Business Context and Reporting Period
This Form 8-K, filed on December 4, 2023, reports on events occurring on December 1 and December 3, 2023, involving SilverSun Technologies, Inc. (SSNT). The filing details a transformative transaction where the Company entered into an Investment Agreement with Jacobs Private Equity II, LLC (JPE) and other investors. The transaction involves a $1 billion equity investment, a change in control, a corporate spin-off of the existing business, and a complete reconstitution of the Board of Directors and executive management.
Key Financial Metrics and Transaction Terms
- Investment Amount: $1,000,000,000 in cash from Investors.
- Equity Issuance: 1,000,000 shares of Convertible Perpetual Preferred Stock and warrants to purchase approximately 219 million shares of common stock.
- Conversion/Exercise Prices: Initial conversion price of $4.57 per share (post-split). Warrants have tiered exercise prices of $4.57 (50%), $6.85 (25%), and $13.70 (25%).
- Ownership Structure: Post-closing, Investors will own approximately 99.85% of the Company's common stock on an as-converted basis.
- Dividends: Preferred Stock pays quarterly cash dividends equal to the greater of as-converted common dividends or 9% of the liquidation preference per annum.
- Stock Split: An 8:1 reverse stock split will be effected prior to closing.
- Shareholder Dividend: A $2.5 million aggregate cash dividend will be declared to stockholders of record prior to the spin-off.
- Executive Compensation: Current CEO Mark Meller is eligible for a lump sum severance payment of up to $3,000,000 upon termination of his employment agreement.
Material Changes and Corporate Actions
- Change in Control: JPE will become the controlling stockholder. Mr. Brad Jacobs will become Chairman and CEO. Current officers and directors will resign.
- Spin-Off: The existing SilverSun business will be separated into a new entity, SilverSun Technologies Holdings, Inc., and distributed to existing stockholders. The spin-off company will seek OTCQX listing.
- Corporate Name and Symbol: The Company will change its name and trading symbol as determined by JPE following the closing.
- Capital Structure: Series A Preferred Stock was eliminated on December 1, 2023. The 2019 Equity and Incentive Plan and all outstanding options will be terminated.
- Future Acquisitions: The Company will cooperate with JPE to acquire one or more businesses selected by JPE, with the closing of such acquisitions occurring after the spin-off.
Guidance, Risks, and Contingencies
- Closing Conditions: The transaction is subject to stockholder approval, antitrust approvals, and other customary closing conditions.
- Termination Fees: The Company may be obligated to pay JPE a termination fee of $600,000 if the agreement is terminated due to a Superior Proposal or other specified circumstances.
- Delay Fees: If JPE delays closing beyond 7 months, the Company will receive monthly fees ranging from $40,000 to $50,000.
- Risks: Significant risks include the failure to obtain stockholder or regulatory approval, the possibility of competing proposals, volatility due to low public float, and the uncertainty of realizing anticipated benefits from the spin-off and future acquisitions.
- Financial Outlook: The filing does not provide specific revenue or profit guidance for the post-transaction entity, as the future business focus depends on acquisitions selected by JPE.
Investor Verification Checklist
- Verify the final terms of the Investment Agreement and the definitive proxy statement for stockholder voting.
- Confirm the status of the 8:1 reverse stock split and the exact record date for the $2.5 million cash dividend.
- Monitor the progress of the spin-off and the subsequent listing of SilverSun Technologies Holdings, Inc. on the OTCQX.
- Assess the potential dilution impact of the 1,000,000 Preferred Shares and 219 million Warrants on existing shareholders.
- Review the specific criteria for the $600,000 termination fee and the conditions under which JPE may delay closing.
- Track the identification and valuation of any target businesses JPE intends to acquire and contribute to the Company.