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UNITED STATES

SILVERSUN TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

 

New Jersey		16-1633636
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

PART I

Item  1 . Business.

Background

SilverSun Technologies, Inc., a Delaware corporation (the “Company” or “SilverSun”), was 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, Inc. 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 Over-the-Counter Bulletin board (the “OTCBB”) under the symbol TYRIA.OB. In June 2011, the Company changed its name to SilverSun Technologies, Inc. The Company is publicly traded and is currently quoted on the Over-the-Counter Bulletin Board (“OTCBB”) under the symbol “SSNT.”

 

In June 2004, our wholly-owned subsidiary, SWK Technologies, Inc., a New Jersey-based information technology company, completed a merger with SWK, Inc., a value added reseller and master developer for Sage Software’s MAS 90/200/500 financial accounting software as well as the publisher of its own proprietary Electronic Data Interchange (EDI) software, “MAPADOC.”  Until its acquisition of SWK, Inc. on June 2, 2004, the Company was engaged in the design, manufacture, and marketing of specialized telecommunication equipment. With the acquisition of SWK and as part of its plan to expand into new markets, the Company transformed into an information technology company, and a value added reseller and master developer for Sage Software’s MAS 90/200/500 and ERP X3 financial and accounting software as well as the publisher of its own proprietary Electronic Data Interchange (EDI) software, “MAPADOC.”  The Company focuses on the business software and information technology consulting market, and is looking for other opportunities to grow its business. The Company sells services and products to various end users, manufacturers, wholesalers and distributor industry clients located throughout the United States.

 
  On June 2, 2006, SWK Technologies, Inc. completed the acquisition of certain assets of AMP-Best Consulting, Inc. of Syracuse, New York.  AMP-Best Consulting, Inc. is an information technology company and value added reseller of licensed accounting software published by Sage Software.  AMP-Best Consulting, Inc. sold services and products to various end users, manufacturers, wholesalers and distribution industry clients located throughout the United States, with special emphasis on companies located in the upstate New York region.

Our principal offices and facilities are located at 5 Regent Street, Suite 520, Livingston, NJ  07039 and our telephone number is (973) 758-9555. The Company is publicly traded and is currently traded on the OTCBB under the symbol “SSNT.”

General

 

We are business consultants for small and medium sized businesses and value-added resellers and developers of financial accounting software.  We also publish our own proprietary EDI software.  We are a leader in marketing financial accounting solutions across a broad spectrum of industries focused on manufacturing and distribution. We specialize in software integration and deployment, programming, and training and technical support, aimed at improving the financial reporting and operational efficiencies of small and medium sized companies. The sale of our financial accounting software is concentrated in the northeastern United States, while our EDI software and programming services are sold to corporations nationwide.

We differentiate ourselves from traditional software resellers through our wide range of value-added services, consisting primarily of programming, training, technical support, and other consulting and professional services. We also provide software customization, data migration, business consulting, and implementation assistance for complex design environments. Our strategic focus is to respond to our customers’ requests for interoperability and provide solutions that address broad, enterprise-wide initiatives.

Our product sales are cyclical, and increase when the developer of a specific software product offers new versions, promotions or discontinues support of an older product.

As is common among software resellers, we purchase our products from our suppliers with a combination of cash and credit extended by the supplier. We do not carry inventory, and generally place an order with the supplier only after receiving a firm commitment from our customer. Except in unusual situations, we do not allow our customers to return merchandise and rarely offer extended payment terms to our customers.

 

Our Products

Substantially all of our initial sales of financial accounting solutions consist of prepackaged software and associated services to customers in the United States. Our sales are focused on three major product categories and associated value-added services.

 

 

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Financial Accounting Software

The Company resells accounting software published by Sage Software, Inc. (Sage) 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. 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 and accounts receivable, and inventory management.

We provide a variety of services along with our financial accounting software sales to assist our customers in maximizing the benefits from these software applications. These services include training, technical support, and professional services.  We employ class instructors and have formal, specific training in the topics they are teaching. We can also provide on-site training services that are highly tailored to meet the needs of a particular customer. Our instructors must pass annual subject-matter examinations required by Sage to retain their product-based teaching certifications.

We provide end-user technical support services through our support/help desk.  Our staff of product and technology consultants assists customers calling with questions about product features, functions, usability issues, and configurations. The support/help desk offers services in a variety of ways, including prepaid services, time and materials billed as utilized and annual support contracts. Customers can communicate with the support/help desk through e-mail, telephone, and fax channels. Standard support/help desk services are offered during normal business hours five days per week.

Our professional services include project-focused offerings such as software customization, data migration, and small and medium sized business consulting. We have project managers who provide professional services to our financial accounting customers.

Electronic Data Interchange (EDI) Software

We publish our own proprietary EDI software “MAPADOC.”  EDI can be used to automate existing processes, to rationalize procedures and reduce costs, and to improve the speed and quality of services. Because EDI necessarily involves business partners, it can be used as a catalyst for gaining efficiencies across organizational boundaries.

Our “MAPADOC” EDI solution is a fully integrated EDI solution that provides users of Sage Software’s market-leading MAS family of accounting software products with a feature rich product that is easy to use. “MAPADOC” provides the user with dramatically decreased data entry time, elimination of redundant steps, the lowering of  paper and postage costs, the reduction of time spent typing, signing, checking and approving documents and the ability to self-manage EDI and to provide a level of independence that saves time and money.

We market our “MAPADOC” solutions to our existing and new small and medium-sized business customers, and through a network of resellers.  We have a sales team of technical specialists involved in marketing and supporting sales of the “MAPADOC” product and associated services .

Warehouse Management Systems

We are resellers of the Warehouse Management System (WMS) software published by Accellos, Inc.  Accellos, Inc. 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 RF hardware, accounting software, shipping systems and warehouse automation equipment.

We market the Accellos solution to our existing and new medium-sized business customers.

Network Services and Business Consulting

We provide 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 server implementation, support and assistance, operation and maintenance of large central systems, technical design of network infrastructure, technical troubleshooting for large scale problems, network and server security, and backup, archiving, and storage of data from servers.  There are numerous competitors, both larger and smaller, nationally and locally, with whom we compete in this market.

 

 

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Markets

Financial Accounting Software .

In the financial accounting software market, we focus on providing enterprise solutions to small- and medium-sized businesses (“SMB”) with less than $250 million of annual revenue, primarily in the manufacturing and distribution industries.  The SMB market is comprised of thousands of companies within the New York region alone.

While several local and regional competitors exist in the various geographic territories where we conduct business, we believe we  have a competitive advantage in terms of geographic reach, comprehensive training and support, and the provision of other products and services. We are one of the larger Sage resellers in the United States.   While there are numerous national, regional, and local competitors that could be compared to us in scale, size, geographical reach, and target markets for the resale of Sage products, there is no one dominant competitor or dominant group of competitors with whom we compete for contracts or assignments on a regular basis.  There are also numerous competitors who publish and/or resell competing product lines, such as Microsoft’s General Dynamics accounting software.

 

Electronic Data Interchange Software .

We publish and sell through a network of software resellers our proprietary EDI software, “MAPADOC”.  Electronic Data Interchange (“EDI”) is computer-to-computer communication of business documents between companies.  It is a paperless way to send and receive Purchase Orders, Invoices, etc.  EDI replaces human-readable documents with electronically coded documents. The sending computer creates the document and the receiving computer interprets the document.  Implementation of EDI streamlines the process of exchanging standard business transactions.   Companies save by eliminating people cost as well as the cost due to errors and double entry of data.   The transmissions are accomplished by connecting to a mailbox via a modem or the Internet.   The most common mailbox is a Value Added Network's  electronic mailbox.  Each user, identified by a unique EDI ID, accesses his mailbox to send and receive all EDI transactions.  To standardize the documents communicated between many companies, the Transportation Data Coordinating Committee, in 1975, published its first set of standards.

EDI standards are formats and protocols that trading partners agree to use when sending and receiving business documents.  Around 1979, The American National Standards Institute  designated an accredited standards committee for EDI.  The standards continue to evolve to address the needs of the member companies.   “MAPADOC” complies with all current standards. The market for EDI continues to expand as big box retailers, such as Wal-Mart, Target, and K-Mart, insist their vendors utilize EDI in their business transactions. There are numerous companies with whom we compete in the SMB EDI marketplace, including True Commerce and Kissinger Associates.

Warehouse Management Systems .

We resell under a distributor agreement the Warehouse Management Solution published by Accellos, Inc. (“Accellos”)  Accellos  develops warehouse management software (“WMS”) 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 warehouse management 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.  The WMS marketplace is extremely competitive.  We compete against national, regional, and local resellers, some of which are significantly larger than us.

 

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.

 

 

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We are required to enter into an annual Channel Partner Agreement with Sage Software, Inc. (“Sage”) whereby Sage appoints us as a non-exclusive partner to market, distribute, and support MAS 90/200/500 and ERP X3. These agreements authorize us to sell these software products to certain customers in the United States. There are no clauses in this agreement that limit or restrict the services that we can offer to customers.  We also operate a Sage Software Authorized Training Center Agreement and also are party to a Master Developers Program License Agreement.

For the years ended December 31, 2011 and 2010, purchases from one supplier were approximately 58% and 23%, respectively, of the Company’s total cost.  Generally, the Company does not rely on any one specific supplier for all of its purchases and maintains relationships with other suppliers that could replace its existing supplier if the need arose.

 

Customers

 

We market our products to private companies throughout the United States.  For the years ended December 31, 2011 and 2010, our top ten customers had approximately $3,210,574 and $1,488,235 in sales and these represented 31% and 20%, respectively, of our total sales for the period. No single customer accounted for ten percent or more of our consolidated revenues.  Generally, we do not rely on any one specific customer for any significant portion of our revenue base.

Intellectual Property

 

We regard our technology and other proprietary rights as essential to our business. We rely on copyright, trade secret, confidentiality procedures, contract provisions, and trademark law to protect our technology and intellectual property. We have also entered into confidentiality agreements with our consultants and corporate partners and intend to control access to, and distribution of our products, documentation, and other proprietary information.

We own several trademarks registered with the U.S. Patent and Trademark Office, including “MAPADOC” and have a number of trademark applications pending. We have no patents or patent applications pending.

Employees

As of December 31, 2011, we had approximately 48 full time employees and one office in Livingston, New Jersey, and one office in Syracuse, New York.  Approximately 12 of our employees are engaged in sales and marketing activities and approximately 27 employees are engaged in service fulfillment.

Our future success depends in significant part upon the continued services of our key sales, technical, and senior management personnel and our ability to attract and retain highly qualified sales, technical, and managerial personnel. None of our employees are represented by collective bargaining agreements, and we have never experienced a work stoppage.

Available information

We file electronically with the U.S. Securities and Exchange Commission (SEC) our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. The public can obtain materials that we file with the SEC through the SEC’s website at http://www.sec.gov or at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549.  Information on the operation of the Public Reference Room is available by calling the SEC at 800-SEC-0330.

Item 1A. Risk Factors.

You should carefully consider the risks described below, together with all of the other information included in this report, in considering our business and prospects.  The risks and uncertainties described below are not the only ones facing the Company.  Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.  The occurrence of any of the following risks could harm our business, financial condition or results of operations.  

Risks Related to Our Business and Industry

WE CANNOT ACCURATELY FORECAST OUR FUTURE REVENUES AND OPERATING RESULTS, WHICH MAY FLUCTUATE.

 

 

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Our operating history and the rapidly changing nature of the markets in which we compete make it difficult to accurately forecast our revenues and operating results.  Furthermore, we expect our revenues and operating results to fluctuate in the future due to a number of factors, including the following:

·	the timing of sales of our products and services;

·	the timing of product implementation, particularly large design projects;

·	unexpected delays in introducing new products and services;

·	increased expenses, whether related to sales and marketing, product development, or administration;

·	deferral in the recognition of revenue in accordance with applicable accounting principles, due to the time required to complete projects;

·	the mix of product license and services revenue; and

·	costs related to possible acquisitions of technology or businesses.

WE MAY FAIL TO DEVELOP NEW PRODUCTS, OR MAY INCUR UNEXPECTED EXPENSES OR DELAYS.

Although we currently have fully developed products available for sale, we may also develop various new technologies, products and product features and may rely on them to remain competitive.  Due to the risks inherent in developing new products and technologies—limited financing, competition, obsolescence, loss of key personnel, and other factors—we may fail to develop these technologies and products, or may experience lengthy and costly delays in doing so.  Although we are able to license some of our technologies in their current stage of development, we cannot assure that we will be able to develop new products or enhancements to our existing products in order to remain competitive.

BECAUSE OUR FINANCIAL ACCOUNTING SOFTWARE, EDI SOFTWARE, AND BUSINESS CONSULTING BUSINESSES ARE STILL EVOLVING, WE MAY EXPERIENCE DIFFICULTIES THAT COULD PREVENT US FROM BECOMING PROFITABLE.

Because our financial accounting software, EDI software, and business consulting businesses are still evolving, we may experience difficulties that could inhibit the development in the new and evolving markets.  These difficulties include the following:

·	substantial delays and expenses related to testing and developing  new products;

·	marketing and distribution problems encountered in connection with our new and existing products and technologies;

·	competition from larger and more established companies;

·	delays in reaching our marketing goals;

·	difficulty in recruiting qualified employees for management and other positions;

·	lack of sufficient customers, revenues and cash flow; and

·	limited financial resources.

We may continue to face these and other difficulties in the future, some of which may be beyond our control.  If we are unable to successfully address these problems, our business will suffer and our stock price could decline.

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.

 

 

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OUR SUCCESS IS HIGHLY DEPENDENT UPON OUR ABILITY TO COMPETE AGAINST COMPETITORS THAT HAVE SIGNIFICANTLY GREATER RESOURCES THAN WE HAVE.

The financial accounting software, EDI software, and business consulting industries are highly competitive, and we believe that this competition will intensify.  Many of our competitors have longer operating histories, significantly greater financial, technical, product development and marketing resources, greater name recognition and larger client bases than we do.  Our competitors could use these resources to market or develop products or services that are more effective or less costly than any or all of our products or services or that could render any or all of our products or services obsolete.  Our competitors could also use their economic strength to influence the market to continue to buy their existing products.

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.  Most of our competitors have substantially greater financial, marketing, technical and manufacturing resources than we have, and we may not be profitable if our competitors are also able to take advantage of our trade secrets.

WE MAY UNINTENTIONALLY INFRINGE ON THE PROPRIETARY RIGHTS OF OTHERS.

Many lawsuits currently are being brought in the software industry alleging violation of intellectual property rights.  Although we do not believe that we are infringing on any patent rights, patent holders may claim that we are doing so.  Any such claim would likely be time-consuming and expensive to defend, particularly if we are unsuccessful, and could prevent us from selling our products or services. In addition, we may also be forced to enter into costly and burdensome royalty and licensing agreements.

OUR PRESIDENT CONTROLS A SIGNIFICANT PERCENTAGE OF OUR CAPITAL STOCK AND HAS SUFFICIENT VOTING POWER TO CONTROL THE VOTE ON SUBSTANTIALLY ALL CORPORATE MATTERS.

As of December 31, 2011, Mark Meller, our President, owned approximately 96% of our outstanding shares of our Class A common stock (assuming the conversion of the convertible debenture into shares of Class A common stock).  Mr. Meller may be able to influence all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions.  This concentration of ownership, which is not subject to any voting restrictions, could limit the price that investors might be willing to pay for our Class A common stock.  In addition, Mr. Meller is in a position to impede transactions that may be desirable for other stockholders.  Mr. Meller’s majority ownership, for example, could make it more difficult for anyone to take control of us.

OUR INDUSTRY IS CHARACTERIZED BY RAPID TECHNOLOGICAL CHANGE AND FAILURE TO ADAPT OUR PRODUCT DEVELOPMENT TO THESE CHANGES MAY CAUSE OUR PRODUCTS TO BECOME OBSOLETE.

We participate in a highly dynamic industry characterized by rapid change and uncertainty relating to new and emerging technologies and markets. Future technology or market changes may cause some of our products to become obsolete more quickly than expected.

THE TREND TOWARD CONSOLIDATION IN OUR INDUSTRY MAY IMPEDE OUR ABILITY TO COMPETE EFFECTIVELY.

As consolidation in the software industry continues, fewer companies dominate particular markets, changing the nature of the market and potentially providing consumers with fewer choices.  Also, many of these companies offer a broader range of products than us, ranging from desktop to enterprise solutions.  We may not be able to compete effectively against these competitors.  Furthermore, we may use strategic acquisitions, as necessary, to acquire technology, people and products for our overall product strategy.  The trend toward consolidation in our industry may result in increased competition in acquiring these technologies, people or products, resulting in increased acquisition costs or the inability to acquire the desired technologies, people or products. Any of these changes may have a significant adverse effect on our future revenues and operating results.

 

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WE FACE INTENSE PRICE-BASED COMPETITION FOR LICENSING OF OUR PRODUCTS WHICH COULD REDUCE PROFIT MARGINS.   

Price competition is often intense in the software market. Price competition may continue to increase and become even more significant in the future, resulting in reduced profit margins.

IF WE LOSE THE SERVICES OF ANY OF OUR KEY PERSONNEL, INCLUDING OUR CHAIRMAN OF THE BOARD OF DIRECTORS OR CHIEF EXECUTIVE OFFICER, OUR BUSINESS MAY SUFFER.

We are dependent on Mark Meller, our Chief Executive Officer and our key employees in our operating subsidiary, specifically Jeffrey Roth.   The loss of any of our key personnel could materially harm our business because of the cost and time necessary to retain and train a replacement.  Such a loss would also divert management attention away from operational issues.  In an attempt to minimize the effects of such loss, we presently maintain a $1,000,000 key-man term life insurance policies on Mr. Meller and Mr. Roth.

WE DO NOT EXPECT TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE.

We intend to retain any future earnings to finance the growth and development of our business.  Therefore, we do not expect to pay any cash dividends in the foreseeable future.  Any future dividends will depend on our earnings, if any, and our financial requirements.

Risks Related to Our Common Stock

OUR CLASS A COMMON STOCK IS THINLY TRADED AND WE CANNOT PREDICT THE EXTENT TO WHICH A MORE ACTIVE TRADING MARKET WILL DEVELOP.

Our Class A Common Stock is thinly traded compared to larger more widely known companies. Thinly traded Class A Common Stock can be more volatile than common stock trading in an active public market. We cannot predict the extent to which an active public market for the Class A Common Stock will develop or be sustained after this offering.

IF WE NEED ADDITIONAL CAPITAL TO FUND OUR GROWING OPERATIONS, WE MAY NOT BE ABLE TO OBTAIN SUFFICIENT CAPITAL AND MAY BE FORCED TO LIMIT THE SCOPE OF OUR OPERATIONS. 

 

If adequate additional financing is not available on reasonable terms, we may not be able to continue our marketing efforts and we would have to modify our business plans accordingly. There is no assurance that additional financing will be available to us.

