What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2023-02-28 compared with 2022-03-29 · 58 added, 92 removed, 181 unchanged (45% of the section changed)

3 unchanged sentences

(b) Holders of Common Equity

As of March 25, 2022, there were approximately 851 stockholders of record.

As of February 26, 2023, there were approximately 855 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.

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.

On June 21, 2021, the Company announced the payment of a $0.60 special cash dividend per share of Common Stock to shareholders of record July 9, 2021.

The dividend was paid on July 16, 2021 in the amount of $3,081,706.

The Company did not declare or pay any dividends in the year 2022.

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.

1 unchanged sentence

There were no unregistered sales of the Company’s equity securities during 2022 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 $479,112 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 September 29, 2022, the Company approved 120,000 shares of common stock in exchange for services.

The market value of these shares was $297,600.

These shares were issued in December 2022.

Transfer Agent

38 unchanged sentences

We have a dedicated Information Technology (“IT”) network services practice that provides managed services, Infrastructure-as-a-Service, 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 customers are nationwide, with concentrations in the New York/New Jersey metropolitan area, Arizona, Connecticut, Southern California, North Carolina, Washington, Oregon and Illinois.

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.

11 unchanged sentences

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 WMS software published by Korber, which develops warehouse management software for middle market distributors.

We also are resellers of the WMS software, 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.

2 unchanged sentences

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.

The WMS software improves accuracy and efficiency, streamlines materials handling, meets retail compliance requirements, and refines inventory control.

WMS 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 WMS solution to our new and existing 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.

19 unchanged sentences

During 2022 the Company continued to expand its customer base and growth trend which we believe will provide a basis for future growth.

As discussed above (see Recent Events – Merger), on September 29, 2022, the Company entered into a definitive agreement and plan of merger (the “Merger Agreement”) with Rhodium Enterprises, Inc.

(“Rhodium”), an industrial-scale digital asset technology company utilizing proprietary technologies to mine bitcoin.

The proposed business combination is expected to close in the first quarter of 2023, subject to the receipt of any applicable regulatory approvals, the approval of SilverSun's and Rhodium's respective stockholders, and other customary closing conditions.

Results of Operations

Revenues for the year ended December 31, 2022 increased $3,283,896 (7.9%) to $ 44,985,276 as compared to $41,701,380 for the year ended December 31, 2021.

This increase is mostly attributed to an increase in software sales, offset partially by a decrease in service revenues.

Software sales increased by $3,917,975 (49.8%) to $11,781,362 in 2022 from $7,863,387 in 2021.

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 $279,167 (0.8%) to $33,837,993 in 2021 from $33,558,826 in 2020.

This increase is mainly attributed to increases in managed services and application hosting as we continue to focus in this area due to the needs of our customers’ digital transformation and the further requirement of customers to have the ability within their organizations to work remotely, particularly during the Covid pandemic.

Service revenue decreased by $634,079 (1.9%) to $33,203,914 in 2022 from $33,837,993 in 2021.

This decrease is mainly attributed to lower maintenance revenue as more customers migrate to cloud-based products, and lower consulting revenues as a result of customer delays on projects and the sale of a consulting practice in late 2021.

Service revenue increased $2,817,672 (8.3%) excluding the X3 product line which was sold in 2021.

Gross profit for the year ended December 31, 2022 increased $752,678 (4.4%) to $17,960,736, as compared to $17,208,058 for the year ended December 31, 2021.

The increase in overall gross profit for this period is attributable to the increase in revenues and the sale of higher margin products and services.

For the year ended December 31, 2022, the overall gross profit percentage was 39.9%, as compared to 41.3% for the year ended December 31, 2021.

The gross profit attributed to software sales increased $235,310 (7.7%) to $3,288,001 for 2021 from $3,052,691 in 2020.

The gross profit attributed to software sales increased $1,415,557 (43.1%) to $4,703,558 for 2022 from $3,288,001 in 2021, which is due mostly to the increased volume of software sold.

For the year ended December 31, 2022, the gross profit percentage for software was 39.9%, as compared to 41.8 % for the year ended December 31, 2021.

This increase is due mostly to the increased sale of higher margin products.

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 $393,767 (2.9%) to $13,920,057 for 2021 from $13,526,290 in 2020.

This increase is attributed to revenue increases in managed services and application hosting, which provide for higher profit margins, and increases in commission and maintenance revenue for the period offset partially by costs associated with the learning curve related to the training of new employees, who were hired to accommodate our growth.

While revenues may decrease because of the shift to a subscription-based 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 can cause the overall gross margin percentage to vary.

