
years ended December 31, 2013 and 2012.
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 of the stock options. The grant date fair value is determined using the Black-Scholes-
Merton (“Black-Scholes”) pricing model. For all 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, expected term, and forfeiture rate. Any changes in these
highly subjective assumptions significantly impact stock-based compensation expense.
F-11
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings per Share
The Company’s basic income (loss) per common share is based on net income (loss) for the relevant period, divided by the weighted
average number of common shares outstanding during the period. Diluted income per common share is based on net income, divided by
the weighted average number of common shares outstanding during the period, including common share equivalents, such as outstanding
stock options and warrants to the extent they are dilutive. Diluted loss per share does not include common stock equivalents, stock
options and warrants, as these shares would have an anti-dilutive effect as their exercise prices were above the market price of the
Company’s common stock at December 31, 2013
The computation of EPS is approximately as follows:
Basic net income (loss) per share:
Net income (loss) attributable to common
stockholders
Weighted-average common shares outstanding
Basic net income (loss) per share attributable to
common stockholders
Diluted net income (loss) per share:
Net income (loss) attributable to common
stockholders
Weighted-average common shares outstanding
Incremental shares attributable to warrants and
convertible promissory note
Total adjusted weighted-average shares
Diluted net income (loss) per share attributable to
common stockholders
Year Ended
December 31,
2013
Year Ended
December 31,
2012
$
$
$
322,548 $
117,060,232
(1,235,170 )
115,395,550
0.00 $
(0.01 )
322,548 $
117,060,232
(1,235,170 )
115,395,550
-
117,060,232
-
115,395,550
$
0.00 $
(0.01 )
The following table summarizes securities that, if exercised, would have an anti-dilutive effect on earnings per share.
Stock options
Warrants
2013
2,673,476
750,000
2012
2,874,710
750,000
Total potential dilutive securities not included in loss per share
3,423,476
3,624,710
Recent Accounting Pronouncements
No recently issued accounting pronouncements had or are expected to have a material impact on the Company’s consolidated financial
statements.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows:
Leasehold improvements
Equipment, furniture and fixtures
Less: Accumulated depreciation
December 31,
2013
December 31,
2012
$
30,557 $
1,001,920
1,032,477
(790,582 )
30,557
904,928
935,485
(685,252 )
Property and equipment, net
$
241,895 $
250,233
Depreciation and amortization expense related to these assets for the years ended December 31, 2013 and 2012 was $105,330 and
$92,037.
F-12
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 4 – BUSINESS COMBINATION
In June 2012, the Company’s wholly-owned subsidiary, SWK Technologies, Inc., acquired certain assets of HighTower Inc. for total
consideration of $441,964 in cash and noncash assumption of deferred revenue obligation of $299,634. Based on an independent
valuation, the purchase price was allocated to the tangible and identifiable intangible assets acquired and liabilities according to their
respective estimated fair values. The following summarizes the purchase price allocation:
Current assets
Long-lived assets
Bargain purchase gain
Intangible assets
Deferred maintenance liability
Fair value of net assets acquired
Cash paid for acquisition
Bargain purchase gain
Total purchase price
$
38,736
26,794
(17,932 )
694,000
(299,634 )
$
459,896
441,964
17,932
$
459,896
Intangible assets acquired are primarily made up of a customer list acquired and proprietary technology. Acquisition costs were
approximately $46,000, which are included in general and administrative expenses.
The Company’s consolidated financial statements for the year ended December 31, 2012 include the results of HighTower since date of
acquisition. The following unaudited pro forma information assumes the acquisition occurred on January1, but does not purport to
present what the Company’s actual results would have been had the acquisition actually occurred on January 1, 2011, nor is the financial
information indicative of the results of future operations. The unaudited pro forma financial information includes the depreciation and
amortization expense related to the acquisition.
