What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2021-03-25 compared with 2020-03-26 · 268 added, 3 removed, 14 unchanged (95% of the section changed)

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(b) Holders of Common Equity

As of March 25, 2020, there were 858 stockholders of record.

As of March 24, 2021, there were approximately 854 stockholders of record.

An additional number of stockholders are beneficial holders of our Common Stock in “street name” through banks, brokers and other financial institutions that are the record holders.

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 .

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.

On December 10, 2020, the Company announced the payment of a $0.40 special cash dividend per share of Common Stock payable on December 28, 2020 for an aggregate amount of $1,800,509 which was applied against paid in capital.

The declaration of any future cash dividends is at the discretion of our board of directors and depends upon our earnings, if any, our capital requirements and financial position, our general economic conditions, and other pertinent conditions.

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There were no unregistered sales of the Company’s equity securities during 2020 that were not previously disclosed in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K.

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 where 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 $4.026, 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”).

In February 2021, ISM converted the outstanding balance of the loan in the amount of $479,111 into 119,004 shares of the Company’s common stock.

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 where 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 Nellnube Note, 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 $4.026, 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 Nellnube Note (the “Fixed Conversion Price”).

In February 2021, Nellnube converted the outstanding balance of the loan in the amount of $191,645 into 47,602 shares of the Company’s common stock.

Transfer Agent

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Not applicable.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations

This annual report on Form 10-K and other reports filed by SilverSun Technologies, Inc.

and its wholly owned subsidiaries, SWK Technologies, Inc., Secure Cloud Services, Inc., and Critical Cyber Defense Corp.

(together the “Company”, “we”, “our”, and “us”) from time to time with the U.S.

Securities and Exchange Commission (the “SEC”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management.

Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof.

When used in the filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements.

Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks contained in the “Risk Factors” section of the Annual Report on Form 10-K, relating to the Company’s industry, the Company’s operations and results of operations, and any businesses that the Company may acquire.

Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements.

Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).

These accounting principles require us to make certain estimates, judgments, and assumptions.

We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made.

These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements as well as the reported amounts of revenues and expenses during the periods presented.

Our consolidated financial statements would be affected to the extent there are material differences between these estimates and actual results.

In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application.

There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result.

The following discussion should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this report.

SilverSun Technologies, Inc.

is engaged in providing transformational business management applications and technologies and professional consulting services to small and medium size companies, primarily in the manufacturing, distribution and service industries.

We are executing a multi-pronged business strategy centered on recurring revenue, customer retention and on rapidly increasing the size of our installed customer base.

The growth of our customer base is accomplished via our traditional marketing programs and acquisitions.

After a customer is secured, our strategy is to up-sell and cross-sell, providing the customer with advanced technologies and third-party add-ons that help them digitally transform their business.

These add-on products could include application hosting, cybersecurity, warehouse management, human capital management, payment automation, sales tax compliance or any number of other products or services that we represent.

Many of these incremental products and services are billed on a subscription basis, often paying monthly for the service, which increases our monthly recurring revenue (“MRR”).

This strategy increases the average revenue per customer, which facilitates our continued growth, and reduces our cost of customer acquisition, which enhances our profitability profile.

Our core strength is rooted in our ability to discover and identify the driving forces of change that are affecting – or will affect – businesses in a wide range of industries.

We invest valuable time and resources to fully understand how technology is transforming the business management landscape and what current or emerging innovations are deserving of a clients’ attention.

By leveraging this knowledge and foresight, our growing list of clients are empowered with the means to more effectively manage their businesses;

to capitalize on real-time insight drawn from their data resources;

and to materially profit from enhanced operational functionality, process flexibility and expedited process execution.

As Microsoft Certified Systems Engineers and Microsoft Certified Professionals, our staff offers a host of mission critical services, including cybersecurity, business continuity, disaster recovery, application hosting, remote network monitoring, server implementation, support and assistance, and technical design of network infrastructure, among other services.

We compete with numerous large and small companies in this market sector, both nationally and locally.

Distinguished as one of the largest Acumatica and Sage Software practices in North America, we resell enterprise resource planning software published by both Acumatica and Sage, which addresses the financial accounting requirements of small- and medium-size businesses focused on manufacturing and distribution.

We also offer services related to these sales, including design, installation, implementation, support and training.

These product sales are primarily packaged software programs installed on a user workstation, on a local area network server, or in a hosted environment.

The programs perform and support a wide variety of functions related to accounting, including financial reporting, accounts payable, accounts receivable and inventory management.

We employ consultants and host formal, topic-specific, training classes, both remotely and on-site at our clients’ facilities.

Our consultants must pass annual subject matter examinations required by the software publisher to retain their product-based teaching certifications.

We also provide end-user technical support services through our support/help desk, which is available during normal business hours, Monday through Friday.

Our team of qualified product and technology consultants assist customers that contact us with questions about product features, functions, usability issues and configurations.

The support/help desk offers services in a variety of ways, including prepaid services, time and materials billed as utilized and annual support contracts.

Our customers can communicate with our support/help desk through email, chat, telephone and fax channels.

Led by specialized project managers, we provide professional services ranging from software customization to data migration to small- and medium-size business consulting.

We also are resellers of the Warehouse Management System (“WMS”) software published by Korber, which develops warehouse management software for middle market distributors.

The primary purpose of a WMS is to control the movement and storage of materials within an operation and process the associated transactions.

Directed picking, directed replenishment, and directed put-away are the key to WMS.

The detailed setup and processing within a WMS can vary significantly from one software vendor to another.

However, the basic WMS will use a combination of item, location, quantity, unit of measure and order information to determine where to stock, where to pick, and in what sequence to perform these operations.

The Accellos WMS software improves accuracy and efficiency, streamlines materials handling, meets retail compliance requirements, and refines inventory control.

Accellos also works as part of a complete operational solution by integrating seamlessly with RF hardware, accounting software, shipping systems and warehouse automation equipment.

We market the Accellos solution to our existing and new medium-sized business clients.

Investing in the acquisition of other companies and proprietary business management solutions has been an important growth strategy for our Company, allowing us to rapidly expand into new geographic markets and create new and exciting profit centers.

To date, we have completed a series of strategic ventures that have served to fundamentally strengthen our Company’s operating platform and materially expand our footprint to nearly every U.S.

More specifically, over the past fifteen years, we have outright acquired, acquired select assets of or entered into revenue sharing agreements with Business Tech Solutions Group, Inc.;

Wolen Katz Associates;

AMP-BEST Consulting, Inc.;

Micro-Point, Inc.;

HighTower, Inc.;

Point Solutions, LLC;

SGEN, LLC., ESC, Inc., 2000 SOFT, Inc., Productive Tech Inc., The Macabe Associates, Oates & Co;

Pinsight Technology, Inc.;

Info Sys Management, Inc., Nellnube, Inc., Partners in Technology Inc., Prairie Technology Solutions Group, Inc., Computer Management Services, LLC and Business Software Solutions.

Additionally, it is our intention to continue to increase our business by seeking additional opportunities through potential acquisitions, revenue sharing arrangements, partnerships or investments.

Such acquisitions, revenue sharing arrangements, partnerships or investments may consume cash reserves or require additional cash or equity.

Our working capital and additional funding requirements will depend upon numerous factors, including:

(i) strategic acquisitions or investments;

(ii) an increase to current company personnel;

(iii) the level of resources that we devote to sales and marketing capabilities;

(iv) technological advances;

and (v) the activities of competitors.

During 2020 the Company continued to expand its customer base and growth trend which we believe will provide a basis for future growth.

Results of Operations

Revenues for the year ended December 31, 2020 increased $2,717,924 (7.1%) to $41,220,406 as compared to $38,502,482 for the year ended December 31, 2019.

Software sales increased by $784,898 (11.4%) to $7,661,580 in 2020 from $6,876,682 in 2019.

The increase is attributable to an increase in sales of cloud-based ERP software and increased sales of third-party solutions which add functionality to customer’s existing systems.

Service revenue increased by $1,933,026 (6.1%) to $33,558,826 in 2020 from $31,625,800 in 2019.

The overall increases are primarily due to increases in services related to increased volume of sales of software.

Gross profit for the year ended December 31, 2020 increased $1,900,527 (12.9%) to $16,578,981 as compared to $14,678,454 for the year ended December 31, 2019.

The increase in overall gross profit for this period is largely attributable to the increase in revenues and the sale of higher margin products and services.

For the year ended December 31, 2020, the overall gross profit percentage was 40.2% as compared to 38.1 % for the year ended December 31, 2019.

The gross profit attributed to software sales increased $355,601(13.2%) to $3,052,691 for 2020 from $2,697,090 in 2019.

For the year ended December 31, 2020, the gross profit percentage for software was 39.8% as compared to 39.2 % for the year ended December 31, 2019.

While revenues may decrease because of the shift to a subscription business model, our margins will, for the most part, not significantly change.

The mix of products being sold by the Company changes from time to time which causes the overall gross margin percentage to vary.

The gross profit attributed to services increased $1,544,926 (12.9%) to $13,526,290 for 2020 from $11,981,364 in 2019.

This increase is attributed to the increases in consulting revenue as well as increases in network managed services and application hosting.

For the year ended December 31, 2020, the gross profit percentage for services was 40.3% as compared to 37.9% for the year ended December 31, 2019.

The increase in the gross profit percentage can be attributed to the increase in network managed services and application hosting which has a higher gross profit as well as the overall change in product mix.

Operating Expenses

Selling and marketing expenses increased $527,167 (7.7%) to $7,365,912 for the year ended December 31, 2020 as compared to $6,838,745 for the year ended December 31, 2019.

This increase is due to both additional headcount as well as increased variable compensation because of increased sales.

General and administrative expenses decreased $499,407 (5.7%) to $8,273,558 for the year ended December 31, 2020 as compared to $8,772,965 for the year ended December 31, 2019.

This decrease is primarily the result of decreases in travel expenses as a result of less employees traveling during the pandemic, reduced credit card expenses as well as department changes for various employees, thereby reducing salary and benefit expense.

In addition, in 2019 the Company incurred a one-time legal expense of approximately $115,000 associated with the cost of defense of the previously announced and settled shareholder derivative suit.

Depreciation and amortization expense for the year ended December 31, 2020 was $705,932 as compared to $720,035 for the year ended December 31, 2019.

This decrease is due to some equipment being fully depreciated in 2020.

Impairment for intangible asset expense for the year ended December 31, 2020 was $-0- as compared to $236,860 for the year ended December 31, 2019.

The decrease is due to the write-off of software in 2019 that will no longer be marketed.

Income (Loss) from Continuing Operations

As a result of the above, the Company generated income from continuing operation of $223,385 for the year ended December 31, 2020 as compared to a loss from continuing operation in the amount of $1,907,061 for the year ended December 31, 2019.

Other Expense

For the year ended December 31, 2020 other expense was $347 as compared to $15,809 for the year ended December 31, 2019, primarily because of lower interest expense.

Income (Loss) from Continuing Operations Before Taxes

As a result of the above, the Company generated income from continuing operation before taxes of $223,038 for the year ended December 31, 2020 as compared to a loss from continuing operation before taxes in the amount of $1,922,870 for the year ended December 31, 2019.

For the year ended December 31, 2020, the Company recorded a tax provision of $47,391 as compared to a benefit of $455,006 for the year ended December 31, 2019 because of the income generated in the current year.

State provision requirements were calculated based on the estimated tax rate.

Net Income (Loss) from Continuing Operations

As a result of the above, the Company generated net income from continuing operation of $175,647 for the year ended December 31, 2020 as compared to a net loss from continuing operation in the amount of $1,467,864 for the year ended December 31, 2019.

Liquidity and Capital Resources

The negative impact of Covid-19 on the economy creates tremendous uncertainty for the Company in the coming months and quarters.

While our Company has not been significantly impacted as a result of this uncertainty, the negative impact on our business, in the future, is impossible to determine at this point, although it is likely that we could suffer negative consequences as many companies go out of business or decrease their technology spending.

As previously disclosed, SWK Technologies, Inc.

(“SWK”), a wholly-owned subsidiary of SilverSun Technologies, Inc.

(the “Company”), entered into a promissory note (the “Note”) with JPMorgan Chase Bank, N.A.

(the “Lender”), which provided for a loan in the amount of $3,150,832 (the “PPP Loan”) pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).

At the time SWK applied for the PPP Loan, we believed that it qualified to receive funds pursuant to the then published PPP qualification and certification requirements.

On April 23, 2020, the SBA, in consultation with the Department of Treasury, issued new guidance that creates uncertainty regarding the qualification requirements for a PPP Loan (the “New Guidance”).

Out of an abundance of caution and in light of the New Guidance, SWK determined to pay off the entire amount of the PPP Loan.

Accordingly, the PPP Loan was paid in full to the Lender on May 18, 2020, resulting in the full satisfaction of the Note.

Under the terms of the PPP Loan, SWK had the right to repay the Note without penalty.

As such, we need to rely on our own limited resources to weather the anticipated economic downturn.

Our competitors, almost all of whom are privately held, and able to avail themselves of the PPP program, will make it more difficult for the Company to compete in the marketplace.

Management will continue to monitor developments, explore various cost-cutting measures, and explore other sources of funding, but there is no guarantee we will be successful in doing so.

We are currently seeking additional operating income opportunities through potential acquisitions or investments.

Such acquisitions or investments may consume cash reserves or require additional cash or equity.

Our working capital and additional funding requirements will depend upon numerous factors, including:

(i) strategic acquisitions or investments;

(ii) an increase to current company personnel;

(iii) the level of resources that we devote to sales and marketing capabilities;

(iv) technological advances;

and (v) the activities of competitors.

In addition to developing new products, obtaining new customers and increasing sales to existing customers, management plans to increase its business and profitability by entering into collaboration agreements, buying assets, and acquiring companies in the business software and information technology consulting and other markets with solid revenue streams and established customer bases that generate positive cash flow.

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.

In February 2021, ISM converted the outstanding balance of the loan in the amount of $479,111 into 119,004 shares of the Company’s common stock.

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.

In February 2021, Nellnube converted the outstanding balance of the loan in the amount of $191,645 into 47,602 shares of the Company’s common stock.

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 December 31, 2020 and December 31, 2019, the outstanding balances of the loan were $64,040 and $121,968, respectively.

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 subject to a downward adjustment.

At December 31, 2020 the outstanding balance on the PT notes were $310,000.

On October 1, 2020, SWK acquired certain assets of Computer Management Services, LLC, (“CMS”) pursuant to an Asset Purchase Agreement for and the issuance of a promissory note in the aggregate principal amount of $170,000 (the “CMS Note”) for a total of $287,598.

The CMS 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 $4,869.

At December 31, 2020 the outstanding balance of the loan was $160,821.

On December 1, 2020, SWK acquired certain assets of Business Software Solutions (“BSS”) pursuant to an Asset Purchase Agreement for a promissory note in the aggregate principal amount of $230,000 (the “BSS Note”).

The BSS Note is due in 60 months from the closing date and bears interest at a rate of two percent (2.0%) per annum.

Monthly payments including interest are $4,031.

At December 31, 2020 the outstanding balance of the loan was $230,000.

In February 2021, the Company received net proceeds of $3,382,352, excluding legal expenses, from the sale of 393,300 of common stock under its Registration Statement on Form S-3 and the previously disclosed At Market Issuance Sales Agreement with a sales agent.

During the year ended December 31, 2020, the Company had a net decrease in cash of $2,062,985.

The Company’s principal sources and uses of funds were as follows:

Cash provided by (used in) operating activities of continuing operations

The Company provided $1,729,091 in cash from continuing operating activities for the year ended December 31, 2020 as compared to using $903,307 of cash for continuing operating activities for the year ended December 31, 2019.

This increase is in cash provided by operating activities is primarily due to an increase in income and the decrease in accounts receivable offset partially by the decrease in accounts payable and deferred revenues.

