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, 2020
or
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-38063
SILVERSUN TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
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 pursuant to Section 12(g) of the Act:
Title of each class
Common Stock, par value $0.00001 per share
Trading Symbol(s)
SSNT
Name of each exchange on which registered
The NASDAQ Capital Market
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 past 12
months, and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth
company. See definition of “large accelerated filer,” accelerated filer” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
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, 2020 based on a closing price of $2.01 was
$3,915,930.
As of March 24, 2021, the registrant had 5,061,177 shares of its common stock, par value $0.00001 per share, outstanding.
TABLE OF CONTENTS
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
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.
We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. The COVID-19 pandemic could adversely affect us, our
customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on our business, financial position, results of operations,
liquidity and prospects are uncertain. In addition, changes to statutes, regulations, or regulatory policies or practices because of, or in response to COVID-19, could affect us
in substantial and unpredictable ways. It is not possible for us to predict all of those risks, nor can we assess the impact of all of those risks on our business or the extent to
which any factor may cause actual results to differ materially from those contained in any forward-looking statement. The forward-looking statements in this Annual Report
on Form 10-K are based on assumptions management believes are reasonable. However, due to the uncertainties associated with forward-looking statements, you should not
place undue reliance on any forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and unless required by law, we
expressly disclaim any obligation or undertaking to publicly update any of them in light of new information, future events, or otherwise.
From time to time, forward-looking statements also are included in our other periodic reports on Forms 10-Q and 8-K, in our press releases, in our presentations, on our
website and in other materials released to the public. Any or all of the forward-looking statements included in this Annual Report on Form 10-K and in any other reports or
public statements made by us are not guarantees of future performance and may turn out to be inaccurate. These forward-looking statements represent our intentions, plans,
expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could
cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the
events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not
to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. All subsequent written and oral forward-
looking statements concerning other matters addressed in this Annual Report on Form 10-K and attributable to us or any person acting on our behalf are expressly qualified
in their entirety by the cautionary statements contained or referred to in this Annual Report on Form 10-K.
Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a
change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.
For discussion of factors that we believe could cause our actual results to differ materially from expected and historical results see “Item 1A — Risk Factors” below.
In this Annual Report on Form 10-K, unless otherwise indicated or the context otherwise requires, “SilverSun”, the “Company”, “we”, “us” or “our” refer to SilverSun
Technologies, Inc., a Delaware corporation, and its subsidiaries.
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”), Human
Capital Management (“HCM”), Warehouse Management Systems (“WMS”), Customer Relationship Management (“CRM”), and Business Intelligence (“BI”). Additionally,
we have our own development staff building software solutions for various ERP enhancements. Our value-added services focus on consulting and professional services,
specialized programming, training, and technical support. We have a dedicated Information Technology (“IT”) network services practice that provides managed services,
cybersecurity, application hosting, disaster recovery, business continuity, cloud and other services. Our customers are nationwide, with concentrations in the New York/New
Jersey metropolitan area, Arizona, Southern California, North Carolina, Washington, Oregon and Illinois.
Our core business is divided into the following practice areas:
ERP (Enterprise Resource Management) and Accounting Software
We are a value-added reseller for a number of industry-leading ERP applications. We are a Sage Software Authorized Business Partner and Sage Certified Gold
Development Partner. We believe we are among the largest Sage partners in North America, with a sales and implementation presence complemented by a scalable software
development practice for customizations and enhancements. Due to the growing demand for cloud-based ERP solutions, we also have in our ERP portfolio Acumatica, a
browser-based ERP solution that can be offered on premise, in the public cloud, or in a private cloud. We develop and resell a variety of add-on solutions to all our ERP and
accounting packages that help customize the installation to our customers’ needs and streamline their operations.
Value-Added Services for ERP
We go beyond simply reselling software packages; we have a consulting and professional services organization that manages the process as we move from the sales stage
into implementation, go live, and production. We work inside our customers’ organizations to ensure all software and IT solutions are enhancing their business needs. A
significant portion of our services revenue comes from continuing to work with existing customers as their business needs change, upgrading from one version of software to
another, or providing additional software solutions to help them manage their business and grow their revenue. We have a dedicated help desk team that fields hundreds of
calls every week. Our custom programming department builds specialized software packages as well as “off the shelf” enhancements and time and billing software.
Network and Managed Services
We provide comprehensive IT network and managed services designed to eliminate the IT concerns of our customers. Businesses can focus on their core strengths rather
than technology issues. We adapt our solutions for virtually any type of business, from large national and international product and service providers, to small businesses
with local customers. Our business continuity services provide automatic on-site and off-site backups, complete encryption, and automatic failure testing. We also provide
application hosting, IT consulting and managed network services. Our focus in the network and managed services practice is to focus on industry verticals in order to
demonstrate our ability to better understand our customers’ needs.
Industry Overview
As a value-added reseller of business application software, we offer solutions for accounting and business management, financial reporting, managed services, ERP, HCM,
WMS, CRM, and BI. Additionally, we have our own development staff building software solutions for various ERP enhancements. Our value-added services focus on
consulting and professional services, specialized programming, training, and technical support. The majority of our customers are small and medium businesses (“SMBs”).
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Potential Competitive Strengths
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Independent Software Vendor. As an independent software vendor we have published integrations between ERPs and third-party products which differentiates us
from other business application providers because, as a value-added reseller of the ERPs that our proprietary products integrate with, we have specific software
solution expertise in the ERPs we resell, which ensures that our products tightly integrate with the ERPs. We own the intellectual property related to these
integrations and sell the solutions both directly and through other software resellers within the Sage network.
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.
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 us 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. We have established a national presence via our internal marketing, sales programs, and acquisitions and now have ERP customers
throughout most of the United States.
Intra-Company Growth
Our intra-company growth strategy is to increase our market penetration and client retention through the upgrade of, and expanded sales efforts with our existing products
and managed services and development of new and enhanced software and technology solutions. Our client retention is sustained by our providing responsive, ongoing
software and technical support and monitoring and maintenance services for both the solutions we sell and other client technology needs we provide.
Repeat business from our existing customer base has been key to our success and we expect it will continue to play a vital role in our growth. We focus on nurturing long-
standing relationships with existing customers while also establishing relationships with new customers.
Acquisitions
The markets in which we provide our services are occupied by a large number of competitors, many substantially larger than us, and with significantly greater resources and
geographic reach. We believe that to remain competitive, we need to take advantage of acquisition opportunities that arise which may help us achieve greater geographic
presence and economies both within our existing footprint and expanded territories. 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:
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Managed Service Providers (“MSPs”). MSPs provide their small and medium-sized business clients with a suite of services, which may include 24/7/365 remote monitoring
of networks, disaster recovery, business continuity, data back-up, cyber-security and the like. There are hundreds of providers of such services in the U.S., most with annual
recurring revenue of less than $10 million. We believe that we may be able to consolidate a number of these MSPs with our existing operation in an effort to become one of
the more significant providers of these services in the U.S.
Independent Software Vendors (“ISVs”). ISVs are publishers of both stand-alone software solutions and integrations that integrate with other third-party products. Our
interest lies with ISVs selling into the small and medium-sized business marketplace, providing applications addressing e-commerce, mobility, security, and other
functionalities. Since we have expertise in both selling directly to end-users and selling through a sales channel, we believe we can significantly enhance the sales volume of
any potential acquisition via our existing infrastructure, our sales channel, and our internal marketing programs. There are many ISVs in North America, constituting a large
and significant target base for our acquisition efforts.
Value-Added Resellers (“VARs”) of ERP, Human Capital Management (“HCM”), Warehouse Management Systems (“WMS”), CRM and BI Software. VAR’s gross
margins are a function of the sales volume they provide a publisher in a twelve (12) month period, and we are currently operating at the highest margins. Smaller resellers
who sell less and operate at significantly lower margins, are at a competitive disadvantage to companies such as ours and are often amenable to creating a liquidity event for
themselves by selling to larger organizations. We have benefitted from completing such acquisitions in a number of ways, including but not limited to: (i) garnering new
customers to whom we can upsell and cross-sell our broad range of products and services; (ii) gaining technical resources that enhance our capabilities; and (iii) extending
our geographic reach.
Our business strategy provides that we will examine the potential acquisition of businesses within and outside our industry. In determining a suitable acquisition candidate,
we will carefully analyze a target’s potential to add to and complement our product mix, expand our existing revenue base, improve our margins, expand our geographic
coverage, strengthen our management team, add technical resources and expertise, and, above all, improve stockholder returns. More specifically, we have identified the
criteria listed below, by which we evaluate potential acquisition targets in an effort to gain the synergies necessary for successful growth of the Company:
● 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.
We continue to seek out and hold preliminary discussions with various acquisition candidates.
In February 2021, the Company signed a non-binding letter of intent to acquire CT-Solution, Inc. ("CT"), a leading Indianapolis-based reseller of Sage Software solutions.
Over the last 20 years, CT-Solution has implemented technology applications at prominent manufacturers, distributors, and professional service organizations throughout the
Midwest. However, currently we have not entered into other any agreements or understandings for any acquisitions that management deems material.
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Enterprise Resource Planning Software Strategy
Our ERP software strategy is focused on serving the needs of our expansive installed base of customers for our Sage 100cloud, Sage 500 ERP, and Sage BusinessWorks
practices, while rapidly growing the number of customers using Sage X3 and Acumatica. We currently have approximately 8,000 active ERP customers using one of these
six solutions, including customers using certain add-on support products to these solutions. In the past we, have focused primarily on on-premise mid-market Sage Software
solutions but in the past three years have focused on larger enterprise-type offerings and cloud ERP solutions. This has allowed us to increase our average deal size and to
keep pace with the changing trends that we see in the industry.
Managed Services Strategy
The IT Managed Services market is broadly segmented by types of services, for example, managed datacenter, managed network, managed mobility, managed
infrastructure, managed communications, managed information, managed security and other managed services. In addition, the market is segmented by market verticals,
such as public sector, banking, financial services and insurance, education, retail, contact centers and service industries, high tech and telecommunications, healthcare and
pharmaceuticals, travel and logistics, manufacturing, energy and utilities among others.
The recent trend in the industry shows that there is a high demand for managed services across every industry vertical. The implementation of managed services can reduce
IT costs by 30% to 40% in such enterprises. This enables organizations to have flexibility and technical advantage. Enterprises having their services outsourced look forward
to risk sharing and to reduce their IT costs and IT commitments, so that they can concentrate on their core competencies. Organizations implementing managed services
have reported almost a 50% to 60% increase in the operational efficiency of their outsourced processes. Enterprises have accepted outsourcing services as a means to enable
them to reduce their capital expenditure (CapEx) and free up internal sources. Newer managed services that penetrate almost all the industry domains, along with aggressive
pricing in services, are being offered. This results in an increase in the overall revenues of the managed services market. It is observed that there is an increase in outsourcing
of wireless, communications, mobility, and other value-added services, such as content and e-commerce facilities. With increasing technological advancements and the cost
challenges associated with having the IT services in-house, we believe the future seems optimistic for managed services providers.
Our strategy is to continue to expand our product offerings to the small and medium sized business marketplace, and to increase our scale and capabilities via acquisition
throughout the United States, but initially in those regions where we currently have existing offices.
Geographic Expansion
Generally, our technology offerings require some on-premise implementation and support. When we expand into new geographic territories, we prefer to find qualified
personnel in an area to augment our current staff of consultants to service our business. The need for hands-on implementation and support may also require investment in
additional physical offices and other overhead. We believe our approach is conservative.
We may accelerate expansion if we find complementary businesses that we are able to acquire in other regions. Our marketing efforts to expand into new territories have
included attendance at trade shows in addition to personal contact.
Our Products and Services
Enterprise Resource Planning Software
Substantially all our initial sales of ERP financial accounting solutions consist of pre-packaged software and associated services to customers in the United States.
The Company resells ERP software published by Sage Software, Acumatica and other providers for the financial accounting requirements of small- and medium-sized
businesses focused on manufacturing and distribution, and the delivery of related services from the sales of these products, including installation, support and training. The
programs perform and support a wide variety of functions related to accounting, including financial reporting, accounts payable and accounts receivable, and inventory
management.
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We provide a variety of services along with our financial accounting software sales to assist our customers in maximizing the benefits from these software applications.
These services include training, technical support, and professional services. We employ class instructors and have formal, specific training in the topics they are teaching.
We can also provide on-site training services that are highly tailored to meet the needs of a particular customer. Our instructors must pass annual subject-matter
examinations required by Sage to retain their product-based teaching certifications.
We provide end-user technical support services through our support/help desk. Our product and technology consultants assist customers calling with questions about product
features, functions, usability issues, and configurations. The support/help desk offers services in a variety of ways, including prepaid services, time and materials billed as
utilized and annual support contracts. Customers can communicate with the support/help desk through e-mail, telephone, and fax channels. Standard support/help desk
services are offered during normal business hours five (5) days per week.
Warehouse Management Systems
We are resellers of the Accellos Warehouse Management System (“WMS”) software published by High Jump, Inc. (“High Jump”). High Jump develops warehouse
management software for mid-market distributors. The primary purpose of a WMS is to control the movement and storage of materials within an operation and process the
associated transactions. Directed picking, directed replenishment, and directed put-away are the key to WMS. The detailed setup and processing within a WMS can vary
significantly from one software vendor to another. However, the basic WMS will use a combination of item, location, quantity, unit of measure, and order information to
determine where to stock, where to pick, and in what sequence to perform these operations.
The Accellos WMS software improves accuracy and efficiency, streamlines materials handling, meets retail compliance requirements, and refines inventory
control. Accellos also works as part of a complete operational solution by integrating seamlessly with radio frequency hardware, accounting software, shipping systems and
warehouse automation equipment.
We market the Accellos solution to our existing and new medium-sized business customers.
IT Managed Network Services and Business Consulting
We provide IT managed services, cybersecurity, business continuity, disaster recovery, data back-up, network maintenance and service upgrades for our business clients. We
are a Microsoft Solutions Provider. Our staff includes engineers who maintain certifications from Microsoft and Sage Software. They are Microsoft Certified Systems
Engineers and Microsoft Certified Professionals, and they provide a host of services for our clients, including remote network monitoring, server implementation, support
and assistance, operation and maintenance of large central systems, technical design of network infrastructure, technical troubleshooting for large scale problems, network
and server security, and backup, archiving, and storage of data from servers. There are numerous competitors, both larger and smaller, nationally and locally, with whom we
compete in this market.
Cybersecurity
We provide enterprise level security services to the mid-market. Our cybersecurity-as-a-service offering includes a security operations center, incident response,
cybersecurity assessments, and hacking simulations. The service is particularly well-suited for customers in compliance-driven and regulated industries, including financial
services, pension administration, insurance, and the land and title sector.
Application Hosting
Through our wholly owned subsidiary, Secure Cloud Services, Inc., we acquired the assets of Nellnube, Inc. to further market application hosting services throughout the
country.
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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. 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 Cloud, Sage 500 ERP and Sage X3. The Channel Partner Agreement is for a one-year term, and automatically renews for an additional one-year term
on the anniversary of the agreement’s effective date. These agreements authorize us to sell these software products to customers in the United States. There are no clauses in
this agreement that limit or restrict the services that we can offer to customers. We also operate a Sage Software Authorized Training Center Agreement and are party to a
Master Developers Program License Agreement.
For the years ended December 31, 2020 and 2019, purchases from one supplier through a “channel partner” agreement were approximately 15% and 19% 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. 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, 2020 and 2019, the top ten customers accounted for 10% ($4,246,257) and
10% ($3,903,702), respectively, of total revenues. Generally, we do not rely on any one specific customer for any significant portion of our revenue base. No single
customer accounted for ten percent or more of our consolidated revenues base.
Intellectual Property
We regard our technology and other proprietary rights as essential to our business. We rely on copyright, trade secret, confidentiality procedures, contract provisions, and
trademark law to protect our technology and intellectual property. We have also entered into confidentiality agreements with our consultants and corporate partners and
intend to control access to, and distribution of our products, documentation, and other proprietary information.
Competition
Our markets are highly fragmented, and the business is characterized by a large number of participants, including several large companies, as well significant number of
small, privately-held, local competitors. A significant portion of our revenue is currently derived from requests for proposals (“RFPs”) and price is often an important factor
in awarding such agreements. Accordingly, our competitors may underbid us if they elect to price their services aggressively to procure such business. Our competitors may
also develop the expertise, experience and resources to provide services that are equal or superior in both price and quality to our services, and we may not be able to
enhance our competitive position. The principal competitive factors for our professional services include geographic presence, breadth of service offerings, technical skills,
quality of service and industry reputation. We believe we compete favorably with our competitors on the basis of these factors.
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Employees
As of March 24, 2021, we had approximately 165 full time employees with 46 of our employees engaged in sales and marketing activities, 79 employees are engaged in
service fulfillment, and 40 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.
On June 2, 2006, SWK completed the acquisition of certain assets of AMP-Best Consulting, Inc. (“AMP”) of Syracuse, New York. AMP is an information technology
company and value-added reseller of licensed ERP software published by Sage Software. AMP sold services and products to various end users, manufacturers, wholesalers
and distribution industry clients located throughout the United States, with special emphasis on companies located in the upstate New York region.
During 2011, SWK acquired Sage’s Software’s customer accounts in connection with IncorTech, LLC (“IncorTech”), a Southern California-based Sage business partner.
This transaction increased our geographical influence in Southern California for the sale and support of our MAPADOC integrated EDI solution and the marketing of our
Sage EM (formerly Sage ERP X3) to both former IncorTech customers as well as new consumers. IncorTech had previously provided professional accounting, technology,
and business consulting services to over 300 clients.
In June 2012, SWK acquired selected assets and obligations of Hightower, Inc., a Chicago-based reseller of Sage software applications. In addition to the strategic
geographic benefits that this acquisition brings to SWK, there is also a substantial suite of proprietary enhancement software solutions.
In May 2014, we completed the purchase of selected assets of ESC Software (“ESC”), a leading Arizona-based reseller of Sage Software and Acumatica applications.
Founded in 2000, ESC has implemented technology solutions at prominent companies throughout the Southwest. In addition to the strategic benefits of this acquisition, it
has given us additional annual revenues, approximately 300 additional Sage Software ERP customers and affords us market penetration in the Southwest.
On March 11, 2015 SWK entered into an Asset Purchase Agreement with 2000 SOFT, Inc. d/b/a Accounting Technology Resource (“ATR”), a California corporation. In
addition to the strategic geographic benefits of this acquisition, it has provided additional revenues from the approximately 250 additional customers.
On July 6, 2015 SWK entered into an Asset Purchase Agreement with ProductiveTech, Inc. (“PTI”), a Southern New Jersey corporation. In addition to the strategic
geographic benefits of this acquisition, it has provided additional revenues from the approximately 85 additional customers.
On October 1, 2015, SWK entered into an Asset Purchase Agreement with The Macabe Associates, Inc., (“Macabe”) a Washington based reseller of Sage Software and
Acumatica applications. In addition to the strategic geographic benefits of this acquisition, it has provided additional revenues from the approximately 180 additional
customers.
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On October 19, 2015, SWK entered into an Asset Purchase Agreement with Oates & Company, (“Oates”) a North Carolina reseller of Sage Software applications. In
addition to the strategic geographic benefits of this acquisition, it has provided additional revenues from the approximately 185 additional customers.
On May 31, 2018, SWK entered into an Asset Purchase Agreement with Info Sys Management, Inc., (“ISM”) an Oregon based reseller of Sage Software and Acumatica
applications. In addition to the strategic geographic benefits of this acquisition, it has provided additional revenues from the approximately 700 additional customers.
In May 2018, the Company formed a wholly owned subsidiary, Secure Cloud Services, Inc. (“SCS”), a Nevada corporation, for the purpose of providing application hosting
services. On May 31, 2018, Secure Cloud Services entered into an Asset Purchase Agreement with Nellnube, Inc. (“Nellnube”) an Oregon based application hosting
provider.
In May 2018, the Company formed a wholly owned subsidiary, Critical Cyber Defense Corp. (“CCD”), a Nevada corporation, for the purpose of providing cyber defense
products and services.
On January 1, 2019, SWK entered into an Asset Purchase Agreement with Partners in Technology, Inc., (PIT) an Illinois based reseller of Sage Software. In addition to the
strategic geographic benefits of this acquisition, it has provided additional revenues from the approximately 170 additional customers.
On August 26, 2019 SWK entered into and closed that certain Asset Purchase Agreement (the “MAPADOC Asset Purchase Agreement”) by and among the Company, SPS
Commerce, Inc., as buyer (“SPS”), and SWK as seller, pursuant to which SPS agreed to acquire from SWK substantially all of the assets related to the MAPADOC business.
On July 31, 2020, the Company entered into an Asset Agreement to acquire certain assets of Prairie Technology Solutions Group, LLC, (“PT”), a Chicago-based managed
services provider ("MSP") which provides managed IT services, cybersecurity, and business continuity and disaster recovery services for small and medium-sized businesses
pursuant to an Asset Agreement. This acquisition will help us in our plans to expand our MSP business to other regions where we currently have significant numbers of
customers from our other technology businesses, including Phoenix, Southern California, the Pacific Northwest, and North Carolina.
On October 1, 2020, the Company acquired certain assets of Computer Management Services, LLC (“CMS”) pursuant to an Asset Purchase Agreement. CMS is in the
business of selling and supporting enterprise resource planning and similar software for small and middle market companies. In addition to the strategic geographic benefits
of this acquisition, it has provided additional revenues from its additional customers.
On December 1, 2020, the Company acquired certain assets of a company d/b/a Business Software Solutions (“BSS”) pursuant to an Asset Purchase Agreement. BSS is an
Oregon based reseller of Sage Software and Acumatica applications. In addition to the strategic geographic benefits of this acquisition, it has provided additional revenues
from its additional customers.
In February 2021, the Company signed a non-binding letter of intent to acquire certain assets CT-Solution, Inc. ("CT"), a leading Indianapolis-based reseller of Sage
Software solutions. The acquisition is expected to close in April 2021. Over the last 20 years, CT-Solution has implemented technology applications at prominent
manufacturers, distributors, and professional service organizations throughout the Midwest.
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.
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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, 2020, and December 31, 2019, we had an accumulated deficit of $459,937 and $635,584, respectively. As of December 31, 2020, and December 31,
2019, we had stockholders’ equity of $7,279,992 and $8,894,660, respectively. We may incur net losses in the future. Our ability to achieve and sustain long-term
profitability is largely dependent on our ability to successfully market and sell our products and services, control our costs, and effectively manage our growth. We cannot
assure you that we will be able to maintain profitability. In the event we fail to maintain profitability, our stock price could decline.
We cannot accurately forecast our future revenues and operating results, which may fluctuate.
Our operating history and the rapidly changing nature of the markets in which we compete make it difficult to accurately forecast our revenues and operating
results. Furthermore, we expect our revenues and operating results to fluctuate in the future due to a number of factors, including the following:
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the timing of sales of our products and services;
disruption to the Company’s customers and revenue, labor workforce, unavailability of products and supplies used in operations due to the COVID-19
pandemic
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.
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 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.
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If we fail to maintain an effective system of internal control, we may not be able to report our financial results accurately or to reduce probability of fraud occurrence.
Any inability to report and file our financial results accurately and timely could harm our reputation and adversely impact the trading price of our Common Stock.
Effective internal control is necessary for us to provide reliable financial reports and prevent fraud. We may not be able to manage our business as effectively as we would if
an effective control environment existed, and our business and reputation with investors may be harmed.
Management has concluded that the Company did maintain effective internal control over financial reporting as of December 31, 2020, based on the criteria set forth in
2013 Internal Control—Integrated Framework issued by the COSO.
We may fail to recruit and retain qualified personnel.
We expect to rapidly expand our operations and grow our sales, development and administrative operations. Accordingly, recruiting and retaining such personnel in the
future will be critical to our success. There is intense competition from other companies for qualified personnel in the areas of our activities, particularly sales, marketing and
managed services. If we fail to identify, attract, retain and motivate these highly skilled personnel, we may be unable to continue our marketing and managed services
activities and service our clients’ needs, and this could have a material adverse effect on the Company’s business, financial condition, results of operations and future
prospects.
If our technologies and products contain defects or otherwise do not work as expected, we may incur significant expenses in attempting to correct these defects or in
defending lawsuits over any such defects.
Software products are not currently accurate in every instance, and may never be. Furthermore, we could inadvertently release products and technologies that contain
defects. In addition, third-party technology that we include in our products could contain defects. We may incur significant expenses to correct such defects. Clients who are
not satisfied with our products or services could bring claims against us for substantial damages. Such claims could cause us to incur significant legal expenses and, if
successful, could result in the plaintiffs being awarded significant damages. Our payment of any such expenses or damages could prevent us from becoming profitable.
Our success is highly dependent upon our ability to compete against competitors that have significantly greater resources than we have.
The ERP software, MSP and business consulting industries are highly competitive, and we believe that this competition will intensify. Many of our competitors have longer
operating histories, significantly greater financial, technical, product development and marketing resources, greater name recognition and larger client bases than we do. Our
competitors could use these resources to market or develop products or services that are more effective or less costly than any or all of our products or services or that could
render any or all of our products or services obsolete. Our competitors could also use their economic strength to influence the market to continue to buy their existing
products.
If we are not able to protect our trade secrets through enforcement of our confidentiality and non-competition agreements, then we may not be able to compete
effectively, and we may not be profitable.
We attempt to protect our trade secrets, including the processes, concepts, ideas and documentation associated with our technologies, through the use of confidentiality
agreements and non-competition agreements with our current employees and with other parties to whom we have divulged such trade secrets. If the employees or other
parties breach our confidentiality agreements and non-competition agreements or if these agreements are not sufficient to protect our technology or are found to be
unenforceable, our competitors could acquire and use information that we consider to be our trade secrets and we may not be able to compete effectively. Some of our
competitors have substantially greater financial, marketing, technical and manufacturing resources than we have, and we may not be profitable if our competitors are also
able to take advantage of our trade secrets.
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Our failure to secure trademark registrations could adversely affect our ability to market our product candidates and our business.
Our trademark applications in the United States and any other jurisdictions where we may file may be denied, and we may not be able to maintain or enforce our registered
trademarks. During trademark registration proceedings, we may receive rejections. Although we are given an opportunity to respond to those rejections, we may be unable to
overcome such rejections. In addition, with respect to the United States Patent and Trademark Office and any corresponding foreign agencies, third parties are given an
opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our
applications and/or registrations, and our applications and/or registrations may not survive such proceedings. Failure to secure such trademark registrations in the United
States and in foreign jurisdictions could adversely affect our ability to market our product candidates and our business.
We may unintentionally infringe on the proprietary rights of others.
Many lawsuits currently are being brought in the software industry alleging violation of intellectual property rights. Although we do not believe that we are infringing on any
patent rights, patent holders may claim that we are doing so. Any such claim would likely be time-consuming and expensive to defend, particularly if we are unsuccessful,
and could prevent us from selling our products or services. In addition, we may also be forced to enter into costly and burdensome royalty and licensing agreements.
Our industry is characterized by rapid technological change and failure to adapt our product development to these changes may cause our products to become obsolete.
We participate in a highly dynamic industry characterized by rapid change and uncertainty relating to new and emerging technologies and markets. Future technology or
market changes may cause some of our products to become obsolete more quickly than expected.
The trend toward consolidation in our industry may impede our ability to compete effectively.
As consolidation in the software industry continues, fewer companies dominate particular markets, changing the nature of the market and potentially providing consumers
with fewer choices. Also, many of these companies offer a broader range of products than us, ranging from desktop to enterprise solutions. We may not be able to compete
effectively against these competitors. Furthermore, we may use strategic acquisitions, as necessary, to acquire technology, people and products for our overall product
strategy. The trend toward consolidation in our industry may result in increased competition in acquiring these technologies, people or products, resulting in increased
acquisition costs or the inability to acquire the desired technologies, people or products. Any of these changes may have a significant adverse effect on our future revenues
and operating results.
We face intense price-based competition for licensing of our products which could reduce profit margins.
Price competition is often intense in the software market. Price competition may continue to increase and become even more significant in the future, resulting in reduced
profit margins.
The software and technology industry is highly competitive. If we cannot develop and market desirable products that the public is willing to purchase, we will not be
able to compete successfully. Our business may be adversely affected and we may not be able to generate any revenues.
We have many potential competitors in the software industry. We consider the competition to be competent, experienced, and may have greater financial and marketing
resources than we do. Our ability to compete effectively may be adversely affected by the ability of these competitors to devote greater resources to the development, sales,
and marketing of their products than are available to us. Some of the Company’s competitors, also, offer a wider range of software products, have greater name recognition
and more extensive customer bases than the Company. These competitors may be able to respond more quickly to new or changing opportunities, customer desires, as well
as undertake more extensive promotional activities, offer terms that are more attractive to customers and adopt more aggressive pricing policies than the Company. We
cannot provide any assurances that we will be able to compete successfully against present or future competitors or that the competitive pressure we may encounter will not
force us to cease operations.
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If there are events or circumstances affecting the reliability or security of the internet, access to our website and/or the ability to safeguard confidential information
could be impaired causing a negative effect on the financial results of our business operations.
Despite the implementation of security measures, our website infrastructure may be vulnerable to computer viruses, hacking or similar disruptive problems caused by
members, other internet users, other connected internet sites, and the interconnecting telecommunications networks. Such problems caused by third-parties could lead to
interruptions, delays or cessation of service to our customers. Inappropriate use of the internet by third-parties could also potentially jeopardize the security of confidential
information stored in our computer system, which may deter individuals from becoming customers. Such inappropriate use of the internet includes attempting to gain
unauthorized access to information or systems, which is commonly known as “cracking” or “hacking.” Although we have implemented security measures, such measures
have been circumvented in the past by hackers on other websites on the internet, although our networks have never been breached, and there can be no assurance that any
measures we implement would not be circumvented in future. Dealing with problems caused by computer viruses or other inappropriate uses or security breaches may
require interruptions, delays or cessation of service to our customers, which could have a material adverse effect on our business, financial condition and results of
operations.
If we lose the services of any of our key personnel our business may suffer.
We are dependent on Mark Meller, our Chief Executive Officer, and other key employees in our operating subsidiary SWK. The loss of any of our key personnel could
materially harm our business because of the cost and time necessary to retain and train a replacement. Such a loss would also divert management attention away from
operational issues.
To service our debt obligations, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control. Any failure to
repay our outstanding indebtedness as it matures, could materially adversely impact our business, prospects, financial condition, liquidity, results of operations and
cash flows.
Our ability to satisfy our debt obligations and repay or refinance our maturing indebtedness will depend principally upon our future operating performance.
As a result, prevailing economic conditions and financial, business, legislative, regulatory and other factors, many of which are beyond our control, will affect our ability to
make payments on our debt. If we do not generate sufficient cash flow from operations to satisfy our debt service obligations, we may have to undertake alternative financing
plans, such as refinancing or restructuring our debt, incurring additional debt, issuing equity or convertible securities, reducing discretionary expenditures and selling
certain assets (or combinations thereof). Our ability to execute such alternative financing plans will depend on the capital markets and our financial condition at such time. In
addition, our ability to execute such alternative financing plans may be subject to certain restrictions under our existing indebtedness. Any refinancing of our debt could be
at higher interest rates and may require us to comply with more onerous covenants compared to those associated with any debt that is being refinanced, which could further
restrict our business operations. Our inability to generate sufficient cash flow to satisfy our debt obligations, or our inability to refinance our debt obligations on
commercially reasonable terms or at all, would have a material adverse effect on our business, prospects, financial condition, liquidity, results of operations and cash flows.
Computer Malware, Viruses, Hacking, Phishing Attacks and Spamming Could Harm Our Business and Results of Operations.
Computer malware, viruses, physical or electronic break-ins and similar disruptions could lead to interruption and delays in our services and operations and loss, misuse or
theft of data. Computer malware, viruses, computer hacking and phishing attacks against online networking platforms have become more prevalent and may occur on our
systems in the future.
Any attempts by hackers to disrupt our website service or our internal systems, if successful, could harm our business, be expensive to remedy and damage our reputation or
brand. Our network security business disruption insurance may not be sufficient to cover significant expenses and losses related to direct attacks on our website or internal
systems. Efforts to prevent hackers from entering our computer systems are expensive to implement and may limit the functionality of our services. Though it is difficult to
determine what, if any, harm may directly result from any specific interruption or attack, any failure to maintain performance, reliability, security and availability of our
products and services and technical infrastructure may harm our reputation, brand and our ability to attract customers. Any significant disruption to our website or internal
computer systems could result in a loss of customers and could adversely affect our business and results of operations.
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We have previously experienced, and may in the future experience, service disruptions, outages and other performance problems due to a variety of factors, including
infrastructure changes, third-party service providers, human or software errors and capacity constraints. If our services are unavailable when customers attempt to access
them or they do not load as quickly as they expect, customers may seek other services.
Some errors in our software code may only be discovered after the code has been deployed. Any errors, bugs, or vulnerabilities discovered in our code after deployment,
inability to identify the cause or causes of performance problems within an acceptable period of time or difficultly maintaining and improving the performance of our
platform, particularly during peak usage times, could result in damage to our reputation or brand, loss of revenues, or liability for damages, any of which could adversely
affect our business and financial results.
We expect to continue to make significant investments to maintain and improve our software and to enable rapid releases of new features and products. To the extent that we
do not effectively address capacity constraints, upgrade our systems as needed and continually develop our technology and network architecture to accommodate actual and
anticipated changes in technology, our business and operating results may be harmed.
We have a disaster recovery program to transition our operating platform and data to a failover location in the event of a catastrophe and have tested this capability under
controlled circumstances, however, there are several factors ranging from human error to data corruption that could materially lengthen the time our platform is partially or
fully unavailable to our user base as a result of the transition. If our platform is unavailable for a significant period of time as a result of such a transition, especially during
peak periods, we could suffer damage to our reputation or brand, or loss of revenues any of which could adversely affect our business and financial results.
We Need to Manage Growth in Operations to Realize Our Growth Potential and Achieve Our Expected Revenues, and Our Failure to Manage Growth Will Cause a
Disruption of Our Operations Resulting in the Failure to Generate Revenue and an Impairment of Our Long-Lived Assets.
In order to take advantage of the growth that we anticipate in our current and potential markets, we believe that we must expand our sales and marketing operations. This
expansion will place a significant strain on our management and our operational, accounting, and information systems. We expect that we will need to continue to improve
our financial controls, operating procedures and management information systems. We will also need to effectively train, motivate and manage our employees. Our failure to
manage our growth could disrupt our operations and ultimately prevent us from generating the revenues we expect.
In order to achieve the above-mentioned targets, the general strategies of our Company are to maintain and search for hard-working employees who have innovative
initiatives, as well as to keep a close eye on expansion opportunities through merger and/or acquisition.
There is a risk associated with COVID-19
The Company’s operations may be affected by the recent and ongoing outbreak of the coronavirus disease 2019 (COVID-19) which in March 2020, was declared a
pandemic by the World Health Organization. The ultimate disruption which may be caused by the outbreak is uncertain; however, it may result in a material adverse impact
on the Company’s financial position, operations and cash flows. Possible areas that may be affected include, but are not limited to, disruption to the Company’s customers
and revenue, labor workforce, inability of customers to pay outstanding accounts receivable due and owing to the Company as they limit or shut down their businesses,
customers seeking relief or extended payment plans relating to accounts receivable due and owing to the Company, unavailability of products and supplies used in
operations, and the decline in value of assets held by the Company, including property and equipment.
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We Face Risks Arising from Acquisitions.
We may pursue strategic acquisitions in the future. Risks in acquisition transactions include difficulties in the integration of acquired businesses into our operations and
control environment, difficulties in assimilating and retaining employees and intermediaries, difficulties in retaining the existing clients of the acquired entities, assumed or
unforeseen liabilities that arise in connection with the acquired businesses, the failure of counterparties to satisfy any obligations to indemnify us against liabilities arising
from the acquired businesses, and unfavorable market conditions that could negatively impact our growth expectations for the acquired businesses. Fully integrating an
acquired company or business into our operations may take a significant amount of time. We cannot assure you that we will be successful in overcoming these risks or any
other problems encountered with acquisitions and other strategic transactions. These risks may prevent us from realizing the expected benefits from acquisitions and could
result in the failure to realize the full economic value of a strategic transaction or the impairment of goodwill and/or intangible assets recognized at the time of an acquisition.
These risks could be heightened if we complete a large acquisition or multiple acquisitions within a short period of time.
Risks Related to Our Securities
The market price of our common stock is likely to be volatile and could subject us to litigation.
The market price of our common stock has been and is likely to continue to be subject to wide fluctuations. Factors affecting the market price of our common stock include:
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variations in our operating results, earnings per share, cash flows from operating activities, deferred revenue, and other financial metrics and non-financial metrics,
and how those results compare to analyst expectations;
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.
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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, stockbrokers, 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 compared to a
seasoned issuer that has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. A broader or more
active public trading market for our common shares may not develop or if developed, may not be sustained. Due to these conditions, you may not be able to sell your shares
at or near ask prices or at all if you need money or otherwise desire to liquidate your shares.
Although our shares have been approved for listing on the NASDAQ Capital Market, our shares may be subject to potential delisting if we do not meet or continue to
maintain the listing requirements of the NASDAQ Capital Market.
Our shares have been approved for and currently trading on The Nasdaq Capital Market (“Nasdaq”); however Nasdaq has rules for continued listing, including, without
limitation, minimum market capitalization and other requirements. Failure to maintain our listing, or delisting from Nasdaq, would make it more difficult for shareholders to
dispose of our common stock and more difficult to obtain accurate price quotations on our common stock. This could have an adverse effect on the price of our common
stock. Our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially
and adversely affected if our common stock is not traded on a national securities exchange.
In order to raise sufficient funds to expand our operations, we may have to issue additional securities at prices which may result in substantial dilution to our
shareholders.
If we raise additional funds through the sale of equity or convertible debt, our current stockholders’ percentage ownership will be reduced. In addition, these transactions
may dilute the value of our common shares outstanding. We may also have to issue securities that may have rights, preferences and privileges senior to our common stock.
Possible adverse effect of issuance of preferred stock.
Our Certificate of Incorporation authorizes the issuance of 1,000,000 shares of preferred stock, of which all shares are available for issuance, with designations, rights and
preferences as determined from time to time by the Board of Directors. As a result of the foregoing, the Board of Directors can issue, without further shareholder approval,
preferred stock with dividend, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of Common Stock.
The issuance of preferred stock could, under certain circumstances, discourage, delay or prevent a change in control of the Company.
Our stock price could fall and we could be delisted from the NASDAQ in which case U.S. Broker-Dealers may be discouraged from effecting transactions in shares of
our common stock because they may be considered penny stocks and thus be subject to the penny stock rules.
The SEC has adopted a number of rules to regulate “penny stock” that restricts transactions involving stock which is deemed to be penny stock. Such rules include Rules
3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities and Exchange Act of 1934, as amended. These rules may have the effect of
reducing the liquidity of penny stocks. “Penny stocks” generally are equity securities with a price of less than $5.00 per share (other than securities registered on certain
national securities exchanges or quoted on the NASDAQ Stock Market if current price and volume information with respect to transactions in such securities is provided by
the exchange or system). Our securities have in the past constituted, and may again in the future constitute, “penny stock” within the meaning of the rules. The additional
sales practice and disclosure requirements imposed upon U.S. broker-dealers may discourage such broker-dealers from effecting transactions in shares of our common stock,
which could severely limit the market liquidity of such shares and impede their sale in the secondary market.
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A U.S. broker-dealer selling penny stock to anyone other than an established customer or “accredited investor” (generally, an individual with net worth in excess of
$1,000,000 or an annual income exceeding $200,000, or $300,000 together with his or her spouse) must make a special suitability determination for the purchaser and must
receive the purchaser’s written consent to the transaction prior to sale, unless the broker-dealer or the transaction is otherwise exempt. In addition, the “penny stock”
regulations require the U.S. broker-dealer to deliver, prior to any transaction involving a “penny stock”, a disclosure schedule prepared in accordance with SEC standards
relating to the “penny stock” market, unless the broker-dealer or the transaction is otherwise exempt. A U.S. broker-dealer is also required to disclose commissions payable
to the U.S. broker-dealer and the registered representative and current quotations for the securities. Finally, a U.S. broker-dealer is required to submit monthly statements
disclosing recent price information with respect to the “penny stock” held in a customer’s account and information with respect to the limited market in “penny stocks”.
Stockholders should be aware that, according to SEC, the market for “penny stocks” has suffered in recent years from patterns of fraud and abuse. Such patterns include (i)
control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching
of purchases and sales and false and misleading press releases; (iii) “boiler room” practices involving high-pressure sales tactics and unrealistic price projections by
inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities
by promoters and broker-dealers after prices have been manipulated to a desired level, resulting in investor losses. Our management is aware of the abuses that have
occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the
market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
On March 1, 2017, the Company entered into a new operating lease agreement for its main office located at 120 Eagle Rock Avenue, East Hanover, NJ 07936. The main
office premises consist of 5,129 square feet of office space at a monthly rent starting at $8,762 and escalating to $10,044 per month by the end of the term April 30, 2024.
On September 11, 2017, the Company entered into an operating lease agreement for an additional 1,870 square feet of office space at 120 Eagle Rock Ave, East Hanover,
NJ (suite 302) commencing October 1, 2017 with a monthly rent of $3,506 for a period of one year. This lease was extended for a period of one month at $4,675.
On October 24, 2017 the Company entered into a lease for $3,584 per month for one year beginning November 1, 2018 for the additional space at 120 Eagle Rock Ave (suite
302). It was subsequently extended on February 1, 2020 for five years starting while extending the rental space to 3,516 square feet at $6,153 per month and escalating to $
6,886 per month by the end of the term.
The Company leases office space in Syracuse, NY, at a monthly rent of $2,300. The lease expired on May 31, 2018 and was subsequently extended for a three-year term
commencing June 1, 2018 and ending May 31, 2021.
The Company leased 3,422 square feet of office space in Greensboro, NC with a monthly rent of $4,182 a month. The lease expired February 28, 2017 and was extended
after reducing the rental space to 2,267 square feet at a monthly rent of $2,765 per month. The extension expired February 28, 2020 and was renewed for a term of three
years at a rate of $3,022 per month.
The Company leases 6,115 square feet of office space in Thorofare, NJ starting at $4,591 per month and escalating to $5,168 per month by the end of the term February 28,
2022.
The Company leases office space in Chicago, IL with a monthly rent of $582. The lease expired May 31, 2020. This has been renewed for two years expiring May 31, 2022
at rate of $655 per month.
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The Company leased office space in Seattle, WA with a monthly rent of $2,066. The lease expired May 31, 2020.
The Company leases office space in Sisters, OR with a monthly rent of $720. The lease expired on November 30, 2019 and is being rented on a month to month basis.
The Company leases 1,107 square feet of office space in San Diego, CA with a monthly rent of $4,184 escalating to $4,461 per month at the end of the lease term, February
28, 2021. The Company extended this lease for one month, ending March 31, 2021, for $4,461 for the one month.
On February 25, 2019, the Company signed a lease for 1,180 square feet of office space in Lisle, IL. The lease begins April 1, 2019 with a monthly rent of $1,942 escalating
to $2,040 by the end of the lease term March 31, 2022.
The Company leases 2,105 square feet of office space in Phoenix, AZ starting at $1,271 and escalating to $2,982 per month by the end of the term September 30, 2020. On
June 25, 2020, the Company signed an extension to a lease for 2,105 square feet of space in Phoenix, Arizona. The lease begins October 1, 2020 and terminates September
30, 2023 with a monthly rent of $3,026 escalating to $3,201 per month in the third year.
The Company leases office space in Burr. Ridge, IL starting at $2,849 per month and escalating to $2,929 per month by the end of the term which ends July 30, 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. Other than indicated
below, to our knowledge, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization
or body pending or, to the knowledge of the executive officers of our Company our subsidiaries, threatened against or affecting our Company, our common stock, our
subsidiaries or of our Company’s or our Company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse
effect.
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
The Company has been listed and is traded on the NASDAQ Capital Market under the symbol “SSNT”.
(b) Holders of Common Equity
As of March 24, 2021, there were approximately 854 stockholders of record. An additional number of stockholders are beneficial holders of our Common Stock in “street
name” through banks, brokers and other financial institutions that are the record holders.
(c) Dividend Information
On December 24, 2019, the Company announced the payment of a $0.50 special cash dividend per share of Common Stock payable on January 14, 2020 for an aggregate
amount of $2,250,636, which was applied against paid in capital.
On December 10, 2020, the Company announced the payment of a $0.40 special cash dividend per share of Common Stock payable on December 28, 2020 for an aggregate
amount of $1,800,509 which was applied against paid in capital.
The declaration of any future cash dividends is at the discretion of our board of directors and depends upon our earnings, if any, our capital requirements and financial
position, our general economic conditions, and other pertinent conditions.
Unregistered Equity Securities
There were no unregistered sales of the Company’s equity securities during 2020 that were not previously disclosed in a Quarterly Report on Form 10-Q or in a Current
Report on Form 8-K.
On May 31, 2018, SWK acquired certain assets of Info Sys Management, Inc. (“ISM”) pursuant to an Asset Purchase Agreement for cash of $300,000 and a promissory
note issued in the aggregate principal amount of $1,000,000 (the “ISM Note”). The ISM Note is due five years from the closing date and bears interest at a rate of two
percent (2%) per annum. Monthly payments including interest are $17,528. The ISM Note has an optional conversion feature where the holder may, at its sole and exclusive
option, elect to convert, at any time and from time to time, until payment in full of the ISM Note, all of the outstanding principal amount of the ISM Note, plus accrued
interest, into shares (the “Conversion Shares”) of the Company’s Common Stock, (“Common Stock”) at per share price equal to $4.026, a price equal to the average closing
price of its Common Stock for the five (5) trading days immediately preceding the issuance date of the ISM Note (the “Fixed Conversion Price”). In February 2021, ISM
converted the outstanding balance of the loan in the amount of $479,111 into 119,004 shares of the Company’s common stock.
On May 31, 2018, Secure Cloud Services acquired certain assets of Nellnube, Inc. (“Nellnube”) pursuant to an Asset Purchase Agreement for a promissory note issued in
the aggregate principal amount of $400,000 (the “Nellnube Note”). The Nellnube Note is due five years from the closing date and bears interest at a rate of two percent
(2%) per annum. Monthly payments including interest are $7,011. The Nellnube Note has an optional conversion feature where the holder may, at its sole and exclusive
option, elect to convert, at any time and from time to time, until payment in full of the Nellnube Note, all of the outstanding principal amount of the Nellnube Note, plus
accrued interest, into shares (the “Conversion Shares”) of the Company’s Common Stock, (“Common Stock”) at per share price equal to $4.026, a price equal to the average
closing price of its Common Stock for the five (5) trading days immediately preceding the issuance date of the Nellnube Note (the “Fixed Conversion Price”). In February
2021, Nellnube converted the outstanding balance of the loan in the amount of $191,645 into 47,602 shares of the Company’s common stock.
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. and its wholly owned subsidiaries, SWK Technologies, Inc., Secure Cloud
Services, Inc., and Critical Cyber Defense Corp. (together the “Company”, “we”, “our”, and “us”) from time to time with the U.S. Securities and Exchange Commission (the
“SEC”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s
management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking
statements, which are only predictions and speak only as of the date hereof. When used in the filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,”
“intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking
statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors,
including the risks contained in the “Risk Factors” section of the Annual Report on Form 10-K, relating to the Company’s industry, the Company’s operations and results of
operations, and any businesses that the Company may acquire. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove
incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of
activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any
of the forward-looking statements to conform these statements to actual results.
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles
require us to make certain estimates, judgments, and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon
information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported
amounts of assets and liabilities as of the date of the consolidated financial statements as well as the reported amounts of revenues and expenses during the periods
presented. Our consolidated financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the
accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in
which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction
with our consolidated financial statements and notes thereto appearing elsewhere in this report.
Overview
SilverSun Technologies, Inc. is engaged in providing transformational business management applications and technologies and professional consulting services to small and
medium size companies, primarily in the manufacturing, distribution and service industries.
We are executing a multi-pronged business strategy centered on recurring revenue, customer retention and on rapidly increasing the size of our installed customer base. The
growth of our customer base is accomplished via our traditional marketing programs and acquisitions. After a customer is secured, our strategy is to up-sell and cross-sell,
providing the customer with advanced technologies and third-party add-ons that help them digitally transform their business. These add-on products could include
application hosting, cybersecurity, warehouse management, human capital management, payment automation, sales tax compliance or any number of other products or
services that we represent. Many of these incremental products and services are billed on a subscription basis, often paying monthly for the service, which increases our
monthly recurring revenue (“MRR”). This strategy increases the average revenue per customer, which facilitates our continued growth, and reduces our cost of customer
acquisition, which enhances our profitability profile.
Our core strength is rooted in our ability to discover and identify the driving forces of change that are affecting – or will affect – businesses in a wide range of
industries. We invest valuable time and resources to fully understand how technology is transforming the business management landscape and what current or emerging
innovations are deserving of a clients’ attention. By leveraging this knowledge and foresight, our growing list of clients are empowered with the means to more effectively
manage their businesses; to capitalize on real-time insight drawn from their data resources; and to materially profit from enhanced operational functionality, process
flexibility and expedited process execution.
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As Microsoft Certified Systems Engineers and Microsoft Certified Professionals, our staff offers a host of mission critical services, including cybersecurity, business
continuity, disaster recovery, application hosting, remote network monitoring, server implementation, support and assistance, and technical design of network infrastructure,
among other services. We compete with numerous large and small companies in this market sector, both nationally and locally.
Distinguished as one of the largest Acumatica and Sage Software practices in North America, we resell enterprise resource planning software published by both Acumatica
and 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 design, installation, implementation, 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 consultants and host formal, topic-specific, training classes, both remotely and on-site at our clients’ facilities. Our consultants must pass annual subject matter
examinations required by the software publisher 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, chat, 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 Korber, which develops warehouse management software for middle market
distributors. The primary purpose of a WMS is to control the movement and storage of materials within an operation and process the associated transactions. Directed
picking, directed replenishment, and directed put-away are the key to WMS. The detailed setup and processing within a WMS can vary significantly from one software
vendor to another. However, the basic WMS will use a combination of item, location, quantity, unit of measure and order information to determine where to stock, where to
pick, and in what sequence to perform these operations. The Accellos WMS software improves accuracy and efficiency, streamlines materials handling, meets retail
compliance requirements, and refines inventory control. Accellos also works as part of a complete operational solution by integrating seamlessly with RF hardware,
accounting software, shipping systems and warehouse automation equipment. We market the Accellos solution to our existing and new medium-sized business clients.
Investing in the acquisition of other companies and proprietary business management solutions has been an important growth strategy for our Company, allowing us to
rapidly expand into new geographic markets and create new and exciting profit centers. To date, we have completed a series of strategic ventures that have served to
fundamentally strengthen our Company’s operating platform and materially expand our footprint to nearly every U.S. state. More specifically, over the past fifteen years, we
have outright acquired, acquired select assets of or entered into revenue sharing agreements with Business Tech Solutions Group, Inc.; Wolen Katz Associates; AMP-BEST
Consulting, Inc.; IncorTech; Micro-Point, Inc.; HighTower, Inc.; Point Solutions, LLC; SGEN, LLC., ESC, Inc., 2000 SOFT, Inc., Productive Tech Inc., The Macabe
Associates, Oates & Co; Pinsight Technology, Inc.; Info Sys Management, Inc., Nellnube, Inc., Partners in Technology Inc., Prairie Technology Solutions Group, Inc.,
Computer Management Services, LLC and Business Software Solutions.
Additionally, it is our intention to continue to increase our business by seeking additional opportunities through potential acquisitions, revenue sharing arrangements,
partnerships or investments. Such acquisitions, revenue sharing arrangements, partnerships or investments may consume cash reserves or require additional cash or equity.
Our working capital and additional funding requirements will depend upon numerous factors, including: (i) strategic acquisitions or investments; (ii) an increase to current
company personnel; (iii) the level of resources that we devote to sales and marketing capabilities; (iv) technological advances; and (v) the activities of competitors.
During 2020 the Company continued to expand its customer base and growth trend which we believe will provide a basis for future growth.
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Results of Operations
Revenues
Revenues for the year ended December 31, 2020 increased $2,717,924 (7.1%) to $41,220,406 as compared to $38,502,482 for the year ended December 31, 2019.
Software sales increased by $784,898 (11.4%) to $7,661,580 in 2020 from $6,876,682 in 2019. The increase is attributable to an increase in sales of cloud-based ERP
software and increased sales of third-party solutions which add functionality to customer’s existing systems.
Service revenue increased by $1,933,026 (6.1%) to $33,558,826 in 2020 from $31,625,800 in 2019. The overall increases are primarily due to increases in services related to
increased volume of sales of software.
Gross Profit
Gross profit for the year ended December 31, 2020 increased $1,900,527 (12.9%) to $16,578,981 as compared to $14,678,454 for the year ended December 31, 2019. The
increase in overall gross profit for this period is largely attributable to the increase in revenues and the sale of higher margin products and services. For the year ended
December 31, 2020, the overall gross profit percentage was 40.2% as compared to 38.1 % for the year ended December 31, 2019.
The gross profit attributed to software sales increased $355,601(13.2%) to $3,052,691 for 2020 from $2,697,090 in 2019. For the year ended December 31, 2020, the gross
profit percentage for software was 39.8% as compared to 39.2 % for the year ended December 31, 2019. While revenues may decrease because of the shift to a subscription
business model, our margins will, for the most part, not significantly change. The mix of products being sold by the Company changes from time to time which causes the
overall gross margin percentage to vary.
The gross profit attributed to services increased $1,544,926 (12.9%) to $13,526,290 for 2020 from $11,981,364 in 2019. This increase is attributed to the increases in
consulting revenue as well as increases in network managed services and application hosting. For the year ended December 31, 2020, the gross profit percentage for services
was 40.3% as compared to 37.9% for the year ended December 31, 2019. The increase in the gross profit percentage can be attributed to the increase in network managed
services and application hosting which has a higher gross profit as well as the overall change in product mix.
Operating Expenses
Selling and marketing expenses increased $527,167 (7.7%) to $7,365,912 for the year ended December 31, 2020 as compared to $6,838,745 for the year ended December
31, 2019. This increase is due to both additional headcount as well as increased variable compensation because of increased sales.
General and administrative expenses decreased $499,407 (5.7%) to $8,273,558 for the year ended December 31, 2020 as compared to $8,772,965 for the year ended
December 31, 2019. This decrease is primarily the result of decreases in travel expenses as a result of less employees traveling during the pandemic, reduced credit card
expenses as well as department changes for various employees, thereby reducing salary and benefit expense. In addition, in 2019 the Company incurred a one-time legal
expense of approximately $115,000 associated with the cost of defense of the previously announced and settled shareholder derivative suit.
Depreciation and amortization expense for the year ended December 31, 2020 was $705,932 as compared to $720,035 for the year ended December 31, 2019. This decrease
is due to some equipment being fully depreciated in 2020.
Impairment for intangible asset expense for the year ended December 31, 2020 was $-0- as compared to $236,860 for the year ended December 31, 2019. The decrease is
due to the write-off of software in 2019 that will no longer be marketed.
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Income (Loss) from Continuing Operations
As a result of the above, the Company generated income from continuing operation of $223,385 for the year ended December 31, 2020 as compared to a loss from
continuing operation in the amount of $1,907,061 for the year ended December 31, 2019.
Other Expense
For the year ended December 31, 2020 other expense was $347 as compared to $15,809 for the year ended December 31, 2019, primarily because of lower interest expense.
Income (Loss) from Continuing Operations Before Taxes
As a result of the above, the Company generated income from continuing operation before taxes of $223,038 for the year ended December 31, 2020 as compared to a loss
from continuing operation before taxes in the amount of $1,922,870 for the year ended December 31, 2019.
Income Taxes
For the year ended December 31, 2020, the Company recorded a tax provision of $47,391 as compared to a benefit of $455,006 for the year ended December 31, 2019
because of the income generated in the current year. State provision requirements were calculated based on the estimated tax rate.
Net Income (Loss) from Continuing Operations
As a result of the above, the Company generated net income from continuing operation of $175,647 for the year ended December 31, 2020 as compared to a net loss from
continuing operation in the amount of $1,467,864 for the year ended December 31, 2019.
Liquidity and Capital Resources
The negative impact of Covid-19 on the economy creates tremendous uncertainty for the Company in the coming months and quarters. While our Company has not been
significantly impacted as a result of this uncertainty, the negative impact on our business, in the future, is impossible to determine at this point, although it is likely that we
could suffer negative consequences as many companies go out of business or decrease their technology spending.
As previously disclosed, SWK Technologies, Inc. (“SWK”), a wholly-owned subsidiary of SilverSun Technologies, Inc. (the “Company”), entered into a promissory note
(the “Note”) with JPMorgan Chase Bank, N.A. (the “Lender”), which provided for a loan in the amount of $3,150,832 (the “PPP Loan”) pursuant to the Paycheck Protection
Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). At the time SWK applied for the PPP Loan, we believed that it qualified to
receive funds pursuant to the then published PPP qualification and certification requirements. On April 23, 2020, the SBA, in consultation with the Department of Treasury,
issued new guidance that creates uncertainty regarding the qualification requirements for a PPP Loan (the “New Guidance”). Out of an abundance of caution and in light of
the New Guidance, SWK determined to pay off the entire amount of the PPP Loan. Accordingly, the PPP Loan was paid in full to the Lender on May 18, 2020, resulting in
the full satisfaction of the Note. Under the terms of the PPP Loan, SWK had the right to repay the Note without penalty.
As such, we need to rely on our own limited resources to weather the anticipated economic downturn. Our competitors, almost all of whom are privately held, and able to
avail themselves of the PPP program, will make it more difficult for the Company to compete in the marketplace. Management will continue to monitor developments,
explore various cost-cutting measures, and explore other sources of funding, but there is no guarantee we will be successful in doing so.
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.
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In addition to developing new products, obtaining new customers and increasing sales to existing customers, management plans to increase its business and profitability by
entering into collaboration agreements, buying assets, and acquiring companies in the business software and information technology consulting and other markets with solid
revenue streams and established customer bases that generate positive cash flow.
On May 31, 2018, SWK acquired certain assets of Info Sys Management, Inc. (“ISM”) pursuant to an Asset Purchase Agreement for cash of $300,000 and a promissory
note issued in the aggregate principal amount of $1,000,000 (the “ISM Note”). The ISM Note is due five years from the closing date and bears interest at a rate of two
percent (2%) per annum. Monthly payments including interest are $17,528. The ISM Note has an optional conversion feature where the holder may, at its sole and exclusive
option, elect to convert, at any time and from time to time, until payment in full of the ISM Note, all of the outstanding principal amount of the ISM Note, plus accrued
interest, into shares (the “Conversion Shares”) of the Company’s Common Stock, (“Common Stock”) at per share price equal to $4.026, a price equal to the average closing
price of its Common Stock for the five (5) trading days immediately preceding the issuance date of the ISM Note (the “Fixed Conversion Price”). In February 2021, ISM
converted the outstanding balance of the loan in the amount of $479,111 into 119,004 shares of the Company’s common stock.
On May 31, 2018, Secure Cloud Services acquired certain assets of Nellnube, Inc. (“Nellnube”) pursuant to an Asset Purchase Agreement for a promissory note issued in
the aggregate principal amount of $400,000 (the “Nellnube Note”). The Nellnube Note is due five years from the closing date and bears interest at a rate of two percent
(2%) per annum. Monthly payments including interest are $7,011. The Nellnube Note has an optional conversion feature where the holder may, at its sole and exclusive
option, elect to convert, at any time and from time to time, until payment in full of the Nellnube Note, all of the outstanding principal amount of the Nellnube Note, plus
accrued interest, into shares (the “Conversion Shares”) of the Company’s Common Stock, (“Common Stock”) at per share price equal to $4.026, a price equal to the average
closing price of its Common Stock for the five (5) trading days immediately preceding the issuance date of the Nellnube Note (the “Fixed Conversion Price”). In February
2021, Nellnube converted the outstanding balance of the loan in the amount of $191,645 into 47,602 shares of the Company’s common stock.
On January 1, 2019, SWK acquired certain assets of Partners in Technology, Inc. (“PIT”) pursuant to an Asset Purchase Agreement for cash of $60,000 and the issuance of
a promissory note in the aggregate principal amount of $174,000 (the “PIT Note”). The PIT Note is due in 36 months from the closing date and bears interest at a rate of
two percent (2.0%) per annum. Monthly payments including interest are $4,984. At December 31, 2020 and December 31, 2019, the outstanding balances of the loan were
$64,040 and $121,968, respectively.
On July 31, 2020, the Company acquired certain assets of Prairie Technology Solutions Group, LLC (“Prairie Tech”) pursuant to an Asset Purchase Agreement. In
consideration for the acquired assets, the Company paid $185,000 in cash and issued three promissory notes to Prairie Tech (“Prairie Tech Note 1”, “Prairie Tech Note 2”
and “Prairie Tech Note 3”), each in the principal aggregate amount of $103,333 (collectively the “Prairie Tech Notes”). The Prairie Tech Notes bear interest at a rate of 4%
per annum. Prairie Tech Note 1 has a term of one (1) year and is subject to downward adjustment based on whether certain revenue milestones are achieved. Prairie Tech
Note 2 has a term of two (2) years and is also subject to downward adjustment based on whether certain revenue milestones are achieved. Prairie Tech Note 3 has a term of
three (3) years and is not subject to a downward adjustment. At December 31, 2020 the outstanding balance on the PT notes were $310,000.
On October 1, 2020, SWK acquired certain assets of Computer Management Services, LLC, (“CMS”) pursuant to an Asset Purchase Agreement for and the issuance of a
promissory note in the aggregate principal amount of $170,000 (the “CMS Note”) for a total of $287,598. The CMS Note is due in 36 months from the closing date and
bears interest at a rate of two percent (2.0%) per annum. Monthly payments including interest are $4,869. At December 31, 2020 the outstanding balance of the loan was
$160,821.
On December 1, 2020, SWK acquired certain assets of Business Software Solutions (“BSS”) pursuant to an Asset Purchase Agreement for a promissory note in the
aggregate principal amount of $230,000 (the “BSS Note”). The BSS Note is due in 60 months from the closing date and bears interest at a rate of two percent (2.0%) per
annum. Monthly payments including interest are $4,031. At December 31, 2020 the outstanding balance of the loan was $230,000.
In February 2021, the Company received net proceeds of $3,382,352, excluding legal expenses, from the sale of 393,300 of common stock under its Registration Statement
on Form S-3 and the previously disclosed At Market Issuance Sales Agreement with a sales agent.
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During the year ended December 31, 2020, the Company had a net decrease in cash of $2,062,985. The Company’s principal sources and uses of funds were as follows:
Cash provided by (used in) operating activities of continuing operations
The Company provided $1,729,091 in cash from continuing operating activities for the year ended December 31, 2020 as compared to using $903,307 of cash for continuing
operating activities for the year ended December 31, 2019. This increase is in cash provided by operating activities is primarily due to an increase in income and the decrease
in accounts receivable offset partially by the decrease in accounts payable and deferred revenues.
Cash provided by investing activities of continuing operations
Investing activities for the year ended December 31, 2020 provided cash of $839,808 as compared to providing $8,152,790 of cash for the year ended December 31, 2019.
This decrease in cash provided is due to proceeds received from the sale of the EDI practice in August 2019 and which did not occur during the year ended December 31,
2020.
Cash used in financing activities of continuing operations
Financing activities for the year ended December 31, 2020 used cash of $4,631,884 as compared to using cash of $870,170 for the year ended December 31, 2019. This
increase in cash used in financing activities is mostly attributed to the payment of a cash dividends in January 2020 and December 2020.
Cash flows from discontinued operations
There were no cash flows related to discontinued operations for the year ended December 31, 2020.
Operating activities for discontinued operations for the year ended December 31, 2019 provided cash of $505,910. This is due to the fact that Mapadoc EDI was sold in
August 2019, providing eight months of operating activities in 2019.
Investing activities of discontinued operations for the year ended December 31, 2019 used cash of $127,679.
The Company believes that it has adequate liquidity to fund its operating plans for at least the next twelve months from the date of issuance of these financial statements.
There was no significant impact on the Company’s operations because of inflation for the year ended December 31, 2020.
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.
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Revenue Recognition
The Financial Accounting Standards Board “FASB” issued ASU 2014-09, Revenue from Contracts with Customers: Topic 606 which superseded nearly all existing revenue
recognition guidance under GAAP. The core principle of Topic 606 is to recognize revenues when promised goods or services are transferred to customers in an amount that
reflects the consideration that is expected to be received for those goods or services. Topic 606 defines a five-step process to achieve this core principle and, in doing so, it is
possible more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP, including identifying performance
obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate
performance obligation, among others. Topic 606 also provides guidance on the recognition of costs related to obtaining customer contracts.
With the adoption of ASC 606, the Company has elected the significant financing component practical expedient. In determining the transaction price, the Company does
not adjust the promised amount of consideration for the effects of a significant financing component as the Company expects, at contract inception, that the period between
when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.
Software product revenue is recognized when the product is delivered to the customer and the Company’s performance obligation is fulfilled.
Service revenue is recognized when the professional consulting, maintenance or other ancillary services are provided to the customer. Shipping and handling costs charged to
customers are classified as revenue, and the shipping and handling costs incurred are included in cost of sales.
Accounts Receivable
Accounts receivable consist primarily of invoices for maintenance and professional services. Full payment for software ordered by customers is primarily due in advance of
ordering from the software supplier. Payments for maintenance and support plan renewals are due before the beginning of the maintenance period. Terms under our
professional service agreements are generally 50% due in advance and the balance on completion of the services.
The Company maintains an allowance for bad debt estimated by considering a number of factors, including the length of time the amounts are past due, the Company’s
previous loss history and the customer’s current ability to pay its obligations. Accounts are written off against the allowance when deemed uncollectable.
Unbilled Services
The Company recognizes revenue on its professional services as those services are performed. Unbilled services represent the revenue recognized but not yet invoiced.
Goodwill
Goodwill is the excess of acquisition cost of an acquired entity over the fair value of the identifiable net assets acquired. Goodwill is not amortized, but tested for
impairment annually or whenever indicators of impairment exist. These indicators may include a significant change in the business climate, legal factors, operating
performance indicators, competition, sale or disposition of a significant portion of the business or other factors.
Definite Lived Intangible Assets and Long-Lived Assets
The values assigned to intangible assets were based on an independent valuation. Purchased intangible assets are amortized over the useful lives based on the estimate of the
use of economic benefit of the asset using the straight-line amortization method.
The Company assesses potential impairment of its intangible assets and other long-lived assets when there is evidence that recent events or changes in circumstances have
made recovery of an asset’s carrying value unlikely. Factors the Company considers important, which may cause impairment include, among others, significant changes in
the manner of use of the acquired asset, negative industry or economic trends, and significant underperformance relative to historical or projected operating results.
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Business Combinations
We account for business combinations under the acquisition method of accounting. This method requires the recording of acquired assets and assumed liabilities at their
acquisition date fair values. The excess of the purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Results of operations
related to business combinations are included prospectively beginning with the date of acquisition and transaction costs related to business combinations are recorded within
S,G&A.
Income Taxes
The Company accounts for income taxes using the asset and liability method described in FASB ASC 740, “Income Taxes”. Deferred tax assets arise from a variety of
sources, the most significant being: a) tax losses that can be carried forward to be utilized against profits in future years; b) expenses recognized for financial reporting
purposes but disallowed in the tax return until the associated cash flow occurs; and c) valuation changes of assets which need to be tax effected for book purposes but are
deductible only when the valuation change is realized.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes, as well as net operating loss carryforwards. Based on ASU 2015-17, all deferred tax assets or liabilities are classified as long-term.
Valuation allowances are established against deferred tax assets if it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates or laws is recognized in operations in the period that includes the enactment date.
The Company accounts for uncertainties in income taxes under ASC 740-10-50 which prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740-10 requires that the Company determine whether the benefits
of its tax positions are more-likely-than-not of being sustained upon audit based on the technical merits of the tax position. The Company recognizes the impact of an
uncertain income tax position taken on its income tax return at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority.
The Company has federal net operating loss (“NOL”) carryforwards which are subject to limitations under Section 382 of the Internal Revenue Code.
The Company files income tax returns in the U.S. federal and state jurisdictions. Tax years 2017 to 2020 remain open to examination for both the U.S. federal and state
jurisdictions.
Despite the Company’s belief that its tax return positions are consistent with applicable tax laws, one or more positions may be challenged by taxing authorities. Settlement
of any challenge can result in no change, a complete disallowance, or some partial adjustment reached through negotiations or litigation. Interest and penalties related to
income tax matters, if applicable, will be recognized as income tax expense. There were no liabilities for uncertain tax positions at December 31, 2020 and 2019. During the
years ended December 31, 2020 and 2019 the Company did not incur any expense related to interest or penalties for income tax matters, and no such amounts were accrued
as of December 31, 2020 and 2019.
Off Balance Sheet Arrangements
During fiscal 2020, 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 and Supplementary Data
Our consolidated financial statements are contained in pages F-1 through F-28 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, 2020.
Item 9A. Controls and Procedures
(a) Evaluation of Disclosure and Control Procedures
As of the end of the period covered by this Annual Report on Form 10-K, the Company’s management evaluated, with the participation of the Company’s principal
executive officer and principal financial officer, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934). Based upon that evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s
disclosure controls and procedures are effective in ensuring that information required to be disclosed by the company in the reports that we file or submit under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and
communicated to our management, including the Company’s principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding
required disclosure.
(b) Management’s Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)
under the Securities Exchange Act of 1934). The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:
• Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets;
• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that the Company’s
receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and
• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material
effect on our financial statements.
As of the end of the period covered by this Annual Report on Form 10-K, the Company’s management evaluated, with the participation of its principal executive officer and
principal financial officer, the effectiveness of the Company’s internal control over financial reporting. This evaluation was conducted using the framework in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 2013. Based upon that evaluation, the Company’s
management concluded that its internal control over financial reporting was effective as of December 31, 2020.
Pursuant to the rules of the SEC, the Company’s management’s report on internal control over financial reporting is furnished with this Annual Report on Form 10-K and
shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be
deemed to be incorporated by reference in any filing under the Securities Act of 1933 or Securities Exchange Act of 1934.
This Annual Report on Form 10-K does not include an attestation report of the Company’s independent registered public accounting firm regarding the Company's internal
control over financial reporting. The Company’s management’s report on internal control over financial reporting was not subject to attestation by the Company’s
independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permits the Company to provide only the
Company’s management’s report on internal control over financial reporting in this Annual Report on Form 10-K.
(c) Changes to Internal Controls over Financial Reporting
There were no changes in our internal control over financial reporting during our fourth quarter ended December 31, 2020, or in other factors that could significantly affect
these controls, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
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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 24, 2021:
Name
Mark Meller
Joseph Macaluso
Stanley Wunderlich
Kenneth Edwards
John Schachtel
Age
Position
Officer and/or Director
Since
61
69
73
62
59
Chairman, President, Chief Executive Officer and Director
Chief Financial Officer
Director
Director
Director
2003
2021
2011
2021
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.
Joseph Macaluso, Chief Financial Officer
Joseph Macaluso has over 30 years of experience in financial management. Mr. Macaluso has served as Chairman of the Audit Committee and a Director of the Company
since 2015 before becoming its Chief Financial Officer on January 4, 2021. 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.
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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.
Kenneth Edwards, Director
Mr. Edwards combines over 40 years of experience in the accounting and finance industry. Previously, he has been involved with a few certified public accounting firms as
well as companies in various other industries holding positions including Partner, Managing Director, Chief Financial Officer and Senior Vice-President of Finance. Ken
currently serves as Chief Financial Officer of Edison Learning, Inc., an Education Management Company. Ken joined Edison Learning, Inc. in September 2017. From July
2016 to September 2017, he was Managing Director for CFO Strategies, LLC, a company involved in outsourced CFO and Controller services. From July 1981 to July 1993
and from October 2000 to June 2016, he was with several public accounting firms (Coopers & Lybrand, BDO Seidman, Edwards & Company and Cohn Reznick) in various
roles until his retirement from Cohn Reznick as an Audit Partner in June 2016. During the period from July 1993 to July 1997, he served as Senior Vice President of Finance
for Home State Holdings, Inc., an insurance holding company that focused on property and casualty insurance, and from July 1997 to September 2000 as Chief Financial
Officer for Menu Direct, Inc. a specialty food manufacturer. Ken is currently a member of the Advisory Board of Robert Wood Johnson University Hospital, located at
Somerset New Jersey. He previously served as a Director and Treasurer for the Urban League of Morris Country and as a Director and Chairperson for the Hope Chest
Scholarship Foundation. He has an undergraduate accounting degree from Goshen College.
The Board believes that Mr. Edwards’ extensive experience as a CPA makes him well-qualified to help guide the Audit Committee of the Board. The Board has determined
that Mr. Edwards meets the current independence and experience requirements contained in the listing standards of The Nasdaq Capital Markets and is an audit committee
financial expert as defined in Securities and Exchange Commission regulations.
John Schachtel, Director
On March 27, 2017, Mr. Schachtel was appointed to the Board. Since May 2017, Mr. Schachtel has been the Executive Vice President and Chief Operating Officer of
Regional Management Corp., one of the leading consumer finance installment loan companies in the United States. Prior to assuming his current position, Mr. Schachtel was
the Chief Operating Officer of OneMain Financial Holdings, Inc. and served 11 years as the Executive Vice President, Northeast & Midwest Division for OneMain
Financial Holdings, Inc.
Mr. Schachtel has a Bachelor of Science degree from Northwestern University and an MBA in Finance from New York University.
In evaluating Mr. Schachtel’s specific experience, qualifications, attributes and skills in connection with his appointment to Board, we took into account his expertise in
general management, finance, corporate governance and strategic planning, as well as his experience in operations and mergers and acquisitions.
Family Relationships
There are no family relationships among any of our directors or executive officers.
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Board Composition and Director Independence
Our board of directors consists of four members: Mr. Mark Meller, Mr. Stanley Wunderlich, Mr. Kenneth Edwards, 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. Edwards, and Mr. Schachtel have
qualified as independent and that they have no material relationship with us that might interfere with his or her exercise of independent judgment.
Board Committees
The Audit Committee was established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. Currently, the Audit Committee consists of Mr.
Kenneth Edwards, Mr. Stanley Wunderlich and Mr. John Schachtel. Mr. Edwards, Chairman of the Audit Committee, may be deemed a financial expert as defined in Item
407(d)(5) of Regulation S-K.
The Audit Committee operates pursuant to a written charter (the “Audit Committee Charter”), a current copy of which is publicly available on the investor relations portion
of the Company’s website at www.silversuntech.com.
Currently, the Compensation Committee consists of Mr. Stanley Wunderlich and Mr. John Schachtel. Mr. Schachtel serves as Chairman. The Compensation Committee
operates pursuant to a written charter, a current copy of which is publicly available on the investor relations portion of our website.
Currently, the Nominating and Corporate Governance Committee consists of Mr. Kenneth Edwards, Mr. Stanley Wunderlich and Mr. John Schachtel. Mr. Wunderlich serves
as Chairman. The Nominating and Corporate Governance Committee operates pursuant to a written charter, a current copy of which is publicly available on the investor
relations portion of our website.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who beneficially own 10% or more of a class of securities registered
under Section 12 of the Exchange Act to file reports of beneficial ownership and changes in beneficial ownership with the SEC. Directors, executive officers and greater than
10% stockholders are required by the rules and regulations of the SEC to furnish the Company with copies of all reports filed by them in compliance with Section 16(a).
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the Company during the fiscal year ended December 31, 2020, including those reports
that we have filed on behalf of our directors and Section 16 officers, no director, Section 16 officer, beneficial owner of more than 10% of the outstanding common stock, or
any other person subject to Section 16 of the Exchange Act, failed to file with the SEC on a timely basis during the fiscal year ended December 31, 2020.
Code of Ethics
The Company has adopted a Code of Ethics for adherence by its Chief Executive Officer, Chief Financial 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.
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Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has, during the past ten years:
●
●
●
●
●
●
been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a
general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state
authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures,
commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to
have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or
vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or
commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or
permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order,
or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section
3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association,
entity or organization that has disciplinary authority over its members or persons associated with a member.
Except as set forth in our discussion below in “Certain Relationships and Related Transactions,” none of our directors or executive officers has been involved in any
transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the
Commission.
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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, 2020 and 2019.
Stock
Option
Awards ($)
Awards ($)
Non-Equity
Incentive Plan
Compensation ($)
Nonqualified
Deferred
Compensation
Earnings ($)
All Other
Compensation ($)
Name and
Position(s)
Mark Meller
President, Chief
Executive Officer,
and Director
Christine Dye,
Chief Financial
Officer (1) (2)
Year Salary ($) Bonus ($)
885,758 $
2020 $
- $
- $
- $
2019 $
777,986 $
- $
2020 $
218,500 $
80,400 $
2019 $
213,692 $
53,000 $
- $
- $
- $
- $
- $
- $
- $
- $
- $
- $
- $
- $
- $
- $
Total
Compensation
($)
885,758
- $
- $
777,986
- $
298,900
- $
262,692
(1)
(2)
Effective November 13, 2020, resigned from her position as Chief Financial Officer of the Company. To facilitate a transition of her duties, the Company and
Ms. Dye entered into a Separation Agreement, effective as of October 13, 2020 (the “Separation Agreement”). Pursuant to the Separation Agreement, Ms.
Dye’s employment with the Company will end on November 13, 2020 and Ms. Dye will receive separation payments in an aggregate gross amount of
$47,400.00.
On January 4, 2021, the Board of Directors of SilverSun Technologies, Inc. (the “Company”) appointed Mr. Joseph Macaluso as Chief Financial Officer of the
Company (the “CFO Appointment”). Concurrently, Mr. Joseph Macaluso submitted his resignation from his positions as a member of the Board and Chairman
of the Audit Committee of the Company.
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).
Joseph Macaluso, Chief Financial Officer
In connection with the CFO Appointment, Mr. Macaluso entered into an offer letter (the “Offer Letter”) with the Company. Pursuant to the Offer Letter, Mr. Macaluso is to
receive a base salary at the annual rate of Two Hundred Fifteen Thousand Dollars ($215,000) and a one-time cash sign on bonus in the amount of Thirty Thousand Dollars
($30,000). Mr. Macaluso is eligible for a discretionary bonus of up to Twenty percent (20%) of the Annual Rate. Pursuant to the Offer Letter, Mr. Macaluso’s employment
with the Company is at-will and it may be terminated with or without cause.
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Outstanding Equity Awards at Fiscal Year-End 2020
The Company had no outstanding equity awards to the executives named above at the end of the most recent completed fiscal year.
Director Compensation
The following Director Compensation Table sets forth the compensation of our directors for the fiscal year ending on December 31, 2020.
Fees Earned
or Paid in
Cash
($)
Stock
Awards
($)
Option
Awards
($)
Non-Equity
Incentive Plan
Compensation
($)
Non-Qualified
Deferred
Compensation
Earnings
($)
All Other
Compensation
($)
12,000
18,000
18,000
-
-
-
-
-
-
-
-
-
-
-
-
Total
($)
-
12,000
-
-
18,000
18,000
Name
Stanley Wunderlich
Joseph Macaluso
(1) (2)
John Schachtel
(1) On January 4, 2021, the Board of Directors (the “Board”) of SilverSun Technologies, Inc. (the “Company”) appointed Mr. Joseph Macaluso as Chief Financial
Officer of the Company (the “CFO Appointment”). Concurrently, Mr. Joseph Macaluso submitted his resignation from his positions as a member of the Board and
Chairman of the Audit Committee of the Company, Mr. Macaluso did not resign as a result of any disagreement with the Company on any matter relating to the
Company’s operations, policies or practices.
(2) On January 4, 2021, in connection with the Resignation of Mr. Macaluso, the Board appointed Mr. Kenneth E. Edwards Sr. as a member of the Board and Chairman
of the Audit Committee. Mr. Edwards will be paid $1,667 per month, payable quarterly for his service as a member of the board and as Chairman of the Audit
Committee.
We pay only our independent directors for their service on our board of directors. Mr. Wunderlich is paid $1,000 per month, payable quarterly for his service as a member of
the board and as Chairman of the Nominating and Governance Committee. Mr. Macaluso was paid $1,500 per month, payable quarterly for his service as a member of the
board and as Chairman of the Audit Committee. Mr. Schachtel is paid $1,500 per month, payable quarterly for his service as a member of the board and as Chairman of the
Compensation Committee. Mr. Edwards will be paid $1,667 per month, payable quarterly for his service as a member of the board and as Chairman of the Audit Committee.
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.
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On March 27, 2017, we entered into a director agreement (“Schachtel Director Agreement”) with John Schachtel, pursuant to which Mr. Schachtel was appointed to the
Board effective March 27, 2017 (the “Effective Date”). The Schachtel Director Agreement may, at the option of the Board, be automatically renewed on such date that Mr.
Schachtel is re-elected to the Board. Under the Schachtel Director Agreement, Mr. Schachtel is to be paid a stipend of one thousand five hundred dollars ($1,500) (the
“Stipend”) per month, payable quarterly. Additionally, Mr. Schachtel shall receive warrants (the “Warrants”) to purchase such number of shares of the Company’s Common
Stock, as shall equal (the “Formula”) (A) $20,000 divided by (B) the closing price of the Common Stock on the date of grant of the Warrant. The exercise price of the
Warrant shall be the closing price on the date of the grant of such Warrant (the “Grant Date”) plus $0.01. The Warrant shall be fully vested upon receipt thereof (the
“Vesting Date”).
On January 4, 2021, we entered into a director agreement (“Edwards Director Agreement”) with Kenneth Edwards, pursuant to which Mr. Edwards was appointed to the
Board effective January 4, 2021 (the “Effective Date”). The Edwards Director Agreement may, at the option of the Board, be automatically renewed on such date that Mr.
Edwards is re-elected to the Board. Under the Edwards Director Agreement, Mr. Edwards is to be paid a stipend of $5,000 (the “Stipend”) payable quarterly.
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 24, 2021 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 24, 2021. 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 24, 2021 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.
Officers and Directors
Mark Meller
Chief Executive Officer, President and Chairman
Joseph Macaluso
Chief Financial Officer
Kenneth Edwards
Director
Stanley Wunderlich
Director
John Schachtel
Director
Officers and Directors as a Group
5% Beneficial Shareholders
Jeffrey Roth (2)
Ault Global Holdings, Inc. (3)
Bard Associates (4)
38
Number of Shares of
Common Stock
Beneficially Owned
Percentage of
Ownership
of Common Stock (1)
2,006,534
39.65 %
-
-
1,400
11,031
-
-
*
*
2,018,965
39.89 %
440,082
286,774
229,863
8.70 %
5.67 %
4.54 %
Table of Contents
* denotes less than 1%
(1)
(2)
(3)
(4)
Based on 5,061,177 shares of Common Stock outstanding as of March 24, 2021. 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.
All information about Mr. Roth is based on a Form 4 filed with the SEC on February 16, 2021. Mr. Roth is a former employee of SWK Technologies, Inc, a
wholly-owned subsidiary of SilverSun Technologies, Inc.
All information about Ault Global Holdings, Inc., and related parties, is based on a Schedule 13-D filed with the SEC on March 18, 2021.
All information about Bard Associates, Inc. is based on a Schedule 13G filed with the SEC on February 12, 2021.
Securities Authorized for Issuance Under Equity Compensation Plans
There are no outstanding options to purchase our securities as of December 31, 2020.
The following table sets forth information as of December 31, 2020 with respect to compensation plans (including individual compensation arrangements) under which our
common shares are authorized for issuance, aggregated as follows:
Plan category
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders.
Total
2004 Stock Incentive Plan
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)
Number of securities
remaining available for
future issuance
(c)
- $
- $
- $
-
-
-
855,030
-
-
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, 2020
and 2019, -0- and 26,280 options remained outstanding under the 2004 Plan, respectively.
2019 Equity and Incentive Plan
The Company adopted the 2019 Equity and Incentive Plan (the “2019 Plan”) to order provide long-term incentives for employees and non-employees to contribute to the
growth of the Company and attain specific performance goals. The 675,000 shares available under the 2019 Plan represent approximately 13% of the Company’s 5,061,177
currently outstanding shares (the “Share Reserve”). The Share Reserve will automatically increase on January 1st of each year, for a period of not more than ten years,
commencing on January 1, 2020 and ending on (and including) January 1, 2029, in an amount equal to 180,030 shares (which is the equivalent of 4.0% of the 4,500,755
shares of common stock outstanding as of September 30, 2019). As of March 24, 2021, no securities were issued.
39
Table of Contents
Item 13. Certain Relationships and Related Transactions
The Company leased its Seattle, WA office space from Mary Abdian, an employee of SWK. The lease which expires on September 30, 2018, was terminated by mutual
consent on May 31, 2019, and the lease continued on a month-to-month basis with a monthly rent of approximately $2,066. The Company ended the lease on May 31, 2020.
Total rent paid for 2020 and 2019 was $10,195 and $24,117 respectively under this lease.
Item 14. Principal Accountant Fees and Services
The following table sets forth fees billed to the Company by the Company’s independent auditors for (i) services rendered for the audit of the Company’s annual financial
statements and the review of the Company’s quarterly financial statements, (ii) services rendered that are reasonably related to the performance of the audit or review of the
Company’s financial statements that are not reported as Audit Fees, and (iii) services rendered in connection with tax preparation, compliance, advice and assistance.
Services
Audit Fees
Audit - Related Fees
Tax fees
All Other Fees
Total
$
$
$
2020
2019
106,281 $
95,000
53,694
56,823
-
216,798 $
-
30,000
-
125,000
Prior to engaging our accountants to perform a particular service, our Audit Committee obtains an estimate for the service to be performed. All the services described above
were approved by the Audit Committee in accordance with its procedures.
40
Table of Contents
Item 15. Exhibits
(a)
Exhibit No.
Description
PART IV
2.1
2.2
2.2
2.3
2.4
3.1
3.2
3.3
3.4
3.5
4.1
4.2
4.3
4.4
4.5
4.6
4.7
10.1
10.2
10.3
10.4
10.5
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).
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).
Form of Asset Purchase Agreement, dated May 18, 2018, by and among SWK Technologies, Inc., InfoSys Management, Inc. and three individuals
(incorporated herein by reference to Exhibit 2.1 on the Company’s Form 8-K, filed with the SEC on May 24, 2018).
Form of Asset Purchase Agreement, dated May 18, 2018, by and among Secure Cloud Services, Inc., SilverSun Technologies, Inc., Nellnube, Inc. and
Info Sys Management, Inc. (incorporated herein by reference to Exhibit 2.2 on the Company’s Form 8-K, filed with the SEC on May 24, 2018).
Asset Purchase Agreement, dated August 26, 2019, by and among SilverSun Technologies, Inc. SWK Technologies, Inc., and SPS Commerce, Inc.
(incorporated herein by reference to Exhibit 10.1 on Form 8-K, filed with the SEC on August 27, 2019).
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).
Certificate of Elimination of Series B Preferred Stock (incorporated herein by reference to Exhibit 3.1 on Form 8-K, dated September 13, 2019).
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 4.3 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 4.4 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).
41
Table of Contents
10.6
10.7
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
10.24
10.25
10.26
10.27
14.1
Placement Agreement dated January 24, 2003 between iVoice Acquisition 1, Inc. and Cornell Capital Partners LP. (incorporated herein by reference to
Exhibit 10.5 of the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003, filed with the SEC on May 12, 2003).
Termination Agreement dated December 30, 2005 between YA Global (f/k/a/ Cornell Capital Partners, LP). and SilverSun Technologies, Inc.
Escrow Agreement dated December 30, 2005 between David Gonzalez, Esq. And SilverSun Technologies, Inc.
Securities Purchase Agreement dated December 30, 2005 between YA Global (f/k/a/ Cornell Capital Partners, LP). and SilverSun Technologies, Inc.
Investor Rights Agreement dated December 30, 2005 between YA Global (f/k/a/ Cornell Capital Partners, LP). and SilverSun Technologies, Inc.
Amended and Restated Security Agreement dated December 30, 2005 between YA Global (f/k/a/ Cornell Capital Partners, LP). and SilverSun
Technologies, Inc.
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).
Form of $1,000,000 Convertible Promissory Note, dated May 18, 2018, issued in favor of Info Sys Management, Inc. (incorporated herein by reference to
Exhibit 10.1 on Form 8-K, filed with the SEC on May 24, 2018).
Form of $400,000 Convertible Promissory Note, May 18, 2018, issued in favor of Info Sys Management, Inc. (incorporated herein by reference to Exhibit
10.2 on Form 8-K, filed with the SEC on May 24, 2018).
Form of Employment Agreement, dated May 18, 2018 by and between SWK Technologies, Inc. and Brian James O’Reilly (incorporated herein by
reference to Exhibit 10.3 on Form 8-K, filed with the SEC on May 24, 2018).
Form of Escrow Agreement, dated August 26, 2019, by and among SWK Technologies, Inc., SPS Commerce, Inc. and Wells Fargo Bank, National
Association (incorporated herein by reference to Exhibit 10.2 on Form 8-K, filed with the SEC on August 27, 2019).
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).
42
Table of Contents
21.1 *
23.1*
31.1 *
31.2 *
32.1 *
32.2 *
List of Subsidiaries
Consent of Independent Registered Public Accounting Firm
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.
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 Sarbanes-Oxley Act of 2002
filed herein.
101.INS *
101.SCH *
101.CAL *
101.DEF *
101.LAB *
101.PRE *
XBRL Instance Document
XBRL Taxonomy Extension Schema
XBRL Taxonomy Extension Calculation Linkbase
XBRL Taxonomy Extension Definition Linkbase
XBRL Taxonomy Extension Label Linkbase
XBRL Taxonomy Extension Presentation Linkbase
* Filed herewith
43
Table of Contents
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 25, 2021
Date: March 25, 2021
SILVERSUN TECHNOLOGIES, INC.
By:
By:
/s/ Mark Meller
Mark Meller
Principal Executive Officer
/s/ Joseph Macaluso
Joseph Macaluso
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/ Kenneth Edwards
Kenneth Edwards
/s/ John Schachtel
John Schachtel
/s/ Joseph Macaluso
Joseph Macaluso
Position
Principal Executive Officer
Director
Director
Director
Principal Financial Officer
44
Date
March 25, 2021
March 25, 2021
March 25, 2021
March 25, 2021
March 25, 2021
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-9
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 Subsidiaries (the “Company”) as of December 31, 2020 and 2019, 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, 2020, 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, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2020, 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.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be
communicated to the audit committee and that: (1) related to accounts or disclosures that are material to the financial statements and (2) involved especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion or the financial statements, taken as a whole, and we are
not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Revenue recognition
Description of the Matter
As described in Note 2 to the financial statements, the Company recognizes revenue mainly from the resale of software products, maintenance and professional consulting
services. The Company enters into contracts with customers that may include combinations of products and services, which are generally distinct and recorded as separate
performance obligations. Revenue is recognized when control of the distinct performance obligation is transferred. For example, product revenue is recognized at a point in
time while maintenance and professional consulting services revenue is recognized over time. Auditing the Company’s revenue is a critical audit matter due to the effort
required to analyze the high volume of transactions, significance of the total amounts recognized as revenue, and timing of when revenue is recognized.
How We Addressed the Matter in Our Audit
Our audit procedures related to the Company’s revenue recognition included, among others, selecting a sample of recorded revenue transactions and examining customer
source documents for each selection, including the contract or agreement and invoices and payment support. In addition, we evaluated management’s application of the
Company’s accounting policy, tested the mathematical calculation of revenue and associated timing of revenue recognized in the financial statements.
/s/ Friedman LLP
We have served as the Company’s auditor since 2004.
East Hanover, New Jersey
March 25, 2021
F-2
Table of Contents
ASSETS
Current assets:
Cash
Escrow accounts receivable
Accounts receivable, net of allowance of $375,000
Unbilled services
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Operating lease right-of-use assets
Intangible assets, net
Goodwill
Deferred tax assets
Deposits and other assets
Total assets
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Accrued expenses
Accrued dividend
Accrued interest
Income taxes payable
Long term debt – current portion
Long term convertible debt – current portion
Finance lease obligations – current portion
Operating lease liabilities – current portion
Deferred revenue
Total current liabilities
Long term debt net of current portion
Long term convertible debt net of current portion
Finance lease obligations net of current portion
Operating lease liabilities net of current portion
Total liabilities
Commitments and Contingencies
Stockholders’ equity:
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
$
$
$
2020
2019
6,595,416 $
-
1,580,242
52,072
400,820
8,658,401
1,150,000
2,529,545
183,484
455,434
8,628,550
12,976,864
523,040
1,373,720
3,126,336
1,011,952
1,039,084
198,726
712,627
698,840
2,607,301
891,000
874,482
192,158
15,901,408 $
18,953,272
1,875,115 $
1,330,786
-
21,206
318,031
262,301
282,699
118,658
481,250
2,039,241
2,210,618
1,189,746
2,250,636
15,378
152,355
131,795
277,106
162,625
262,020
2,006,983
6,729,287
8,659,262
502,560
434,783
62,316
892,470
64,072
717,482
180,976
436,820
8,621,416
10,058,612
Preferred Stock, $0.001 par value; authorized 1,000,000 shares
Series A Preferred Stock, $0.001 par value; authorized 2 shares
No shares issued and outstanding
Common stock, $0.00001 par value; authorized 75,000,000 shares
4,501,271 and 4,501,271 issued and outstanding as of December 31, 2020 and 2019, respectively
Additional paid-in capital
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
-
-
46
7,739,883
(459,937)
46
9,530,198
(635,584)
7,279,992
8,894,660
$
15,901,408 $
18,953,272
The accompanying notes are an integral part of these consolidated financial statements.
F-3
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended
December 31, 2020 December 31, 2019
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 expenses
Impairment of intangible assets
Depreciation and amortization expenses
Total selling, general and administrative expenses
Income (loss) from continuing operations
Other (expense) income:
Other income
Interest expense, net
Total other expense, net
Income (loss) from continuing operations before taxes
(Provision) Benefit for income taxes
Income (loss) from continuing operations
Discontinued operations
Income from discontinued operations
Gain on sale of discontinued operations
Provision for income taxes
Income from discontinued operations
Net income
Basic earnings (loss) per share applicable to common shareholders:
Continuing operations
Discontinued operations
Net income
Diluted earnings (loss) per share applicable to common shareholders:
Continuing operations
Discontinued operations
Net income
Weighted average shares outstanding:
Basic
Diluted
$
7,661,580 $
33,558,826
41,220,406
4,608,889
20,032,536
24,641,425
6,876,682
31,625,800
38,502,482
4,179,592
19,644,436
23,824,028
16,578,981
14,678,454
7,365,912
8,273,558
10,194
-
705,932
16,355,596
6,838,745
8,772,965
16,910
236,860
720,035
16,585,515
223,385
(1,907,061 )
13,269
(13,616 )
(347 )
24,005
(39,814 )
(15,809 )
223,038
(1,922,870 )
(47,391 )
455,006
175,647
(1,467,864 )
-
-
-
-
988,525
10,307,155
(3,033,590 )
8,262,090
$
175,647 $
6,794,226
0.04
-
0.04
0.04
-
0.04
(0.33 )
1.84
1.51
(0.33 )
1.84
1.51
4,501,271
4,501,271
4,500,827
4,500,827
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Table of Contents
Balance at January 1,
2019
Cancellation of Series
B stock
Cash dividend
declared
Exercised stock
warrants
Share-based
compensation
Net income
Balance at December
31, 2019
Cash dividend
Share-based
compensation
Net income
Balance at December
31, 2020
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
Series A
Preferred
Stock
Series B
Preferred
Stock
Common Stock
Class A
Shares
Amount
Shares
Amount
Shares
Amount
Additional
Paid in
Capital
Accumulated
(Deficit)
Total
Stockholders’
Equity
-
$
-
-
-
-
-
-
-
-
-
$
-
$
-
-
-
-
-
-
-
-
-
-
-
1
$
1
4,500,755
$
46
$
11,763,923
$
(7,429,810) $
4,334,160
(1)
(1)
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
516
-
-
-
-
-
-
-
1
(2,250,636)
-
16,910
-
-
-
-
-
6,794,226
-
(2,250,636)
-
16,910
6,794,226
4,501,271
-
$
$
46
-
9,530,198
(1,800,509)
$
(635,584) $
-
8,894,660
(1,800,509)
-
-
-
-
10,194
-
-
175,647
10,194
175,647
-
$
-
4,501,271
$
46
$
7,739,883
$
(459,937) $
7,279,992
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
Cash flows from operating activities:
Net income
Net income from discontinued operations
Net income (loss) from continuing operations
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Deferred income taxes
Depreciation and amortization
Amortization of intangibles
Amortization of right of use assets
Bad debt expense
Share-based compensation
Impairment of intangible asset
Changes in 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
Operating lease obligations
Net cash provided by (used in) operating activities of continuing operations
Cash flows from investing activities:
Purchase of property and equipment
Acquisition of business
Escrow accounts receivable
Proceeds from sale of EDI practice, net of fees and taxes
Software development costs
Net cash provided by investing activities of continuing operations
Cash flows from financing activities:
Payment of cash dividend
Proceeds from PPP loan
Payment of PPP loan
Payment of contingent consideration
Payment for repurchase of common stock
Payment of long-term debt
Payment of long-term convertible debt
Payment of capital lease obligations
Net cash used in financing activities of continuing operations
Cash flows from discontinued operations
Operating activities of discontinued operations
Investing activities of discontinued operations
Net cash provided by discontinued operations
Net (decrease) 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
2020
2019
$
$
175,647
-
175,647
6,794,226
8,262,090
(1,467,864 )
(164,602 )
314,369
391,563
416,061
(2,274 )
10,194
-
977,451
131,412
54,614
354
(335,503 )
141,040
165,676
5,828
(136,678 )
(416,061 )
1,729,091
(124,782 )
(185,410 )
1,150,000
-
-
839,808
(4,051,145 )
3,150,832
(3,150,832 )
-
-
(141,006 )
(277,106 )
(162,627 )
(4,631,884 )
-
-
-
(2,062,985 )
8,658,401
6,595,416
$
(455,006 )
338,103
381,933
212,164
139,270
16,910
236,860
(605,611 )
(16,888 )
(21,707 )
(152,368 )
182,400
(232,808 )
132,350
750
620,365
(212,160 )
(903,307 )
(70,672 )
(60,000 )
-
8,365,192
(81,730 )
8,152,790
(225,038 )
-
-
(22,548 )
-
(206,760 )
(271,622 )
(144,202 )
(870,170 )
505,910
(127,679 )
378,231
6,757,544
1,900,857
8,658,401
41,957
36,915
$
$
1,907,382
39,814
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
For the Year Ended December 31, 2020:
On January 23, 2020 the Company entered into an operating lease for equipment with VAR Technology Finance. Accordingly, operating lease right of use assets and
operating lease liabilities were recognized in the amount of $453,379.
On January 29, 2020 the Company entered into an operating lease in Greensboro, NC. Accordingly, operating lease right of use assets and operating lease liabilities were
recognized in the amount of $104,296.
On February 1, 2020 the Company entered into an operating lease in East Hanover, NJ. Accordingly, operating lease right of use assets and operating lease liabilities were
recognized in the amount of $349,987.
The Company leases office space in Chicago, IL with a monthly rent of $582. The lease expired May 31, 2020. This has been renewed for two years expiring May 31, 2022
at rate of $655 per month.
On July 1, 2020 the Company entered into an operating lease in Phoenix, Arizona. Accordingly, operating lease right of use assets and operating lease liabilities were
recognized in the amount of $103,451.
On July 31, 2020, the Company acquired certain assets of Prairie Technology Solutions Group, LLC (“Prairie Tech”) pursuant to an Asset Purchase Agreement. In
consideration for the acquired assets, the Company paid $185,000 in cash and issued three promissory notes to Prairie Tech (“Prairie Tech Note 1”, “Prairie Tech Note 2”
and “Prairie Tech Note 3”), each in the principal aggregate amount of $103,333 (collectively the “Prairie Tech Notes”). The Prairie Tech Notes bear interest at a rate of 4%
per annum. The Company also received deferred revenue in the amount of $51,748 and deposits of $32,896. The Company assumed office lease in Burr. Ridge, IL starting
at $2,849 per month and escalating to $2,929 per month by the end of the term which ends July 30, 2022. The Company also recognized right-of-use assets and related
liabilities in the amount of $64,863.
On October 1, 2020, SWK acquired certain assets of Computer Management Services, LLC, (“CMS”) pursuant to an Asset Purchase Agreement for cash of $410, liabilities
in the form of clients deposits related to technical support in the amount of $50,115 and prepaid time from clients in the amount of $67,073, and the issuance of a promissory
note in the aggregate principal amount of $170,000 (the “CMS Note”) for a total of $287,598. The CMS Note is due in 36 months from the closing date and bears interest at
a rate of two percent (2.0%) per annum. Monthly payments including interest are $4,869.
On December 1, 2020, SWK acquired certain assets of Business Software Solutions (“BSS”) pursuant to an Asset Purchase Agreement for a promissory note in the
aggregate principal amount of $230,000 (the “BSS Note”). The BSS Note is due in 60 months from the closing date and bears interest at a rate of two percent (2.0%) per
annum. Monthly payments including interest are $4,031.
On December 9, 2020, the Company declared a $0.40 special cash dividend per share of Common Stock payable on December 28, 2020 for shareholders of record on
December 28, 2020 for an aggregate amount of $1,800,509.
For the Year Ended December 31, 2019:
The Company acquired certain assets of Partners in Technology, Inc. (“PIT”) for a $174,000 promissory note in addition to a cash payment of $60,000. (see Note 10).
Operating lease right of use assets and operating lease liabilities were recognized in the amount of $911,000 at January 1, 2019.
On April 1, 2019 the Company entered into an operating lease in Lisle, IL. Accordingly, operating lease right of use assets and operating lease liabilities were recognized in
the amount of $71,685.
The Company incurred approximately $291,936 in finance lease obligations for the purchase of equipment.
F-7
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS(Continued)
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
For the Year Ended December 31, 2019 (continued):
On September 6, 2019, the Company filed a Certificate of Elimination of Certificate of Designations (the “Certificate of Elimination”) with the Secretary of State of the
State of Delaware. The Certificate of Withdrawal eliminated the Company’s Series B Preferred Stock, par value $.001 per share (the “Series B Preferred”), from the
Company’s Certificate of Incorporation. Prior to filing the Certificate of Elimination, Mark Meller, the Company’s Chief Executive Officer and Chairman and owner of the
only share of Series B Preferred, cancelled the only share of Series B Preferred issued and outstanding.
On August 26, 2019 the Company sold the EDI practice and $1,150,000 of the proceeds were put in an escrow receivable account (see Note 14). There was also an
adjustment to the Working Capital and an additional $162,868 was added to the gain on the sale of Mapadoc.
On October 10, 2019, the Company’s Board of Directors authorized a new stock repurchase program, under which the Company may repurchase up to $2 million of its
outstanding common stock. Under this new stock repurchase program, the Company may repurchase shares in accordance with all applicable securities laws and
regulations, including Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The extent to which the Company repurchases its shares, and the timing of such
repurchases, will depend upon a variety of factors, including market conditions, regulatory requirements and other corporate considerations, as determined by the
Company’s management. The repurchase program may be extended, suspended or discontinued at any time. The Company expects to finance the program from existing
cash resources. As of December 31, 2019, no repurchases have been made.
On December 24, 2019, the Company announced the payment of a $0.50 special cash dividend per share of Common Stock payable on January 14, 2020 for an aggregate
amount of $2,250,636, which was applied against paid in capital.
The accompanying notes are an integral part of these consolidated financial statements.
F-8
Table of Contents
NOTE 1 – DESCRIPTION OF BUSINESS
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
“SilverSun Technologies, Inc. (“SilverSun”) through our wholly owned subsidiaries SWK Technologies, Inc. (“SWK”), Secure Cloud Services, Inc. (“SCS”) and Critical
Cyber Defense Corp. (“CCD”) (together with SWK, SCS and SilverSun, the “Company” is a business application, technology and consulting company providing strategies
and solutions to meet our clients’ information, technology and business management needs. Our services and technologies enable customers to manage, protect and monetize
their enterprise assets whether on-premise or in the “Cloud”. As a value-added reseller of business application software, we offer solutions for accounting and business
management, financial reporting, Enterprise Resource Planning (“ERP”), Human Capital Management (“HCM”), Warehouse Management Systems (“WMS”), Customer
Relationship Management (“CRM”), and Business Intelligence (“BI”). Additionally, we have our own development staff building software solutions for time and billing,
and various ERP enhancements. Our value-added services focus on consulting and professional services, specialized programming, training, and technical support. We have
a dedicated network services practice that provides managed services, cybersecurity, application hosting, disaster recovery business continuity, cloud migration and other
services. Our customers are nationwide, with concentrations in the New York/New Jersey metropolitan area, Arizona, Southern California, North Carolina, Washington,
Oregon and Illinois.”
On August 26, 2019 SWK entered into and closed that certain Asset Purchase Agreement (the “MAPADOC Asset Purchase Agreement”) by and among the Company, SPS
Commerce, Inc., as buyer (“SPS”), and SWK as seller, pursuant to which SPS agreed to acquire from SWK substantially all of the assets related to the MAPADOC business
(See footnote 14).
The Company is publicly traded and was quoted on the Over-the-Counter Market Place (“OTCQB”) under the symbol “SSNT” until April 18, 2017. Since April 19, 2017,
the Company has been listed and is traded on the NASDAQ Capital Market under the symbol “SSNT”.
The Company’s operations may be affected by the recent and ongoing outbreak of the coronavirus disease 2019 (COVID-19), which in March 2020, was declared a
pandemic by the World Health Organization. The ultimate disruption which may be caused by the outbreak is uncertain; however, it may result in a material adverse impact
on the Company’s financial position, operations, and cash flows. Possible areas that may be affected include, but are not limited to, disruption to the Company’s customers
and revenue, labor workforce, inability of customers to pay outstanding accounts receivable due and owing to the Company as they limit or shut down their businesses,
customers seeking relief or extended payment plans relating to accounts receivable due and owing to the Company, unavailability of products and supplies used in
operations, and the decline in value of assets held by the Company, including property and equipment.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the “Company” and its wholly-owned subsidiaries. These consolidated financial statements
have been prepared in accordance with accounting principles generally accepted in the United States. All significant inter-company transactions and accounts have been
eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Goodwill
Goodwill is the excess of acquisition cost of an acquired entity over the fair value of the identifiable net assets acquired. Goodwill is not amortized but tested for impairment
annually or whenever indicators of impairment exist. These indicators may include a significant change in the business climate, legal factors, operating performance
indicators, competition, sale or disposition of a significant portion of the business or other factors. No impairment losses were identified or recorded for the years ended
December 31, 2020 and 2019.
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Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Capitalization of proprietary developed software
Software development costs are accounted for in accordance with ASC 985-20, Software — Costs of Software to be Sold, Leased or Marketed. Costs associated with the
planning and designing phase of software development are expensed as incurred. Once technological feasibility has been determined, a portion of the costs incurred in
development, including coding, testing and quality assurance, are capitalized until available for general release to clients, and subsequently reported at the lower of
unamortized cost or net realizable value. Amortization is calculated on a solution-by-solution basis and is over the estimated economic life of the software. Amortization
commences when a solution is available for general release to clients.
Business Combinations
We account for business combinations under the acquisition method of accounting. This method requires the recording of acquired assets and assumed liabilities at their
acquisition date fair values. The excess of the purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Results of operations
related to business combinations are included prospectively beginning with the date of acquisition and transaction costs related to business combinations are recorded within
SG&A.
Definite Lived Intangible Assets and Long-lived Assets
Purchased intangible assets are recorded at fair value using an independent valuation at the date of acquisition and are amortized over the useful lives of the asset using the
straight-line amortization method.
The Company assesses potential impairment of its intangible assets and other long-lived assets when there is evidence that recent events or changes in circumstances have
made recovery of an asset’s carrying value unlikely. A triggering event occurred with the sale of Mapadoc EDI and an analysis was prepared by management. Factors the
Company considers important, which may cause impairment include, among others, significant changes in the manner of use of the acquired asset, negative industry or
economic trends, and significant underperformance relative to historical or projected operating results. Impairment losses of $ -0- and $236,860, were identified and
recorded for the years ended December 31, 2020 and 2019 respectively.
Revenue Recognition
The Financial Accounting Standards Board “FASB” issued ASU 2014-09, Revenue from Contracts with Customers: Topic 606 which superseded nearly all existing revenue
recognition guidance under GAAP. The core principle of Topic 606 is to recognize revenues when promised goods or services are transferred to customers in an amount that
reflects the consideration that is expected to be received for those goods or services. Topic 606 defines a five-step process to achieve this core principle and, in doing so, it is
possible more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP, including identifying performance
obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate
performance obligation, among others. Topic 606 also provides guidance on the recognition of costs related to obtaining customer contracts.
With the adoption of ASC 606, the Company has elected the significant financing component practical expedient. In determining the transaction price, the Company does
not adjust the promised amount of consideration for the effects of a significant financing component as the Company expects, at contract inception, that the period between
when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.
Software product revenue is recognized when the product is delivered to the customer and the Company’s performance obligation is fulfilled. Service revenue is recognized
when the professional consulting, maintenance or other ancillary services are provided to the customer.
Shipping and handling costs charged to customers are classified as revenue, and the shipping and handling costs incurred are included in cost of sales.
F-10
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Components of revenue:
Professional Consulting
Maintenance Revenue
Software revenue
Ancillary Service Revenue
Unbilled Services
For the Year Ended December 31
2020
13,617,958 $
7,152,209
7,661,580
12,788,659
41,220,406 $
2019
12,055,878
7,722,181
6,876,682
11,847,741
38,502,482
$
$
The Company recognizes revenue on its professional services as those services are performed. Unbilled services (contract assets) represent the revenue recognized but not
yet invoiced.
Deferred Revenues
Deferred revenues consist of maintenance on proprietary products (contract liabilities), customer telephone support services (contract liabilities) and deposits for future
consulting services which will be earned as services are performed over the contractual or stated period, which generally ranges from three to twelve months. As of
December 31, 2020, there was $167,267 in deferred maintenance, $308,343 in deferred support services, and $1,563,631 in deposits for future consulting services. As of
December 31, 2019, there was $145,977 in deferred maintenance, $159,165 in deferred support services, and $1,701,841 in deposits for future consulting services.
Commissions
Sales commissions relating to service revenues are considered incremental and recoverable costs of obtaining a project with our customer. These commissions are calculated
based on estimated revenue to be generated over the life of the project. These costs are deferred and expensed as the service revenue is earned. Commission expense is
included in selling and marketing expenses in the accompanying consolidated statements of operations.
Fair Value of Financial Instruments
The Company estimates that the fair value of all financial instruments at December 31, 2020 and December 31, 2019, as defined in Financial Accounting Standards Board
(“FASB”) ASC 825 “Financial Instruments”, does not differ materially, except for the items discussed below, from the aggregate carrying values of its financial instruments
recorded in the accompanying consolidated balance sheets. The estimated fair value amounts have been determined by the Company using available market information and
appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value.
The carrying amounts reported in the consolidated balance sheets as of December 31, 2020 and December 31, 2019 for cash, accounts receivable, and accounts payable
approximate the fair value because of the immediate or short-term maturity of these financial instruments. Each reporting period we evaluate market conditions including
available interest rates, credit spreads relative to our credit rating and liquidity in estimating the fair value of our debt. After considering such market conditions, we estimate
that the fair value of debt approximates its carrying value.
Leases
On January 1, 2019, the Company adopted the new lease accounting standard using the modified retrospective transition method applied at the effective date of the standard.
Results for reporting periods beginning after January 1, 2019 are presented under the new leasing standard, while prior period amounts are not adjusted and continue to be
reported in accordance with the Company’s historic accounting. The Company has elected to utilize the package of practical expedients at the time of adoption, which allows
the Company to (1) not reassess whether any expired or existing contracts are or contain leases, (2) not reassess the lease classification of any expired or existing leases, and
(3) not reassess initial direct costs for any existing leases. The Company also has elected to utilize the short-term lease recognition exemption and, for those leases that
qualified, the Company did not recognize right-of-use (“ROU”) assets or lease liabilities.
F-11
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Leases (continued)
The Company accounts for its leases in accordance with ASC 842 Leases. The Company leases office space and equipment. The Company concludes on whether an
arrangement is a lease at inception. This determination as to whether an arrangement contains a lease is based on an assessment as to whether a contract conveys the right to
the Company to control the use of identified property, plant or equipment for period of time in exchange for consideration. Leases with an initial term of 12 months or less
are not recorded on the balance sheet. The Company recognizes these lease expenses on a straight-line basis over the lease term.
The Company has assessed its contracts and concluded that its leases consist of finance and operating leases. Operating leases are included in operating lease right-of-use
(ROU) assets, current portion of operating lease liabilities, and operating lease liabilities in the Company’s consolidated balance sheets.
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments
arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As
most of the Company’s leases do not provide an implicit rate, the Company determines an incremental borrowing rate based on the information available at commencement
date in determining the present value of lease payments. The incremental borrowing rate represents a significant judgment that is based on an analysis of the Company’s
credit rating, country risk, treasury and corporate bond yields, as well as comparison to the Company’s borrowing rate on its most recent loan. The Company uses the
implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease
payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are generally accounted
for separately.
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, 2020, the Company had cash on
deposit of approximately $5,900,593 in excess of the federally insured limits of $250,000.
As of December 31, 2020, no one customer represented more than 10% of the total accounts receivable and unbilled services. As of December 31, 2019, one customer
represented 14% of the total accounts receivable and unbilled services.
For the years ended December 31, 2020 and 2019, the top ten customers accounted for 10% ($4,246,257) and 10% ($3,903,702), respectively, of total revenues. The
Company does not rely on any one specific customer for any significant portion of its revenue base.
For the years ended December 31, 2020 and 2019, purchases from one supplier through a “channel partner” agreement were approximately 15% and 19% 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 year ended December 31, 2020 two suppliers represented approximately 39% of accounts payable. For the year ended December 31, 2019, one supplier represented
approximately 15% of total accounts payable.
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade accounts receivable and cash. As of December 31,
2020, the Company believes it has no significant risk related to its concentration of accounts receivable.
F-12
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounts Receivable
Accounts receivable consist primarily of invoices for maintenance and professional services. Full payment for software ordered by customers is primarily due in advance of
ordering from the software supplier. Payments for maintenance and support plan renewals are due before the beginning of the maintenance period. Terms under our
professional service agreements are generally 50% due in advance and the balance on completion of the services.
The Company maintains an allowance for bad debt estimated by considering several factors, including the length of time the amounts are past due, the Company’s previous
loss history and the customer’s current ability to pay its obligations. Accounts are written off against the allowance when deemed uncollectable.
Property and Equipment
Property and equipment is stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method based upon the estimated useful lives of
the assets, generally three to seven years. Maintenance and repairs that do not materially add to the value of the equipment nor appreciably prolong its life are charged to
expense as incurred.
When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is included in
the consolidated statements of operations.
Income Taxes
The Company accounts for income taxes using the asset and liability method described in FASB ASC 740, “Income Taxes”. Deferred tax assets arise from a variety of
sources, the most significant being: a) tax losses that can be carried forward to be utilized against profits in future years; b) expenses recognized for financial reporting
purposes but disallowed in the tax return until the associated cash flow occurs; and c) valuation changes of assets which need to be tax effected for book purposes but are
deductible only when the valuation change is realized.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes, as well as net operating loss carryforwards. Based on ASU 2015-17, all deferred tax assets or liabilities are classified as long-term.
Valuation allowances are established against deferred tax assets if it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates or laws is recognized in operations in the period that includes the enactment date.
The Company accounts for uncertainties in income taxes under ASC 740-10-50 which prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740-10 requires that the Company determine whether the benefits
of its tax positions are more-likely-than-not of being sustained upon audit based on the technical merits of the tax position. The Company recognizes the impact of an
uncertain income tax position taken on its income tax return at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority.
The Company has federal net operating loss (“NOL”) carryforwards which are subject to limitations under Section 382 of the Internal Revenue Code.
The Company files income tax returns in the U.S. federal and state jurisdictions. Tax years 2017 to 2020 remain open to examination for both the U.S. federal and state
jurisdictions.
Despite the Company’s belief that its tax return positions are consistent with applicable tax laws, one or more positions may be challenged by taxing authorities. Settlement
of any challenge can result in no change, a complete disallowance, or some partial adjustment reached through negotiations or litigation. Interest and penalties related to
income tax matters, if applicable, will be recognized as income tax expense. There were no liabilities for uncertain tax positions at December 31, 2020 and 2019.
During the years ended December 31, 2020 and 2019 the Company did not incur any expense related to interest or penalties for income tax matters, and no such amounts
were accrued as of December 31, 2020 and 2019.
F-13
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair Value Measurement
FASB ASC 820, “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and
prescribes disclosures about fair value measurements.
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 leases and debt obligations approximate fair value as their stated interest rates approximate the rates currently
available. The Company’s goodwill and intangibles are measured at fair-value on a non-recurring basis using Level 3 inputs, as discussed in Note 5 and 9.
Stock-Based Compensation
Compensation expense related to share-based transactions, including employee stock options, is measured and recognized in the financial statements based on a
determination of the fair value. The grant date fair value is determined using the Black-Scholes-Merton (“Black-Scholes”) pricing model. For employee stock options, the
Company recognizes expense over the requisite service period on a straight-line basis (generally the vesting period of the equity grant). The Company’s option pricing model
requires the input of highly subjective assumptions, including the expected stock price volatility and expected term. Any changes in these highly subjective assumptions
significantly impact stock-based compensation expense.
Recently Adopted Authoritative Pronouncements
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. This was adopted on January 1, 2020 and did not have a significant impact on our financial position and results of
operations.
Recent Authoritative Pronouncements
In June 2016, the FASB issued ASU No. 2016-13 Financial Instruments -Credit Losses (Topic 326), Measurement of Credit Losses on Financial Statements. The
amendment in this update replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses on instruments within
its scope, including trade receivables. We have evaluated the requirements of this standard on our financial assets and have concluded that the adoption of this ASU,
beginning January 1, 2021, will not have a material impact on our consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes - simplifying the accounting for income taxes (Topic 740), which is meant to simplify the accounting
for income taxes by removing certain exceptions to the general principles in Topic 740, Income Taxes. The amendment also improves consistent application and simplify
GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This standard is effective for annual periods beginning after December 15, 2020,
including interim reporting periods within these annual periods. We do not expect the adoption of this standard to have a significant impact on our financial position and
results of operations.
F-14
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s
Own Equity (Subtopic 815-40). The update simplifies the accounting for convertible debt instruments and convertible preferred stock by reducing the number of accounting
models and limiting the number of embedded conversion features separately recognized from the primary contract. The guidance also includes targeted improvements to the
disclosures for convertible instruments and earnings per share. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods
within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The Company is evaluating the impact of the
adoption on its consolidated financial statements.
No other recently issued accounting pronouncements had or are expected to have a material impact on the Company’s consolidated financial statements.
NOTE 3 – NET INCOME (LOSS) PER COMMON SHARE
The Company’s basic income (loss) per common share is based on net income (loss) for the relevant period, divided by the weighted average number of common shares
outstanding during the period. Diluted income per common share is based on net income (loss), divided by the weighted average number of common shares outstanding
during the period, including common share equivalents, such as outstanding options, warrants and convertible securities to the extent they are dilutive. As of December 31,
2020, and 2019, the average market prices for the years ended are less than the exercise price of all the outstanding stock options and warrants, therefore, the inclusion of the
stock options and warrants would be anti-dilutive. In addition, since the effect of common stock equivalents is anti-dilutive, the convertible promissory notes have also been
excluded from the Company’s computation of income (loss) per common share from continuing operations for the years ended December 31, 2020 and 2019. Therefore,
basic and diluted income (loss) per common share for continuing operations for the years ended December 31, 2020 and 2019 are the same.
Year Ended
Year Ended
December 31, 2020
December 31, 2019
Basic net income (loss) from continuing operations per share computation:
Net income (loss) from continuing operations
Weighted-average common shares outstanding
Basic net income (loss) per share
Diluted net income (loss) from continuing operations per share computation:
Net income (loss) per above
Interest on convertible note
Net income (loss)
Weighted-average common shares outstanding
Incremental shares for convertible promissory note, warrants And stock options
Total adjusted weighted-average shares
Diluted net loss per share
$
$
$
$
175,647 $
4,501,271
0.04 $
175,647 $
-
175,647
4,501,271
-
4,501,271
0.04 $
(1,467,864)
4,500,827
(0.33)
(1,467,864)
-
(1,467,864)
4,500,827
-
4,500,827
(0.33)
The following table summarizes securities that, if exercised, would have an anti-dilutive effect on earnings per share.
Stock options
Warrants
Convertible promissory notes
Total potential dilutive securities not included in loss per share
F-15
Year Ended
December 31, 2020
-
4,988
178,212
183,200
Year Ended
December 31, 2019
26,280
191,543
247,041
464,864
Table of Contents
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows:
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
Leasehold improvements
Equipment, furniture, and fixtures
Less: Accumulated depreciation and amortization
Property and equipment, net
December 31, 2020 December 31, 2019
98,831
$
2,842,340
2,941,171
(2,228,544)
165,701 $
2,900,252
3,065,953
(2,542,913)
$
523,040 $
712,627
Depreciation and amortization expense related to these assets for the years ended December 31, 2020 and 2019 was $314,369 and $338,103.
Property and equipment under finance leases (included in Note 7) are summarized as follows:
Equipment, furniture, and fixtures
Less: Accumulated amortization
Property and equipment, net
NOTE 5 – INTANGIBLE ASSETS
December 31, 2020 December 31, 2019
708,272
$
(248,497)
708,272 $
(433,100)
$
275,172 $
459,775
Intangible assets consist of proprietary developed software, intellectual property, customer lists and acquired contracts 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, 2020 December 31, 2019
$
390,082 $
5,340,612
5,730,694 $
(2,604,358)
3,126,336 $
390,082
4,430,014
4,820,096
(2,212,795)
2,607,301
$
$
Estimated Useful
Lives
5 –7
5 –15
Amortization expense related to the above intangible assets was $391,563 and $381,933, respectively, the years ended December 31, 2020 and 2019. Impairment on
intangible assets was $-0- and $236,860 for the years ended December 31, 2020 and 2019, respectively.
F-16
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 5 – INTANGIBLE ASSETS (Continued)
The Company expects future amortization expense to be the following:
2021
2022
2023
2024
2025
thereafter
Total
Amortization
429,412
362,709
299,597
299,597
292,740
1,442,281
3,126,336
$
$
NOTE 6 – LINE OF CREDIT, CONVERTIBLE DEBT, LONG TERM DEBT, RELATED PARTY AND PPP LOAN
On September 11, 2018, SWK entered into a Revolving Demand Note (the “JPM Revolving Demand Note”) by and between SWK and JPMorgan Chase Bank (“JPM
Lender”), a commercial lender. The JPM Lender had agreed to loan SWK up to a principal amount of two million dollars. The interest rate on the JPM Revolving Demand
Note was to be a variable rate, equal to the “Adjusted LIBOR Rate”, plus two and one quarter percent (2.25%) per annum. The JPM Revolving Demand Note was secured
by all of SWK’s assets pursuant to a Security Agreement. The line was also collateralized by substantially all the assets of the Company. On August 26, 2019, all amounts
owed to JPM Lender under the JPM Revolving Demand Note were paid and the JPM Revolving Demand Note terminated and is of no further force or effect.
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 matured on April 1, 2019. Monthly payments were $6,135 including interest at 2% per year. At December 31, 2020 and December 31,
2019, the outstanding balances were $-0- and $-0-, respectively.
On July 6, 2015, SWK acquired certain assets of Productive Tech Inc. (PTI) pursuant to an Asset Purchase Agreement for cash of $500,000 and a promissory note for
$600,000 (the “PTI Note”). The PTI Note was due in 60 months from the closing date and with an interest rate of two and one half (2.5%) percent. Monthly payments
including interest are $10,645. THE PTI Note matured and last payment made on July 1, 2020. At December 31, 2020 and December 31, 2019, the outstanding balances on
the PTI Note were $-0- and $73,899, respectively.
On May 31, 2018, SWK acquired certain assets of Info Sys Management, Inc. (“ISM”) pursuant to an Asset Purchase Agreement for cash of $300,000 and a promissory
note issued in the aggregate principal amount of $1,000,000 (the “ISM Note”). The ISM Note is due five years from the closing date and bears interest at a rate of two
percent (2%) per annum. Monthly payments including interest are $17,528. The ISM Note has an optional conversion feature where the holder may, at its sole and exclusive
option, elect to convert, at any time and from time to time, until payment in full of the ISM Note, all of the outstanding principal amount of the ISM Note, plus accrued
interest, into shares (the “Conversion Shares”) of the Company’s Common Stock, (“Common Stock”) at per share price equal to $4.026, a price equal to the average closing
price of its Common Stock for the five (5) trading days immediately preceding the issuance date of the ISM Note (the “Fixed Conversion Price”). At December 31, 2020 and
December 31, 2019, the outstanding balances on the ISM Note were $512,487 and $710,420, respectively. In February 2021, ISM converted the outstanding balance of the
loan in the amount of $479,111 into 119,004 shares of the Company’s common stock.
F-17
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 6 – LINE OF CREDIT, CONVERTIBLE DEBT, LONG TERM DEBT, RELATED PARTY AND PPP LOAN (Continued)
On May 31, 2018, Secure Cloud Services acquired certain assets of Nellnube, Inc. (“Nellnube”) pursuant to an Asset Purchase Agreement for a promissory note issued in
the aggregate principal amount of $400,000 (the “Nellnube Note”). The Nellnube Note is due five years from the closing date and bears interest at a rate of two percent
(2%) per annum. Monthly payments including interest are $7,011. The Nellnube Note has an optional conversion feature where the holder may, at its sole and exclusive
option, elect to convert, at any time and from time to time, until payment in full of the Nellnube Note, all of the outstanding principal amount of the Nellnube Note, plus
accrued interest, into shares (the “Conversion Shares”) of the Company’s Common Stock, (“Common Stock”) at per share price equal to $4.026, a price equal to the average
closing price of its Common Stock for the five (5) trading days immediately preceding the issuance date of the Nellnube Note (the “Fixed Conversion Price”). At December
31, 2020 and December 31, 2019, the outstanding balances on the Nellnube Note were $204,995 and $284,168 respectively. In February 2021, Nellnube converted the
outstanding balance of the loan in the amount of $191,645 into 47,602 shares of the Company’s common stock.
On January 1, 2019, SWK acquired certain assets of Partners in Technology, Inc. (“PIT”) pursuant to an Asset Purchase Agreement for cash of $60,000 and the issuance of
a promissory note in the aggregate principal amount of $174,000 (the “PIT Note”). The PIT Note is due in 36 months from the closing date and bears interest at a rate of
two percent (2.0%) per annum. Monthly payments including interest are $4,984. At December 31, 2020 and December 31, 2019, the outstanding balances of the loan were
$64,040 and $121,968, respectively.
On July 31, 2020, the Company acquired certain assets of Prairie Technology Solutions Group, LLC (“Prairie Tech”) pursuant to an Asset Purchase Agreement. In
consideration for the acquired assets, the Company paid $185,000 in cash and issued three promissory notes to Prairie Tech (“Prairie Tech Note 1”, “Prairie Tech Note 2”
and “Prairie Tech Note 3”), each in the principal aggregate amount of $103,333 (collectively the “Prairie Tech Notes”). The Prairie Tech Notes bear interest at a rate of 4%
per annum. Prairie Tech Note 1 has a term of one (1) year and is subject to downward adjustment based on whether certain revenue milestones are achieved. Prairie Tech
Note 2 has a term of two (2) years and is also subject to downward adjustment based on whether certain revenue milestones are achieved. Prairie Tech Note 3 has a term of
three (3) years and is not subject to a downward adjustment. At December 31, 2020 the outstanding balance on the PT notes were $310,000.
On October 1, 2020, SWK acquired certain assets of Computer Management Services, LLC, (“CMS”) pursuant to an Asset Purchase Agreement for cash of $410, clients
deposits related to technical support in the amount of $50,115, prepaid time from clients in the amount of $67,073, and the issuance of a promissory note in the aggregate
principal amount of $170,000 (the “CMS Note”) for a total of $287,598. The CMS Note is due in 36 months from the closing date and bears interest at a rate of two percent
(2.0%) per annum. Monthly payments including interest are $4,869. At December 31, 2020 the outstanding balance on the note was $160,821.
On December 1, 2020, SWK acquired certain assets of Business Software Solutions (“BSS”) pursuant to an Asset Purchase Agreement for a promissory note in the
aggregate principal amount of $230,000 (the “BSS Note”). The BSS Note is due in 60 months from the closing date and bears interest at a rate of two percent (2.0%) per
annum. Monthly payments including interest are $4,031. At December 31, 2020, the outstanding balance of the loan was $230,000.
Total convertible debt and long-term debt balances at December 31, 2020 and 2019 were $1,482,343 and $1,190,455, respectively, of which $545,000 and $408,901 was
classified as current portion at December 31, 2020 and 2019, respectively.
At December 31, 2020, future payments of promissory notes are as follows over each of the next five fiscal years:
2021
2022
2023
2024
2025
Total
F-18
$
$
545,000
498,634
343,942
46,918
47,849
1,482,343
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 6 – LINE OF CREDIT, CONVERTIBLE DEBT, LONG TERM DEBT, RELATED PARTY AND PPP LOAN (Continued)
As previously disclosed, SWK Technologies, Inc. (“SWK”), a wholly-owned subsidiary of SilverSun Technologies, Inc. (the “Company”), entered into a promissory note
(the “Note”) with JPMorgan Chase Bank, N.A. (the “Lender”), which provided for a loan in the amount of $3,150,832 (the “PPP Loan”) pursuant to the Paycheck Protection
Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). At the time SWK applied for the PPP Loan, we believed that it qualified to
receive funds pursuant to the then published PPP qualification and certification requirements. On April 23, 2020, the SBA, in consultation with the Department of Treasury,
issued new guidance that creates uncertainty regarding the qualification requirements for a PPP Loan (the “New Guidance”). Out of an abundance of caution and in light of
the New Guidance, SWK determined to pay off the entire amount of the PPP Loan. Accordingly, the PPP Loan was paid in full to the Lender on May 18, 2020, resulting in
the full satisfaction of the Note. Under the terms of the PPP Loan, SWK had the right to repay the Note without penalty.
NOTE 7 – FINANCE 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 in
property and equipment in the accompanying consolidated balance sheets. The related obligations are based upon the present value of the future minimum lease payments
with the following:
Weighted average remaining lease terms
Weighted average interest rates
At December 31, 2020, future payments under finance leases are as follows:
2021
2022
2023
Total minimum lease payments
Less amounts representing interest
Present value of net minimum lease payments
Less current portion
Long-term capital lease obligation
NOTE 8 – OPERATING LEASE LIABILITIES
December 31, 2020
1.31
December 31, 2019
2.33
5.53%
5.6%
$
$
125,591
57,586
6,637
189,814
(8,840)
180,974
(118,658)
62,316
The Company leases office space in eleven different locations with monthly payments ranging from $744 to $10,279 which expire at various dates through April 2025.
The Company's leases generally do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring
operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount
equal to the lease payments on a collateralized basis over the term of a lease. The Company used incremental borrowing rates as of January 1, 2019 for operating leases that
commenced prior to that date.
The Company's weighted average remaining lease term and weighted average discount rate for operating leases as of December 31, 2020 and 2019 are as follows:
Weighted average remaining lease term
Weighted average discount rate
F-19
December 31, 2020
2.93
4.77%
December 31, 2019
3.42
4.77%
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 8 – OPERATING LEASE LIABILITIES (Continued)
The following table reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under noncancelable operating leases with terms of
more than one year to the total lease liabilities recognized on the consolidated balance sheet as of December 31, 2020:
2021
2022
2023
2024
2025 and thereafter
Total undiscounted future minimum lease payments
Less: Difference between undiscounted lease payments and discounted lease liabilities
Total operating lease liabilities
Less current portion
Long-term operating lease liabilities
$
$
$
535,097
425,489
356,844
141,457
20,510
1,479,397
(105,677)
1,373,720
(481,250)
892,470
Total rent expense under operating leases for the year ended December 31, 2020 was $548,336 as compared to $417,467 for the year ended December 31, 2019. Rent
expense paid with cash was $552,613 for the year ended December 31, 2020 as compared to $423,469 for the year ended December 31, 2019.
NOTE 9 – EQUITY
On September 6, 2019, the Company filed a Certificate of Elimination of Certificate of Designations (the “Certificate of Elimination”) with the Secretary of State of the
State of Delaware. The Certificate of Withdrawal eliminated the Company’s Series B Preferred Stock, par value $.001 per share (the “Series B Preferred”), from the
Company’s Certificate of Incorporation. Prior to filing the Certificate of Elimination, Mark Meller, the Company’s Chief Executive Officer and Chairman and owner of the
only share of Series B Preferred, cancelled the only share of Series B Preferred issued and outstanding.
On October 10, 2019, the Company’s Board of Directors authorized a new stock repurchase program, under which the Company may repurchase up to $2 million of its
outstanding common stock. Under this new stock repurchase program, the Company may repurchase shares in accordance with all applicable securities laws and
regulations, including Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The extent to which the Company repurchases its shares, and the timing of such
repurchases, will depend upon a variety of factors, including market conditions, regulatory requirements and other corporate considerations, as determined by the
Company’s management. The repurchase program may be extended, suspended or discontinued at any time. The Company expects to finance the program from existing
cash resources. As of December 31, 2020, no repurchases have been made.
On December 24, 2019, the Company announced the payment of a $0.50 special cash dividend per share of Common Stock payable on January 14, 2020 for an aggregate
amount of $2,250,636, which was applied against paid in capital.
On December 10, 2020, the Company announced the payment of a $0.40 special cash dividend per share of Common Stock payable on December 28, 2020 for an aggregate
amount of $1,800,509 which was applied against paid in capital.
Stock Options
The fair value of each option awarded is estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the following
table. Expected volatilities are based on historical volatility of Common Stock. The expected life of the options granted represents the period from date of grant to expiration
(5 years). The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant. There were no stock options granted for the year ended December 31,
2020. As of December 31, 2020, the Company has no outstanding stock options.
F-20
Table of Contents
NOTE 9 – EQUITY (Continued)
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
A summary of the status of the Company’s stock option plans for the fiscal years ended December 31, 2020 and 2019 and changes during the years are presented below (in
number of options):
Outstanding options at January 1, 2019
Options granted
Options canceled/forfeited
Outstanding options at December 31, 2019
Options granted
Options canceled/forfeited
Outstanding options at December 31, 2020
Vested Options:
December 31, 2020:
December 31, 2019:
Number
of Options
Average
Exercise Price
Average Remaining
Contractual Term
Aggregate
Intrinsic Value
56,280 $
-
(30,000) $
26,280 $
- $
(26,280) $
- $
- $
21,960 $
1.0 years
$
0.7 years
$
3.75
-
3.78
3.71
-
3.71
-
-
-
3.72
-
0.6 years
$
$
$
-0-
-0-
-0-
-0-
-0-
Total stock compensation recognized for the year ended December 31, 2020 and 2019 was $10,194 and $16,910, respectively
As of December 31, 2020, the unamortized compensation expense for stock options was $0.
Warrants
The following table summarizes the warrants transactions:
Balance, January 1, 2019
Granted
Exercised
Canceled
Outstanding and Exercisable December 31, 2019
Granted
Exercised
Canceled
Outstanding and Exercisable December 31, 2020
Warrants
Outstanding
Weighted Average
Exercise Price
Average
Remaining
Contractual Term
208,241 $
- $
16,698 $
- $
191,543 $
- $
- $
186,555 $
4,988 $
5.26
-
5.09
-
5.28
-
-
5.31
4.01
2.3 years
.3 years
1.24 years
F-21
Table of Contents
NOTE 10 – BUSINESS COMBINATIONS
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
On January 1, 2019, SWK acquired certain assets of Partners in Technology, Inc. (“PIT”) pursuant to an Asset Purchase Agreement in exchange for cash of $60,000 and a
promissory note in the aggregate principal amount of $174,000 (“PIT Note”). The PIT Note is due in 36 months from the closing date and bears interest at a rate of two
percent (2.0%). Monthly payments including interest are $4,984. The allocation of the purchase price to customer list with an estimated life of fifteen years and goodwill,
which is deductible for tax purposes, has been based on an independent valuation.
On July 31, 2020, the Company acquired certain assets of Prairie Technology Solutions Group, LLC, (“PT”) pursuant to an Asset Agreement for cash of $185,000 and the
issuance of three promissory notes each in the amount of $103,333. Note 1 is due on the one- year anniversary of the closing date. Note 2 is due on the two-year anniversary
of the closing date and Note 3 is due on the three-year anniversary of the closing date. Each note bears an interest rate of four percent (4%) per annum. Payments are due
annually including interest. The allocation of the purchase price to customer list with an estimated life of ten years and goodwill, which is deductible for tax purposes, has
been based on an independent valuation.
On October 1, 2020, the Company acquired certain assets of Computer Management Services, LLC (“CMS”) pursuant to an Asset Purchase Agreement. In consideration
for the acquired assets, the Company paid $410 in cash and issued a promissory note to CMS in the principal aggregate amount of $170,000. The CMS Note is due in 36
months from the closing date and bears interest at a rate of two (2%) percent per annum. Monthly payments including interest are $4,869. The allocation of the purchase
price to customer list with an estimated life of ten years and goodwill, which is deductible for tax purposes, has been based on an independent valuation.
On December 1, 2020, SWK acquired certain assets of Business Software Solutions (“BSS”) pursuant to an Asset Purchase Agreement for a promissory note in the
aggregate principal amount of $230,000 (the “BSS Note”). The BSS Note is due in 60 months from the closing date and bears interest at a rate of two percent (2.0%) per
annum. Monthly payments including interest are $4,031. The purchase price has been allocated to customer list with an estimated life of fifteen years. Upon completion of
an independent valuation, the allocation of the purchase price to customer lists will be modified with the excess purchase consideration being allocated to goodwill.
The Company expects these acquisitions to create synergies by combining operations and expanding geographic market share and product offerings.
The Company expects these acquisitions to create synergies by combining operations and expanding geographic market share and product offerings.
The following summarizes the purchase price allocation for all prior year and current year’s acquisitions:
PIT
PT
CMS
BSS (Preliminary)
Cash consideration
Note payable
Total purchase price
Deposits and other assets
Accounts Receivable
Customer List
Operating Lease Right-of-Use Assets
Goodwill
Total assets acquired
Deferred revenue
Contingent liability
Operating lease liability
Net assets acquired
$
$
$
$
60,000 $
174,000
234,000 $
- $
-
228,000
-
6,000
234,000
(-)
(-)
(-)
234,000 $
F-22
185,000 $
310,000
495,000 $
32,896 $
-
406,000
64,863
107,852
611,611
(51,748)
(-)
(64,863)
495,000 $
410 $
170,000
170,410 $
- $
-
274,115
-
13,000
287,115
(111,705)
(5,000)
-
170,410 $
-
230,000
230,000
-
-
230,000
-
-
230,000
(-)
(-)
(-)
230,000
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 10 – BUSINESS COMBINATIONS (Continued)
The following unaudited pro forma information does not purport to present what the Company’s actual results would have been had the acquisitions occurred on January 1,
2019, nor is the financial information indicative of the results of future operations. The following table represents the unaudited consolidated pro forma results of operations
for the years ended December 31, 2020 and 2019 as if the acquisitions occurred on January 1, 2019. Operating expenses have been increased for the amortization expense
associated with the estimated fair value adjustment as of December 31, 2019 of expected definite lived intangible assets and interest on the notes payable.
Pro Forma
Net revenues
Cost of revenues
Operating expenses
Income (loss) before taxes
Net income (loss) from continuing operations
Basic and diluted income (loss) per common share
Year Ended
December 31, 2020
$
$
$
42,774,741 $
25,241,176
17,237,828
295,737
278,519 $
0.06 $
Year Ended
December 31, 2019
41,592,100
25,073,722
18,013,296
(1,494,918)
(1,059,912)
(0.24)
The Company’s consolidated financial statements for the years ending December 31, 2020 and 2019 include the actual results of PIT since the date of acquisition, January 1,
2019. The year ended December 31, 2020 pro-forma results above include seven months of results of PT, nine months of CMS and eleven months of BSS. For the year
ending December 31, 2020, there is $23,683 of estimated amortization expense and $7,231 of estimated interest expense included in the PT pro-forma results, $20,598 of
estimated amortization expense and $2,274 of estimated interest expense included in the CMS pro-forma results, and $30,118 of estimated amortization expense and $3,881
of estimated interest expense included in the BSS pro-forma results. For the year ended December 31, 2020, PT had a net loss of $5,739, CMS had net income of $116, 074
and BSS had a net loss $7,463. For the year ended December 31, 2020, the PT, CMS & BSS operations had a net income before taxes of $157,515 which represented 6
months of operations of PT, three months of operations of CMS and one months of operations of BSS that were included in the Company’s Consolidated Statement of
Operations. This consisted of approximately $867,991 in revenues, $467,654 in cost of revenues and $242,822 in operating expenses.
The year ended December 31, 2019 pro-forma results above include total year results for PT, CMS and BSS. For the year ending December 31, 2019, there is $40,596 of
estimated amortization expense and $12,630 of estimated interest expense included in the PT pro-forma results, $27,456 of estimated amortization expense and $2,893 of
estimated interest expense included in the CMS pro-forma results, and $32,856 of estimated amortization expense and $4,196 of estimated interest expense included in the
BSS pro-forma results. For the years ended December 31, 2019, there was no income included in the Company’s Statement of Operations for PT, CMS and BSS.
NOTE 11 – 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 $5,800,000 as of December 31, 2020, 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 2033.
F-23
Table of Contents
NOTE 11 – INCOME TAXES (Continued)
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
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. 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:
Installment sale
Long lived assets
Deferred tax liabilities
Net deferred tax asset
Less: Valuation allowance
Net deferred tax asset
December 31,
2020
December 31,
2019
$
$
1,431,000 $
117,000
6,000
107,000
13,084
1,674,084
-
(173,000)
(173,000)
1,501,084
(462,000)
1,039,084
1,517,482
181,000
13,000
109,000
15,000
1,835,482
(346,000)
(278,000)
(624,000)
1,211,482
(337,000)
874,482
For the year ended December 31, 2020, 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 50% of meals, 100% entertainment expense which are not tax deductible. The total tax provision for the year ended
December 31, 2020 was $47,391.
For the year ended December 31, 2019, the Company’s Federal and State provision requirements were calculated based on the estimated tax rate. The Federal effective rate
is higher than the statutory rate primarily due to change in federal statutory rate described above and Incentive Stock Options (ISO) and 50% of meals, 100% entertainment
expense which are not tax deductible. The total tax benefit for the year ended December 31, 2019 was $455,006.
A reconciliation of the statutory income tax rate to the effective rate is as follows for the period December 31, 2020 and 2019:
Federal income tax rate
State income tax, net of federal benefit
Permanent items
Return to provision for prior year
Other
Effective income tax rate
F-24
December 31,
2020
December 31,
2019
21%
7%
3%
(7%)
(3%)
21%
21%
6%
-%
-%
(3%)
24%
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 11 – INCOME TAXES (Continued)
Income tax provision (benefit) from continuing operations:
Current:
Federal
State and local
Total current tax provision (benefit)
Deferred:
Federal
State and local
Total deferred tax provision (benefit)
Total provision (benefit)
NOTE 12 – RELATED PARTY TRANSACTIONS
Year Ended
December 31,
2020
December 31,
2019
$
$
136,083 $
75,910
211,993
(115,221)
(49,381)
(164,602)
47,391
-
-
-
(342,006)
(113,000)
(455,006)
(455,006)
As of December 31, 2020 and 2019, long term debt and convertible debt are considered related party liabilities as holders are current employees of the Company, see Note
6.
The Company leased its Seattle, WA office space from Mary Abdian, an employee of SWK. The lease which expires on September 30, 2018, was terminated by mutual
consent on May 31, 2019 and the lease continued on a month-to-month basis with a monthly rent of approximately $2,066. The Company ended the lease on May 31, 2020.
Total rent paid for 2020 and 2019 was $10,195 and $24,117 respectively under this lease.
NOTE 13 – COMMITMENTS AND CONTINGENCIES
Contingencies
On March 4, 2019, plaintiff John Solak (“Plaintiff”) commenced a direct and derivative action in the Delaware Court of Chancery (the “Action”): both on his own behalf as
a stockholder of Silversun and derivatively on behalf of SilverSun against the Company’s officers and directors relating to stockholder voting rights granted to the
Company’s Chairman and Chief Executive Officer, Mark Meller in the form of Series B Preferred Stock.
On or about April 22, 2019, the Company determined to undertake certain actions relating to the Series B Preferred Stock challenged in Plaintiff’s complaint, as well as
certain changes to the Company’s governance policies.
The Company’s officers and directors have at all relevant times denied, and continue to deny, any alleged violations of Delaware law. Plaintiff’s counsel believe that the
remedial measures by SilverSun in response to the Action render the Action moot, and give rise only to a claim for attorney’s fees. The Company and the Plaintiff agreed
that the Company shall pay $115,000 to Plaintiff’s counsel for fees and expenses. The Court of Chancery of the State of Delaware has not been asked to review, and will
pass no judgment on, this payment of fees and expenses or its reasonableness.
The Stipulation and Order Regarding Notice to Stockholders was entered into by Plaintiff, the Company and the Company’s officers and directors on August 2, 2019 and this
matter is now resolved.
F-25
Table of Contents
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 13 – COMMITMENTS AND CONTINGENCIES (Continued)
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 14 – SALE OF EDI PRACTICE
On August 26, 2019 the Company entered into and closed that certain Asset Purchase Agreement (the “Asset Purchase Agreement”) by and among the Company, SPS
Commerce, Inc., as buyer (“Buyer” or “SPS”), and SWK, as seller (the “Seller”), pursuant to which the Buyer has agreed to acquire from the Seller certain assets (all
intellectual property and accounts receivable) related to the MAPADOC business, which was the EDI practice. In consideration for the Acquired Assets (as defined in the
Asset Purchase Agreement), at closing, SPS: (i) paid Seller $10,350,000 in cash (the “Initial Cash Payment”); and (ii) delivered $1,150,000 to an escrow account (the
“Escrowed Property”) pursuant to the terms and conditions of that certain Escrow Agreement dated August 26, 2019 (the “Escrow Agreement”), for an aggregate
consideration of $11,500,000 (the “Purchase Price”). Pursuant to the terms and conditions of that certain Escrow Agreement entered into in connection with the Asset
Purchase Agreement, portions of the Escrowed Property will be released at six months and at twelve months following the date of closing of the Asset Purchase Agreement,
to the extent that no indemnity claims against the Escrowed Property have been filed by the Buyer. On February 28, 2020, the company received the first half of the escrow
agreement ($575,000), per the agreement. There was also an adjustment to the Working Capital and an additional $162,868 was added to the gain on the sale of Mapadoc
which was recognized in 2019 and paid in February 2020. On August 31, 2020, the Company received the second half of the escrow amount of $575,000 as per the
agreement.
F-26
Table of Contents
NOTE 15 – DISCONTINUED OPERATIONS
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
The financial results of our EDI Practice (“Mapadoc”) through December 31, 2019 are presented as discontinued operations. The following table presents the financial
results of “Mapadoc.”
Mapadoc Results of Operations for the year ended December 31, 2019:
Revenues:
Software product, net
Service, net
Total revenues, net
Cost of revenues:
Product
Service
Cost of revenues
Gross profit
Selling, general and administrative expenses:
Selling and marketing expenses
General and administrative expenses
Depreciation and amortization expenses
Total selling, general and administrative expenses
Income from discontinued operations
Gain from sale of discontinued operations
Provision for income taxes
Income from discontinued operations
Calculation of gain on sale
Purchase Price*
Net Assets at August 26, 2019
Net Liabilities at August 26, 2019
Expenses associated with the sale
Gain on sale
*Includes $162,868 of working capital adjustment
F-27
Year Ended
December 31, 2019
$
$
$
$
445,025
2,936,898
3,381,923
2,745
1,387,926
1,390,671
1,991,252
371,061
540,822
90,844
1,002,727
988,525
10,307,155
(3,033,590)
8,262,090
11,662,868
(1,575,547)
437,260
(217,426)
10,307,155
Table of Contents
NOTE 16 – SUBSEQUENT EVENTS
In January 2021, the Company entered into a new capital lease agreement with Dimension Funding for a finance lease in the amount of $90,007 for equipment.
In February 2021, ISM converted the outstanding balance of the loan into 119,004 shares of the Company’s common stock (see Note 6).
In February 2021, Nellnube converted the outstanding balance of the loan into 47,602 shares of the Company’s common stock (see Note 6).
In February 2021, the Company signed a letter of intent to acquire CT-Solution, Inc. ("CT"), a leading Indianapolis-based reseller of Sage Software solutions. Over the last
20 years, CT-Solution has implemented technology applications at prominent manufacturers, distributors, and professional service organizations throughout the Midwest.
In February 2021, the Company received net proceeds of $3,382,352, excluding legal expenses, from the sale of 393,300 of common stock under its Registration Statement
on Form S-3 and the previously disclosed At Market Issuance Sales Agreement with a sales agent.
F-28
SilverSun Technologies, Inc.
List of Subsidiaries
SWK Technologies, Inc.
Secure Cloud Services, Inc.
Critical Cyber Defense Corp.
Delaware
Nevada
Nevada
100% Owned
100% Owned
100% Owned
Exhibit 21.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Exhibit 23.1
We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-249238) of our report dated March 25, 2021, related to the
consolidated financial statements of SilverSun Technologies, Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and 2019, and for the years then ended
included in this Annual Report on Form 10-K for the year ended December 31, 2020.
/s/ Friedman LLP
March 25, 2021
East Hanover, New Jersey
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. I have reviewed this Form 10-K of SilverSun Technologies, Inc.;
2. 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;
3. 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;
4. 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:
a) 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;
b) 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;
c) 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
d) 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
5. 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 25, 2021
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, Joseph P. Macaluso, certify that:
1. I have reviewed this Form 10-K of SilverSun Technologies, Inc.;
2. 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;
3. 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;
4. 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:
a) 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;
b) 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;
c)
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
d) 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
5. 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 25, 2021
By:
/s/ Joseph P. Macaluso
Joseph P. Macaluso
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, 2020, 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, 2020, 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, 2020, fairly presents, in all material respects, the financial
condition and results of operations of the Company.
Date: March 25, 2021
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, 2020, as filed with the U.S.
Securities and Exchange Commission on the date hereof, I, Christine Dye, 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, 2020, 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, 2020, fairly presents, in all material respects, the financial
condition and results of operations of the Company.
Date: March 25, 2021
By:
/s/ Joseph P. Macaluso
Joseph P. Macaluso
Principal Financial Officer
SilverSun Technologies, Inc.