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What changed in QXO, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of QXO, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+289 added−175 removedSource: 10-K (2024-03-14) vs 10-K (2023-02-28)

Top changes in QXO, Inc.'s 2023 10-K

289 paragraphs added · 175 removed · 76 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

16 edited+155 added−39 removed103 unchanged
Biggest changeOn January 22, 2022, entered into an agreement to acquire certain assets of NEO3, LLC (“NEO3”), an Ohio-based company related to its Sage 100 and Acumatica operations. 12 Table of Contents Recent Events – Rhodium Merger Agreement On September 29, 2022, SilverSun Technologies, Inc., a Delaware corporation (“SilverSun” or the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, Rhodium Enterprises Acquisition Corp., a Delaware corporation and direct wholly owned subsidiary of the Company (“Merger Sub I”), Rhodium Enterprises Acquisition LLC, a Delaware limited liability company and direct wholly owned subsidiary of the Company (“Merger Sub II”), and Rhodium Enterprises, Inc., a Delaware corporation (“Rhodium”).
Biggest changeOn January 22, 2022, entered into an agreement to acquire certain assets of NEO3, LLC (“NEO3”), an Ohio-based company related to its Sage 100 and Acumatica operations.
On January 1, 2022, the Company entered into an Asset Purchase Agreement with Dynamic Tech Services, Inc (DTS”), a Georgia corporation (“DTS”) pursuant to which SWK acquired from DTS certain assets related to the component of DTS’ operations devoted to selling and supporting Acumatica Cloud Enterprise Resource Planning solutions.
On January 1, 2022, SWK entered into an Asset Purchase Agreement with Dynamic Tech Services, Inc (DTS”), a Georgia corporation (“DTS”) pursuant to which SWK acquired from DTS certain assets related to the component of DTS’ operations devoted to selling and supporting Acumatica Cloud Enterprise Resource Planning solutions.
On May 31, 2018, Secure Cloud Services entered into an Asset Purchase Agreement with Nellnube, Inc. (“Nellnube”) an Oregon based application hosting provider. In May 2018, the Company formed a wholly owned subsidiary, Critical Cyber Defense Corp. (“CCD”), a Nevada corporation, for the purpose of providing cyber defense products and services.
On May 31, 2018, Secure Cloud Services entered into an Asset Purchase Agreement with Nellnube, Inc. (“Nellnube”) an Oregon based application hosting provider. In May 2018, the Company formed a wholly owned subsidiary, Critical Cyber Defense Corp. (“CCDC”), a Nevada corporation, for the purpose of providing cyber defense products and services.
In addition to the strategic geographic benefits of this acquisition, it has provided additional revenues from the approximately 250 additional customers. On July 6, 2015 SWK entered into an Asset Purchase Agreement with ProductiveTech, Inc. (“PTI”), a New Jersey managed IT service provider.corporation.
In addition to the strategic geographic benefits of this acquisition, it has provided additional revenues from the approximately 250 additional customers. On July 6, 2015, SWK entered into an Asset Purchase Agreement with Productive Tech, Inc. (“PTI”), a New Jersey managed IT service provider. corporation.
For the years ended December 31, 2022 and 2021, purchases from one supplier through a “channel partner” agreement were approximately 15% and 13% respectively. This channel partner agreement is for a one-year term and automatically renews for an additional one-year term on the anniversary of the agreements effective date.
For the years ended December 31, 2023 and 2022, purchases from one supplier through a “channel partner” agreement were approximately 16% and 15% respectively. This channel partner agreement is for a one-year term and automatically renews for an additional one-year term on the anniversary of the agreements effective date.
For the years ended December 31, 2022 and 2021, the top ten customers accounted for 7% ($3,147,258) and 9% ($3,644,319), respectively, of total revenues. Generally, we do not rely on any one specific customer for any significant portion of our revenue base. No single customer accounted for ten percent or more of our consolidated revenues base.
For the years ended December 31, 2023 and 2022, the top ten customers accounted for 9% ($4,869,634) and 7% ($3,147,258), respectively, of total revenues. Generally, we do not rely on any one specific customer for any significant portion of our revenue base. No single customer accounted for ten percent or more of our consolidated revenues base.
Our future success depends in significant part upon the continued services of our key sales, technical, and senior management personnel and our ability to attract and retain highly qualified sales, technical, and managerial personnel. None of our employees are represented by a collective bargaining agreement and we have never experienced a work stoppage.
SilverSun’s future success depends in significant part upon the continued services of its key sales, technical, and senior management personnel and its ability to attract and retain highly qualified sales, technical, and managerial personnel. None of SilverSun’s employees are represented by a collective bargaining agreement and SilverSun Holdings has never experienced a work stoppage.
We believe we compete favorably with our competitors on the basis of these factors. 10 Table of Contents Human Capital As of February 6, 2022, we had approximately 172 full time employees with 45 of our employees engaged in sales and marketing activities, 97 employees are engaged in service fulfillment, and 30 employees performing administrative functions.
We believe we compete favorably with our competitors on the basis of these factors. 10 Table of Contents Human Capital As of January 31, 2024, we had approximately 195 full time employees with 48 of our employees engaged in sales and marketing activities, 108 employees engaged in service fulfillment, and 39 employees performing administrative functions.
The Separation Agreement provides that SilverSun Holdings will indemnify SilverSun following the Distribution for any obligations and liabilities related to or arising from the SilverSun Holdings’ business, on the one hand, and SilverSun and its wholly owned subsidiary, CCDC, on the other hand, prior to the date of Distribution.
The Separation Agreement provides that SilverSun Holdings will indemnify SilverSun following the Distribution for any obligations and liabilities related to or arising from the SilverSun Holdings’ obligations and liabilities related to or arising from its respective businesses.
In the Distribution, SilverSun stockholders of record on the Dividend and Distribution Record Date will receive shares of SilverSun Holdings common stock on a pro rata basis.
On the Distribution Date, SilverSun will distribute to its stockholders that hold SilverSun common stock as of the Record Date of all of the issued and outstanding shares of SilverSun Holdings common stock on a pro rata basis.
Accordingly, each holder of SilverSun common stock as of the Dividend and Distribution Record Date will receive one share of SilverSun Holdings common stock for every share of SilverSun common stock held by such holder immediately prior to the Reverse Stock Split.
In addition, at the Effective Time on the Distribution Date, each holder of SilverSun common stock as of the Record Date will receive eight shares of SilverSun Holdings common stock for every share of SilverSun common stock held as of the close of business on the Record Date by such holder of SilverSun common stock as of the Record Date.
The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0030. The SEC maintains an Internet website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
We do not intend our website address to be an active link or to otherwise incorporate by reference the contents of the website into this Report. The SEC maintains an Internet website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
In addition, SilverSun has the right in its sole and absolute discretion to determine the date and terms of the Distribution and will have the right, at any time until completion of the Distribution, to determine to abandon or modify the Distribution and to terminate the Separation Agreement. 17 Table of Contents In addition, the Separation Agreement governs the treatment of indemnification, insurance, and litigation responsibility and management of SilverSun Holdings and SilverSun after the date of Distribution.
No fractional shares of SilverSun Holdings common stock will be issued. The Separation Agreement sets forth the terms and conditions regarding the Separation and the Distribution. In addition, the Separation Agreement governs the treatment of indemnification, insurance, and litigation responsibility and management of SilverSun Holdings and SilverSun after the date of Distribution.
Prior to the effectiveness of the Form 10, SilverSun will contribute all of the issued and outstanding common stock of its wholly owned subsidiaries, SWK and SCS, to SWK Holdings (the “Contribution”).
Plan of Reorganization Prior to Closing, SilverSun will contribute to SilverSun Holdings all of the issued and outstanding stock of SWK, SCS, and CCDC to SilverSun Holdings resulting in SWK, SCS and CCDC being direct wholly owned subsidiaries of SilverSun Holdings and SWK Technologies Canada, Inc., an Ontario corporation, which is currently owned by SWK and at the time of such Contribution will continue being owned by SWK, being an indirect wholly owned subsidiary of SilverSun Holdings.
The proposed Mergers are expected to close as soon as possible following regulatory approval, subject to the receipt of any applicable regulatory approvals, the approval of SilverSun's and Rhodium's respective stockholders, and other customary closing conditions.
The transactions are also subject to the receipt of necessary antitrust approvals and the satisfaction of other customary closing conditions.
The holders of shares of SilverSun Class A common stock and Class B common stock will be entitled to one vote for each share of Class A common stock and Class B common stock, respectively, held of record on all matters on which stockholders are entitled to vote generally.
On the Distribution Date and effective as of the Effective Time, SilverSun will distribute all of the issued and outstanding shares of SilverSun Holdings common stock owned by it to the SilverSun stockholders as of the Record Date based on the distribution ratio of eight shares of SilverSun Holdings common stock for every one share of SilverSun common stock held by such holder of SilverSun common stock as of the Record Date.
Removed
Upon the terms and subject to the conditions set forth in the Merger Agreement, among other things, (i) Merger Sub I shall be merged with and into Rhodium (the “First Merger”) in accordance with Delaware General Corporation Law (the “DGCL”).
Added
On November 13, 2023, SWK entered into an Asset Purchase Agreement with JCS Computer Resource Corporation (“JCS”), an Illinois corporation pursuant to which SWK acquired from JCS certain assets (the “ Acquired Assets ”) related to the component of JCS’ business devoted to being a value added reseller of Sage 100, Sage 50, and Quickbooks software, together with ancillary consulting services related thereto.
Removed
As a result of the First Merger, Merger Sub I shall cease to exist, and Rhodium shall continue as the surviving corporation of the First Merger (the “First Surviving Company”), and (ii) immediately following the First Merger, Rhodium shall be merged with and into Merger Sub II (the “Second Merger” and together with the First Merger, the “Mergers”) in accordance with the DGCL and the Delaware Limited Liability Company Act (“DLLCA”).
Added
On November 13, 2023, SWK entered into an Asset Purchase Agreement with JCS Computer Resource Corporation (“JCS”), an Illinois corporation pursuant to which SWK acquired from JCS certain assets (the “ Acquired Assets ”) related to the component of JCS’ business devoted to being a value-added reseller of Sage 100, Sage 50, and QuickBooks software, together with ancillary consulting services related thereto. 12 Table of Contents Recent Events – Rhodium On September 29, 2022, SilverSun entered into a definitive agreement and plan of merger (the “ Rhodium Merger Agreement ”) by and among SilverSun, Rhodium Enterprises Acquisition Corp, Rhodium Enterprises Acquisition LLC and Rhodium Enterprises, Inc., an industrial-scale digital asset technology company utilizing proprietary technologies to mine bitcoin.
Removed
As a result of the Second Merger, Rhodium shall cease to exist, and Merger Sub II shall continue as the surviving company of the Second Merger (the “Surviving Company”) and as a direct, wholly owned subsidiary of SilverSun which will operate the pre-Merger business of Rhodium through its management of Rhodium Technologies LLC, a Delaware limited liability company (“Technologies”).
Added
On October 13, 2023, SilverSun terminated the Rhodium Merger Agreement.
Removed
Upon consummation of the Mergers, SilverSun will be structured as an umbrella partnership C-corporation and will have two classes of common stock outstanding, the SilverSun Class A common stock and the SilverSun Class B common stock.
Added
Recent Events – Jacobs Private Equity II, LLC ( “ JPE ” ) On December 3, 2023, SilverSun entered into an Investment Agreement (as it may be amended or supplemented, the “ Investment Agreement ”), with Jacobs Private Equity II, LLC, a Delaware limited liability company (“ JPE ”), and the other investors party thereto (the “ Other Investors ,” and together with JPE, the “ Investors ”), providing for an aggregate investment by the Investors of $1,000,000,000 in cash in SilverSun, including $900,000,000 from JPE (the “ Equity Investment ”).
