What changed in this filing

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Item 1. Financial Statements

2021-05-11 compared with 2020-11-10 · 368 added, 379 removed, 359 unchanged (68% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, 2020

March 31, 2021

December 31, 2020

Current assets:

Escrow accounts receivable

Accounts receivable, net of allowance of $375,000

11 unchanged sentences

Accrued expenses

Accrued dividend

Accrued interest

20 unchanged sentences

authorized 75,000,000 shares,

4,501,271 shares issued and outstanding

5,061,177 and 4,501,271 shares issued and outstanding, respectively

Additional paid-in capital

7 unchanged sentences

Three Months Ended

Nine Months Ended

March 31, 2021

March 31, 2020

Software product, net

6 unchanged sentences

Share-based compensation expenses

Impairment of intangible assets

Depreciation and amortization expenses

Total selling, general and administrative expenses

Income (loss) from continuing operations

Other income (expense):

Income (loss) from operations

Other (expense) income:

Interest income (expense)

Total other income (expense)

Income (loss) from continuing operations before taxes

Income (loss) before taxes

Provision (benefit) for income taxes

Income (loss) from continuing operations

Discontinued operations

Income from discontinued operations

Gain on sale of discontinued operations

Provision for income taxes

Income from discontinued operations

Net (loss) income

Basic earnings (loss) per share applicable to common shareholders:

Continuing operations

Discontinued operations

Net (loss) income

Diluted earnings (loss) per share applicable to common shareholders:

Continuing operations

Discontinued operations

Net (loss) income

Net income (loss)

Net income (loss) per common share – basic and fully diluted

Weighted average shares outstanding:

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020

FOR THE THREE MONTHS ENDED MARCH 31, 2021

Preferred Stock

2 unchanged sentences

Balance at January 1, 2021

Issuance of common stock in exchange for convertible debt

Issuance of common stock from a public offering, net of expenses

Share-based compensation

Balance at September 30, 2020

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019

Balance at March 31, 2021

FOR THE THREE MONTHS ENDED MARCH 31, 2020

Preferred Stock

2 unchanged sentences

Balance at January 1, 2020

Cancellation of Series B stock

Share-based compensation

Balance at September 30, 2019

See accompanying notes to the unaudited condensed consolidated financial statements.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED SEPTEMBER 30 , 2020

Preferred Stock

Stockholders’

Balance at July 1, 2020

Share-based compensation

Balance at September 30, 2020

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019

Preferred Stock

Stockholders’

Balance at July 1, 2019

Cancellation of the Series B stock

Share-based compensation

Balance at September 30, 2019

Balance at March 31, 2020

See accompanying notes to the unaudited condensed consolidated financial statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

Net (loss) income

Net income from discontinued operations

Net loss from continuing operations

Adjustments to reconcile net loss from continuing operations to net cash provided by (used in) operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Deferred income taxes

2 unchanged sentences

Amortization of right of use assets

Bad debt (recovery) expense

Bad debt expense

Share-based compensation

Impairment of intangible asset

Changes in assets and liabilities:

2 unchanged sentences

Prepaid expenses and other current assets

Deposits and other assets

Accounts payable

4 unchanged sentences

Operating lease obligations

Net cash provided by (used in) operating activities of continuing operations

Net cash used in operating activities

Cash flows from investing activities:

Purchase of property and equipment

Acquisition of business

Proceeds from sale of EDI practice, net of fees

Software development costs

Escrow accounts receivable

Net cash provided by investing activities of continuing operations

Net cash provided by investing activities

Cash flows from financing activities:

Payment of cash dividend

Proceeds from PPP loan

Payment of PPP loan

Payment of contingent consideration

Proceeds from issuance of stock, net of expenses

Payment of long-term debt

1 unchanged sentence

Payment of finance lease obligations

Net cash used in financing activities of continuing operations

Cash flows from discontinued operations:

Operating activities of discontinued operations

Investing activities of discontinued operations

Net cash provided by discontinued operations

Net (decrease) increase in cash

Net cash provided by (used in) financing activities

Net increase (decrease) in cash

Cash, beginning of period

1 unchanged sentence

Cash paid during period for:

See accompanying notes to the unaudited condensed consolidated financial statements.

SILVERSUN TECHNOLOGIES, INC.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

For the nine months ended September 30, 2020:

For the three months ended March 31, 2021:

On January 18, 2021, the Company incurred approximately $90,007 in financial lease obligations for purchases of equipment.

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

At March 31, 2021 and December 31, 2020, the outstanding balances on the ISM Note were $-0- and $512,487 respectively (see Note 6).

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

At March 31, 2021 and December 31, 2020, the outstanding balances on the Nellnube Note were $-0- and $204,995 respectively (see Note 6).

For the three months ended March 31, 2020:

On January 23, 2020 the Company entered into an operating lease for equipment with VAR Technology Finance.

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Accordingly, operating lease right of use assets and operating lease liabilities were recognized in the amount of $349,987.

