Business Context and Reporting Period
This Form 8-K was filed by SilverSun Technologies, Inc. (the "Company") on March 11, 2015. The report details a material definitive agreement entered into by the Company's wholly-owned subsidiary, SWK Technologies, Inc. ("SWK"), to acquire assets from 2000Soft, Inc. d/b/a Accounting Technology Resources ("ATR").
Key Financial Metrics and Transaction Terms
The filing outlines the financial structure of the asset acquisition and related employment agreements:
- Acquisition Consideration: SWK paid $80,000 in cash and issued a promissory note with a principal amount of $175,000.
- Debt Instrument: The promissory note bears interest at 2% per annum, has a three-year term, and is amortized in 36 equal installments.
- Contingent Compensation: SWK agreed to pay the seller 10% of net maintenance renewals from existing ATR clients. Additionally, a 5% payment on net maintenance renewals is due between the 13th and 24th months post-closing.
- Employment Costs: SWK entered into a three-year employment agreement with Karen Espinoza McGarrigle at an annual salary of $155,000.
- Equity Compensation: Ms. McGarrigle received 10,000 stock options vesting at 20% per year over five years.
- Assumed Liabilities: SWK assumed liability for client deposits and the real estate lease for ATR's Santa Ana, CA premises.
The filing text does not provide specific values for the Company's overall revenue, profit, cash flow, margins, or total liquidity position.
Material Changes
The primary material change is the expansion of SWK's asset base and client portfolio through the acquisition of ATR's assets. This transaction introduces new fixed obligations (lease, salary) and debt service requirements ($175,000 note) to the Company's balance sheet.
Outlook, Risks, and Contingencies
Management Commentary: The acquisition is intended to bolster SWK's ERP sales capabilities, with Ms. McGarrigle appointed as an ERP sales executive to focus on new and existing customers.
Risks and Contingencies: Future cash outflows are contingent on the success of maintenance renewals from acquired clients. The Company also assumes the risk associated with the real estate lease and client deposit liabilities.
Investor Verification Checklist
- Verify the exact closing price of the Company's common stock on March 10, 2015, to determine the strike price of the 10,000 stock options granted.
- Review the full Asset Purchase Agreement (Exhibit 2.1) for definitions of "Acquired Assets" and specific terms regarding the assumed client deposit liabilities.
- Assess the impact of the $175,000 promissory note and $155,000 annual salary on the Company's current cash flow and liquidity.
- Confirm the status of the real estate lease assumption at 200 East Sandpointe Avenue, Santa Ana, CA.