Pro - Forma (unaudited)
Total revenue, net
Cost of revenues
Operating expenses
Other expense (income)
Income (loss) before taxes
Net income (loss)
Basic income (loss) per common share
Diluted income (loss) per common share
Year Ended
December 31,
2012
13,773,967
8,039,161
7,008,124
56,635
(1,235,170 )
(1,329,9538 )
(0.01 )
(0.01 )
$
$
$
$
For the year ended December 31, 2012, the HighTower operations contributed approximately $461,647 in net income, which consisted of
approximately $1,145,319 in revenues and $683,672 in expenses. These revenues were generated in combination with HighTower and
SWK personnel, and likely would not have been achieved if HighTower was a standalone business.
F-13
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 5 – INTANGIBLE ASSETS
Intangible assets consist of intellectual property and customer lists acquired and are carried at cost less accumulated amortization.
Amortization is computed using the straight-line method over the estimated useful lives.
The components of intangible assets are as follows:
Proprietary developed software
Intellectual property, customer list, and
acquired contracts
Total intangible assets
Less: accumulated amortization
December 31,
2013
December 31,
2012
Estimated
Useful Lives
$
294,036 $
294,036
694,000
694,000
$
$
988,036 $
300,156
687,880 $
988,036
103,523
884,513
5
5
Amortization expense related to the above intangible assets was $196,633 and $103,523, respectively, the tears ended December 31, 2013
and 2012.
The Company expects amortization expense to be the following:
Amortization
$
2014
2015
2016
2017
197,607
197,607
197,607
95,059
Total
$
687,880
NOTE 6 – LINE OF CREDIT AND TERM LOAN
In October 2011, the Company negotiated a line of credit from a bank. The agreement included a borrowing base calculation tied to
accounts receivable with a maximum availability of $750,000. On August 1, 2013, the Company negotiated a new line of credit and term
loan from the bank. The term of the line is for two years and expires on July 31, 2015. The agreement included a borrowing base
calculation tied to accounts receivable with a maximum availability of $750,000 at prime plus 1.75% interest (currently 5%). The line is
collateralized by substantially all of the assets of the Company and is guaranteed by the Company’s Chief Executive Officer, Mr.
Meller. The credit facility requires the Company to pay a monitoring fee of $1,000 monthly. At December 31, 2013, the Company was in
compliance with the required financial covenants, the fixed charge ratio and debt to net worth. As of December 31, 2013, the availability
under this line was $750,000.
Under the term loan, the Company borrowed $350,000 in July 2013 from a bank. The term of the loan is for two years and expires on
July 31, 2015. Monthly payments are at $15,776 including interest at 8%. The term loan is collateralized by substantially all of the assets
of the Company and is guaranteed by the Company’s Chief Executive Officer, Mr. Meller. At December 31, 2013 the outstanding
balance was $279,517.
F-14
Table of Contents
NOTE 7 - INCOME TAXES
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
Significant components of the Company's deferred tax assets and liabilities are summarized as follows:
Deferred tax assets:
Net operating loss carry forwards
Long lived assets
Share based payments
Other
Deferred tax asset
Deferred tax liabilities:
Long lived assets
Deferred tax liabilities
Net deferred tax asset
Less: Valuation allowance
Net deferred tax asset
December 31,
2013
December 31,
2012
$
$
2,928,000 $
270,000
71,000
35,000
3,304,000
2,920,000
326,000
75,000
32,000
3,353,000
(44,000 )
(44,000 )
3,260,000
(3,140,000 )
120,000 $
(73,000 )
(73,000 )
3,280,000
(3,280,000 )
-0-
The recognized deferred tax asset is based upon the expected utilization of its benefit from future taxable income. The Company has
federal net operating loss (“NOL”) carryforwards of approximately $7,552,000 as of December 31, 2013, which is subject to limitations
under Section 382 of the Internal Revenue Code. These carryforward losses are available to offset future taxable income, and begin to
expire in the year 2025 to 2030. A valuation allowance has been recorded, for those deferred tax assets that management does not
believe that the realization is more likely than not.
The foregoing amounts are management’s estimates and the actual results could differ from those estimates. Future profitability in this
competitive industry depends on continually obtaining and fulfilling new profitable sales agreements and modifying products. The
inability to obtain new profitable contracts could reduce estimates of future profitability, which could affect the Company’s ability to
realize the deferred tax assets.
