UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549 
 

FORM 10-K 

 
ý  
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended: December 31, 2012
 
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission file number: 000-50302
 
SILVERSUN TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
 
New Jersey
 
16-1633636
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
5 Regent Street
Livingston, NJ 07039
(Address of principal executive offices)
 
(973) 958-9555
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Class A Common Stock, par value $0.00001
 
Indicate by checkmark if registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes ¨  No ý
 
Indicate by checkmark if registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes ¨  No ý

Indicate by checkmark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ý  No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý  No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer
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Accelerated Filer
o
Non-Accelerated Filer
o
Smaller reporting company
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Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Act). Yes ¨  No ý

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant based on a closing price of $.20 on June 30, 2012 was approximately $4,853,373. As of March 20, 2013, the registrant had 116,978,291 shares of its common stock, par value $0.00001, outstanding.

Documents Incorporated By Reference: None.
 
 
 

 
TABLE OF CONTENTS
 
 
    
PAGE
PART I
   
     
ITEM 1.
  4
ITEM 1A.
8
ITEM 1B.
  11
ITEM 2.
  12
ITEM 3.
  12
ITEM.4.
  12
     
PART II
   
     
ITEM 5.
  13
ITEM 6.
  14
ITEM 7.
  14
ITEM 7A
  18
ITEM 8.
  19
ITEM 9.
  19
ITEM 9A.
  19
ITEM 9B.
19
     
PART III
   
     
ITEM 10.
  20
ITEM 11.
  22
ITEM 12.
  23
ITEM 13.
  26
ITEM 14.
  27
     
PART IV
   
     
ITEM 15.
  28
 
 
 


FORWARD LOOKING STATEMENTS

Included in this Form 10-K are “forward-looking” statements, as well as historical information. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that the expectations reflected in these forward-looking statements will prove to be correct. Our actual results could differ materially from those anticipated in forward-looking statements as a result of certain factors, including matters described in the section titled “Risk Factors.” Forward-looking statements include those that use forward-looking terminology, such as the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “project,” “plan,” “will,” “shall,” “should,” and similar expressions, including when used in the negative. Although we believe that the expectations reflected in these forward-looking statements are reasonable and achievable, these statements involve risks and uncertainties and we cannot assure you that actual results will be consistent with these forward-looking statements. We undertake no obligation to update or revise these forward-looking statements, whether to reflect events or circumstances after the date initially filed or published, to reflect the occurrence of unanticipated events or otherwise.
 
 
 
 
 
 

 
PART I

Item 1. Business.

Background
 
SilverSun Technologies, Inc., a Delaware corporation  (the “Company” or  SilverSun”) is an information technology company, and a value added reseller and master developer for Sage Software’s Sage 100/500 and ERP X3 financial and accounting software as well as the publisher of its own proprietary Electronic Data Interchange (“EDI”) software, “MAPADOC”, and 36 other assorted software solutions and enhancements.  The Company focuses on the business software and information technology consulting market for small and medium-sized businesses, 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.
 
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 Sage 100/500 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 Sage 100/500 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.

During 2011, SWK Technologies, Inc., acquired the Sage software customer accounts of IncorTech, a Southern California-based Sage business partner. This transaction increases the Company’s geographical influence.  The focus in Southern California will be to sell and support our MAPADOC integrated EDI solution and to market Sage ERP X3 to both former IncorTech customers, where suitable, as well as new prospects. IncorTech has provided professional accounting, technology, and business consulting services to over 300 clients.

In June 2012, the Company completed the purchase of selected assets and obligations of HighTower, Inc., a leading Chicago-based reseller of Sage software applications and a publisher of proprietary business management enhancements. HighTower’s customers and business products and services have been integrated into the infrastructure of SWK Technologies, SilverSun’s principal operating subsidiary. In addition to the  strategic benefits that this acquisition affords the Company, it brings SilverSun and SWK additional annual revenues,  approximately 870 additional Sage ERP customers, a substantial suite of proprietary enhancement software solutions (with approximately 700 users) and affords the Company market penetration in the Midwest. Moreover, we look forward to leveraging Hightower’s established network of independent resellers to further expand distribution of SWK’s proprietary software solutions, and vice versa.
 
In June 2012, SWK Technologies, Inc. also acquired the Sage Software customer accounts of MicroPoint,, a New York-based Sage business partner. MicroPoint has provided professional accounting, technology, and business consulting services to over 32 clients.
 
With acquisitions serving a as key driver of SilverSun’s national expansion strategy, the Company will continue to remain very busy qualifying and pursuing opportunities in order to facilitate its growth and add to shareholder value.

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 OTCQB 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, as well as 36 other proprietary solutions and enhancements utilized for warehousing, time and billing, and the like.  We consider ourselves 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 and EDI software are sold to corporations nationwide.
 
 
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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 significant 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.

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 Sage 100/500/ERP X3 software products with a feature rich product that is easy to use. “MAPADOC” provides the user with dramatically decreased data entry time, elimination of redundant steps, the lowering of  paper and postage costs, the reduction of time spent typing, signing, checking and approving documents and the ability to self-manage EDI and to provide a level of independence that saves time and money.

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

We are resellers of the Warehouse Management System (“WMS”) software published by Accellos, Inc (“Accellos”).  Accellos 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 managed services, data back-up, network maintenance and service upgrades for our business clients.  We are a Microsoft Solutions Provider.  Our staff includes engineers who maintain certifications from Microsoft and Sage Software.  They are Microsoft Certified Systems Engineers and Microsoft Certified Professionals, and they provide a host of services for our clients, including remote network monitoring, server implementation, support and assistance, operation and maintenance of large central systems, technical design of network infrastructure, technical troubleshooting for large scale problems, network and server security, and backup, archiving, and storage of data from servers.  There are numerous competitors, both larger and smaller, nationally and locally, with whom we compete in this market. 

Craft Brewery Business Management Solutions

We provide a proprietary series of cloud-based business management solutions created specifically for the U.S. craft brewery and distribution industry. Currently, implementations of BeerRun, BrewPub, BrewX ERP (powered by Sage ERP X3) and the Distributor Relationship Management System – Software-as-a-Service (SaaS) solutions jointly developed SWK Technologies – have been sold to 17 craft breweries throughout the country and one internationally. These innovative solutions provide brew masters with a single, turnkey database batch/process solution capable of managing their manufacturing operations – from forecasting and planning to recipe management to inventory control and traceability, among other critical business functions, including automated TTB reporting.

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 $500 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 Dynamics accounting software.
 
Electronic Data Interchange Software

We publish and sell both directly and through a network of software resellers our proprietary EDI software, “MAPADOC”.  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.
 
 
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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.

Arrangements with Principal Suppliers
 
Our revenues are primarily derived from the resale of vendor software products and services. These resales are made pursuant to channel sales agreements whereby we are granted authority to purchase and resell the vendor products and services.  Under these agreements, we either resell software directly to our customers or act as a sales agent for various vendors and receive commissions for our sales efforts.

We are required to enter into an annual Channel Partner Agreement with Sage Software, Inc. (“Sage”) whereby Sage appoints us as a non-exclusive partner to market, distribute, and support Sage 100/500 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, 2012 and 2011, purchases from one supplier were approximately 47% and 22%, respectively, of the Company’s total cost of revenue.   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 should the need arose.
 
Customers
 
We market our products to private companies throughout the United States.  For the years ended December 31, 2012 and 2011, our top ten customers had approximately $2,262,000 and $3,211,000 in sales and these represented 17% and 31%, respectively, of our total sales for the period.  Generally, we do not rely on any one specific customer for any significant portion of our revenue base. No single customer accounted for ten percent or more of our consolidated revenues.  

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, 2012, we had approximately 61 full time employees with 13 of our employees engaged in sales and marketing activities, 36 employees are engaged in service fulfillment, and 12 employees employed in administrative activities

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 agreement 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.
 
 
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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.

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.

IF OUR TECHNOLOGIES AND PRODUCTS CONTAIN DEFECTS OR OTHERWISE DO NOT WORK AS EXPECTED, WE MAY INCUR SIGNIFICANT EXPENSES IN ATTEMPTING TO CORRECT THESE DEFECTS OR IN DEFENDING LAWSUITS OVER ANY SUCH DEFECTS.

