UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2017
or
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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.)
120 Eagle Rock Ave
East Hanover, NJ 07936
(Address of principal executive offices)
(973) 396-1720
(Registrant’s telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Stock, par value $0.00001 per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and
(2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Website, 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 ☒ No ☐
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 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 large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See definition of “large accelerated filer,” accelerated filer” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer ☐
Non-accelerated filer ☐
Emerging growth company ☐
Accelerated filer ☐
Smaller Reporting Company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant on June 30, 2017 based
on a closing price of $3.90 was $5,476,587. As of March 23, 2018, the registrant had 4,495,728 shares of its common stock, par value
$0.00001 per share, outstanding.
Documents Incorporated By Reference: None.
PART I
TABLE OF CONTENTS
Page No.
Business
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4. Mine Safety Disclosures
Properties
Legal Proceedings
PART II
Selected Financial Data
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Item 9A. Controls and Procedures
Item 9B. Other Information
Financial Statements and Supplementary Data
Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accounting Fees and Services
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
PART IV
Item 15. Exhibits, Financial Statements Schedules
SIGNATURES
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Included in this Annual Report on Form 10-K are “forward-looking” statements, as well as historical information. Although we believe
that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that the expectations reflected in
these forward-looking statements will prove to be correct. Our actual results could differ materially from those anticipated in forward-
looking statements as a result of certain factors, including matters described in the section titled “Risk Factors.” Forward-looking
statements include those that use forward-looking terminology, such as the words “anticipate,” “believe,” “estimate,” “expect,” “intend,”
“may,” “project,” “plan,” “will,” “shall,” “should,” and similar expressions, including when used in the negative. Although we believe that
the expectations reflected in these forward-looking statements are reasonable and achievable, these statements involve risks and
uncertainties and we cannot assure you that actual results will be consistent with these forward-looking statements. We undertake no
obligation to update or revise these forward-looking statements, whether to reflect events or circumstances after the date initially filed or
published, to reflect the occurrence of unanticipated events or otherwise.
Table of Contents
Item 1. Business Overview
PART I
We are a business application, technology and consulting company providing strategies and solutions to meet our clients’ information,
technology and business management needs. Our services and technologies enable customers to manage, protect and monetize their
enterprise assets whether on-premise or in the “Cloud”. As a value-added reseller of business application software, we offer solutions for
accounting and business management, financial reporting, Enterprise Resource Planning (“ERP”), Warehouse Management Systems
(“WMS”), Customer Relationship Management (“CRM”), and Business Intelligence (“BI”). Additionally, we have our own development
staff building software solutions for Electronic Data Interchange (“EDI”), time and billing, and various ERP enhancements. Our value-
added services focus on consulting and professional services, specialized programming, training, and technical support. We have a
dedicated network services practice that provides managed services, hosting, business continuity, cloud, email and web services. Our
customers are nationwide, with concentrations in the New York/New Jersey metropolitan area, Chicago, Arizona, Southern California,
North Carolina and Washington.
Our core business is divided into the following practice areas:
ERP (Enterprise Resource Management) and Accounting Software
We are a value-added reseller for a number of industry-leading ERP applications. We are a Sage Software Authorized Business Partner
and Sage Certified Gold Development Partner. We believe we are among the largest Sage ERP X3 partners in North America, with a
sales and implementation presence complemented by a scalable software development practice for customizations and enhancements. Due
to the growing demand for true cloud-based ERP solutions, we have added two (2) industry leading applications to our ERP portfolio: (1)
NetSuite ERP, among the world’s leading cloud ERP solutions; and (2) Acumatica, a browser-based ERP solution that can be offered on
premise, in the public cloud, or in a private cloud. We develop and resell a variety of add-on solutions to all our ERP and accounting
packages that help customize the installation to our customers’ needs and streamline their operations.
Value-Added Services for ERP
We go beyond simply reselling software packages; we have a consulting and professional services organization that manages the process
as we move from the sales stage into implementation, go live, and production. We work inside our customers’ organizations to ensure all
software and Information Technology (“IT”) solutions are enhancing their business needs. A significant portion of our services revenue
comes from continuing to work with existing customers as their business needs change, upgrading from one version of software to
another, or providing additional software solutions to help them grow their revenue. We have a dedicated help desk team that fields
hundreds of calls every week. Our custom programming department builds specialized software packages as well as “off the shelf”
enhancements and time and billing software.
EDI (Electronic Data Interchange) Software and Services
EDI is the computer to computer exchange of standard business documents, such as purchase orders and invoices, in electronic format. A
standard file format is established for each kind of document in order to facilitate the exchange of data across a variety of platforms and
programs. We have a proprietary software solution, MAPADOC, which is fully integrated with the Sage ERPs. MAPADOC allows
businesses to dramatically cut data entry time by eliminating duplicate entries and reduces costly errors with trading partners.
MAPADOC is the only EDI solution that is built within the framework of the Sage ERPs, allowing customers to stay within one
application to get their job done.
Network and Managed Services
We provide comprehensive network and managed services designed to eliminate the IT concerns of our customers. Businesses can focus
on their core strengths rather than technology issues. We adapt our solutions for virtually any type of business, from large national and
international product and service providers, to small businesses with local customers. Our business continuity services provide automatic
on and off-site backups, complete encryption, and automatic failure testing. We also provide email and web security, IT consulting,
managed network, and emergency IT services. Our focus in the network and managed services practice is to focus on industry verticals in
order to demonstrate our ability to better understand our customers’ needs.
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Industry Overview
As a value-added reseller of business application software, we offer solutions for accounting and business management, financial
reporting, managed services, ERP, WMS, CRM, and BI. Additionally, we have our own development staff building software solutions
for EDI, time and billing, and various ERP enhancements. Our value-added services focus on consulting and professional services,
specialized programming, training, and technical support. The majority of our customers are small and medium businesses (“SMBs”).
Potential Competitive Strengths
•
•
•
•
Independent Software Vendor. As an independent software vendor we have published integrations between ERPs and third-
party products which differentiates us from other business application providers because, as a value-added reseller of the ERPs
that our proprietary products integrate with, we have specific software solution expertise in the ERPs we resell, which affords
us the opportunity to ensure that our proprietary products tightly integrate with the ERPs. We own the intellectual property
related to these integrations, and sell the solutions both directly and through other software resellers within the Sage network.
Sage Certified Gold Development Partner. As a Sage Certified Gold Development Partner, we are licensed to customize the
source code of the Sage ERPs. Very few resellers are master developers, and in fact, we provide custom programming services
for many other resellers. We have full-time programmers on staff, which provides us with a depth and breadth of expertise that
we believe very few competitors can match.
Experienced Leadership. We have a senior management team which in the aggregate has greater than 60 years of experience
across a broad range of disciplines.
Ability to Recruit, Manage and Retain Quality Personnel. We have a track record of recruiting, managing and retaining
skilled labor and our ability to do so represents an important advantage in an industry in which a shortage of skilled labor is
often a key limitation for both clients and competitors alike. We recruit skilled labor from competitors and from amongst end
users with experience using the various products we sell, whom we then train as consultants. We believe our ability to hire,
manage and maintain skilled labor gives an edge over our competitors as we continue to grow.
• Combination of Hardware/Software Expertise. Many competitors have software solution expertise. Others have
network/hardware expertise. We believe we are among the very few organizations with an expertise in both software and
hardware, affording us the opportunity to provide turnkey solutions for our customers without the need to bring in additional
vendors on a project.
•
Technical Expertise. Our geographical reach and substantial technical capabilities afford our clients the ability to customize
and tailor solutions to satisfy all of their business needs.
Our Growth Strategy
General
Our strategy is to grow our business through a combination of intra-company growth of our software applications, technology solutions
and managed services, as well as expansion through acquisitions, both within our existing geographic reach and through geographic
expansion. We have established a national presence via our internal marketing, sales programs, and acquisitions and now have ERP
customers and MAPADOC customers throughout most of the United States.
Intra-Company Growth
Our intra-company growth strategy is to increase our market penetration and client retention through the upgrade of, and expanded sales
efforts with, our existing products and managed services and development of new and enhanced software and technology solutions. Our
client retention is sustained by our providing responsive, ongoing software and technical support and monitoring and maintenance
services for both the solutions we sell and other client technology needs we provide.
Repeat business from our existing customer base has been key to our success and we expect it will continue to play a vital role in our
growth. We focus on nurturing long-standing relationships with existing customers while also establishing relationships with new
customers.
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Acquisitions
The markets in which we provide our services are occupied by a large number of competitors, many substantially larger than us, and with
significantly greater resources and geographic reach. We believe that to remain competitive, we need to take advantage of acquisition
opportunities that arise which may help us achieve greater geographic presence and economies both within our existing footprint and
expanded territories. As such, we have completed twelve (12) acquisitions and/or collaborative agreements in the past sixty (60) months.
We may also utilize acquisitions, whenever appropriate, to expand our technological capabilities and product offerings. We focus on
acquisitions that are profitable and fit seamlessly with our existing operations.
We believe our markets contain a number of attractive acquisition candidates. We foresee expanding through acquisitions of one or more
of the following types of software and technology organizations:
• Managed Service Providers (“MSPs”). MSPs provide their small and medium-sized business clients with a suite of
services, which may include 24/7/365 remote monitoring of networks, disaster recovery, business continuity, data back-up, cyber-
security and the like. There are hundreds of providers of such services in the U.S., most with annual recurring revenue of less than
$10 million. We believe that we may be able to consolidate a number of these MSPs with our existing operation in an effort to
become one of the more significant providers of these services in the U.S.
• Independent Software Vendors (“ISVs”) . ISVs are publishers of both stand-alone software solutions and integrations that
integrate with other third party products. Our interest lies with ISVs selling into the small and medium-sized business
marketplace, providing applications addressing e-commerce, mobility, security, and other functionalities. Since we have expertise
in both selling directly to end-users and selling through a sales channel, we believe we can significantly enhance the sales volume
of any potential acquisition via our existing infrastructure, our sales channel, and our internal marketing programs. There are
many ISVs in North America, constituting a large and significant target base for our acquisition efforts.
• Value-Added Resellers (“VARs”) of ERP, Warehouse Management Systems (“WMS”), CRM and BI Software . Of the
hundreds of VARs in the Sage Software sales channel, we believe we are one of the top based on our 2017 revenue. VARs gross
margins are a function of the sales volume they provide a publisher in a twelve (12) month period, and we are currently operating
at the highest margins. Smaller resellers, who sell less and operate at significantly lower margins, are at a competitive
disadvantage to companies such as ours, and are often amenable to creating a liquidity event for themselves by selling to larger
organizations. We have benefitted from completing such acquisitions in a number of ways, including but not limited to: (i)
garnering new customers to whom we can upsell and cross-sell our broad range of products and services; (ii) gaining technical
resources that enhance our capabilities; and (iii) extending our geographic reach.
Our business strategy provides that we will examine the potential acquisition of businesses within our industry. In determining a suitable
acquisition candidate, we will carefully analyze a target’s potential to add to and complement our product mix, expand our existing
revenue base, improve our margins, expand our geographic coverage, strengthen our management team, add technical resources and
expertise, and, above all, improve stockholder returns. More specifically, we have identified the criteria listed below, by which we
evaluate potential acquisition targets in an effort to gain the synergies necessary for successful growth of the Company:
• Access to new customers and geographic markets;
• Recurring revenue of the target;
• Opportunity to gain operating leverage and increased profit margins;
• Diversification of sales by customer and/or product;
• Improvements in product/service offerings; and
• Ability to attract public capital and increased investor interest.
We are unable to predict the nature, size or timing of any acquisition. We can give no assurance that we will reach agreement or procure
the financial resources necessary to fund any acquisition, or that we will be able to successfully integrate or improve returns as a result of
any such acquisition.
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We continue to seek out and hold preliminary discussions with various acquisition candidates. However, currently we have not entered
into any agreements or understandings for any acquisitions that management deems material.
Electronic Data Interchange Software Strategy
Our strategy for our proprietary EDI software, including specifically “MAPADOC” is to continue to achieve market penetration with new
customers within our existing and expanding footprint and increase sales of new modules and enhanced functionality to our existing
customer base. To remain competitive, we must periodically upgrade our software to the platform most commonly requested by the
market. We must also continue our focus on enhancing applications through the addition of new functionality. Towards that end, we are
exploring the development of a cloud offering or Software-as-a-Service model for MAPADOC.
Enterprise Resource Planning Software Strategy
Our ERP software strategy is focused on serving the needs of our expansive installed base of customers for our Sage 100 ERP, Sage 500
ERP, and Sage BusinessWorks practices, while rapidly growing the number of customers using Sage ERP X3, NetSuite, and Acumatica.
We currently have approximately 3,000 active ERP customers using one of these six solutions, including customers using certain add-on
support products to these solutions. In the past we, have focused primarily on on-premise mid-market Sage Software solutions but in the
past three years have shifted our focus to the more enterprise-level Sage ERP X3 offering, as well as diversifying into cloud ERP
solutions. This has allowed us to increase our average deal size significantly and also to keep pace with the changing trends that we see in
the industry.
Managed Services Strategy
The Managed Services market is broadly segmented by types of services as such, for example managed data-center, managed network,
managed mobility, managed infrastructure, managed communications, managed information, managed security and other managed
services. In addition, the market is segmented by market verticals, such as public sector, banking, financial services and insurance,
education, retail, contact centers and service industries, high tech and telecommunications, healthcare and pharmaceuticals, travel and
logistics, manufacturing, energy and utilities among others.
The recent trend in the industry shows that there is a high demand for managed services across every industry vertical. The
implementation of managed services reduces IT costs by 30% to 40% in such enterprises. This enables organizations to have flexibility
and technical advantage. Enterprises having their services outsourced look forward to risk sharing and to reduce their IT costs and IT
commitments, so that they are able to concentrate on their core competencies. Organizations implementing managed services have
reported almost a 50% to 60% increase in the operational efficiency of their outsourced processes. Enterprises have accepted outsourcing
services as a means to enable them to reduce their capital expenditure (CapEx) and free up internal sources. Newer managed services that
penetrate almost all the industry domains, along with aggressive pricing in services, are being offered. This results in an increase in the
overall revenues of the managed services market. It is observed that there is an increase in outsourcing of wireless, communications,
mobility and other value-added services, such as content and e-commerce facilities. With increasing technological advancements and the
cost challenges associated with having the IT services in-house, we believe the future seems optimistic for managed services providers.
Our strategy is to continue to expand our product offerings to the small and medium sized business marketplace, and to increase our scale
and capabilities via acquisition throughout the United States, but initially in those regions where we currently have existing offices.
Geographic Expansion
Generally, our technology offerings require on-premise implementation and support. When we expand into new geographic territories, we
prefer to find qualified personnel in an area to augment our current staff of consultants to service our business. The need for hands-on
implementation and support may also require investment in additional physical offices and other overhead. We believe our approach is
conservative.
We may accelerate expansion if we find complementary businesses that we are able to acquire in other regions. Our marketing efforts to
expand into new territories have included attendance at trade shows in addition to personal contact.
Our Products and Services
Enterprise Resource Planning Software
Substantially all our initial sales of ERP financial accounting solutions consist of pre-packaged software and associated services to
customers in the United States.
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The Company resells ERP software published by Sage Software and other providers for the financial accounting requirements of small-
and medium-sized businesses focused on manufacturing and distribution, and the delivery of related services from the sales of these
products, including installation, support and training. The programs perform and support a wide variety of functions related to accounting,
including financial reporting, accounts payable and accounts receivable, and inventory management.
We provide a variety of services along with our financial accounting software sales to assist our customers in maximizing the benefits
from these software applications. These services include training, technical support, and professional services. We employ class
instructors and have formal, specific training in the topics they are teaching. We can also provide on-site training services that are highly
tailored to meet the needs of a particular customer. Our instructors must pass annual subject-matter examinations required by Sage to
retain their product-based teaching certifications.