Removed
The SilverSun legacy stockholders and option holders (collectively, the “SilverSun Legacy Stockholders”) will retain approximately 6.22% of the outstanding SilverSun Class A common stock (on a fully diluted basis) which, following the Mergers will be approximately 3.2% of the outstanding SilverSun common stock.
Added
The Investment Agreement has been unanimously approved by the SilverSun board of directors.
Removed
The Rhodium legacy stockholders and equity holders (collectively, the “Rhodium Legacy Stockholders”) will receive approximately 93.78% of the SilverSun Class A common stock (on a fully diluted basis) which, following the Mergers, will be approximately 96.8% of the SilverSun common stock.
Added
Following the closing (the “ Closing ”) of the Equity Investment (together with all of the other transactions contemplated by the Investment Agreement), JPE will become the controlling stockholder of SilverSun, and Brad Jacobs, the Managing Member of JPE, will become Chairman of the SilverSun board of directors and Chief Executive Officer of SilverSun.
Removed
Imperium Investment Holdings LLC, a Wyoming limited liability company and the existing holder of 100% of Rhodium Class B common stock will hold 100% of the SilverSun Class B common stock following the consummation of the Mergers representing approximately 49% of the voting power of the combined company.
Added
Following the Closing, SilverSun intends to pursue a business strategy of creating a tech-forward leader in the building products distribution industry. After spinning off the existing SilverSun business as described below, the remaining company, which will be renamed QXO, Inc., will be a standalone platform for acquisitions and operations in the building products distribution industry.
Removed
Upon consummation of the Mergers, SilverSun will become the managing member of Technologies.
Added
At least two days prior to the Closing, SilverSun will amend and restate its certificate of incorporation (the “ Charter Amendment ”) or the “Fifth Amended and Restated Certificate of Incorporation”) to, among other things, effect an 8:1 reverse stock split (the “ Reverse Stock Split ”) with respect to SilverSun’s common stock, par value $0.00001 per share (“ SilverSun common stock ”).
Removed
The parties to the Merger Agreement have agreed that for all purposes of the Merger Agreement: (i) the agreed pro forma net equity value of SilverSun after giving effect to the Mergers is $671,875,172 (the “Pro Forma Valuation”), (ii) based on such Pro Forma Valuation, the agreed value of the consideration to be received by the Rhodium Legacy Stockholders is $650,375,000 (the “Rhodium Valuation”) and the agreed value attributable to the SilverSun Legacy Stockholders is $21,500,172, and (iii) the holders of Rhodium’s simple agreements for future equity (“Rhodium SAFEs”) outstanding immediately prior to the First Effective Time shall receive SilverSun Class A common stock at the effective time of the First Merger based on the Rhodium Valuation.
Added
Upon the Closing and giving effect to the Reverse Stock Split, SilverSun will issue to the Investors, in the aggregate: (a) 1,000,000 shares of Convertible Perpetual Preferred Stock of SilverSun (the “ Convertible Preferred Stock ”) that, in the aggregate, will be convertible into approximately 219 million shares of SilverSun common stock at an initial conversion price of $4.566 per share (equivalent to $0.571 per share pre-Reverse Stock Split), subject to customary anti-dilution adjustments; and (b) warrants to purchase an additional approximately 219 million shares of SilverSun common stock (the “ Warrants ,” and together with the Convertible Preferred Stock, the “ Securities ”) at initial exercise prices of $4.566 per share (equivalent to $0.571 per share pre-Reverse Stock Split) with respect to 50% of the Warrants, $6.849 per share (equivalent to $0.856 per share pre-Reverse Stock Split) with respect to 25% of the Warrants, and $13.698 per share (equivalent to $1.712 per share pre-Reverse Stock Split) with respect to the remaining 25% of the Warrants, in each case subject to customary anti-dilution adjustments.
Removed
Following the Mergers, SilverSun’s Class A common stock shall be listed on The Nasdaq Stock Market LLC (“Nasdaq”) and SilverSun shall be renamed Rhodium Enterprises, Inc.
Added
Following the Closing, the Investors will own approximately 99.85% of SilverSun common stock on an as-converted, as-exercised basis. The Convertible Preferred Stock will pay quarterly cash dividends equal to the greater of (a) the as-converted dividends on the underlying Company common stock for the relevant quarter and (b) 9% of the then-applicable liquidation preference per annum.
Removed
In connection with the Mergers and pursuant to the terms of the Merger Agreement: • subject to stockholder approval, SilverSun will, prior to the effective time of the First Merger, file an Amended and Restated Certificate of Incorporation to, among other things, change its name to “Rhodium Enterprises, Inc.” or such other name agreed to by Rhodium and SilverSun, set forth the number of authorized shares of SilverSun Class A common stock and SilverSun Class B common stock and set forth the rights and preferences of such shares of SilverSun Class A common stock and SilverSun Class B common stock, remove provisions that are no longer applicable following the completion of the Mergers, cancel the designation of the Series A Preferred Stock, par value $0.001 per share, and effect, at the discretion of the SilverSun Board, a reverse stock split at a ratio to be determined (the “Reverse Stock Split”); • prior to the effective time of the Second Merger and immediately following the Reverse Stock Split, by virtue of filing the Amended and Restated Certificate of Incorporation and without any additional action on the part of any SilverSun entity, Rhodium or the holders of any securities of SilverSun or Rhodium, including holders of SilverSun common stock, each share of SilverSun common stock issued and outstanding immediately prior to the filing of the Amended and Restated Certificate of Incorporation will be automatically be converted into one validly issued, fully paid and nonassessable share of SilverSun Class A common stock; • at the effective time of the First Merger, by virtue of the First Merger, each share of Rhodium Class A common stock issued and outstanding immediately prior to the effective time of the First Merger (other than any dissenting shares or the Excluded Rhodium Shares (as such term is defined below)) will automatically be converted into the right to receive a number of shares of SilverSun Class A common stock equal to the Rhodium Class A Exchange Ratio (as such term is defined in the Merger Agreement); 13 Table of Contents • each share of Rhodium Class B common stock issued and outstanding immediately prior to the effective time of the First Merger (other than any dissenting shares or the Excluded Rhodium Shares) will automatically be converted into the right to receive a number of shares of SilverSun Class B common stock equal to the Rhodium Class B Exchange Ratio (as such term is defined in the Merger Agreement); • each Rhodium warrant that is outstanding and unexercised as of immediately prior to the First Effective Time will be converted into and become a warrant to purchase SilverSun Class A common stock and SilverSun will assume each such Rhodium warrant in accordance with its terms; • each holder of a Rhodium Simple Agreement for Future Equity (“SAFE”) that is outstanding as of immediately prior to the effective time of the First Merger will, at the closing, receive a certain number of validly issued, fully paid and nonassessable shares of SilverSun Class A common stock equal to the Purchase Amount (as such term is defined in the Merger Agreement) divided by the per share price implied by the Rhodium Valuation (as such term is defined in the Merger Agreement); • each share of Rhodium common stock held in the treasury of Rhodium, owned by Rhodium or any of its direct or indirect wholly owned subsidiaries or by SilverSun or any of its affiliates at the effective time of the First Merger (collectively, the “ Excluded Rhodium Shares ”) if any, will be cancelled automatically and will cease to exist, and no consideration will be paid for those Excluded Rhodium Shares; • each Rhodium restricted stock unit (“RSU”) that is a vested will, as of the effective time of the First Merger , be automatically cancelled without any action on the part of any holder thereof in consideration for the right to receive a number of shares of SilverSun Class A common stock equal to the product obtained by multiplying (x) the total number of shares of Rhodium Class A common stock subject to such vested RSU immediately prior to the effective time of the First Merger by (y) the Rhodium Class A Exchange Ratio (as such term is defined in the Merger Agreement).
Added
Accrued and unpaid dividends for any quarter will accrete to liquidation preference for all purposes.
Removed
Each Rhodium RSU that is outstanding immediately prior to the effective time of the First Merger and that is not a vested RSU will, as of the effective time of the First Merger , automatically and without any action on the part of the holder thereof, be converted into a restricted stock unit award with respect to a number of shares of SilverSun Class A common stock equal to the product obtained by multiplying (x) the total number of shares of Rhodium Class A common stock subject to such unvested RSU immediately prior to the effective time of the First Merger by (y) the Rhodium Class A Exchange Ratio (each, a “ Rhodium Adjusted RSU Award ”).
Added
The Convertible Preferred Stock will not be redeemable and will vote together with the Company’s common stock on an as-converted basis on all matters, except as otherwise required by law, and separately as a class with respect to certain matters implicating the rights of holders of shares of Convertible Preferred Stock.
Removed
Each such Rhodium Adjusted RSU Award will continue to have, and will be subject to, the same terms and conditions (including vesting and settlement terms) as applied to the corresponding unvested RSU immediately prior to the effective time of the First Merger; • each SilverSun stock option that is outstanding immediately prior to the effective time of the Second Merger but following the Reverse Stock Split will (A) if the exercise price of such SilverSun stock option is equal to or greater than the Per Share SilverSun Value (as defined below), terminate and be cancelled as of immediately prior to the effective time of the Second Merger , without any consideration being payable in respect of each such SilverSun stock option, and have no further force or effect, and (B) if the exercise price of such SilverSun stock option is less than the Per Share SilverSun Value, (i) become fully vested as of immediately prior to the effective time of the Second Merger , (ii) be converted into an option award with respect to a number of shares of SilverSun Class A common stock equal to the total number of shares of SilverSun common stock subject to such SilverSun stock option immediately prior to the effective time of the Second Merger but following the Reverse Stock Split and (iii) shall automatically expire on the 90th th day following the date of the closing.
Added
The terms of the Convertible Preferred Stock are more fully set forth in Exhibit A to the Investment Agreement filed herewith.
Removed
Following the effective time of the Second Merger , (i) no cancelled SilverSun stock option that was outstanding immediately prior to the Second Effective Time shall remain outstanding and each holder of a cancelled SilverSun stock option will cease to have any rights with respect to such cancelled SilverSun stock option and (ii) each adjusted SilverSun option award will continue to have, and will continue to be subject to, the same terms and conditions (other than as set forth in the previous sentence) as applied to the corresponding SilverSun stock option as of immediately prior to the effective time of the Second Merger .
Added
Each Warrant will initially be exercisable at any time and from time to time from the closing date until the tenth anniversary of the Closing date, at the option of the holder thereof, into one share of Company common stock at the exercise prices described above, subject to customary anti-dilution adjustments.
Removed
For purposes of the foregoing, the “ Per Share SilverSun Value ” means the volume-weighted average price, rounded to the nearest one-hundredth of a cent, of a share of SilverSun Class A common stock on Nasdaq (as reported by Bloomberg L.P. or, if not reported by Bloomberg L.P., in another authoritative source mutually selected by the parties to the Merger Agreement) in respect of the five consecutive trading day period beginning at 9:30 am (New York City time) on the first day of such trading day period and ending at 4:00 pm (New York City time) on the fifth full trading day prior to the effective time of the Second Merger ; provided, that such measurement period shall not begin prior to the eighth day prior to the effective time of the Second Merger and will not end after the third day prior to the effective time of the Second Merger , in each case, with such adjustments as necessary to reflect the Reverse Stock Split; 14 Table of Contents • at the effective time of the Mergers, and by virtue of the Second Merger, without any additional action on the part of any SilverSun entity, Rhodium or the holders of any securities of SilverSun or Rhodium, including holders of SilverSun common stock, each share of capital stock of Rhodium as the surviving company of the First Merger will be cancelled and each limited liability company interest of Merger Sub II issued and outstanding immediately prior to the Effective Time will be converted into and become one validly issued, fully paid and (to the extent applicable) non-assessable limited liability company interest of Merger Sub II as the surviving company of the Second Merger, with the same rights, powers, and privileges as the limited liability company interests of Merger Sub II as the surviving company of the Second Merger; • SilverSun will cause its shares of SilverSun Class A common stock to be listed on Nasdaq under the symbol “RHDM”, to the extent available, at or after the effective time of the Second Merger. • Merger Sub II will be a wholly owned direct subsidiary of SilverSun and, as a result, Merger Sub II, as the surviving entity of the Second Merger, will operate Rhodium’s current business; • promptly following the effective time of the Second Merger, SilverSun will distribute a cash dividend (the “Dividend”) in the aggregate amount of approximately $8,500,000 (at least $1.50 per pre-Merger/pre-Reverse Stock Split share) to the pre-Merger holders of SilverSun common stock as of a pre-Merger record date to be determined (the “Dividend and Distribution Record Date”).
