SilverSun Technologies, Inc. - Quarter Report: 2011 September (Form 10-Q)

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Delaware	16-1633636
(State or other jurisdiction of incorporation)	(IRS Employer Identification No.)

 

Large accelerated filer	¨		Accelerated filer	¨
Non-accelerated filer	¨		Smaller reporting company	ý

 

		Page No.
PART I.    FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited):	3
	Condensed Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010	3
	Condensed Consolidated Statements of Operations for the Three and Nine Months September 30, 2011 and 2010	4
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2011 and 2010	5
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	19
PART II.   OTHER INFORMATION
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3.	Defaults Upon Senior Securities	20
Item 4.	(Removed and Reserved)	20
Item 5.	Other Information	20
Item 6.	Exhibits	20

ASSETS		September 30, 2011				December 31, 2010
Current assets:
Cash and cash equivalents		$	587,424			$	104,344
Accounts receivable, net of allowance of $41,000 and $41,000			1,050,249				489,280
Inventories			15,285				15,285
Prepaid expenses and other current assets			234,983				189,718
Total current assets			1,887,941				798,627
Property, plant and equipment, net of accumulated depreciation of $571,064 and $498,212			155,517				156,621
Deposits and other assets			70,916				65,866
Total assets		$	2,114,374			$	1,021,114
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and accrued expenses		$	1,029,037			$	1,081,201
Accrued interest			16,265				660,501
Due to related parties			3,705				1,293,341
Capital leases			73,233				55,565
Deferred revenue			1,236,667				486,019
Promissory notes			450,000				-
Notes payable to related parties			40,000				45,000
Convertible promissory note – related party, net of discount of $17,000			34,000				-
Convertible debentures			15,000				1,334,000
Derivative liabilities			-				1,177,845
Total current liabilities			2,897,907				6,133,472
Commitments and contingencies			-				-
Stockholders’ deficit:
Preferred stock, $1.00 par value; authorized 1,000,000 shares;          No shares issued and outstanding			-				-
Series A Preferred Stock, 1.00 par value; authorized 2 shares;          2 shares issued and outstanding			22,886				-
Series B Preferred Stock, 1.00 par value; authorized 1 share;          1 shares issued and outstanding			1				-
Common stock:
Class A – par value $.0001; authorized 750,000,000 shares;               4,785,037 and 4,723,119 shares issued and outstanding			479				472
Class B – par value $.0001: authorized 50,000,000 shares;               no shares issued and outstanding			-				-
Additional paid-in capital			9,347,539				7,845,651
Accumulated deficit			(10,207,103	)			(12,913,304	)
Total SilverSun stockholders’ deficit			(836,198	)			(5,067,181	)
Non-controlling interest in SWK Technologies, Inc.			52,665				(45,177	)
Total stockholders’ deficit			(783,533	)			(5,112,358	)
Total liabilities and stockholders’ deficit		$	2,114,374			$	1,021,114

 

		Three Months Ended								Nine Months Ended
		September 30, 2011				September 30, 2010				September 30, 2011				September 30, 2010
Revenues:
Product, net		$	356,909			$	219,369			$	1,553,861			$	922,426
Service. net			2,014,891				1,688,847				6,271,462				4,601,937
Total revenues, net			2,371,800				1,908,216				7,825,323				5,524,363
Cost of revenues:
Product			146,447				104,730				790,480				484,019
Service			1,214,116				970,050				3,656,569				2,935,453
Cost of revenues			1,360,563				1,074,780				4,447,049				3,419,472
Gross profit			1,011,237				833,436				3,378,274				2,104,891
Selling, general and administrative expenses:
Selling expenses			450,345				382,831				1,307,193				1,179,251
General and administrative expenses			527,701				539,127				1,666,543				1,479,505
Depreciation and amortization			22,548				19,164				74,860				61,656
Total selling, general and administrative expenses			1,000,594				941,122				3,048,596				2,720,412
Income (loss) from operations			10,643				(107,686)				329,678				(615,521)
Other income (expense):
Gain (loss) on revaluation of derivatives			-				866,084				362,035				1,048,840
Gain on extinguishment of debt and         derivative liability			-				-				2,228,939				-
Interest expense, net			(24,784	)			(27,613)				(116,609	)			(89,960)
Total other income (expense)			(24,784	)			838,471				2,474,365				958,880
Net income (loss)			(14,141	)			730,785				2,804,043				343,359
Net income (loss) attributable to the    Noncontrolling interest in SWK Technologies			10,511				(3,136)				97,842				(62,249)
Net income (loss) attributable to SilverSun Technologies		$	(24,652	)		$	733,921			$	2,706,201			$	405,608
Net income (loss) per common share:
Basic		$	(0.01	)		$	0.21			$	0.60			$	0.12
Fully diluted		$	(0.01	)		$	0.13			$	0.03			$	0.07
Weighted average shares:
Basic			4,492,578				3,571,175				4,500,809				3,431,691
Diluted			4,492,578				5,521,811				105,777,990				5,521,811

 

		2011				2010
Cash flows from operating activities:
Net income		$	2,804,043			$	343,359
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization			74,860				61,656
Amortization of debt discount			56,886				-
Gain on extinguishment of debt and derivative liability			(2,228,939	)			-
Other			-				4,500
Gain on revaluation of derivative liability			(362,035	)			(1,048,840	)
Return of shares for services not rendered			(65,000	)			-
Share-based compensation			21,000				-
Changes in assets and liabilities:
Accounts receivable			(560,969	)			33,427
Inventory			-				(24,060	)
Prepaid expenses and other current assets			55,076				(36,604	)
Accounts payable and accrued expenses			146,741				239,958
Accrued interest			34,519				77,557
Deferred revenue			750,648				(16,879	)
Due to related parties			49,330				253,089
Net cash provided by (used in) operating activities			776,160				(112,837	)
Cash flows from investing activities:
Purchase of property and equipment			(71,748	)			(43,881	)
Net cash used in investing activities			(71,748	)			(43,881	)
Cash flows from financing activities:
Proceeds from convertible promissory note – related party			51,000				-
Proceeds from promissory notes			550,000				-
Proceeds from note payable to related party			-				25,000
Repayment of note payable to related party			(5,000)
Repayment of promissory notes			(100,000	)			-
Repayment of related party loans			-				(75,405	)
Repayment of convertible debentures			(735,000	)			-
Principal payments under capital leases obligations			17,668				(21,650	) )
Net cash used in financing activities			(221,332	)			(72,055	)
Net increase in cash and cash equivalents			483,080				(228,773	)
Cash and cash equivalents – beginning of period			104,344				300,482
Cash and cash equivalents – end of period		$	587,424			$	71,709
Cash paid during period for:
Interest expense		$	8,395			$	-
Income taxes		$	-			$	-

NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

 

		Nine Months Ended				Nine Months Ended
		September 30, 2011				September 30, 2010
Basic net income (loss)  per share attributable to common shareholders computation:
Net income (loss) attributable to common stockholders		$	2,706,201			$	405,608
Weighted-average common shares outstanding			4,500,839				3,431,691
Basic net income (loss) per share attributable to common Stockholders		$	0.60			$	0.12
Diluted net income (loss) per share attributable to common shareholders computation
Net income (loss) attributable to common stockholders		$	2,706,201			$	405,608
Weighted-average common shares outstanding			4,500,839				3,431,691
Incremental shares attributable to the common stock  equivalents			101,277,181				2,090,120
Total adjusted weighted-average shares			105,777,990				5,521,811
Diluted net income (loss) per share attributable to common Stockholders		$	0.03			$	0.07

		Three Months Ended				Three Months Ended
		September 30, 2011				September 30, 2010
Basic net income (loss)  per share attributable to common shareholders computation:
Net income (loss) attributable to common stockholders		$	(24,652)			$	733,921
Weighted-average common shares outstanding			4,492,578				3,571,175
Basic net income (loss) per share attributable to common Stockholders		$	(0.01)			$	0.21
Diluted net income (loss) per share attributable to common shareholders computation
Net income (loss) attributable to common stockholders		$	(24,652)			$	733,921
Weighted-average common shares outstanding			4,492,578				3,571,175
Incremental shares attributable to the common stock  equivalents			-				1,950,636
Total adjusted weighted-average shares			4,492,578				5,521,811
Diluted net income (loss) per share attributable to common Stockholders		$	(0.01)			$	0.13

 

		April 12, 2011				December 31, 2010
Fair market value of stock		$	0.00013			$	0.00013
Exercise price		$	0.0001			$	0.0001
Dividend yield			0.00	%			0.00	%
Risk free interest rate			0.24	%			0.29	%
Expected volatility			145.01	%			183.32	%
Expected life		0.71 Year				1 Year

		May 17 , 2011				At Inception
Fair market value of stock		$	0.00013			$	0.00013
Exercise price		$	0.00005			$	0.00005
Dividend yield			0.00	%			0.00	%
Risk free interest rate			0.41	%			0.24	%
Expected volatility			169.92	%			182.35	%
Expected life		0.83 Year				1 Year

·

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.

·

Level 2 – Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures.

·	Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

Fair value, December 31, 2010		$	(1,177,845	)
Total gains or losses included in earnings:
Net change in unrealized gain (loss), net			415,856
New issuances			(104,821)
Debt extinguishment			767,279
Meller promissory note			99,531
			-
Fair value, September 30, 2011		$	-

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

2. A decrease in the number of authorized shares of Class A Common Stock from ten billion (10,000,000,000) shares of Class A Common Stock to seven hundred and fifty million (750,000,000) shares of Class A Common Stock;

3. An amendment to the par value of blank check preferred stock from a par value $1.00 per share to a par value $0.001 per share.

4. A change in the conversion ratio at which the Class B Common Stock, par value $.00001 per share of the Company converts into Class A Common Stock from (i) fifty percent (50%) of the lowest price ever paid for the issuance of Class A Common Stock for each one share of Class B Common Stock being converted to (ii) 1,975 shares of Class A Common Stock for each one share of Class B Common Stock;

5. The cancellation of Class C Common Stock, par value $.00001 per share.;

6. A change in the name of the Company from Trey Resources, Inc. to SilverSun Technologies, Inc.

 

 

 

 

·	For the nine months ended September 30, 2011, sales increased 42% to $7,825,323 and the Company generated an operating profit of $329,678 as compared to an operating loss of $615,521 for the same period in the prior year;

·	The Company reduced its liabilities by $3,183,815;

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

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

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

 

 

 

 

 

 

3.1			Fourth Amended and Restated Certificate of Incorporation, dated June 27, 2011 (as filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K, as filed with the SEC on June 30, 2011)
3.2			Amended and Restated Bylaws, dated June 28, 2011*
4.1			Certificate of Designation of Series A Convertible Preferred Stock filed with Delaware Secretary of State on May 5, 2011(as filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K, as filed with the SEC on May 12, 2011)
10.1			Form of Promissory Note dated April 11, 2011 executed by the Company in favor the investor named therein (as filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed with the SEC on April 15, 2011)
10.2			Form of Preferred Stock Agreement (as filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K, as filed with the SEC on May 12, 2011)
31.1			Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).*
31.2			Certification by the Principal Accounting Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).*
32.1			Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2			Certification by the Principal Accounting Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101.INS				XBRL Instance Document
101.SCH				XBRL Taxonomy Extension Schema
101.CAL				XBRL Taxonomy Extension Calculation Linkbase
101.DEF				XBRL Taxonomy Extension Definition Linkbase
101.LAB				XBRL Taxonomy Extension Label Linkbase
101.PRE				XBRL Taxonomy Extension Presentation Linkbase

 

		SILVERSUN TECHNOLOGIES, INC.
Dated: November 10, 2011		By:	/s/ Mark Meller
			Mark Meller
			Chief Executive Officer (Principal Executive Officer)
			Chief Financial Officer (Principal Accounting Officer)