A reconciliation of the statutory income tax rate to the effective rate is as follows for the period December 31, 2013 and 2012:
Federal income tax rate
State income tax, net of federal benefit
Permanent differences
Prior year adjustments
Effective income tax rate
Effect on valuation allowance
Effective income tax rate
F-15
December 31,
2013
December 31,
2012
34 %
6 %
6 %
(35 %)
11 %
(70 %)
(59.0 %)
34 %
6 %
40 %
- %
80 %
(80 %)
0.0 %
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 7 - INCOME TAXES (continued)
Income tax (benefit) provision:
Current:
Federal
State and local
Total current tax provision
Deferred:
Federal
State and local
Release of valuation allowance
Total deferred tax (benefit) provision
Year Ended
December 31,
2013
December 31,
2012
$
- $
-
-
-
-
(120,000 )
(120,000 )
Total (benefit) provision
$
(120,000 )
NOTE 8 – CAPITAL LEASE OBLIGATIONS
-
-
-
-
-
-
-
-
The Company has entered into lease commitments for equipment that meet the requirements for capitalization. The equipment has been
capitalized and shown in equipment, furniture and leasehold improvements in the accompanying balance sheets. The related obligations
are also recorded in the accompanying balance sheets and are based upon the present value of the future minimum lease payments with
interest rates ranging from 8.5% to 11.0%.
At December 31, 2013, future payments under capital leases are as follows over each of the next five fiscal years:
2014
2015
2016
2017
2018
Total minimum lease payments
Less amounts representing interest
Present value of net minimum lease payments
Less current portion
Long-term capital lease obligation
F-16
$
$
62,499
39,741
12,457
-
-
114,697
(12,347)
102,350
(53,726)
48,624
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 9 – DUE TO RELATED PARTY
Amounts owed to Mr. Meller as of December 31, 2013 and December 31, 2012, representing accrued interest totaled $2,672 and $5,942,
respectively.
NOTE 10 – NOTES PAYABLE TO RELATED PARTY
On October 19, 2010, the Company borrowed $45,000 in exchange for issuing a Note payable to Mr. Meller. The Note Payable is not
collateralized, and carries an interest rate of 3% per annum on the unpaid balance. In January 2013, Mr. Meller extended the due date of
the Note Payable to January 2014. The outstanding balance at December 31, 2013 and 2012 was $20,000.
NOTE 11 – CONVERTIBLE PROMISSORY NOTE – RELATED PARTY
On January 28, 2011, the Company issued a 7% $51,000 convertible promissory note to Mr. Meller (“Convertible Note”). The note is
not collateralized. On January 4, 2012 the holder of the Convertible Note, Mr. Meller, converted $30,458 into 60,154,178 shares of
Common Stock. In addition, the holder had sold $13,488 of the Convertible Note to certain employees of the Company for cash in
January 2012, in accordance with options which were granted to such employees in January 2011, which were immediately converted
into 26,639,515 shares of Common Stock. The additional fair value of the shares issued to the employees upon conversion was recorded
as share-based compensation of $719,000 which was recorded as a charge in the consolidated statement of operations. In December
2012, the remaining balance of the note was repaid to Mr. Meller in the amount of $7,054.
The outstanding balances at December 31, 2013 and 2012 were $-0. The accrued interest was paid in full in March 2013.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
Operating Leases
Our main offices are at 5 Regent Street, Livingston, NJ 07039 where we have 6,986 square feet of office space at a monthly rent of
$7,400. The lease expires December 31, 2016. The Company has a two-year lease, with a one-year extension, for office space at 6834
Buckley Road, North Syracuse, New York, at a monthly rent of $2,100. The lease expires May 31, 2015. The Company also leases
2,700 square feet of office space for sales and support in Skokie, IL with a monthly rent of $3,000. This lease expires April 30, 2018.
The Company also leases 500 square feet for sales and support in Minneapolis, MN for $400 a month. This lease expires August 2014.
We use our facilities to house our corporate headquarters and operations and believe our facilities are suitable for such purpose Total rent
expense under these operating leases for the year ended December 31, 2013 and 2012 was $153,000 and $130,000, respectively.
The following is a schedule of approximate future minimum rental payments for operating leases subsequent to the year ended December
31, 2013.
2014
2015
2016
2017
2018
141,000
129,000
121,000
36,000
36,000
$
F-17
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 12 - COMMITMENTS AND CONTINGENCIES (continued)
Employment agreements
The Company has an Employment Agreement with Mark Meller, President and Chief Executive Officer of the Company, which began on
September 15, 2003, which was extended on September 1, 2010, and expires on September 15, 2017. As consideration, the Company
agreed to pay Mr. Meller the sum of $180,000 the first year with a 10% increase every year thereafter, as well as a monthly travel expense
allowance of $600 and an auto allowance of $800. Based on this agreement Mr. Meller’s salary is $466,874. As of December 31, 2013,
Mr. Meller agreed to accept a salary of $426,500 for 2013. The employment agreement with Mr. Meller also provides for a severance
payment to him 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 employment agreement.
NOTE 13 – STOCKHOLDERS’ EQUITY
Series A Convertible Preferred Stock
The Company issued 2 shares of Series A Convertible Preferred Stock (“Series A”), having the rights, preferences, privileges, powers
and restrictions set forth in the Certificate of Designation filed with the Secretary of State of Delaware. The Company has the right to
convert, at its sole option, each share of Series A into Class A Common Stock equal to 1% of the outstanding shares of Class A Common
Stock at the time of conversion. Each one share of Series A shall entitle the Series A Holder to voting rights equal to 2,666,667 votes of
Class A Common Stock. On January 12, 2012, the Series A Convertible Preferred Stock was converted into 2,385,650 shares of
Common Stock. As of December 31, 2013 and 2012, no shares of Series A Convertible Preferred Stock were outstanding.
Series B Preferred Stock
The Series B Preferred Stock, par value $1.00 per share, has the rights, privileges, preferences and restrictions set for in the Certificate of
Designation (the “Certificate of Designation”) filed by the Corporation with the Secretary of State of the State of Delaware (“Delaware
Secretary of State”) on September 23, 2011.
The one (1) share of the Series B Preferred shall have voting rights equal to (x) the total issued and outstanding Common Stock and
preferred stock eligible to vote at the time of the respective vote divided by (y) forty nine one-hundredths (0.49) minus (z) the total issued
and outstanding Common Stock and preferred stock eligible to vote at the time of the respective vote. For the avoidance of doubt, if the
total issued and outstanding Common Stock eligible to vote at the time of the respective vote is 5,000,000, the voting rights of the Series
B Preferred Stock shall be equal to 5,204,082 (e.g. (5,000,000 / 0.49) – 5,000,000 = 5,204,082).
F-18
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 13 – STOCKHOLDERS’ EQUITY (continued)
Common Stock
The Company is authorized to issue 750,000,000 shares of common stock, par value $.00001 per share. At December 31, 2013 and
December 31, 2012, there were 117,676,976 and 116,950,933 common shares issued and outstanding, respectively.
NOTE 14 - STOCK OPTIONS AND WARRANTS
2004 Stock Incentive Plan
The Company adopted the 2004 Stock Incentive as amended Plan (the “2004 Plan”) which reserves for issuance up to 3,482,000 shares
of the Company’s Common Stock in order to attract and retain qualified employees, directors, independent contractors or agents of the
Company. Under the Plan, the Board of Directors (the “Board”), in its discretion may grant stock options (including non-statutory stock
options and incentive stock options qualifying under Section 422 of the Code), stock appreciation rights (including free-standing, tandem
and limited stock appreciation rights), warrants, dividend equivalents, stock awards, restricted stock, phantom stock, performance shares
or other securities or rights that the Board determines to be consistent with the objectives and limitations of the plan at a price to be equal
to or greater than 50% of the fair market value of such shares on the date of grant of such award. The Board may determine that all or a
portion of a payment to a participant under the Plan, whether it is to be made in cash, shares of the Company common stock or a
combination thereof, shall be vested at such times and upon such terms as may be selected by it in its sole discretion. The Plan (but not the
awards theretofore granted under the Plan) shall terminate on and no awards shall be granted after September 29, 2014.
2007 Consultant Stock Incentive Plan
The Company adopted the 2007 Consultant Stock Incentive Plan (the “2007 Plan”) to: (i) provide long-term incentives, payment in
stock in lieu of cash and rewards to consultants, advisors, attorneys, independent contractors or agents ("Eligible Participants") of the
Company; (ii) assist the Company in attracting and retaining independent contractors or agents with experience and/or ability on a basis
competitive with industry practices; and (iii) associate the interests of such independent contractors or agents with those of the
Company's stockholders. The Company has reserved 581,800 shares for issuance under this plan. Awards under the Plan may include,
but need not be limited to, stock options (including non-statutory stock options and incentive stock options qualifying under Section 422
of the Code), stock appreciation rights (including free-standing, tandem and limited stock appreciation rights), warrants, dividend
equivalents, stock awards, restricted stock, phantom stock, performance shares or other securities or rights that the Board determines to
be consistent with the objectives and limitations of the Plan. The price shall be equal to or greater than 50% of the fair market value of
such shares on the date of grant of such award. The Board shall determine the extent to which awards shall be payable in cash, shares of
the Company common stock or any combination thereof. The Board may determine that all or a portion of a payment to a participant
under the Plan, whether it is to be made in cash, shares of the Company common stock or a combination thereof shall be
deferred. Deferrals shall be for such periods and upon such terms as the Board may determine in its sole discretion. The Plan (but not
the awards theretofore granted under the Plan) shall terminate on and no awards shall be granted after January 22, 2017.
2004 Directors’ and Officers’ Stock Incentive Plan
The Company adopted the 2004 Directors’ and Officers’ Stock Incentive Plan (the “2004 D&O Plan”) which reserves for issuance up
to 165,600 shares of the Company’s Common Stock in order to provide long-term incentive and rewards to officers and directors of the
Company and subsidiaries and to attract and retain qualified employees, directors, independent contractors or agents of the
Company. Awards under the Plan may include, but need not be limited to, stock options (including non-statutory stock options and
incentive stock options qualifying under Section 422 of the Code), stock appreciation rights (including free-standing, tandem and limited
stock appreciation rights), warrants, dividend equivalents, stock awards, restricted stock, phantom stock, performance shares or other
securities or rights that the Board determines to be consistent with the objectives and limitations of the Plan. The price shall be equal to
or greater than 50% of the fair market value of such shares on the date of grant of such award. The Board shall determine the extent to
which awards shall be payable in cash, shares of the Company common stock or any combination thereof. The Board may determine
that all or a portion of a payment to a participant under the Plan, whether it is to be made in cash, shares of the Company common stock
or a combination thereof shall be deferred. Deferrals shall be for such periods and upon such terms as the Board may determine in its
sole discretion. The Plan (but not the awards theretofore granted under the Plan) shall terminate on and no awards shall be granted after
September 29, 2014.
F-19
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 14 - STOCK OPTIONS AND WARRANTS (continued)
In May 2012, the Company issued approximately 2,875,000 common stock options from the 2004 Stock Incentive Plan with a weighted
average exercise price of $0.16 and an expected life of 5 years. Approximately, 2,257,000 of the common stock options vest
immediately. The remaining 618,000 options shall vest 50% at grant date with the balance vested ratably over a three-year period.
The Company estimated
the Black Scholes option-pricing
model. Compensation cost is recognized on a straight-line basis over the vesting period and, as such, the Company recorded
compensation expense of approximately $17,616 and $416,991 for the years ended December 31, 2013 and 2012, respectively.
the options at approximately $460,000 using
the value of
The weighted average inputs into the Black Scholes were as follows:
1. Expected dividend yield of 0.0%,
2. Risk-free interest rate of 0.86%
3. Expected Volatility at 298%
4. Expected term of 5 years
5. Exercise price of $0.16
The Company uses judgment in estimating the amount of stock-based awards that are expected to be forfeited. If actual forfeitures differ
significantly from the original estimate, stock-based compensation expense and the results of operations could be impacted.
A summary of the status of the Company’s stock option plans for the fiscal years ended December 31, 2013 and 2012 and changes
during the years are presented below: (in number of options):
Average
Remaining
Contractual
Term
5.0 years
Aggregate
Intrinsic
Value
0.00
0.16
0.00
0.00
0.16
4.4 years
$
-0-
Number of
Options
Average
Exercise Price
0 $
2,874,710 $
0 $
0 $
2,874,710 $
-
-
(201,234 )
2,673,476
0.16
3.4 years
$
2,551,327 $
2,544,118 $
0.16
0.16
3.4 years
4.4 years
$
$
-0-
-0-
-0-
Outstanding options at January
1, 2012
Options granted
Options exercised
Options canceled/forfeited
options
Outstanding
December 31, 2012
Options granted
Options exercised
Options canceled/forfeited
Outstanding
December 31, 2013
options
at
at
Vested Options:
December 31, 2013:
December 31, 2012:
For the years ended December 31, 2013 and 2012, the unamortized compensation expense for stock options was $21,000 and $43,000,
respectively. Unamortized compensation expense is expected to be recognized over a weighted-average period of 2 years.
Options immediately vest upon grant or 50% upon grant with the remaining 50% vested evenly over the next three years on the
anniversary date after the year of grant.
Warrants Outstanding
During 2013 the Company issued 250,000 warrants for services with a fair value of approximately $29,000, which immediately vested.
The estimated fair value of the warrant has been calculated based on a Black-Scholes pricing model using the following assumptions: a)
fair market value of stock of $0.12; b) exercise price of $0.12; c) Dividend yield of 0%; d) Risk free interest rate of 0.27%; e) expected
volatility of 278.17%; f) Expected life of 2 years.
F-20
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 14 - STOCK OPTIONS AND WARRANTS (continued)
Warrants Outstanding (continued)
During 2012 the Company issued 750,000 warrants for services with a fair value of approximately $105,000. The estimated fair value of
the warrant has been calculated based on a Black-Scholes pricing model using the following assumptions: a) fair market value of stock of
$0.03-$0.20; b) exercise price of $0.02-$0.04; c) Dividend yield of 0%; d) Risk free interest rate of 0.25%- 0.33%; e) expected volatility
of 280.02%-296.79%; f) Expected life of 2 years.
Unexpired warrants outstanding are as follows as of December 31, 2013:
Expiration Date
July 1, 2014
October 1, 2014
January 1, 2015
The following table summarizes the warrants transactions:
Balance, January 1, 2012
Granted
Exercised
Canceled
Balance, December 31, 2012
Granted
Exercised
Canceled
Balance, December 31, 2013
Outstanding and Exercisable,
December 31, 2013
Outstanding and Exercisable,
December 31, 2012
F-21
Exercise Price
Shares
$
$
$
0.20
0.20
0.12
250,000
250.000
250,000
Warrants
Outstanding
Weighted
Average
Exercise Price
554,000 $
750,000 $
- $
553,960 $
750,040 $
250,000 $
250,000 $
40 $
750,000 $
.2711
.1433
.0000
.2618
.1500
.1200
.0300
126.7700
.1733
750,000 $
.1733
750,040 $
.1500
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, Mark Meller, certify that:
1.
2.
3.
4.
I have reviewed this Form 10-K of SilverSun Technologies, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13-a-15(f) and 15d-15(f)) for the registrant and have:
a)
b)
c)
d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
a)
b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: March 31, 2014
By: /s/ Mark Meller
Mark Meller
Principal Financial Officer
SilverSun Technologies, Inc.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with this Annual Report of SilverSun Technologies, Inc. (the “Company”), on Form 10-K for the fiscal year ended December 31,
2013, as filed with the U.S. Securities and Exchange Commission on the date hereof, I, Mark Meller, Principal Executive Officer of the
Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of
2002, that:
(1) Such Annual Report on Form 10-K for the fiscal year ended December 31, 2013, fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in such Annual Report on Form 10-K for the fiscal year ended December 31, 2013, fairly presents, in all
material respects, the financial condition and results of operations of the Company.
Date: March 31, 2014
By: /s/ Mark Meller
Mark Meller
Principal Executive Officer
SilverSun Technologies, Inc.