Business Context and Reporting Period
This Form 8-K, dated September 29, 2022, reports that SilverSun Technologies, Inc. (SilverSun) entered into a definitive Agreement and Plan of Merger with Rhodium Enterprises, Inc. (Rhodium). The transaction involves a reverse merger where SilverSun will acquire Rhodium, restructure as an umbrella partnership C-corporation, and change its name to Rhodium Enterprises, Inc. Concurrently, SilverSun plans to separate its existing cybersecurity and cloud services businesses (SWK Technologies and Secure Cloud Services) into a new public entity, SWK Technologies Holdings, Inc.
Key Financial Metrics and Transaction Valuation
The filing does not provide historical revenue, profit, or cash flow data for the reporting period. Key financial terms of the proposed transaction include:
- Pro Forma Net Equity Value: $671,875,172.
- Rhodium Valuation: $650,375,000 (consideration for Rhodium legacy stockholders).
- SilverSun Legacy Valuation: $21,500,172 (consideration for SilverSun legacy stockholders).
- Ownership Structure Post-Merger: Rhodium legacy stockholders will own approximately 96.8% of the combined company; SilverSun legacy stockholders will own approximately 3.2%.
- Cash Dividend: SilverSun intends to distribute approximately $8,500,000 (at least $1.50 per pre-Reverse Stock Split share) to pre-Merger SilverSun stockholders from $10,000,000 cash received from Rhodium.
- Termination Fees: $5,000,000 payable by either party to the other under specific unilateral termination conditions.
Material Changes and Structural Reorganization
The filing details a significant corporate restructuring rather than operational performance changes:
- Reverse Stock Split: SilverSun will effect a reverse stock split of its common stock at a ratio to be determined by Rhodium.
- Stock Class Creation: Post-merger, the company will have two classes of common stock: Class A (held by public shareholders) and Class B (held 100% by Imperium Investment Holdings LLC).
- Management Change: Upon closing, current SilverSun officers and directors will resign, and Rhodium's officers and a new board of seven directors chosen by Rhodium will take control.
- Business Separation: SilverSun will distribute its SWK and SCS subsidiaries to shareholders, leaving the post-merger entity focused on Rhodium's business operations.
Guidance, Risks, and Conditions
The transaction is subject to several material conditions and risks:
- Conditions to Closing: Requires shareholder approval from both SilverSun and Rhodium, SEC effectiveness of the Form S-4 Registration Statement and Form 10, Nasdaq listing approval, and the absence of material adverse effects.
- Termination Date: The agreement may be terminated if the closing does not occur by March 31, 2023.
- Equity Award Treatment: SilverSun stock options with exercise prices above the "Per Share SilverSun Value" will be cancelled; those below will vest and convert. Rhodium RSUs will convert to SilverSun Class A RSUs.
- Tax Treatment: The parties intend for the transaction to qualify as a tax-free reorganization under Section 368(a) of the Internal Revenue Code.
- Risks: Risks include failure to obtain regulatory or shareholder approvals, disruption of business operations, and the inability to raise additional capital.
Investor Verification Checklist
- Verify the final Reverse Stock Split ratio, which is to be determined by Rhodium prior to the Second Merger.
- Confirm the outcome of the SilverSun and Rhodium shareholder votes required to approve the Merger Agreement.
- Monitor the effectiveness of the Form S-4 Registration Statement and Form 10 filed with the SEC.
- Review the definitive proxy statement/prospectus for detailed risk factors and the exact terms of the Separation and Distribution Agreement.
- Check for any material adverse effects or regulatory injunctions that could trigger termination of the agreement before March 31, 2023.