Software products are not currently accurate in every instance, and may never be.  Furthermore, we could inadvertently release products and technologies that contain defects.  In addition, third-party technology that we include in our products could contain defects.  We may incur significant expenses to correct such defects.  Clients who are not satisfied with our products or services could bring claims against us for substantial damages.  Such claims could cause us to incur significant legal expenses and, if successful, could result in the plaintiffs being awarded significant damages.  Our payment of any such expenses or damages could prevent us from becoming profitable.

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

The 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.
 
 
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IF WE ARE NOT ABLE TO PROTECT OUR TRADE SECRETS THROUGH ENFORCEMENT OF OUR CONFIDENTIALITY AND NON-COMPETITION AGREEMENTS, THEN WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY AND WE MAY NOT BE PROFITABLE.

We attempt to protect our trade secrets, including the processes, concepts, ideas and documentation associated with our technologies, through the use of confidentiality agreements and non-competition agreements with our current employees and with other parties to whom we have divulged such trade secrets.  If the employees or other parties breach our confidentiality agreements and non-competition agreements or if these agreements are not sufficient to protect our technology or are found to be unenforceable, our competitors could acquire and use information that we consider to be our trade secrets and we may not be able to compete effectively.  Some of our competitors have substantially greater financial, marketing, technical and manufacturing resources than we have, and we may not be profitable if our competitors are also able to take advantage of our trade secrets.

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, 2012, Mark Meller, our President and Chief Executive Officer, beneficially owned approximately 76% of our outstanding shares of our Class A common stock, par value $.00001 (the “Class A Common Stock” or “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  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.
 
On September 23, 2011, SilverSun Technologies, Inc., entered into a Series B preferred stock purchase agreement (the “Preferred Stock Purchase Agreement”) with Mr.  Meller (the “Series B Holder”), pursuant to which Mr. Meller was issued one  authorized share of Series B Preferred Stock (the “Series B Preferred”), par value $0.001 per share.  Mr. Meller was issued one share of Series B Preferred as partial consideration for personally guaranteeing repayment of the Notes.
 
The 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 shall be equal to 5,204,082 (e.g. (5,000,000 / 0.49) – 5,000,000 = 5,204,082).  At December 31, 2012 voting rights of 121,724,440 shares are associated with Series B Preferred and are included as part of the beneficial ownership calculation.
  
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 COMMON STOCK IS THINLY TRADED AND WE CANNOT PREDICT THE EXTENT TO WHICH A MORE ACTIVE TRADING MARKET WILL DEVELOP.
 
Our Common Stock is thinly traded compared to larger more widely known companies. Thinly traded 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 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 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  Common Stock in short time periods, or possibly at all.  Our  Common Stock has experienced 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 Common Stock to fluctuate substantially.

 
10


OUR 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  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  Common Stock by reducing the number of potential investors.  This may make it more difficult for investors in our 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 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 COMMON STOCK MAY SIGNIFICANTLY DILUTE THE EQUITY INTEREST OF EXISTING STOCKHOLDERS.

We have reserved for issuance shares of our 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 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.
 
 
11


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.  The Company also leases 2700 square feet of office space in Skokie, IL for  three-year period ended April 2013 with a monthly rent of $2,500 in year one, $3,000 in year two, and $3,500 in year three. 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.
 
 
12

 
PART II

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

(a) Market Information
 
Our Class A common stock, $0.00001 par value (the “Class A Common Stock” or “Common Stock”), is quoted on the OTC Bulletin Board under the symbol “SSNT”.  The following table shows the high and low closing prices for the periods indicated.
 
Quarter ended
 
High
   
Low
 
December 31, 2012
 
$
0.20500
   
$
0.10000
 
September 30, 2012
 
$
0.24980
   
$
0.13000
 
June 30, 2012
 
$
0.40000
   
$
0.11000
 
March 31, 2012
 
$
0.18000
   
$
0.01060
 
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
 

(b) Holders of Common Equity.

As of March 26, 2013, 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, 2012, 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 converted $43,946 of the Convertible Promissory Note (as defined herein) at a fixed conversion rate of 1,975 shares per $1 for 86,793,693 shares of the Company’s Common Stock, par value $0.00001 (the “Common Stock”).
 
 
·  
The Company converted 2 shares of Series A Convertible preferred stock for 2,385,650 shares of Common Stock.
 
 
·  
The Company bought back their 20% interest in SWK Technologies, Inc. for 22,664,678 shares of Common Stock.

·  
The Company issued 150,000 shares of Common Stock with a fair market value of $30,000 to Spencer Clark LLC in exchange for services.

·  
The Company issued 500,000 shares of Common Stock with a fair market value of $5,000 to Tri-Point Global Equities, Inc. in exchange for services

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”).

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.
 
 
13

 
(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. 

In May 2012, the Company issued approximately 2,875,000 Common Stock options from the 2004 Stock Incentive Plan with a weighted average exercise price of $0.16 and an expected life of 5 years.  Approximately, 2,257,000 of the Common Stock options vest immediately. The remaining 618,000 options shall vest 50% at grant date with the balance vested ratably over a three-year period.

In addition, as of December 31, 2012, there were approximately 40 warrants to purchase 40 shares of Common Stock outstanding.  No warrants were exercised during 2012 and 553,960 were canceled.

The following table sets forth information as of December 31, 2012 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.
   
2,875,040
 
 
$
0.16
     
1,354,460
 
Total
   
2,875,040
   
$
0.16
     
1,354,460
 
 
Transfer Agent

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

Item 6.  Selected Financial Data.

Not applicable.
 
Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

This annual report on Form 10-K and other reports filed by SilverSun Technologies, Inc. (the “Company”) from time to time with the U.S. Securities and Exchange Commission (the “SEC”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management.  Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof.  When used in the filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements.  Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks contained in the “Risk Factors” section of the this Annual Report on Form 10-K., relating to the Company’s industry, the Company’s operations and results of operations, and any businesses that the Company may acquire.  Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.
 
 
14

 
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements.  Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.
 
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made.  These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result.  The following discussion should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this report.

Overview
 
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 wholly-owned subsidiary and the sole source of the Company’s revenue, is a New Jersey-based information technology subsidiary of the Company, value added reseller, and master developer of licensed accounting and financial software published by Sage Software.  SWK Technologies also publishes 36 proprietary software solutions and enhancements, including its 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.
  
We continue to develop and increase our existing business by aggressively seeking new business and offering solutions to our customers, including our own proprietary software.   We specialize in ERP software sales and implementation, 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 and programming services are sold to corporations nationwide.
 
Additionally, it is our intention to increase our business by seeking additional opportunities through potential acquisitions, partnerships or investments.  Such acquisitions, partnerships or investments may consume cash reserves or require additional cash or equity.  Our working capital and additional funding requirements will depend upon numerous factors, including: (i) strategic acquisitions or investments; (ii) an increase to current company personnel; (iii) the level of resources that we devote to sales and marketing capabilities; (iv) technological advances; and (v) the activities of competitors.

In June 2012 the Company completed the purchase of selected assets and obligations of HighTower, Inc., a leading Chicago-based reseller of Sage software applications and a publisher of proprietary business management software enhancements. HighTower’s customers and business products and services have been integrated into the infrastructure of SWK Technologies, SilverSun’s principal operating subsidiary. In addition to the  strategic benefits that this acquisition affords the Company, it brought  SilverSun and SWK approximately $1,145,000 of revenues in 2012, approximately 870 additional Sage ERP customers, an impressive suite of proprietary enhancement software solutions (with approximately 700 users) and a much deeper market penetration in the Midwest. Moreover, we look forward to leveraging Hightower’s established network of independent resellers to further expand distribution of SWK’s proprietary software solutions, and vice versa. This acquisition marks an important milestone for SilverSun, and one that should have notable impact on our revenue and earnings growth in 2012 and well beyond.

During  2011 SWK Technologies, Inc., also acquired the Sage software customer accounts of IncorTech, a Southern California-based Sage business partner. This transaction increases the Company’s geographical influence.  The focus in Southern California will be to sell and support our MAPADOC integrated EDI solution and to market Sage ERP X3 to both former IncorTech customers, where suitable, and to new prospects. IncorTech has provided professional accounting, technology, and business consulting services to over 300 clients.

In June 2012, SWK Technologies, Inc. also acquired the sage software customer accounts of MicroPoint, a New York-based Sage business partner. MicroPoint has provided professional accounting, technology, and business consulting services to over 32 clients.

With acquisitions serving as a key component of SilverSun’s national expansion strategy, the Company will continue to remain very busy qualifying and pursuing opportunities to continue its growth and add to shareholder value.
 
 
15


Revenues

Revenues for the year ended December 31, 2012 increased $2,656,905 (25.3%) to $13,178,985 as compared to $10,522,080 for the year ended December 31, 2011.  These revenues were all generated by the Company’s wholly-owned operating subsidiary, SWK Technologies. This increase is attributed to revenues associated with its newly acquired operation HTI of approximately $1,145,000, of which approximately $192,000 was service revenue, as well as an increase in revenues from its existing customer base.   The overall increase is primarily due to the continued marketing efforts and very competitive pricing as well as the Company’s strategy to increase its business by seeking additional opportunities through potential acquisitions, partnerships or investments. The increase in the Company’s maintenance support business of $1,716,008 (89.2%) to $3,640,573 for the year ended December 31, 2012 represents a significant portion of and a great foundation for potential future growth.

Gross Profit

Gross profit for the year ended December 31, 2012 increased $836,480 (18.6%) to $5,334,100 as compared to $4,497,620 for the year ended December 31, 2011. The increase in gross profit for this period is mostly attributed to the recent acquisition of HTI as well as the higher level of sales.  For the year ended December 31, 2012, the gross profit percentage was 40.5% as compared to 42.7% for the year ended December 31, 2011. The mix of products being sold by the Company changes from time to time and sometimes causes the overall gross margin percentage to vary.  The change in sales mix year ended December 31, 2012, resulted in gross profit being slightly lower as a percent of sales as compared to the year ended December 31, 2011, primarily a result of higher software sales, which sales have a lower gross profit. In addition, the Company, when acquiring business accounts from other resellers, will often enter into revenue sharing agreements for a period of time with the selling reseller. The Company currently has 12 revenue sharing agreements, which often have the result of reducing the Company’s reported gross margins.

Operating Expenses

Selling and marketing expenses increased $458,434 (24.9%) to $2,302,258 for the year ended December 31, 2012 compared to $1,843,824 for the year ended December 31, 2011 as a result of the continued increase in sales activity and incremental expenses associated with HTI.
 
General and administrative expenses increased $579,738 (25.2%) to $2,876,456 for the year ended December 31, 2012 as compared to $2,296,718 for the year ended December 31, 2011 primarily as a result of increases in payroll related expenses as the Company hired additional employees to support the higher sales activity, rent, investment banking, investor relations and insurance expenses.
 
On January 4, 2012, in accordance with options granted in January 2011, Mr. Meller sold portions of his Convertible Note payable to certain employees of SWK Technologies, Inc. in the amount of $13,235. On January 4, 2012, Mr. Meller converted $30,458 of the Convertible Note into 60,154,178 shares of the Company’s Common Stock, and those certain employees converted the $13,238 into 23,139,523 shares of the Company’s Common Stock. As a consequence the Company recognized $719,267 of share-based compensation expense in 2012. Additionally, during the year ended December 31, 2012, the Company recognized $416,991 of share-based compensation as a result of the granting of stock options to most of its non-executive employees.

Depreciation and amortization expense increased $98,550 for the year ended December 31, 2012 to $195,560 as compared to $97,011 for the year ended December 31, 2011. This increase is primarily attributed to the increase in amortization associated with the newly acquired intangible assets.

Income (Loss) from Operations

Total net loss from operations was $1,176,432 for the year ended December 31, 2012 as compared to net income from operations of $260,057 for the year ended December 31, 2011 primarily attributed to non-cash share-based compensation of $1,136,258 as discussed above.

Other Income (Expense)

For the year ended December 31, 2012, the Company had other expense of $58,738 as compared to other income for the year ended December 31, 2011 of $2,448,864.  This change is primarily attributed to the gain on the extinguishment of debt and derivative liability for the year ended December 31, 2011.

Net Income (Loss)

For year ended December 31, 2012, the Company had a net loss of $1,235,170 as compared to net income of $2,708,931 for the year ended December 31, 2011, The change is attributed to the non-cash share-based compensation expense in 2012 and the gain on the extinguishment of debt and derivative liability realized in 2011 which was not available in 2012.  
 
 
16


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.

In October 2011, the Company obtained 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, 2012. 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, 2012, the Company has an outstanding balance of $178,633. As of December 31, 2012, the availability under this line was $571,367. At December 31, 2012, the Company was in compliance with the required financial covenants, the fixed charge ratio and debt to net worth.

During the year ended December 31, 2012, the Company had a net decrease in cash of $229,239.  The Company’s principal sources and uses of funds were as follows:

Cash used in operating activities

The Company provided $392,803 in cash from operating activities for the year ended December 31, 2012 as compared to providing $905,906 of cash for operating activities for the year ended December 31, 2011. This decrease in cash provided by operating activities is primarily attributed to an increase in accounts receivable and a decrease in deferred revenues offset partially by an increase in accounts payable and accrued liabilities.

Cash used in investing activities

Investing activities for the year ended December 31, 2012 used cash of $744,374 as compared to using $40,653 of cash for the year ended December 31, 2011. This increase in cash used is attributed to the increase in purchases of property and equipment, software development costs and intangible assets, including the acquisition of selected assets of HighTower.
 
Cash provided by financing activities

Financing activities for the year ended December 31, 2012 provided cash of $122,332 as compared to using $735,875 of cash for the year ended December 31, 2011. This increase in cash provided by financing activities is attributed to proceeds from the line of credit and as compared to receiving proceeds from the promissory notes and convertible debenture offset by the repayment of convertible debentures during the year ended December 31, 2011.
 
The Company believes that as a result of the growth in business, recent acquisitions, and the availability of its credit line, it has adequate liquidity to fund its operating plans for at least the next twelve months.

There was no significant impact on the Company’s operations as a result of inflation for the year ended December 31, 2012.  

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.
 
 
17


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.

Revenue Recognition

Revenue is recognized when products are shipped, or services are rendered, evidence of a contract exists, the price is fixed or reasonably determinable, and collectability is reasonably assured.

Product Revenue

Software product revenue is recognized when the product is shipped to the customer. The Company treats the software component and the professional services consulting component as two separate arrangements that represent separate units of accounting. The arrangement consideration is allocated to each unit of accounting based upon that unit’s proportion of the fair value.  In a situation where both components are present, software sales revenue is recognized when collectability is reasonably assured and the product is delivered and has stand-alone value based upon vendor specific objective evidence.

Service Revenue

Service revenue is comprised of primarily professional service consulting revenue, maintenance revenue and other ancillary services provided as described below. Professional service revenue is recognized as service time is incurred.

With respect to maintenance services, upon the completion of one year from the date of sale, considered to be the warranty period, the Company offers customers an optional annual software maintenance and support agreement for subsequent one-year periods. Maintenance and support agreements are recorded as deferred revenue and recognized over the respective terms of the agreements, which typically range from three months to one year and are included in service revenue in the Consolidated Statement of Operations

Shipping and handling costs charged to customers are classified as revenue, and the shipping and handling costs incurred are included in cost of sales.

Accounts receivable

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

Intangible Assets

The values assigned to intangible assets are based on an independent valuation. Purchased intangible assets are amortized over the useful lives based on the estimate of the use of economic benefit of the asset using the straight-line amortization method. 

The Company assesses potential impairment of its intangible assets when there is evidence that recent events or changes in circumstances have made recovery of an asset’s carrying value unlikely. Factors the Company considers important, which may cause impairment include, among others, significant changes in the manner of use of the acquired asset, negative industry or economic trends, and significant underperformance relative to historical or projected operating results. 

Off Balance Sheet Arrangements

During fiscal 2012, 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.
 
 
18

 
Item 8. Financial Statements.

Our financial statements are contained in pages F-1 through F-27 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, 2012, and concluded that the disclosure controls and procedures were effective as a whole.
 
(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 December 31, 2012.  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, 2012, 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.
 
 
19

 
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 20, 2013:

Name
 
Age
 
Position
 
Officer and/or Director Since
 
               
Mark Meller
  53  
Chairman, President, Chief Executive Officer, Chief Financial Officer and Director
  2003  
               
Stanley Wunderlich
  62  
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. From December 15, 2004 until September 2009, Mr. Meller was the President, Chief Executive Officer, Chief Financial Officer and Director of MM2 Group, Inc. From August 29, 2005 until August 2006, Mr. Meller was the President, Chief Executive Officer and Chief Financial Officer of iVoice Technology, Inc. From 1988 until 2003, Mr. Meller was Chief Executive Officer of Bristol Townsend and Co., Inc., a New Jersey based consulting firm providing merger and acquisition advisory services to middle market companies. From 1986 to 1988, Mr. Meller was Vice President of Corporate Finance and General Counsel of Crown Capital Group, Inc., a New Jersey based consulting firm providing advisory services for middle market leveraged buy-outs (LBO’s). Prior to 1986, Mr. Meller was a financial consultant and practiced law in New York City. He is a member of the New York State Bar.
 
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, 2012, the Company’s Audit Committee has two members, one of which is independent.

For the year ended December 31, 2012, the Board held no meetings but acted by Unanimous Written Consent 6 times.

Audit Committee

During 2012, the Audit Committee consisted of Mr. Mark Meller, the Company’s Chief Executive Officer and President and Mr. Stanley Wunderlich. The Audit Committee has one independent member 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 2012. The Board of Directors approved an Audit Committee Charter. As of this date, the Audit Committee operates pursuant to this Audit Committee Charter. 
 
 
20


AUDIT COMMITTEE REPORT

The following is the Audit Committee’s report submitted to the Board of Directors for the fiscal year ended December 31, 2012.  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, 2012, 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, 2012, were timely. 
 
 
21


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)
 
2012
 
$
370,489
   
$
0
   
$
0
   
$
0
   
$
370,489
 
President, Chief  Executive Officer, Chief Financial Officer and Director
 
2011
 
$
250,000
   
$
0
   
$
0
   
$
0
   
$
250,000
 

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

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

Pursuant to the Agreement with Mr. Wunderlich, Director, he 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 was in the amount of three thousand dollars ($3,000) and was paid on July 26, 2011. 

Employment Contracts
 
The Company has an Employment Agreement with Mark Meller, President and Chief Executive Officer of the Company, which began on September 15, 2003, was extended on September 1, 2010,  and expires on September 15, 2017. 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. Based on this agreement, Mr. Meller’s salary is $424,431. As of December 31, 2012, Mr. Meller agreed to accept a salary of $370,000 for 2012. 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.
 
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.

 
22


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, 2013 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, 2013 there were a total of 116,950,933 shares of  Common Stock outstanding. Each share of 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 20, 2013, 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.
 
Name and Address (1)
 
Beneficial
Relationship to Company
 
Outstanding
Common Stock
   
Percentage of
Ownership of
Common Stock
(3)
 
                 
Mark Meller
 
Chief Executive Officer, Chief Financial Officer, President and Chairman
   
181,920,437
(2)
   
76.2
%
                     
Stanley Wunderlich
 
Director
   
500,000-
     
-
%
                     
Officers and Directors (2 persons)
 
-
   
182,420,437
     
76.2
%
                     
Jeffrey Roth  (1)          32,015,429       27.4 %
 
(1) Mr. Roth is Chief Executive Officer of SWK, Technologies, Inc., a wholly-owned subsidiary of SilverSun Technologies, Inc.

(2) Includes voting rights of 121,724,440 shares associated with Series B Preferred Stock.

Description of Securities
 
On May 17, 2011, the Board of Directors (the “Board”) of  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” or the “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”).
 
Upon receiving the consent of the Board and the Majority, filed on June 27, 2011, the Company filed 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.
 
 
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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 $.001 per share.  Below is a description of SilverSun Technologies’ outstanding securities, including Class A common stock, Class B common stock, options, warrants and debt.

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 116,950,933 issued and outstanding at March 26, 2013.  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, 2013, 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 $.001 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;
 
 
24


·  
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.
 
As of December 31, 2012, the Company has issued the following shares of Preferred Stock:
 
The Company issued to the each holder of the Notes one (1) share of Series A Convertible Preferred Stock (“Series A Preferred”), 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 into Class A Common Stock equal to 1% of the outstanding shares of Common Stock at the time of conversion. The Company valued the Series A Convertible Preferred Stock at $22,886 representing 1% of the outstanding shares deliverable multiplied by the fair market value of the stock on the date of issuance and recorded as debt discount, which has been amortized to interest expense during 2011. Each one share of Series A Preferred shall entitle the Series A Holder to voting rights equal to 2,666,667 votes of  Common Stock.
 
On January 12, 2012, the Series A Convertible was converted into 2,385,650 shares of Common Stock. As of December 31, 2012, no shares of Series A Convertible Preferred were outstanding.

Series B Preferred Stock

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.

The 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).

On September 23, 2011, SilverSun Technologies, Inc., entered into a Series B preferred stock purchase agreement (the “Preferred Stock Purchase Agreement”) with Mr. Meller (the “Series B Holder”), pursuant to which the Series B Holder was issued one  authorized share of Series B Preferred Stock (“Series B”), par value $0.001 per share.  The Series B Holder was issued one share of Series B as partial consideration for personally guaranteeing repayment of the Notes.

Options and Stock Awards

2004 Stock Incentive Plan

The Company adopted the 2004 Stock Incentive as amended Plan (the “2004 Plan”) which reserves for issuance up to 3,482,000 shares of the Company’s Common Stock in order to attract and retain qualified employees, directors, independent contractors or agents of the Company.  Under the Plan, the Board of Directors (the “Board”), in its discretion may grant stock options (including non-statutory stock options and incentive stock options qualifying under Section 422 of the Code), stock appreciation rights (including free-standing, tandem and limited stock appreciation rights), warrants, dividend equivalents, stock awards, restricted stock, phantom stock, performance shares or other securities or rights that the Board determines to be consistent with the objectives and limitations of the plan  at a price to be equal to or greater than 50% of the fair market value of such shares on the date of grant of such award.    The Board may determine that all or a portion of a payment to a participant under the Plan, whether it is to be made in cash, shares of the Company common stock or a combination thereof, shall be vested at such times and upon such terms as may be selected by it in its sole discretion. The Plan (but not the awards theretofore granted under the Plan) shall terminate on and no awards shall be granted after September 29, 2014.

In May 2012, the Company issued approximately 2,875,000 common stock options from the 2004 Stock Incentive Plan with a weighted average exercise price of $0.16 and an expected life of 5 years.  Approximately, 2,257,000 of the common stock options vest immediately. The remaining 618,000 options shall vest 50% at grant date with the balance vested ratably over a three-year period.
 
 
25

 
2007 Consultant Stock Incentive Plan

The Company adopted the 2007 Consultant Stock Incentive Plan (the “2007 Plan”) to: (i) provide long-term incentives, payment in stock in lieu of cash and rewards to consultants, advisors, attorneys, independent contractors or agents ("Eligible Participants") of the Company; (ii) assist the Company in attracting and retaining independent contractors or agents with experience and/or ability on a basis competitive with industry practices; and (iii) associate the interests of such independent contractors or agents with those of the Company's stockholders.  The Company has reserved 581,800 shares for issuance under this plan. Awards under the Plan may include, but need not be limited to, stock options (including non-statutory stock options and incentive stock options qualifying under Section 422 of the Code), stock appreciation rights (including free-standing, tandem and limited stock appreciation rights), warrants, dividend equivalents, stock awards, restricted stock, phantom stock, performance shares or other securities or rights that the Board determines to be consistent with the objectives and limitations of the Plan. The price shall be equal to or greater than 50% of the fair market value of such shares on the date of grant of such award. The Board shall determine the extent to which awards shall be payable in cash, shares of the Company common stock or any combination thereof.  The Board may determine that all or a portion of a payment to a participant under the Plan, whether it is to be made in cash, shares of the Company common stock or a combination thereof shall be deferred.  Deferrals shall be for such periods and upon such terms as the Board may determine in its sole discretion. The Plan (but not the awards theretofore granted under the Plan) shall terminate on and no awards shall be granted after January 22, 2017. No securities were issued pursuant to this Plan for the year ended December 31, 2012.

2004 Directors’ and Officers’ Stock Incentive Plan

The Company adopted the 2004 Directors’ and Officers’ Stock Incentive Plan (the “2004 D&O Plan”) which reserves for issuance up to 165,600 shares of the Company’s Common Stock in order to provide long-term incentive and rewards to officers and directors of the Company and subsidiaries and to attract and retain qualified employees, directors, independent contractors or agents of the Company.  Awards under the Plan may include, but need not be limited to, stock options (including non-statutory stock options and incentive stock options qualifying under Section 422 of the Code), stock appreciation rights (including free-standing, tandem and limited stock appreciation rights), warrants, dividend equivalents, stock awards, restricted stock, phantom stock, performance shares or other securities or rights that the Board determines to be consistent with the objectives and limitations of the Plan. The price shall be equal to or greater than 50% of the fair market value of such shares on the date of grant of such award. The Board shall determine the extent to which awards shall be payable in cash, shares of the Company common stock or any combination thereof.  The Board may determine that all or a portion of a payment to a participant under the Plan, whether it is to be made in cash, shares of the Company common stock or a combination thereof shall be deferred.  Deferrals shall be for such periods and upon such terms as the Board may determine in its sole discretion. The Plan (but not the awards theretofore granted under the Plan) shall terminate on and no awards shall be granted after September 29, 2014. No securities were issued pursuant to this Plan for the year ended December 31, 2012.

Item 13. Certain Relationships and Related Transactions.

Related Party Notes and Accounts Due

The Company has an Employment Agreement with Mark Meller, President and Chief Executive Officer of the Company, which began on September 15, 2003, was extended on September 1, 2010 and expires on September 15, 2017. 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. Based on this agreement Mr. Meller’s salary is $424,431. As of December 31, 2012, Mr. Meller agreed to accept a salary of $370,000 for 2012. 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

Forgiveness of Debt

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.

Total amounts owed to Mr. Meller as of December 31, 2012 and December 31, 2011, representing unpaid salary and accrued interest totaled $5,942 and $6,355, respectively.
  
On October 19, 2010, the Company borrowed $45,000 in exchange for issuing a Note payable to Mr. Meller. The Note Payable is not collateralized, not convertible, and carries an interest rate of 3% per annum on the unpaid balance. In January 2013, Mr. Meller extended the due date of the Note Payable to January 2014. The outstanding balance at December 31, 2012 and 2011 was $20,000, plus accrued interest of $2,064 and $1,454, respectively.
 
 
26


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, 2012, the Board determined that Mr. Wunderlich is independent.

Item 14. Principal Accountant Fees and Services.

The following table sets forth fees billed to the Company by the Company’s independent auditors for (i) services rendered for the audit of the Company’s annual financial statements and the review of the Company’s quarterly financial statements, (ii) services rendered that are reasonably related to the performance of the audit or review of the Company’s financial statements that are not reported as Audit Fees, and (iii) services rendered in connection with tax preparation, compliance, advice and assistance.

Services
 
2012
   
2011
 
Audit Fees
 
$
55,000
   
$
41,500
 
                 
Audit - Related Fees
   
30,000
(1)    
-
 
                 
Tax fees
 
$
8,000
   
$
18,000
 
                 
All Other Fees
   
-
     
-
 
                 
Total
 
$
93,000
   
$
59,500
 
 
(1)  
Related to  audit of Hightower, Inc.
 
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.
 
 
27

 
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.
 
 
28

 
 
Exhibit No.
 
Description
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 (incorporated herein by reference to Exhibit 10.18 of the Annual Report on Form 10-K for the  period ended December 31, 2011, filed with the SEC on March 29, 2012).
10.19
 
Audit Committee Charter(incorporated herein by reference to Exhibit 10.19 of the Annual Report on Form 10-K for the  period ended December 31, 2011, filed with the SEC on March 29, 2012).
10.20
 
Form of Purchase Agreement, dated June 14, 2012, by and among SWK Technologies, the Company’s wholly-owned subsidiary, Neil Wolf, Esq., not individually, but solely in his capacity as  Trustee-Assignee of the Trust Agreement and Assignment for the Benefit of the Creditors of Hightower, Inc., Hightower, Inc., and the Stockholders of Hightower, Inc. (incorporated by reference to Exhibit 2.1 on the Company’s current report on Form 8-K filed with the commission on June 20, 2012).
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 *
 
32.1 *
 
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
 
 
29

 
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, 2013
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, 2013
Mark Meller
       
         
/s/ Stanley Wunderlich
 
Director
 
March 29, 2013
Stanley Wunderlich
       
 
 
30


PART F/S
 
INDEX TO FINANCIAL STATEMENTS
 
AUDITED FINANCIAL STATEMENTS
 
 
Page (s)
   
  F-2
   
CONSOLIDATED FINANCIAL STATEMENTS
 
   
F-3
   
F-4
   
F-5
   
F-6
   
F-8

 
F-1

 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
SilverSun Technologies, Inc.

We have audited the accompanying consolidated balance sheets of SilverSun Technologies, Inc. and Subsidiaries (the “Company”) as of December 31, 2012 and 2011, and the related consolidated statements of operations, stockholders' deficit, and cash flows for each of the two years in the period ended December 31, 2012.  The Company’s management is responsible for these consolidated financial statements.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with standards established by the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2012 and 2011, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of America.


/s/Friedman LLP
East Hanover, NJ
March 29, 2013
 
 
F-2


SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
 
   
2012
   
2011
 
ASSETS
           
Current assets:
           
Cash and cash equivalents
 
$
4,483
   
$
233,722
 
Accounts receivable, net of allowance for bad debts of $80,000 and $41,000
   
1,509,532
     
881,217
 
Prepaid expenses and other current assets
   
131,520
     
115,024
 
Total current assets
   
1,645,535
     
1,229,963
 
                 
                 
Property, plant and equipment, net
   
250,233
     
137,948
 
Intangible assets, net
   
884,513
     
95,445
 
Deposits and other assets
   
21,996
     
57,921
 
Total assets
 
$
2,802,277
   
$
1,521,277
 
                 
LIABILITIES & STOCKHOLDERS’ DEFICIT
               
Current liabilities:
               
Bank line of credit
   
178,633
     
-
 
Accounts payable and accrued expenses
 
$
1,953,182
   
$
1,260,045
 
Accrued interest
   
12,422
     
7,675
 
Due to related party
   
5,942
     
6,335
 
Convertible promissory note – related party, net of discount of $-0- and  $4,250
   
-
     
46,750
 
Capital  leases
   
88,829
     
64,367
 
Notes payable to related parties
   
20,000
     
20,000
 
Deferred revenue
   
1,357,800
     
1,015,750
 
                 
Total current liabilities
   
3,616,808
     
2,420,922
 
                 
Commitments and Contingencies
               
                 
Stockholders' deficit:
               
  Preferred Stock, $1.00 par value; authorized 1,000,000 shares;
     no shares issued and outstanding
   
-
     
-
 
  Series A Preferred Stock, $1.00 par value; authorized 2 shares
    -0- and 2 shares issued and outstanding
   
-
     
22,886
 
  Series B Preferred Stock, $.001 par value; authorized 1 share
     1 share issued and outstanding
   
1
     
1
 
   Common stock:
               
         Class A – par value $.00001, authorized 750,000,000 shares;
                116,950,933 and 4,456,912 shares issued and outstanding
   
1,170
     
45
 
         Class B – par value $.00001, authorized 50,000,000 shares; -0- issued and outstanding
   
-
     
-
 
   Additional paid-in capital
   
10,716,224
     
9,326,973
 
   Accumulated deficit
   
(11,531,926
)
   
(10,296,756
)
Total SilverSun stockholders' deficit
   
(814,531
)
   
(946,851
)
Non-controlling interest in SWK Technologies, Inc.
   
-
     
47,206
 
                 
Total stockholders' deficit
   
(814,531
)
   
(899,645
)
Total liabilities and stockholders' deficit
 
$
2,802,277
   
$
1,521,277
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-3

 
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 
   
For the Years Ended
 
   
December 31, 2012
   
December 31, 2011
 
             
Revenues:
           
Software product, net
 
$
2,432,187
   
$
1,902,417
 
Service, net
   
10,746,798
     
8,619,663
 
Total revenues, net
   
13,178,985
     
10,522,080
 
                 
Cost of revenues:
               
Product
   
1,173,510
     
969,130
 
Service
   
6,671,375
     
5,055,330
 
Total cost of revenues
   
7,844,885
     
6,024,460
 
                 
Gross profit
   
5,334,100
     
4,497,620
 
                 
Operating expenses:
               
  Selling and marketing expenses
   
2,302,258
     
1,843,824
 
  General and administrative expenses
   
2,876,456
     
2,296,718
 
  Share-based compensation
   
1,136,258
     
-
 
  Depreciation and amortization
   
195,560
     
97,011
 
Total operating expenses
   
6,510,532
     
4,237,553
 
                 
Income (loss) from operations
   
 (1,176,432
)
   
 260,067
 
                 
Other income (expense):
               
  Gain on revaluation of derivatives
   
-
     
362,035
 
  Gain from extinguishment of debt and derivative liability
   
-
     
2,228,939
 
  Gain from bargain purchase
   
17,932
         
  Interest expense, net
   
(76,670
)
   
(142,110
)
Total other income (expense)
   
(58,738
)
   
2,448,864
 
                 
Income (loss) from operations before income taxes
   
(1,235,170
)
   
2,708,931
 
                 
Provision for income taxes
   
 -
     
 -
 
                 
Net income (loss)
   
(1,235,170
)
   
2,708,931
 
                 
Net income attributable to non-controlling
   interest in SWK Technologies Inc.
   
 -
     
 92,383
 
                 
Net income (loss) attributable to SilverSun Technologies, Inc.
 
$
(1,235,170
)
 
$
2,616,548
 
Basic and diluted net income (loss) per share attributable
     to SilverSun Technologies, Inc. shareholders:
   
         
     
         
 
Basic income (loss) per common share
 
$
  (0.01
)
 
$
  0.58
 
Diluted income (loss) per common share
 
 $
  (0.01
 )
 
$
  0.02
 
                 
Weighted average shares outstanding:
               
Basic
   
 115,395,550
     
 4,481,000
 
Diluted
   
115,395,550
     
105,803,000
 

The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-4

 
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
 
   
Series A
Preferred
Stock
   
Series B
Preferred
Stock
   
Common Stock
 Class A
   
Additional
Paid in
   
Accumulated
   
Noncontrolling
Interest in
SWK
Technologies,
   
Total
Stockholders’
 
   
Shares
   
Amount
   
Shares
   
Amount
   
Shares
   
Amount
   
Capital
   
Deficit
   
Inc.
   
Deficit
 
Balance at January 1, 2011
   
-
   
$
-
     
-
   
$
-
     
4,723,119
   
$
47
   
$
7,846,076
   
$
(12,913,304
)
 
$
(45,177
)
 
$
(5,112,358
)
                                                                                 
Return of common stock that was previously issued for services
   
-
     
-
     
-
     
-
     
(276,091
)
   
(3
)
   
(64,997
)
   
-
     
-
     
(65,000
)
Issuance of warrants for services
   
-
     
-
     
-
     
-
     
-
     
-
     
107,398
     
-
     
-
     
107,398
 
Issuance of warrants for services
   
-
     
-
     
-
     
-
     
781
     
-
     
-
     
-
     
-
     
-
 
Additional shares to balance the participating brokers and beneficial shareholders to the terms of the reverse stock split
   
-
     
-
     
-
     
-
     
9,103
     
1
     
(1
)
   
-
     
-
     
-
 
Forgiveness of debt and gain from extinguishment of derivative liability – related party
   
-
     
-
     
-
     
-
     
-
     
-
     
1,438,497
     
-
     
-
     
1,438,497
 
Issuance of Series A Preferred Stock
   
2
     
22,886
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
22,886
 
Issuance of Series B Preferred Stock
   
-
     
-
     
1
     
1
     
-
     
-
     
-
     
-
     
-
     
1
 
Net income
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
2,616,548
     
92,383
     
2,708,931
 
Balance at December 31, 2011
   
2
     
22,886
     
1
     
1
     
4,456,912
   
$
45
   
$
9,326,973
     
(10,296,756
)
   
47,206
   
$
(899,645
)
                                                                                 
Exchange of shares of SWK for shares of SilverSun Technologies, Inc
   
-
     
-
     
-
     
-
     
22,664,678
     
227
     
46,979
     
-
     
(47,206
   
-
 
Conversion of Series A Preferred Stock to common stock
   
(2
)
   
(22,886
)
   
-
     
-
     
2,385,650
     
24
     
22,862
     
-
     
-
     
-
 
Conversion of convertible promissory note to common stock
   
-
     
-
     
-
     
-
     
86,793,693
     
868
     
43,078
     
-
     
-
     
43,946
 
Share-Based Compensation
   
  -
     
  -
     
  -
     
  -
     
-
     
-
     
1,136,258
     
  -
     
-
     
1,136,258
 
Issuance of warrant for services
   
  -
     
  -
     
  -
     
  -
     
-
     
-
     
105,080
     
  -
     
-
     
105,080
 
Issuance of common stock for services
   
-
     
-
     
-
     
-
     
650,000
     
6
     
34,994
     
-
     
-
     
35,000
 
Net loss
   
-
     
-
     
-
     
-
     
-
     
-
     
--
     
(1,235,170
)
   
-
     
(1,235,170
)
                                                                                 
Balance at December 31, 2012
   
-
   
$
-
     
1
   
$
1
     
116,950,933
   
$
1,170
   
$
10,716,224
   
$
(11,531,926
)
 
$
-
   
$
(814,531
)
 
The accompanying notes are an integral part of these consolidated financial statements. 
 
 
F-5

 
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,

   
2012
   
2011
 
Cash flows from operating activities:
           
    Net income (loss)
 
$
(1,235,170
)
 
$
2,708,931
 
    Adjustments to reconcile net loss to net cash   
       used in operating activities:
               
          Depreciation and amortization
   
92,037
     
97,011
 
          Amortization of intangibles
   
103,523
         
          Gain on revaluation of derivative
   
-
     
(362,035
)
          Amortization of debt discount
   
4,250
     
69,637
 
          Provision for bad debts
   
39,000
     
-
 
          Share-based compensation
   
1,136,258
     
-
 
          Gain on extinguishment of debt and derivative liability
   
-
     
(2,228,939
)
          Gain from bargain purchase
   
(17,932
)
   
-
 
          Common stock issued for services
   
35,000
     
80,550
 
          Warrant issued in exchange for services
   
105,080
     
-
 
          Return of shares for services not rendered
   
-
     
(65,000
)
    Changes in certain assets and liabilities:
               
               Accounts receivable
   
(667,315
)
   
(391,937
)
               Prepaid expenses and other assets
   
22,240
     
21,382
 
               Deposits and other assets
   
35,925
     
5,937
 
               Accounts payable and accrued liabilities
   
693,137
     
362,749
 
               Accrued interest
   
4,747
     
25,929
 
               Due to related parties
   
(393
)
   
51,960
 
               Deferred revenues
   
42,416
     
529,731
 
                  Net cash provided by operating activities
   
392,803
     
905,906
 
                 
Cash flows from investing activities:
               
   Acquisition of new business
   
(441,964
)
   
-
 
    Software development costs
   
(198,591
)
   
-
 
   Purchases of equipment
   
(103,819
)
   
(40,653
)
   Net cash used in investing activities
   
(744,374
)
   
(40,653
)
                 
Cash flows from financing activities:
               
   Repayment of notes payable to related parties
   
(7,054
)
   
(25,000
)
   Proceeds from line of credit, net
   
178,633
     
-
 
   Proceeds from convertible promissory note – related party
   
-
     
51,000
 
   Proceeds from promissory notes
   
-
     
550,000
 
   Repayment of promissory notes
   
-
     
(550,000
)
   Repayment of convertible debentures
           
(735,000
)
   Principal payment under capital lease obligations
   
(49,247
)
   
(26,875
)
   Net cash provided by (used in) financing activities
   
122,332
     
(735,875
)
                 
Net (decrease) increase in cash and cash equivalents
   
(229,239
)
   
129,378
 
Cash and cash equivalents, beginning of year
   
233,722
     
104,344
 
                 
Cash and cash equivalents, end of year
 
$
4,483
   
$
233,722
 
                 
Supplemental Schedule of Cash Flow Information::
               
During the year, cash was paid for the following:
               
Income taxes
 
$
-
   
$
-
 
Interest
 
$
66,776,
   
$
15,145
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-6


SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS  (Continued)
 
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

For the Year Ended December 31, 2012:

a)  
The Company converted $43,946 of the Convertible Promissory Note (as defined herein) at a fixed conversion rate of 1,975 shares per $1 for 86,793,693 shares of the Company’s Class A common stock, par value $0.00001 (the “Common Stock”).
 
 
b)  
The Company converted 2 shares of Series A Convertible preferred stock for 2,385,650 shares of Common Stock.
 
 
c)  
The Company bought back their 20% interest in SWK Technologies, Inc. for 22,664,678 shares of Common Stock.

d)
The Company incurred approximately $73,709 in capital lease obligations.
 
For the Year Ended December 31, 2011:

a)  
SilverSun Technologies, Inc (“the Company”) recorded a derivative liability of $105,000 related to a conversion feature embedded in the $51,000 convertible note issued during the period to an executive officer of the Company.  The derivative liability was recorded as debt discount and the excess as an expense on the statement of operations as other income (expense).

b)  
The Company issued warrants to a Company in exchange for financial services to be provided over one year with a fair value of $107,398. The Company amortized over the period of service, and recorded $80,550 through December 31, 2011.

c)  
On June 29, 2011, Mr. Meller forgave outstanding liabilities representing unpaid salary, unpaid expense and auto allowances, and a one-time payment in connection with a previous transaction in the amount of $1,338,967. Such amount is recorded as Additional Paid-In Capital in the accompanying balance sheet.  An additional $99,531 was recorded in Additional Paid-In Capital relating to the Convertible Promissory Note when the conversion price was fixed.

d)
The Company incurred approximately $35,677 in capital lease obligations.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-7

 
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND 2011
 
NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business

SilverSun Technologies, Inc. (the “Company”) is an information technology company, and a value added reseller and master developer for Sage Software’s Sage100/500 and ERP X3 financial and accounting software as well as the publisher of 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. In June 2011, the Company changed its name from Trey Resources, Inc. 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 2012 the Company completed the purchase of selected assets and obligations of HighTower, Inc., a leading Chicago-based reseller of Sage software applications and a publisher of proprietary business management enhancements.


NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements include the accounts of SilverSun Technologies, Inc. (the “Company”) and its majority owned subsidiaries, SWK Technologies, Inc. and BTSG Acquisition Corp. These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. All significant inter-company transactions and accounts have been eliminated in consolidation.
 
Noncontrolling Interest

Noncontrolling interest represents third party ownership in the net assets of our consolidated subsidiaries. For financial reporting purposes, the assets and liabilities of our majority owned subsidiaries are consolidated with those of our own, with any third party investor’s interest shown as noncontrolling interest.

On May 6, 2009, the Company sold twenty-five (25) newly issued shares or 20% of the stock of SWK Technologies, Inc. (“SWK”), a subsidiary of SilverSun Technologies, Inc., for a purchase price of $150,000 to the President of SWK.

On January 12, 2012, SilverSun Technologies, Inc. entered into a share exchange agreement (the “Agreement”) with certain shareholders and the President (the “SWK Shareholders”) of SWK Technologies, Inc.  Pursuant to the terms of the Agreement, the SWK Shareholders exchanged an aggregate of 25 shares of SWK to the Company for a total of 22,664,678 shares (the “Exchange Shares”) of the Company’s common stock (the “Exchange”). The shares had a fair value of approximately $612,000 ($0.027 per share) at the time of exchange. The transaction was recorded as an equity transaction.  SWK is now a wholly-owned subsidiary of the Company.

Use of Estimates

 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates. The most significant estimates include:

1.                 Revenue recognition of software sales
2.                 Allowance for doubtful accounts
3.                 Fair market value of share based payments and other equity instruments
4.                 Valuation of intangible assets
 
 
F-8


SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND 2011
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 
Revenue Recognition

Revenue is recognized when products are shipped, or services are rendered, evidence of a contract exists, the price is fixed or reasonably determinable, and collectability is reasonably assured.

Product Revenue
Software product revenue is recognized when the product is shipped to the customer. The Company treats the software component and the professional services consulting component as two separate arrangements that represent separate units of accounting. The arrangement consideration is allocated to each unit of accounting based upon that unit’s proportion of the fair value.  In a situation where both components are present, software sales revenue is recognized when collectability is reasonably assured and the product is delivered and has stand-alone value based upon vendor specific objective evidence.

Service Revenue
Service revenue is comprised of primarily professional service consulting revenue, maintenance revenue and other ancillary services provided as described below. Professional service revenue is recognized as service time is incurred.

With respect to maintenance services, upon the completion of one year from the date of sale, considered to be the warranty period, the Company offers customers an optional annual software maintenance and support agreement for subsequent one-year periods. Maintenance and support agreements are recorded as deferred revenue and recognized over the respective terms of the agreements, which typically range from three months to one year and are included in services revenue in the Consolidated Statements of Operations

Shipping and handling costs charged to customers are classified as revenue, and the shipping and handling costs incurred are included in cost of sales.

 
Cash and Cash Equivalents

 
The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Company maintains cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to federally insured limits. At times balances may exceed FDIC insured limits. The Company has not experienced any losses in such accounts.
 
 
Concentration of Credit Risk

For the years ended December 31, 2012 and 2011, our top ten customers represented approximately 17% and 31%, respectively, of our total revenues of approximately $2,262,000 and $3,211,000. The Company does not rely on any one specific customer for any significant portion of our revenue base.

For the years ended December 31, 2012 and 2011, purchases from one supplier were approximately 47% and 22%, respectively, of the Company’s total cost of revenue.

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade accounts receivable and cash and cash equivalents.  As of December 31, 2012 the Company believes it has no significant risk related to its concentration of accounts receivable.
 
Accounts Receivable

Accounts receivable consist primarily of invoices for maintenance and professional services. Full payment for software ordered by customers is due in advance of ordering from the software supplier. Payments for maintenance and support plan renewals are due before the beginning of the maintenance period. Terms under our professional service agreements are generally 50% due in advance and the balance on completion of the services.

The Company maintains an allowance estimated by considering a number of factors, including the length of time the amounts are past due, the Company’s previous loss history, the customer’s current ability to pay its obligations and the condition of the general economy and the industry as a whole.
 
 
F-9

 
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND 2011

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Property and Equipment

Property and equipment is stated at cost, net of accumulated depreciation.  Depreciation is computed using the straight-line method based upon the estimated useful lives of the assets, generally five to seven years.  Maintenance and repairs that do not materially add to the value of the equipment nor appreciably prolong its life are charged to expense as incurred.

When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is included in the Statements of Operations.

Deferred Revenues

Deferred revenues consist of maintenance service, customer support services, including telephone support and deposits for future consulting services which will be earned as services are performed over the contractual or stated period, which generally ranges from three to twelve months.

Deferred Income Taxes

Deferred income taxes reflects the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as operating loss, capital loss and tax credit carryforwards. Deferred tax assets and liabilities are classified as current or non-current based on the classification of the related assets or liabilities for financial reporting, or according to the expected reversal dates of the specific temporary differences, if not related to an asset or liability for financial reporting. Valuation allowances are established against deferred tax assets if it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates or laws is recognized in operations in the period that includes the enactment date.

Income Tax Uncertainties

The calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax regulations. The Company recognizes liabilities for uncertain tax positions based on the two-step process prescribed by applicable accounting principles. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step requires the Company to estimate and measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as this requires the Company to determine the probability of various possible outcomes. The Company reevaluates these uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and new audit activity. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision in the period. The Company recognizes interest and penalties as incurred in finance income (expense), net in the Consolidated Statements of Operations.

There were no liabilities for uncertain tax positions at December 31, 2012 and 2011.

 
F-10

 
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND 2011
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

               Fair Value Measurement
 
The Company adopted the provisions of the accounting pronouncement which defines fair value, establishes a framework for measuring fair value and enhances fair value measurement disclosure. Under the provisions of the pronouncement, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.
 
The pronouncement establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use on unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is described below:
 
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
 
Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
 
Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

The Company’s current financial assets and liabilities approximate fair value due to their short term nature and include cash, accounts receivable, accounts payable, capital leases and line of credit.

Intangible Assets

The values assigned to intangible assets are based on an independent valuation. Purchased intangible assets are amortized over the useful lives of the asset using the straight-line amortization method. 

The Company assesses potential impairment of its intangible assets when there is evidence that recent events or changes in circumstances have made recovery of an asset’s carrying value unlikely. Factors the Company considers important, which may cause impairment include, among others, significant changes in the manner of use of the acquired asset, negative industry or economic trends, and significant underperformance relative to historical or projected operating results. 

Long-Lived Assets

Long-lived assets are reviewed for impairment when circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future net cash flows estimated by the Company to be generated by such assets. If such assets are considered to be impaired, the impairment to be recognized is the amount by which the carrying amount of the assets exceeds the fair value of the assets. No impairment losses were identified or recorded in the years ended December 31, 2012 and 2011.

Stock-Based Compensation

The Company accounts for stock-based awards to employees in accordance with applicable accounting principles, which requires compensation expense related to share-based transactions, including employee stock options, to be measured and recognized in the financial statements based on a determination of the fair value of the stock options. The grant date fair value is determined using the Black-Scholes-Merton (“Black-Scholes”) pricing model. For all employee stock options, the Company recognizes expense over the requisite service period on a straight-line basis over the employee’s requisite service period (generally the vesting period of the equity grant). The Company’s option pricing model requires the input of highly subjective assumptions, including the expected stock price volatility, expected term, and forfeiture rate. Any changes in these highly subjective assumptions significantly impact stock-based compensation expense.
 
 
F-11

 
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND 2011
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Earnings per Share

The Company’s basic income (loss) per common share is based on net income (loss) for the relevant period, divided by the weighted average number of common shares outstanding during the period.  Diluted income per common share is based on net income, divided by the weighted average number of common shares outstanding during the period, including common share equivalents, such as outstanding stock options and warrants to the extent they are dilutive. Diluted loss per share does not include common stock equivalents, as these shares would have an anti-dilutive effect.

 The computation of EPS is approximately as follows:
 
   
Year Ended
December 31, 2012
   
Year Ended
December 31, 2011
 
Basic net income (loss) per share:
           
  Net income (loss) attributable to common
       Stockholders
 
$
(1,235,170
)
 
$
2,616,548
 
  Weighted-average common shares outstanding
   
115,395,550
     
4,481,000
 
  Basic net income (loss) per share attributable to
     common stockholders
 
$
(0.01
)
 
$
0.58
 
Diluted net income (loss) per share:
               
  Net income (loss) attributable to common
        Stockholders
 
$
(1,235,170
)
 
$
2,616,548
 
  Weighted-average common shares outstanding
   
115,395,550
     
4,481,000
 
  Incremental shares attributable to warrants and
        convertible promissory note
   
-
     
101,322,000
 
  Total adjusted weighted-average shares
   
115,395,550
     
105,803,000
 
  Diluted net income (loss) per share attributable to
        common stockholders
 
$
(0.01
)
 
$
0.02
 

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation. The reclassifications have had no effect on the financial position, operations or cash flows for the year ended December 31, 2011.

Recent Accounting Pronouncements

No recently issued accounting pronouncements had or are expected to have a material impact on the Company’s consolidated financial statements.

NOTE 3 – PROPERTY AND EQUIPMENT

Property and equipment is summarized as follows:

   
December 31, 2012
   
December 31, 2011
 
Leasehold improvements
 
$
30,557
   
$
30,557
 
Equipment, furniture and fixtures
   
904,928
     
700,606
 
     
935,485
     
731,163
 
Less: Accumulated depreciation
   
(685,252
)
   
(593,215
)
                 
 Property and equipment, net
 
$
250,233
   
$
137,948
 

Depreciation and amortization expense for the years ended December 31, 2012 and 2011 was $92,038 and $95,003.
 
 
F-12

 
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND 2011
 
NOTE 4 – BUSINESS COMBINATION

In June 2012, the Company’s wholly-owned subsidiary, SWK Technologies, Inc., acquired certain assets of HighTower Inc. for total consideration of $441,964 in cash  and noncash assumption of deferred revenue obligation of $299,634. Based on an independent valuation, the purchase price was allocated to the tangible and identifiable intangible assets acquired and liabilities according to their respective estimated fair values. The following summarizes the purchase price allocation:
 
Current assets
 
$
38,736
 
Long-lived assets
   
26,794
 
Bargain purchase gain
   
(17,932
)
Intangible assets
   
694,000
 
Deferred maintenance liability
   
(299,634
)
         
Fair value of net assets acquired
 
$
459,896
 
       
 
Cash paid for acquisition
   
441,964
 
Bargain purchase gain
   
17,932
 
         
Total purchase price
 
$
459,896
 
 
Intangible assets acquired are primarily made up of a customer list acquired and proprietary technology. Acquisition costs were approximately $46,000, which are included in general and administrative expenses.

The Company’s consolidated financial statements for the year ended December 31, 2012 include the results of HighTower since date of acquisition. The following unaudited pro forma information assumes the acquisition occurred on January1, but does not purport to present what the Company’s actual results would have been had the acquisition actually occurred on January 1, 2011, nor is the financial information indicative of the results of future operations.  The unaudited pro forma financial information includes the depreciation and amortization expense related to the acquisition.
 
   
Pro – Forma
 
   
Year Ended
December 31, 2012
   
Year Ended
December 31, 2011
 
Total revenue, net
 
$
13,773,967
   
$
13,887,774,
 
Cost of revenues
   
8,039,161
     
7,138,618
 
Operating expenses
   
7,008,124
     
7,063,752
 
Other expense (income)
   
56,635
     
(2,526,138
)
Income (loss) before taxes
   
(1,235,170
)
   
2,161,542
 
Net income (loss)
 
$
(1,329,953
)
 
$
2,161,542
 
Basic income (loss) per common share
 
$
(0.01
)
 
$
0.48
 
Diluted income (loss) per common share
 
$
(0.01
)
 
$
0.02
 
 
For the year ended December 31, 2012, the HighTower operations contributed approximately $461,647 in net income, which consisted of approximately $1,145,319 in revenues and $683,672 in expenses.   These revenues were generated in combination with HighTower and SWK personnel, and likely would not have been achieved if HighTower was a standalone business.
 
 
F-13

 
SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND 2011

NOTE 5 – INTANGIBLE ASSETS

Intangible assets consist of intellectual property and customer lists acquired and are carried at cost less accumulated amortization. Amortization is computed using the straight-line method over the estimated useful lives.

The components of intangible assets are as follows:
 
   
December 31, 2012
   
December 31, 2011
   
Estimated Useful Lives
 
Proprietary developed software
 
$
294,036
   
$
95,445
     
5
 
Intellectual property, customer list, and acquired contracts
   
694,000
     
-0-
     
5
 
                         
Total intangible assets
 
$
988,036
   
$
95,445
         
Less: accumulated amortization
   
103,523
     
-0-
         
   
$
884,513
   
$
95,445
         
 
The Company expects amortization expense to approximate the following:
 
    Amortization  
       
2013   $ 197,607  
2014     197,607  
2015     197,607  
2016      197,607  
2017      94,085  
         
Total    $ 884,513  

NOTE 6 – INCOME TAXES

Significant components of the Company's deferred tax assets and liabilities are summarized as follows:

   
December 31,
   
December 31,
 
   
2012
   
2011