Cash provided by investing activities of continuing operations

Investing activities for the year ended December 31, 2020 provided cash of $839,808 as compared to providing $8,152,790 of cash for the year ended December 31, 2019.

This decrease in cash provided is due to proceeds received from the sale of the EDI practice in August 2019 and which did not occur during the year ended December 31, 2020.

Cash used in financing activities of continuing operations

Financing activities for the year ended December 31, 2020 used cash of $4,631,884 as compared to using cash of $870,170 for the year ended December 31, 2019.

This increase in cash used in financing activities is mostly attributed to the payment of a cash dividends in January 2020 and December 2020.

Cash flows from discontinued operations

There were no cash flows related to discontinued operations for the year ended December 31, 2020.

Operating activities for discontinued operations for the year ended December 31, 2019 provided cash of $505,910.

This is due to the fact that Mapadoc EDI was sold in August 2019, providing eight months of operating activities in 2019.

Investing activities of discontinued operations for the year ended December 31, 2019 used cash of $127,679.

The Company believes that it has adequate liquidity to fund its operating plans for at least the next twelve months from the date of issuance of these financial statements.

There was no significant impact on the Company’s operations because of inflation for the year ended December 31, 2020.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).

The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

On an on-going basis, we evaluate these estimates, including those related to bad debts, intangible assets, and litigation.

We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of certain assets and liabilities.

Actual results may differ from these estimates under different assumptions or conditions.

We have identified below the accounting policies, related to what we believe are most critical to our business operations and are discussed throughout Management’s Discussion and Analysis of Financial Condition or Plan of Operation where such policies affect our reported and expected financial results.

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.

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.

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.

Unbilled Services

The Company recognizes revenue on its professional services as those services are performed.

Unbilled services represent the revenue recognized but not yet invoiced.

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.

Definite Lived Intangible Assets and Long-Lived Assets

The values assigned to intangible assets were based on an independent valuation.

Purchased intangible assets are amortized over the useful lives based on the estimate of the use of economic benefit 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.

Business Combinations

We account for business combinations under the acquisition method of accounting.

This method requires the recording of acquired assets and assumed liabilities at their acquisition date fair values.

The excess of the purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill.

Results of operations related to business combinations are included prospectively beginning with the date of acquisition and transaction costs related to business combinations are recorded within S,G&A.

The Company accounts for income taxes using the asset and liability method described in FASB ASC 740, “Income Taxes”.

Deferred tax assets arise from a variety of sources, the most significant being:

a) tax losses that can be carried forward to be utilized against profits in future years;

b) expenses recognized for financial reporting purposes but disallowed in the tax return until the associated cash flow occurs;

and c) valuation changes of assets which need to be tax effected for book purposes but are deductible only when the valuation change is realized.

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 accounts for uncertainties in income taxes under ASC 740-10-50 which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

ASC 740-10 requires that the Company determine whether the benefits of its tax positions are more-likely-than-not of being sustained upon audit based on the technical merits of the tax position.

The Company recognizes the impact of an uncertain income tax position taken on its income tax return at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority.

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 2017 to 2020 remain open to examination for both the U.S.

federal and state jurisdictions.

Despite the Company’s belief that its tax return positions are consistent with applicable tax laws, one or more positions may be challenged by taxing authorities.

Settlement of any challenge can result in no change, a complete disallowance, or some partial adjustment reached through negotiations or litigation.

Interest and penalties related to income tax matters, if applicable, will be recognized as income tax expense.

There were no liabilities for uncertain tax positions at December 31, 2020 and 2019.

During the years ended December 31, 2020 and 2019 the Company did not incur any expense related to interest or penalties for income tax matters, and no such amounts were accrued as of December 31, 2020 and 2019.

Off Balance Sheet Arrangements

During fiscal 2020, we did not engage in any material off-balance sheet activities or have any relationships or arrangements with unconsolidated entities established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Further, we have not guaranteed any obligations of unconsolidated entities nor do we have any commitment or intent to provide additional funding to any such entities.

Quantitative and Qualitative Disclosures About Market Risk

We do not hold any derivative instruments and do not engage in any hedging activities.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity