What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2024-03-14 compared with 2023-02-28 · 55 added, 102 removed, 137 unchanged (53% of the section changed)

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(a) Market Information

The Company has been listed and is traded on the NASDAQ Capital Market under the symbol “SSNT”.

The Company’s Common is listed and is traded on the Nasdaq Capital Market under the symbol “SSNT”.

(b) Holders of Common Equity

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

As of March 13, 2024, there were approximately 850 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 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.

On August 4, 2023, the Board of Directors approved the payment of a $0.20 special cash dividend per share of Common Stock to shareholders of record August 18, 2023.

The dividend was paid on August 25, 2023.

No dividends were approved or paid for the year ended December 31, 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.

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There were no unregistered sales of the Company’s equity securities during 2023 that were not previously disclosed in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K.

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

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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.

and its wholly owned subsidiaries, SWK Technologies, Inc., Secure Cloud Services, Inc., Critical Cyber Defense Corp., and SilverSun Technologies Holdings, Inc.

(together the “Company”, “we”, “our”, and “us”) from time to time with the U.S.

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Pinsight Technology, Inc.;

Info Sys Management, Inc., Nellnube, Inc., Partners in Technology Inc., Prairie Technology Solutions Group, Inc., Computer Management Services, LLC, Business Software Solutions, PeopleSense, Inc., and more recently Dynamic Tech Services, Inc.

and NEO3, LLC.

On November 13, 2023, SWK entered into an Asset Purchase Agreement with JCS Computer Resource Corporation (“JCS”), an Illinois corporation pursuant to which SWK acquired from JCS certain assets (the “ Acquired Assets ”) related to the component of JCS’ business devoted to being a value-added reseller of Sage 100, Sage 50, and QuickBooks software, together with ancillary consulting services related thereto.

Additionally, it is our intention to continue to increase our business by seeking additional opportunities through potential acquisitions, revenue sharing arrangements, partnerships or investments.

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and (v) the activities of competitors.

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.

As discussed above (see Recent Events – Merger), on September 29, 2022, SilverSun entered into a definitive agreement and plan of merger (the “ Rhodium Merger Agreement ”) by and among SilverSun, Rhodium Enterprises Acquisition Corp, Rhodium Enterprises Acquisition LLC and Rhodium Enterprises, Inc., an industrial-scale digital asset technology company utilizing proprietary technologies to mine bitcoin.

On October 13, 2023, SilverSun terminated the Rhodium Merger Agreement

On December 3, 2023, SilverSun entered into an Investment Agreement (as it may be amended or supplemented, the “ Investment Agreement ”), with Jacobs Private Equity II, LLC, a Delaware limited liability company (“ JPE ”), and the other investors party thereto (the “ Other Investors ,” and together with JPE, the “ Investors ”), providing for an aggregate investment by the Investors of $1,000,000,000 in cash in SilverSun, including $900,000,000 from JPE (the “ Equity Investment ”).

The Investment Agreement has been unanimously approved by the SilverSun board of directors.

Following the closing (the “ Closing ”) of the Equity Investment (together with all of the other transactions contemplated by the Investment Agreement), JPE will become the controlling stockholder of SilverSun, and Brad Jacobs, the Managing Member of JPE, will become Chairman of the SilverSun board of directors and Chief Executive Officer of SilverSun (see “Recent Events” above for more detail).

Results of Operations

Revenues for the year ended December 31, 2023 increased $9,531,665 (21.2%) to $54,516,941 as compared to $44,985,276 for the year ended December 31, 2022.

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

This increase is mostly attributed to increases in professional consulting services and software.

Software sales increased by $2,329,411 (19.8%) to $14,110,773 in 2023 from $11,781,362 in 2022.

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 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.

The increase is primarily attributable to an increase in our ERP software sales, especially for Acumatica and Sage Intacct.

Service revenue increased by $7,202,254 (21.7%) to $40,406,168 in 2023 from $33,203,914 in 2022.

This increase is mainly attributed to the increase in professional services, especially for our Acumatica, Sage 100, and Sage Intacct products, as well as an increase in revenue in our hosting services.

Recruiting in 2022 was a difficult challenge, but our efforts to increase our consulting staff with additional resources, as well as system improvements, has yielded a positive result in our financial performance.

We have also utilized some outside contractors to assist in projects because of our growth.

Gross profit for the year ended December 31, 2023 increased $3,653,073 (20.3%) to $21,613,809, as compared to $17,960,736 for the year ended December 31, 2022.

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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.

The gross profit attributed to services increased $2,758,625 (20.8%) to $16,015,803 for 2023 from $13,257,178 in 2022.

This increase is attributed to revenue increases in professional services and application hosting.

For the year ended December 31, 2023 the gross profit percentage for services was 39.6% as compared to 39.9% for the year ended December 31, 2022.

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.

This change in gross profit percentage is mostly due to higher 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 increased $1,107,474 (14.3%) to $8,852,739 for the year ended December 31, 2023, as compared to $7,745,265 for the year ended December 31, 2022.

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.

This increase is primarily due to increased salary increases, new personnel, higher commissions to employees as a result of the increased revenues, as well as increased travel expenses associated with attendance at trade shows and conferences.

General and administrative expenses increased $745,532 (7.9%) to $10,217,157 for the year ended December 31, 2023, as compared to $9,471,625 for the year ended December 31, 2022.

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.

This increase is a result of salary increases and increased accrued compensation, travel and entertainment, professional and license fees, offset partially by a decrease in credit card fees, lower rent and recruitment expenses.

Share-based compensation decreased $138,763 (77.0%) to $41,497 for the year ended December 31, 2023, as compared to $180,260 for the year ended December 31, 2022.

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

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

Depreciation and amortization expense for the year ended December 31, 2023 was $828,157 as compared to $948,965 for the year ended December 31, 2022.

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 $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, 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 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.

This $120,808 (12.7%) increase is primarily due to the additional amortization of intangible assets related to the new acquisitions.

Income (Loss) from Operations

As a result of the above, the Company had net income from operations of $1,674,259 for the year ended December 31, 2023, as compared to a loss from operations of $385,379 for the year ended December 31, 2022.

Other Expense

For the year ended December 31, 2023, the Company incurred other expense of $2,986,107 related to the termination of the Agreement and Plan of Merger dated as of September 29, 2022 (Notes 15 and Note 2).

The Company charged to expense all previously deferred deal related expenses in the amount of $2,986,107.

These expenses are recorded as Deal Costs in the accompanying statement of operations in Other Expense.

(Loss) Before Taxes

As a result of the above, the Company had a loss before taxes of $1,367,514 for the year ended December 31, 2023 as compared to a loss before taxes in the amount of $474,403 for the year ended December 31, 2022.

For the year ended December 31, 2023, the Company recorded tax benefit of $297,419, 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.

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

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

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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.

While our Company has not been significantly impacted because of this uncertainty, 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.

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At December 31, 2023, 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.

The Company’s working capital was $273,762 at December 31, 2023 as compared to $2,946,349 at December 31, 2022 mostly due to lower deferred charges, lower prepaid expenses and other current assets and cash offset partially by the decrease in deferred revenues.

During the year ended December 31, 2023, the Company had a net decrease in cash of $1,865,335.

The Company’s principal sources and uses of funds were as follows:

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The Company provided $583,805 in cash for operating activities for the year ended December 31, 2023, as compared to providing $2,038,392 of cash from operating activities for the year ended December 31, 2022.

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.

This decrease in cash provided by operations is primarily because of the increase in loss before taxes as a result of the deal costs and the decrease in deferred revenues offset partially by the increase in deferred charges.

Cash used in investing activities:

Investing activities for the year ended December 31, 2023 used cash of $399,416, as compared to using $188,742 of cash for the year ended December 31, 2022.

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.

This increase in cash used is due primarily to an increase in amounts required to acquire businesses or assets as well as higher purchases of property and equipment.

Cash used in financing activities:

For the year ended December 31, 2023 financing activities used cash of $2,049,724 as compared to using cash of $655,134 for the year ended December 31, 2022.

The increase in cash used is a result of the cash dividend paid to shareholders in August 2023 as well as increase in payments of long-term debt.

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 recent economic uncertainty and its effects on the business in the coming quarters.

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

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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

The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).

The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

On an on-going basis, we evaluate these estimates, including those related to bad debts, intangible assets, and litigation.

We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of certain assets and liabilities.

Actual results may differ from these estimates under different assumptions or conditions.

We have identified below the accounting policies, related to what we believe are most critical to our business operations and are discussed throughout Management’s Discussion and Analysis of Financial Condition or Plan of Operation where such policies affect our reported and expected financial results.

Revenue Recognition

The Company has elected the significant financing component practical expedient in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers.

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.

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.

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 general and administrative expenses.

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 2019 to 2022 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, 2022 and 2021.

During the years ended December 31, 2022 and 2021 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, 2022 and 2021.

Critical Accounting Estimates

We prepare our consolidated financial statements in accordance with U.S.

generally accepted accounting principles, which require our management to make estimates that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods.

To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected.

We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations for the future based on available information.

We evaluate these estimates on an ongoing basis.

We consider an accounting estimate to be critical if:

(i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.

There are items within our financial statements that require estimation but are not deemed critical, as defined above.

For a detailed discussion of our significant accounting policies and related judgments, see Note 2 of the Notes to Consolidated Financial Statements in “Item 8.

Financial Statements and Supplementary Data” of this report.

Off Balance Sheet Arrangements

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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