We provide end-user technical support services through our support/help desk. Our product and technology consultants assist customers
calling with questions about product features, functions, usability issues, and configurations. The support/help desk offers services in a
variety of ways, including prepaid services, time and materials billed as utilized and annual support contracts. Customers can
communicate with the support/help desk through e-mail, telephone, and fax channels. Standard support/help desk services are offered
during normal business hours five (5) days per week.
Electronic Data Interchange 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
ERP/Sage 500 ERP/Sage 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 Accellos Warehouse Management System software published by High Jump, Inc. (“High Jump”). High Jump
develops warehouse management software for mid-market distributors. The primary purpose of a WMS is to control the movement and
storage of materials within an operation and process the associated transactions. Directed picking, directed replenishment, and directed
put-away are the key to WMS. The detailed setup and processing within a WMS can vary significantly from one software vendor to
another. However, the basic WMS will use a combination of item, location, quantity, unit of measure, and order information to determine
where to stock, where to pick, and in what sequence to perform these operations.
The Accellos WMS software improves accuracy and efficiency, streamlines materials handling, meets retail compliance requirements,
and refines inventory control. Accellos also works as part of a complete operational solution by integrating seamlessly with radio
frequency hardware, accounting software, shipping systems and warehouse automation equipment.
We market the Accellos solution to our existing and new medium-sized business customers.
Managed 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.
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Product Development
We are continually looking to improve and develop new products. Our product initiatives include various new product offerings, which
are either extensions of existing products or newly conceptualized product offerings including, but not limited to:
• Time and Billing Exact (TBX)
• SPS RSX Connector
• MAPADOC Express
• Fusion X3 Integration
• Accellos X3 Integration
We are using a dual-shore development approach to keep product development costs at a minimum. All our product development is led
by U.S. based employees. The project leaders are technical resources who are involved in developing technical specifications, design
decisions, usability testing, and transferring the project knowledge to our offshore development team. Several times per week, the product
development leadership team meets with our project leaders and development teams to discuss project status, development obstacles, and
project timelines.
Arrangements with Principal Suppliers
Our revenues are primarily derived from the resale of vendor software products and services. These resales are made pursuant to channel
sales agreements whereby we are granted authority to purchase and resell the vendor products and services. Under these agreements, we
either resell software directly to our customers or act as a sales agent for various vendors and receive commissions for our sales efforts.
We are required to enter into an annual Channel Partner Agreement with Sage Software whereby Sage Software appoints us as a non-
exclusive partner to market, distribute, and support Sage 100 ERP, Sage 500 ERP and Sage ERP X3. The Channel Partner Agreement is
for a one-year term, and automatically renews for an additional one-year term on the anniversary of the agreement’s effective date. These
agreements authorize us to sell these software products to customers in the United States. There are no clauses in this agreement that limit
or restrict the services that we can offer to customers. We also operate a Sage Software Authorized Training Center Agreement and also
are party to a Master Developers Program License Agreement.
For the years ended December 31, 2017 and 2016, purchases from Sage Software were approximately 23% and 24%, respectively, of the
Company’s total cost of revenue. Generally, the Company does not rely on any one specific supplier for all its purchases and maintains
relationships with other suppliers that could replace its existing supplier should the need arise.
Customers
We market our products primarily throughout North America. For the years ended December 31, 2017 and 2016, our top ten (10)
customers accounted for 21% ($7,461,570) and 19% ($6,574,232), 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 two trademarks registered with the U.S. Patent and Trademark Office for “MAPADOC” and have two (2) trademark applications
pending. We have no patents or patent applications pending.
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Competition
Our markets are highly fragmented and the business is characterized by a large number of participants, including several large companies,
as well significant number of small, privately-held, local competitors. A significant portion of our revenue is currently derived from
requests for proposals (RFPs”) and price is often an important factor in awarding such agreements. Accordingly, our competitors may
underbid us if they elect to price their services aggressively to procure such business. Our competitors may also develop the expertise,
experience and resources to provide services that are equal or superior in both price and quality to our services, and we may not be able to
enhance our competitive position. The principal competitive factors for our professional services include geographic presence, breadth of
service offerings, technical skills, quality of service and industry reputation. We believe we compete favorably with our competitors on
the basis of these factors.
Employees
As of March 23, 2018, we had approximately 158 full time employees with 40 of our employees engaged in sales and marketing activities,
84 employees are engaged in service fulfillment, and 34 employees performing administrative functions.
Our future success depends in significant part upon the continued services of our key sales, technical, and senior management personnel
and our ability to attract and retain highly qualified sales, technical, and managerial personnel. None of our employees are represented by
a collective bargaining agreement and we have never experienced a work stoppage.
Our Corporate History
We were incorporated on October 3, 2002, as a wholly owned subsidiary of iVoice, Inc. (“iVoice”). On February 11, 2004, the Company
was spun off from iVoice and became an independent publicly traded company. On September 5, 2003, we changed our corporate name
to Trey Resources, Inc. In March 2004, Trey Resources, Inc. began trading on the OTCBB under the symbol TYRIA.OB. In June 2011,
we changed our name to SilverSun Technologies, Inc., trading under the symbol SSNT.
Prior to June 2004, we were engaged in the design, manufacture, and marketing of specialized telecommunication equipment. On June 2,
2004, our wholly-owned subsidiary, SWK Technologies, Inc. (“SWK”) completed its acquisition of SWK, Inc. Since the acquisition of
SWK, Inc. we have focused on three (3) core business sectors, including acting as the following: (i) a managed service provider for
computer networks, providing cybersecurity, 24/7 remote monitoring of networks, data backup, hosting, and business continuity and
disaster recovery services; (ii) a value added reseller and master developer for Sage Software’s Sage 100 ERP, Sage 500 ERP and Sage
ERP X3 enterprise resource planning (“ERP”) financial software; and (iii) publisher of its own proprietary software solutions and
integrations, including its Electronic Data Interchange (“EDI”) software, “MAPADOC.” We also publish twenty (20) other assorted
software solutions. We focus on the business application software and the information technology consulting market for small and
medium-sized businesses (“SMB’s”), selling services and products to various end users, manufacturers, wholesalers and distributors
located throughout the United States.
Our strategy is to grow our business through a combination of intra-company growth of our software applications and technology
solutions, as well as expansion through acquisitions, both within our existing geographic reach and through geographic expansion. To that
end, since 2006, we have completed a number of acquisitions that have increased our client base, technical expertise and geographic
footprint.
On June 2, 2006, SWK completed the acquisition of certain assets of AMP-Best Consulting, Inc. (“AMP”) of Syracuse, New York. AMP
is an information technology company and value added reseller of licensed ERP software published by Sage Software. AMP sold services
and products to various end users, manufacturers, wholesalers and distribution industry clients located throughout the United States, with
special emphasis on companies located in the upstate New York region.
During 2011, SWK acquired Sage’s Software’s customer accounts in connection with IncorTech, LLC (“IncorTech”), a Southern
California-based Sage business partner. This transaction increased our geographical influence in Southern California for the sale and
support of our MAPADOC integrated EDI solution and the marketing of our Sage ERP X3 to both former IncorTech customers as well as
new consumers. IncorTech had previously provided professional accounting, technology, and business consulting services to over 300
clients.
In June 2012, SWK acquired selected assets and obligations of Hightower, Inc., a Chicago-based reseller of Sage software applications. In
addition to the strategic geographic benefits that this acquisition brings to SWK, there is also a substantial suite of proprietary
enhancement software solutions.
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In May 2014, we completed the purchase of selected assets of ESC Software (“ESC”), a leading Arizona-based reseller of Sage Software
and Acumatica applications. Founded in 2000, ESC has implemented technology solutions at prominent companies throughout the
Southwest. In addition to the strategic benefits of this acquisition, it has given us additional annual revenues, approximately 300
additional Sage Software ERP customers and affords us market penetration in the Southwest.
On March 11, 2015 SWK entered into an Asset Purchase Agreement with 2000 SOFT, Inc. d/b/a Accounting Technology Resource
(“ATR”), a California corporation. In addition to the strategic geographic benefits of this acquisition, it has provided additional revenues
from the approximately 250 additional customers.
On July 6, 2015 SWK entered into an Asset Purchase Agreement with ProductiveTech, Inc. (“PTI”), a Southern New Jersey corporation.
In addition to the strategic geographic benefits of this acquisition, it has provided additional revenues from the approximately 85
additional customers.
On October 1, 2015, SWK entered into an Asset Purchase Agreement with The Macabe Associates, Inc., (“Macabe”) a Washington based
reseller of Sage Software and Acumatica applications. In addition to the strategic geographic benefits of this acquisition, it has provided
additional revenues from the approximately 180 additional customers.
On October 19, 2015, SWK entered into an Asset Purchase Agreement with Oates & Company, (“Oates”) a North Carolina reseller of
Sage Software applications. In addition to the strategic geographic benefits of this acquisition, it has provided additional revenues from
the approximately 185 additional customers.
Where You Can Find More Information
Our website address is www.silversuntech.com. We do not intend our website address to be an active link or to otherwise incorporate by
reference the contents of the website into this Report. The public may read and copy any materials the Company files with the U.S.
Securities and Exchange Commission (the “SEC”) at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549.
The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0030. The SEC
maintains an Internet website (http://www.sec.gov) that contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC.
Item 1A. Risk Factors.
Risks Relating to our Business
We have a large accumulated deficit, may incur future losses and may be unable to maintain profitability.
As of December 31, 2017, and December 31, 2016, we had an accumulated deficit of $7,692,242 and $7,205,773, respectively. As of
December 31, 2017, and December 31, 2016 we had stockholders’ equity of $4,227,121 and $4,970,916 respectively. We may incur net
losses in the future. Our ability to achieve and sustain long-term profitability is largely dependent on our ability to successfully market and
sell our products and services, control our costs, and effectively manage our growth. We cannot assure you that we will be able to
maintain profitability. In the event we fail to maintain profitability, our stock price could decline.
We cannot accurately forecast our future revenues and operating results, which may fluctuate.
Our operating history and the rapidly changing nature of the markets in which we compete make it difficult to accurately forecast our
revenues and operating results. Furthermore, we expect our revenues and operating results to fluctuate in the future due to a number of
factors, including the following:
·
·
·
·
·
·
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;
the mix of product license and services revenue; and
costs related to possible acquisitions of technology or businesses.
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We may fail to develop new products, or may incur unexpected expenses or delays.
Although we currently have fully developed products available for sale, we may need to develop various new technologies, products and
product features and to remain competitive. Due to the risks inherent in developing new products and technologies — limited financing,
loss of key personnel, and other factors — we may fail to develop these technologies and products, or may experience lengthy and costly
delays in doing so. Although we are able to license some of our technologies in their current stage of development, we cannot assure that
we will be able to develop new products or enhancements to our existing products in order to remain competitive.
We may need additional financing which we may not be able to obtain on acceptable terms. If we are unable to raise additional capital,
as needed, the future growth of our business and operations could be severely limited.
A limiting factor on our growth is our limited capitalization, which could impact our ability to execute on our business plan. If we raise
additional capital through the issuance of debt, this will result in increased interest expense. If we raise additional funds through the
issuance of equity or convertible debt securities, the percentage ownership of the Company held by existing shareholders will be reduced
and our shareholders may experience significant dilution. In addition, new securities may contain rights, preferences or privileges that are
senior to those of our Common Stock. If additional funds are raised by the issuance of debt or other equity instruments, we may become
subject to certain operational limitations (for example, negative operating covenants). There can be no assurance that acceptable financing
necessary to further implement our business plan can be obtained on suitable terms, if at all. Our ability to develop our business, fund
expansion, develop or enhance products or respond to competitive pressures, could suffer if we are unable to raise the additional funds on
acceptable terms, which would have the effect of limiting our ability to increase our revenues or possibly attain profitable operations in
the future.
If we fail to establish and maintain an effective system of internal control, we may not be able to report our financial results accurately
or to reduce probability of fraud occurrence. Any inability to report and file our financial results accurately and timely could harm our
reputation and adversely impact the trading price of our Common Stock.
Effective internal control is necessary for us to provide reliable financial reports and prevent fraud. We may not be able to manage our
business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be
harmed.
Management has concluded that the Company did maintain effective internal control over financial reporting as of December 31, 2017,
based on the criteria set forth in 2013 Internal Control—Integrated Framework issued by the COSO.
We may fail to recruit and retain qualified personnel.
We expect to rapidly expand our operations and grow our sales, development and administrative operations. Accordingly, recruiting and
retaining such personnel in the future will be critical to our success. There is intense competition from other companies for qualified
personnel in the areas of our activities, particularly sales, marketing and managed services. If we fail to identify, attract, retain and
motivate these highly skilled personnel, we may be unable to continue our marketing and managed services activities and service our
clients’ needs, and this could have a material adverse effect on the Company’s business, financial condition, results of operations and
future prospects.
If our technologies and products contain defects or otherwise do not work as expected, we may incur significant expenses in
attempting to correct these defects or in defending lawsuits over any such defects.
Software products are not currently accurate in every instance, and may never be. Furthermore, we could inadvertently release products
and technologies that contain defects. In addition, third-party technology that we include in our products could contain defects. We may
incur significant expenses to correct such defects. Clients who are not satisfied with our products or services could bring claims against us
for substantial damages. Such claims could cause us to incur significant legal expenses and, if successful, could result in the plaintiffs
being awarded significant damages. Our payment of any such expenses or damages could prevent us from becoming profitable.
Our success is highly dependent upon our ability to compete against competitors that have significantly greater resources than we
have.
The ERP software, EDI software, MSP and business consulting industries are highly competitive, and we believe that this competition
will intensify. Many of our competitors have longer operating histories, significantly greater financial, technical, product development
and marketing resources, greater name recognition and larger client bases than we do. Our competitors could use these resources to
market or develop products or services that are more effective or less costly than any or all of our products or services or that could render
any or all of our products or services obsolete. Our competitors could also use their economic strength to influence the market to continue
to buy their existing products.
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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.
Our failure to secure trademark registrations could adversely affect our ability to market our product candidates and our business.
Our trademark applications in the United States and any other jurisdictions where we may file may be denied, and we may not be able to
maintain or enforce our registered trademarks. During trademark registration proceedings, we may receive rejections. Although we are
given an opportunity to respond to those rejections, we may be unable to overcome such rejections. In addition, with respect to the United
States Patent and Trademark Office and any corresponding foreign agencies, third parties are given an opportunity to oppose pending
trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our
applications and/or registrations, and our applications and/or registrations may not survive such proceedings. Failure to secure such
trademark registrations in the United States and in foreign jurisdictions could adversely affect our ability to market our product candidates
and our business.
We may unintentionally infringe on the proprietary rights of others.
Many lawsuits currently are being brought in the software industry alleging violation of intellectual property rights. Although we do not
believe that we are infringing on any patent rights, patent holders may claim that we are doing so. Any such claim would likely be time-
consuming and expensive to defend, particularly if we are unsuccessful, and could prevent us from selling our products or services. In
addition, we may also be forced to enter into costly and burdensome royalty and licensing agreements.
Our industry is characterized by rapid technological change and failure to adapt our product development to these changes may cause
our products to become obsolete.
We participate in a highly dynamic industry characterized by rapid change and uncertainty relating to new and emerging technologies and
markets. Future technology or market changes may cause some of our products to become obsolete more quickly than expected.
The trend toward consolidation in our industry may impede our ability to compete effectively.
As consolidation in the software industry continues, fewer companies dominate particular markets, changing the nature of the market and
potentially providing consumers with fewer choices. Also, many of these companies offer a broader range of products than us, ranging
from desktop to enterprise solutions. We may not be able to compete effectively against these competitors. Furthermore, we may use
strategic acquisitions, as necessary, to acquire technology, people and products for our overall product strategy. The trend toward
consolidation in our industry may result in increased competition in acquiring these technologies, people or products, resulting in
increased acquisition costs or the inability to acquire the desired technologies, people or products. Any of these changes may have a
significant adverse effect on our future revenues and operating results.
We face intense price-based competition for licensing of our products which could reduce profit margins.
Price competition is often intense in the software market. Price competition may continue to increase and become even more significant in
the future, resulting in reduced profit margins.
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The software and technology industry is highly competitive. If we cannot develop and market desirable products that the public is
willing to purchase, we will not be able to compete successfully. Our business may be adversely affected and we may not be able to
generate any revenues.
We have many potential competitors in the software industry. We consider the competition to be competent, experienced, and may have
greater financial and marketing resources than we do. Our ability to compete effectively may be adversely affected by the ability of these
competitors to devote greater resources to the development, sales, and marketing of their products than are available to us. Some of the
Company’s competitors, also, offer a wider range of software products, have greater name recognition and more extensive customer bases
than the Company. These competitors may be able to respond more quickly to new or changing opportunities, customer desires, as well as
undertake more extensive promotional activities, offer terms that are more attractive to customers and adopt more aggressive pricing
policies than the Company. We cannot provide any assurances that we will be able to compete successfully against present or future
competitors or that the competitive pressure we may encounter will not force us to cease operations.
If there are events or circumstances affecting the reliability or security of the internet, access to our website and/or the ability to
safeguard confidential information could be impaired causing a negative effect on the financial results of our business operations.
Despite the implementation of security measures, our website infrastructure may be vulnerable to computer viruses, hacking or similar
disruptive problems caused by members, other internet users, other connected internet sites, and the interconnecting telecommunications
networks. Such problems caused by third-parties could lead to interruptions, delays or cessation of service to our customers. Inappropriate
use of the internet by third-parties could also potentially jeopardize the security of confidential information stored in our computer system,
which may deter individuals from becoming customers. Such inappropriate use of the internet includes attempting to gain unauthorized
access to information or systems, which is commonly known as “cracking” or “hacking.” Although we have implemented security
measures, such measures have been circumvented in the past by hackers on other websites on the internet, although our networks have
never been breached, and there can be no assurance that any measures we implement would not be circumvented in future. Dealing with
problems caused by computer viruses or other inappropriate uses or security breaches may require interruptions, delays or cessation of
service to our customers, which could have a material adverse effect on our business, financial condition and results of operations.
If we lose the services of any of our key personnel our business may suffer.
We are dependent on Mark Meller, our Chief Executive Officer and other key employees in our operating subsidiary SWK. The loss of
any of our key personnel could materially harm our business because of the cost and time necessary to retain and train a
replacement. Such a loss would also divert management attention away from operational issues.
To service our debt obligations, we will require a significant amount of cash. Our ability to generate cash depends on many factors
beyond our control. Any failure to repay our outstanding indebtedness as it matures, could materially adversely impact our business,
prospects, financial condition, liquidity, results of operations and cash flows.
Our ability to satisfy our debt obligations and repay or refinance our maturing indebtedness will depend principally upon our future
operating performance.
As a result, prevailing economic conditions and financial, business, legislative, regulatory and other factors, many of which are beyond
our control, will affect our ability to make payments on our debt and comply with the covenants of the line of credit. If we do not generate
sufficient cash flow from operations to satisfy our debt service obligations, we may have to undertake alternative financing plans, such as
refinancing or restructuring our debt, incurring additional debt, issuing equity or convertible securities, utilizing our line of credit,
reducing discretionary expenditures and selling certain assets (or combinations thereof). Our ability to execute such alternative financing
plans will depend on the capital markets and our financial condition at such time. In addition, our ability to execute such alternative
financing plans may be subject to certain restrictions under our existing indebtedness, including our revolving credit facility and our term
loan. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants compared
to those associated with any debt that is being refinanced, which could further restrict our business operations. Our inability to generate
sufficient cash flow to satisfy our debt obligations, or our inability to refinance our debt obligations on commercially reasonable terms or
at all, would have a material adverse effect on our business, prospects, financial condition, liquidity, results of operations and cash flows.
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Risks Related To Our Securities
The market price of our common stock is likely to be volatile and could subject us to litigation.
The market price of our common stock has been and is likely to continue to be subject to wide fluctuations. Factors affecting the market
price of our common stock include:
● variations in our operating results, earnings per share, cash flows from operating activities, deferred revenue, and other financial
metrics and non-financial metrics, and how those results compare to analyst expectations;
● issuances of new stock which dilutes earnings per share;
● forward looking guidance to industry and financial analysts related to future revenue and earnings per share;
● the net increases in the number of customers and paying subscriptions, either independently or as compared with published
expectations of industry, financial or other analysts that cover our company;
● changes in the estimates of our operating results or changes in recommendations by securities analysts that elect to follow our
common stock;
● announcements of technological innovations, new services or service enhancements, strategic alliances or significant agreements
by us or by our competitors;
● announcements by us or by our competitors of mergers or other strategic acquisitions, or rumors of such transactions involving
us or our competitors;
● announcements of customer additions and customer cancellations or delays in customer purchases;
● recruitment or departure of key personnel;
● trading activity by a limited number of stockholders who together beneficially own a majority of our outstanding common stock.
In addition, if the stock market in general experiences uneven investor confidence, the market price of our common stock could decline
for reasons unrelated to our business, operating results or financial condition. The market price of our common stock might also decline
in reaction to events that affect other companies within, or outside, our industries even if these events do not directly affect us. Some
companies that have experienced volatility in the trading price of their stock have been the subject of securities class action litigation. If
we are to become the subject of such litigation, it could result in substantial costs and a diversion of management’s attention and
resources.
We currently have a limited trading volume, which results in higher price volatility for, and reduced liquidity of, our common stock.
There has been limited trading of our common stock since we began trading on the NASDAQ Capital Market in April 2017, meaning
that the number of persons interested in purchasing our common stock at or near ask prices at any given time may be relatively small or
non-existent. This situation is attributable to a number of factors, including the fact that we are a smaller reporting company that is
relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community who generate or
influence sales volume. Even in the event that we come to the attention of such persons, they would likely be reluctant to follow an
unproven company such as ours or purchase or recommend the purchase of our shares until such time as we become more seasoned and
viable. As a consequence, our stock price may not reflect an actual or perceived value. Also, there may be periods of several days or
more when trading activity in our shares is minimal or non-existent, as is currently the case, as compared to a seasoned issuer that has a
large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. A
broader or more active public trading market for our common shares may not develop or if developed, may not be sustained. Due to
these conditions, you may not be able to sell your shares at or near ask prices or at all if you need money or otherwise desire to liquidate
your shares.
The ownership by our Chief Executive Officer of Series B Preferred Stock will likely limit your ability to influence corporate matters.
Mr. Mark Meller, our chief executive officer, is the beneficial owner of 100% of the outstanding shares of the Company’s Series B
Preferred Stock. On July 28, 2016 the Company entered into a Series B Preferred Stock Purchase Agreement with the Company’s
Chief Executive Officer, Mr. Mark Meller, pursuant to which Mr. Meller was issued the only share of the Company’s authorized but
unissued Series B Preferred Stock. Mr. Meller was issued one (1) share of Series B Preferred Stock for (i) $100 in cash and (ii) as
partial consideration for Mr. Meller’s personal guarantee of the Revolving Demand Note. One (1) share of the Series B Preferred Stock
has voting rights equal to (x) the total issued and outstanding Common 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 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). The Series B Preferred Stock has the rights, privileges, preferences and restrictions set for in the Certificate of
Designation filed by the Corporation with the Secretary of State of the State of Delaware on September 23, 2011. As a result, our chief
executive officer would have significant influence over most matters that require approval by our stockholders, including the election
of directors and approval of significant corporate transactions, even if other stockholders oppose them. In addition, Mr. Meller
beneficially owns approximately 44.6% of our issued and outstanding common stock. This concentration of ownership might also have
the effect of delaying or preventing a change of control of our company that other stockholders may view as beneficial.
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Although our shares have been approved for listing on the NASDAQ Capital Market, our shares may be subject to potential delisting
if we do not meet or continue to maintain the listing requirements of the NASDAQ Capital Market.
Our shares have been approved for and currently trading on The Nasdaq Capital Market (“Nasdaq”); however Nasdaq has rules for
continued listing, including, without limitation, minimum market capitalization and other requirements. Failure to maintain our listing,
or delisting from Nasdaq, would make it more difficult for shareholders to dispose of our common stock and more difficult to obtain
accurate price quotations on our common stock. This could have an adverse effect on the price of our common stock. Our ability to issue
additional securities for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be
materially and adversely affected if our common stock is not traded on a national securities exchange.
In order to raise sufficient funds to expand our operations, we may have to issue additional securities at prices which may result in
substantial dilution to our shareholders.
If we raise additional funds through the sale of equity or convertible debt, our current stockholders’ percentage ownership will be
reduced. In addition, these transactions may dilute the value of our common shares outstanding. We may also have to issue securities
that may have rights, preferences and privileges senior to our common stock.
Possible adverse effect of issuance of preferred stock.
Our Certificate of Incorporation authorizes the issuance of 1,000,000 shares of preferred stock, of which all shares are available for
issuance, with designations, rights and preferences as determined from time to time by the Board of Directors. As a result of the
foregoing, the Board of Directors can issue, without further shareholder approval, preferred stock with dividend, liquidation,
conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of Common Stock. The
issuance of preferred stock could, under certain circumstances, discourage, delay or prevent a change in control of the Company.
Our stock price could fall and we could be delisted from the NASDAQ in which case U.S. Broker-Dealers may be discouraged from
effecting transactions in shares of our common stock because they may be considered penny stocks and thus be subject to the penny
stock rules.
The SEC has adopted a number of rules to regulate “penny stock” that restricts transactions involving stock which is deemed to be
penny stock. Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities and
Exchange Act of 1934, as amended. These rules may have the effect of reducing the liquidity of penny stocks. “Penny stocks”
generally are equity securities with a price of less than $5.00 per share (other than securities registered on certain national securities
exchanges or quoted on the NASDAQ Stock Market if current price and volume information with respect to transactions in such
securities is provided by the exchange or system). Our securities have in the past constituted, and may again in the future constitute,
“penny stock” within the meaning of the rules. The additional sales practice and disclosure requirements imposed upon U.S. broker-
dealers may discourage such broker-dealers from effecting transactions in shares of our common stock, which could severely limit the
market liquidity of such shares and impede their sale in the secondary market.
A U.S. broker-dealer selling penny stock to anyone other than an established customer or “accredited investor” (generally, an individual
with net worth in excess of $1,000,000 or an annual income exceeding $200,000, or $300,000 together with his or her spouse) must
make a special suitability determination for the purchaser and must receive the purchaser’s written consent to the transaction prior to
sale, unless the broker-dealer or the transaction is otherwise exempt. In addition, the “penny stock” regulations require the U.S. broker-
dealer to deliver, prior to any transaction involving a “penny stock”, a disclosure schedule prepared in accordance with SEC standards
relating to the “penny stock” market, unless the broker-dealer or the transaction is otherwise exempt. A U.S. broker-dealer is also
required to disclose commissions payable to the U.S. broker-dealer and the registered representative and current quotations for the
securities. Finally, a U.S. broker-dealer is required to submit monthly statements disclosing recent price information with respect to the
“penny stock” held in a customer’s account and information with respect to the limited market in “penny stocks”.
Stockholders should be aware that, according to SEC, the market for “penny stocks” has suffered in recent years from patterns of fraud
and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the
promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press
releases; (iii) “boiler room” practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales
persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of
the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, resulting in investor losses.
Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a
position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the
confines of practical limitations to prevent the described patterns from being established with respect to our securities.
Item 1B. Unresolved Staff Comments.
Not applicable.
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Item 2. Properties.
·
·
·
·
·
·
·
·
·
·
In 2017 the Company leased 6,968 square feet of office space in Livingston, NJ, at a monthly rent of $7,400. This lease
expired December 31, 2016 but was subsequently extended for two months ending February 28, 2017. The Company has
entered into a new operating lease agreement for its main office relocating to East Hanover, NJ on March 1, 2017. This office
space consists of 5,120 square feet at a monthly rent starting at $8,762 and escalating to $10,044 per month by the end of the
term on April 30, 2024.
On September 11, 2017, the Company entered into an operating lease agreement for an additional 1,870 square feet of office
space at the same location in East Hanover, NJ commencing October 1, 2017 with a monthly rent of $3,506 for a period of
one year.
The Company leases office space in North Syracuse, NY, at a monthly rent of $2,100, the lease has a three year term ending
May 31, 2018.
The Company currently leases 2,700 square feet of office space in Skokie, IL with a monthly rent of $3,000 with such lease
set to expire on April 30, 2018.
The Company currently leases 702 square feet of office space in Minneapolis, MN with a monthly rent of $1,515 which
expired March 31, 2017. The lease was renewed for one year at $1,560 per month.
The Company currently leases 2,105 square feet of office space in Phoenix, AZ starting at $1,271 and escalating to $2,894 per
month by the end of the term September 30, 2019.
The Company currently leases 1,500 square feet of office space in Seattle, WA with a monthly rent of $3,000 per month
escalating to $3,183 per month. The lease expires September 30, 2018.
The Company leased 3,422 square feet of office space in Greensboro, NC with a monthly rent of $4,182 a month. The lease
expired February 28, 2017 and was extended for 2,267 square feet with a monthly rent of $2,765 expiring February 28, 2020.
The Company currently leases 1,745 square feet of office space in Santa Ana, CA with a monthly rent of $3,225 per month
escalating to $3,402 per month by the end of the lease term on April 30, 2018.
The Company has entered into operating lease agreement for its south New Jersey office commencing March 1, 2017. The
company will lease 6,115 square feet of office space in Thorofare, NJ starting at $4,591 and escalating to $5,168 per month by
the end of the term, February 28, 2022.
Our leased space is utilized for office purposes and it us our belief that the space is adequate for our immediate needs. Additional space
may be required as we expand our business activities. We do not foresee any significant difficulties in obtaining additional facilities if
deemed necessary.
Item 3. Legal Proceedings.
We are not currently involved in any litigation that we believe could have a material adverse effect on our financial condition or results of
operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-
regulatory organization or body pending or, to the knowledge of the executive officers of our Company our subsidiary, threatened against
or affecting our Company, our common stock, our subsidiary or of our Company’s or our Company’s subsidiary’ 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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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
(a) Market Information
Our shares of Common Stock were quoted on the Over-the-Counter Bulletin Board (“OTCQB”) under the symbol “SSNT” until April 18,
2017. Since April 19, 2017, the Company has been listed and is traded on the NASDAQ Capital Market under the symbol “SSNT”.
The following table sets forth the high and low bid price for our common stock for each quarter during the past two fiscal years. The
prices reflect inter-dealer quotations, do not include retail mark-ups, markdowns or commissions and do not necessarily reflect actual
transactions.
Fiscal 2016:
First Quarter (January 1 – March 31)
Second Quarter (April 1 – June 30)
Third Quarter (July 1 – September 30)
Fourth Quarter (October 1 – December 31)
Fiscal 2017:
First Quarter (January 1 – March 31)
Second Quarter (April 1 – June 30)
Third Quarter (July 1 – September 30)
Fourth Quarter (October 1 – December 31)
High
Low
$
$
$
$
$
$
$
$
2.75 $
1.87 $
2.40 $
5.00 $
4.74 $
4.39 $
5.22 $
4.84 $
1.30
1.20
1.42
1.85
3.00
3.24
3.64
4.06
(b) Holders of Common Equity
As of March 23, 2018, there were 867 stockholders of record. An additional number of stockholders are beneficial holders of our
Common Stock in “street name” through banks, brokers and other financial institutions that are the record holders.
(c) Dividend Information
On January 11, 2016, the Company announced the payment of a $0.06 special cash dividend per share of Common Stock. The dividend
payments announced in January were paid out on January 20, 2016 for an aggregate amount of approximately $265,000, which was
applied against additional paid in capital.
On January 23, 2017, the Company announced the payment of a $0.02 special cash dividend per share of Common Stock. The dividend
payments announced in January was paid out on January 31, 2017 for an aggregate amount of $89,566, which was applied
against additional paid in capital.
On April 24, 2017, the Company announced the payment of a $0.02 special cash dividend per share of Common Stock. The dividend
payments announced in April was paid out on May 10, 2017 for an aggregate amount of $89,816, which was applied against additional
paid in capital.
On November 15, 2017, the Company announced the payment of a $0.04 special cash dividend per share of Common Stock. The
dividend payments announced in November was paid out on December 4, 2017 for an aggregate amount of $179,632, which was applied
against additional paid in capital.
The declaration of any future cash dividends is at the discretion of our board of directors and depends upon our earnings, if any, our
capital requirements and financial position, our general economic conditions, and other pertinent conditions.
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(d) Securities Authorized For Issuance Under Equity Compensation Plans
There are 62,280 outstanding options to purchase our securities.
The following table sets forth information as of December 31, 2017 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)
0
62,280
62,280
$
$
$
0.00
3.78
3.78
Number of
securities
remaining
available for
future issuance
(c)
0
19,393
19,393
Plan category
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders.
Total
2004 Stock Incentive Plan
The Company adopted the 2004 Stock Incentive as the amended Plan (the “2004 Plan”) in order to attract and retain qualified employees,
directors, independent contractors or agents of the Company. The 2004 Plan terminated on September 29, 2014; options granted before
that date were not affected by plan termination. At December 31, 2017 and 2016, 62,280 and 143,576 options remained outstanding under
the 2004 Plan, respectively.
2004 Directors’ and Officers’ Stock Incentive Plan
The Company adopted the 2004 Directors’ and Officers’ Stock Incentive Plan (the “2004 D&O Plan”) in order to provide long-term
incentive and rewards to officers and directors of the Company and subsidiary and to attract and retain qualified employees, directors,
independent contractors or agents of the Company. The 2004 D&O Plan terminated on September 29, 2014 and as of March 26, 2018, no
securities were issued.
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 19,393 shares for issuance under this plan. Awards under the 2007 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 2007 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’s Common Stock or any combination thereof. The 2007 Plan (but not the awards theretofore granted under the 2007 Plan)
terminated on January 22, 2017 and no awards were granted thereafter. As of March 26, 2018, no securities were issued pursuant to the
2007 Plan.
Recent Sales of Unregistered Equity Securities
There were no unregistered sales of the Company’s equity securities during 2017 that were not previously disclosed in a Quarterly
Report on Form 10-Q or in a Current Report on Form 8-K.
Transfer Agent
Our transfer agent is Pacific Stock Transfer Company at 6725 Via Austi Pkwy, Suite 300, Las Vegas, NV 89119.
Item 6. Selected Financial Data.
Not applicable.
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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
Annual Report on Form 10-K, relating to the Company’s industry, the Company’s operations and results of operations, and any businesses
that the Company may acquire. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions
prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot
guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities
laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to
actual results.
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States
(“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates,
judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates,
judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and
liabilities as of the date of the consolidated financial statements as well as the reported amounts of revenues and expenses during the
periods presented. Our consolidated financial statements would be affected to the extent there are material differences between these
estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does
not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available
alternative would not produce a materially different result. The following discussion should be read in conjunction with our consolidated
financial statements and notes thereto appearing elsewhere in this report.
Overview
SilverSun Technologies, Inc. is 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 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 ERP, Sage 500 ERP and Sage ERP X3 software
products and for users of the cloud ERP solution published by Acumatica, Inc. 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, CVS, Target and Costco.
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We also provide 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, typically on-site at our clients’ facilities . Our instructors
must pass annual subject matter examinations required by Sage to retain their product-based teaching certifications. We also provide
end-user technical support services through our support/help desk, which is available during normal business hours, Monday through
Friday. Our team of qualified product and technology consultants assist customers that contact us with questions about product features,
functions, usability issues and configurations. The support/help desk offers services in a variety of ways, including prepaid services, time
and materials billed as utilized and annual support contracts. Our customers can communicate with our support/help desk through email,
telephone and fax channels.
Led by specialized project managers, we provide professional services ranging from software customization to data migration to small-
and medium-size business consulting.
We also are resellers of the Warehouse Management System (“WMS”) software published by High Jump, Inc. (“High Jump”), which
develops warehouse management software for middle market distributors. The primary purpose of a WMS is to control the movement
and storage of materials within an operation and process the associated transactions. Directed picking, directed replenishment, and
directed put-away are the key to WMS. The detailed setup and processing within a WMS can vary significantly from one software vendor
to another. However, the basic WMS will use a combination of item, location, quantity, unit of measure and order information to
determine where to stock, where to pick, and in what sequence to perform these operations. The Accellos WMS software improves
accuracy and efficiency, streamlines materials handling, meets retail compliance requirements, and refines inventory control. Accellos
also works as part of a complete operational solution by integrating seamlessly with RF hardware, accounting software, shipping systems
and warehouse automation equipment. We market the Accellos solution to our existing and new medium-sized business clients.
Investing in the acquisition of other companies and proprietary business management solutions has been an important growth strategy for
our Company, allowing us to rapidly 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 ten years, we have
outright acquired, acquired select assets of or entered into revenue sharing agreements with Business Tech Solutions Group, Inc.; Wolen
Katz Associates; AMP-BEST Consulting, Inc.; IncorTech; Micro-Point, Inc.; HighTower, Inc.; Point Solutions, LLC; SGEN, LLC., ESC,
Inc., 2000 SOFT, Inc., Productive Tech Inc., The Macabe Associates, Oates & Co and Pinsight Technology, Inc.
Additionally, it is our intention to continue to increase our business by seeking additional opportunities through potential acquisitions,
revenue sharing arrangements, partnerships or investments. Such acquisitions, revenue sharing arrangements, partnerships or investments
may consume cash reserves or require additional cash or equity. Our working capital and additional funding requirements will depend
upon numerous factors, including: (i) strategic acquisitions or investments; (ii) an increase to current company personnel; (iii) the level of
resources that we devote to sales and marketing capabilities; (iv) technological advances; and (v) the activities of competitors.
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During 2017 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 2017 are as follows:
1) Revenues increased 2.14% from the prior year.
2) Income from operations was $939,258 as compared to $1,267,3473 in the prior year.
3) Sales of the Company’s proprietary and cloud-based business management solutions increased.
4) Recurring revenue from all sources represents approximately 40.7% of total revenue.
Revenues
Revenues for the year ended December 31, 2017 increased $730,058 (2.14%) to $34,852,028 as compared to $34,121,970 for the year
ended December 31, 2016.
Software sales increased by $567,720 to $5,275,266 in 2017 from $4,707,546 in 2016 for an overall increase of 12.1%. This increase was
primarily due to an increase in sales of our accounting software products, such as Sage ERP X3, cloud solutions Netsuite and Acumatica,
and Accellos Warehouse Management.
Service revenue increased by $162,338 to $29,576,762 in 2017 from $29,414,424 in 2016 for an overall increase of 0.6%. The overall
increases are primarily due to the continued marketing efforts and aggressive 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, 2017 increased $1,138,198 (8.9%) to $13,865,440 as compared to $12,727,242 for the year
ended December 31, 2016. The increase in overall gross profit for this period is attributed to the increase in revenues from existing
business. For the year ended December 31, 2017, the overall gross profit percentage was 39.8% as compared to 37.3 % for the year ended
December 31, 2016.
The gross profit attributed to software sales increased $452,985 to $2,675,390 for 2017 from $2,222,405 in 2016 which resulted in an
increase in the gross profit percentage from 47.2% in 2016 to 50.7% for 2017. 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 gross profit attributed to services increased $685,213 to $11,190,050 for 2017 from $10,504,837 is 2016 primarily due to the
implementations of larger scale accounting systems. The gross profit percentage attributed to services increased to 37.8% in 2017 from
35.7% in 2016.
Operating Expenses
Selling and marketing expenses increased $491,762 (11.3%) to $4,849,996 for the year ended December 31, 2017 compared to
$4,358,234 for the year ended December 31, 2016 due to additional sales personnel and related expenses in anticipation of accelerated
growth in 2018.
General and administrative expenses increased $979,991 (15.4%) to $7,354,201 for the year ended December 31, 2017 as compared to
$6,374,210 for the year ended December 31, 2016 primarily as a result of increases in payroll and related expenses associated with the
addition of management personnel and relocation of two of the Company’s offices.
Depreciation and amortization expense for the year ended December 31, 2017 was $620,297 as compared to $684,660 for the year
ended December 31, 2016.
Income Taxes
For the year ended December 31, 2017, the Company’s Federal and State provision requirements were calculated based on the estimated
tax rate. The Federal effective rate is higher than the statutory rate primarily due to change in federal statutory rate from 34% to 21% and
Incentive Stock Options (ISO) and 50% of general meal and entertainment expense which are not tax deductible. The total provision for
the year ended December 31, 2017 was $1,394,031.
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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 and established customer bases that generate positive cash flow.
On May 6, 2014, SWK acquired certain assets of ESC, Inc. pursuant to an Asset Purchase Agreement for a promissory note in the
aggregate principal amount of $350,000 (the “ESC Note”). The ESC Note matures on April 1, 2019. Monthly payments are $6,135
including interest at 2% per year. At December 31, 2017 and December 31, 2016, the outstanding balance was $102,742 and $173,535
respectively.
On March 11, 2015 SWK entered into an Asset Purchase Agreement with 2000 SOFT, Inc. d/b/a ATR, a California corporation, and
Karen Espinoza McGarrigle in her individual capacity as Shareholder. SWK acquired certain assets of ATR (as defined in the Purchase
Agreement). In consideration for the acquired assets, the Company issued a promissory note in the aggregate principal amount of
$175,000 and paid cash of $80,000. At December 31, 2017 and December 31, 2016, the outstanding balance was $14,987 and
$74,194 respectively.
On July 6, 2015, SWK acquired certain assets of ProductiveTech Inc. (PTI) pursuant to an Asset Purchase Agreement cash of $500,000
and a promissory note for $600,000 (the “PTI Note”). The PTI Note is due in 60 months from the closing date and bears interest at a rate
of two and one half (2.5%) percent. The monthly payments including interest are $10,645. At December 31, 2017 and December 31,
2016, the outstanding balance was $319,249 and $437,403 respectively.
On October 1, 2015 SWK entered into an Asset Purchase Agreement (the “Macabe Purchase Agreement”) with The Macabe Associates,
Inc., (“Macabe”), a Washington corporation and Mary Abdian and John Nicholson in their individual capacity as shareholders. SWK
acquired certain assets and liabilities of Macabe (as defined in the Macabe Purchase Agreement). In consideration for the acquired
assets, the Company paid $21,423 in cash. As additional consideration, the Company paid $5,500 cash after twelve months from closing
and paid $5,500 cash twenty-four months from closing on the net-to-SWK revenues for Software and Maintenance sales if certain
estimates are met for a total of $11,000 and was recorded as part of the contingent consideration included in the purchase price.
Additionally, the Company will pay 35% of the net margin on software maintenance renewals for former Macabe customers for the first
twelve months, and then 30%, 25% and 20% of the net margin on software maintenance renewals for the following three years. The
Company will also pay 50% the first year, and 40%, 30% and 20% the three years after on the net margin on EASY Solution
Maintenance, new software & license to existing Macabe customers and EASY Solutions software and maintenance sales to new
customers. On any former Macabe customers migrating to Netsuite, X3 or Acumatica, the Company will pay 50% of the net margin of
the sale after applicable costs and commissions for the three years period after the acquisition. The Company estimated this contingent
consideration to be approximately $417,971 at acquisition and which is included in the purchase price. Certain payments were made in
each of these contingent consideration components, resulting in a remaining balance of $105,635 as of December 31, 2017.
On October 19, 2015, SWK acquired certain assets of Oates & Company, LLC (Oates) pursuant to an Asset Purchase Agreement ( the
“Oates Purchase Agreement”) cash of $125,000 and a promissory note for $175,000 (the “Oates Note”). The Oates Note is due in three
years from the closing date and bears interest at a rate of two (2%) percent. The monthly payments including interest are $5,012. At
December 31, 2017 and December 31, 2016, the outstanding balance was $49,494 and $108,018 respectively.
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On July 21, 2016, SWK entered into a Revolving Demand Note (the “Revolving Demand Note”) by and between SWK (the “Borrower”)
and M&T Bank (“Lender”), a commercial lender. The Lender has agreed to loan SWK up to a principal amount of one million dollars.
The interest rate on the Revolving Demand Note shall be a variable rate, equal to the “Prime Rate”, plus ninety-five one-hundredths
percent (0.95%) per annum. There is a minimum interest rate floor of four percent (4%). The Revolving Demand Note is secured by all of
the Borrower’s assets pursuant to a Security Agreement. Furthermore, on July 21, 2016, the Company and Mr. Mark Meller, individually,
entered into Unlimited Guaranty agreements (the “Guaranty Agreements”) with the Lender. Under the Guaranty Agreements, the
Company and Mr. Meller personally, jointly and severally guaranteed the liabilities of the Borrower due and owing under the terms of the
Revolving Demand Note. At December 31, 2017 and December 31, 2016, the outstanding balance was $0.
During the year ended December 31, 2017, the Company had a net increase in cash of $614,298. The Company’s principal sources and
uses of funds were as follows:
Cash provided by operating activities
The Company generated $2,308,825 in cash from operating activities for the year ended December 31, 2017 as compared to generating
$1,794,160 of cash for operating activities for the year ended December 31, 2016. This increase in cash provided by operating activities
is primarily attributed to a decrease in accounts receivable and an increase in deferred revenue.
Cash used in investing activities
Investing activities for the year ended December 31, 2017 used cash of $815,510 as compared to using $496,719 of cash for the year
ended December 31, 2016. This increase is a result of increased purchases of property and equipment and investment in software
development costs.
Cash used in financing activities
Financing activities for the year ended December 31, 2017 used cash of $879,017 as compared to using cash of $869,705 for the year
ended December 31, 2016. This increase in cash used in financing activities is mostly attributed to the payment of a cash dividend,
contingent consideration, and repayment of the long term debt and capital lease payments.
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 because of inflation for the year ended December 31, 2017.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements,
which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The
preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate
these estimates, including those related to bad debts, intangible assets, and litigation. We base our estimates on historical experience and
on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying values of certain assets and liabilities. Actual results may differ from these estimates under different
assumptions or conditions.
We have identified below the accounting policies, related to what we believe are most critical to our business operations and are discussed
throughout Management’s Discussion and Analysis of Financial Condition or Plan of Operation where such policies affect our reported
and expected financial results.
Revenue Recognition
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.
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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, 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 Income.
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.
Unbilled Services
The Company recognizes revenue on its professional services as those services are performed or certain obligations are met.
Goodwill
Goodwill is the excess of acquisition cost of an acquired entity over the fair value of the identifiable net assets acquired. Goodwill is not
amortized, but tested for impairment annually or whenever indicators of impairment exist. These indicators may include a significant
change in the business climate, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of
the business or other factors.
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 reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes, as well as net operating loss carryforwards. Deferred tax
assets and liabilities are classified as 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.
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The Company has federal net operating loss (“NOL”) carryforwards which are subject to limitations under Section 382 of the Internal
Revenue Code.
The 2017 Tax Cuts and Jobs Act (“Tax Reform”) was enacted on December 22, 2017. The Tax Reform includes a number of changes in
existing tax law impacting businesses including a permanent reduction in the U.S. federal statutory rate from 34% to 21%, effective on
January 1, 2018. Under U.S. GAAP, changes in tax rates and tax law are accounted for in the period of enactment and deferred tax
assets and liabilities are measured at the enacted tax rate. The rate reconciliation includes the Company’s assessment of the accounting
under the Tax Reform which is preliminary and is based on information that was available to management at the time the consolidated
financial statements were prepared.
The Company files income tax returns in the U.S. federal and state jurisdictions. Tax years 2014 to 2017 remain open to examination for
both the U.S. federal and state jurisdictions.
Off Balance Sheet Arrangements
During fiscal 2017, we did not engage in any material off-balance sheet activities or have any relationships or arrangements with
unconsolidated entities established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited
purposes. Further, we have not guaranteed any obligations of unconsolidated entities nor do we have any commitment or intent to provide
additional funding to any such entities.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We do not hold any derivative instruments and do not engage in any hedging activities.
Item 8. Financial Statements.
Our consolidated financial statements are contained in pages F-1 through F-21 which appear at the end of this Annual Report on Form 10-
K.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
There are no reportable events under this item for the year ended December 31, 2017.
Item 9A. Controls and Procedures.
(a) Evaluation of Disclosure and Control Procedures
The management of SilverSun Technologies, Inc. (“SilverSun” or the “Company”) is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Rules 13a- 15(f) and 15d-15(f) under the Securities Exchange Act of
1934, as amended. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in
accordance with accounting principles generally accepted in the United States (“GAAP”).The Company is considered a smaller
reporting company under the appropriate SEC guidance and is currently exempt, based on Section 404(b), from attestation requirements
on their internal control over financial reporting.
In order to facilitate Management’s assessment of the effectiveness of ICOFR, the Company engaged an independent consultant, Centri
Business Consulting LLC, (“Centri”) to assist with the documentation and testing of internal controls. Centri commenced planning and
scoping activities in June 2017 and testing of the effectiveness of ICOFR for the 2017 year continued through to March 2018.
(b) Management’s Report on Internal Control over Financial Reporting
Management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017. In
making this assessment, Management used the criteria set forth in the framework established by the Committee of Sponsoring
Organizations of the Treadway Commission 2013 Internal Control - Integrated Framework (“COSO”). Based on this assessment,
Management has not identified any material weaknesses or significant deficiencies. A material weakness is a control deficiency, or
combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim
financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of
deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit
attention by those responsible for oversight of the company’s financial reporting.
Noting no material weaknesses, Management has concluded that the five components of internal control, including the 17 principles and
related points of focus noted within the 2013 Internal Control-Integrated Framework are in place and operating effectively as of
December 31, 2017.
Management has concluded that the Company did maintain effective internal control over financial reporting as of December 31, 2017,
based on the criteria set forth in 2013 Internal Control—Integrated Framework issued by the COSO.
(c) Changes in Internal Control over Financial Reporting
Under applicable SEC rules (Exchange Act Rules 13a-15(c) and 15d-15(c)) management is required to evaluate any changes in internal
control over financial reporting that occurred during each fiscal quarter that materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting. As a result of the previously identified material weakness in our internal controls over
financial reporting, due to the ineffective controls review of complex transactions as described in Item 9A of our Annual Report on Form
10-K for the year ended December 31, 2016, we have undertaken a number of remedial actions in 2017 to address the previously
identified material weakness by enhancing the design of our controls. Based on the enhanced design of these controls as well as the as the
testing of the operating effectiveness of these controls completed to date, we believe that, as of December 31, 2017, the previously
identified material weakness has been remediated
Item 9B. Other Information.
None.
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Table of Contents
Item 10. Directors, Executive Officers and Corporate Governance.
Directors and Executive Officers
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 26, 2018:
Name
Mark Meller
Crandall Melvin III
Stanley Wunderlich
Joseph Macaluso
John Schachtel
Age
Position
58
61
66
66
56
Chairman, President, Chief Executive Officer and Director
Chief Financial Officer
Director
Director
Director
Officer and/or
Director Since
2003
2015
2011
2015
2017
Mark Meller, Chief Executive Officer, President, Director
Mr. Mark Meller has been the President and Director of the Company since September 15, 2003, and was further appointed Chief
Executive Officer on September 1, 2004. He became Chairman of the Board on May 10, 2009. Mr. Meller is currently the President,
Chief Executive Officer and Chairman of the Board of Directors. From September 2003 through January 2015, he was Chief Financial
Officer of the Company. From October 2004 until February 2007, Mr. Meller was the President, Chief Executive Officer, Chief Financial
Officer and Director of Deep Field Technologies, Inc. From December 15, 2004 until September 2009, Mr. Meller was the President,
Chief Executive Officer, Chief Financial Officer and Director of MM2 Group, Inc. From August 29, 2005 until August 2006, Mr. Meller
was the President, Chief Executive Officer and Chief Financial Officer of iVoice Technology, Inc. From 1988 until 2003, Mr. Meller was
Chief Executive Officer of Bristol Townsend and Co., Inc., a New Jersey based consulting firm providing merger and acquisition
advisory services to middle market companies. From 1986 to 1988, Mr. Meller was Vice President of Corporate Finance and General
Counsel of Crown Capital Group, Inc, a New Jersey based consulting firm providing advisory services for middle market leveraged buy-
outs (LBO’s). Prior to 1986, Mr. Meller was a financial consultant and practiced law in New York City. He is a member of the New York
State Bar.
Mr. Meller has a B.A. from the State University of New York at Binghamton and a J.D. from the Boston University School of Law.
In evaluating Mr. Meller’s specific experience, qualifications, attributes and skills in connection with his appointment to our board, we
took into account his experience in the industry and his knowledge of running and managing the Company.
Crandall Melvin III, Chief Financial Officer
Crandall Melvin III combines over 30 years of experience in public accounting and industry, holding a number of senior management
positions following a 5-year career in retail and commercial banking and equipment leasing. Mr. Melvin is also currently the CFO of
SWK, the Company’s operating subsidiary, and has been so since 2007.
From 2002 to 2006, he was Co-Founder and Chief Operating Officer of AMP-Best Consulting, Inc. (“AMP-Best”) a company involved in
software sales and implementation. AMP-Best was acquired by SWK Technologies in 2006. From 1993 to 2002, he worked in public
accounting in Alaska and New York, and is currently a Certified Public Accountant licensed in the State of New York and holds the
designation of Certified Global Management Accountant. Mr. Melvin has also served on boards of directors of various not-for-profit
organizations located in the Syracuse Area.
Mr. Melvin has a Bachelor of Arts degree from the University of Southern California and an MBA from Syracuse University with
additional graduate studies from the University of Alaska at Anchorage.
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Table of Contents
Stanley Wunderlich, Director
Mr. Stanley Wunderlich has over 40 years of experience on Wall Street as a business owner and consultant. Mr. Wunderlich is a founding
partner and has been Chairman and Chief Executive Officer of Consulting for Strategic Growth 1, specializing in investor and media
relations and the formation of capital for early-growth stage companies both domestic and international, from 2000 through the present.
Since 1987, he has been the Chief Executive Officer of Consulting for Strategic Growth 1, Ltd.
Mr. Wunderlich has a Bachelor’s degree from Brooklyn College.
In evaluating Mr. Wunderlich’s experience, qualifications, attributes and skills in connection with his appointment to our Board, we took
into account his experience in finance and investor relations.
Joseph Macaluso, Director
Joseph Macaluso has over 30 years of experience in financial management. Mr. Macaluso has been the Principal Accounting Officer of
Tel-Instrument Electronics Corp., a developer and manufacturer of avionics test equipment for both the commercial and military markets
since 2002. Previously, he had been involved in companies in the medical device and technology industries holding positions including
Chief Financial Officer, Treasurer and Controller.
Mr. Macaluso has a Bachelor of Science degree in Accounting from Fairfield University.
In evaluating Mr. Macaluso’s specific experience, qualifications, attributes and skills in connection with his appointment to Board, we
took into account his expertise in general management, finance, corporate governance and strategic planning, as well as his experience in
operations and mergers and acquisitions.
John Schachtel, Director
On March 27, 2017, Mr. Schachtel was appointed to the Board. Before joining the Board, Mr. Schachtel was the Chief Operating Officer
of OneMain Financial Holdings, Inc. As Chief Operating Officer of OneMain Financial Holdings, Inc., Mr. Schachtel’s responsibilities
included oversight of sales and field operations, marketing, and centralized collections. Prior to assuming the Chief Operating Officer
role, Mr. Schachtel served 11 years as the Executive Vice President, Northeast & Midwest Division for OneMain Financial Holdings, Inc.
Mr. Schachtel has a Bachelor of Science degree from Northwestern University and an MBA in Finance from New York University.
In evaluating Mr. Schachtel’s specific experience, qualifications, attributes and skills in connection with his appointment to Board, we
took into account his expertise in general management, finance, corporate governance and strategic planning, as well as his experience in
operations and mergers and acquisitions.
Family Relationships
There are no family relationships among any of our directors or executive officers.
Board Composition and Director Independence
Our board of directors consists of four members: Mr. Mark Meller, Mr. Stanley Wunderlich, Mr. Joseph Macaluso, and Mr. John
Schachtel. The directors will serve until our next annual meeting and until their successors are duly elected and qualified. The Company
defines “independent” as that term is defined in Rule 5605(a)(2) of the NASDAQ listing standards.
In making the determination of whether a member of the board is independent, our board considers, among other things, transactions and
relationships between each director and his immediate family and the Company, including those reported under the caption “Certain
Relationships and Related-Party Transactions”. The purpose of this review is to determine whether any such relationships or transactions
are material and, therefore, inconsistent with a determination that the directors are independent. On the basis of such review and its
understanding of such relationships and transactions, our board affirmatively determined that Mr. Wunderlich, Mr. Macaluso, and Mr.
Schachtel have qualified as independent and that they have no material relationship with us that might interfere with his or her exercise of
independent judgment.
29
Table of Contents
Board Committees
Currently, the Audit Committee consists of Mr. Joseph Macaluso, Mr. Stanley Wunderlich and Mr. John Schachtel. Mr. Macaluso,
Chairman of the Audit Committee, may be deemed a financial expert as defined in §228.401(e) of the regulations promulgated by the SEC
pursuant to the Securities Exchange Act of 1934, as amended.
Currently, the Compensation Committee consists of Mr. Joseph Macaluso, Mr. Stanley Wunderlich and Mr. John Schachtel.
Mr. Schachtel serves as Chairman.
Currently, the Nominating and Corporate Governance Committee consists of Mr. Joseph Macaluso, Mr. Stanley Wunderlich and Mr.
John Schachtel. Mr. Wunderlich serves as Chairman.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who beneficially own 10% or more
of a class of securities registered under Section 12 of the Exchange Act to file reports of beneficial ownership and changes in beneficial
ownership with the SEC. Directors, executive officers and greater than 10% stockholders are required by the rules and regulations of the
SEC to furnish the Company with copies of all reports filed by them in compliance with Section 16(a).
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the Company during the fiscal year ended December
31, 2017, including those reports that we have filed on behalf of our directors and Section 16 officers, no director, Section 16 officer,
beneficial owner of more than 10% of the outstanding common stock of the company, or any other person subject to Section 16 of the
Exchange Act, failed to file with the SEC on a timely basis during the fiscal year ended December 31, 2017, except that, Joseph P.
Macaluso, and Stanley Wunderlich, did not file on a timely basis. Mr. Wunderlich did not timely file his Form 3 on time in 2011. Mr.
Macaluso did not timely file his Form 4 one time, but has made all required filings as of November 22, 2017. Additionally, John
Schachtel became a member of the Company’s board on March 27, 2017 and was not required to make any filings in 2016. Upon being
appointed a director, Mr. Schachtel did not file timely in 2017 but has made all the required filings as of November 21, 2017.
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.
Legal Proceedings
There are no material proceedings to which any director or officer, or any associate of any such director or officer, is a party that is
adverse to our Company our subsidiary or has a material interest adverse to our Company or our subsidiary. 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 ten 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 ten 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 ten 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 ten years.
30
Table of Contents
Item 11. Executive Compensation.
The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers
paid by us during the years ended December 31, 2017 and 2016.
Name and
Position(s)
Mark Meller
President,
Chief Executive
Officer,
and Director
Crandall
Melvin III
Chief Financial
Officer
Year Salary($) Bonus($)
0 $
2017 $640,862 $
Stock
Awards($)
0 $
Option
Awards($)
0 $
Non-Equity
Incentive Plan
Compensation($)
0 $
Nonqualified
Deferred
Compensation
Earnings($)
0 $
All Other
Compensation($)
0 $
Total
Compensation($)
640,862
2016 $591,476 $
0 $
2017 $199,423 $
2016 $181,365 $
0 $
5,773 $
0 $
0 $
0 $
0 $
0 $
0 $
0 $
0 $
0 $
0 $
0 $
0 $
0 $
0 $
0 $
591,476
199,423
187,138
Mark Meller, Chief Executive Officer
The Company’s Chief Executive Officer and President has had an Employment Agreement with the Company since September 15,
2003. On February 4, 2016 (the “Effective Date”), the Company entered into an amended and restated employment agreement (the
“Meller Employment Agreement”) with Mark Meller, pursuant to which Mr. Meller will continue to serve as the Company’s President
and Chief Executive Officer.
The Meller Employment Agreement was entered into by the Company and Mr. Meller primarily to extend the term of Mr. Meller’s
employment. The term of the Meller Employment Agreement runs through September of 2023 (the “Term”) and shall automatically
renew for additional periods of one year unless otherwise terminated in accordance with the employment agreement. The Company will
pay Mr. Meller an annual salary of $565,000 per annum, with a ten percent (10%) increase on September 1 and every anniversary of such
date for the duration of the Term.
Potential Payments upon Termination or Change in Control
The Meller Employment Agreement provides for a severance payment to Mr. Meller of three hundred percent (300%), less $100,000 of
his gross income for services rendered to the Company in each of the five prior calendar years should his employment be terminated
following a change in control (as defined in the Meller Employment Agreement).
Outstanding Equity Awards at Fiscal Year-End 2017
The Company had no outstanding equity awards to the executives named above at the end of the most recent completed fiscal year.
Director Compensation
We pay only our independent directors for their service on our board of directors. Mr. Wunderlich will be paid $1,000 per month, payable
quarterly for his service as a member of the board and as Chairman of the Nominating and Governance Committee. Mr. Macaluso will be
paid $1,500 per month, payable quarterly for his service as a member of the board and as Chairman of the Audit Committee. Mr.
Schachtel will be paid $1,500 per month, payable quarterly for his service as a member of the board and as Chairman of the Compensation
Committee.
The following Director Compensation Table sets forth the compensation of our directors for the fiscal year ending on December 31, 2017.
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Table of Contents
Director Compensation for Fiscal 2017
Fees
Earned
or Paid in
Cash
($)
12,000
Name
Stanley Wunderlich
Joseph Macaluso
18,000
Stock
Awards
($)
Option
Awards
($)
-
-
-
-
John Schachtel (1)
13,500
-
19,923
Non-Equity
Incentive Plan
Compensation
($)
Non-Qualified
Deferred
Compensation
Earnings
($)
All Other
Compensation
($)
-
-
-
-
-
-
Total
($)
12,000
-
-
18,000
-
33,423
(1) John Schachtel was appointed as a director on March 27, 2017.
Director Agreements
On July 26, 2011, we entered into a director agreement with Stanley Wunderlich, pursuant to which Mr. Wunderlich was appointed to the
Board effective July 26, 2011. On August 3, 2011 the Company entered into an amended and restated director agreement (the “Amended
Agreement”). The term of the Amended Agreement is one year from August 3, 2011. The Amended Agreement may, at the option of the
Board, be automatically renewed on such date that Mr. Wunderlich is re-elected to the Board. In connection with a recapitalization of the
Company in 2012, Mr. Wunderlich and the Company agreed to amend the Amended Director Agreement to (i) change the Stipend to
$1,000 per month, payable quarterly; (ii) to forego the issuance of any warrants due to Wunderlich under the Amended Agreement; and
(iii) to cancel the future issuance of any warrants due to Mr. Wunderlich under the Amended Agreement. To date no warrants have been
issued pursuant to this agreement.
On January 29, 2015, we entered into a director agreement (“Macaluso Director Agreement”) with Joseph Macaluso, pursuant to which
Mr. Macaluso was appointed to the Board effective January 29, 2015 (the “Effective Date”). The Macaluso Director Agreement may, at
the option of the Board, be automatically renewed on such date that Mr. Macaluso is re-elected to the Board. Under the Macaluso
Director Agreement, Mr. Macaluso is to be paid a stipend of one thousand five hundred dollars ($1,500) (the “Stipend”) per month,
payable quarterly. Additionally, Mr. Macaluso shall receive warrants (the “Warrants”) to purchase such number of shares of the
Company’s Common Stock, as shall equal (the “Formula”) (A) $20,000 divided by (B) the closing price of the Common Stock on the
OTC Markets on the date of grant of the Warrant. The exercise price of the Warrant shall be the closing price on the date of the grant of
such Warrant (the “Grant Date”) plus $0.01. The Warrant shall be fully vested upon receipt thereof (the “Vesting Date”).
On March 27, 2017, we entered into a director agreement (“Schachtel Director Agreement”) with John Schachtel, pursuant to which Mr.
Schachtel was appointed to the Board effective March 27, 2017 (the “Effective Date”). The Schachtel Director Agreement may, at the
option of the Board, be automatically renewed on such date that Mr. Schachtel is re-elected to the Board. Under the Schachtel Director
Agreement, Mr. Schachtel is to be paid a stipend of one thousand five hundred dollars ($1,500) (the “Stipend”) per month, payable
quarterly. Additionally, Mr. Schachtel shall receive warrants (the “Warrants”) to purchase such number of shares of the Company’s
Common Stock, as shall equal (the “Formula”) (A) $20,000 divided by (B) the closing price of the Common Stock on the OTC Markets
on the date of grant of the Warrant. The exercise price of the Warrant shall be the closing price on the date of the grant of such Warrant
(the “Grant Date”) plus $0.01. The Warrant shall be fully vested upon receipt thereof (the “Vesting Date”).
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth certain information regarding the beneficial ownership of our Common Stock as of March 23, 2018 by (a)
each stockholder who is known to us to own beneficially 5% or more of our outstanding Common Stock; (b) all directors; (c) our
executive officers, and (d) all executive officers and directors as a group. Except as otherwise indicated, all persons listed below have (i)
sole voting power and investment power with respect to their shares of Common Stock, except to the extent that authority is shared by
spouses under applicable law, and (ii) record and beneficial ownership with respect to their shares of Common Stock.
For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of Common Stock that
such person has the right to acquire within 60 days of March 23, 2018. For purposes of computing the percentage of outstanding shares
of our Common Stock held by each person or group of persons named above, any shares that such person or persons has the right to
acquire within 60 days of March 23, 2018 is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing
the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an
admission of beneficial ownership. Unless otherwise identified, the address of our directors and officers is c/o SilverSun Technologies,
Inc. at 120 Eagle Rock Ave, Suite 330, East Hanover, NJ 07936.
5% Beneficial Shareholders
Jeffrey Roth (2)
Officers and Directors
Mark Meller
Chief Executive Officer, President and Chairman
Crandall Melvin III
Chief Financial Officer
Joseph Macaluso
Director
Stanley Wunderlich
Director
John Schachtel
Director
Number of
Shares of
Common
Stock
Beneficially
Owned
Percentage of
Ownership
of Common
Stock (1)
Outstanding
Preferred Stock
Percentage
Ownership
of Preferred
Stock (3)
671,384
14.93%
-
-
2,006,534
44.63%
1
100%
74,589
1.66%
3,333
23,334
10,988
*
*
*
-
-
-
-
1
-
-
-
-
100%
Officers and Directors as a Group (4 persons)
2,118,778
47.13%
* denotes less than 1%
(1)
Based on 4,495,728 shares of Common Stock outstanding as of March 23, 2018. Shares of Common Stock subject to options or
warrants currently exercisable or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage of
the person holding such options or warrants, but are not deemed outstanding for purposes of computing the percentage of any
other person.
(2) Mr. Roth is a former employee of SWK Technologies, Inc, a wholly-owned subsidiary of SilverSun Technologies, Inc.
(3)
On July 28, 2016 the Company entered into a Series B Preferred Stock Purchase Agreement with the Company’s Chief Executive
Officer, Mr. Mark Meller, pursuant to which Mr. Meller was issued the only share of the Company’s authorized but unissued
Series B Preferred Stock. Mr. Meller was issued one (1) share of Series B Preferred Stock for (i) $100 in cash and (ii) as partial
consideration for Mr. Meller’s personal guarantee of the Revolving Demand Note. One (1) share of the Series B Preferred Stock
has voting rights equal to (x) the total issued and outstanding Common 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 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). The Series B Preferred Stock has the rights, privileges, preferences and restrictions
set for in the Certificate of Designation filed by the Corporation with the Secretary of State of the State of Delaware on September
23, 2011.
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Table of Contents
Item 13. Certain Relationships and Related Transactions.
The Company leases its North Syracuse office space from its current CFO, Crandall Melvin III. The monthly rent for this office space is
$2,100.
The Company leases its Seattle office space from a current employee, Mary Abdian. The monthly rent for this office space is $3,090 and
increases 3% each year.
Director Independence
On an annual basis, each director and executive officer will be obligated to disclose any transactions with the Company in which a
director or executive officer, or any member of his or her immediate family, have a direct or indirect material interest in accordance with
Item 407(a) of Regulation S-K. Following completion of these disclosures, the Board will make an annual determination as to the
independence of each director using the current standards for “independence” that satisfy the criteria for the Nasdaq Capital Markets.
As of December 31, 2017, the Board determined that Mr. Wunderlich, Mr. Macaluso, and Mr. Schachtel were independent.
Item 14. Principal Accountant Fees and Services.
The following table sets forth fees billed to the Company by the Company’s independent auditors for (i) services rendered for the audit
of the Company’s annual financial statements and the review of the Company’s quarterly financial statements, (ii) services rendered that
are reasonably related to the performance of the audit or review of the Company’s financial statements that are not reported as Audit
Fees, and (iii) services rendered in connection with tax preparation, compliance, advice and assistance.
Services
Audit Fees
Audit - Related Fees
Tax fees
All Other Fees (a)
Total
2017
2016
$
90,000 $
90,000
-
-
15,000
15,000
-
-
$
105,000 $
105,000
All other fees include fees primarily for review and other services related to securities registration documents, assistance with other
document reviews and assistance with revenue agent examination.
Prior to engaging our accountants to perform a particular service, our Audit Committee obtains an estimate for the service to be
performed. All of the services described above were approved by the Audit Committee in accordance with its procedures.
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Table of Contents
Item 15. Exhibits.
(a)
PART IV
Exhibit No. Description
2.1
Asset Purchase Agreement, dated March 11, 2015, by and among SWK Technologies, Inc., 2000Soft, Inc. d/b/a
Accounting Technology Resources and Karen Espinoza McGarrigle. (incorporated by reference to Exhibit 2.1 on the
Company’s current report on Form 8-K filed with the SEC on March 17, 2015).
2.2
3.1
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
Form of Asset Purchase Agreement, dated July 6, 2015, by and among SWK Technologies, Inc., ProductiveTech, Inc. a
New Jersey corporation John McPoyle and Kevin Snyder (incorporated herein by reference to Exhibit 2.1 on Form 8-K,
filed with the SEC on July 10, 2015)
Second Amended Certificate of incorporation of SilverSun Technologies, Inc., filed September 5, 2003 (incorporated
herein by reference to Exhibit 3.1 of the registration statement on Form SB-2, filed with the SEC on November 25, 2003).
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 10.9 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).
10.7
Termination Agreement dated December 30, 2005 between YA Global (f/k/a/ Cornell Capital Partners, LP). and SilverSun
Technologies, Inc.
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Table of Contents
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
14.1
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.
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 10.2 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 SEC 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 the SEC on August 3, 2011).
Form of Warrant (incorporated by reference to Exhibit 10.2 to the Company’s current report on Form 8-K filed with the
SEC on August 3, 2011).
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 SEC on June 20,
2012).
Promissory Note, dated March 11, 2015, issued in favor of 2000Soft, Inc. d/b/a Accounting Technology Resources, a
California corporation (incorporated by reference to Exhibit 10.2 on the Company’s current report on Form 8-K filed with
the SEC on March 17, 2015).
Form of Promissory Note, dated July 6, 2015, issued in favor of ProductiveTech, Inc., a New Jersey corporation
(incorporated herein by reference to Exhibit 10.1 on Form 8-K, filed with the SEC on July 10, 2015)
Amended and Restated Employment Agreement, dated February 4, 2016, between Mark Meller and Silversun
Technologies, Inc. (incorporated herein by reference to Exhibit 10.1 on Form 8-K, filed with the SEC on February 5, 2016.
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).
31.1 *
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 filed herein.
31.2 *
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 filed herein.
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 filed herein.
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
32.1 *
32.2 *
Sarbanes-Oxley Act of 2002 filed herein.
XBRL Instance Document
101.INS *
101.SCH * XBRL Taxonomy Extension Schema
101.CAL * XBRL Taxonomy Extension Calculation Linkbase
101.DEF * XBRL Taxonomy Extension Definition Linkbase
101.LAB * XBRL Taxonomy Extension Label Linkbase
101.PRE * XBRL Taxonomy Extension Presentation Linkbase
* Filed herewith
36
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
Date: March 26, 2018
Date: March 26, 2018
SILVERSUN TECHNOLOGIES, INC.
By:
By:
/s/ Mark Meller
Mark Meller
Principal Executive Officer
/s/ Crandall Melvin III
Crandall Melvin III
Principal Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
Name
/s/ Mark Meller
Mark Meller
/s/ Stanley Wunderlich
Stanley Wunderlich
/s/ Joseph Macaluso
Joseph Macaluso
/s/ John Schachtel
John Schachtel
/s/ Crandall Melvin III
Crandall Melvin III
Position
Principal Executive Officer
Director
Director
Director
Principal Financial Officer
37
Date
March 26, 2018
March 26, 2018
March 26, 2018
March 26, 2018
March 26, 2018
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’ Equity
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.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of SilverSun Technologies, Inc. and Subsidiary (the “Company”) as of
December 31, 2017 and 2016, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the
years in the two-year period ended December 31, 2017, and the related notes (collectively referred to as the financial statements). In our
opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017
and 2016, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2017, in
conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part
of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such
opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
/s/ Friedman LLP
We have served as the Company’s auditor since 2004.
Marlton, New Jersey
March 26, 2018
F-2
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
ASSETS
Current assets:
Cash
Accounts receivable, net of allowance of $375,000
Unbilled services
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Intangible assets, net
Goodwill
Deferred tax assets
Deposits and other assets
Total assets
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities:
Bank line of credit
Accounts payable
Accrued expenses
Accrued interest
Income taxes payable
Contingent consideration – current portion
Long term debt – current portion
Capital lease obligations – current portion
Deferred revenue
Total current liabilities
Contingent consideration net of current portion
Long term debt net of current portion
Capital lease obligations net of current portion
Total liabilities
Commitments and Contingencies
Stockholders’ equity:
Preferred Stock, $0.001 par value; authorized 1,000,000 shares
No shares issued and outstanding
Series A Preferred Stock, $0.001 par value; authorized 2 shares
No shares issued and outstanding
Series B Preferred Stock, $0.001 par value; authorized 1 share
1 share issued and outstanding
Common stock, $0.00001 par value; authorized 75,000,000 shares
4,489,903 and 4,477,403 shares issued and outstanding
Additional paid-in capital
Accumulated deficit
Total stockholders’ equity
2017
2016
$
2,235,347 $
2,336,481
428,208
403,911
1,621,049
2,501,621
463,563
331,094
5,403,947
4,917,327
567,532
2,640,457
401,000
1,363,000
36,312
466,202
2,431,111
401,000
2,414,902
28,887
$
10,412,248 $
10,659,429
$
- $
2,094,297
1,071,515
16,283
97,097
63,380
257,846
94,443
2,150,771
-
1,822,071
823,591
15,533
177,466
180,029
306,677
94,714
1,690,147
5,845,632
5,110,228
42,255
228,626
68,614
31,685
486,473
60,127
6,185,127
5,688,513
-
-
1
-
-
1
46
11,919,316
(7,692,242)
46
12,176,642
(7,205,773)
4,227,121
4,970,916
Total liabilities and stockholders’ equity
$
10,412,248 $
10,659,429
The accompanying notes are an integral part of these consolidated financial statements.
F-3
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARY
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 from operations
Other (expense) income:
Interest expense, net
Other income
Total other (expense) income
Income before income taxes
Income tax (provision) benefit
Net (loss) income
Basic and diluted net (loss) income per common share
Basic
Diluted
Weighted average shares outstanding:
Basic
Diluted
For the Years Ended
December 31,
2017
December 31,
2016
$
5,275,266 $
29,576,762
34,852,028
4,707,546
29,414,424
34,121,970
2,599,876
18,386,712
20,986,588
2,485,141
18,909,587
21,394,728
13,865,440
12,727,242
4,849,996
7,354,201
101,688
620,297
12,926,182
4,358,234
6,374,210
42,795
684,660
11,459,899
939,258
1,267,343
(31,696)
-
(31,696)
(64,678)
10,000
(54,678)
907,562
1,212,665
(1,394,031)
2,223,734
$
(486,469) $
3,436,399
$
$
(0.11) $
(0.11) $
0.78
0.77
4,489,013
4,489,013
4,414,743
4,473,403
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
Series A
Preferred
Stock
Series B
Preferred
Stock
Common Stock
Class A
Additional
Paid in Accumulated
Shares Amount Shares Amount Shares
Amount Capital
(Deficit)
Total
Stockholders’
Equity
Balance at
January 1,
2016
Convertible
note
conversion
into common
stock
Issuance of
preferred
share
Cash
dividend
Share-Based
Compensation
Net income
Balance at
December 31,
2016
Stock
warrants in
exchange for
services
Issuance of
common
stock for
services
Cash
dividend
Share-Based
Compensation
Net loss
Balance at
December 31,
2017
- $
-
- $
- 4,410,736 $
45 $12,198,448 $ (10,642,172) $
1,556,321
-
-
-
-
-
-
-
-
66,667
1
199,999
-
200,000
-
-
-
-
1
-
-
-
1
-
-
-
-
-
-
-
-
99
-
100
-
(264,699)
-
(264,699)
-
-
42,795
-
-
3,436,399
42,795
3,436,399
- $
-
1 $
1 4,477,403 $
46 $12,176,642 $ (7,205,773) $
4,970,916
-
-
-
-
-
-
19,923
-
19,923
-
-
-
-
-
-
-
-
-
-
-
-
-
12,500
-
47,500
-
47,500
-
-
-
-
-
-
-
(359,014)
-
(359,014)
-
-
34,265
-
-
(486,469)
34,265
(486,469)
- $
-
1 $
1 4,489,903 $
46 $11,919,316 $ (7,692,242) $
4,227,121
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
Cash flows from operating activities:
Net (loss) income
Adjustments to reconcile net (loss) income to net cash
2017
2016
$
(486,469) $
3,436,399
provided by operating activities:
Deferred income taxes
Depreciation and amortization
Amortization of intangibles
Bad debt write-off
Share-based compensation
Common stock issued in exchange for services
Stock warrants in exchange for services
Changes in certain assets and liabilities:
Accounts receivable
Unbilled services
Prepaid expenses and other current assets
Deposits and other assets
Accounts payable
Accrued expenses
Income tax payable
Accrued interest
Deferred revenues
Net cash provided by operating activities
Cash flows from investing activities:
Software development costs
Acquisition of customer list
Purchases of property and equipment
Net cash used in investing activities
Cash flows from financing activities:
Payment of cash dividend
Proceeds from issuance of preferred stock
Repayment of contingent consideration
Repayments of long term debt
Principal payment under capital lease obligations
Net cash used in financing activities
Net increase in cash
Cash, beginning of year
Cash, end of year
Supplemental Schedule of Cash Flow Information:
During the year, cash was paid for the following:
Income taxes
Interest
1,051,902
255,362
364,934
44,147
34,265
47,500
19,923
120,993
35,355
(72,817)
(7,425)
272,226
247,924
(80,369)
750
460,624
2,308,825
(2,214,902)
232,316
452,344
-
42,795
-
-
(24,320)
277,980
112,525
1,002
227,970
2,005
(72,818)
716
(679,852)
1,794,160
(514,280)
(60,000)
(241,230)
(815,510)
(311,917)
-
(184,802)
(496,719)
(359,014)
-
(106,079)
(306,678)
(107,246)
(879,017)
(264,699)
100
(188,933)
(300,033)
(116,140)
(869,705)
614,298
1,621,049
427,736
1,193,313
$
2,235,347 $
1,621,049
$
$
335,398 $
30,946 $
100,885
64,462
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARY
STATEMENTS OF CASH FLOWS (Continued)
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
For the Year Ended December 31, 2017:
The Company incurred approximately $115,462 in capital lease obligations.
For the Year Ended December 31, 2016:
The Company incurred approximately $88,369 in capital lease obligations.
On December 9, 2016 the $200,000 Oates Convertible Note was converted into 66,667 shares of Common Stock.
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
SilverSun Technologies, Inc. (the “Company”) and wholly owned subsidiary SWK Technologies, Inc. (“SWK”) is 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
proprietary software solutions, including its own proprietary Electronic Data Interchange (EDI) software, “MAPADOC.” The Company
is also a managed network service provider, providing remote network monitoring services, business continuity, disaster recovery, data
backup, and application hosting. The Company sells services and products to various industries including, but not limited to,
manufacturers, wholesalers and distributors located throughout the United States. The Company is publicly traded and was quoted on the
Over-the-Counter Bulletin Board (“OTCQB”) under the symbol “SSNT” until April 18, 2017. Since April 19, 2017, the Company has
been listed and is traded on the NASDAQ Capital Market under the symbol “SSNT”.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principals of Consolidation
The accompanying consolidated financial statements include the accounts of the “Company” and its wholly-owned subsidiary, SWK
Technologies, Inc. (“SWK”). These consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States. All significant inter-company transactions and accounts have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated 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.
F-8
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Goodwill
Goodwill is the excess of acquisition cost of an acquired entity over the fair value of the identifiable net assets acquired. Goodwill is not
amortized, but tested for impairment annually or whenever indicators of impairment exist. These indicators may include a significant
change in the business climate, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of
the business or other factors. No impairment losses were identified or recorded in the years ended December 31, 2017 and 2016.
Definite Lived Intangible Assets and Long-lived Assets
Purchased intangible assets are recorded at fair value using an independent valuation at the date of acquisition and are amortized over the
useful lives of the asset using the straight-line amortization method.
The Company assesses potential impairment of its intangible assets and other long-lived assets when there is evidence that recent events
or changes in circumstances have made recovery of an asset’s carrying value unlikely. 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. No impairment losses were
identified or recorded in the years ended December 31, 2017 and 2016.
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. 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, the Company offers customers an optional
annual software maintenance and support agreement for subsequent periods not exceeding one year. 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 Income.
Shipping and handling costs charged to customers are classified as revenue, and the shipping and handling costs incurred are included in
cost of sales.
Unbilled Services
The Company recognizes revenue on its professional services as those services are performed or certain obligations are met.
Unbilled services represent the revenue recognized but not yet invoiced.
F-9
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND 2016
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.
The Company maintains cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”) up
to federally insured limits. At times balances may exceed FDIC insured limits. The Company has not experienced any losses in such
accounts.
Concentrations
The Company maintains its cash with various institutions, which exceed federally insured limits throughout the year. At December 31,
2017, the Company had cash on deposit of approximately $1,933,772 in excess of the federally insured limits of $250,000.
For the years ended December 31, 2017 and 2016, our top ten customers accounted for 21% ($7,461,570) and 19% ($6,574,232),
respectively, of our total revenues. The Company does not rely on any one specific customer for any significant portion of our revenue
base.
For both the years ended December 31, 2017 and 2016, purchases from one supplier through a “channel partner” agreement were
approximately 23% and 24% respectively. This channel partner agreement is for a one year term and automatically renews for an
additional one year term on the anniversary of the agreements effective date.
For the years ended December 31, 2017 and 2016, one supplier represented approximately 37% and 42% 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, 2017, 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.
Property and Equipment
Property and equipment is stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method based
upon the estimated useful lives of the assets, generally three to seven years. Maintenance and repairs that do not materially add to the
value of the equipment nor appreciably prolong its life are charged to expense as incurred.
When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and the
resulting gain or loss is included in the consolidated statements of operations.
F-10
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes, as well as net operating loss carryforwards. Deferred tax
assets and liabilities are classified as 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.
The 2017 Tax Cuts and Jobs Act (“Tax Reform”) was enacted on December 22, 2017. The Tax Reform includes a number of changes in
existing tax law impacting businesses including a permanent reduction in the U.S. federal statutory rate from 34% to 21%, effective on
January 1, 2018. Under U.S. GAAP, changes in tax rates and tax law are accounted for in the period of enactment and deferred tax assets
and liabilities are measured at the enacted tax rate. The rate reconciliation includes the Company’s assessment of the accounting under
the Tax Reform which is preliminary and is based on information that was available to management at the time the consolidated financial
statements were prepared.
The Company files income tax returns in the U.S. federal and state jurisdictions. Tax years 2014 to 2017 remain open to examination for
both the U.S. federal and state jurisdictions.
There were no liabilities for uncertain tax positions at December 31, 2017 and 2016.
Fair Value Measurement
The accounting standards define fair value and establish a hierarchy for inputs used in measuring fair value that maximizes the use of
observable inputs and minimizes the use on unobservable inputs by requiring that the most observable inputs be used when available.
Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained
from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the
assumptions market participants would use in pricing the asset or liability developed based on the best information available in the
circumstances. The hierarchy is as follows:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value
hierarchy gives the highest priority to Level 1 inputs.
Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to
Level 3 inputs.
The Company’s current financial assets and liabilities approximate fair value due to their short term nature and include cash, accounts
receivable, accounts payable, and accrued liabilities. The carrying value of longer term lease and debt obligations approximate fair value
as their stated interest rates approximate the rates currently available. The Company’s intangibles are measured on a non-recurring basis
using Level 3 inputs, as discussed in Note 5.
Stock-Based Compensation
Compensation expense related to share-based transactions, including employee stock options, is measured and recognized in the
financial statements based on a determination of the fair value. The grant date fair value is determined using the Black-Scholes-Merton
(“Black-Scholes”) pricing model. For employee stock options, the Company recognizes expense over the requisite service period on a
straight-line basis (generally the vesting period of the equity grant). The Company’s option pricing model requires the input of highly
subjective assumptions, including the expected stock price volatility and expected term. Any changes in these highly subjective
assumptions significantly impact stock-based compensation expense.
F-11
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recently Adopted Authoritative Pronouncements
In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classifications of Deferred Taxes,
which requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The current
requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not
affected by this amendment. The new guidance is effective for fiscal years, and interim periods within those years, beginning after
December 15, 2016. Early adoption is permitted and the standard may be applied either retrospectively or on a prospective basis to all
deferred tax assets and liabilities. During the first quarter of 2017, the Company adopted this ASU and the appropriate reclassifications
were made.
In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee
Share-Based Payment Accounting, which includes provisions intended to simplify various aspects related to how share-based payments
are accounted for and presented in the financial statements. The standard is effective for annual periods beginning after December 15,
2016. During the first quarter of 2017, the Company adopted this ASU. The key effects of the adoption on the Company’s financial
statements include that the Company will now recognize windfall tax benefits as deferred tax assets instead of tracking the windfall pool
and recording such benefits in equity. Additionally, the Company has elected to recognize forfeitures as they occur rather than
estimating them at the time of the grant.
Recent Authoritative Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to put most leases on their balance
sheets by recognizing a lessee’s rights and obligations, while expenses will continue to be recognized in a similar manner to today’s
legacy lease accounting guidance. This ASU could significantly affect the financial ratios used for external reporting and other purposes,
such as debt covenant compliance. This ASU will be effective for the Company on January 1, 2019, with early adoption permitted. The
Company is currently in the process of assessing the impact of this ASU on our consolidated financial statements.
In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers: Identifying performance obligations and
licensing (Topic 606), to reduce the cost and complexity of applying the guidance on identifying promised goods or services around
identifying performance obligations and implementation guidance on determining whether an entity’s promise to grant a license provides
a customer with either a right to use the entity’s intellectual property (which is satisfied at a point in time) or a right to access the entity’s
intellectual property (which is satisfied over time). The ASU defines a five-step process to achieve the core principal and, in doing so, it
is possible more judgement and estimates may be required within the revenue recognition process than are currently in use. The ASU
will be effective for the Company in the first quarter of 2018 using either of two methods: (1) retrospective application to each prior
reporting period presented with the option to elect certain practical expedients or (2) retrospective application with the cumulative effect
of initially applying the ASU recognized at the date of the initial application and providing certain disclosures. Early adoption is
permitted as of an annual and interim reporting periods beginning after December 15, 2016. The Company has evaluated the impact of
this ASU on the consolidated financial statements and does not believe there will be a material impact to their revenue.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350), which includes provisions, intended
to simplify the test for goodwill impairment. The standard is effective for annual periods beginning after December 15, 2019, with early
adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not expect
the adoption of this standard to have a significant impact on our financial position and results of operations.
No other recently issued accounting pronouncements had or are expected to have a material impact on the Company’s consolidated
financial statements.
F-12
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 3 – NET INCOME PER COMMON SHARE
The Company’s basic income per common share is based on net income 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
option and warrants to the extent they are dilutive. The computation of diluted income per share for the year ended December 31, 2017
and December 31, 2016 does not include share equivalents as all warrants and options exceeded the average market price of the common
stock.
Basic net (loss) income per share:
Net (loss) income
Weighted-average common shares outstanding
Basic net (loss) income per shares
Diluted net (loss) income per share:
Net (loss) income
Weighted-average common shares outstanding
Total adjusted weighted-average shares
Diluted net (loss) income per share
Year Ended
December 31,
2017
Year Ended
December 31,
2016
$
$
$
$
(486,469) $
4,489,013
(0.11) $
(486,469) $
4,489,013
4,489,013
(0.11) $
3,436,399
4,414,743
0.78
3,436,399
4,473,403
4,473,403
0.77
The following table summarizes securities that, if exercised, would have an anti-dilutive effect on earnings per share.
Stock options
Warrants
Year Ended
December 31,
2017
Year Ended
December 31,
2016
62,280
208,241
143,576
203,253
Total potential dilutive securities not included in loss per share
270,521
346,829
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows:
Leasehold improvements
Equipment, furniture and fixtures
Less: Accumulated depreciation
December 31,
2017
December 31,
2016
$
88,511 $
2,043,177
2,131,688
(1,564,156)
30,557
1,744,439
1,774,996
(1,308,794)
Property and equipment, net
$
567,532 $
466,202
Depreciation and amortization expense related to these assets for the years ended December 31, 2017 and 2016 was $255,362 and
$232,316.
Property and equipment under capital leases are summarized as follows:
Equipment, furniture and fixtures
Less: Accumulated depreciation
Property and equipment, net
F-13
December 31,
2017
December 31,
2016
315,560
(126,478)
521,905
(335,672)
$
189,082 $
186,233
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 5 – INTANGIBLE ASSETS
Intangible assets consist of developed intellectual property carried at cost less accumulated amortization and customer lists acquired at fair
value 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,
2017
1,192,109 $
3,129,551
4,321,660 $
(1,681,203)
2,640,457 $
$
$
$
December 31,
2016
677,829
3,069,551
3,747,380
(1,316,269)
2,431,111
Estimated
Useful Lives
5 – 7
5 – 15
Amortization expense related to the above intangible assets was $364,934 and $452,344, respectively, the years ended December 31,
2017 and 2016.
Included in proprietary developed software is $707,118 not yet in service and accordingly no amortization was recorded. The Company
expects the proprietary developed software to be placed in service in 2018, and has included amortization in the future amortization
schedule accordingly. On September 1, 2017 the Company paid $60,000 to an entity for its customer list.
The Company expects future amortization expense to be the following:
2018
2019
2020
2021
2022
thereafter
Total
Amortization
$
$
387,001
387,001
369,010
332,460
265,759
899,226
2,640,457
NOTE 6 – LINE OF CREDIT AND PROMISSORY NOTE
On July 21, 2016, SWK entered into a Revolving Demand Note (the “Revolving Demand Note”) by and between SWK (the “Borrower”)
and M&T Bank (“Lender”), a commercial lender. The Lender has agreed to loan SWK up to a principal amount of one million dollars.
The interest rate on the Revolving Demand Note shall be a variable rate, equal to the “Prime Rate”, plus ninety-five one-hundredths
percent (0.95%) per annum. There is a minimum interest rate floor of four percent (4%). The Revolving Demand Note is secured by all of
the Borrower’s assets pursuant to a Security Agreement. Furthermore, on July 21, 2016, the Company and Mr. Mark Meller, individually,
entered into Unlimited Guaranty agreements (the “Guaranty Agreements”) with the Lender. The line is also collateralized by substantially
all of the assets of the Company. Under the Guaranty Agreements, the Company and Mr. Meller personally, jointly and severally
guaranteed the liabilities of the Borrower due and owing under the terms of the Revolving Demand Note. At December 31, 2017 and
December 31, 2016, the outstanding balance was $0.
On May 6, 2014, SWK acquired certain assets of ESC, Inc. pursuant to an Asset Purchase Agreement for a promissory note in the
aggregate principal amount of $350,000 (the “ESC Note”). The ESC Note matures on April 1, 2019. Monthly payments are $6,135
including interest at 2% per year. At December 31, 2017 and December 31, 2016, the outstanding balance was $102,742 and $173,535
respectively.
On March 11, 2015, SWK acquired certain assets of 2000 SOFT, Inc. d/b/a Accounting Technology Resource (ATR) pursuant to an
Asset Purchase Agreement for cash of $80,000 and a promissory note for $175,000 (the “ATR Note”). The ATR note matures on
February 1, 2018. Monthly payments are $5,012 including interest at 2% per year. At December 31, 2017 and December 31, 2016, the
outstanding balance was $14,987 and $74,194 respectively.
F-14
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 6 – LINE OF CREDIT AND PROMISSORY NOTE (Continued)
On July 6, 2015, SWK acquired certain assets of ProductiveTech Inc. (PTI) pursuant to an Asset Purchase Agreement cash of $500,000
and a promissory note for $600,000 (the “PTI Note”). The PTI note is due in 60 months from the closing date and bears interest at a rate
of two and one half (2.5%) percent. The monthly payments including interest are $10,645. At December 31, 2017 and December 31,
2016, the outstanding balance was $319,249 and $437,403 respectively.
On October 19, 2015, SWK acquired certain assets of Oates & Company, LLC (Oates) pursuant to an Asset Purchase Agreement cash of
$125,000 and a promissory note for $175,000 (the “Oates Note”). The Oates note is due in three years from the closing date and bears
interest at a rate of two (2%) percent. The monthly payments including interest are $5,012. At December 31, 2017 and December 31,
2016, the outstanding balance was $49,494 and $108,018 respectively.
At December 31, 2017, future payments of promissory notes are as follows over each of the next three fiscal years:
2018
2019
2020
Total
$
$
257,846
154,726
73,900
486,472
NOTE 7 – CAPITAL LEASE OBLIGATIONS
The Company has entered into lease commitments for equipment that meet the requirements for capitalization. The equipment has been
capitalized and is included property and equipment, net in the accompanying balance sheets. The related obligations are based upon the
present value of the future minimum lease payments with interest rates ranging from 7.1% to 9%.
At December 31, 2017, future payments under capital leases are as follows:
2018
2019
2020
Total minimum lease payments
Less amounts representing interest
Present value of net minimum lease payments
Less current portion
Long-term capital lease obligation
$
$
104,094
45,249
28,489
177,832
(14,775)
163,057
(94,443)
68,614
NOTE 8 – EQUITY
Equity
On January 11, 2016, the Company announced the payment of a $0.06 special cash dividend per share of Common Stock. The dividend
payments were paid out on January 20, 2016 for an aggregate amount of $264,699, which reduced additional paid in capital.
On July 28, 2016 (the “Effective Date”), the Company entered into a Series B Preferred Stock Purchase Agreement (the “Preferred Stock
Purchase Agreement”) with the Company’s Chief Executive Officer, Mr. Mark Meller, pursuant to which Mr. Meller was issued the only
share of the Company’s authorized but unissued Series B Preferred Stock. Mr. Meller was issued one (1) share of Series B Preferred
Stock for (i) $100 in cash and (ii) as partial consideration for Mr. Meller’s personal guarantee of the Revolving Demand Note. Each one
(1) share of the Series B Preferred Stock shall have voting rights equal to (x) the total issued and outstanding Common 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 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). 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.
F-15
Table of Contents
NOTE 8 – EQUITY (Continued)
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
On January 23, 2017, the Company announced the payment of a $0.02 special cash dividend per share of Common Stock. The dividend
payments were paid out on January 31, 2017 for an aggregate amount of $89,566, which was applied against additional paid in capital.
On January 27, 2017 the Company issued 100 shares of stock each to 125 non-executive employees of SWK valued at $47,500 based on
the current market price at issue date.
On April 24, 2017, the Company announced the payment of a $0.02 special cash dividend per share of Common Stock. The dividend
payments were paid out on May 10, 2017 for an aggregate amount of $89,816, which was applied against additional paid in capital.
On November 15, 2017, the Company announced the payment of a $0.04 special cash dividend per share of Common Stock. The
dividend payments were paid out on December 4, 2017 for an aggregate amount of $179,632, which was applied against additional paid
in capital.
Options
Total stock compensation recognized for the year ended December 31, 2017 and 2016 was $34,265 and $42,795, respectively.
A summary of the status of the Company’s stock option plans for the fiscal years ended December 31, 2017 and 2016 and changes
during the years are presented below (in number of options):
Outstanding options at January 1, 2016
Options granted
Options canceled/forfeited
Outstanding options at December 31, 2016
Options granted
Options canceled/forfeited
Number
of Options
Average
Exercise Price
183,576 $
-
(40,000) $
143,576 $
- $
(81,296) $
4.49
-
4.50
3.76
-
4.80
Average
Remaining
Contractual
Term
Aggregate
Intrinsic Value
2.7 years
$
-0-
1.6 years
$
-0-
Outstanding options at December 31, 2017
62,280 $
3.78
2.0 years
$
Vested Options:
December 31, 2017:
December 31, 2016:
34,640 $
103,575 $
3.61
4.47
1.8 years
1.0 years
$
$
-0-
-0-
-0-
F-16
Table of Contents
NOTE 8 – EQUITY (Continued)
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
As of December 31, 2017 the unamortized compensation expense for stock options was $70,535. Unamortized compensation expense is
expected to be recognized over a weighted-average period of 2.4 years.
Warrants
On March 27, 2017 the Company granted 4,988 warrants with a fair value of approximately $19,923, which immediately vested, to John
Schachtel as part of his compensation for agreeing to join the Board of Directors. 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 $4.00; b) exercise
price of $4.01; c) Dividend yield of 0%; d) Risk free interest rate of 1.42%; e) expected volatility of 284.28%; f) Expected life of 5 years.
The following table summarizes the warrants transactions:
Balance, January 1, 2016
Granted
Exercised
Canceled
Outstanding and Exercisable December 31, 2016
Granted
Exercised
Canceled
Outstanding and Exercisable December 31, 2017
Warrants
Outstanding
Weighted
Average
Exercise Price
203,253 $
- $
- $
- $
203,253 $
4,988 $
- $
- $
208,241 $
5.29
-
-
-
5.29
4.01
-
-
5.26
NOTE 9 – INCOME TAXES
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 $6,849,000 as of December 31, 2017, 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 2024 to 2034.
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.
F-17
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 9 – INCOME TAXES (Continued)
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
Allowance for doubtful accounts
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, December 31,
2017
2016
$
$
1,745,000 $
285,000
13,000
118,000
15,000
2,176,000
(179,000)
(179,000)
1,997,000
(634,000)
1,363,000 $
2,660,000
355,000
8,000
150,000
11,000
3,184,000
(179,000)
(179,000)
3,005,000
(590,098)
2,414,902
The 2017 Tax Cuts and Jobs Act (“Tax Reform”) was enacted on December 22, 2017. The Tax Reform includes a number of changes in
existing tax law impacting businesses including a permanent reduction in the U.S. federal statutory rate from 34% to 21%, effective on
January 1, 2018. Under U.S. GAAP, changes in tax rates and tax law are accounted for in the period of enactment and deferred tax
assets and liabilities are measured at the enacted tax rate. The rate reconciliation includes the Company’s assessment of the accounting
under the Tax Reform which is preliminary and is based on information that was available to management at the time the consolidated
financial statements were prepared. Accordingly, the Company has determined a preliminary $934,000 of tax provision related to Tax
Reform. This initial assessment is subject to adjustment in future periods for factors including the completion of federal and state tax
returns for 2017 and finalization of gross deferred tax differences, future interpretive guidance expected to be issued by U.S. Treasury,
future interpretive guidance issued by states regarding conformity with the Internal Revenue Code provisions as of December 31, 2017,
ongoing IRS examinations and the additional time required to refine calculations.
For the year ended December 31, 2017, the Company’s Federal and State provision requirements were calculated based on the
estimated tax rate. The Federal effective rate is higher than the statutory rate primarily due to change in federal statutory rate
described above and Incentive Stock Options (ISO) and 50% of general meal and entertainment expense which are not tax deductible.
The total provision for the year ended December 31, 2017 was $1,394,031.
For the year ended December 31, 2016, the Company’s Federal and State provision requirements were offset by the reversal of a
significant portion of our valuation allowance, no longer deemed necessary, taking into consideration Section 382 limitations. The
Company recorded a tax benefit of $2,563,637, 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 current and projected income. Additionally, the tax return
to provision true-up of prior year taxes owed was a result of over accrual of taxes for the 2015 tax year.
F-18
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 9 – INCOME TAXES (Continued)
A reconciliation of the statutory income tax rate to the effective rate is as follows for the period December 31, 2017 and 2016:
Federal income tax rate
State income tax, net of federal benefit
Permanent differences
Prior year adjustments
Change in tax rates
Change in valuation allowance
Effective income tax rate
Income tax provision (benefit):
Current:
Federal
State and local
December 31,
2017
December 31,
2016
34%
10%
4%
-%
48%
103%
2%
153%
34%
5%
6%
(20%)
25%
-
(208%)
(183%)
Year Ended
December 31, December 31,
2017
2016
$
183,546 $
158,583
(108,832)
100,000
Total current tax provision (benefit)
342,129
(8,832)
Deferred:
Federal
State and local
Release of valuation allowance
1,159,502
(107,600)
-
334,786
13,949
(2,563,637)
Total deferred tax provision (benefit)
1,051,902
(2,214,902)
Total provision (benefit)
$
1,394,031
(2,223,734)
NOTE 10 – RELATED PARTY TRANSACTIONS
The Company leases its North Syracuse office space from its current CFO, Crandall Melvin III which expires on May 31, 2018. The
monthly rent for this office space is $2,100. Total rent paid for 2017 and 2016 was $25,200 and $25,200 respectively under this lease.
The Company leases its Seattle office space from Mary Abdian, an employee of SWK, which expires September 30, 2018. The
monthly rent for this office space is $3,090 and increases 3% each year. Total rent paid for 2017 and 2016 under this lease was $37,358
and $36,270 respectively under the lease.
As of December 31, 2017, long term debt and contingent consideration are considered related party liabilities as holders are current
employees of the company, see Note 6 and Note 11.
F-19
Table of Contents
NOTE 11 – COMMITMENTS
Operating Leases
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
Our main office was located at 5 Regent Street, Livingston, NJ where we had 6,986 square feet of office space at a monthly rent of
$7,400. The lease expired on December 31, 2016 and was subsequently extended for two months ending February 28, 2017. On March
1, 2017 the Company entered into a new operating lease agreement for its main office located at 120 Eagle Rock Ave, East Hanover, NJ.
The main office premises consist of 5,129 square feet of office space at a monthly rent starting at $8,762 and escalating to $10,044 per
month by the end of the term April 30, 2024. On September 11, 2017, the company entered into an operating lease agreement for an
additional 1,870 square feet of office space at 120 Eagle Rock Ave, East Hanover, NJ commencing October 1, 2017 with a monthly rent
of $3,506 for a period of one year.
The Company has a 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 expired on May 31, 2015 and was subsequently extended for a three year term commencing June 1, 2015 and
ending May 31, 2018.
The Company also leases 2,700 square feet of office space in Skokie, Illinois with a monthly rent of $3,000. This lease expires April 30,
2018.
The Company leases 702 square feet of office space in Minneapolis, MN with a monthly rent of $1,515 a month. This lease expired
March 31, 2017 and was renewed for one year at $1,560 per month.
The Company leases 2,105 square feet of office space in Phoenix, AZ starting at $1,271 and escalating to $2,894 per month by the end
of the term September 30, 2019.
The Company leases 1,500 square feet of office space in Seattle, WA with a monthly rent of $3,000 a month escalating to $3,183 per
month. The lease expires September 30, 2018.
The Company leased 383 square feet of office space in Spartanburg, SC with a monthly rent of $450 a month which expired June 30,
2016.
The Company leases 3,422 square feet of office space in Greensboro, NC with a monthly rent of $4,182 a month. The lease expired
February 28, 2017 and was extended after reducing the rental space to 2,267 square feet at a monthly rent of $2,765 per month. The
extension expires February 28, 2020.
The Company leases 1,745 square feet of office space in Santa Ana, CA with a monthly rent of $3,225 per month escalating to $3,402
per month by the end of the lease term, April 30, 2018.
On January 12, 2017, the Company entered into an operating lease agreement for its south New Jersey office commencing March 1,
2017. The Company leases 6,115 square feet of office space in Thorofare, NJ starting at $4,591 per month and escalating to $5,168 per
month by the end of the term February 28, 2022.
Total rent expense under these operating leases for the year ended December 31, 2017 and 2016 was $412,272 and $365,205,
respectively.
The following is a schedule of approximate future minimum rental payments for operating leases subsequent to the year ended
December 31, 2017.
2018
2019
2020
2021
2022
Thereafter
$
$
329,773
228,671
177,763
176,258
127,447
159,854
1,199,766
F-20
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 11 – COMMITMENTS (continued)
Contingent Consideration
On October 1, 2015, SWK entered into an Asset Purchase Agreement (the “Macabe Purchase Agreement”) with The Macabe
Associates, Inc., (“Macabe”), a Washington corporation and Mary Abdian and John Nicholson in their individual capacity as
Shareholders. SWK acquired certain assets and liabilities of Macabe (as defined in the Macabe Purchase Agreement). In consideration
for the acquired assets, the Company paid $21,423 in cash. Additionally, the Company is obligated to 35% of the net margin on
software maintenance renewals for former Macabe customers for the first twelve months, and then 30%, 25% and 20% of the net
margin on software maintenance renewals for the following three years. The Company is obligated to pay 50% the first year, and 40%,
30% and 20% the three years after on the net margin on EASY Solution Maintenance, new software and license to existing Macabe
customers and EASY Solutions software and maintenance sales to new customers. On any former Macabe customers migrating to
Netsuite, X3 or Acumatica, the Company is obligated to pay 50% of the net margin of the sale after applicable costs and commissions
for the three years period after the acquisition. The Company estimated this contingent consideration to be approximately $417,971 at
acquisition. Certain payments were made in each of these contingent consideration components, resulting in a remaining balance of
$105,635 as of December 31, 2017. The Company estimates that the contingent consideration will be fully paid by September 30,
2019.
Employment agreements
The Company’s Chief Executive Officer and President has had an Employment Agreement with the Company since September 15,
2003. On February 4, 2016 (the “Effective Date”), the Company entered into an amended and restated employment agreement (the
“Meller Employment Agreement”) with Mark Meller, pursuant to which Mr. Meller will continue to serve as the Company’s President
and Chief Executive Officer. The Meller Employment Agreement was entered into by the Company and Mr. Meller primarily to
extend the term of Mr. Meller’s employment. The term of the Meller Employment Agreement is for an additional 7 years through
September of 2023 (the “Term”) and shall automatically renew for additional periods of one year unless otherwise terminated in
accordance with the employment agreement. As of the renewal date, the Company agreed to pay Mr. Meller and annual salary of
$565,000 with a ten percent (10%) increase every year. The Meller Employment Agreement provides for a severance payment to Mr.
Meller of three hundred percent (300%), less $100,000 of his gross income for services rendered to the Company in each of the five
prior calendar years should his employment be terminated following a change in control (as defined in the Meller Employment
Agreement).
NOTE 12 – SUBSEQUENT EVENTS
On January 18, 2018, the Company issued 100 shares of stock each to 10 non-executive employees of SWK Technologies, Inc. valued
at $3,830 based on the current market price at issuance date.
On February 8, 2018, Board approved entering into a financial advisory agreement with WestPark Capital, Inc. The Company issued
4,825 shares of Common Stock at $3.70 per share or $17,853.
F-21
CERTIFICATION OF PRINCIPAL EXECUTIVE 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.
a)
b)
c)
d)
5.
a)
b)
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 present in
this report;
I am 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:
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 financing 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
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):
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 involved management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: March 26, 2018
By:
/s/ Mark Meller
Mark Meller
Principal Executive Officer
SilverSun Technologies, Inc.
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 31.2
I, Crandall Melvin III, certify that:
1.
2.
3.
4.
a)
b)
c)
d)
5.
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 present in
this report;
I am 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:
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 financing 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
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) 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
b) Any fraud, whether or not material, that involved management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: March 26, 2018
By:
/s/ Crandall Melvin III
Crandall Melvin III
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 period ended December
31, 2017, 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 period ended December 31, 2017, 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 period ended December 31, 2017, fairly presents, in all
material respects, the financial condition and results of operations of the Company.
Date: March 26, 2018
By:
/s/ Mark Meller
Mark Meller
Principal Executive 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 32.2
In connection with this Annual Report of SilverSun Technologies, Inc. (the “Company”), on Form 10-K for the period ended December
31, 2017, as filed with the U.S. Securities and Exchange Commission on the date hereof, I, Crandall Melvin III, Principal Financial
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 period ended December 31, 2017, 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 period ended December 31, 2017, fairly presents, in all
material respects, the financial condition and results of operations of the Company.
Date: March 26, 2018
By:
/s/ Crandall Melvin III
Crandall Melvin III
Principal Financial Officer
SilverSun Technologies, Inc.