The gross profit attributed to services decreased $662,879 (4.8%) to $13,257,178 for 2022 from $13,920,057 in 2021.

This decrease is mostly due to the gross profit loss associated with sale of a legacy consulting practice in November 2021.

Excluding the effect of that practice in 2021, gross profit declined only $5,222 (0.0%) for the year ended December 31, 2022 as compared to the year ended December 31, 2021.

For the year ended December 31, 2022 the gross profit percentage for services was 39.9% as compared to 41.3% for the year ended December 31, 2021.

This change in gross profit percentage is mostly due higher to costs associated with increasing pay and benefits to employees to retain and recruit their services and to address inflationary pressures in the overall economy, plus the training of new employees, who were hired to accommodate our growth, and who are not as yet as billable as our more experienced team.

Operating Expenses

Selling and marketing expenses decreased $646,003 (8.8%) to $6,719,909 for the year ended December 31, 2021 as compared to $7,365,912 for the year ended December 31, 2020.

This decrease is primarily due to lower travel and entertainment expense and reduced attendance at conferences and trade shows and lower marketing expenses.

In addition, we experienced a slight reduction in payroll related expenses because of departmental changes for various employees, thereby reducing salary and benefit expense.

Selling and marketing expenses increased $1,025,356 (15.3%) to $7,745,265 for the year ended December 31, 2022 as compared to $6,719,909 for the year ended December 31, 2021.

This increase is primarily due to increased commissions as a result of the increase in software sales, higher travel and entertainment expenses associated with attendance with trade shows and conference as well as higher outside sales expenses.

General and administrative expenses increased $69,366 (0.7%) to $9,471,625 for the year ended December 31, 2022, as compared to $9,402,259 for the year ended December 31, 2021.

This increase primarily a result of increases in payroll and payroll related expenses related to both additional personnel and departmental changes for various employees, which increased salary and benefit expense.

Share-based compensation increased $431,116 to $441,310 for the year ended December 31, 2021 as compared to $10,194 for the year ended December 31, 2020.

The increase is due to the issuance of stock options at the end of March 2021 and in October 2021.

This increase is a result of payroll and payroll-related expenses and departmental changes for various employees which involved moving their compensation between cost of revenues and administrative expenses as well as a lower rent, professional fees, license fees and credit card charges, mostly offset by higher recruitment costs, outside services fees, bad debt expense and excise taxes.

Share-based compensation decreased $261,050 to $180,260 for the year ended December 31, 2022 as compared to $441,310 for the year ended December 31, 2021.

The decrease is primarily due to the issuance of stock options in 2021 that were expensed as these stock options were immediately vested.

Depreciation and amortization expense for the year ended December 31, 2021 was $948,965 as compared to $875,566 for the year ended December 31, 2021.

This increase of $169,634 (24%) for the year ended December 31, 2021 is primarily due to the additional amortization of intangible assets related to the new acquisitions.

This increase of $73,399 (8.4%) for the year ended December 31, 2022 is primarily due to the additional amortization of intangible assets related to the new acquisitions and increased depreciation related to equipment purchases over the last 12 months.

Loss Income from Operations

As a result of the above, the Company had a loss from operations of $230,986 for the year ended December 31, 2021 as compared to income from operations of $223,385 for the year ended December 31, 2020.

As a result of the above, the Company had a loss from operations of $385,379 for the year ended December 31, 2022, as compared to a loss from operations of $230,986 for the year ended December 31, 2021.

Other Income (Expense)

For the year ended December 31, 2021 other income was $274,557 as compared to other expense of $347 for the year ended December 31, 2020.

The year ended December 31, 2021 includes the gain on the sale of a product line in the amount of $250,000 as well as a gain of a bargain purchase from an acquisition in the amount of $71,359.

For the year ended December 31, 2022, other expense was $89,024 as compared to other income of $274,557 for the year ended December 31, 2021.

The year ended December 31, 2021 includes the gain on the sale of a product line in the amount of $250,000 as well as a gain of a bargain purchase from an acquisition in the amount of $71,359 which did not occur in 2022.

(Loss) Income Before Taxes

As a result of the above, the Company generated income before taxes of $43,571 for the year ended December 31, 2021 as compared to income before taxes in the amount of $223,038 for the year ended December 31, 2020.

For the year ended December 31, 2021, the Company recorded a tax provision of $178,005 as compared to a tax provision in the amount of $47,391 for the year ended December 31, 2020, primarily due to the non-cash share-based compensation due to the issuance of stock options which are not tax deductible in the current year.