 

In connection with our growth strategies and plan of operation, we may experience increased capital needs and accordingly, we may not have sufficient capital to fund our future operations without additional capital investments.  Our capital needs will depend on numerous factors, including (i) our profitability; (ii) the release of competitive products and services by our competition; (iii) the level of our investment in research and development; and (iv) the amount of our capital expenditures, including acquisitions. We cannot assure you that we will be able to obtain capital in the future to meet our needs.

 

Even if we do find a source of additional capital, we may not be able to negotiate terms and conditions for receiving the additional capital that are acceptable to us. Any future capital investments could dilute or otherwise materially and adversely affect the holdings or rights of our existing shareholders.  In addition, new equity or convertible debt securities issued by us to obtain financing could have rights, preferences and privileges senior to our common stock. We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us.

THE PRICE OF OUR STOCK MAY BE AFFECTED BY A LIMITED TRADING VOLUME AND MAY FLUCTUATE SIGNIFICANTLY.

There has been a limited public market for our Class A common stock and there can be no assurance that an active trading market for our stock will continue. An absence of an active trading market could adversely affect our stockholders' ability to sell our Class A common stock in short time periods, or possibly at all.  Our Class A common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations which could adversely affect the market price of our stock without regard to our operating performance.  In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our Class A common stock to fluctuate substantially.

 

 

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OUR CLASS A COMMON STOCK IS DEEMED TO BE "PENNY STOCK," WHICH MAY MAKE IT MORE DIFFICULT FOR INVESTORS TO SELL THEIR SHARES DUE TO SUITABILITY REQUIREMENTS.

Our Class A common stock is deemed to be "penny stock" as that term is defined in Rule 3a51-1 promulgated under the Securities Exchange Act of 1934. These requirements may reduce the potential market for our Class A common stock by reducing the number of potential investors.  This may make it more difficult for investors in our Class A common stock to sell shares to third parties or to otherwise dispose of them.  This could cause our stock price to decline.  Penny stocks are stock:

·	With a price of less than $5.00 per share;

·	That are not traded on a "recognized" national exchange;

·	Whose prices are not quoted on the NASDAQ automated quotation system  (NASDAQ listed stock must still have a price of not less than $5.00 per share); or

·	In issuers with net tangible assets less than $2.0 million (if the issuer has been in continuous operation for at least three years) or $5.0 million (if in continuous operation for less than three years), or with average revenues of less than $6.0 million for the last three years.

Broker/dealers dealing in penny stocks are required to provide potential investors with a document disclosing the risks of penny stocks.  Moreover, broker/dealers are required to determine whether an investment in a penny stock is a suitable investment for a prospective investor.

AS AN ISSUER OF “PENNY STOCK,” THE PROTECTION PROVIDED BY THE FEDERAL SECURITIES LAWS RELATING TO FORWARD LOOKING STATEMENTS DOES NOT APPLY TO US.

Although federal securities laws provide a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, the Company will not have the benefit of this safe harbor protection in the event of any legal action based upon a claim that the material provided by the Company contained a material misstatement of fact or was misleading in any material respect because of the Company’s failure to include any statements necessary to make the statements not misleading. Such an action could hurt our financial condition.

FUTURE SALES OF OUR CLASS A COMMON STOCK COULD CAUSE OUR STOCK PRICE TO DECLINE.

The sale of a large number of our shares, or the perception that such a sale may occur, could lower our stock price.  Such sales could make it more difficult for us to sell equity securities in the future at a time and price that we consider appropriate.

ISSUANCE OF OUR RESERVED SHARES OF CLASS A COMMON STOCK MAY SIGNIFICANTLY DILUTE THE EQUITY INTEREST OF EXISTING STOCKHOLDERS.

We have reserved for issuance shares of our Class A common stock upon exercise or conversion of stock options, warrants, or other convertible securities that are presently outstanding.  Issuance of these shares will have the effect of diluting the equity interest of our existing stockholders and could have an adverse effect on the market price for our Class A common stock.

WE HAVE NOT PAID DIVIDENDS IN THE PAST AND DO NOT EXPECT TO PAY DIVIDENDS FOR THE FORESEEABLE FUTURE. ANY RETURN ON INVESTMENT MAY BE LIMITED TO THE VALUE OF OUR COMMON STOCK.

No cash dividends have been paid on the Company’s common stock. We expect that any income received from operations will be devoted to our future operations and growth. The Company does not expect to pay cash dividends in the near future. Payment of dividends would depend upon our profitability at the time, cash available for those dividends, and other factors as the Company’s board of directors may consider relevant. If the Company does not pay dividends, the Company’s common stock may be less valuable because a return on an investor’s investment will only occur if the Company’s stock price appreciates.

Item 1B.  Unresolved Staff Comments.

Not applicable.

 

 

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Item 2. Description of Property.

We do not own any real property for use in our operations or otherwise.  Our main offices are at 5 Regent Street, Livingston, NJ  07039 where we have 6,986 square feet of office space at a monthly rent of $7,423.  The Company entered into a two-year lease, with a one-year extension, for office space at 6834 Buckley Road, North Syracuse, New York, at a monthly rent of $2,100.  We use our facilities to house our corporate headquarters and operations and believe our facilities are suitable for such purpose.  We also believe that our insurance coverage adequately covers our interest in our leased space.  We have a good relationship with our landlords and believe that these facilities will  adequately serve our business purposes for the foreseeable future.

Item 3. Legal Proceedings.

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

 

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PART II

Item 5. Market for Common Equity and Related Stockholder Matters.

(a) Market Information

Our Class A common stock, $0.0001 par value, is quoted on the NASD OTC Bulletin Board under the symbol “SSNTA”, formerly “TYRIA.”  The following table shows the high and low closing prices for the periods indicated.

Quarter ended		High				Low
December 31, 2011		$	0.08000			$	0.01063
September 30, 2011		$	0.36000			$	0.03000
June 30, 2011		$	0.34409			$	0.23543
March 31, 2011		$	0.34409			$	0.23543
December 31, 2010		$	0.68818			$	0.23543
September 30, 2010		$	1.2496			$	0.23543
June 30, 2010		$	0.34409			$	0.23543
March 31, 2010		$	0.23543			$	0.23543

(b) Holders of Common Equity.

As of March 26, 2012, there were approximately 716 holders of record of our common stock. This figure does not take into account those shareholders whose certificates are held in the name of broker-dealers or other nominees.

  (c) Dividend Information.

We have never paid any cash dividends on our common shares, and we do not anticipate that we will pay any dividends with respect to those securities in the foreseeable future. Our current business plan is to retain any future earnings to finance the expansion development of our business.

Sales of Unregistered Securities

In the year ending December 31, 2011, the Company issued the following securities pursuant to exemptions from registration provided by Section 4(2) of the Securities Act of 1933, as amended, and/or Regulation D promulgated thereunder.

·	The Company issued 9,884 shares as a result of the 1-for-1,811 reverse stock split of the Company’s issued and outstanding shares of Class A Common Stock (the “ Reverse Stock Split ”).

In the year ending December 31, 2010, the Company issued the following securities pursuant to exemptions from registration provided by Section 4(2) of the Securities Act of 1933, as amended, and/or Regulation D promulgated thereunder:

·	The Company issued 325,079 shares of Class A common stock for conversion of $60,900 of principal on convertible debentures with YA Global Investments

·	The Company issued 82,828 shares of Class A Common stock for repayment of $15,000 in accrued expenses with a fair value of value $19,500. The difference in the market value and $15,000 of accrued expenses was charged to general and administrative expenses in the amount of $4,500.

·

The Company issued 83,638 shares of Class A Common stock to Mr. Meller for repayment of $1,515 in deferred compensation with a fair value of $28,779. The difference in the fair value and the amount of deferred compensation repaid was charged to general and administrative expenses in the amount of $27,264.

·	The Company issued 222,908 shares of Class A Common stock for repayment of $8,074 of legal fees with a fair value of $52,479. The difference in the fair value and the amount of legal fees repaid was charged to general and administrative expenses in the amount of $44,405.

·	The Company issued 786,858 shares of Class A Common stock for professional fees, and management and financial consulting fees with a fair value of $216,750.

 

 

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The securities mentioned above were not registered under the Securities Act of 1933, as amended (the “ Securities Act ”), and qualified for exemption under Section 4(2) of the Securities Act because the issuance of the securities did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the transaction, size of the offering, manner of the offering and number of securities offered.

(d) Securities Authorized For Issuance Under Equity Compensation Plans

During the year ended December 31, 2004, and as subsequently amended, the Company adopted the Stock Option Plan (the “Plan”) in order to attract and retain qualified employees, directors, independent contractors or agents of SilverSun Technologies, Inc.  Under the Plan, the Board of Directors (the “Board”), in its discretion may grant stock options (either incentive or non-qualified stock options) to employees, directors, independent contractors or agents to purchase the Company’s common stock at no less than 85% of the market price on the date the option is granted.  Options generally vest over four years and have a maximum term of ten years.  As of December 31, 2011, there were approximately 554,000 warrants to purchase  shares of Class A common stock outstanding.  None of these warrants was exercised during 2011.

The following table sets forth information as of December 31, 2011 with respect to compensation plans (including individual compensation arrangements) under which our common shares are authorized for issuance, aggregated as follows:

		All compensation plans previously approved by security holders; and All compensation plans not previously approved by security holders
Plan category		Number of securities to be issued upon exercise of outstanding options, warrants and rights				Weighted average exercise price of outstanding options, warrants and rights				Number of securities remaining available for future issuance
		(a)				(b)				(c)
Equity compensation plans approved by security holders			0			$	0.00				0
Equity compensation plans not approved by security holders.			1,698	(1) (2)		$	28.976				4,450	(3)
Total			1,698			$	28.976				4,450

(1)

Consists of options to purchase 41 Class A common shares of SilverSun Technologies, Inc. issued to unrelated third parties for contractual services and fees related to investor relations transactions of the Company. These options have an exercise price of $126.77 per share.  These options will expire on July 31, 2014.

(2)	Consists of warrants to purchase 1,657 Class A common shares of SilverSun Technologies, Inc. issued to unrelated third parties for professional consulting services to the Company. These warrants have an exercise price of $27.165 per share.  These warrants will expire on July 11, 2012.

(3)	Represents the balance of shares authorized and unissued under the 2004 Stock Incentive Plan.

Transfer Agent

Our transfer agent is Fidelity Transfer  Company at 8915 South 700 East , Sandy, Utah 84070..

Ite m 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 discussion and analysis of our financial condition and results of operations includes “forward-looking” statements that reflect our current views with respect to future events and financial performance.  We use words such as “expect,” “anticipate,” “believe,” and “intend” and similar expressions to identify forward-looking statements.  You should be aware that actual results may differ materially from our expressed expectations because of risks and uncertainties inherent in future events and you should not rely unduly on these forward looking statements.  We will not necessarily update the information in this discussion if any forward-looking statement later turns out to be inaccurate.  This discussion and analysis of financial condition and results of operations should be read in conjunction with our Financial Statements included in this filing.  Management is uncertain that it can generate sufficient cash to sustain its operations in the next twelve months, or beyond.  We can give no assurances that we will be able to generate sufficient revenues to be profitable, obtain adequate capital funding or continue as a going concern.

December 31, 2011 compared to December 31, 2010

Overview

In June 2011, the Company changed its name to SilverSun Technologies, Inc. The Company focuses on the business software and information technology consulting market, and is looking to acquire other companies in this industry.  SWK Technologies, Inc. (“SWK Technologies”), the Company’s subsidiary and the surviving company from the acquisition and merger with SWK, Inc., is a New Jersey-based information technology company, value added reseller, and master developer of licensed accounting and financial software published by Sage Software.  SWK Technologies also publishes its own proprietary supply-chain software, the Electronic Data Interchange (EDI) solution “MAPADOC.”  SWK Technologies sells services and products to various end users, manufacturers, wholesalers and distribution industry clients located throughout the United States, along with network services provided by the Company.

On June 2, 2006, SWK Technologies completed the acquisition of certain assets of AMP-Best Consulting, Inc. of Syracuse, New York.  AMP-Best Consulting, Inc. is an information technology company and value added reseller of licensed accounting software published by Sage Software.  AMP-Best Consulting, Inc. sells 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.

 

This year had significant developments that helped change the financial situation of the Company that we hope will provide a basis for our future growth.

1.	For the year ended December 31, 2011, sales increased 40.5% to $10,522,080 and the Company generated an operating profit of $260,057 as compared to an operating loss of $937,117 for the same period in the prior year;

2.	The Company reduced its liabilities by $3,712,550;

3.	The Company repaid YA Global and recorded a gain of $1,461,660 on extinguishment of these liabilities.

4.	Mr. Mark Meller, the Company’s Chief Executive Officer, forgave $1,338,967 in liabilities due him;

5.	The Company completed a 1-for-1,811 reverse stock split of the Company’s issued and outstanding shares of Class A Common Stock; and

6.	The Company negotiated a line of credit with a commercial bank.

Revenues

All revenues reported by the Company are derived from the sales and service of Sage Software, MAPADOC, and other third-part software products to various end users, manufacturers, wholesalers and distribution industry clients located throughout the United States, along with consulting and customer support and network services provided by the Company.

Revenues for the year ended December 31, 2011, increased $3,035,377 (40.5%) to $10,522,080, as compared to $7,486,703 for the year ended December 31, 2010.  These sales were all generated by the Company’s operating subsidiary, SWK Technologies.  This increase is primarily due to a significant increase in business as a result of strong marketing efforts and  competitive pricing as well as the Company’s investment in its Sage ERP X3 practice.  The largest increases were for consulting services and software sales. Management continues to focus on marketing and sales across all its product lines.

Gross Profit

Gross profit for the year ended December 31, 2011, increased $1,672,553 (56.7%) to $4,500,116, as compared to $2,872,563, for the year ended December 31, 2010.  For the year ended December 31, 2011, the gross profit percentage was 42.8%, as compared to 38.4% for the year ended December 31, 2010.  The mix of products being sold by the Company changes from time to time and sometimes causes the overall gross margin percentage to vary.  Sales of the larger Sage Software products carry a lower gross margin percentage while consulting revenues generate a higher gross profit.  The change in sales mix for the year ended December 31, 2011, resulted in gross profit being higher as a percent of sales as compared to the year ended December 31, 2010.  This increase is primarily due the increase in consulting revenues.

 

 

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Operating Expenses

Total operating expenses increased $415,379(10.9%) to $4,225,059, for the year ended December 31, 2011, as compared to $3,809,680 for the year ended December 31, 2010.  This increase is mainly attributed to an increase in general and administrative professional and consulting fees, administrative salaries and marketing expenses.

Income (Loss) from Operations

Total income from operations was $260,057 for the year ended December 31, 2011 as compared to a loss of $937,117 for the year ended December 31, 2010 due to the aforementioned reasons.

Other Income (Expense)

Total other income for the year ended December 31, 2011 was $2,433,874, as compared to $368,612 for the year ended December 31, 2010.  This change is primarily attributed to the gain on the extinguishment of debt and derivative liability.

Net Income (Loss)

For year ended December 31, 2011, the Company had net income of $2,708,931, as compared to a net loss of $568,505 for the year ended December 31, 2010.  This change is primarily attributed to the improvement in operations and the gain on the extinguishment of debt and derivative liability.

Liquidity and Capital Resources

We are currently seeking additional operating income opportunities through potential acquisitions or investments. Such acquisitions or investments may consume cash reserves or require additional cash or equity.  Our working capital and additional funding requirements will depend upon numerous factors, including: (i) strategic acquisitions or investments; (ii) an increase to current company personnel; (iii) the level of resources that we devote to sales and marketing capabilities; (iv) technological advances; and (v) the activities of competitors.

In addition to developing new products, obtaining new customers and increasing sales to existing customers, management plans to increase its business and profitability by entering into collaboration agreements, buying assets, and acquiring companies in the business software and information technology consulting market with solid revenue streams, established customer bases that generate positive cash flow.

On December 30, 2005, the Company entered into a Securities Purchase Agreement with YA Global Investments, L.P (YA Global). Pursuant to such purchase agreement, YA Global purchased $2,359,047 of secured convertible debentures, which are convertible into shares of the Company’s Class A common stock. Two such debentures were issued on December 30, 2005 for an aggregate of $1,759,047, interest payable at the rate of 7.5% per annum, and included a debenture was issued on May 6, 2006 equal to $600,000 with interest payable at the rate of 7.5% per annum (the “YA Global Debentures”).

On November 9, 2010, the YA Global Convertible Debentures to YA Global were amended with the maturity date being extended to December 31, 2011. This amendment required an initial payment of $175,000 due on January 28, 2011, with additional monthly payments of $10,000 to be made for the following eleven months ending December 1, 2011. The remaining principal and all accrued interest is due on December 31, 2011. This agreement also modified and fixed the conversion price at $.0001, but is also subject to price protection features. The YA Global Debentures are also not convertible during 2011, provided that the payments required by the amended agreement have been made in a timely fashion. During the first three months of 2011, the Company made payments in the amount of $205,000 in accordance with the terms of the amendment. In April 2011, the Company paid YA Global $530,000 to satisfy any and all obligations owed to YA Global, including outstanding principal, accrued interest and liquidated damages.  As a result, the Company recorded a gain on the extinguishment of debt in the amount of $1,461,660 and is recorded as other income in the accompanying statement of operations.

On April 11, 2011, the Company entered into two promissory notes (each a “Note” and together the “Notes”), each in the face amount of $275,000 (the “Loans”), with two accredited investors.  Each Note bears 7% interest and has a maturity date of September 15, 2011. These notes are secured by all of the Company’s assets. As partial consideration for the Loans, the Company issued two shares of Series A convertible preferred stock, par value $1.00 per share (the “Series A Convertible Preferred Stock”), one share to be issued to each investor mandatorily convertible into Class A Common Stock equal to 1% of the outstanding common stock at the time of conversion (no later than January 15, 2012).

 

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In October the Company negotiated a line of credit from a bank. The agreement included a borrowing base calculation tied to accounts receivable with a maximum availability of $750,000. Interest on outstanding balances is payable daily at an interest rate that is two and three quarter percentage points (2.75%) above the Prime Rate. The Company’s interest rate was 6% at December 31, 2011. The Company paid a $5,000 documentation fee for this loan.  The line was collateralized by substantially all of the assets of the Company and is personally guaranteed by the Company’s Chief Executive Office, Mr. Mark Meller.  The credit facility required the Company to pay a monitoring fee of 0.315% of eligible collateral to be paid monthly. An annual facility fee equal to one percent (1%) of the Maximum Credit is assessed upon the initial funding, annually thereafter. The term of the agreement is for three years and expires in October 2014. As of December 31, 2011, the Company has no outstanding balance against this line.

During the year ended December 31, 2011, the Company had a net increase in cash of $129,378.  The Company’s principal sources and uses of funds were as follows:

Cash used in operating activities

The Company provided $905,906 in cash for operating activities for the year ended December 31, 2011, as compared to using $38,177 of cash for operating activities for the year ended December 31, 2010. This increase in cash used in operating activities is primarily attributed to the increased operating income for the year ended December 31, 2011, and an increase in cash from deferred revenues partially offset by an increase in accounts receivable.

 
  Cash used in investing activities

Investing activities for the year ended December 31, 2011 used cash of $40,653, as compared to using $31,725 of cash for the year ended December 31, 2010. This increase in cash used is attributed to the increase in purchases of property, plant and equipment.

Cash provided by financing activities

Financing activities for the year ended December 31, 2011 used cash of $735,000, as compared to using $126,236 of cash for the year ended December 31, 2010. This increase in cash used is primarily attributed to the payoff of YA Global convertible debentures.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate these estimates, including those related to bad debts, inventory obsolescence, intangible assets, payroll tax obligations, and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of certain assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.

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

 

 

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Revenue Recognition

Revenue is recognized when persuasive evidence of an agreement exists, delivery has occurred, the amount is fixed or determinable, and cash is received.

The Company recognizes revenues from consulting and support services as the services are performed.

The assessment of collectability is critical in determining whether revenue should be recognized. As part of the revenue recognition process, we determine whether trade receivables are reasonably assured of collection based on various factors. Revenue and related costs are deferred if we are uncertain as to whether the receivable can be collected. Revenue is deferred but costs are recognized when we determine that the collection of the receivable is unlikely.  Hardware and software revenues are recognized when the product is shipped to the customer. The Company separates the software component and the professional services component into two distinct parts for purposes of determining revenue recognition. In that situation where both components are present, software sales revenue is recognized when the cash is received and the product is delivered, and professional service revenue is recognized as the service time is incurred.

 

With respect to the sale of software license fees in accordance with GAAP, the Company generally recognizes revenue when all of the following criteria are met: (1) persuasive evidence of an arrangement exists generally evidenced by a signed, written purchase order from the customer, (2) delivery of the software product on Compact Disk (CD) or other means to the customer has occurred, (3) the perpetual license fee is fixed or determinable and (4) collectability, which is assessed on a customer-by-customer basis, is probable.

 

With respect to customer support services, upon the completion of one year from the date of sale, considered to be the warranty period, the Company offers customers an optional annual software maintenance and support agreement for subsequent one-year periods. Sales of purchased maintenance and support agreements are recorded as deferred revenue and recognized over the respective terms of the agreements.

Derivative Liabilities

The Company accounts for its embedded conversion features in its convertible debentures in accordance FASB ASC 815-10, which requires a periodic valuation of their fair value and a corresponding recognition of liabilities associated with such derivatives, and FASB ASC 815-40 Section 05, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock. The recognition of derivative liabilities related to the issuance of convertible debt is applied first to the proceeds of such issuance as a debt discount, at the date of issuance, and the excess of derivative liabilities over the proceeds is recognized as “Loss on Valuation of Derivative” in other expense in the accompanying financial statements. Any subsequent increase or decrease in the fair value of the derivative liabilities is recognized as “Other expense” or “Other income”, respectively. The financial statements for the period include the recognition of the derivative liability on the underlying securities issuable upon conversion of the Convertible Debentures with YA Global Investments.  Such liability was extinguished in 2011 as a result of the YA Global debenture extinguishment.

Accounts receivable

The Company performs ongoing credit evaluations of its customers and adjusts credit limits based on customer payment and current credit worthiness, as determined by review of their current credit information.  The Company continuously monitors credits and payments from its customers and maintains provision for estimated credit losses based on its historical experience and any specific customer issues that have been identified.  While such credit losses have historically been within our expectation and the provision established, the Company cannot guarantee that it will continue to receive positive results.

 

 

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Off Balance Sheet Arrangements

During fiscal 2011, we did not engage in any material off-balance sheet activities or have any relationships or arrangements with unconsolidated entities established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities nor do we have any commitment or intent to provide additional funding to any such entities.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

We do not hold any derivative instruments and do not engage in any hedging activities.

 

Item 8. Financial Statements.

Our financial statements are contained in pages F-1 through F-23 which appear at the end of this Annual Report.

Item 9.  Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

(a) Evaluation of Disclosure and Control Procedures

The Company’s disclosure controls and procedures are designed to ensure (i) that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms; and (ii) that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Our principal executive officer and principal financial officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2011, and concluded that the disclosure controls and procedures were effective as a whole.

 

 

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(b)   Management’s Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining an adequate system of internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act.  The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with Generally Accepted Accounting Principles (“GAAP”). 

 

Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance of such reliability and may not prevent or detect misstatements.  Also, projection of any evaluation of effectiveness to future periods is subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management has conducted, with the participation of our Chief Executive Officer and our Principal Accounting Officer, an assessment of the effectiveness of our internal control over financial reporting as of December31, 2011.  Management’s assessment of internal control over financial reporting used the criteria set forth in SEC Release 33-8810 based on the framework established by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control over Financial Reporting – Guidance for Smaller Public Companies . Based on this evaluation, Management concluded that our system of internal control over financial reporting was effective as of December 31, 2011, based on these criteria. 

(c) Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

None.

 

 

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PART III

Item 10. Directors, Executive Officers, and Corporate Governance.

The following table and biographical summaries set forth information, including principal occupation and business experience, about our directors and executive officers at March 26, 2012:

Name		Age			Position		Officer and/or Director Since
Mark Meller		52			Chairman, President, Chief Executive Officer, Chief Financial Officer and Director		2003
Stanley Wunderlich		61			Director		2011

Mark Meller .

Mr. Mark Meller has been the President, Chief Financial Officer and Director of the Company since September 15, 2003, and was further appointed Chief Executive Officer on September 1, 2004. He became Chairman of the Board on May 10, 2009. From October 2004 until February 2007, Mr. Meller was the President, Chief Executive Officer, Chief Financial Officer and Director of Deep Field Technologies, Inc. Since December 15, 2004, Mr. Meller has been the President, Chief Executive Officer, Chief Financial Officer and Director of MM2 Group, Inc. From August 29, 2005 until August 2006, Mr. Meller was the President, Chief Executive Officer and Chief Financial Officer of iVoice Technology, Inc. Since 1988, Mr. Meller has been Chief Executive Officer of Bristol Townsend and Co., Inc., a New Jersey based consulting firm providing merger and acquisition advisory services to middle market companies. From 1986 to 1988, Mr. Meller was Vice President of Corporate Finance and General Counsel of Crown Capital Group, Inc, a New Jersey based consulting firm providing advisory services for middle market leveraged buy-outs (LBO’s). Prior to 1986, Mr. Meller was a financial consultant and practiced law in New York City. He is a member of the New York State Bar.

Stanley Wunderlich

Mr. Stanley Wunderlich has over 40 years of experience in Wall Street as a business owner and consultant.  Mr. Wunderlich is a founding partner and has been Chairman and Chief Executive Officer of Consulting for Strategic Growth 1, specializing in investor and media relations and the formation of capital for early-growth stage companies both domestic and international, from 2000 through the present.  Mr. Wunderlich has a Bachelor’s degree from Brooklyn College.

Board of Directors

Directors are elected at our annual meeting of shareholders and serve for one year until the next annual meeting of shareholders or until their successors are elected and qualified.

Nominating Committee

The Company does not have a standing nominating committee or a committee performing similar functions.

There are no agreements or understandings for the officer or director to resign at the request of another person and the above-named officers are not acting on behalf of nor will act at the direction of any other person. As of the fiscal year ended December 31, 2011, the Company’s Audit Committee has two members, one, of which is independent.

For the year ended December 31, 2011, the Board held no meetings but acted by Unanimous Written Consent [●] times.

Audit Committee

During 2011, the Audit Committee consisted solely of Mr. Mark Meller, the Company’s Chief Executive Officer and President. The Audit Committee has no independent members and no member that may deemed a financial expert as defined in §228.401(e) of the regulations promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as amended. Due to the Company's limited resources, it cannot attract a financial expert to sit on its Board of Directors. Management is responsible for the Company's internal controls and the financial reporting process.  The Audit Committee's responsibility is to monitor corporate financial reporting and external audits, although the member of the Audit Committee is not engaged in the practice of auditing or accounting. The Audit committee did not meet in 2011. The Board of Directors approved an Audit Committee Charter. As of this date, the Audit Committee operates pursuant to this Audit Committee Charter.

 

 

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AUDIT COMMITTEE REPORT

The following is the Audit Committee’s report submitted to the Board of Directors for the fiscal year ended December 31, 2011.  The Audit Committee has:

·	reviewed and discussed the Company’s audited financial statements with Friedman LLP, the Company’s independent registered accounting firm;

·	discussed with Friedman LLP the matters required to be discussed by Statement on Auditing Standards No. 114, as may be modified or supplemented; and

·	received from Friedman the written disclosures and the letter regarding their independence as required by Independence Standards Board Standard No. 1, as may be modified or supplemented, and discussed the auditors’ independence with them.

Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, for filing with the Securities and Exchange Commission.

	AUDIT COMMITTEE
	Mark Meller, CEO and President

 

The Audit Committee report shall not be deemed incorporated by reference by any general statement incorporating by reference this Annual Report on Form 10-K into any filing under the Securities Act of 1933, as amended or the Securities Exchange Act of 1934, as amended, and shall not otherwise be deemed filed under these acts.

Family Relationships

There are no family relationships among our directors, executive officers, or persons nominated or chosen by the Company to become directors or executive officers.

Subsequent Executive Relationships

No director or executive officer has been a director or executive officer of any business which has filed a bankruptcy petition or had a bankruptcy petition filed against it during the past five years. No director or executive officer has been convicted of a criminal offense or is the subject of a pending criminal proceeding during the past five years. No director or executive officer has been the subject of any order, judgment or decree of any court permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities during the past five years. No director or officer has been found by a court to have violated a federal or state securities or commodities law during the past five years.

None of our directors or executive officers or their respective immediate family members or affiliates are indebted to us.

Legal Proceedings

None of the members of the board of directors or other executives has been involved in any bankruptcy proceedings, criminal proceedings, any proceeding involving any possibility of enjoining or suspending members of our board of directors or other executives from engaging in any business, securities or banking activities, and have not been found to have violated, nor been accused of having violated, any Federal or State securities or commodities laws.

Compliance with Section 16(A) of the Exchange Act

Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who beneficially own 10% or more of a class of securities registered under Section 12 of the Exchange Act to file reports of beneficial ownership and changes in beneficial ownership with the SEC. Directors, executive officers and greater than 10% stockholders are required by the rules and regulations of the SEC to furnish the Company with copies of all reports filed by them in compliance with Section 16(a).

 

Based solely on our review of certain reports filed with the Securities and Exchange Commission pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended, the reports required to be filed with respect to transactions in our common stock during the fiscal year ended December 31, 2011, were timely.

 

 

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Code of Ethics.

The Company has adopted a Code of Ethics for adherence by its Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and Controller to ensure honest and ethical conduct; full, fair and proper disclosure of financial information in the Company's periodic reports filed pursuant to the Securities Exchange Act of 1934; and compliance with applicable laws, rules, and regulations. Any person may obtain a copy of our Code of Ethics by mailing a request to the Company at the address appearing on the front page of this Annual Report on Form 10-K.

Item 11. Executive Compensation.

The following table sets forth compensation information for services rendered by certain of our executive officers in all capacities during the last two completed fiscal years.  The following information includes the dollar value of base salaries and certain other compensation, if any, whether paid or deferred.  The executive officers of the company did not receive any stock award, option award, non-equity incentive plan compensation, or nonqualified deferred compensation earnings during the last two completed fiscal years.

Summary Compensation Table

 

Name and Position(s)		Year		Salary($)				Bonus				Stock Awards				All Other Compensation				Total Compensation
Mark Meller (1)		2011		$	250,000	(3)		$	0			$	0			$	0			$	250,000
President, Chief  Executive Officer, Chief Financial Officer and Director		2010		$	328,632	(2)		$	0			$	0			$	0			$	328,632

(1)

Mr. Meller has served as our President, Chief Executive Officer and Chief Financial Officer since September 13, 2003. Mr. Meller employment contract is for a term of five-years at a base salary of $180,000 in the first year with annual increases based on the Consumer Price Index every year thereafter.  On September 1, 2010, the Company entered Amendment No. 1 to the Employment Agreement whereby the term of the Employment Agreement was extended to September 15, 2017.

(2)	$252,797 was accrued and unpaid in fiscal year 2010.

(3)

On September 15, 2003, the Company entered into an employment agreement with Mr. Meller. He will serve as the Company's President and Chief Financial Officer for a term of five years. As consideration, the Company agreed to pay Mr. Meller the sum of $180,000 the first year with a 10% increase every year thereafter, as well as a monthly travel expense allowance of $600 and an auto allowance of $800. The employment agreement with Mr. Meller also provides for a severance payment to him of three hundred percent (300%), less $100,000 of his gross income for services rendered to the Company in each of the five prior calendar years should his employment be terminated following a change in control, as defined in the employment agreement. Mr. Meller shall also be paid the sum of $350,000 upon the completion of the Spin-Off, and compensation retroactive to August 1, 2003, at the annual rate dictated by the terms of the employment agreement, as a result of SilverSun technologies acquiring SWK, Inc. on June 2, 2004.   On June 29, 2011, Mr. Meller forgave outstanding liabilities representing unpaid salary, unpaid expense and auto allowances, and the one-time payment in connection with a previous transaction in the amount of $1,338,967. Such amount is recorded as a contribution of capital in Additional Paid-In Capital in the accompanying balance sheet. As of December 31, 2011, Mr. Meller also waived any deferred salary.   See “Certain Relationships and Related Transactions” below

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

The Company had no outstanding equity awards at the end of the most recent completed fiscal year.

 

 

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Compensation of Directors

Under the Agreement with Mr. Wunderlich, Director, Mr. Wunderlich is to be paid a stipend of one thousand dollars ($1,000) per month, payable at the end of each fiscal quarter. Notwithstanding the foregoing, the first Stipend shall be in the amount of three thousand dollars ($3,000) and was paid on July 26, 2011 pursuant to the Original Director Agreement.   Additionally, Mr. Wunderlich shall receive warrants (the “Warrants”) to purchase such number of shares of the Company’s Class A common stock, par value $0.0001 (the “Common Stock”), as shall equal (the “Formula”) (A) $20,000 divided by (B) the closing price of the Common Stock on the OTC Markets on the date of grant of the Warrant.  The exercise price of the Warrant shall be the closing price on the date of the grant of such Warrant (the “Grant Date”) plus $0.01.  The Warrant shall be fully vested upon receipt thereof (the “Vesting Date”). For the duration of the directorship term, on the three month anniversary of the Vesting Date, and for each successive three month period thereafter, Wunderlich shall receive a warrant exercisable for the number of shares of Common Stock resulting from the application of the Formula on the applicable Grant Date.  The first Warrant shall be issued no earlier than October 26, 2011.  Except with respect to the first Stipend, the Stipend and the Warrants shall be pro-rated based on the actual number of days during such quarter that Wunderlich served on the Board.

 

Employment Contracts

On September 15, 2003, the Company entered into an employment agreement with Mr. Meller. He will serve as the Company's President and Chief Financial Officer for a term of five years. As consideration, the Company agreed to pay Mr. Meller the sum of $180,000 the first year with a 10% increase every year thereafter, as well as a monthly travel expense allowance of $600 and an auto allowance of $800. The employment agreement with Mr. Meller also provides for a severance payment to him of three hundred percent (300%), less $100,000 of his gross income for services rendered to the Company in each of the five prior calendar years should his employment be terminated following a change in control, as defined in the employment agreement. Mr. Meller shall also be paid the sum of $350,000 upon the completion of the Spin-Off, and compensation retroactive to August 1, 2003, at the annual rate dictated by the terms of the employment agreement, as a result of SilverSun Technologies acquiring SWK, Inc. on June 2, 2004

Mr. Meller has agreed to defer payment of a portion of the monies due and owing him representing fixed compensation, which has been accrued on the Company’s balance sheet, and the one-time payment in connection with the Spin-off, until such time as the Board of Directors determines that the Company has sufficient capital and liquidity to make such payments.  Pursuant to an agreement between the Company and Mr. Meller has further agreed, however, to accept payment or partial payment, from time to time, as determined in the sole discretion of the Board of Directors in the form of cash, the Company’s Class A Common Stock and/ or the Company’s Class B Common Stock.  Amounts owed to him can be converted into (i) one share of our Class B common stock for each dollar owed, or (ii) the number of shares of our Class A common stock calculated by multiplying the amount owed times 1975.

On September 1, 2010,   the Company entered into Amendment No. 1 to the Employment Agreement with Mark Meller, President and Chief Executive Officer of the Company, whereby the term of the Employment Agreement was extended to September 15, 2017.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

The following tables set forth certain information regarding the beneficial ownership of our voting securities as of March 26, 2012 of (i) each person known to us to beneficially own more than 5% of the applicable class of voting securities, (ii) our directors, (iii) and each named executive officer and (iv) all directors and executive officers as a group.  As of March 26, 2012 there were a total of 116,413,069 shares of Class A common stock outstanding. Each share of Class A common stock is entitled to one vote on matters on which holders of common stock are eligible to vote.  The column entitled “Percentage of Total Voting Stock” shows the percentage of total voting stock beneficially owned by each listed party.

The number of shares beneficially owned is determined under rules promulgated by the Securities and Exchange Commission, and the information is not necessarily indicative of beneficial ownership for any other purpose.  Under those rules, beneficial ownership includes any shares as to which the individual has sole or shared voting power or investment power and also any shares which the individual has the right to acquire within 60 days of March 26, 2012, through the exercise or conversion of any stock option, convertible security, warrant or other right.  Unless otherwise indicated, each person or entity named in the table has sole voting power and investment power (or shares that power with that person’s spouse) with respect to all shares of capital stock listed as owned by that person or entity.

 

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Name and Address (1)		Beneficial Relationship to Company		Outstanding Class A Common Stock				Percentage of Ownership of Common Stock (3)
Mark Meller		Chief Executive Officer, Chief Financial Officer, President and Chairman			76,602,302	(1)			57.7	%
Stanley Wunderlich		Director			-				-	%
Officers and Directors (2 persons)		-			76,602,302				57.7	%

1)Includes 14,431,299 shares of our Class A common stock issuable upon conversion of $8,307 of the remaining amount of the Convertible Debenture due to Meller. On May 17, 2011, the Board of Directors of the Company and the stockholders holding in the aggregate a majority of the outstanding capital stock of the Company entitled to vote approved by written consent the change in the conversion ratio at which the Class B Common Stock, from fifty percent (50%) of the lowest price ever paid for the issuance of Class A Common Stock to a fixed conversion of one thousand nine hundred seventy five (1,975) shares of Class A Common Stock for each one (1) share of Class B Common Stock (the “Ratio Change”). Therefore, the Meller Note could convert into 16,406,305 Class A Common Stock upon the election of the note holder.

 

Description of Securities

On May 17, 2011, the Board of Directors (the “Board”) of  SilverSun Technologies, Inc. (the “Company”) and the stockholders holding in the aggregate a majority of the outstanding capital stock of the Company entitled to vote (the “Majority”), approved by written consent: (i) the decrease in the number of authorized shares of Class A common stock, par value $.00001 per share (the Class A Common Stock”), of the Company from ten billion (10,000,000,000) shares of Class A Common Stock to seven hundred and fifty million (750,000,000) shares of Class A Common Stock (the “Authorized Class A Share Decrease”); (ii) the change in the conversion ratio at which the Class B common stock, par value $.00001 per share (the “Class B Common Stock”), of the Company converts into Class A Common Stock from (A) fifty percent (50%) of the lowest price ever paid for the issuance of Class A Common Stock for each one share of Class B Common Stock being converted to (B) one thousand nine hundred seventy five (1,975) shares of Class A Common Stock for each one (1) share of Class B Common Stock (the “Ratio   Change”); (iii) the cancellation (the “Cancellation”) of the entire class of Class C Common Stock, par value $.00001 per share (the “Class C Common   Stock”); and (iv) the change in the name of the Company from “Trey Resources, Inc.” to “SilverSun Technologies, Inc.” (the “Name Change”).

After receiving the consent of the Board and the Majority, the Company filed on June 27, 2011 the Fourth Amended and Restated Certificate of Incorporation (the “Amended Certificate”) with the Secretary of State of the State of Delaware to reflect the (i) Authorized Class A Share Decrease, (ii) Ratio Change, (iii) Cancellation and (iv) the Name Change.

On June 28, 2011, the Board of the Company adopted by resolution an amendment (the “Amendment”) to the Bylaws of the Company to allow the Company, in the event that fractional equity interests are created, to issue one (1) full share of capital stock of the Company in lieu of a fractional share of capital stock in the event that fractional equity interests are created.  Prior to the Amendment, the Bylaws only allowed the Company to: (i) arrange for the disposition of fractional interests by those entitled thereto; (ii) pay in cash the fair value of a fraction of a share as of the time when those entitled to receive such fractional shares are determined; or (iii) issue scrip or warrants in registered form (represented by a certificate or uncertificated) or bearer form (represented by a certificate) which entitles the holder to receive one (1) full share of capital stock upon the surrender of such scrip or warrant.

Pursuant to our certificate of incorporation, as amended, we are authorized to issue up to: 750,000,000 shares of Class A common stock, par value $0.00001 per share; 50,000,000 shares of Class B common stock, par value $.00001 per share and 1,000,000 shares of preferred stock, par value of $1.00 per share.  Below is a description of SilverSun Technologies’ outstanding securities, including Class A common stock, Class B common stock, options, warrants and debt.

 

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Class A Common Stock

Each holder of our Class A Common Stock is entitled to one vote for each share held of record. Holders of our Class A Common Stock have no preemptive, subscription, conversion, or redemption rights. There are 750,000,000 shares authorized and 116,328,291 issued and outstanding at March 26, 2012.  Upon liquidation, dissolution or winding-up, the holders of Class A Common Stock are entitled to receive our net assets pro rata. Each holder of Class A Common Stock is entitled to receive ratably any dividends declared by our board of directors out of funds legally available for the payment of dividends. We have not paid any dividends on our Common Stock and do not contemplate doing so in the foreseeable future. We anticipate that any earnings generated from operations will be used to finance our growth.

Class B Common Stock

Each share of Class B Common Stock has voting rights equal to 100 shares of Class A Common Stock. Holders of Class B Common Stock are entitled to receive dividends in the same proportion as the Class B Common Stock conversion and voting rights have to Class A Common Stock. There are 50,000,000 shares authorized and there were no shares issued and outstanding as of March 26, 2012, nor does the Company have any plans to issue Class B Common Stock in the immediate future. Upon our liquidation, dissolution, or winding-up, holders of Class B Common Stock will be entitled to receive distributions. The Class B common stock, par value $.00001 per converts to one thousand nine hundred seventy five (1,975) shares of Class A Common Stock for each one (1) share of Class B Common Stock.

Preferred Stock

The Company’s certificate of incorporation authorizes the issuance of 1,000,000 shares of Preferred Stock, par value $1.00 per share.

Our board of directors is authorized (by resolution and by filing an amendment to our certificate of incorporation and subject to limitations prescribed by the General Corporation Law of the State of Delaware) to issue, from to time, shares of Preferred Stock in one or more series, to establish from time to time the number of shares to be included in each series, and to fix the designation, powers, preferences and other rights of the shares of each such series and to fix the qualifications, limitations and restrictions thereon, including, but without limiting the generality of the foregoing, the following:

·	the number of shares constituting that series and the distinctive designation of that series;

·	the dividend rate on the shares of that series, whether dividends are cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series;

·	whether that series has voting rights, in addition to voting rights provided by law, and, if so, the terms of those voting rights;

·	whether that series has conversion privileges, and, if so, the terms and conditions of conversion, including provisions for adjusting the conversion rate in such events as our board of directors determines;

·

whether or not the shares of that series are redeemable, and, if so, the terms and conditions of redemption, including the dates upon or after which they are redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates;

·	whether that series has a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of that sinking fund;

·	the rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Company, and the relative rights of priority, if any, of payment of shares of that series; and

·	any other relative powers, preferences and rights of that series, and qualifications, limitations or restrictions on that series.

If we liquidate, dissolve or wind up our affairs, whether voluntarily or involuntarily, the holders of Preferred Stock of each series will be entitled to receive only that amount or those amounts as are fixed by the certificate of designations or by resolution of the board of directors providing for the issuance of that series.

 

 

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As of December 31, 2011, the Company has issued the following shares of Preferred Stock:

 

The Company issued to each holder of the Promissory Notes (as defined below) one (1) share of Series A Convertible Preferred Stock, having the rights, preferences, privileges, powers and restrictions set forth in the Certificate of Designation filed with the Secretary of State of Delaware. The Company has the right to convert, at its sole option, each share of Series A Convertible Preferred Stock into Class A Common Stock equal to 1% of the outstanding shares of Class A Common Stock at the time of conversion. Each one share of Series A Preferred Stock shall entitle the Series A Holder to voting rights equal to 2,666,667,000 votes of Class A Common Stock.

On September 23, 2011, SilverSun Technologies, Inc., entered into a Series B preferred stock purchase agreement (the “Preferred Stock Purchase Agreement”) with the Company’s Chief Executive Officer, Mr. Mark Meller (the “Series B Holder”), pursuant to which the Series B Holder was issued the only one (1) authorized share of Series B Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”).  The Series B Holder was issued one (1) share of Series B Preferred Stock as partial consideration for such Series B Holder’s agreement to personally guarantee the repayment of two Promissory Notes (the “Notes”), dated April 11, 2011, each in the principal face amount of $275,000, for an aggregate principal sum of $550,000 the terms of which are incorporated by reference herein as Exhibit 10.14.

The Series B Preferred Stock has the rights, privileges, preferences and restrictions set for in the Certificate of Designation (the “Certificate of Designation”) filed by the Corporation with the Secretary of State of the State of Delaware (“Delaware Secretary of State”) on September 23, 2011 and incorporated herein by reference to Exhibit [●]

Each one (1) share of the Series B Preferred shall have voting rights equal to (x) the total issued and outstanding Common Stock and preferred stock eligible to vote at the time of the respective vote divided by (y) forty nine one-hundredths (0.49) minus (z) the total issued and outstanding Common Stock and preferred stock eligible to vote at the time of the respective vote.  For the avoidance of doubt, if the total issued and outstanding Common Stock eligible to vote at the time of the respective vote is 5,000,000, the voting rights of the Series B Preferred Stock shall be equal to 5,204,082 (e.g. (5,000,000 / 0.49) – 5,000,000 = 5,204,082).

Options and Stock Awards

During the fiscal year ended December 31, 2004, the Company adopted the SilverSun Technologies, Inc. 2004 Stock Incentive Plan (the “Stock Incentive Plan”) to:  (i) provide long-term incentives and rewards to employees, directors, independent contractors or agents the Company and its subsidiaries; (ii) assist the Company in attracting and retaining employees, directors, independent contractors or agents with experience and/or ability on a basis competitive with industry practices; and (iii) associate the interests of such employees, directors, independent contractors or agents with those of the Company's stockholders. The Board of Directors authorized the issuance of up to 2.4 million shares of Class A common stock under the Stock Incentive Plan. In 2005, the Board of Directors amended this plan to increase the authorized number of shares to 20 million Class A Common Stock.  In 2007, the Board of Directors amended this plan to increase the authorized number of shares to 87.9 million Class A Common Stock.

During the fiscal year ended December 31, 2007, the Company adopted the SilverSun Technologies, Inc. 2007 Consultant Stock Incentive Plan (the “Consultant Plan”) to: (i) provide long-term incentives, payment in stock in lieu of cash and rewards to consultants, advisors, attorneys, independent contractors or agents ("Eligible Participants") of SilverSun Technologies, Inc. ("the Company") and its subsidiaries; (ii) assist the Company in attracting and retaining independent contractors or agents with experience and/or ability on a basis competitive with industry practices; and (iii) associate the interests of such independent contractors or agents with those of the Company's stockholders.  Total shares issuable under this plan may not exceed twenty (20) percent of the issued and outstanding shares of the Company’s Class A Common Stock.

No securities were issued pursuant to the 2004 Plan and 2007 Plans for the years ended December 31, 2011 and 2010.

During the fiscal year ended December 31, 2004, and as amended, the Company adopted the SilverSun Technologies, Inc. 2004 Directors’ and Officers’ Stock Incentive Plan (the "Directors’ and Officers’ Plan") is to (i) provide long-term incentives and rewards to officers and directors the Company and its subsidiaries; (ii) assist the Company in attracting and retaining officers and directors with experience and/or ability on a basis competitive with industry practices; and (iii) associate the interests of such officers and directors with those of the Company's stockholders.  The Board of Directors authorized the issuance of up to 2,400,000 shares of Class A common stock under the Directors’ and Officers’ Plan.  In 2005, the Board of Directors amended this plan to increase the authorized number of shares to 20,000,000 shares of Class A Common Stock.

No securities were issued pursuant to the 2004 D&O Plan for the years ended December 31, 2011 and 2010.

 

 

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Item 13. Certain Relationships and Related Transactions.

Related Party Notes and Accounts Due

On September 15, 2003, the Company entered into an employment agreement with Mr. Meller. He will serve as the Company's President and Chief Financial Officer for a term of five years. As consideration, the Company agreed to pay Mr. Meller the sum of $180,000 the first year with a 10% increase every year thereafter, as well as a monthly travel expense allowance of $600 and an auto allowance of $800. The employment agreement with Mr. Meller also provides for a severance payment to him of three hundred percent (300%), less $100,000 of his gross income for services rendered to the Company in each of the five prior calendar years should his employment be terminated following a change in control, as defined in the employment agreement. Mr. Meller shall also be paid the sum of $350,000 upon the completion of the Spin-Off, and compensation retroactive to August 1, 2003, at the annual rate dictated by the terms of the employment agreement, as a result of SilverSun technologies acquiring SWK, Inc. on June 2, 2004

On June 29, 2011, Mr. Meller forgave outstanding liabilities representing unpaid salary, unpaid expense and auto allowances, and the one-time payment in connection with a previous transaction in the amount of $1,338,967. Such amount is recorded as a contribution of capital in Additional Paid-In Capital in the accompanying balance sheet.

Mr. Meller has agreed to waive payment of a portion of the monies due representing fixed compensation.  Pursuant to an agreement between the Company and Mr. Meller, Mr. Meller has further agreed, however, to accept payment or partial payment, from time to time, as determined in the sole discretion of the Board of Directors in the form of cash, the Company’s Class A Common Stock and/ or the Company’s Class B Common Stock.  Amounts owed to him can be converted into (i) one share of our Class B common stock for each dollar owed, or (ii) the number of shares of our Class A common stock calculated by multiplying (x) the sum of the liability being extinguished by 1,975. As of December 31, 2011 and 2010 amounts due to Mr. Meller would convert into -0- and 9,700,000 million shares of Class A Common Stock, respectively.

On September 1, 2010,   the Company entered into Amendment No. 1 to the Employment Agreement with Mark Meller, President and Chief Executive Officer of the Company, whereby the term of the Employment Agreement was extended to September 15, 2017.

During the year ended December 31, 2010, the Company isssued 83,638 shares of Class A Common stock to Mr. Meller for repayment of $1,515 in deferred compensation with a fair value of $27,779. The difference in the fair value and the amount of deferred compensation repaid was charged to general and administrative expense in the amount of $27,264 and included in operating expenses in the statement of operations.

Total amounts owed to Mr. Meller as of December 31, 2011 and December 31, 2010, representing unpaid salary, unpaid expense and auto allowances, accrued interest, and the one-time payment in connection with a previous transaction, totaled $6,335 and $1,293,941.

On October 19, 2010, the Company borrowed $45,000 in exchange issuing a promissory note to Mr. Mark Meller, the Company’s Chief Executive Officer. This note is not collateralized, and carries an interest rate of 3% per annum on the unpaid balance. The note and interest are due January 1, 2012. In the event of (a) default in payment of any installment of principal or interest hereof as the same becomes due and such default is not cured within ten (10) days from the due date after the Holder provides the Maker written notice of default, then the Holder may, without further notice, declare the remainder of the principal sum, together with all interest accrued thereon, at once due and payable.  Failure to exercise this option shall not constitute a waiver of the right to exercise the same at any other time.  The unpaid principal of this Promissory Note and any part thereof, accrued interest and all other sums due under this Promissory Note shall bear interest at the rate of Ten Percent (10%) percent per annum after default until paid. The outstanding balances at December 31, 2011 and 2010 were $20,000 and $45,000, plus accrued interest of $1,454 and $274, respectively.

Director Independence

 

The common stock of the Company is currently quoted on the OTCBB, an exchange which currently does not have director independence requirements.  On an annual basis, each director and executive officer will be obligated to disclose any transactions with the Company in which a director or executive officer, or any member of his or her immediate family, have a direct or indirect material interest in accordance with Item 407(a) of Regulation S-K.  Following completion of these disclosures, the Board will make an annual determination as to the independence of each director using the current standards for “independence” that satisfy both the criteria for the Nasdaq and the American Stock Exchange.

As of December 31, 2011, the Board determined that Mr. Wunderlich is independent.

 

 

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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		2011				2010
Audit Fees		$	41,500			$	34,000
Audit - Related Fees			-				-
Tax fees		$	18,000			$	7,620
All Other Fees			-				-
Total		$	59,500			$	41,620

 

Prior to engaging our accountants to perform a particular service, our Audit Committee obtains an estimate for the service to be performed. All of the services described above were approved by the Audit Committee in accordance with its procedures.

 

 

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PART IV

Item 15. Exhibits.

(a)

Exhibit No.		Description
3.1		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 ).
3.2		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.
3.3		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).
3.4		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)
4.1		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).
4.2		iVoice Acquisition 1, Inc. 5% Convertible Debenture due March 20, 2005 issued to Darryl A. Moy (incorporated herein by reference to Exhibit 4.2 of the registration statement on Form SB-2, filed with the SEC on December 22, 2003).
4.3		iVoice Acquisition 1, Inc. 5% Convertible Debenture due March 20, 2005 issued to Henry Tyler (incorporated herein by reference to Exhibit 4.2 of the registration statement on Form SB-2, filed with the SEC on December 22, 2003).
4.4		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).
4.5		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).
4.6		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.
4.7		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.
10.1		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).
10.2		Employment Agreement, dated September 15, 2003, between SilverSun Technologies, Inc. and Mark Meller. (incorporated herein by reference to Exhibit 10.8 of the Registration Statement on Form SB-2 filed on November 25, 2003).
10.3		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)
10.4		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).
10.5		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).
10.6		Placement Agreement dated January 24, 2003 between iVoice Acquisition 1, Inc. and Cornell Capital Partners LP. (incorporated herein by reference to Exhibit 10.5 of the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003, filed with the SEC on May 12, 2003).
10.7		Termination Agreement dated December 30, 2005 between YA Global (f/k/a/ Cornell Capital Partners, LP). and SilverSun Technologies, Inc.
10.8		Escrow Agreement dated December 30, 2005 between David Gonzalez, Esq. And SilverSun Technologies, Inc.
10.9		Securities Purchase Agreement dated December 30, 2005 between YA Global (f/k/a/ Cornell Capital Partners, LP). and SilverSun Technologies, Inc.
10.10		Investor Rights Agreement dated December 30, 2005 between YA Global (f/k/a/ Cornell Capital Partners, LP). and SilverSun Technologies, Inc.
10.11		Amended and Restated Security Agreement dated December 30, 2005 between YA Global (f/k/a/ Cornell Capital Partners, LP). and SilverSun Technologies, Inc.
10.12		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).
10.13		Termination Settlement Agreement dated May 6, 2009 by and among SilverSun Technologies, SWK Technologies, Inc., Jeffrey D. Roth and Jerome R. Mahoney. (incorporated herein by reference to Exhibit 10.1 on Form 10-K, dated May 9, 2009, filed with the SEC on May 26, 2009).
10.14		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).
10.15		Form of Preferred Stock Purchase Agreement (incorporated by reference to Exhibit 10.2 on the Company’s current report on Form 8-K filed with the commission on May 12, 2011).
10.16		Amended Agreement by and between the Company and Mr. Stanley Wunderlich (incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K filed with commission on August 3, 2011).
10.17		Form of Warrant (incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K filed with commission on August 3, 2011).
10.18*		Loan and Security Agreement by and between the Company, its subsidiary SWK Technologies, Inc and a commercial lender.
10.19*		Audit Committee Charter
14.1		Code of Ethics incorporated by reference to Exhibit 14.1 filed with the Registrant’s Form 10-KSB for the fiscal year ended December 31, 2003.
31.1 *		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herein.
32.1 *		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 filed herein.

101.INS				XBRL Instance Document
101.SCH				XBRL Taxonomy Extension Schema
101.CAL				XBRL Taxonomy Extension Calculation Linkbase
101.DEF				XBRL Taxonomy Extension Definition Linkbase
101.LAB				XBRL Taxonomy Extension Label Linkbase
101.PRE				XBRL Taxonomy Extension Presentation Linkbase

                                      

* Filed herewith

 

 

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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.

				SILVERSUN TECHNOLOGIES, INC.
Dated:  March 29, 2012				By:	/s/ Mark Meller
					Chief Executive Officer
					(Principal Executive Officer) Chief Financial Officer (Principal Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Name		Position		Date
/s/ Mark Meller		Chief Executive Officer, Chief Financial Officer, President, and Chairman		March 29, 2012
Mark Meller
/s/ Stanley Wunderlich		Director		March 29, 2012
Stanley Wunderlich

 

 

31

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Table of Contents

PART F/S

 

INDEX TO FINANCIAL STATEMENTS

 

AUDITED FINANCIAL STATEMENTS