Added
The terms of the Warrants are more fully set forth in Exhibit B to the Investment Agreement that was filed as Exhibit 2.1 to our Form 8-K filed with the SEC on December 4, 2023.
Removed
The Dividend will be paid out of the $10,000,000 cash to be received by SilverSun from Rhodium in connection with the Mergers. The balance of the $10,000,000 will be used by SilverSun to pay certain transaction expenses including tax payments.
Added
Under the terms of the Investment Agreement, SilverSun will, six days after the Closing (the “ Distribution Date ”), separate the existing SilverSun business (the “ Separation ”) into SilverSun Technologies Holdings, Inc., a Nevada corporation and currently a wholly owned subsidiary of the Company (“ SilverSun Holdings ” or “ SpinCo ”), and distribute all of the shares of SilverSun Holdings (the “ Distribution ”) to the stockholders of SilverSun as of the close of business on a record date that is expected to be one day prior to the date of closing (the “ Record Date ”) (collectively, the “ Spin-Off ”) in accordance with a separation and distribution agreement to be executed between SilverSun and SilverSun Technologies Holdings on or prior to the Distribution Date (the “ Separation Agreement ”).
Removed
In connection with the Mergers, Rhodium will also assume approximately $1,000,000 of SilverSun’s income tax liabilities related to the Distribution; • prior to the effective time of the First Merger , the SilverSun Board and SilverSun shareholders of record as of the record date for the Special Meeting will (i) adopt the SilverSun Technologies, Inc. 2023 Omnibus Incentive Plan, reserving for issuance a number of shares of SilverSun Class A common stock equal to 10% of the fully diluted capitalization of SilverSun (including SilverSun Class B common stock on an as exchanged basis) immediately following the effective time of the First Merger, and (ii) assume the Rhodium 2022 Omnibus Incentive Plan in its then-current form; and • when the transactions contemplated by the Separation Agreement described below are consummated, all of the issued and outstanding common stock of SilverSun’s recently created, wholly owned subsidiary, SilverSun Technologies Holdings, Inc.will be distributed to the SilverSun stockholders of record on the Dividend and Distribution Record Date (the “Separation and Distribution”).
Added
Upon completion of the Distribution, each SilverSun stockholder as of the Record Date will receive eight shares of common stock, par value $0.00001 per share, of SilverSun Holdings (“ SilverSun Holdings common stock ”), for every share of SilverSun common stock held as of the close of business on the Record Date.
Removed
As a result of this Distribution, SilverSun’s indirect wholly owned subsidiaries, SWK and SCS, will be owned by the SilverSun stockholders indirectly through their shares of SilverSun Holdings. The Merger Agreement contains a number of closing conditions, including the following conditions that apply to the obligations of each of SilverSun, Rhodium, Merger Sub I and Merger Sub II.
Added
SilverSun Holdings common stock will be issued in book-entry form only, which means that no physical share certificates will be issued.
Removed
Conditions to Each Party ’ s Obligation to Consummate the Transactions The Merger Agreement contains a number of closing conditions, including the following conditions that apply to the obligations of each of SilverSun, Rhodium, Merger Sub I and Merger Sub II: • SilverSun shall have obtained the approval of its stockholders to adopt the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Mergers; • Rhodium shall have obtained the approval of its Class B stockholders to adopt the Merger Agreement; • the SilverSun registration statement on Form S-4 shall have become effective under the Securities Act, and no stop order suspending the effectiveness of the SilverSun registration statement shall have been issued and no proceeding for that purpose shall have been initiated or threatened in writing by the SEC or its staff and not withdrawn; • the registration statement on Form 10, as may be amended from time to time, filed by SilverSun with the SEC to effect the registration of the shares of common stock of SilverSun Holdings shall have become effective and no proceeding for that purpose shall have been initiated or threatened in writing by the SEC or its staff and not withdrawn; • the shares of SilverSun Class A common stock to be issued to Rhodium stockholders pursuant to the Merger Agreement shall have been approved for listing on Nasdaq, subject only to official notice of issuance; • the parties to the Merger Agreement shall have received all approvals with any governmental body necessary to consummate the transactions contemplated by the Merger Agreement, including, but not limited to, the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”), if applicable; and 15 Table of Contents • there shall have not been enacted, promulgated or made effective following the date of the Merger Agreement any law or order by a governmental body of competent jurisdiction that enjoins or otherwise prohibits or makes illegal, and there has not been any legal action by any governmental body seeking to enjoin or prohibit or make illegal, the consummation of the transactions contemplated by the Merger Agreement, and there is not in effect any injunction (whether temporary, preliminary or permanent) by any governmental body of competent jurisdiction that enjoins or otherwise prohibits the consummation of the transactions contemplated by the Merger Agreement.
Added
No fractional shares of SilverSun Holdings common stock will be issued. 13 Table of Contents Also pursuant to the Investment Agreement and the Separation Agreement, SilverSun will declare a $2.5 million aggregate cash dividend to its stockholders of record as of the Record Date (the “ Dividend ”).
Removed
Prior to the Mergers, SilverSun will hold a special meeting of its shareholders as of a pre-Merger record date to be determined (the “Special Meeting”).
Added
The Dividend will be paid on the Distribution Date from proceeds received by SilverSun from the Equity Investment.
Removed
At the Special Meeting, the SilverSun stockholders will be asked to vote on the proposals set forth in the Form S-4 Registration Statement of SilverSun (the “Form S-4”) filed on October 19, 2022, as amended on January 9, 2023 and February 14, 2023 and as may be further amended in the future.
Added
The Charter Amendment and the transactions contemplated by the Investment Agreement (including the issuance and sale to the Investors of the Securities), among other matters, were submitted for approval at the Special Meeting of the stockholders of SilverSun held at 9:00 A.M.EST on March 14, 2024 (the “ Special Meeting ”) as discussed in the definitive proxy statement of SilverSun dated February 13, 2024 and were approved at the Special Meeting.
Removed
These proposals include, but are not limited to, approval of (i) the Mergers; (ii) the Amended and Restated Certificate of Incorporation (and the matters covered thereby including the Reverse Stock Split); (iii) the Separation and Distribution Agreement; (iv) the SilverSun Technologies, Inc. 2023 Omnibus Incentive Plan; (v) the share issuances related to the Mergers requiring Nasdaq approval; and (vi) the post-Merger board nominees.
Added
As a result of the approval of the proposals set forth in such definitive proxy statement and subject to the closing under the Investment Agreement, eligible shareholders do not need to take any action to receive their shares of SilverSun Holdings common stock in connection with the Distribution.
Removed
These proposals are set forth in greater detail in the Form S-4. The Mergers are conditioned upon the approval of the Merger Proposal, subject to terms of the Merger Agreement. If the Merger Proposal is not approved, the other proposals (except the adjournment proposal, as described in the S-4) will not be presented to the shareholders for a vote.
Added
It is expected that their shares of SilverSun Holdings common stock will trade on the OTCQX tier of OTC Markets and that their shares of SilverSun common stock will continue to trade on The Nasdaq Capital Market. Shortly after the Closing, SilverSun is expected to change its name to QXO, Inc.
Removed
Similarly, approval of the Merger proposal is subject to the approval of the Amended and Restated Certificate of Incorporation proposal, the Separation and Distribution Agreement proposal and the share issuance proposal. The Merger Agreement may be terminated, whether before or after obtaining the requisite vote of SilverSun shareholders, by mutual written consent of SilverSun and Rhodium.
Added
Once renamed, SilverSun is expected to change the ticker symbol of its common stock to “QXO.” Until such time, SilverSun will continue to trade on The Nasdaq Capital Market under the symbol “SSNT.” Following the Distribution, SilverSun Holdings will operate through its direct subsidiaries SWK, SCS and CCDC and conduct the business conducted by SilverSun prior to the Distribution and the Closing under the Investment Agreement.
Removed
The Merger Agreement may be terminated, and the transactions abandoned, by either SilverSun or Rhodium at any time before the effective time of the , by written notice from one to the other if (i) the Closing has not occurred on or before March 31, 2023 or such later date mutually agreed to by SilverSun and Rhodium (the “Termination Date”), except that the right to terminate the Merger Agreement for this reason is not available to any party who is then in material breach of the Merger Agreement; (ii) the requisite vote of SilverSun shareholders has not been obtained by reason of the failure to obtain the required vote at the SilverSun Shareholders’ Meeting (or any adjournment or postponement of such meeting) duly convened for such purpose, except that the right to terminate the Merger Agreement for this reason shall not be available to SilverSun where the failure to obtain the requisite vote has been caused by the action or failure to act of any of the SilverSun Entities or such action or failure to act constitutes a material breach by any of the SilverSun Entities of the Merger Agreement; or (iii) any law or order is enacted, issued, promulgated or entered by a governmental authority of competent jurisdiction (including Nasdaq) that permanently enjoins, or otherwise prohibits the consummation of the transactions, and (in the case of any order) such order has become final and non-appealable.
Added
One day prior to the date of the Distribution, SilverSun and SilverSun Holdings will enter into an Employee Matters Agreement (the “ Employee Matters Agreement ”). The Employee Matters Agreement sets forth the terms and conditions of certain employment, compensation and benefit matters related to the Distribution beyond those covered by the Separation Agreement.
Removed
The Merger Agreement may be terminated, and the transactions abandoned, by SilverSun at any time before the First Effective Time, if (i) Rhodium breaches any of its representations, warranties, covenants or agreements contained in the Merger Agreement, which breach (a) would give rise to the failure to satisfy the general closing conditions or the closing conditions to the obligations of SilverSun at the Closing and (b) such breach cannot be cured by the Termination Date, or, if curable, has not been cured by Rhodium within the earlier of (A) 30 days after Rhodium’s receipt of written notice of such breach from SilverSun and (B) three business days prior to the Termination Date, subject to certain conditions; or (ii) all of the general closing conditions and the closing conditions to the obligations of Rhodium at the Closing have been satisfied (other than any condition the failure of which to be satisfied has been principally caused by the breach of the Merger Agreement by Rhodium or any of its affiliates and conditions that, by their nature, are to be satisfied at Closing and which are, at the time of termination, capable of being satisfied) and Rhodium has failed to fulfill its obligations and agreements contained in the Merger Agreement to consummate the Closing within three business days following written notice of such satisfaction from SilverSun and SilverSun is ready, willing and able to consummate the Closing.
Added
One day prior to the date of the Distribution, SilverSun and SilverSun Holdings will also enter into a Tax Matters Agreement (the “ Tax Matters Agreement ”).
Removed
If the Merger Agreement is validly terminated pursuant to the termination section of the Merger Agreement, except as provided below, it shall become void and of no further force and effect, with no liability (except as provided below) on the part of any party (or any stockholder, affiliate or representative of such party), except that, if such termination results from (a) fraud or (b) the willful and material (i) failure of any party to perform its covenants, obligations or agreements contained in the Merger Agreement or (ii) breach by any party of its representations or warranties contained in the Merger Agreement, then such party shall be liable for any damages incurred or suffered by the other parties as a result of such failure or breach. 16 Table of Contents SilverSun shall pay, or cause to be paid, to Rhodium (or its designee(s)) by wire transfer of immediately available funds an amount equal to $5,000,000, if the Merger Agreement is terminated by Rhodium pursuant to the unilateral termination provisions in favor Rhodium described above.
Added
The Tax Matters Agreement will govern the respective rights, responsibilities and obligations of SilverSun and SilverSun Holdings after the Distribution with respect to tax liabilities and benefits, tax attributes, certain indemnification rights with respect to tax matters, the preparation and filing of tax returns, the control of audits and other tax proceedings, the intended federal income tax characterization of the Separation and the Distribution and the agreed-upon reporting thereof and certain other tax matters.
Removed
Rhodium shall pay, or cause to be paid, to SilverSun (or its designee(s)) by wire transfer of immediately available funds an amount equal to $5,000,000, if the Merger Agreement is terminated by SilverSun pursuant to the unilateral termination provisions in favor of SilverSun described above. SilverSun Technologies Holdings, Inc. filed its Form 10 with the SEC on December 23, 2022.
Added
The Distribution will have tax consequences to SilverSun and the SilverSun stockholders that receive shares of SilverSun Holdings in the Distribution. Following the Spin-Off, the Company’s current executive officers and directors, including Mark Meller, SilverSun’s chief executive officer, are expected to continue in their current roles at SilverSun Holdings and its subsidiaries.
Removed
The Form 10 was withdrawn on February 21, 2023 because the financial statements contained therein were stale. SilverSun Technologies Holdings, Inc. intends to refile a Form 10 containing updated financial statements on or about early March 2023 and expects to be able to request accelerated effectiveness of the Form 10 at its discretion.
Added
SilverSun Holdings will apply for the public quotation of its shares on the OTCQX tier of OTC Markets, which shares will be registered pursuant to a Form 10 registration statement that has been filed with the U.S. Securities and Exchange Commission (the “ SEC ”).
Removed
If the Mergers are not completed for any reason, SilverSun will remain an independent public company, its common stock will continue to be listed and traded on Nasdaq under the symbol SSNT and will continue to be registered under the Exchange Act, the distribution and dividend will not take place and SilverSun will continue to file periodic reports with the SEC.
Added
The Investment Agreement and the transactions contemplated by the Investment Agreement have been approved by SilverSun’s board of directors. The approval of the Equity Investment, the Fifth Amended and Restated Certificate of Incorporation (including the 8:1 reverse stock split contemplated therein) and the equity incentive plan proposed by JPE were approved by the stockholders at the Special Meeting.
Removed
On February 14, 2023, the Company filed Amendment 2 to Form S-4 Registration Statement with the SEC.
Added
Following the Closing of the Equity Investment, the board of directors of SilverSun will be reconstituted such that (a) the number of seats on the board of directors will be as directed by JPE, (b) each of such directors (including Mr.
Removed
The Separation and Distribution Agreement In connection with the mergers, SilverSun Technologies Holdings, Inc., a recently formed Delaware corporation and direct wholly owned subsidiary of SilverSun (“SilverSun Holdings”), will enter into that certain Separation and Distribution Agreement (the “Separation Agreement”), whereby all of the issued and outstanding common stock of SilverSun Holdings, which owns all of the issued and outstanding common stock of (i) SWK Technologies, Inc., a Delaware corporation and indirect wholly owned subsidiary of SilverSun (“SWK”), and (ii) Secure Cloud Services, Inc., a Nevada corporation and indirect wholly owned subsidiary of SilverSun (“SCS”), will be distributed on a pro rata basis to the stockholders of SilverSun as of a record date to be determined by the SilverSun Board (the “Distribution”).
Added
Jacobs) will be individuals designated by JPE, (c) each standing committee of the board of directors of the Company will be reconstituted in a manner designated by JPE and (d) Mr. Jacobs will be appointed as the Chairman of the Board of Directors of SilverSun and Chief Executive Officer of SilverSun. For information regarding the expected terms of Mr.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

18 edited+39 added−10 removed81 unchanged
Biggest changeThe additional sales practice and disclosure requirements imposed upon U.S. broker-dealers may discourage such broker-dealers from effecting transactions in shares of our common stock, which could severely limit the market liquidity of such shares and impede their sale in the secondary market. 25 Table of Contents A U.S. broker-dealer selling penny stock to anyone other than an established customer or “accredited investor” (generally, an individual with net worth in excess of $1,000,000 or an annual income exceeding $200,000, or $300,000 together with his or her spouse) must make a special suitability determination for the purchaser and must receive the purchaser’s written consent to the transaction prior to sale, unless the broker-dealer or the transaction is otherwise exempt.
Biggest changeA U.S. broker-dealer selling penny stock to anyone other than an established customer or “accredited investor” (generally, an individual with net worth in excess of $1,000,000 or an annual income exceeding $200,000, or $300,000 together with his or her spouse) must make a special suitability determination for the purchaser and must receive the purchaser’s written consent to the transaction prior to sale, unless the broker-dealer or the transaction is otherwise exempt.
Factors affecting the market price of our common stock include: ● variations in our operating results, earnings per share, cash flows from operating activities, deferred revenue, and other financial metrics and non-financial metrics, and how those results compare to analyst expectations; ● issuances of new stock which dilutes earnings per share; ● forward looking guidance to industry and financial analysts related to future revenue and earnings per share; ● the net increases in the number of customers and customers paying subscriptions, either independently or as compared with published expectations of industry, financial or other analysts that cover our company; ● changes in the estimates of our operating results or changes in recommendations by securities analysts that elect to follow our common stock; ● announcements of technological innovations, new services or service enhancements, strategic alliances or significant agreements by us or by our competitors; ● announcements by us or by our competitors of mergers or other strategic acquisitions, or rumors of such transactions involving us or our competitors; ● announcements of customer additions and customer cancellations or delays in customer purchases; ● recruitment or departure of key personnel; ● trading activity by a limited number of stockholders who together beneficially own a majority of our outstanding common stock.
Factors affecting the market price of our common stock include: ● variations in our operating results, earnings per share, cash flows from operating activities, deferred revenue, and other financial metrics and non-financial metrics, and how those results compare to analyst expectations; ● issuances of new stock which dilutes earnings per share; ● forward looking guidance to industry and financial analysts related to future revenue and earnings per share; ● the net increases in the number of customers and customers paying subscriptions, either independently or as compared with published expectations of industry, financial or other analysts that cover our company; ● changes in the estimates of our operating results or changes in recommendations by securities analysts that elect to follow our common stock; ● announcements of technological innovations, new services or service enhancements, strategic alliances or significant agreements by us or by our competitors; ● announcements by us or by our competitors of mergers or other strategic acquisitions, or rumors of such transactions involving us or our competitors; ● announcements of customer additions and customer cancellations or delays in customer purchases; ● recruitment or departure of key personnel; and ● trading activity by a limited number of stockholders who together beneficially own a majority of our outstanding common stock.
There has been limited trading of our common stock since we began trading on the NASDAQ Capital Market in April 2017, meaning that the number of persons interested in purchasing our common stock at or near ask prices at any given time may be relatively small or non-existent.
There has been limited trading of our common stock since we began trading on the NASDAQ Capital Market (“NASDAQ”) in April 2017, meaning that the number of persons interested in purchasing our common stock at or near ask prices at any given time may be relatively small or non-existent.
Management has concluded that the Company did maintain effective internal control over financial reporting as of December 31, 2022, based on the criteria set forth in 2013 Internal Control—Integrated Framework issued by the COSO. We may fail to recruit and retain qualified personnel. We expect to rapidly expand our operations and grow our sales, development and administrative operations.
Management has concluded that the Company did maintain effective internal control over financial reporting as of December 31, 2023, based on the criteria set forth in 2013 Internal Control—Integrated Framework issued by the COSO. We may fail to recruit and retain qualified personnel. We expect to rapidly expand our operations and grow our sales, development and administrative operations.
Computer malware, viruses, computer hacking and phishing attacks against online networking platforms have become more prevalent and may occur on our systems in the future. 21 Table of Contents Any attempts by hackers to disrupt our website service or our internal systems, if successful, could harm our business, be expensive to remedy and damage our reputation or brand.
Computer malware, viruses, computer hacking and phishing attacks against online networking platforms have become more prevalent and may occur on our systems in the future. 29 Table of Contents Any attempts by hackers to disrupt our website service or our internal systems, if successful, could harm our business, be expensive to remedy and damage our reputation or brand.
Price competition may continue to increase and become even more significant in the future, resulting in reduced profit margins. 20 Table of Contents The software and technology industry is highly competitive. If we cannot develop and market desirable products that the public is willing to purchase, we will not be able to compete successfully.
Price competition may continue to increase and become even more significant in the future, resulting in reduced profit margins. 28 Table of Contents The software and technology industry is highly competitive. If we cannot develop and market desirable products that the public is willing to purchase, we will not be able to compete successfully.
Although we license some of our technologies in their current stage of development, we cannot assure that we will be able to develop new products or enhancements to our existing products in order to remain competitive. 18 Table of Contents We may need additional financing which we may not be able to obtain on acceptable terms.
Although we license some of our technologies in their current stage of development, we cannot assure that we will be able to develop new products or enhancements to our existing products in order to remain competitive. 26 Table of Contents We may need additional financing which we may not be able to obtain on acceptable terms.
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.
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. 27 Table of Contents Our success is highly dependent upon our ability to compete against competitors that have significantly greater resources than we have.
Although our shares have been approved for listing on the NASDAQ Capital Market, our shares may be subject to potential delisting if we do not meet or continue to maintain the listing requirements of the NASDAQ Capital Market.
Although our shares have been approved for listing on the NASDAQ, our shares may be subject to potential delisting if we do not meet or continue to maintain the listing requirements of the NASDAQ.
Our competitors could also use their economic strength to influence the market to continue to buy their existing products. 19 Table of Contents 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.
Our competitors could also use their economic strength to influence the market to continue to buy their existing products. If we are not able to protect our trade secrets through enforcement of our confidentiality and non-competition agreements, then we may not be able to compete effectively, and we may not be profitable.
If we are to become the subject of such litigation, it could result in substantial costs and a diversion of management’s attention and resources. 24 Table of Contents We currently have a limited trading volume, which results in higher price volatility for, and reduced liquidity of, our common stock.
If we are to become the subject of such litigation, it could result in substantial costs and a diversion of management’s attention and resources. We currently have a limited trading volume, which results in higher price volatility for, and reduced liquidity of, our common stock.
Our Certificate of Incorporation authorizes the issuance of 1,000,000 shares of preferred stock, of which all shares are available for issuance, with designations, rights and preferences as determined from time to time by the Board of Directors.
Possible adverse effect of issuance of preferred stock. Our Certificate of Incorporation authorizes the issuance of 1,000,000 shares of preferred stock, of which all shares are available for issuance, with designations, rights and preferences as determined from time to time by the Board of Directors.
Our shares have been approved for and are currently trading on The Nasdaq Capital Market (“Nasdaq”); however Nasdaq has rules for continued listing, including, without limitation, minimum market capitalization and other requirements.
Our shares have been approved for and are currently trading on NASDAQ; however Nasdaq has rules for continued listing, including, without limitation, minimum market capitalization and other requirements.
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; ● disruption to the Company’s customers and revenue, labor workforce, unavailability of products and supplies used in operations due to the COVID-19 pandemic ● the timing of product implementation, particularly large design projects; ● unexpected delays in introducing new products and services; ● increased expenses, whether related to sales and marketing, product development, or administration; ● the mix of product license and services revenue; and ● costs related to possible acquisitions of technology or businesses.
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; ● the mix of product license and services revenue; and ● costs related to possible acquisitions of technology or businesses.
In order to achieve the above-mentioned targets, the general strategies of our Company are to maintain and search for hard-working employees who are innovative and creative, as well as to keep a close eye on expansion opportunities through merger and/or acquisition.
In order to achieve the above-mentioned targets, the general strategies of our Company are to maintain and search for hard-working employees who are innovative and creative, as well as to keep a close eye on expansion opportunities through merger and/or acquisition. We face risks arising from acquisitions. We may pursue strategic acquisitions in the future.
Risks Related to Our Securities The market price of our common stock is likely to be volatile and could subject us to litigation. The market price of our common stock has been and is likely to continue to be subject to wide fluctuations.
The market price of our common stock has been and is likely to continue to be subject to wide fluctuations.
Our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if our common stock is not traded on a national securities exchange.
Our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if our common stock is not traded on a national securities exchange. 33 Table of Contents In order to raise sufficient funds to expand our operations, we may have to issue additional securities at prices which may result in substantial dilution to our shareholders.
In addition, these transactions may dilute the value of our common shares outstanding. We may also have to issue securities that may have rights, preferences and privileges senior to our common stock. Possible adverse effect of issuance of preferred stock.
If we raise additional funds through the sale of equity or convertible debt, our current stockholders’ percentage ownership will be reduced. In addition, these transactions may dilute the value of our common shares outstanding. We may also have to issue securities that may have rights, preferences and privileges senior to our common stock.
Removed
There is a risk associated with COVID-19 The Company’s operations may be affected by the recent and ongoing outbreak of the coronavirus disease 2019 (COVID-19) which in March 2020, was declared a pandemic by the World Health Organization.
Added
The global macroeconomic environment could negatively impact our business and our financial position, results of operations and/or cash flows could be materially adversely affected.
Removed
The ultimate disruption which may be caused by the outbreak is uncertain; however, it may result in a material adverse impact on the Company’s financial position, operations and cash flows.
Added
Our business, financial position, results of operations and cash flows may be adversely impacted by the global macroeconomic environment, which has experienced, and continues to experience, extraordinary challenges, including high rates of inflation; increasing interest rates; widespread disruptions in supply chains; workforce challenges, including labor shortages; and market volatility.
Removed
Possible areas that may be affected include, but are not limited to, disruption to the Company’s customers and revenue, labor workforce, inability of customers to pay outstanding accounts receivable due and owing to the Company as they limit or shut down their businesses, customers seeking relief or extended payment plans relating to accounts receivable due and owing to the Company, unavailability of products and supplies used in operations, and the decline in value of assets held by the Company, including property and equipment. 22 Table of Contents We Face Risks Arising from Acquisitions.
Added
These challenges have, among other things, led to increased costs, labor and supply shortages, and transportation and performance delays and disruptions and have adversely affected us, our industry, our customers and suppliers and others with whom we do business.
Removed
We may pursue strategic acquisitions in the future.
Added
We (including our suppliers, customer and other partners) have and may continue to experience inflationary pressures, supply chain disruption and labor, material and transportation cost increases at a rate higher than anticipated. As such, we may be unable to recover some of these increased costs or to offset such costs with greater than expected efficiencies.
Removed
These risks could be heightened if we complete a large acquisition or multiple acquisitions within a short period of time.
Added
While some aspects of the macroeconomic environment continues to experience challenges, and we have been able to mitigate some of the challenges, other challenges persist. We cannot predict how long these challenges will persist or how they will change over time, or how the macroeconomic environment will evolve and continue to impact us.
Removed
Risks Relating to the Proposed Mergers There are significant risks associated with the proposed Mergers and the business of Rhodium including the following: • The value of the shares of SilverSun Class A common stock may decrease following the Mergers. • The SilverSun Legacy Stockholders will have a significantly reduced ownership and voting interest in SilverSun after the Mergers and will exercise minimal influence over management of the combined company. • The SilverSun Legacy Stockholders may not realize the value being attributed to their retained SilverSun shares as the result of the Mergers. • The Mergers are subject to a number of conditions, some of which are beyond the control of the parties to the Merger Agreement. • The Merger Agreement limits SilverSun’s ability to pursue an alternative acquisition proposal and requires SilverSun to pay a termination fee of $5,000,000 if it does. • The Mergers will result in Imperium, which is currently Rhodium’s largest and controlling owner and is controlled by Chase Blackmon, Nicholas Cerasuolo and Cameron Blackmon, holding a substantial portion of the common stock of the combined company, with the right to appoint a portion of the combined company board, and its interests may conflict with those of other stockholders. • The absence of a historical trading market for Rhodium Class A common stock creates uncertainty about future trading prices of the SilverSun Class A common stock following the Mergers. • Rhodium is subject to a highly evolving regulatory landscape and any adverse changes to, or its failure to comply with, any laws and regulations could adversely affect its business, prospects or operations. • It may be illegal now, or in the future, to acquire, own, hold, sell or use Bitcoin, or other cryptocurrencies, participate in blockchains or utilize similar cryptocurrency assets in one or more countries, the ruling of which would adversely affect Rhodium. • Rhodium is subject to risks associated with its need for significant electrical power.
Added
While we continue to work proactively to mitigate these challenges, if we are unable to do so successfully, our financial position, results of operations and/or cash flows could be materially adversely affected.
Removed
Government regulators may potentially restrict the ability of electricity suppliers to provide electricity to Bitcoin mining operations, such as Rhodium’s. • While the Mergers are pending, Rhodium will be subject to business uncertainties and contractual restrictions that could adversely affect its business. • Rhodium’s operations are subject to power risk related to power supply, electricity pricing volatility and hosting services.
Added
These risks could be heightened if we complete a large acquisition or multiple acquisitions within a short period of time. 30 Table of Contents Risks Related to the Separation and the Distribution SilverSun’s separation into two independent, publicly traded companies is complex in nature, and unanticipated developments or changes, including changes in the law, the macroeconomic environment, competitive conditions of SilverSun’s markets, regulatory approvals or clearances, the uncertainty of the financial markets and challenges in executing the Separation, could delay or prevent the completion of the proposed separation, or cause the separation to occur on terms or conditions that are different or less favorable than expected.
Removed
Rhodium does not have fixed electricity pricing at its Temple Site and there is a risk that it may not have a fixed electricity price at this site. • Rhodium’s Rockdale Site is subject to access risks which could create a risk of avoidable downtime due to the inability to perform maintenance or make repairs when needed, and a risk of avoidable damage to equipment for the same reason. 23 Table of Contents • While the Mergers are pending, Rhodium may seek to raise additional funds, finance additional acquisitions or develop strategic relationships by issuing additional securities, including capital stock. • The combined company post-Closing management team has limited experience managing a public company. • Rhodium’s colocation hosting services agreement and its ability to commence or continue its operations at its Rockdale Site is dependent on leases between third parties. • The Rockdale Site where Rhodium is currently conducting operations is subject to possible environmental risks. • Rhodium’s mining operations will be heavily dependent on a continuous supply of large amounts of electricity to both the Rockdale and Temple Sites which is subject to disruption.
Added
The process of completing the proposed separation has been and is expected to continue to be time-consuming and involves significant costs and expenses.
Removed
Any such disruptions could result in disruption to Rhodium’s mining operations and affect Rhodium’s ability to operate efficiently and profitably. • Disruption of high-speed broad-band Internet access to the Rockdale Site and/or Temple Site will result in disruption to Rhodium’s mining operations and affect Rhodium’s ability to operate efficiently and profitably. • There is a risk that Rhodium will not secure the funds necessary to finance its operations or future purchases of Bitcoin mining equipment from its suppliers. • Rhodium is subject to ongoing litigation matters and may become subject to other disputes, including other intellectual property disputes, which are costly and may subject Rhodium to significant liability and increased costs of doing business. • Future developments regarding the treatment of Bitcoin for U.S. federal income and foreign tax purposes could adversely affect Rhodium. • Rhodium does not presently have the funds required to fulfill its business plan. • The market and price for Bitcoin generated by Rhodium can be highly volatile, which may reduce revenues and net income.
Added
The Separation costs may be significantly higher than what we currently anticipate and may not yield a discernible benefit if the Separation is not completed or is not well-executed, or the expected benefits of the Separation are not realized.
Removed
In order to raise sufficient funds to expand our operations, we may have to issue additional securities at prices which may result in substantial dilution to our shareholders. If we raise additional funds through the sale of equity or convertible debt, our current stockholders’ percentage ownership will be reduced.
Added
Executing the proposed Separation will also require significant amounts of management’s time and effort, which may divert management’s attention from operating and growing our business.
Added
Other challenges associated with effectively executing the separation include attracting, retaining and motivating employees during the pendency of the Separation and following its completion; addressing disruptions to our procurement, sales and distribution, and other operations resulting from separating SilverSun into two independent companies.
Added
We may not realize the anticipated benefits from the Separation and the Distribution, and the Separation and the Distribution could harm our business. We may not be able to achieve the full strategic and financial benefits expected to result from the Separation and the Distribution and our realization of such benefits may be delayed or not occur at all.
Added
The Separation and the Distribution are designed to enhance strategic and management focus, provide a distinct investment identity, and allow us to efficiently allocate resources and deploy capital.
Added
We may not achieve these and other anticipated benefits for a variety of reasons, including the following: ● the Separation and the Distribution will require significant amounts of management’s time and effort, which may divert management’s attention from operating and growing our business; and ● actions required to separate the respective businesses could disrupt our operations.
Added
If we fail to achieve some or all of the benefits expected to result from the Separation and the Distribution, or if such benefits are delayed, our business could be harmed.
Added
In connection with the Separation and the Distribution, we and SilverSun Holdings will indemnify each other for certain liabilities, we may need to divert cash to meet those obligations if we are required to act under these indemnities to SilverSun Holdings, and SilverSun Holdings may not be able to satisfy its indemnification obligations to us in the future.
Added
Pursuant to the Separation Agreement and other agreements with SilverSun Holdings, SilverSun Holdings will agree to indemnify us for certain liabilities and we will agree to indemnify SilverSun Holdings for certain liabilities, as discussed further in “ The Separation and the Distribution .” Payments that we may be required to provide under indemnities to SilverSun Holdings may be significant and could negatively affect our business.
Added
Third parties could also seek to hold us responsible for the liabilities that SilverSun Holdings has agreed to retain and, under certain circumstances, we may be subject to continuing contingent liabilities of SilverSun Holdings following the Separation and the Distribution that arise relating to the operations of the spun-out businesses during the time prior to the Separation and the Distribution.
Added
SilverSun Holdings has agreed to indemnify us for such contingent liabilities.
Added
While we have no reason to expect that SilverSun Holdings will not be able to support its indemnification obligations to us, we can provide no assurance that SilverSun Holdings will be able to fully satisfy its indemnification obligations or that such indemnity obligations will be sufficient to cover our liabilities for matters which SilverSun Holdings has agreed to retain, including such contingent liabilities.
Added
Moreover, even if we ultimately succeed in recovering from SilverSun Holdings any amounts for which we are indemnified, we may be temporarily required to bear these losses ourselves. Each of these risks could have a material adverse effect on our business, operating results, and financial condition.
Added
The one-time and ongoing costs of the Separation and the Distribution may be greater than we expect. We will incur significant costs in connection with the Separation and the Distribution.
Added
These costs, whether incurred before or after the Separation and the Distribution, may be greater than anticipated and could have a material adverse effect on our business, financial condition, results of operations and cash flows. 31 Table of Contents We will share responsibility for certain of our and SilverSun ’ s Holdings ’ income tax liabilities for tax periods ending prior to or including the Distribution Date.
Added
In connection with the Distribution, we will enter into the Tax Matters Agreement with SilverSun Holdings which will govern our and SilverSun Holdings’ rights and obligations with respect to certain pre-Distribution tax liabilities.
Added
To the extent we are responsible for any liability under the Tax Matters Agreement, there could be a material adverse impact on our business, financial condition, results of operations and cash flows in future reporting periods. We or SilverSun Holdings may fail to perform under various transaction agreements that will be executed as part of the Separation and the Distribution.
Added
Prior to the Distribution, we and SilverSun Holdings will enter into various transaction agreements related to the Separation and the Distribution. All of these agreements will also govern our relationship with SilverSun Holdings following the Separation and the Distribution. We will rely on SilverSun Holdings to satisfy its performance obligations under these agreements.
Added
If we or SilverSun Holdings are unable to satisfy our respective obligations pursuant to the Separation Agreement, the Tax Matters Agreement and the Employee Matters Agreement, including indemnification obligations, our business, results of operations, cash flows, and financial condition could be adversely affected.
Added
The Distribution will be taxable to SilverSun stockholders who receive shares of SilverSun Holdings ’ common stock in the Distribution for U.S. federal income tax purposes. Each U.S. Holder (as defined in the section of this information statement titled “ Material U.S.
Added
Federal Income Tax Consequences of the Distribution ”) of SilverSun common stock that receives shares of SilverSun Holdings common stock in connection with the Distribution will be treated as receiving a taxable distribution in an amount equal to the fair market value of the shares of SilverSun Holdings common stock received.
Added
Such distribution generally will be taxed as a dividend to the extent of such holder’s ratable share of SilverSun’s current or accumulated earnings and profits (including the SilverSun’s taxable gain, if any, recognized in connection with the Distribution and the Dividend), with any excess treated as a non-taxable return of capital to the extent of such holder’s basis in its SilverSun common stock and any remaining excess treated as capital gain from the sale or exchange of SilverSun common stock.
Added
Although SilverSun will be ascribing a value to the shares of SilverSun Holdings common stock in the Distribution for tax purposes, this valuation is not binding on the IRS or any other tax authority.
Added
These tax authorities could ascribe a higher valuation to those shares, particularly if shares of SilverSun Holdings common stock trade at prices significantly above the value ascribed to those shares by SilverSun in the period following the Distribution. Such higher valuation may cause a larger reduction in the tax basis of a U.S.
Added
Holder’s shares of SilverSun common stock or may cause a U.S. Holder to recognize additional dividend or capital gain income. SilverSun will not be able to advise U.S. Holders of the amount of its earnings and profits until after the end of the calendar year in which the Distribution occurs.
Added
However, SilverSun anticipates that it will recognize capital gain for U.S. federal income tax purposes in connection with the Distribution that will have the effect of increasing its earnings and profits for the year in which the Distribution occurs. The tax consequences to you related to the Distribution will depend on your particular facts and circumstances.
Added
You are urged to consult your tax advisors as to the specific tax consequences to you. Holders who are not U.S. Holders are urged to consult with their tax advisor regarding the U.S. federal income tax consequences of the Distribution and the Dividend.
Added
Following the Distribution, certain of our directors and employees may have actual or potential conflicts of interest because of their positions with or financial interests in SilverSun. After the Closing, the Investors will own approximately 99.85% of SilverSun’s common stock on an as-converted, as-exercised basis.
Added
Certain of our expected executive officers and directors may continue to own equity interests in SilverSun following the Distribution. These factors could create, or appear to create, potential conflicts of interest to the extent that we and SilverSun Holdings face decisions that could have different implications for the two companies.
Added
For example, potential conflicts of interest could arise in connection with the resolution of any dispute that may arise between SilverSun Holdings and us regarding the terms of the agreements governing the Separation and the relationship thereafter between the companies. 32 Table of Contents Risks Related to Our Securities The market price of our common stock is likely to be volatile and could subject us to litigation.
Added
The additional sales practice and disclosure requirements imposed upon U.S. broker-dealers may discourage such broker-dealers from effecting transactions in shares of our common stock, which could severely limit the market liquidity of such shares and impede their sale in the secondary market.

Item 2. Properties

Properties — owned and leased real estate

4 edited+2 added−9 removed2 unchanged
Biggest changeThe Company leased 3,422 square feet of office space in Greensboro, NC with a monthly rent of $4,182 a month. The lease expired February 28, 2017 and was extended after reducing the rental space to 2,267 square feet at a monthly rent of $2,765 per month.
Biggest changeThe lease expired February 28, 2017 and was extended after reducing the rental space to 2,267 square feet at a monthly rent of $2,765 per month. The extension expired February 28, 2020 and was renewed for a term of three years at a rate of $3,022 per month. The Company vacated the premises on February 28, 2023.
The main office premises consist of 5,129 square feet of office space at a monthly rent starting at $8,762 and escalating to $10,044 per month by the end of the term April 30, 2024.
The main office premises consist of 5,129 square feet of office space at a monthly rent starting at $8,762 and escalating to $10,044 per month by the end of the term April 30, 2024. On January 3, 2024, the Company extended its lease for two years ended April 30, 2026.
The Company leases office space in Sisters, OR with a monthly rent of $720. The lease expired on November 30, 2019 and is being rented on a month to month basis.
The Company leases office space in Sisters, OR with a monthly rent of $720. The lease expired on November 30, 2019 and is being rented on a month-to-month basis. The Company leases 2,105 square feet of office space in Phoenix, AZ starting at $1,271 and escalating to $2,982 per month by the end of the term September 30, 2020.
Our leased space is utilized for office purposes and it us our belief that the space is adequate for our immediate needs. We do not foresee any significant difficulties in obtaining additional facilities if deemed necessary.
Additional space may be required as we expand our business activities. We do not foresee any significant difficulties in obtaining additional facilities if deemed necessary. 36 Table of Contents
Removed
On October 24, 2017 the Company entered into a lease for $3,584 per month for one year beginning November 1, 2018 for the additional space at 120 Eagle Rock Ave (suite 302).
Added
Monthly base rent will be $10,258 for the first year and $10,471 for the second year. The Company leased 3,422 square feet of office space in Greensboro, NC with a monthly rent of $4,182 a month.
Removed
It was subsequently extended on February 1, 2020 for five years starting while extending the rental space to 3,516 square feet at $6,153 per month and escalating to $ 6,886 per month by the end of the term. The Company terminated this lease September 30, 2021.
Added
On June 2, 2023, the Company extended the lease for an additional three years expiring September 30, 2026 with monthly rent of $3,245 escalating to $3,421 in the third year. Our leased space is utilized for office purposes and it us our belief that the space is adequate for our immediate needs.
Removed
The extension expired February 28, 2020 and was renewed for a term of three years at a rate of $3,022 per month. The Company leases 6,115 square feet of office space in Thorofare, NJ starting at $4,591 per month and escalating to $5,168 per month by the end of the term February 28, 2022.
Removed
The Company terminated this lease February 28, 2022. The Company leases office space in Chicago, IL with a monthly rent of $582. The lease expired May 31, 2020. This has been renewed for two years expiring May 31, 2022 at rate of $655 per month. The Company terminated this lease May 31, 2022.
Removed
The Company leases 1,107 square feet of office space in San Diego, CA with a monthly rent of $4,184 escalating to $4,461 per month at the end of the lease term, February 28, 2021. The Company extended this lease for one month, ending March 31, 2021, for $4,461 for the one month. This Company terminated this lease March 31, 2021.
Removed
On February 25, 2019, the Company signed a lease for 1,180 square feet of office space in Lisle, IL. The lease begins April 1, 2019 with a monthly rent of $1,942 escalating to $2,040 by the end of the lease term March 31, 2022.
Removed
This was terminated March 31, 2022. 26 Table of Contents The Company leases 2,105 square feet of office space in Phoenix, AZ starting at $1,271 and escalating to $2,982 per month by the end of the term September 30, 2020.
Removed
The Company leases office space in Burr Ridge, IL starting at $2,849 per month and escalating to $2,929 per month by the end of the term which ends July 30, 2022. The Company requested and received early termination and, as such, the Company terminated the lease on March 31, 2022.
Removed
The Company leases office space in Syracuse, NY, at a monthly rent of $2,300. The lease expired on May 31, 2018 and was subsequently extended for a three-year term commencing June 1, 2018 and ending May 31, 2021. This lease was terminated May 31, 2021.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed2 unchanged
Biggest changeItem 4. Mine Safety Disclosures Not applicable. 27 Table of Contents PART II
Biggest changeItem 4. Mine Safety Disclosures Not applicable. 37 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

2 edited+0 added−0 removed0 unchanged
Biggest changeItem 4. Mine Safety Disclosures 27 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 28 Item 6. Reserved 28 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 29 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 36 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 37 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 38 Item 6. Reserved 38 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 39 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 44 Item 8.
Financial Statements and Supplementary Data 36 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 36 Item 9A. Controls and Procedures 36
Financial Statements and Supplementary Data 44 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 44 Item 9A. Controls and Procedures 45

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+0 added−2 removed0 unchanged
Biggest changeUnregistered Equity Securities There were no unregistered sales of the Company’s equity securities during 2022 that were not previously disclosed in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K. On September 29, 2022, the Company approved 120,000 shares of common stock in exchange for services. The market value of these shares was $297,600.
Biggest changeUnregistered Equity Securities There were no unregistered sales of the Company’s equity securities during 2023 that were not previously disclosed in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K. Transfer Agent Our transfer agent is Pacific Stock Transfer Company at 6725 Via Austi Pkwy, Suite 300, Las Vegas, NV 89119.
Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities (a) Market Information The Company has been listed and is traded on the NASDAQ Capital Market under the symbol “SSNT”. (b) Holders of Common Equity As of February 26, 2023, there were approximately 855 stockholders of record.
Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities (a) Market Information The Company’s Common is listed and is traded on the Nasdaq Capital Market under the symbol “SSNT”. (b) Holders of Common Equity As of March 13, 2024, there were approximately 850 stockholders of record.
An additional number of stockholders are beneficial holders of our Common Stock in “street name” through banks, brokers and other financial institutions that are the record holders. (c) Dividend Information On June 21, 2021, the Company announced the payment of a $0.60 special cash dividend per share of Common Stock to shareholders of record July 9, 2021.
An additional number of stockholders are beneficial holders of our Common Stock in “street name” through banks, brokers and other financial institutions that are the record holders. (c) Dividend Information On August 4, 2023, the Board of Directors approved the payment of a $0.20 special cash dividend per share of Common Stock to shareholders of record August 18, 2023.
The declaration of any future cash dividends is at the discretion of our board of directors and depends upon our earnings, if any, our capital requirements and financial position, our general economic conditions, and other pertinent conditions.
The dividend was paid on August 25, 2023. No dividends were approved or paid for the year ended December 31, 2022. The declaration of any future cash dividends is at the discretion of our board of directors and depends upon our earnings, if any, our capital requirements and financial position, our general economic conditions, and other pertinent conditions.
Removed
The dividend was paid on July 16, 2021 in the amount of $3,081,706. The Company did not declare or pay any dividends in the year 2022.
Removed
These shares were issued in December 2022. Transfer Agent Our transfer agent is Pacific Stock Transfer Company at 6725 Via Austi Pkwy, Suite 300, Las Vegas, NV 89119.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

31 edited+17 added−39 removed31 unchanged
Biggest changeThis increase in cash provided by operations is primarily because of the increase in accounts payable and deferred revenues offset partially by the increase in deferred charges. Cash used in investing activities: Investing activities for the year ended December 31, 2022 used cash of $188,742 as compared to using $510,464 of cash for the year ended December 31, 2021.
Biggest changeCash used in investing activities: Investing activities for the year ended December 31, 2023 used cash of $399,416, as compared to using $188,742 of cash for the year ended December 31, 2022. This increase in cash used is due primarily to an increase in amounts required to acquire businesses or assets as well as higher purchases of property and equipment.
This change in gross profit percentage is mostly due higher to costs associated with increasing pay and benefits to employees to retain and recruit their services and to address inflationary pressures in the overall economy, plus the training of new employees, who were hired to accommodate our growth, and who are not as yet as billable as our more experienced team.
This change in gross profit percentage is mostly due to higher costs associated with increasing pay and benefits to employees to retain and recruit their services and to address inflationary pressures in the overall economy, plus the training of new employees, who were hired to accommodate our growth, and who are not as yet as billable as our more experienced team.
More specifically, over the past fifteen years, we have outright acquired select assets of or entered into revenue sharing agreements with Business Tech Solutions Group, Inc.; Wolen Katz Associates; AMP-BEST Consulting, Inc.; IncorTech; Micro-Point, Inc.; HighTower, Inc.; Point Solutions, LLC; SGEN, LLC., ESC, Inc., 2000 SOFT, Inc., Productive Tech Inc., The Macabe Associates, Oates & Co; Pinsight Technology, Inc.; Info Sys Management, Inc., Nellnube, Inc., Partners in Technology Inc., Prairie Technology Solutions Group, Inc., Computer Management Services, LLC, Business Software Solutions, PeopleSense, Inc., and more recently Dynamic Tech Services, Inc. and NEO3, LLC.
More specifically, over the past fifteen years, we have outright acquired select assets of or entered into revenue sharing agreements with Business Tech Solutions Group, Inc.; Wolen Katz Associates; AMP-BEST Consulting, Inc.; IncorTech; Micro-Point, Inc.; HighTower, Inc.; Point Solutions, LLC; SGEN, LLC., ESC, Inc., 2000 SOFT, Inc., Productive Tech Inc., The Macabe Associates, Oates & Co; Pinsight Technology, Inc.; Info Sys Management, Inc., Nellnube, Inc., Partners in Technology Inc., Prairie Technology Solutions Group, Inc., Computer Management Services, LLC, Business Software Solutions, PeopleSense, Inc., Dynamic Tech Services, Inc. and NEO3, LLC.
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.
Our working capital and additional funding requirements will depend upon numerous factors, including: (i) strategic acquisitions or investments; (ii) an increase in 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.
As a value-added reseller of business application software, we offer solutions for accounting and business management, financial reporting, Enterprise Resource Planning (“ERP”), Human Capital Management (“HCM”), Warehouse Management Systems (“WMS”), Customer Relationship Management (“CRM”), and Business Intelligence(“BI”). 29 Table of Contents Additionally, we have our own development staff building software solutions for various ERP enhancements.
As a value-added reseller of business application software, we offer solutions for accounting and business management, financial reporting, Enterprise Resource Planning (“ERP”), Human Capital Management (“HCM”), Warehouse Management Systems (“WMS”), Customer Relationship Management (“CRM”), and Business Intelligence(“BI”). 39 Table of Contents Additionally, we have our own development staff building software solutions for various ERP enhancements.
Off Balance Sheet Arrangements During fiscal 2022, 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.
Off Balance Sheet Arrangements During fiscal 2023, 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.
While our Company has not been significantly impacted because of this uncertainty nor from the impact of Covid-19, the potential negative impact on our business, in the future, is impossible to determine at this point, although it is likely that we could suffer negative consequences as many companies go out of business or decrease their technology spending.
While our Company has not been significantly impacted because of this uncertainty, the potential negative impact on our business, in the future, is impossible to determine at this point, although it is likely that we could suffer negative consequences as many companies go out of business or decrease their technology spending.
The Company believes that as a result of the growth in business, and the funds on hand, it has adequate liquidity to fund its operating plans for at least the next twelve months, provided, however, that the Company cannot currently quantify the uncertainty related to the recent pandemic and the uncertainty of the economy and its effects on the business in the coming quarters.
The Company believes that as a result of the growth in business, and the funds on hand, it has adequate liquidity to fund its operating plans for at least the next twelve months, provided, however, that the Company cannot currently quantify the recent economic uncertainty and its effects on the business in the coming quarters.
Income Taxes For the year ended December 31, 2022 the Company recorded tax benefit of $192,184, primarily as a result of the loss for the year.
Income Taxes For the year ended December 31, 2023, the Company recorded tax benefit of $297,419, primarily as a result of the loss for the year. For the year ended December 31, 2022, the Company recorded a tax benefit of $192,184, primarily as a result of the loss for the year.
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. 35 Table of Contents
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.
The Company’s principal sources and uses of funds were as follows: Cash provided by operating activities: The Company provided $2,038,392 in cash for operating activities for the year ended December 31, 2022 as compared to providing $226,034 of cash from operating activities for the year ended December 31, 2021.
The Company’s principal sources and uses of funds were as follows: Cash provided by operating activities: The Company provided $583,805 in cash for operating activities for the year ended December 31, 2023, as compared to providing $2,038,392 of cash from operating activities for the year ended December 31, 2022.
The decrease is primarily due to the issuance of stock options in 2021 that were expensed as these stock options were immediately vested. Depreciation and amortization expense for the year ended December 31, 2021 was $948,965 as compared to $875,566 for the year ended December 31, 2021.
The decrease is primarily due to the issuance of certain stock options in 2021 that were all expensed as these stock options were immediately vested. Depreciation and amortization expense for the year ended December 31, 2023 was $828,157 as compared to $948,965 for the year ended December 31, 2022.
As such, we need to rely on our own limited resources to weather any economic downturn. Management will continue to monitor developments, explore various cost-cutting measures, and explore other sources of funding, but there is no guarantee we will be successful in doing so. The Company currently has no line of credit or other credit facility with any lender.
As such, we need to rely on our own limited resources to weather any economic downturn. Management will continue to monitor developments, explore various cost-cutting measures, and explore other sources of funding, but there is no guarantee we will be successful in doing so.
The Federal effective rate is higher than the statutory rate primarily due to the non-cash share-based compensation related to the issuance of stock options which are not tax deductible.
State provision requirements were calculated based on the estimated tax rate. The Federal effective rate is higher than the statutory rate primarily due to the non-cash share-based compensation related to the issuance of stock options which are not tax deductible.
Item 7. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations This annual report on Form 10-K and other reports filed by SilverSun Technologies, Inc. and its wholly owned subsidiaries, SWK Technologies, Inc., Secure Cloud Services, Inc., and Critical Cyber Defense Corp. (together the “Company”, “we”, “our”, and “us”) from time to time with the U.S.
Item 7. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations This annual report on Form 10-K and other reports filed by SilverSun Technologies, Inc. and its wholly owned subsidiaries, SWK Technologies, Inc., Secure Cloud Services, Inc., Critical Cyber Defense Corp., and SilverSun Technologies Holdings, Inc.
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.
(together the “Company”, “we”, “our”, and “us”) from time to time with the U.S. Securities and Exchange Commission (the “SEC”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management.
Net (Loss) Income As a result of the above, the Company generated a net loss of $282,219 for the year ended December 31, 2022 as compared to a net loss of $134,434 for the year ended December 31, 2021.
Net (Loss) Income As a result of the above, the Company generated a net loss of $1,070,095 for the year ended December 31, 2023, as compared to a net loss of $282,219 for the year ended December 31, 2022.
Loss Income from Operations As a result of the above, the Company had a loss from operations of $385,379 for the year ended December 31, 2022, as compared to a loss from operations of $230,986 for the year ended December 31, 2021.
Income (Loss) from Operations As a result of the above, the Company had net income from operations of $1,674,259 for the year ended December 31, 2023, as compared to a loss from operations of $385,379 for the year ended December 31, 2022.
The gross profit attributed to software sales increased $1,415,557 (43.1%) to $4,703,558 for 2022 from $3,288,001 in 2021, which is due mostly to the increased volume of software sold. For the year ended December 31, 2022, the gross profit percentage for software was 39.9%, as compared to 41.8 % for the year ended December 31, 2021.
The gross profit attributed to software sales increased $894,448 (19.0%) to $5,598,006 for 2023 from $4,703,558 in 2022, which is due mostly to the increased volume of software sold. For the year ended December 31, 2023, the gross profit percentage for software was 39.7%, as compared to 39.9 % for the year ended December 31, 2022.
Operating Expenses Selling and marketing expenses increased $1,025,356 (15.3%) to $7,745,265 for the year ended December 31, 2022 as compared to $6,719,909 for the year ended December 31, 2021.
Operating Expenses Selling and marketing expenses increased $1,107,474 (14.3%) to $8,852,739 for the year ended December 31, 2023, as compared to $7,745,265 for the year ended December 31, 2022.
Gross Profit Gross profit for the year ended December 31, 2022 increased $752,678 (4.4%) to $17,960,736, as compared to $17,208,058 for the year ended December 31, 2021. For the year ended December 31, 2022, the overall gross profit percentage was 39.9%, as compared to 41.3% for the year ended December 31, 2021.
Gross Profit Gross profit for the year ended December 31, 2023 increased $3,653,073 (20.3%) to $21,613,809, as compared to $17,960,736 for the year ended December 31, 2022. For the year ended December 31, 2023, the overall gross profit percentage was 39.6%, as compared to 39.9% for the year ended December 31, 2022.
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.
The Company currently has no line of credit or other credit facility with any lender. 42 Table of Contents 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.
(Loss) Income Before Taxes As a result of the above, the Company had a loss before taxes of $474,403 for the year ended December 31, 2022 as compared to income before taxes in the amount of $43,571 for the year ended December 31, 2021.
These expenses are recorded as Deal Costs in the accompanying statement of operations in Other Expense. (Loss) Before Taxes As a result of the above, the Company had a loss before taxes of $1,367,514 for the year ended December 31, 2023 as compared to a loss before taxes in the amount of $474,403 for the year ended December 31, 2022.
Our working capital and additional funding requirements will depend upon numerous factors, including: (i) strategic acquisitions or investments; (ii) an increase in 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. 32 Table of Contents In addition to developing new products, obtaining new customers and increasing sales to existing customers, management plans to increase its business and profitability by entering into collaboration agreements, buying assets, and acquiring companies in the business software and information technology consulting and other markets with solid revenue streams and established customer bases that generate positive cash flow.
In addition to developing new products, obtaining new customers and increasing sales to existing customers, management plans to increase its business and profitability by entering into collaboration agreements, buying assets, and acquiring companies in the business software and information technology consulting and other markets with solid revenue streams and established customer bases that generate positive cash flow.
For the year ended December 31, 2022, inflation has impacted the Company’s profitability, as it has resulted in increased costs necessary to recruit and retain personnel. As the Company returns back to its pre-Covid marketing and trade show schedules, the higher costs of travel and meals will also have a negative impact on the Company’s profitability.
The Company does not anticipate any major capital expenditures in the near future. For the year ended December 31, 2023, inflation has impacted the Company’s profitability, as it has resulted in increased costs necessary to recruit and retain personnel.
This increase of $73,399 (8.4%) for the year ended December 31, 2022 is primarily due to the additional amortization of intangible assets related to the new acquisitions and increased depreciation related to equipment purchases over the last 12 months.
This $120,808 (12.7%) increase is primarily due to the additional amortization of intangible assets related to the new acquisitions.
Cash (used in) provided by financing activities For the year ended December 31, 2022 financing activities used cash of $655,134 as compared to providing cash of $503,131 for the year ended December 31, 2021.
Cash used in financing activities: For the year ended December 31, 2023 financing activities used cash of $2,049,724 as compared to using cash of $655,134 for the year ended December 31, 2022. The increase in cash used is a result of the cash dividend paid to shareholders in August 2023 as well as increase in payments of long-term debt.
Results of Operations Revenues Revenues for the year ended December 31, 2022 increased $3,283,896 (7.9%) to $ 44,985,276 as compared to $41,701,380 for the year ended December 31, 2021. This increase is mostly attributed to an increase in software sales, offset partially by a decrease in service revenues.
Results of Operations Revenues Revenues for the year ended December 31, 2023 increased $9,531,665 (21.2%) to $54,516,941 as compared to $44,985,276 for the year ended December 31, 2022. This increase is mostly attributed to increases in professional consulting services and software. Software sales increased by $2,329,411 (19.8%) to $14,110,773 in 2023 from $11,781,362 in 2022.
This increase is a result of payroll and payroll-related expenses and departmental changes for various employees which involved moving their compensation between cost of revenues and administrative expenses as well as a lower rent, professional fees, license fees and credit card charges, mostly offset by higher recruitment costs, outside services fees, bad debt expense and excise taxes. 31 Table of Contents Share-based compensation decreased $261,050 to $180,260 for the year ended December 31, 2022 as compared to $441,310 for the year ended December 31, 2021.
This increase is a result of salary increases and increased accrued compensation, travel and entertainment, professional and license fees, offset partially by a decrease in credit card fees, lower rent and recruitment expenses. Share-based compensation decreased $138,763 (77.0%) to $41,497 for the year ended December 31, 2023, as compared to $180,260 for the year ended December 31, 2022.
This increase is primarily due to increased commissions as a result of the increase in software sales, higher travel and entertainment expenses associated with attendance with trade shows and conference as well as higher outside sales expenses.
This increase is primarily due to increased salary increases, new personnel, higher commissions to employees as a result of the increased revenues, as well as increased travel expenses associated with attendance at trade shows and conferences. 41 Table of Contents General and administrative expenses increased $745,532 (7.9%) to $10,217,157 for the year ended December 31, 2023, as compared to $9,471,625 for the year ended December 31, 2022.
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.
To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations for the future based on available information.
Removed
During 2022 the Company continued to expand its customer base and growth trend which we believe will provide a basis for future growth. 30 Table of Contents As discussed above (see Recent Events – Merger), on September 29, 2022, the Company entered into a definitive agreement and plan of merger (the “Merger Agreement”) with Rhodium Enterprises, Inc.
Added
On November 13, 2023, SWK entered into an Asset Purchase Agreement with JCS Computer Resource Corporation (“JCS”), an Illinois corporation pursuant to which SWK acquired from JCS certain assets (the “ Acquired Assets ”) related to the component of JCS’ business devoted to being a value-added reseller of Sage 100, Sage 50, and QuickBooks software, together with ancillary consulting services related thereto.
Removed
(“Rhodium”), an industrial-scale digital asset technology company utilizing proprietary technologies to mine bitcoin. The proposed business combination is expected to close in the first quarter of 2023, subject to the receipt of any applicable regulatory approvals, the approval of SilverSun's and Rhodium's respective stockholders, and other customary closing conditions.
Added
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. 40 Table of Contents As discussed above (see Recent Events – Merger), on September 29, 2022, SilverSun entered into a definitive agreement and plan of merger (the “ Rhodium Merger Agreement ”) by and among SilverSun, Rhodium Enterprises Acquisition Corp, Rhodium Enterprises Acquisition LLC and Rhodium Enterprises, Inc., an industrial-scale digital asset technology company utilizing proprietary technologies to mine bitcoin.
Removed
Software sales increased by $3,917,975 (49.8%) to $11,781,362 in 2022 from $7,863,387 in 2021. The increase is attributable to an increase in sales of cloud-based ERP software and increased sales of third-party solutions which add functionality to customer’s existing systems. Service revenue decreased by $634,079 (1.9%) to $33,203,914 in 2022 from $33,837,993 in 2021.
Added
On October 13, 2023, SilverSun terminated the Rhodium Merger Agreement On December 3, 2023, SilverSun entered into an Investment Agreement (as it may be amended or supplemented, the “ Investment Agreement ”), with Jacobs Private Equity II, LLC, a Delaware limited liability company (“ JPE ”), and the other investors party thereto (the “ Other Investors ,” and together with JPE, the “ Investors ”), providing for an aggregate investment by the Investors of $1,000,000,000 in cash in SilverSun, including $900,000,000 from JPE (the “ Equity Investment ”).
Removed
This decrease is mainly attributed to lower maintenance revenue as more customers migrate to cloud-based products, and lower consulting revenues as a result of customer delays on projects and the sale of a consulting practice in late 2021. Service revenue increased $2,817,672 (8.3%) excluding the X3 product line which was sold in 2021.
Added
The Investment Agreement has been unanimously approved by the SilverSun board of directors.
Removed
The gross profit attributed to services decreased $662,879 (4.8%) to $13,257,178 for 2022 from $13,920,057 in 2021. This decrease is mostly due to the gross profit loss associated with sale of a legacy consulting practice in November 2021.
Added
Following the closing (the “ Closing ”) of the Equity Investment (together with all of the other transactions contemplated by the Investment Agreement), JPE will become the controlling stockholder of SilverSun, and Brad Jacobs, the Managing Member of JPE, will become Chairman of the SilverSun board of directors and Chief Executive Officer of SilverSun (see “Recent Events” above for more detail).
Removed
Excluding the effect of that practice in 2021, gross profit declined only $5,222 (0.0%) for the year ended December 31, 2022 as compared to the year ended December 31, 2021. For the year ended December 31, 2022 the gross profit percentage for services was 39.9% as compared to 41.3% for the year ended December 31, 2021.
Added
The increase is primarily attributable to an increase in our ERP software sales, especially for Acumatica and Sage Intacct. Service revenue increased by $7,202,254 (21.7%) to $40,406,168 in 2023 from $33,203,914 in 2022.
Removed
General and administrative expenses increased $69,366 (0.7%) to $9,471,625 for the year ended December 31, 2022, as compared to $9,402,259 for the year ended December 31, 2021.
Added
This increase is mainly attributed to the increase in professional services, especially for our Acumatica, Sage 100, and Sage Intacct products, as well as an increase in revenue in our hosting services.
Removed
Other Income (Expense) For the year ended December 31, 2022, other expense was $89,024 as compared to other income of $274,557 for the year ended December 31, 2021.
Added
Recruiting in 2022 was a difficult challenge, but our efforts to increase our consulting staff with additional resources, as well as system improvements, has yielded a positive result in our financial performance. We have also utilized some outside contractors to assist in projects because of our growth.
Removed
The year ended December 31, 2021 includes the gain on the sale of a product line in the amount of $250,000 as well as a gain of a bargain purchase from an acquisition in the amount of $71,359 which did not occur in 2022.
Added
The gross profit attributed to services increased $2,758,625 (20.8%) to $16,015,803 for 2023 from $13,257,178 in 2022. This increase is attributed to revenue increases in professional services and application hosting. For the year ended December 31, 2023 the gross profit percentage for services was 39.6% as compared to 39.9% for the year ended December 31, 2022.
Removed
For the year ended December 31, 2021, the Company recorded a tax provision of $178,005 primarily due to the non-cash share-based compensation, which is related to the issuance of stock options which are not tax deductible in the current year. State provision requirements were calculated based on the estimated tax rate.
Added
Other Expense For the year ended December 31, 2023, the Company incurred other expense of $2,986,107 related to the termination of the Agreement and Plan of Merger dated as of September 29, 2022 (Notes 15 and Note 2). The Company charged to expense all previously deferred deal related expenses in the amount of $2,986,107.
Removed
We continue to seek these opportunities. At December 31, 2022, future payments of promissory notes are as follows over each of the next four fiscal years: 2023 $ 783,479 2024 360,093 2025 258,738 2026 52,183 Total $ 1,454,493 During the year ended December 31, 2022, the Company had a net increase in cash of $1,194,516.
Added
At December 31, 2023, future payments of promissory notes are as follows over each of the next four fiscal years: 2024 $ 701,749 2025 600,403 2026 393,863 Total $ 1,696,015 The Company’s working capital was $273,762 at December 31, 2023 as compared to $2,946,349 at December 31, 2022 mostly due to lower deferred charges, lower prepaid expenses and other current assets and cash offset partially by the decrease in deferred revenues.
Removed
This decrease in cash used is due primarily to lower cash required to acquire businesses or assets as well as lower purchases of property and equipment. In addition, the Company received proceeds from a sale of a product line in 2021 which it did not receive in 2022.
Added
During the year ended December 31, 2023, the Company had a net decrease in cash of $1,865,335.
Removed
The decrease in cash provided is attributed to the fact that the Company received no proceeds from the sale of common stock for the year ended December 31, 2022, whereas it received net proceeds from the sale of common stock under its Registration Statement on Form S-3 and the previously disclosed At Market Issuance Sales Agreement with a sales agent during the year ended December 31, 2021.
Added
This decrease in cash provided by operations is primarily because of the increase in loss before taxes as a result of the deal costs and the decrease in deferred revenues offset partially by the increase in deferred charges.
Removed
The cash received from the sale of stock was offset mostly by the payment of a cash dividend in 2021.
Added
As the Company returns back to its pre-Covid marketing and trade show schedules, the higher costs of travel and meals will also have a negative impact on the Company’s profitability. 43 Table of Contents Critical Accounting Estimates We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles, which require our management to make estimates that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods.
Removed
The belief that the Company has sufficient liquidity may be incorrect as the impact of Covid-19 becomes clearer over the coming months and quarters. The Company does not anticipate any major capital expenditures in the near future.
Added
We evaluate these estimates on an ongoing basis.
Removed
Critical Accounting Policies The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).
Added
We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.
Removed
The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate these estimates, including those related to bad debts, intangible assets, and litigation.
Added
There are items within our financial statements that require estimation but are not deemed critical, as defined above. For a detailed discussion of our significant accounting policies and related judgments, see Note 2 of the Notes to Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” of this report.
Removed
Actual results may differ from these estimates under different assumptions or conditions. 33 Table of Contents We have identified below the accounting policies, related to what we believe are most critical to our business operations and are discussed throughout Management’s Discussion and Analysis of Financial Condition or Plan of Operation where such policies affect our reported and expected financial results.
Removed
Revenue Recognition The Company has elected the significant financing component practical expedient in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers.
Removed
In determining the transaction price, the Company does not adjust the promised amount of consideration for the effects of a significant financing component as the Company expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.
Removed
Software product revenue is recognized when the product is delivered to the customer and the Company’s performance obligation is fulfilled. Service revenue is recognized when the professional consulting, maintenance or other ancillary services are provided to the customer.
Removed
Shipping and handling costs charged to customers are classified as revenue, and the shipping and handling costs incurred are included in cost of sales. Accounts Receivable Accounts receivable consist primarily of invoices for maintenance and professional services. Full payment for software ordered by customers is primarily due in advance of ordering from the software supplier.
Removed
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.
Removed
The Company maintains an allowance for bad debt estimated by considering a number of factors, including the length of time the amounts are past due, the Company’s previous loss history and the customer’s current ability to pay its obligations. Accounts are written off against the allowance when deemed uncollectable.
Removed
Unbilled Services The Company recognizes revenue on its professional services as those services are performed. Unbilled services represent the revenue recognized but not yet invoiced. Definite Lived Intangible Assets and Long-Lived Assets The values assigned to intangible assets were based on an independent valuation.
Removed
Purchased intangible assets are amortized over the useful lives based on the estimate of the use of economic benefit of the asset using the straight-line amortization method. The Company assesses potential impairment of its intangible assets and other long-lived assets when there is evidence that recent events or changes in circumstances have made recovery of an asset’s carrying value unlikely.
Removed
Factors the Company considers important, which may cause impairment include, among others, significant changes in the manner of use of the acquired asset, negative industry or economic trends, and significant underperformance relative to historical or projected operating results. Business Combinations We account for business combinations under the acquisition method of accounting.
Removed
This method requires the recording of acquired assets and assumed liabilities at their acquisition date fair values. The excess of the purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill.
Removed
Results of operations related to business combinations are included prospectively beginning with the date of acquisition and transaction costs related to business combinations are recorded within general and administrative expenses. 34 Table of Contents Income Taxes The Company accounts for income taxes using the asset and liability method described in FASB ASC 740, “Income Taxes”.
Removed
Deferred tax assets arise from a variety of sources, the most significant being: a) tax losses that can be carried forward to be utilized against profits in future years; b) expenses recognized for financial reporting purposes but disallowed in the tax return until the associated cash flow occurs; and c) valuation changes of assets which need to be tax effected for book purposes but are deductible only when the valuation change is realized.
Removed
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as net operating loss carryforwards. Based on ASU 2015-17, all deferred tax assets or liabilities are classified as long-term.
Removed
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.

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