QXO, Inc. 10-K

Item 9A. Controls and Procedures (a) Evaluation of Disclosure and Control Procedures As of the end of the period covered by this Annual Report on Form 10-K, the Company’s management evaluated, with the participation of the Company’s principal executive officer and principal financial officer, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed by the company in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including the Company’s principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. (b) Management ’ s Report on Internal Control over Financial Reporting The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934). The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that: • Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; • Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and • Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on our financial statements. As of the end of the period covered by this Annual Report on Form 10-K, the Company’s management evaluated, with the participation of its principal executive officer and principal financial officer, the effectiveness of the Company’s internal control over financial reporting. This evaluation was conducted using the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 2013. Based upon that evaluation, the Company’s management concluded that its internal control over financial reporting was effective as of December 31, 2020. Pursuant to the rules of the SEC, the Company’s management’s report on internal control over financial reporting is furnished with this Annual Report on Form 10-K and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933 or Securities Exchange Act of 1934. This Annual Report on Form 10-K does not include an attestation report of the Company’s independent registered public accounting firm regarding the Company's internal control over financial reporting. The Company’s management’s report on internal control over financial reporting was not subject to attestation by the Company’s independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permits the Company to provide only the Company’s management’s report on internal control over financial reporting in this Annual Report on Form 10-K. (c) Changes to Internal Controls over Financial Reporting There were no changes in our internal control over financial reporting during our fourth quarter ended December 31, 2020, or in other factors that could significantly affect these controls, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information None. 31 Table of Contents PART III Item 10. Directors, Executive Officers and Corporate Governance Directors and Executive Officers The following table and biographical summaries set forth information, including principal occupation and business experience, about our directors and executive officers at March 24, 2021: Name Age Position Officer and/or Director Since Mark Meller 61 Chairman, President, Chief Executive Officer and Director 2003 Joseph Macaluso 69 Chief Financial Officer 2021 Stanley Wunderlich 73 Director 2011 Kenneth Edwards 62 Director 2021 John Schachtel 59 Director 2017 Mark Meller, Chief Executive Officer, President, Director Mr. Mark Meller has been the President and Director of the Company since September 15, 2003 and was further appointed Chief Executive Officer on September 1, 2004. He became Chairman of the Board on May 10, 2009. Mr. Meller is currently the President, Chief Executive Officer and Chairman of the Board of Directors. From September 2003 through January 2015, he was Chief Financial Officer of the Company. From October 2004 until February 2007, Mr. Meller was the President, Chief Executive Officer, Chief Financial Officer and Director of Deep Field Technologies, Inc. From December 15, 2004 until September 2009, Mr. Meller was the President, Chief Executive Officer, Chief Financial Officer and Director of MM2 Group, Inc. From August 29, 2005 until August 2006, Mr. Meller was the President, Chief Executive Officer and Chief Financial Officer of iVoice Technology, Inc. From 1988 until 2003, Mr. Meller was Chief Executive Officer of Bristol Townsend and Co., Inc., a New Jersey based consulting firm providing merger and acquisition advisory services to middle market companies. From 1986 to 1988, Mr. Meller was Vice President of Corporate Finance and General Counsel of Crown Capital Group, Inc, a New Jersey based consulting firm providing advisory services for middle market leveraged buy-outs (LBO’s). Prior to 1986, Mr. Meller was a financial consultant and practiced law in New York City. He is a member of the New York State Bar. Mr. Meller has a B.A. from the State University of New York at Binghamton and a J.D. from the Boston University School of Law. In evaluating Mr. Meller’s specific experience, qualifications, attributes and skills in connection with his appointment to our board, we took into account his experience in the industry and his knowledge of running and managing the Company. Joseph Macaluso, Chief Financial Officer Joseph Macaluso has over 30 years of experience in financial management. Mr. Macaluso has served as Chairman of the Audit Committee and a Director of the Company since 2015 before becoming its Chief Financial Officer on January 4, 2021. Mr. Macaluso has been the Principal Accounting Officer of Tel-Instrument Electronics Corp., a developer and manufacturer of avionics test equipment for both the commercial and military markets since 2002. Previously, he had been involved in companies in the medical device and technology industries holding positions including Chief Financial Officer, Treasurer and Controller. Mr. Macaluso has a Bachelor of Science degree in Accounting from Fairfield University. 32 Table of Contents Stanley Wunderlich, Director Mr. Stanley Wunderlich has over 40 years of experience on Wall Street as a business owner and consultant. Mr. Wunderlich is a founding partner and has been Chairman and Chief Executive Officer of Consulting for Strategic Growth 1, specializing in investor and media relations and the formation of capital for early-growth stage companies both domestic and international, from 2000 through the present. Since 1987, he has been the Chief Executive Officer of Consulting for Strategic Growth 1, Ltd. Mr. Wunderlich has a bachelor’s degree from Brooklyn College. In evaluating Mr. Wunderlich’s experience, qualifications, attributes and skills in connection with his appointment to our Board, we took into account his experience in finance and investor relations. Kenneth Edwards, Director Mr. Edwards combines over 40 years of experience in the accounting and finance industry. Previously, he has been involved with a few certified public accounting firms as well as companies in various other industries holding positions including Partner, Managing Director, Chief Financial Officer and Senior Vice-President of Finance. Ken currently serves as Chief Financial Officer of Edison Learning, Inc., an Education Management Company. Ken joined Edison Learning, Inc. in September 2017. From July 2016 to September 2017, he was Managing Director for CFO Strategies, LLC, a company involved in outsourced CFO and Controller services. From July 1981 to July 1993 and from October 2000 to June 2016, he was with several public accounting firms (Coopers & Lybrand, BDO Seidman, Edwards & Company and Cohn Reznick) in various roles until his retirement from Cohn Reznick as an Audit Partner in June 2016. During the period from July 1993 to July 1997, he served as Senior Vice President of Finance for Home State Holdings, Inc., an insurance holding company that focused on property and casualty insurance, and from July 1997 to September 2000 as Chief Financial Officer for Menu Direct, Inc. a specialty food manufacturer. Ken is currently a member of the Advisory Board of Robert Wood Johnson University Hospital, located at Somerset New Jersey. He previously served as a Director and Treasurer for the Urban League of Morris Country and as a Director and Chairperson for the Hope Chest Scholarship Foundation. He has an undergraduate accounting degree from Goshen College. The Board believes that Mr. Edwards’ extensive experience as a CPA makes him well-qualified to help guide the Audit Committee of the Board. The Board has determined that Mr. Edwards meets the current independence and experience requirements contained in the listing standards of The Nasdaq Capital Markets and is an audit committee financial expert as defined in Securities and Exchange Commission regulations. John Schachtel, Director On March 27, 2017, Mr. Schachtel was appointed to the Board. Since May 2017, Mr. Schachtel has been the Executive Vice President and Chief Operating Officer of Regional Management Corp., one of the leading consumer finance installment loan companies in the United States. Prior to assuming his current position, Mr. Schachtel was the Chief Operating Officer of OneMain Financial Holdings, Inc. and served 11 years as the Executive Vice President, Northeast & Midwest Division for OneMain Financial Holdings, Inc. Mr. Schachtel has a Bachelor of Science degree from Northwestern University and an MBA in Finance from New York University. In evaluating Mr. Schachtel’s specific experience, qualifications, attributes and skills in connection with his appointment to Board, we took into account his expertise in general management, finance, corporate governance and strategic planning, as well as his experience in operations and mergers and acquisitions. Family Relationships There are no family relationships among any of our directors or executive officers. 33 Table of Contents Board Composition and Director Independence Our board of directors consists of four members: Mr. Mark Meller, Mr. Stanley Wunderlich, Mr. Kenneth Edwards, and Mr. John Schachtel. The directors will serve until our next annual meeting and until their successors are duly elected and qualified. The Company defines “independent” as that term is defined in Rule 5605(a)(2) of the NASDAQ listing standards. In making the determination of whether a member of the board is independent, our board considers, among other things, transactions and relationships between each director and his immediate family and the Company, including those reported under the caption “ Certain Relationships and Related-Party Transactions ”. The purpose of this review is to determine whether any such relationships or transactions are material and, therefore, inconsistent with a determination that the directors are independent. On the basis of such review and its understanding of such relationships and transactions, our board affirmatively determined that Mr. Wunderlich, Mr. Edwards, and Mr. Schachtel have qualified as independent and that they have no material relationship with us that might interfere with his or her exercise of independent judgment. Board Committees The Audit Committee was established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. Currently, the Audit Committee consists of Mr. Kenneth Edwards, Mr. Stanley Wunderlich and Mr. John Schachtel. Mr. Edwards, Chairman of the Audit Committee, may be deemed a financial expert as defined in Item 407(d)(5) of Regulation S-K. The Audit Committee operates pursuant to a written charter (the “ Audit Committee Charter ”), a current copy of which is publicly available on the investor relations portion of the Company’s website at www.silversuntech.com. Currently, the Compensation Committee consists of Mr. Stanley Wunderlich and Mr. John Schachtel. Mr. Schachtel serves as Chairman. The Compensation Committee operates pursuant to a written charter, a current copy of which is publicly available on the investor relations portion of our website. Currently, the Nominating and Corporate Governance Committee consists of Mr. Kenneth Edwards, Mr. Stanley Wunderlich and Mr. John Schachtel. Mr. Wunderlich serves as Chairman. The Nominating and Corporate Governance Committee operates pursuant to a written charter, a current copy of which is publicly available on the investor relations portion of our website. Compliance with Section 16(a) of the Exchange Act Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who beneficially own 10% or more of a class of securities registered under Section 12 of the Exchange Act to file reports of beneficial ownership and changes in beneficial ownership with the SEC. Directors, executive officers and greater than 10% stockholders are required by the rules and regulations of the SEC to furnish the Company with copies of all reports filed by them in compliance with Section 16(a). Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the Company during the fiscal year ended December 31, 2020, including those reports that we have filed on behalf of our directors and Section 16 officers, no director, Section 16 officer, beneficial owner of more than 10% of the outstanding common stock, or any other person subject to Section 16 of the Exchange Act, failed to file with the SEC on a timely basis during the fiscal year ended December 31, 2020. Code of Ethics The Company has adopted a Code of Ethics for adherence by its Chief Executive Officer, Chief Financial Officer, and Controller to ensure honest and ethical conduct; full, fair and proper disclosure of financial information in the Company’s periodic reports filed pursuant to the Securities Exchange Act of 1934; and compliance with applicable laws, rules, and regulations. Any person may obtain a copy of our Code of Ethics by mailing a request to the Company at the address appearing on the front page of this Annual Report on Form 10-K. 34 Table of Contents Involvement in Certain Legal Proceedings To the best of our knowledge, none of our directors or executive officers has, during the past ten years: ● been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); ● had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; ● been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; ● been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; ● been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or ● been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. Except as set forth in our discussion below in “Certain Relationships and Related Transactions,” none of our directors or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the Commission. 35 Table of Contents Item 11. Executive Compensation The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers paid by us during the years ended December 31, 2020 and 2019. Name and Position(s) Year Salary ($) Bonus ($) Stock Awards ($) Option Awards ($) Non-Equity Incentive Plan Compensation ($) Nonqualified Deferred Compensation Earnings ($) All Other Compensation ($) Total Compensation ($) Mark Meller 2020 $ 885,758 $ - $ - $ - $ - $ - $ - $ 885,758 President, Chief Executive Officer, and Director 2019 $ 777,986 $ - $ - $ - $ - $ - $ - $ 777,986 Christine Dye, 2020 $ 218,500 $ 80,400 $ - $ - $ - $ - $ - $ 298,900 Chief Financial Officer (1) (2) 2019 $ 213,692 $ 53,000 $ - $ - $ - $ - $ - $ 262,692 (1) Effective November 13, 2020, resigned from her position as Chief Financial Officer of the Company. To facilitate a transition of her duties, the Company and Ms. Dye entered into a Separation Agreement, effective as of October 13, 2020 (the “Separation Agreement”). Pursuant to the Separation Agreement, Ms. Dye’s employment with the Company will end on November 13, 2020 and Ms. Dye will receive separation payments in an aggregate gross amount of $47,400.00. (2) On January 4, 2021, the Board of Directors of SilverSun Technologies, Inc. (the “Company”) appointed Mr. Joseph Macaluso as Chief Financial Officer of the Company (the “CFO Appointment”). Concurrently, Mr. Joseph Macaluso submitted his resignation from his positions as a member of the Board and Chairman of the Audit Committee of the Company. Mark Meller, Chief Executive Officer The Company’s Chief Executive Officer and President has had an Employment Agreement with the Company since September 15, 2003. On February 4, 2016 (the “Effective Date”), the Company entered into an amended and restated employment agreement (the “Meller Employment Agreement”) with Mark Meller, pursuant to which Mr. Meller will continue to serve as the Company’s President and Chief Executive Officer. The Meller Employment Agreement was entered into by the Company and Mr. Meller primarily to extend the term of Mr. Meller’s employment. The term of the Meller Employment Agreement runs through September of 2023 (the “Term”) and shall automatically renew for additional periods of one year unless otherwise terminated in accordance with the employment agreement. The Company will pay Mr. Meller an annual salary of $565,000 per annum, with a ten percent (10%) increase on September 1 and every anniversary of such date for the duration of the Term. Potential Payments upon Termination or Change in Control The Meller Employment Agreement provides for a severance payment to Mr. Meller of three hundred percent (300%), less $100,000 of his gross income for services rendered to the Company in each of the five prior calendar years should his employment be terminated following a change in control (as defined in the Meller Employment Agreement). Joseph Macaluso, Chief Financial Officer In connection with the CFO Appointment, Mr. Macaluso entered into an offer letter (the “Offer Letter”) with the Company. Pursuant to the Offer Letter, Mr. Macaluso is to receive a base salary at the annual rate of Two Hundred Fifteen Thousand Dollars ($215,000) and a one-time cash sign on bonus in the amount of Thirty Thousand Dollars ($30,000). Mr. Macaluso is eligible for a discretionary bonus of up to Twenty percent (20%) of the Annual Rate. Pursuant to the Offer Letter, Mr. Macaluso’s employment with the Company is at-will and it may be terminated with or without cause. 36 Table of Contents Outstanding Equity Awards at Fiscal Year-End 2020 The Company had no outstanding equity awards to the executives named above at the end of the most recent completed fiscal year. Director Compensation The following Director Compensation Table sets forth the compensation of our directors for the fiscal year ending on December 31, 2020. Name Fees Earned or Paid in Cash ($) Stock Awards ($) Option Awards ($) Non-Equity Incentive Plan Compensation ($) Non-Qualified Deferred Compensation Earnings ($) All Other Compensation ($) Total ($) Stanley Wunderlich 12,000 - - - - - 12,000 Joseph Macaluso (1) (2) 18,000 - - - - - 18,000 John Schachtel 18,000 - - - - - 18,000 (1) On January 4, 2021, the Board of Directors (the “Board”) of SilverSun Technologies, Inc. (the “Company”) appointed Mr. Joseph Macaluso as Chief Financial Officer of the Company (the “CFO Appointment”). Concurrently, Mr. Joseph Macaluso submitted his resignation from his positions as a member of the Board and Chairman of the Audit Committee of the Company, Mr. Macaluso did not resign as a result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices. (2) On January 4, 2021, in connection with the Resignation of Mr. Macaluso, the Board appointed Mr. Kenneth E. Edwards Sr. as a member of the Board and Chairman of the Audit Committee. Mr. Edwards will be paid $1,667 per month, payable quarterly for his service as a member of the board and as Chairman of the Audit Committee. We pay only our independent directors for their service on our board of directors. Mr. Wunderlich is paid $1,000 per month, payable quarterly for his service as a member of the board and as Chairman of the Nominating and Governance Committee. Mr. Macaluso was paid $1,500 per month, payable quarterly for his service as a member of the board and as Chairman of the Audit Committee. Mr. Schachtel is paid $1,500 per month, payable quarterly for his service as a member of the board and as Chairman of the Compensation Committee. Mr. Edwards will be paid $1,667 per month, payable quarterly for his service as a member of the board and as Chairman of the Audit Committee. Director Agreements On July 26, 2011, we entered into a director agreement with Stanley Wunderlich, pursuant to which Mr. Wunderlich was appointed to the Board effective July 26, 2011. On August 3, 2011 the Company entered into an amended and restated director agreement (the “Amended Agreement”). The term of the Amended Agreement is one year from August 3, 2011. The Amended Agreement may, at the option of the Board, be automatically renewed on such date that Mr. Wunderlich is re-elected to the Board. In connection with a recapitalization of the Company in 2012, Mr. Wunderlich and the Company agreed to amend the Amended Director Agreement to (i) change the Stipend to $1,000 per month, payable quarterly; (ii) to forego the issuance of any warrants due to Wunderlich under the Amended Agreement; and (iii) to cancel the future issuance of any warrants due to Mr. Wunderlich under the Amended Agreement. To date no warrants have been issued pursuant to this agreement. 37 Table of Contents On March 27, 2017, we entered into a director agreement (“Schachtel Director Agreement”) with John Schachtel, pursuant to which Mr. Schachtel was appointed to the Board effective March 27, 2017 (the “Effective Date”). The Schachtel Director Agreement may, at the option of the Board, be automatically renewed on such date that Mr. Schachtel is re-elected to the Board. Under the Schachtel Director Agreement, Mr. Schachtel is to be paid a stipend of one thousand five hundred dollars ($1,500) (the “Stipend”) per month, payable quarterly. Additionally, Mr. Schachtel shall receive warrants (the “Warrants”) to purchase such number of shares of the Company’s Common Stock, as shall equal (the “Formula”) (A) $20,000 divided by (B) the closing price of the Common Stock on the date of grant of the Warrant. The exercise price of the Warrant shall be the closing price on the date of the grant of such Warrant (the “Grant Date”) plus $0.01. The Warrant shall be fully vested upon receipt thereof (the “Vesting Date”). On January 4, 2021, we entered into a director agreement (“Edwards Director Agreement”) with Kenneth Edwards, pursuant to which Mr. Edwards was appointed to the Board effective January 4, 2021 (the “Effective Date”). The Edwards Director Agreement may, at the option of the Board, be automatically renewed on such date that Mr. Edwards is re-elected to the Board. Under the Edwards Director Agreement, Mr. Edwards is to be paid a stipend of $5,000 (the “Stipend”) payable quarterly. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The following table sets forth certain information regarding the beneficial ownership of our Common Stock as of March 24, 2021 by (a) each stockholder who is known to us to own beneficially 5% or more of our outstanding Common Stock; (b) all directors; (c) our executive officers, and (d) all executive officers and directors as a group. Except as otherwise indicated, all persons listed below have (i) sole voting power and investment power with respect to their shares of Common Stock, except to the extent that authority is shared by spouses under applicable law, and (ii) record and beneficial ownership with respect to their shares of Common Stock. For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of Common Stock that such person has the right to acquire within 60 days of March 24, 2021. For purposes of computing the percentage of outstanding shares of our Common Stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire within 60 days of March 24, 2021 is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership. Unless otherwise identified, the address of our directors and officers is c/o SilverSun Technologies, Inc. at 120 Eagle Rock Ave, Suite 330, East Hanover, NJ 07936. Number of Shares of Common Stock Beneficially Owned Percentage of Ownership of Common Stock (1) Officers and Directors Mark Meller Chief Executive Officer, President and Chairman 2,006,534 39.65 % Joseph Macaluso Chief Financial Officer - - Kenneth Edwards Director - - Stanley Wunderlich Director 1,400 * John Schachtel Director 11,031 * Officers and Directors as a Group 2,018,965 39.89 % 5% Beneficial Shareholders Jeffrey Roth (2) 440,082 8.70 % Ault Global Holdings, Inc. (3) 286,774 5.67 % Bard Associates (4) 229,863 4.54 % 38 Table of Contents * denotes less than 1% (1) Based on 5,061,177 shares of Common Stock outstanding as of March 24, 2021. Shares of Common Stock subject to options or warrants currently exercisable or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage of the person holding such options or warrants, but are not deemed outstanding for purposes of computing the percentage of any other person. (2) All information about Mr. Roth is based on a Form 4 filed with the SEC on February 16, 2021. Mr. Roth is a former employee of SWK Technologies, Inc, a wholly-owned subsidiary of SilverSun Technologies, Inc. (3) All information about Ault Global Holdings, Inc., and related parties, is based on a Schedule 13-D filed with the SEC on March 18, 2021. (4) All information about Bard Associates, Inc. is based on a Schedule 13G filed with the SEC on February 12, 2021. Securities Authorized for Issuance Under Equity Compensation Plans There are no outstanding options to purchase our securities as of December 31, 2020. The following table sets forth information as of December 31, 2020 with respect to compensation plans (including individual compensation arrangements) under which our common shares are authorized for issuance, aggregated as follows: All compensation plans previously approved by security holders; and All compensation plans not previously approved by security holders Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance (a) (b) (c) Equity compensation plans approved by security holders - $ - 855,030 Equity compensation plans not approved by security holders. - $ - - Total - $ - - 2004 Stock Incentive Plan The Company adopted the 2004 Stock Incentive as the amended Plan (the “2004 Plan”) in order to attract and retain qualified employees, directors, independent contractors or agents of the Company. The 2004 Plan terminated on September 29, 2014; options granted before that date were not affected by plan termination. At December 31, 2020 and 2019, -0- and 26,280 options remained outstanding under the 2004 Plan, respectively. 2019 Equity and Incentive Plan The Company adopted the 2019 Equity and Incentive Plan (the “2019 Plan”) to order provide long-term incentives for employees and non-employees to contribute to the growth of the Company and attain specific performance goals. The 675,000 shares available under the 2019 Plan represent approximately 13% of the Company’s 5,061,177 currently outstanding shares (the “Share Reserve”). The Share Reserve will automatically increase on January 1st of each year, for a period of not more than ten years, commencing on January 1, 2020 and ending on (and including) January 1, 2029, in an amount equal to 180,030 shares (which is the equivalent of 4.0% of the 4,500,755 shares of common stock outstanding as of September 30, 2019). As of March 24, 2021, no securities were issued. 39 Table of Contents Item 13. Certain Relationships and Related Transactions The Company leased its Seattle, WA office space from Mary Abdian, an employee of SWK. The lease which expires on September 30, 2018, was terminated by mutual consent on May 31, 2019, and the lease continued on a month-to-month basis with a monthly rent of approximately $2,066. The Company ended the lease on May 31, 2020. Total rent paid for 2020 and 2019 was $10,195 and $24,117 respectively under this lease. Item 14. Principal Accountant Fees and Services The following table sets forth fees billed to the Company by the Company’s independent auditors for (i) services rendered for the audit of the Company’s annual financial statements and the review of the Company’s quarterly financial statements, (ii) services rendered that are reasonably related to the performance of the audit or review of the Company’s financial statements that are not reported as Audit Fees, and (iii) services rendered in connection with tax preparation, compliance, advice and assistance. Services 2020 2019 Audit Fees $ 106,281 $ 95,000 Audit - Related Fees 53,694 - Tax fees $ 56,823 30,000 All Other Fees - - Total $ 216,798 $ 125,000 Prior to engaging our accountants to perform a particular service, our Audit Committee obtains an estimate for the service to be performed. All the services described above were approved by the Audit Committee in accordance with its procedures. 40 Table of Contents PART IV Item 15. Exhibits (a) Exhibit No. Description 2.1 Asset Purchase Agreement, dated March 11, 2015, by and among SWK Technologies, Inc., 2000Soft, Inc. d/b/a Accounting Technology Resources and Karen Espinoza McGarrigle (incorporated by reference to Exhibit 2.1 on the Company’s current report on Form 8-K filed with the SEC on March 17, 2015). 2.2 Form of Asset Purchase Agreement, dated July 6, 2015, by and among SWK Technologies, Inc., ProductiveTech, Inc. a New Jersey corporation John McPoyle and Kevin Snyder (incorporated herein by reference to Exhibit 2.1 on Form 8-K, filed with the SEC on July 10, 2015). 2.2 Form of Asset Purchase Agreement, dated May 18, 2018, by and among SWK Technologies, Inc., InfoSys Management, Inc. and three individuals (incorporated herein by reference to Exhibit 2.1 on the Company’s Form 8-K, filed with the SEC on May 24, 2018). 2.3 Form of Asset Purchase Agreement, dated May 18, 2018, by and among Secure Cloud Services, Inc., SilverSun Technologies, Inc., Nellnube, Inc. and Info Sys Management, Inc. (incorporated herein by reference to Exhibit 2.2 on the Company’s Form 8-K, filed with the SEC on May 24, 2018). 2.4 Asset Purchase Agreement, dated August 26, 2019, by and among SilverSun Technologies, Inc. SWK Technologies, Inc., and SPS Commerce, Inc. (incorporated herein by reference to Exhibit 10.1 on Form 8-K, filed with the SEC on August 27, 2019). 3.1 Second Amended Certificate of incorporation of SilverSun Technologies, Inc., filed September 5, 2003 (incorporated herein by reference to Exhibit 3.1 of the registration statement on Form SB-2, filed with the SEC on November 25, 2003). 3.2 By-laws of iVoice, Inc., a New Jersey corporation (incorporated herein by reference to Exhibit 3.2 of the Registrant’s Form 10-QSB for the period ended March 31, 2003). 3.3 Fourth Amended and Restated Certificate of incorporation of SilverSun Technologies, Inc., (incorporated herein by reference to Exhibit 3.1 on Form 8-K, dated June 27, 2011, filed with the SEC on June 30, 2011). 3.4 Amendment to the Bylaws of the Company (incorporated herein by reference to Exhibit 3.2 on Form 8-K, dated June 27, 2011, filed with the SEC on June 30, 2011). 3.5 Certificate of Elimination of Series B Preferred Stock (incorporated herein by reference to Exhibit 3.1 on Form 8-K, dated September 13, 2019). 4.1 iVoice Acquisition 1, Inc. 5% Convertible Debenture due March 20, 2005 issued to Elma S. Foin (incorporated herein by reference to Exhibit 4.2 of the registration statement on Form SB-2, filed with the SEC on December 22, 2003). 4.2 iVoice Acquisition 1, Inc. 5% Convertible Debenture due March 20, 2005 issued to Darryl A. Moy (incorporated herein by reference to Exhibit 4.3 of the registration statement on Form SB-2, filed with the SEC on December 22, 2003). 4.3 iVoice Acquisition 1, Inc. 5% Convertible Debenture due March 20, 2005 issued to Henry Tyler (incorporated herein by reference to Exhibit 4.4 of the registration statement on Form SB-2, filed with the SEC on December 22, 2003). 4.4 SilverSun Technologies, Inc. 7.5% Secured Convertible Debenture, for a value of $600,000, due December 30, 2007 to YA Global (f/k/a/ Cornell Capital Partners, LP). 4.5 SilverSun Technologies, Inc. 7.5% Secured Convertible Debenture, for a value of $1,159,047, due December 30, 2007 to YA Global (f/k/a/ Cornell Capital Partners, LP). 4.6 Certificate of Designation of Series A Convertible Preferred Stock (incorporated herein by reference to Exhibit 4.1 on Form 8-K, dated May 4, 2011, filed with the SEC on May 12, 2011). 4.7 Certificate of Designation of Series B Preferred Stock (incorporated herein by reference to Exhibit 4.1 on Form 8-K, dated September 23, 2011, filed with the SEC on September 27, 2011). 10.1 Employment Agreement, dated January 1, 2003, between iVoice Acquisition 1, Inc. and Jerome Mahoney (incorporated herein by reference to Exhibit 10.8 of the Registration Statement on Form SB-2 filed on November 25, 2003). 10.2 Employment Agreement, dated September 15, 2003, between SilverSun Technologies, Inc. and Mark Meller (incorporated herein by reference to Exhibit 10.9 of the Registration Statement on Form SB-2 filed on November 25, 2003). 10.3 Equity Line of Credit Agreement dated January 24, 2003 between Cornell Capital Partners, LP, and iVoice Acquisition 1, Inc. (incorporated herein by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003, filed with the SEC on May 12, 2003). 10.4 Registration Rights Agreement dated January 24, 2003 between Cornell Capital Partners, LP, and iVoice Acquisition 1, Inc. (incorporated herein by reference to Exhibit 10.2 of the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003, filed with the SEC on May 12, 2003). 10.5 Stock Purchase Agreement dated January 24, 2003 between iVoice Acquisition 1, Inc. and listed Buyers (incorporated herein by reference to Exhibit 10.3 of the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003, filed with the SEC on May 12, 2003). 41 Table of Contents 10.6 Placement Agreement dated January 24, 2003 between iVoice Acquisition 1, Inc. and Cornell Capital Partners LP. (incorporated herein by reference to Exhibit 10.5 of the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003, filed with the SEC on May 12, 2003). 10.7 Termination Agreement dated December 30, 2005 between YA Global (f/k/a/ Cornell Capital Partners, LP). and SilverSun Technologies, Inc. 10.8 Escrow Agreement dated December 30, 2005 between David Gonzalez, Esq. And SilverSun Technologies, Inc. 10.9 Securities Purchase Agreement dated December 30, 2005 between YA Global (f/k/a/ Cornell Capital Partners, LP). and SilverSun Technologies, Inc. 10.10 Investor Rights Agreement dated December 30, 2005 between YA Global (f/k/a/ Cornell Capital Partners, LP). and SilverSun Technologies, Inc. 10.11 Amended and Restated Security Agreement dated December 30, 2005 between YA Global (f/k/a/ Cornell Capital Partners, LP). and SilverSun Technologies, Inc. 10.12 Securities Purchase Agreement dated May 6, 2009 by and among SilverSun Technologies, SWK Technologies, Inc., Jeffrey D. Roth and Jerome R. Mahoney (incorporated herein by reference to Exhibit 10.1 on Form 10-K, dated May 9, 2009, filed with the SEC on May 26, 2009). 10.13 Termination Settlement Agreement dated May 6, 2009 by and among SilverSun Technologies, SWK Technologies, Inc., Jeffrey D. Roth and Jerome R. Mahoney (incorporated herein by reference to Exhibit 10.2 on Form 10-K, dated May 9, 2009, filed with the SEC on May 26, 2009). 10.14 Promissory notes, dated April 11, 2011 among SilverSun Technologies, Inc and accredited investors (incorporated herein by reference to Exhibit 10.1 on Form 8-K, dated April 11, 2011, filed with the SEC on April 15, 2011). 10.15 Form of Preferred Stock Purchase Agreement (incorporated by reference to Exhibit 10.2 on the Company’s current report on Form 8-K filed with the SEC on May 12, 2011). 10.16 Amended Agreement by and between the Company and Mr. Stanley Wunderlich (incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K filed with the SEC on August 3, 2011). 10.17 Form of Warrant (incorporated by reference to Exhibit 10.2 to the Company’s current report on Form 8-K filed with the SEC on August 3, 2011). 10.18 Loan and Security Agreement by and between the Company, its subsidiary SWK Technologies, Inc and a commercial lender (incorporated herein by reference to Exhibit 10.18 of the Annual Report on Form 10-K for the period ended December 31, 2011, filed with the SEC on March 29, 2012). 10.19 Audit Committee Charter (incorporated herein by reference to Exhibit 10.19 of the Annual Report on Form 10-K for the period ended December 31, 2011, filed with the SEC on March 29, 2012). 10.20 Form of Purchase Agreement, dated June 14, 2012, by and among SWK Technologies, the Company’s wholly-owned subsidiary, Neil Wolf, Esq., not individually, but solely in his capacity as Trustee-Assignee of the Trust Agreement and Assignment for the Benefit of the Creditors of Hightower, Inc., Hightower, Inc., and the Stockholders of Hightower, Inc. (incorporated by reference to Exhibit 2.1 on the Company’s current report on Form 8-K filed with the SEC on June 20, 2012). 10.21 Promissory Note, dated March 11, 2015, issued in favor of 2000Soft, Inc. d/b/a Accounting Technology Resources, a California corporation (incorporated by reference to Exhibit 10.2 on the Company’s current report on Form 8-K filed with the SEC on March 17, 2015). 10.22 Form of Promissory Note, dated July 6, 2015, issued in favor of ProductiveTech, Inc., a New Jersey corporation (incorporated herein by reference to Exhibit 10.1 on Form 8-K, filed with the SEC on July 10, 2015) 10.23 Amended and Restated Employment Agreement, dated February 4, 2016, between Mark Meller and Silversun Technologies, Inc. (incorporated herein by reference to Exhibit 10.1 on Form 8-K, filed with the SEC on February 5, 2016). 10.24 Form of $1,000,000 Convertible Promissory Note, dated May 18, 2018, issued in favor of Info Sys Management, Inc. (incorporated herein by reference to Exhibit 10.1 on Form 8-K, filed with the SEC on May 24, 2018). 10.25 Form of $400,000 Convertible Promissory Note, May 18, 2018, issued in favor of Info Sys Management, Inc. (incorporated herein by reference to Exhibit 10.2 on Form 8-K, filed with the SEC on May 24, 2018). 10.26 Form of Employment Agreement, dated May 18, 2018 by and between SWK Technologies, Inc. and Brian James O’Reilly (incorporated herein by reference to Exhibit 10.3 on Form 8-K, filed with the SEC on May 24, 2018). 10.27 Form of Escrow Agreement, dated August 26, 2019, by and among SWK Technologies, Inc., SPS Commerce, Inc. and Wells Fargo Bank, National Association (incorporated herein by reference to Exhibit 10.2 on Form 8-K, filed with the SEC on August 27, 2019). 14.1 Code of Ethics (incorporated by reference to Exhibit 14.1 filed with the Registrant’s Form 10-KSB for the fiscal year ended December 31, 2003). 42 Table of Contents 21.1 * List of Subsidiaries 23.1* Consent of Independent Registered Public Accounting Firm 31.1 * Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herein. 31.2 * Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herein. 32.1 * Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 filed herein. 32.2 * Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 filed herein. 101.INS * XBRL Instance Document 101.SCH * XBRL Taxonomy Extension Schema 101.CAL * XBRL Taxonomy Extension Calculation Linkbase 101.DEF * XBRL Taxonomy Extension Definition Linkbase 101.LAB * XBRL Taxonomy Extension Label Linkbase 101.PRE * XBRL Taxonomy Extension Presentation Linkbase * Filed herewith 43 Table of Contents SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SILVERSUN TECHNOLOGIES, INC. Date: March 25, 2021 By: /s/ Mark Meller Mark Meller Principal Executive Officer Date: March 25, 2021 By: /s/ Joseph Macaluso Joseph Macaluso Principal Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Name Position Date /s / Mark Meller Principal Executive Officer March 25, 2021 Mark Meller /s/ Stanley Wunderlich Director March 25, 2021 Stanley Wunderlich /s/ Kenneth Edwards Director March 25, 2021 Kenneth Edwards /s/ John Schachtel Director March 25, 2021 John Schachtel /s/ Joseph Macaluso Principal Financial Officer March 25, 2021 Joseph Macaluso 44 Table of Contents PART F/S INDEX TO FINANCIAL STATEMENTS AUDITED FINANCIAL STATEMENTS Page (s) REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F-2 CONSOLIDATED FINANCIAL STATEMENTS: Balance Sheets F-3 Statements of Operations F-4 Statements of Stockholders’ Equity F-5 Statements of Cash Flows F-6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-9 F-1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of SilverSun Technologies, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of SilverSun Technologies, Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) related to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion or the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Revenue recognition Description of the Matter As described in Note 2 to the financial statements, the Company recognizes revenue mainly from the resale of software products, maintenance and professional consulting services. The Company enters into contracts with customers that may include combinations of products and services, which are generally distinct and recorded as separate performance obligations. Revenue is recognized when control of the distinct performance obligation is transferred. For example, product revenue is recognized at a point in time while maintenance and professional consulting services revenue is recognized over time. Auditing the Company’s revenue is a critical audit matter due to the effort required to analyze the high volume of transactions, significance of the total amounts recognized as revenue, and timing of when revenue is recognized. How We Addressed the Matter in Our Audit Our audit procedures related to the Company’s revenue recognition included, among others, selecting a sample of recorded revenue transactions and examining customer source documents for each selection, including the contract or agreement and invoices and payment support. In addition, we evaluated management’s application of the Company’s accounting policy, tested the mathematical calculation of revenue and associated timing of revenue recognized in the financial statements. /s/ Friedman LLP We have served as the Company’s auditor since 2004. East Hanover, New Jersey March 25, 2021 F-2 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2020 2019 ASSETS Current assets: Cash $ 6,595,416 $ 8,658,401 Escrow accounts receivable - 1,150,000 Accounts receivable, net of allowance of $375,000 1,580,242 2,529,545 Unbilled services 52,072 183,484 Prepaid expenses and other current assets 400,820 455,434 Total current assets 8,628,550 12,976,864 Property and equipment, net 523,040 712,627 Operating lease right-of-use assets 1,373,720 698,840 Intangible assets, net 3,126,336 2,607,301 Goodwill 1,011,952 891,000 Deferred tax assets 1,039,084 874,482 Deposits and other assets 198,726 192,158 Total assets $ 15,901,408 $ 18,953,272 LIABILITIES & STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 1,875,115 $ 2,210,618 Accrued expenses 1,330,786 1,189,746 Accrued dividend - 2,250,636 Accrued interest 21,206 15,378 Income taxes payable 318,031 152,355 Long term debt – current portion 262,301 131,795 Long term convertible debt – current portion 282,699 277,106 Finance lease obligations – current portion 118,658 162,625 Operating lease liabilities – current portion 481,250 262,020 Deferred revenue 2,039,241 2,006,983 Total current liabilities 6,729,287 8,659,262 Long term debt net of current portion 502,560 64,072 Long term convertible debt net of current portion 434,783 717,482 Finance lease obligations net of current portion 62,316 180,976 Operating lease liabilities net of current portion 892,470 436,820 Total liabilities 8,621,416 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 and 4,501,271 issued and outstanding as of December 31, 2020 and 2019, respectively 46 46 Additional paid-in capital 7,739,883 9,530,198 Accumulated deficit (459,937 ) (635,584 ) Total stockholders’ equity 7,279,992 8,894,660 Total liabilities and stockholders’ equity $ 15,901,408 $ 18,953,272 The accompanying notes are an integral part of these consolidated financial statements. F-3 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended December 31, 2020 December 31, 2019 Revenues: Software product, net $ 7,661,580 $ 6,876,682 Service, net 33,558,826 31,625,800 Total revenues, net 41,220,406 38,502,482 Cost of revenues: Product 4,608,889 4,179,592 Service 20,032,536 19,644,436 Total cost of revenues 24,641,425 23,824,028 Gross profit 16,578,981 14,678,454 Operating expenses: Selling and marketing expenses 7,365,912 6,838,745 General and administrative expenses 8,273,558 8,772,965 Share-based compensation expenses 10,194 16,910 Impairment of intangible assets - 236,860 Depreciation and amortization expenses 705,932 720,035 Total selling, general and administrative expenses 16,355,596 16,585,515 Income (loss) from continuing operations 223,385 (1,907,061 ) Other (expense) income: Other income 13,269 24,005 Interest expense, net (13,616 ) (39,814 ) Total other expense, net (347 ) (15,809 ) Income (loss) from continuing operations before taxes 223,038 (1,922,870 ) (Provision) Benefit for income taxes (47,391 ) 455,006 Income (loss) from continuing operations 175,647 (1,467,864 ) Discontinued operations Income from discontinued operations - 988,525 Gain on sale of discontinued operations - 10,307,155 Provision for income taxes - (3,033,590 ) Income from discontinued operations - 8,262,090 Net income $ 175,647 $ 6,794,226 Basic earnings (loss) per share applicable to common shareholders: Continuing operations 0.04 (0.33 ) Discontinued operations - 1.84 Net income 0.04 1.51 Diluted earnings (loss) per share applicable to common shareholders: Continuing operations 0.04 (0.33 ) Discontinued operations - 1.84 Net income 0.04 1.51 Weighted average shares outstanding: Basic 4,501,271 4,500,827 Diluted 4,501,271 4,500,827 The accompanying notes are an integral part of these consolidated financial statements. F-4 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2020 AND 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 Cancellation of Series B stock - - (1 ) (1 ) - - 1 - - Cash dividend declared - - - - - - (2,250,636 ) - (2,250,636 ) Exercised stock warrants - - - - 516 - - - - Share-based compensation - - - - - - 16,910 - 16,910 Net income - - - - - - - 6,794,226 6,794,226 Balance at December 31, 2019 - $ - - $ - 4,501,271 $ 46 $ 9,530,198 $ (635,584 ) $ 8,894,660 Cash dividend - - - - - - (1,800,509 ) - (1,800,509 ) Share-based compensation - - - - - - 10,194 - 10,194 Net income - - - - - - - 175,647 175,647 Balance at December 31, 2020 - $ - - $ - 4,501,271 $ 46 $ 7,739,883 $ (459,937 ) $ 7,279,992 The accompanying notes are an integral part of these consolidated financial statements. F-5 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020 2019 Cash flows from operating activities: Net income $ 175,647 $ 6,794,226 Net income from discontinued operations - 8,262,090 Net income (loss) from continuing operations 175,647 (1,467,864 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Deferred income taxes (164,602 ) (455,006 ) Depreciation and amortization 314,369 338,103 Amortization of intangibles 391,563 381,933 Amortization of right of use assets 416,061 212,164 Bad debt expense (2,274 ) 139,270 Share-based compensation 10,194 16,910 Impairment of intangible asset - 236,860 Changes in assets and liabilities: Accounts receivable 977,451 (605,611 ) Unbilled services 131,412 (16,888 ) Prepaid expenses and other current assets 54,614 (21,707 ) Deposits and other assets 354 (152,368 ) Accounts payable (335,503 ) 182,400 Accrued expenses 141,040 (232,808 ) Income tax payable 165,676 132,350 Accrued interest 5,828 750 Deferred revenues (136,678 ) 620,365 Operating lease obligations (416,061 ) (212,160 ) Net cash provided by (used in) operating activities of continuing operations 1,729,091 (903,307 ) Cash flows from investing activities: Purchase of property and equipment (124,782 ) (70,672 ) Acquisition of business (185,410 ) (60,000 ) Escrow accounts receivable 1,150,000 - Proceeds from sale of EDI practice, net of fees and taxes - 8,365,192 Software development costs - (81,730 ) Net cash provided by investing activities of continuing operations 839,808 8,152,790 Cash flows from financing activities: Payment of cash dividend (4,051,145 ) (225,038 ) Proceeds from PPP loan 3,150,832 - Payment of PPP loan (3,150,832 ) - Payment of contingent consideration - (22,548 ) Payment for repurchase of common stock - - Payment of long-term debt (141,006 ) (206,760 ) Payment of long-term convertible debt (277,106 ) (271,622 ) Payment of capital lease obligations (162,627 ) (144,202 ) Net cash used in financing activities of continuing operations (4,631,884 ) (870,170 ) Cash flows from discontinued operations Operating activities of discontinued operations - 505,910 Investing activities of discontinued operations - (127,679 ) Net cash provided by discontinued operations - 378,231 Net (decrease) increase in cash (2,062,985 ) 6,757,544 Cash, beginning of year 8,658,401 1,900,857 Cash, end of year $ 6,595,416 $ 8,658,401 Supplemental Schedule of Cash Flow Information: During the year, cash was paid for the following: Income taxes $ 41,957 $ 1,907,382 Interest $ 36,915 $ 39,814 The accompanying notes are an integral part of these consolidated financial statements. F-6 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: For the Year Ended December 31, 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. The Company leases office space in Chicago, IL with a monthly rent of $582. The lease expired May 31, 2020. This has been renewed for two years expiring May 31, 2022 at rate of $655 per month. On July 1, 2020 the Company entered into an operating lease in Phoenix, Arizona. Accordingly, operating lease right of use assets and operating lease liabilities were recognized in the amount of $103,451. 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. The Company also received deferred revenue in the amount of $51,748 and deposits of $32,896. The Company assumed office lease in Burr. Ridge, IL starting at $2,849 per month and escalating to $2,929 per month by the end of the term which ends July 30, 2022. The Company also recognized right-of-use assets and related liabilities in the amount of $64,863. On October 1, 2020, SWK acquired certain assets of Computer Management Services, LLC, (“CMS”) pursuant to an Asset Purchase Agreement for cash of $410, liabilities in the form of clients deposits related to technical support in the amount of $50,115 and prepaid time from clients in the amount of $67,073, 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. 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. On December 9, 2020, the Company declared a $0.40 special cash dividend per share of Common Stock payable on December 28, 2020 for shareholders of record on December 28, 2020 for an aggregate amount of $1,800,509. For the Year Ended December 31, 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. Accordingly, 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 the purchase of equipment. F-7 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS(Continued) SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: For the Year Ended December 31, 2019 (continued): On September 6, 2019, the Company filed a Certificate of Elimination of Certificate of Designations (the “Certificate of Elimination”) with the Secretary of State of the State of Delaware. The Certificate of Withdrawal eliminated the Company’s Series B Preferred Stock, par value $.001 per share (the “Series B Preferred”), from the Company’s Certificate of Incorporation. Prior to filing the Certificate of Elimination, Mark Meller, the Company’s Chief Executive Officer and Chairman and owner of the only share of Series B Preferred, cancelled the only share of Series B Preferred issued and outstanding. On August 26, 2019 the Company sold the EDI practice and $1,150,000 of the proceeds were put in an escrow receivable account (see Note 14). There was also an adjustment to the Working Capital and an additional $162,868 was added to the gain on the sale of Mapadoc. 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 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. The accompanying notes are an integral part of these consolidated financial statements. F-8 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019 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 migration 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 14). 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 The accompanying consolidated financial statements include the accounts of the “Company” and its wholly-owned subsidiaries. These 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. 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 years ended December 31, 2020 and 2019. F-9 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019 NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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. 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 SG&A. 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. A triggering event occurred with the sale of Mapadoc EDI and an analysis was prepared by management. 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. Impairment losses of $ -0- and $236,860, were identified and recorded for the years ended December 31, 2020 and 2019 respectively. 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. F-10 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019 NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Components of revenue: For the Year Ended December 31 2020 2019 Professional Consulting $ 13,617,958 $ 12,055,878 Maintenance Revenue 7,152,209 7,722,181 Software revenue 7,661,580 6,876,682 Ancillary Service Revenue 12,788,659 11,847,741 $ 41,220,406 $ 38,502,482 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 services are performed over the contractual or stated period, which generally ranges from three to twelve months. As of December 31, 2020, there was $167,267 in deferred maintenance, $308,343 in deferred support services, and $1,563,631 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 consolidated statements of operations. Fair Value of Financial Instruments The Company estimates that the fair value of all financial instruments at December 31, 2020 and December 31, 2019, as defined in Financial Accounting Standards Board (“FASB”) ASC 825 “Financial Instruments”, does not differ materially, except for the items discussed below, from the aggregate carrying values of its financial instruments recorded in the accompanying consolidated balance sheets. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value. The carrying amounts reported in the consolidated balance sheets as of December 31, 2020 and December 31, 2019 for cash, accounts receivable, and accounts payable approximate the fair value because of the immediate or short-term maturity of these financial instruments. Each reporting period we evaluate market conditions including available interest rates, credit spreads relative to our credit rating and liquidity in estimating the fair value of our debt. After considering such market conditions, we estimate that the fair value of debt approximates its carrying value. Leases On January 1, 2019, the Company adopted the new lease accounting standard using the modified retrospective transition method applied at the effective date of the standard. Results for reporting periods beginning after January 1, 2019 are presented under the new leasing standard, while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s historic accounting. The Company has elected to utilize the package of practical expedients at the time of adoption, which allows the Company to (1) not reassess whether any expired or existing contracts are or contain leases, (2) not reassess the lease classification of any expired or existing leases, and (3) not reassess initial direct costs for any existing leases. The Company also has elected to utilize the short-term lease recognition exemption and, for those leases that qualified, the Company did not recognize right-of-use (“ROU”) assets or lease liabilities. F-11 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019 NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Leases (continued) The Company accounts for its leases in accordance with ASC 842 Leases. The Company leases office space and equipment. The Company concludes on whether an arrangement is a lease at inception. This determination as to whether an arrangement contains a lease is based on an assessment as to whether a contract conveys the right to the Company to control the use of identified property, plant or equipment for period of time in exchange for consideration. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes these lease expenses on a straight-line basis over the lease term. The Company has assessed its contracts and concluded that its leases consist of finance and operating leases. Operating leases are included in operating lease right-of-use (ROU) assets, current portion of operating lease liabilities, and operating lease liabilities in the Company’s consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company determines an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate represents a significant judgment that is based on an analysis of the Company’s credit rating, country risk, treasury and corporate bond yields, as well as comparison to the Company’s borrowing rate on its most recent loan. The Company uses the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. 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 December 31, 2020, the Company had cash on deposit of approximately $5,900,593 in excess of the federally insured limits of $250,000. As of December 31, 2020, no one customer represented more than 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 years ended December 31, 2020 and 2019, the top ten customers accounted for 10% ($4,246,257) and 10% ($3,903,702), respectively, of total revenues. The Company does not rely on any one specific customer for any significant portion of its revenue base . For the years ended December 31, 2020 and 2019, purchases from one supplier through a “channel partner” agreement were approximately 15% and 19% 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. For the year ended December 31, 2020 two suppliers represented approximately 39% of accounts payable. For the year ended December 31, 2019, one supplier represented approximately 15% of total accounts payable. Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade accounts receivable and cash. As of December 31, 2020, the Company believes it has no significant risk related to its concentration of accounts receivable. F-12 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019 NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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 several 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. 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 consolidated statements of operations. Income Taxes 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. F-13 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019 NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fair Value Measurement FASB ASC 820, “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and prescribes disclosures about fair value measurements. 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 leases 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 9. 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. We have evaluated the requirements of this standard on our financial assets and have concluded that the adoption of this ASU, beginning January 1, 2021, will not have a material impact on our consolidated financial statements. 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. This standard is effective for annual periods beginning after December 15, 2020, including interim reporting periods within these annual periods. We do not expect the adoption of this standard to have a significant impact on our financial position and results of operations. F-14 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019 NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). The update simplifies the accounting for convertible debt instruments and convertible preferred stock by reducing the number of accounting models and limiting the number of embedded conversion features separately recognized from the primary contract. The guidance also includes targeted improvements to the disclosures for convertible instruments and earnings per share. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The Company is evaluating the impact of the adoption on its consolidated financial statements. No other recently issued accounting pronouncements had or are expected to have a material impact on the Company’s consolidated financial statements. NOTE 3 – NET INCOME (LOSS) PER COMMON SHARE The Company’s basic income (loss) per common share is based on net income (loss) 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 (loss), divided by the weighted average number of common shares outstanding during the period, including common share equivalents, such as outstanding options, warrants and convertible securities to the extent they are dilutive. As of December 31, 2020, and 2019, the average market prices for the years 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, the convertible promissory notes have also been excluded from the Company’s computation of income (loss) per common share from continuing operations for the years ended December 31, 2020 and 2019. Therefore, basic and diluted income (loss) per common share for continuing operations for the years ended December 31, 2020 and 2019 are the same. Year Ended December 31, 2020 Year Ended December 31, 2019 Basic net income (loss) from continuing operations per share computation: Net income (loss) from continuing operations $ 175,647 $ (1,467,864 ) Weighted-average common shares outstanding 4,501,271 4,500,827 Basic net income (loss) per share $ 0.04 $ (0.33 ) Diluted net income (loss) from continuing operations per share computation: Net income (loss) per above $ 175,647 $ (1,467,864 ) Interest on convertible note - - Net income (loss) 175,647 (1,467,864 ) Weighted-average common shares outstanding 4,501,271 4,500,827 Incremental shares for convertible promissory note, warrants And stock options - - Total adjusted weighted-average shares 4,501,271 4,500,827 Diluted net loss per share $ 0.04 $ (0.33 ) The following table summarizes securities that, if exercised, would have an anti-dilutive effect on earnings per share. Year Ended December 31, 2020 Year Ended December 31, 2019 Stock options - 26,280 Warrants 4,988 191,543 Convertible promissory notes 178,212 247,041 Total potential dilutive securities not included in loss per share 183,200 464,864 F-15 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019 NOTE 4 – PROPERTY AND EQUIPMENT Property and equipment is summarized as follows: December 31, 2020 December 31, 2019 Leasehold improvements $ 165,701 $ 98,831 Equipment, furniture, and fixtures 2,900,252 2,842,340 3,065,953 2,941,171 Less: Accumulated depreciation and amortization (2,542,913 ) (2,228,544 ) Property and equipment, net $ 523,040 $ 712,627 Depreciation and amortization expense related to these assets for the years ended December 31, 2020 and 2019 was $314,369 and $338,103. Property and equipment under finance leases (included in Note 7) are summarized as follows: December 31, 2020 December 31, 2019 Equipment, furniture, and fixtures $ 708,272 $ 708,272 Less: Accumulated amortization (433,100 ) (248,497 ) Property and equipment, net $ 275,172 $ 459,775 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: December 31, 2020 December 31, 2019 Estimated Useful Lives Proprietary developed software $ 390,082 $ 390,082 5 –7 Intellectual property, customer list, and acquired contracts 5,340,612 4,430,014 5 –15 Total intangible assets $ 5,730,694 $ 4,820,096 Less: accumulated amortization (2,604,358 ) (2,212,795 ) $ 3,126,336 $ 2,607,301 Amortization expense related to the above intangible assets was $391,563 and $381,933, respectively, the years ended December 31, 2020 and 2019. Impairment on intangible assets was $-0- and $236,860 for the years ended December 31, 2020 and 2019, respectively. F-16 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019 NOTE 5 – INTANGIBLE ASSETS (Continued) The Company expects future amortization expense to be the following: Amortization 2021 $ 429,412 2022 362,709 2023 299,597 2024 299,597 2025 292,740 thereafter 1,442,281 Total $ 3,126,336 NOTE 6 – LINE OF CREDIT, CONVERTIBLE DEBT, LONG TERM DEBT, RELATED PARTY AND PPP LOAN On September 11, 2018, SWK entered into a Revolving Demand Note (the “JPM Revolving Demand Note”) by and between SWK and JPMorgan Chase Bank (“JPM Lender”), a commercial lender. The JPM Lender had agreed to loan SWK up to a principal amount of two million dollars. The interest rate on the JPM Revolving Demand Note was to be a variable rate, equal to the “Adjusted LIBOR Rate”, plus two and one quarter percent (2.25%) per annum. The JPM Revolving Demand Note was secured by all of SWK’s assets pursuant to a Security Agreement. The line was also collateralized by substantially all the assets of the Company. On August 26, 2019, all amounts owed to JPM Lender under the JPM Revolving Demand Note were paid and the JPM Revolving Demand Note terminated and is of no further force or effect. On May 6, 2014, SWK acquired certain assets of ESC, Inc. pursuant to an Asset Purchase Agreement for a promissory note in the aggregate principal amount of $350,000 (the “ESC Note”). The ESC Note matured on April 1, 2019. Monthly payments were $6,135 including interest at 2% per year. At December 31, 2020 and December 31, 2019, the outstanding balances were $-0- and $-0-, respectively. On July 6, 2015, SWK acquired certain assets of Productive Tech 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 was due in 60 months from the closing date and with an interest rate of two and one half (2.5%) percent. Monthly payments including interest are $10,645. THE PTI Note matured and last payment made on July 1, 2020. At December 31, 2020 and December 31, 2019, the outstanding balances on the PTI Note were $-0- 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 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”). At December 31, 2020 and December 31, 2019, the outstanding balances on the ISM Note were $512,487 and $710,420, respectively. 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. F-17 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019 NOTE 6 – LINE OF CREDIT, CONVERTIBLE DEBT, 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 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”). At December 31, 2020 and December 31, 2019, the outstanding balances on the Nellnube Note were $204,995 and $284,168 respectively. 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 cash of $410, clients deposits related to technical support in the amount of $50,115, prepaid time from clients in the amount of $67,073, 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 on the note 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. Total convertible debt and long-term debt balances at December 31, 2020 and 2019 were $1,482,343 and $1,190,455, respectively, of which $545,000 and $408,901 was classified as current portion at December 31, 2020 and 2019, respectively. At December 31, 2020, future payments of promissory notes are as follows over each of the next five fiscal years: 2021 $ 545,000 2022 498,634 2023 343,942 2024 46,918 2025 47,849 Total $ 1,482,343 F-18 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019 NOTE 6 – LINE OF CREDIT, CONVERTIBLE DEBT, LONG TERM DEBT, RELATED PARTY AND PPP LOAN (Continued) 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. 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 consolidated balance sheets. The related obligations are based upon the present value of the future minimum lease payments with the following: December 31, 2020 December 31, 2019 Weighted average remaining lease terms 1.31 2.33 Weighted average interest rates 5.6 % 5.53 % At December 31, 2020, future payments under finance leases are as follows: 2021 $ 125,591 2022 57,586 2023 6,637 Total minimum lease payments 189,814 Less amounts representing interest (8,840 ) Present value of net minimum lease payments 180,974 Less current portion (118,658 ) Long-term capital lease obligation $ 62,316 NOTE 8 – OPERATING LEASE LIABILITIES The Company leases office space in eleven different locations with monthly payments ranging from $744 to $10,279 which expire at various dates through April 2025. 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 December 31, 2020 and 2019 are as follows: December 31, 2020 December 31, 2019 Weighted average remaining lease term 2.93 3.42 Weighted average discount rate 4.77 % 4.77 % F-19 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019 NOTE 8 – OPERATING LEASE LIABILITIES (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 consolidated balance sheet as of December 31, 2020: 2021 $ 535,097 2022 425,489 2023 356,844 2024 141,457 2025 and thereafter 20,510 Total undiscounted future minimum lease payments 1,479,397 Less: Difference between undiscounted lease payments and discounted lease liabilities (105,677 ) Total operating lease liabilities $ 1,373,720 Less current portion (481,250 ) Long-term operating lease liabilities $ 892,470 Total rent expense under operating leases for the year ended December 31, 2020 was $548,336 as compared to $417,467 for the year ended December 31, 2019. Rent expense paid with cash was $552,613 for the year ended December 31, 2020 as compared to $423,469 for the year ended December 31, 2019. NOTE 9 – EQUITY On September 6, 2019, the Company filed a Certificate of Elimination of Certificate of Designations (the “Certificate of Elimination”) with the Secretary of State of the State of Delaware. The Certificate of Withdrawal eliminated the Company’s Series B Preferred Stock, par value $.001 per share (the “Series B Preferred”), from the Company’s Certificate of Incorporation. Prior to filing the Certificate of Elimination, Mark Meller, the Company’s Chief Executive Officer and Chairman and owner of the only share of Series B Preferred, cancelled the only share of Series B Preferred issued and outstanding. 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 December 31, 2020, 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. 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. Stock Options The fair value of each option awarded is estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table. Expected volatilities are based on historical volatility of Common Stock. The expected life of the options granted represents the period from date of grant to expiration (5 years). The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant. There were no stock options granted for the year ended December 31, 2020. As of December 31, 2020, the Company has no outstanding stock options. F-20 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019 NOTE 9 – EQUITY (Continued) A summary of the status of the Company’s stock option plans for the fiscal years ended December 31, 2020 and 2019 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 canceled/forfeited (26,280 ) $ 3.71 Outstanding options at December 31, 2020 - $ - - $ -0- Vested Options: December 31, 2020: - $ - - $ -0- December 31, 2019: 21,960 $ 3.72 0.6 years $ -0- Total stock compensation recognized for the year ended December 31, 2020 and 2019 was $10,194 and $16,910, respectively As of December 31, 2020, the unamortized compensation expense for stock options was $0. 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 .3 years Granted - $ - Exercised - $ - Canceled 186,555 $ 5.31 Outstanding and Exercisable December 31, 2020 4,988 $ 4.01 1.24 years F-21 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019 NOTE 10 – BUSINESS COMBINATIONS 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. On July 31, 2020, the Company acquired certain assets of Prairie Technology Solutions Group, LLC, (“PT”) pursuant to an Asset Agreement for cash of $185,000 and the issuance of three promissory notes each in the amount of $103,333. Note 1 is due on the one- year anniversary of the closing date. Note 2 is due on the two-year anniversary of the closing date and Note 3 is due on the three-year anniversary of the closing date. Each note bears an interest rate of four percent (4%) per annum. Payments are due annually including interest. The allocation of the purchase price to customer list with an estimated life of ten years and goodwill, which is deductible for tax purposes, has been based on an independent valuation. On October 1, 2020, the Company acquired certain assets of Computer Management Services, LLC (“CMS”) pursuant to an Asset Purchase Agreement. In consideration for the acquired assets, the Company paid $410 in cash and issued a promissory note to CMS in the principal aggregate amount of $170,000. The CMS Note is due in 36 months from the closing date and bears interest at a rate of two (2%) percent per annum. Monthly payments including interest are $4,869. The allocation of the purchase price to customer list with an estimated life of ten years and goodwill, which is deductible for tax purposes, has been based on an independent valuation. 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. The purchase price has been allocated to customer list with an estimated life of fifteen years. Upon completion of an independent valuation, the allocation of the purchase price to customer lists will be modified with the excess purchase consideration being allocated to goodwill. The Company expects these acquisitions to create synergies by combining operations and expanding geographic market share and product offerings. The Company expects these acquisitions to create synergies by combining operations and expanding geographic market share and product offerings. The following summarizes the purchase price allocation for all prior year and current year’s acquisitions: PIT PT CMS BSS (Preliminary) Cash consideration $ 60,000 $ 185,000 $ 410 $ - Note payable 174,000 310,000 170,000 230,000 Total purchase price $ 234,000 $ 495,000 $ 170,410 $ 230,000 Deposits and other assets $ - $ 32,896 $ - $ - Accounts Receivable - - - - Customer List 228,000 406,000 274,115 230,000 Operating Lease Right-of-Use Assets - 64,863 - - Goodwill 6,000 107,852 13,000 - Total assets acquired 234,000 611,611 287,115 230,000 Deferred revenue (- ) (51,748 ) (111,705 ) (- ) Contingent liability (- ) (- ) (5,000 ) (- ) Operating lease liability (- ) (64,863 ) - (- ) Net assets acquired $ 234,000 $ 495,000 $ 170,410 $ 230,000 F-22 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019 NOTE 10 – BUSINESS COMBINATIONS (Continued) The following unaudited pro forma information does not purport to present what the Company’s actual results would have been had the acquisitions occurred on January 1, 2019, nor is the financial information indicative of the results of future operations. The following table represents the unaudited consolidated pro forma results of operations for the years ended December 31, 2020 and 2019 as if the acquisitions occurred on January 1, 2019. Operating expenses have been increased for the amortization expense associated with the estimated fair value adjustment as of December 31, 2019 of expected definite lived intangible assets and interest on the notes payable. Pro Forma Year Ended December 31, 2020 Year Ended December 31, 2019 Net revenues $ 42,774,741 $ 41,592,100 Cost of revenues 25,241,176 25,073,722 Operating expenses 17,237,828 18,013,296 Income (loss) before taxes 295,737 (1,494,918 ) Net income (loss) from continuing operations $ 278,519 $ (1,059,912 ) Basic and diluted income (loss) per common share $ 0.06 $ (0.24 ) The Company’s consolidated financial statements for the years ending December 31, 2020 and 2019 include the actual results of PIT since the date of acquisition, January 1, 2019. The year ended December 31, 2020 pro-forma results above include seven months of results of PT, nine months of CMS and eleven months of BSS. For the year ending December 31, 2020, there is $23,683 of estimated amortization expense and $7,231 of estimated interest expense included in the PT pro-forma results, $20,598 of estimated amortization expense and $2,274 of estimated interest expense included in the CMS pro-forma results, and $30,118 of estimated amortization expense and $3,881 of estimated interest expense included in the BSS pro-forma results. For the year ended December 31, 2020, PT had a net loss of $5,739, CMS had net income of $116, 074 and BSS had a net loss $7,463. For the year ended December 31, 2020, the PT, CMS & BSS operations had a net income before taxes of $157,515 which represented 6 months of operations of PT, three months of operations of CMS and one months of operations of BSS that were included in the Company’s Consolidated Statement of Operations. This consisted of approximately $867,991 in revenues, $467,654 in cost of revenues and $242,822 in operating expenses. The year ended December 31, 2019 pro-forma results above include total year results for PT, CMS and BSS. For the year ending December 31, 2019, there is $40,596 of estimated amortization expense and $12,630 of estimated interest expense included in the PT pro-forma results, $27,456 of estimated amortization expense and $2,893 of estimated interest expense included in the CMS pro-forma results, and $32,856 of estimated amortization expense and $4,196 of estimated interest expense included in the BSS pro-forma results. For the years ended December 31, 2019, there was no income included in the Company’s Statement of Operations for PT, CMS and BSS. 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 $5,800,000 as of December 31, 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. F-23 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019 NOTE 11 – INCOME TAXES (Continued) 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. Significant components of the Company’s deferred tax assets and liabilities are summarized as follows: December 31, December 31, 2020 2019 Deferred tax assets: Net operating loss carry forwards $ 1,431,000 $ 1,517,482 Long lived assets 117,000 181,000 Share based payments 6,000 13,000 Allowance for doubtful accounts 107,000 109,000 Other 13,084 15,000 Deferred tax asset 1,674,084 1,835,482 Deferred tax liabilities: Installment sale - (346,000 ) Long lived assets (173,000 ) (278,000 ) Deferred tax liabilities (173,000 ) (624,000 ) Net deferred tax asset 1,501,084 1,211,482 Less: Valuation allowance (462,000 ) (337,000 ) Net deferred tax asset $ 1,039,084 874,482 For the year ended December 31, 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 50% of meals, 100% entertainment expense which are not tax deductible. The total tax provision for the year ended December 31, 2020 was $47,391. For the year ended December 31, 2019, 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 change in federal statutory rate described above and Incentive Stock Options (ISO) and 50% of meals, 100% entertainment expense which are not tax deductible. The total tax benefit for the year ended December 31, 2019 was $455,006. A reconciliation of the statutory income tax rate to the effective rate is as follows for the period December 31, 2020 and 2019: December 31, December 31, 2020 2019 Federal income tax rate 21 % 21 % State income tax, net of federal benefit 7 % 6 % Permanent items 3 % - % Return to provision for prior year (7 %) - % Other (3 %) (3 %) Effective income tax rate 21 % 24 % F-24 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019 NOTE 11 – INCOME TAXES (Continued) Income tax provision (benefit) from continuing operations: Year Ended December 31, December 31, 2020 2019 Current: Federal $ 136,083 $ - State and local 75,910 - Total current tax provision (benefit) 211,993 - Deferred: Federal (115,221 ) (342,006 ) State and local (49,381 ) (113,000 ) Total deferred tax provision (benefit) (164,602 ) (455,006 ) Total provision (benefit) $ 47,391 (455,006 ) NOTE 12 – RELATED PARTY TRANSACTIONS As of December 31, 2020 and 2019, long term debt and convertible debt are considered related party liabilities as holders are current employees of the Company, see Note 6. The Company leased its Seattle, WA office space from Mary Abdian, an employee of SWK. The lease which expires on September 30, 2018, was terminated by mutual consent on May 31, 2019 and the lease continued on a month-to-month basis with a monthly rent of approximately $2,066. The Company ended the lease on May 31, 2020. Total rent paid for 2020 and 2019 was $10,195 and $24,117 respectively under this lease. NOTE 13 – COMMITMENTS AND CONTINGENCIES Contingencies On March 4, 2019, plaintiff John Solak (“Plaintiff”) commenced a direct and derivative action in the Delaware Court of Chancery (the “Action”): both on his own behalf as a stockholder of Silversun and derivatively on behalf of SilverSun against the Company’s officers and directors relating to stockholder voting rights granted to the Company’s Chairman and Chief Executive Officer, Mark Meller in the form of Series B Preferred Stock. On or about April 22, 2019, the Company determined to undertake certain actions relating to the Series B Preferred Stock challenged in Plaintiff’s complaint, as well as certain changes to the Company’s governance policies. The Company’s officers and directors have at all relevant times denied, and continue to deny, any alleged violations of Delaware law. Plaintiff’s counsel believe that the remedial measures by SilverSun in response to the Action render the Action moot, and give rise only to a claim for attorney’s fees. The Company and the Plaintiff agreed that the Company shall pay $115,000 to Plaintiff’s counsel for fees and expenses. The Court of Chancery of the State of Delaware has not been asked to review, and will pass no judgment on, this payment of fees and expenses or its reasonableness. The Stipulation and Order Regarding Notice to Stockholders was entered into by Plaintiff, the Company and the Company’s officers and directors on August 2, 2019 and this matter is now resolved. F-25 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019 NOTE 13 – COMMITMENTS AND CONTINGENCIES (Continued) Employment agreements The Company’s Chief Executive Officer and President has had an Employment Agreement with the Company since September 15, 2003. On February 4, 2016 (the “Effective Date”), the Company entered into an amended and restated employment agreement (the “Meller Employment Agreement”) with Mark Meller, pursuant to which Mr. Meller will continue to serve as the Company’s President and Chief Executive Officer. The Meller Employment Agreement was entered into by the Company and Mr. Meller primarily to extend the term of Mr. Meller’s employment. The term of the Meller Employment Agreement is for an additional 7 years through September of 2023 (the “Term”) and shall automatically renew for additional periods of one year unless otherwise terminated in accordance with the employment agreement. As of the renewal date, the Company agreed to pay Mr. Meller and annual salary of $565,000 with a ten percent (10%) increase every year. The Meller Employment Agreement provides for a severance payment to Mr. Meller of three hundred percent (300%), less $100,000 of his gross income for services rendered to the Company in each of the five prior calendar years should his employment be terminated following a change in control (as defined in the Meller Employment Agreement). NOTE 14 – SALE OF EDI PRACTICE On August 26, 2019 the Company entered into and closed 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. On August 31, 2020, the Company received the second half of the escrow amount of $575,000 as per the agreement. F-26 Table of Contents SILVERSUN TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019 NOTE 15 – DISCONTINUED OPERATIONS The financial results of our EDI Practice (“Mapadoc”) through December 31, 2019 are presented as discontinued operations. The following table presents the financial results of “Mapadoc.” Mapadoc Results of Operations for the year ended December 31, 2019: Year Ended December 31, 2019 Revenues: Software product, net $ 445,025 Service, net 2,936,898 Total revenues, net 3,381,923 Cost of revenues: Product 2,745 Service 1,387,926 Cost of revenues 1,390,671 Gross profit 1,991,252 Selling, general and administrative expenses: Selling and marketing expenses 371,061 General and administrative expenses 540,822 Depreciation and amortization expenses 90,844 Total selling, general and administrative expenses 1,002,727 Income from discontinued operations 988,525 Gain from sale of discontinued operations 10,307,155 Provision for income taxes (3,033,590 ) Income from discontinued operations $ 8,262,090 Calculation of gain on sale Purchase Price* $ 11,662,868 Net Assets at August 26, 2019 (1,575,547 ) Net Liabilities at August 26, 2019 437,260 Expenses associated with the sale (217,426 ) Gain on sale $ 10,307,155 * Includes $162,868 of working capital adjustment F-27 Table of Contents NOTE 16 – SUBSEQUENT EVENTS In January 2021, the Company entered into a new capital lease agreement with Dimension Funding for a finance lease in the amount of $90,007 for equipment. In February 2021, ISM converted the outstanding balance of the loan into 119,004 shares of the Company’s common stock (see Note 6). In February 2021, Nellnube converted the outstanding balance of the loan into 47,602 shares of the Company’s common stock (see Note 6). In February 2021, the Company signed a letter of intent to acquire CT-Solution, Inc. ("CT"), a leading Indianapolis-based reseller of Sage Software solutions. Over the last 20 years, CT-Solution has implemented technology applications at prominent manufacturers, distributors, and professional service organizations throughout the Midwest. 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. F-28