As a result of the above, the Company had a loss before taxes of $474,403 for the year ended December 31, 2022 as compared to income before taxes in the amount of $43,571 for the year ended December 31, 2021.

For the year ended December 31, 2022 the Company recorded tax benefit of $192,184, primarily as a result of the loss for the year.

For the year ended December 31, 2021, the Company recorded a tax provision of $178,005 primarily due to the non-cash share-based compensation, which is related to the issuance of stock options which are not tax deductible in the current year.

State provision requirements were calculated based on the estimated tax rate.

The Federal effective rate is higher than the statutory rate primarily due to the non-cash share-based compensation due to the issuance of stock options which are not tax deductible.

The Federal effective rate is higher than the statutory rate primarily due to the non-cash share-based compensation related to the issuance of stock options which are not tax deductible.

Net (Loss) Income

As a result of the above, the Company generated a net loss of $134,434 for the year ended December 31, 2021 as compared to a net income of $175,647 for the year ended December 31, 2020.

As a result of the above, the Company generated a net loss of $282,219 for the year ended December 31, 2022 as compared to a net loss of $134,434 for the year ended December 31, 2021.

Liquidity and Capital Resources

The negative impact of Covid-19 on the economy continues to create uncertainty for the Company in the coming months and quarters.

While our Company has not been significantly impacted because 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.

The Company currently has no line of credit or other credit facility with any lender.

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, were able to avail themselves of the PPP program, making it more difficult for the Company to compete in the marketplace while we could not.

The uncertainty on the economy continues to create uncertainty for the Company in the coming months and quarters.

While our Company has not been significantly impacted because of this uncertainty nor from the impact of Covid-19, the potential 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 such, we need to rely on our own limited resources to weather any economic downturn.

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.

The Company currently has no line of credit or other credit facility with any lender.

We are currently seeking additional operating income opportunities through potential acquisitions or investments.

6 unchanged sentences

and (v) the activities of competitors.

In February 2021, ISM converted the outstanding balance of the loan in the amount of $479,112 into 119,004 shares of the Company’s common stock.

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.

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.

In April 2021, the Company entered into the 2021 At Market Agreement with H.C.

Wainwright & Co.

(the “Sales Agent”) under which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $3,308,842 from time to time through the Sales Agent.

Sales of the Company’s common stock through the Sales Agent, if any, will be made by any method that is deemed an “at the market” offering as defined by the SEC.

The Company will pay to the Sales Agent a commission rate equal to 3.0% of the gross proceeds from the sale of any shares of common stock sold through the Sales Agent under the 2021 At Market Agreement.

In June 2021, 65,452 shares of Common Stock were issued and sold generating $722,116 under The At Market Agreement, excluding legal expenses.

In July 2021, an additional 9,548 shares of Common Stock were issued and sold generating $76,436, net of legal expenses.

On June 21, 2021, the Company announced the payment of a $0.60 special cash dividend per share of Common Stock to shareholders of record July 9, 2021.

The dividend was paid on July 16, 2021 in the amount of $3,081,706.

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 April 1, 2021, the Company acquired certain assets of CT-Solution, Inc.

(“CTS”) pursuant to an Asset Purchase Agreement.

In consideration for the acquired assets, the Company issued a promissory note to CTS in the principal aggregate amount of $130,000 (the CTS Note”).

The CTS 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 $3,724.

On May 1, 2021, SWK acquired certain assets of PeopleSense, Inc.

(“PSI”) pursuant to an Asset Purchase Agreement for cash of $145,703, customer deposits related to prepaid time from clients in the amount of $99,938, and the issuance of a promissory note in the aggregate principal amount of $450,000 (the “PSI Note”).

The PSI 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 $12,889.

On January 1, 2022 (“Effective Date”), the Company entered into an Asset Purchase Agreement with Dynamic Tech Services, Inc.

(“DTS”) to acquire certain assets of DTS.

The purchase price for the acquired assets was $1,335,000, $500,000 of which was paid in cash and $835,000 of which was paid through the issuance of a four-year $835,000 promissory note dated January 1, 2022, paying interest at the rate of 3.25% per annum (the “DTS Note”).

The principal amount of the Note is subject to a downward adjustment in the event the Company loses any subscription renewal revenue during the one-year period immediately following the Effective Date from any persons that were customers of DTS immediately prior to the Effective Date (the “DTS Customers”).

Any such downward adjustment will be determined by calculating the percentage of loss of Acumatica subscription renewals during the one-year period immediately following the Effective Date from DTS Customers.

In the event that subscription renewal revenue received from DTS Customers during the one-year period immediately following the Effective Date is less than 95% of the subscription renewal revenue received by DTS from DTS Customers during the one-year period immediately preceding the Effective Date, the principal amount of the Note will be reduced.

The measuring period for any downward adjustment will be as of the one-year anniversary of the Effective Date.

Notwithstanding the foregoing, under no circumstances will the principal amount of the Note be reduced by reason of such downward adjustment by more than $150,000 ( i.e.

, to a principal amount below $685,000).

The Note will be amortized as follows:

The first payment of principal and interest due under the Note, which will be an annual payment, is due and payable on January 1, 2023, after the revised principal amount of the Buyer Note is determined and thereafter, payments will be made quarterly in twelve equal installments.

On January 22, 2022, the Company entered into an agreement to acquire certain assets of NEO3, LLC (“NEO3”).

The purchase price for the acquired assets was $225,000, $150,000 of which was paid in cash and $75,000 of which was paid through the issuance of a three-year $75,000 promissory note dated January 22, 2022, paying interest at the rate of 2% per annum (“the “NEO3 Note”).

We continue to seek these opportunities.

At December 31, 2022, future payments of promissory notes are as follows over each of the next four fiscal years:

During the year ended December 31, 2022, the Company had a net increase in cash of $1,194,516.

2 unchanged sentences

The Company provided $2,038,392 in cash for operating activities for the year ended December 31, 2022 as compared to providing $226,034 of cash from operating activities for the year ended December 31, 2021.

This decrease in cash provided by operations is primarily because of the increase in prepaid expenses and other current assets as a result due from a vendor in the amount of $691,680 and the increase in accounts receivable offset partially by the increase in accounts payable.

Cash (used in) provided by investing activities:

Investing activities for the year ended December 31, 2021 used cash of $510,464 as compared to providing $839,808 of cash for the year ended December 31, 2020.

This decrease in cash provided is due to proceeds received in 2020 from the sale of the Company’s EDI practice, and such payments not occurring during the year ended December 31, 2021.

This was partially offset by the proceeds received in 2021 from the sale of a product line.

In addition, for the year ended December 31, 2021 the Company spent $645,703 to acquire new businesses as compared to only $185,410 for the year ended December 31, 2020.

Cash provided by (used in) financing activities

For the year ended December 31, 2021 financing activities provided cash of $503,131 as compared to using cash of $4,631,884 for the year ended December 31, 2020.

The increase in cash provided is attributed to the received net proceeds of $4,180,904 from the sale of common stock under its Registration Statement on Form S-3 and the previously disclosed At Market Issuance Sales Agreement with a sales agent offset by lower dividend payments to shareholders.

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 consolidated financial statements.

There was no significant impact on the Company’s operations because of inflation for the year ended December 31, 2021.

This increase in cash provided by operations is primarily because of the increase in accounts payable and deferred revenues offset partially by the increase in deferred charges.

Cash used in investing activities:

Investing activities for the year ended December 31, 2022 used cash of $188,742 as compared to using $510,464 of cash for the year ended December 31, 2021.

This decrease in cash used is due primarily to lower cash required to acquire businesses or assets as well as lower purchases of property and equipment.

In addition, the Company received proceeds from a sale of a product line in 2021 which it did not receive in 2022.

Cash (used in) provided by financing activities

For the year ended December 31, 2022 financing activities used cash of $655,134 as compared to providing cash of $503,131 for the year ended December 31, 2021.

The decrease in cash provided is attributed to the fact that the Company received no proceeds from the sale of common stock for the year ended December 31, 2022, whereas it received net proceeds from the sale of common stock under its Registration Statement on Form S-3 and the previously disclosed At Market Issuance Sales Agreement with a sales agent during the year ended December 31, 2021.

The cash received from the sale of stock was offset mostly by the payment of a cash dividend in 2021.

The Company believes that as a result of the growth in business, and the funds on hand, it has adequate liquidity to fund its operating plans for at least the next twelve months, provided, however, that the Company cannot currently quantify the uncertainty related to the recent pandemic and the uncertainty of the economy and its effects on the business in the coming quarters.

The belief that the Company has sufficient liquidity may be incorrect as the impact of Covid-19 becomes clearer over the coming months and quarters.

The Company does not anticipate any major capital expenditures in the near future.

For the year ended December 31, 2022, inflation has impacted the Company’s profitability, as it has resulted in increased costs necessary to recruit and retain personnel.

As the Company returns back to its pre-Covid marketing and trade show schedules, the higher costs of travel and meals will also have a negative impact on the Company’s profitability.

Critical Accounting Policies

60 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity