QXO, Inc. 10-Q

Item 1. Financial Statements SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) June 30 , 2020 December 31, 2019 ASSETS Current assets: Cash $ 6,859,030 $ 8,658,401 Escrow accounts receivable 575,000 1,150,000 Accounts receivable, net of allowance of $375,000 1,966,582 2,529,545 Unbilled services 660,962 183,484 Prepaid expenses and other current assets 295,489 455,434 Total current assets 10,357,063 12,976,864 Property and equipment, net 625,852 712,627 Operating lease right-of-use assets 1,375,542 698,840 Intangible assets, net 2,423,355 2,607,301 Goodwill 891,000 891,000 Deferred tax assets 1,126,262 874,482 Deposits and other assets 191,804 192,158 Total assets $ 16,990,878 $ 18,953,272 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 1,612,286 $ 2,210,618 Accrued expenses 1,482,412 1,189,746 Accrued dividend - 2,250,636 Accrued interest 15,751 15,378 Income taxes payable 325,355 152,355 Long term debt – current portion 69,100 131,795 Long term convertible debt – current portion 279,888 277,106 Finance lease obligations – current portion 136,861 162,625 Operating lease liabilities – current portion 434,523 262,020 Deferred revenue 2,317,871 2,006,983 Total current liabilities 6,674,047 8,659,262 Long term debt net of current portion 34,656 64,072 Long term convertible debt net of current portion 576,839 717,482 Finance lease obligations net of current portion 121,460 180,976 Operating lease liabilities net of current portion 941,019 436,820 Total liabilities 8,348,021 10,058,612 Commitments and contingencies Stockholders’ equity: Preferred stock, $0.001 par value; authorized 1,000,000 shares Series A Preferred Stock, $0.001 par value; authorized 2 shares; No shares issued and outstanding - - Common stock, $0.00001 par value; authorized 75,000,000 shares; 4,501,271 shares issued and outstanding 46 46 Additional paid-in capital 9,536,996 9,530,198 Accumulated deficit (894,185 ) (635,584 ) Total stockholders’ equity 8,642,857 8,894,660 Total liabilities and stockholders’ equity $ 16,990,878 $ 18,953,272 See accompanying notes to the unaudited condensed consolidated financial statements. 3 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Six Months Ended 30-Jun-20 30-Jun-19 30-Jun-20 30-Jun-19 Revenues: Software product, net $ 1,926,697 $ 1,424,639 $ 3,695,867 $ 3,030,915 Service, net 7,746,248 7,694,779 16,056,601 15,395,817 Total revenues, net 9,672,945 9,119,418 19,752,468 18,426,732 Cost of revenues: Product 1,233,165 910,939 2,362,557 1,807,389 Service 4,501,175 4,731,581 9,599,097 9,379,822 Total cost of revenues 5,734,340 5,642,520 11,961,654 11,187,211 Gross profit 3,938,605 3,476,898 7,790,814 7,239,521 Selling, general and administrative expenses: Selling and marketing expenses 1,733,472 1,565,966 3,674,795 3,308,416 General and administrative expenses 1,981,248 2,077,595 4,107,389 4,132,371 Share-based compensation expenses 3,399 3,398 6,798 10,111 Depreciation and amortization expenses 173,044 186,570 349,579 360,798 Total selling, general and administrative expenses 3,891,163 3,833,529 8,138,561 7,811,696 Income (loss) from continuing operations 47,442 (356,631 ) (347,747 ) (572,175 ) Other income (expense): Other income 5,686 - 11,411 - Interest income (expense) (8,246 ) (24,131 ) (647 ) (40,611 ) Total other income (expense) (2,560 ) (24,131 ) 10,764 (40,611 ) Income (loss) from continuing operations before taxes 44,882 (380,762 ) (336,983 ) (612,786 ) Provision (benefit) for income taxes 11,368 (79,960 ) (78,382 ) (128,685 ) Income (loss) from continuing operations 33,514 (300,802 ) (258,601 ) (484,101 ) Discontinued operations Income from discontinued operations - 378,648 - 734,021 Provision for income taxes - 80,736 - 156,774 Income from discontinued operations - 297,912 - 577,247 Net (loss) income $ 33,514 $ (2,890 ) $ (258,601 ) $ 93,146 Basic earnings (loss) per share applicable to common shareholders: Continuing operations $ 0.01 $ (0.07 ) $ (0.06 ) $ (0.11 ) Discontinued operations $ - $ 0.07 $ - $ 0.13 Net (loss) income $ 0.01 $ (0.00 ) $ (0.06 ) $ 0.02 Diluted earnings (loss) per share applicable to common shareholders: Continuing operations $ 0.01 $ (0.07 ) $ (0.06 ) $ (0.11 ) Discontinued operations $ - $ 0.07 $ - $ 0.13 Net (loss) income $ 0.01 $ (0.00 ) $ (0.06 ) $ 0.02 Weighted average shares outstanding: Basic 4,501,271 4,500,755 4,501,271 4,500,755 Diluted 4,714,070 4,500,755 4,501,271 4,500,755 See accompanying notes to the unaudited condensed consolidated financial statements. 4 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2020 Series A Preferred Stock Series B Preferred Stock Common Stock Class A Additional Paid in Accumulated Total Stockholders’ Shares Amount Shares Amount Shares Amount Capital Deficit Equity Balance at January 1, 2020 - $ - - $ - 4,501,271 $ 46 $ 9,530,198 $ (635,584 ) $ 8,894,660 Share-based compensation - - - - - - 6,798 - 6,798 Net loss - - - - - - - (258,601 ) (258,601 ) Balance at June 30, 2020 - $ - - $ - 4,501,271 $ 46 $ 9,536,996 $ (894,185 ) $ 8,642,857 FOR THE SIX MONTHS ENDED JUNE 30, 2019 Series A Preferred Stock Series B Preferred Stock Common Stock Class A Additional Paid in Accumulated Total Stockholders’ Shares Amount Shares Amount Shares Amount Capital Deficit Equity Balance at January 1, 2019 - $ - 1 $ 1 4,500,755 $ 46 $ 11,763,923 $ (7,429,810 ) $ 4,334,160 Share-based compensation - - - - - - 10,111 - 10,111 Net income - - - - - - - 93,146 93,146 Balance at June 30, 2019 - $ - 1 $ 1 4,500,755 $ 46 $ 11,774,034 $ (7,336,664 ) $ 4,437,417 See accompanying notes to the unaudited condensed consolidated financial statements. 5 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY FOR THE THREE MONTHS ENDED JUNE 30 , 2020 Series A Preferred Stock Series B Preferred Stock Common Stock Class A Additional Paid in Accumulated Total Stockholders’ Shares Amount Shares Amount Shares Amount Capital Deficit Equity Balance at April 1, 2020 - $ - - $ - 4,501,271 $ 46 $ 9,533,597 $ (927,699 ) $ 8,605,944 Share-based compensation - - - - - - 3,399 - 3,399 Net income - - - - - - - 33,514 33,514 Balance at June 30, 2020 - $ - - $ - 4,501,271 $ 46 $ 9,536,996 $ (894,185 ) $ 8,642,857 FOR THE THREE MONTHS ENDED JUNE 30 , 2019 Series A Preferred Stock Series B Preferred Stock Common Stock Class A Additional Paid in Accumulated Total Stockholders’ Shares Amount Shares Amount Shares Amount Capital Deficit Equity Balance at April 1, 2019 - $ - 1 $ 1 4,500,755 $ 46 $ 11,770,636 $ (7,333,774 ) $ 4,436,909 Share-based compensation - - - - - - 3,398 - 3,398 Net loss - - - - - - - (2,890) (2,890 ) Balance at June 30, 2019 - $ - 1 $ 1 4,500,755 $ 46 $ 11,774,034 $ (7,336,664 ) $ 4,437,417 See accompanying notes to the unaudited condensed consolidated financial statements. 6 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, 2020 2019 Cash flows from operating activities: Net (loss) income $ (258,601 ) $ 93,146 Net income from discontinued operations - 577,247 Net loss from continuing operations (258,601 ) (484,101 ) Adjustments to reconcile net loss from continuing operations to net cash provided by (used in) operating activities: Deferred income taxes (251,780 ) (132,774 ) Depreciation and amortization 165,633 161,112 Amortization of intangibles 183,946 199,687 Amortization of right of use assets 230,960 139,742 Bad debt expense 9,175 - Share-based compensation 6,798 10,111 Changes in assets and liabilities: Accounts receivable 553,788 (835,652 ) Unbilled services (477,478 ) (469,940 ) Prepaid expenses and other current assets 159,945 27,361 Deposits and other assets 354 (2,642 ) Accounts payable (598,332 ) (325,692 ) Accrued expenses 292,666 (439,639 ) Income tax payable 173,000 3,313 Accrued interest 373 371 Deferred revenues 310,888 924,194 Operating lease obligations (230,960 ) (139,742 ) Net cash provided by (used in) operating activities of continuing operations 270,375 (1,364,291 ) Cash flows from investing activities: Purchase of property and equipment (78,858 ) (23,693 ) Acquisition of business - (60,000 ) Software development costs - (80,534 ) Escrow accounts receivable 575,000 - Net cash provided by (used in) investing activities of continuing operations 496,142 (164,227 ) Cash flows from financing activities: Payment of cash dividend (2,250,636 ) (225,038 ) Proceeds from PPP loan 3,150,832 - Payment of PPP loan (3,150,832 ) - Payment of contingent consideration - (22,548 ) Payment of long term debt (92,112 ) (115,784 ) Payment of long term convertible debt (137,860 ) (135,133 ) Payment of finance lease obligations (85,280 ) (58,539 ) Net cash used in financing activities of continuing operations (2,565,888 ) (557,042 ) Cash flows from discontinued operations: Operating activities of discontinued operations - 806,189 Investing activities of discontinued operations - (93,826 ) Net cash provided by discontinued operations - 712,363 Net decrease in cash (1,799,371 ) (1,373,197 ) Cash, beginning of period 8,658,401 1,900,857 Cash, end of period $ 6,859,030 $ 527,660 Cash paid during period for: Interest $ 21,796 $ 40,611 Income taxes $ 25,648 $ 901 See accompanying notes to the unaudited condensed consolidated financial statements. 7 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30 , 2020 AND 2019 SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES For the six months ended June 30, 2020: On January 23, 2020 the Company entered into an operating lease for equipment with VAR Technology Finance. Accordingly, operating lease right of use assets and operating lease liabilities were recognized in the amount of $453,379. On January 29, 2020 the Company entered into an operating lease in Greensboro, NC. Accordingly, operating lease right of use assets and operating lease liabilities were recognized in the amount of $104,296. On February 1, 2020 the Company entered into an operating lease in East Hanover, NJ. Accordingly, operating lease right of use assets and operating lease liabilities were recognized in the amount of $349,987. For the six months ended June 30, 2019: The Company acquired certain assets of Partners in Technology, Inc. (“PIT”) for a $174,000 promissory note in addition to a cash payment of $60,000. (see Note 10). Operating lease right of use assets and operating lease liabilities were recognized in the amount of $911,000 at January 1, 2019. On April 1, 2019 the company entered into an operating lease in Lisle, IL and operating lease right of use assets and operating lease liabilities were recognized in the amount of $71,685. The Company incurred approximately $291,936 in finance lease obligations for purchases of equipment. See accompanying notes to the unaudited condensed consolidated financial statements. 8 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 – DESCRIPTION OF BUSINESS “SilverSun Technologies, Inc. (“SilverSun”) through our wholly owned subsidiaries SWK Technologies, Inc. (“SWK”), Secure Cloud Services, Inc. (“SCS”) and Critical Cyber Defense Corp. (“CCD”) together with SWK, SCS and SilverSun (the “Company”) is a business application, technology and consulting company providing strategies and solutions to meet our clients’ information, technology and business management needs. Our services and technologies enable customers to manage, protect and monetize their enterprise assets whether on-premise or in the “Cloud”. 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”). Additionally, we have our own development staff building software solutions for time and billing, and various ERP enhancements. Our value-added services focus on consulting and professional services, specialized programming, training, and technical support. We have a dedicated network services practice that provides managed services, cybersecurity, application hosting, disaster recovery, business continuity, cloud and other services. Our customers are nationwide, with concentrations in the New York/New Jersey metropolitan area, Arizona, Southern California, North Carolina, Washington, Oregon and Illinois. On August 26, 2019 SWK entered into and closed that certain Asset Purchase Agreement (the “MAPADOC Asset Purchase Agreement”) by and among the Company, SPS Commerce, Inc., as buyer (“SPS”), and SWK as seller, pursuant to which SPS agreed to acquire from SWK substantially all of the assets related to the MAPADOC business (See footnote 13). The Company is publicly traded and was quoted on the Over-the-Counter Market Place (“OTCQB”) under the symbol “SSNT” until April 18, 2017. Since April 19, 2017, the Company has been listed and is traded on the NASDAQ Capital Market under the symbol “SSNT”. 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. 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. 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. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position of the Company as of June 30, 2020, the results of operations for the three and six months ended June 30, 2020 and 2019 and cash flows for the six months ended June 30, 2020 and 2019. These results are not necessarily indicative of the results to be expected for the full year. The financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and consequently have been condensed and do not include all of the disclosures normally made in an Annual Report on Form 10-K. The December 31, 2019 balance sheet included herein was derived from the audited consolidated financial statements included in the Company’s annual report on Form 10-K. Accordingly, the financial statements included herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on March 26, 2020. All financial results of the EDI practice are classified as discontinued operations for the purpose of this quarterly report (see Note 13). The accompanying unaudited condensed consolidated financial statements include the accounts of the “Company” and its wholly-owned subsidiaries. These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. All significant inter-company transactions and accounts have been eliminated in consolidation. 9 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Goodwill Goodwill is the excess of acquisition cost of an acquired entity over the fair value of the identifiable net assets acquired. Goodwill is not amortized, but tested for impairment annually or whenever indicators of impairment exist. These indicators may include a significant change in the business climate, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of the business or other factors. No impairment losses were identified or recorded for the three and six months ended June 30, 2020 and 2019. Capitalization of proprietary developed software Software development costs are accounted for in accordance with ASC 985-20, Software — Costs of Software to be Sold, Leased or Marketed . Costs associated with the planning and designing phase of software development are expensed as incurred. Once technological feasibility has been determined, a portion of the costs incurred in development, including coding, testing and quality assurance, are capitalized until available for general release to clients, and subsequently reported at the lower of unamortized cost or net realizable value. Amortization is calculated on a solution-by-solution basis and is over the estimated economic life of the software. Amortization commences when a solution is available for general release to clients. Definite Lived Intangible Assets and Long-lived Assets Purchased intangible assets are recorded at fair value using an independent valuation at the date of acquisition and are amortized over the useful lives 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. 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. No impairment losses were identified or recorded for the three and six months ended June 30, 2020 and 2019. Revenue Recognition The Financial Accounting Standards Board “FASB” issued ASU 2014-09, Revenue from Contracts with Customers: Topic 606 which superseded nearly all existing revenue recognition guidance under GAAP. The core principle of Topic 606 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. Topic 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation, among others. Topic 606 also provides guidance on the recognition of costs related to obtaining customer contracts. With the adoption of ASC 606, the Company has elected the significant financing component practical expedient. 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. Software product revenue is recognized when the product is delivered to the customer and the Company’s performance obligation is fulfilled. 10 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Service revenue is recognized when the professional consulting, maintenance or other ancillary services are provided to the customer. Shipping and handling costs charged to customers are classified as revenue, and the shipping and handling costs incurred are included in cost of sales. For the Three Months Ending June 30, For the Six Months Ending June 30, 2020 2019 2020 2019 Professional Consulting $ 3,357,915 $ 3,016,724 $ 6,905,493 $ 6,017,285 Maintenance Revenue $ 1,592,449 $ 1,606,869 $ 3,290,925 $ 3,434,369 Ancillary Service Revenue $ 2,795,884 $ 3,071,186 $ 5,860,183 $ 5,944,163 Unbilled Services The Company recognizes revenue on its professional services as those services are performed. Unbilled services (contract assets) represent the revenue recognized but not yet invoiced. Deferred Revenues Deferred revenues consist of maintenance on proprietary products (contract liabilities), customer telephone support services (contract liabilities) and deposits for future consulting services which will be earned as such services are performed over the contractual or stated period, which generally ranges from three to twelve months. As of June 30, 2020, there was $129,605 in deferred maintenance, $257,516 in deferred support services, and $1,930,750, in deposits for future consulting services. As of December 31, 2019, there was $145,977 in deferred maintenance, $159,165 in deferred support services, and $1,701,841 in deposits for future consulting services. Commissions Sales commissions relating to service revenues are considered incremental and recoverable costs of obtaining a project with our customer. These commissions are calculated based on estimated revenue to be generated over the life of the project. These costs are deferred and expensed as the service revenue is earned. Commission expense is included in selling and marketing expenses in the accompanying condensed consolidated statements of operations. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Company maintains cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to federally insured limits. At times balances may exceed FDIC insured limits. The Company has not experienced any losses in such accounts. Concentrations The Company maintains its cash with various institutions, which exceed federally insured limits throughout the year. At June 30, 2020 and December 31, 2019, the Company had cash on deposit of $6,087,520 and $8,016,900, respectively, in excess of the federally insured limits of $250,000. As of June 30, 2020, one customer represented 10% of the total accounts receivable and unbilled services. As of December 31, 2019, one customer represented 14% of the total accounts receivable and unbilled services. For the six months ended June 30, 2020 and 2019, the Company’s top ten customers accounted for 12% ($2,433,153) and 12% ($2,267,328), respectively, of total revenues. The Company does not rely on any one specific customer for any significant portion of its revenue. 11 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) For the six months ended June 30, 2020 and 2019, purchases from one supplier through a “channel partner” agreement were approximately 14% and 20% of cost of revenues, 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. As of June 30, 2020 and December 31, 2019, one supplier represented approximately 23% and 15% of total accounts payable respectively. Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of accounts receivable, cash and escrow accounts receivable. As of June 30, 2020, the Company believes it has no significant risk related to its concentration of accounts receivable. 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. 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. 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. Property and Equipment Property and equipment is stated at cost, net of accumulated depreciation and amortization. Depreciation is computed using the straight-line method based upon the estimated useful lives of the assets, generally three to seven years. Maintenance and repairs that do not materially add to the value of the equipment nor appreciably prolong its life are charged to expense as incurred. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is included in the unaudited condensed consolidated statements of operations. Income Taxes 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. 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. The effect on deferred tax assets and liabilities of a change in tax rates or laws is recognized in operations in the period that includes the enactment date. The Company has federal net operating loss (“NOL”) carryforwards which are subject to limitations under Section 382 of the Internal Revenue Code. The Company files income tax returns in the U.S. federal and state jurisdictions. Tax years 2016 to 2019 remain open to examination for both the U.S. federal and state jurisdictions. There were no liabilities for uncertain tax positions at June 30, 2020 and December 31, 2019. 12 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fair Value Measurement The accounting standards define fair value and establish a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use on unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is as follows: Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data. Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. The Company’s current financial assets and liabilities approximate fair value due to their short term nature and include cash, accounts receivable, accounts payable, and accrued liabilities. The carrying value of longer term lease and debt obligations approximate fair value as their stated interest rates approximate the rates currently available. The Company’s goodwill and intangibles are measured at fair-value on a non-recurring basis using Level 3 inputs, as discussed in Note 5 and 10. Stock-Based Compensation Compensation expense related to share-based transactions, including employee stock options, is measured and recognized in the financial statements based on a determination of the fair value. The grant date fair value is determined using the Black-Scholes-Merton (“Black-Scholes”) pricing model. For employee stock options, the Company recognizes expense over the requisite service period on a straight-line basis (generally the vesting period of the equity grant). The Company’s option pricing model requires the input of highly subjective assumptions, including the expected stock price volatility and expected term. Any changes in these highly subjective assumptions significantly impact stock-based compensation expense. Recently Adopted Authoritative Pronouncements In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350), which includes provisions, intended to simplify the test for goodwill impairment. The standard is effective for annual periods beginning after December 15, 2019, with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. This was adopted on January 1, 2020 and did not have a significant impact on our financial position and results of operations. Recent Authoritative Pronouncements In June 2016, the FASB issued ASU No. 2016-13 Financial Instruments -Credit Losses (Topic 326), Measurement of Credit Losses on Financial Statements. The amendment in this update replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses on instruments within its scope, including trade receivables. This update is intended to provide financial statement users with more decision-useful information about the expected credit losses. We do not expect the adoption of this standard to have a significant impact on our financial position and results of operations. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes - simplifying the accounting for income taxes (Topic 740), which is meant to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740, Income Taxes. The amendment also improves consistent application and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. We do not expect the adoption of this standard to have a significant impact on our financial position and results of operations. No other recently issued accounting pronouncements had or are expected to have a material impact on the Company’s unaudited condensed consolidated financial statements. 13 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 3 – NET (LOSS) INCOME PER COMMON SHARE The Company’s basic income per common share is based on net income for the relevant period, divided by the weighted average number of common shares outstanding during the period. Diluted income per common share is based on net income, divided by the weighted average number of common shares outstanding during the period, including common share equivalents, such as outstanding option and warrants to the extent they are dilutive. For the three and six months ended June 30, 2020 and 2019, the average market prices for the periods ended are less than the exercise price of all the outstanding stock options and warrants, therefore, the inclusion of the stock options and warrants would be anti-dilutive. In addition, since the effect of common stock equivalents is anti-dilutive with respect to losses, the convertible promissory notes have also been excluded from the Company’s computation of loss per common share for continuing operations for the six months ended June 30, 2020 and three and six months ended June 30, 2019. Therefore, basic and diluted income (loss) per common share for continuing operations for the six months ended June 30, 2020 and three and six months ended June 30, 2019 are the same. For the three months ended June 30, 2020 convertible promissory notes have been included in the Company’s computation of income per common share for continuing operations. Three Months Ended Three Months Ended June 30, 2020 June 30, 2019 Basic net income (loss) from continuing operations per share computation: Net income (loss) from continuing operations $ 33,514 $ (300,802 ) Weighted-average common shares outstanding 4,501,271 4,500,755 Basic net income (loss) per share $ 0.01 $ (0.07 ) Diluted net income (loss) from continuing operations per share computation: Net income (loss) per above $ 33,514 $ (300,802 ) Interest on Convertible debt 4,514 - Net income (loss) 38,028 (300,802 ) Weighted-average common shares outstanding 4,501,271 4,500,755 Incremental shares for convertible promissory notes 212,799 - Total adjusted weighted-average shares 4,714,070 4,500,755 Diluted net income (loss) per share $ 0.01 $ (0.07 ) Six Months Ended Six Months Ended June 30, 2020 June 30, 2019 Basic net income (loss) from continuing operations per share computation: Net loss from continuing operations $ (258,601 ) $ (484,101 ) Weighted-average common shares outstanding 4,501,271 4,500,755 Basic net loss per share $ (0.06 ) $ (0.11 ) Diluted net income (loss) from continuing operations per share computation: Net income (loss) per above $ (258,601 ) $ (484,101 ) Net income (loss) (258,601 ) (484,101 ) Weighted-average common shares outstanding 4,501,271 4,500,755 Incremental shares for convertible promissory notes - - Total adjusted weighted-average shares 4,501,271 4,500,755 Diluted net income (loss) per share $ (0.06 ) $ (0.11 ) 14 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The following table summarizes securities that, if exercised, would have an anti-dilutive effect on earnings (loss) per share. Three Months June 30, 2020 Three Months June 30, 2019 Stock options 22,280 46,947 Warrants 4,988 208,241 Convertible promissory notes - 280,943 Total potential dilutive securities not included in loss per share 27,268 536,131 Six Months June 30, 2020 Six Months June 30, 2019 Stock options 22,280 41,613 Warrants 4,988 208,241 Convertible promissory notes 212,799 280,943 Total potential dilutive securities not included in loss per share 240,067 530,797 NOTE 4 – PROPERTY AND EQUIPMENT Property and equipment is summarized as follows: June 30 , 2020 December 31, 2019 Leasehold improvements $ 98,831 $ 98,831 Equipment, furniture and fixtures 2,921,198 2,842,340 3,020,029 2,941,171 Less: Accumulated depreciation and amortization (2,394,177 ) (2,228,544 ) Property and equipment, net $ 625,852 $ 712,627 Depreciation and amortization expense related to these assets was $81,070 and $165,633, respectively for the three and six months ended June 30, 2020 as compared to $86,726 and $161,112 for the three and six months ended June 30, 2019. Property and equipment under finance leases are summarized as follows: June 30, 2020 December 31, 2019 Equipment, furniture and fixtures 659,293 708,272 Less: Accumulated amortization (296,144 ) (248,497 ) Property and equipment, net $ 363,149 $ 459,775 15 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 5 – INTANGIBLE ASSETS Intangible assets consist of proprietary developed software, intellectual property, customer lists and acquired contracts carried at cost less accumulated amortization and customer lists acquired at fair value less accumulated amortization. Amortization is computed using the straight-line method over the estimated useful lives. The components of intangible assets are as follows: June 30 , 2020 December 31, 2019 Estimated Useful Lives Proprietary developed software $ 390,082 $ 390,082 5 – 7 Intellectual property, customer list, and acquired contracts 4,430,014 4,430,014 5 – 15 Total intangible assets $ 4,820,096 $ 4,820,096 Less: accumulated amortization (2,396,741 ) (2,212,795 ) $ 2,423,355 $ 2,607,301 Amortization expense related to the above intangible assets for the three and six months ended June 30, 2020 was $91,974 and $183,946, respectively as compared to $99,844 and $199,687 for the three and six months ended June 30, 2020 and 2019. The Company expects future amortization expense to be the following: Amortization Remainder of 2020 $ 181,097 2021 328,495 2022 261,792 2023 198,680 2024 198,680 Thereafter 1,254,611 Total $ 2,423,355 NOTE 6 – CONVERTIBLE DEBT AND LONG-TERM DEBT, RELATED PARTY AND PPP LOAN On July 6, 2015, SWK acquired certain assets of ProductiveTech Inc. (“PTI”) pursuant to an Asset Purchase Agreement for cash of $500,000 and a promissory note for $600,000 (the “PTI Note”). The PTI Note is due in 60 months from the closing date and bears interest at a rate of two and one half (2.5%) percent per annum. Monthly payments including interest are $10,645. At June 30, 2020 and December 31, 2019, the outstanding balance on the PTI Note was $10,623 and $73,899, respectively. On May 31, 2018, SWK acquired certain assets of Info Sys Management, Inc. (“ISM”) pursuant to an Asset Purchase Agreement for cash of $300,000 and a promissory note issued in the aggregate principal amount of $1,000,000 (the “ISM Note”). The ISM Note is due five years from the closing date and bears interest at a rate of two percent (2%) per annum. Monthly payments including interest are $17,528. The ISM Note has an optional conversion feature whereby the holder may, at its sole and exclusive option, elect to convert, at any time and from time to time, until payment in full of the ISM Note, all of the outstanding principal amount of the ISM Note, plus accrued interest, into shares (the “Conversion Shares”) of the Company’s Common Stock, (“Common Stock”) at per share price equal to $4.03, a price equal to the average closing price of its Common Stock for the five (5) trading days immediately preceding the issuance date of the ISM Note (the “Fixed Conversion Price”). At June 30, 2020 and December 31, 2019 the outstanding balance on the ISM Note was $611,948 and $710,420 respectively. 16 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 6 – CONVERTIBLE DEBT AND LONG-TERM DEBT, RELATED PARTY AND PPP LOAN (Continued) On May 31, 2018, Secure Cloud Services acquired certain assets of Nellnube, Inc. (“Nellnube”) pursuant to an Asset Purchase Agreement for a promissory note issued in the aggregate principal amount of $400,000 (the “Nellnube Note”). The Nellnube Note is due five years from the closing date and bears interest at a rate of two percent (2%) per annum. Monthly payments including interest are $7,011. The Nellnube Note has an optional conversion feature whereby the holder may, at its sole and exclusive option, elect to convert, at any time and from time to time, all of the outstanding principal amount of the Nellnube Note, plus accrued interest, into shares (the “Conversion Shares”) of the Company’s Common Stock, (“Common Stock”) at per share price equal to $4.03 (the “Fixed Conversion Price”). At June 30, 2020 and December 31, 2019 the outstanding balance on the Nellnube Note was $244,779 and $284,168 respectively. On January 1, 2019, SWK acquired certain assets of Partners in Technology, Inc. (“PIT”) pursuant to an Asset Purchase Agreement for cash of $60,000 and the issuance of a promissory note in the aggregate principal amount of $174,000 (the “PIT Note”). The PIT Note is due in 36 months from the closing date and bears interest at a rate of two percent (2.0%) per annum. Monthly payments including interest are $4,984. At June 30, 2020 and December 31, 2019 the outstanding balance on the PIT Note was $93,133 and $121,968 respectively. At June 30, 2020, future payments of long term debt are as follows: Remainder of 2020 $ 178,962 2021 341,763 2022 293,380 2023 146,378 Total $ 960,483 On April 9, 2020, SWK Technologies, Inc. (“SWK”), a wholly-owned subsidiary of SilverSun Technologies, Inc. (the “Company”), issued a promissory note (the “Note”) to JPMorgan Chase Bank, N.A., in the principal aggregate amount of $3,150,832 (the “PPP Loan”) pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Loan had a two-year term and an interest at a rate of 0.98% per annum. Monthly principal and interest payments were deferred for six months after the date of disbursement. The PPP Loan could be prepaid at any time prior to maturity with no prepayment penalties. Beginning seven months from the date of the PPP Loan SWK was required to make 24 monthly payments of principal and interest in the amount of $132,629.06. Under the terms of the CARES Act, PPP loan recipients could apply for and be granted forgiveness for all or a portion of loan granted under the program. Such forgiveness would be determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and any payments of mortgage interest, rent, and utilities. No assurance was provided that SWK would obtain forgiveness of the PPP Loan in whole or in part. At the time the Company applied for the PPP Loan, the Company believed it qualified to receive the funds pursuant to the PPP. However, on April 23, 2020, subsequent to the Company’s receipt of the PPP Loan, the SBA, in consultation with the Department of Treasury, issued new guidance that creates uncertainty regarding the qualification requirements for a PPP loan for public companies, and provided a safe harbor whereby a public company could repay its PPP loan without consequence by May 7, 2020. On May 5, 2020, the SBA issued additional guidance, whereby they extended the safe harbor date until May 14, 2020, and furthermore committed to provide additional guidance relative to a public’s company ability to retain its PPP loan. The Company reviewed the new guidance and subsequently returned the full amount of the loan on May 18, 2020. 17 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 7 – FINANCE LEASE OBLIGATIONS The Company has entered into lease commitments for equipment that meet the requirements for capitalization. The equipment has been capitalized and is included in property and equipment in the accompanying unaudited condensed consolidated balance sheets. The related obligations are based upon the present value of the future minimum lease payments with the following: June 30, 2020 Weighted average remaining lease term 1.95 Weighted average interest rate 5.36 % At June 30, 2020 future payments under finance leases are as follows: Remainder of 2020 $ 83,138 2021 125,591 2022 57,584 2023 6,640 Total minimum lease payments 272,953 Less amounts representing interest (14,632 ) Present value of net minimum lease payments 258,321 Less current portion (136,861 ) Long-term finance lease obligation $ 121,460 NOTE 8 – OPERATING LEASE LIABILITY The Company leases office space in ten different locations with monthly payments ranging from $720 to $10,044 which expire at various dates through March 2025. The Company also leases equipment with a monthly payment of $10,279 which expires February 2024. The Company's leases generally do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease. The Company used incremental borrowing rates as of January 1, 2019 for operating leases that commenced prior to that date. The Company's weighted average remaining lease term and weighted average discount rate for operating leases as of June 30, 2020 are as follows: June 30 , 2020 Weighted average remaining lease term 3.40 Weighted average discount rate 3.90 % 18 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 8 – OPERATING LEASE LIABILITY (Continued) The following table reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under noncancelable operating leases with terms of more than one year to the total lease liabilities recognized on the condensed consolidated balance sheet as of June 30, 2020: Remainder 2020 $ 255,759 2021 456,075 2022 364,083 2023 328,032 2024 141,457 Thereafter 20,510 Total undiscounted future minimum lease payments 1,565,916 Less: Difference between undiscounted lease payments and discounted lease liabilities (190,374 ) Total operating lease liabilities $ 1,375,542 Less current portion (434,523 ) Long-term operating lease liabilities $ 941,019 Total rent expense under operating leases for the three and six months ended June 30, 2020 was $134,485 and $263,270 as compared to $103,438 and $260,823 for the three and six months ended June 30, 2019. NOTE 9 – EQUITY Equity On December 24, 2018, the Company announced the payment of a $0.05 special cash dividend per share of Common Stock. The dividend payments announced in December were paid out on January 14, 2019 for an aggregate amount of approximately $225,038, which was applied against additional paid in capital and included in accrued expenses at December 31, 2018. On October 10, 2019, the Company’s Board of Directors authorized a new stock repurchase program, under which the Company may repurchase up to $2 million of its outstanding common stock. Under this new stock repurchase program, the Company may repurchase shares in accordance with all applicable securities laws and regulations, including Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The extent to which the Company repurchases its shares, and the timing of such repurchases, will depend upon a variety of factors, including market conditions, regulatory requirements and other corporate considerations, as determined by the Company’s management. The repurchase program may be extended, suspended or discontinued at any time. The Company expects to finance the program from existing cash resources. As of June 30, 2020 and December 31, 2019, no repurchases have been made. On December 24, 2019, the Company announced the payment of a $0.50 special cash dividend per share of Common Stock payable on January 14, 2020 for an aggregate amount of $2,250,636, which was applied against paid in capital. 19 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 9 – EQUITY (Continued) Options A summary of the status of the Company’s stock option plans for the fiscal years ended December 31, 2019 and the six months ending June 30, 2020 and changes during the years are presented below (in number of options): Number of Options Average Exercise Price Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding options at January 1, 2019 56,280 $ 3.75 1.0 years $ -0- Options granted - - - Options canceled/forfeited (30,000 ) $ 3.78 Outstanding options at December 31, 2019 26,280 $ 3.71 0.7 years $ -0- Options granted - Options exercised - Options canceled/forfeited/expired (4,000 ) $ 4.00 Outstanding options at June 30, 2020 22,280 $ 3.66 0.3 years $ -0- Vested Options: June 30, 2020: 17,960 $ 3.66 0.3 years $ -0- December 31, 2019: 21,960 $ 3.72 0.6 years $ -0- As of June 30, 2020 the unamortized compensation expense for stock options was $3,396. Unamortized compensation expense is expected to be recognized over a weighted-average period of 0.3 years. Warrants The following table summarizes the warrants transactions: Warrants Outstanding Weighted Average Exercise Price Average Remaining Contractual Term Balance, January 1, 2019 208,241 $ 5.26 2.3 years Granted - $ - Exercised 16,698 $ 5.09 Canceled - $ - Outstanding and Exercisable December 31, 2019 191,543 $ 5.28 0.3 years Granted - $ - Exercised - $ - Expired 186,555 $ 5.30 Outstanding and Exercisable June 30, 2020 4,988 $ 4.01 1.8 years 20 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 10 – BUSINESS COMBINATION On January 1, 2019, SWK acquired certain assets of Partners in Technology, Inc. (“PIT”) pursuant to an Asset Purchase Agreement in exchange for cash of $60,000 and a promissory note in the aggregate principal amount of $174,000 (“PIT Note”). The PIT Note is due in 36 months from the closing date and bears interest at a rate of two percent (2.0%). Monthly payments including interest are $4,984. The allocation of the purchase price to customer list with an estimated life of fifteen years and goodwill, which is deductible for tax purposes, has been based on an independent valuation. The Company expects this acquisition to create synergies by combining operations and expanding geographic market share and product offerings. The following summarizes the purchase price allocation for the prior year’s acquisition: PIT Cash consideration $ 60,000 Note payable 174,000 Total purchase price $ 234,000 Customer List $ 228,000 Goodwill 6,000 Total assets acquired 234,000 Liabilities acquired - Net assets acquired $ 234,000 The Company’s unaudited condensed consolidated financial statements for the three and six months ending June 30, 2020 and 2019 include the actual results of PIT since the date of acquisition, January 1, 2019. NOTE 11 – INCOME TAXES The recognized deferred tax asset is based upon the expected utilization of its benefit from future taxable income. The Company has federal net operating loss (“NOL”) carryforwards of approximately $6,177,000 as of June 30, 2020, which is subject to limitations under Section 382 of the Internal Revenue Code. These carryforward losses are available to offset future taxable income and begin to expire in the year 2024 to 2033. The foregoing amounts are management’s estimates and the actual results could differ from those estimates. Future profitability in this competitive industry depends on continually obtaining and fulfilling new profitable sales agreements and modifying products. The inability to obtain new profitable contracts could reduce estimates of future profitability, which could affect the Company’s ability to realize the deferred tax assets. 21 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 11 – INCOME TAXES (Continued) Income tax provision (benefit) from continuing operations: Six Months Ended June 30, June 30, 2020 2019 Current: Federal $ 139,425 $ - State and local 33,973 4,089 Total current tax provision 173,398 4,089 Deferred: Federal (186,780 ) (130,774 ) State and local (65,000 ) (2,000 ) Total deferred tax provision (benefit) (251,780 ) (132,774 ) Total provision (benefit) $ (78,382 ) $ (128,685 ) For the six months ended June 30, 2020, the Company’s Federal and State provision requirements were calculated based on the estimated tax rate. The Federal effective rate is higher than the statutory rate primarily due to Incentive Stock Options (ISO) and 50% of meals, 100% entertainment expense which are not tax deductible. The benefit from continuing operations for the six months ended June 30, 2020 was $78,382. The effective tax rate consists primarily of the 21% federal statutory tax rate and a blended 5% state and local tax rate. NOTE 12 – RELATED PARTY TRANSACTIONS As of June 30, 2020 and December 31, 2019, long term debt and long term convertible debt issued in conjunction with various acquisitions are considered related party liabilities as holders are current employees of the Company, see Note 6. NOTE 13 – SALE OF EDI PRACTICE On August 26, 2019 the Company entered into that certain Asset Purchase Agreement (the “Asset Purchase Agreement”) by and among the Company, SPS Commerce, Inc., as buyer (“Buyer” or “SPS”), and SWK, as seller (the “Seller”), pursuant to which the Buyer has agreed to acquire from the Seller certain assets (all intellectual property and accounts receivable) related to the MAPADOC business, which was the EDI practice. In consideration for the Acquired Assets (as defined in the Asset Purchase Agreement), at closing, SPS: (i) paid Seller $10,350,000 in cash (the “Initial Cash Payment”); and (ii) delivered $1,150,000 to an escrow account (the “Escrowed Property”) pursuant to the terms and conditions of that certain Escrow Agreement dated August 26, 2019 (the “Escrow Agreement”), for an aggregate consideration of $11,500,000 (the “Purchase Price”). Pursuant to the terms and conditions of that certain Escrow Agreement entered into in connection with the Asset Purchase Agreement, portions of the Escrowed Property will be released at six months and at twelve months following the date of closing of the Asset Purchase Agreement, to the extent that no indemnity claims against the Escrowed Property have been filed by the Buyer. On February 28, 2020, the Company received the first half of the escrow agreement ($575,000), per the agreement. There was also an adjustment to the Working Capital and an additional $162,868 was added to the gain on the sale of Mapadoc which was recognized in 2019 and paid in February 2020. 22 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 14 – DISCONTINUED OPERATIONS The financial results of our EDI Practice (“Mapadoc”) through June 30, 2019 are presented as discontinued operations. The following table presents the financial results of “Mapadoc.” Mapadoc Income Statement for the three and six months ended June 30, 2019 3 Months Ending June 30, 2019 6 Months Ending June 30, 2019 Revenues: Software product, net 177,175 305,857 Service, net 1,128,932 2,185,694 Total revenues, net 1,306,107 2,491,551 Cost of revenues: Product 279 2,346 Service 520,990 990,099 Cost of revenues 521,269 992,445 Gross profit 784,838 1,499,106 Selling, general and administrative expenses: Selling and marketing expenses 142,520 240,132 General and administrative expenses 228,759 455,131 Depreciation and amortization expenses 34,911 69,822 Total selling, general and administrative expenses 406,190 765,085 Income from discontinued operations 378,648 734,021 Provision for income taxes (776 ) (156,774 ) Income from discontinued operations 377,872 577,247 NOTE 15 – SUBSEQUENT EVENTS On July 31, 2020, the Company acquired certain assets of Prairie Technology Solutions Group, LLC (“Prairie Tech”) pursuant to an Asset Purchase Agreement. In consideration for the acquired assets, the Company paid $185,000 in cash and issued three promissory notes to Prairie Tech (“Prairie Tech Note 1”, “Prairie Tech Note 2” and “Prairie Tech Note 3”), each in the principal aggregate amount of $103,333 (collectively the “Prairie Tech Notes”). The Prairie Tech Notes bear interest at a rate of 4% per annum. Prairie Tech Note 1 has a term of one (1) year and is subject to downward adjustment based on whether certain revenue milestones are achieved. Prairie Tech Note 2 has a term of two (2) years and is also subject to downward adjustment based on whether certain revenue milestones are achieved. Prairie Tech Note 3 has a term of three (3) years and is not be subject to a downward adjustment. 23 Table of Contents