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.

For the nine months ended September 30, 2019:

The Company acquired certain assets of Partners in Technology, Inc.

(“PIT”) for a $174,000 promissory note in addition to a cash payment of $60,000.

(see Note 10).

Operating lease right of use assets and operating lease liabilities were recognized in the amount of $911,000 at January 1, 2019.

On April 1, 2019 the Company entered into an operating lease in Lisle, IL and operating lease right of use assets and operating lease liabilities were recognized in the amount of $71,685.

The Company incurred approximately $291,936 in finance lease obligations for purchases of equipment.

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).

See accompanying notes to the unaudited condensed consolidated financial statements.

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(“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.

(“CCD”) (collectively 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”.

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Our customers are nationwide, with concentrations in the New York/New Jersey metropolitan area, Arizona, Southern California, North Carolina, Washington, Oregon and Illinois.

On August 26, 2019 SWK entered into and closed that certain Asset Purchase Agreement (the “MAPADOC Asset Purchase Agreement”) by and among the Company, SPS Commerce, Inc., as buyer (“SPS”), and SWK as seller, pursuant to which SPS agreed to acquire from SWK substantially all of the assets related to the MAPADOC business (See footnote 13).

The Company is publicly traded and was quoted on the Over-the-Counter Market Place (“OTCQB”) under the symbol “SSNT” until April 18, 2017.

Since April 19, 2017, the Company has been listed and is traded on the NASDAQ Capital Market under the symbol “SSNT”.

The Company is publicly traded and is 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.

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Basis of Presentation and Principles of Consolidation

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position of the Company as of September 30, 2020, the results of operations for the three and nine months ended September 30, 2020 and 2019 and cash flows for the nine months ended September 30, 2020 and 2019.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position of the Company as of March 31, 2021, the results of operations for the three months ended March 31, 2021 and 2020 and cash flows for the three months ended March 31, 2021 and 2020.

These results are not necessarily indicative of the results to be expected for the full year.

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Accordingly, the financial statements included herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on March 25, 2021.

All financial results of the EDI practice are classified as discontinued operations for the purpose of this quarterly report (see Note 13).

The accompanying unaudited condensed consolidated financial statements include the accounts of the “Company” and its wholly-owned subsidiaries.

The accompanying unaudited condensed consolidated financial statements include the accounts of SilverSun and its wholly-owned subsidiaries.

These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States.

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These indicators may include a significant change in the business climate, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of the business or other factors.

No impairment losses were identified or recorded for the three and nine months ended September 30, 2020 and 2019.

No impairment losses were identified or recorded for the three months ended March 31, 2021 and 2020.

Capitalization of proprietary developed software

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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

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Factors the Company considers important, which may cause impairment include, among others, significant changes in the manner of use of the acquired asset, negative industry or economic trends, and significant underperformance relative to historical or projected operating results.

No impairment losses were identified or recorded for the three and nine months ended September 30, 2020.

There were $236,860 in impairment losses recorded for the three and nine months ended September 30, 2019.

No impairment losses were identified or recorded for the three months ended March 31, 2021 and 2020.

Revenue Recognition

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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.

Shipping and handling costs charged to customers are classified as revenue, and the shipping and handling costs incurred are included in cost of revenues.

Components of revenue:

For the Three Months Ending

September 30,

For the Nine Months Ending

September 30,

Software revenue

Professional Consulting

6 unchanged sentences

Deferred revenues consist of maintenance on proprietary products (contract liabilities), customer telephone support services (contract liabilities) and deposits for future consulting services which will be earned as such services are performed over the contractual or stated period, which generally ranges from three to twelve months.

As of September 30, 2020, there was $176,487 in deferred maintenance, $135,467 in deferred support services, and $1,565,681, in deposits for future consulting services.

As of March 31, 2021, there was $180,847 in deferred maintenance, $435,741 in deferred support services, and $1,958,838, in deposits for future consulting services.

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.

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Commission expense is included in selling and marketing expenses in the accompanying unaudited condensed consolidated statements of operations.

Fair Value of Financial Instruments

The Company estimates that the fair value of all financial instruments at March 31, 2021 and December 31, 2020, 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 unaudited condensed 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 March 31, 2021 and December 31, 2020 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.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (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 unaudited condensed 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

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The Company maintains its cash with various institutions, which exceed federally insured limits throughout the year.

At September 30, 2020 and December 31, 2019, the Company had cash on deposit of $6,264,341 and $8,016,900, respectively, in excess of the federally insured limits of $250,000.

As of September 30, 2020, no one customer represented 10% of the total accounts receivable and unbilled services.

As of December 31, 2019, one customer represented 14% of the total accounts receivable and unbilled services.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

For the nine months ended September 30, 2020 and 2019, the Company’s top ten customers accounted for 11% ($3,157,125) and 11% ($3,094,620), respectively, of total revenues.

At March 31, 2021 and December 31, 2020, the Company had cash on deposit of $8,458,344 and $5,900,593, respectively, in excess of the federally insured limits of $250,000.

As of March 31, 2021, one customer represented 14% of the total accounts receivable and unbilled services.

As of December 31, 2020, no one customer represented more than 10% of the total accounts receivable and unbilled services.

For the three months ended March 31, 2021 and 2020, the Company’s top ten customers accounted for 14% ($1,499,790) and 14% ($1,445,088), respectively, of total revenues.

The Company does not rely on any one specific customer for any significant portion of its revenue.

For the nine months ended September 30, 2020 and 2019, purchases from one supplier through a “channel partner” agreement were approximately 16% and 20% of cost of revenues, respectively.

For the three months ended March 31, 2021 and 2020, purchases from one supplier through a “channel partner” agreement were approximately 15% and 16% of cost of revenues, respectively.

This channel partner agreement is for a one-year term and automatically renews for an additional one-year term on the anniversary of the agreements effective date.

As of September 30, 2020 and December 31, 2019, one supplier represented approximately 32% and 15% of total accounts payable respectively.

As of March 31, 2021, two suppliers represented approximately 25% of total accounts payable.

For the year ended December 31, 2020 two suppliers represented approximately 39% of accounts payable.

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of accounts receivable and cash.

As of September 30, 2020, the Company believes it has no significant risk related to its concentration of accounts receivable.

As of March 31, 2021, the Company believes it has no significant risk related to its concentration of accounts receivable.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Accounts Receivable

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federal and state jurisdictions.

There were no liabilities for uncertain tax positions at September 30, 2020 and December 31, 2019.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

There were no liabilities for uncertain tax positions at March 31, 2021 and December 31, 2020.

Fair Value Measurement

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The fair value hierarchy gives the lowest priority to Level 3 inputs.

The Company’s current financial assets and liabilities approximate fair value due to their short term nature and include cash, accounts receivable, accounts payable, and accrued liabilities.

The carrying value of longer term lease and debt obligations approximate fair value as their stated interest rates approximate the rates currently available.

The Company’s goodwill and intangibles are measured at fair-value on a non-recurring basis using Level 3 inputs, as discussed in Note 5 and 10.

The Company’s goodwill, intangibles and lease obligations are measured at fair-value on a non-recurring basis using Level 3 inputs, as discussed in Notes 5 and 10.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Stock-Based Compensation

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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.

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The amendment in this update replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses on instruments within its scope, including trade receivables.

This update is intended to provide financial statement users with more decision-useful information about the expected credit losses.

We do not expect the adoption of this standard to have a significant impact on our financial position and results of operations.

This was adopted on January 1, 2021 and did not have a significant impact on our financial position and results of operations.

In December 2019, the FASB issued ASU No.

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The amendment also improves consistent application and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

We do not expect the adoption of this standard to have a significant impact on our financial position and results of operations.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

This was adopted on January 1, 2021 and did not have a significant impact on our financial position and results of operations.

Recent Authoritative Pronouncements

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).

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No other recently issued accounting pronouncements had or are expected to have a material impact on the Company’s unaudited condensed consolidated financial statements.

NOTE 3 – NET (LOSS) INCOME PER COMMON SHARE

The Company’s basic income per common share is based on net income for the relevant period, divided by the weighted average number of common shares outstanding during the period.

Diluted income per common share is based on net income, divided by the weighted average number of common shares outstanding during the period, including common share equivalents, such as outstanding option and warrants to the extent they are dilutive.

For the three and nine months ended September 30, 2020 and 2019, the average market prices for the periods ended are less than the exercise price of all the outstanding stock options and warrants, therefore, the inclusion of the stock options and warrants would be anti-dilutive.

In addition, since the effect of common stock equivalents is anti-dilutive with respect to losses, the convertible promissory notes have also been excluded from the Company’s computation of loss per common share for continuing operations for the nine months ended September 30, 2020 and three and nine months ended September 30, 2019.

Therefore, basic and diluted income (loss) per common share for continuing operations for the nine months ended September 30, 2020 and three and nine months ended September 30, 2019 are the same.

For the three months ended September 30, 2020 convertible promissory notes have been included in the Company’s computation of income per common share for continuing operations.

September 30, 2020

September 30, 2019

Basic net income (loss) from continuing operations per share computation:

Net income (loss) from continuing operations

Weighted-average common shares outstanding

Basic net income (loss) per share

Diluted net income (loss) from continuing operations per share computation:

Net income (loss) per above

Interest on Convertible debt

Net income (loss)

Weighted-average common shares outstanding

Incremental shares for convertible promissory notes

Total adjusted weighted-average shares

Diluted net income (loss) per share

SILVERSUN TECHNOLOGIES, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – NET (LOSS) INCOME PER COMMON SHARE (Continued)

September 30, 2020

September 30, 2019

Basic net income (loss) from continuing operations per share computation:

Net loss from continuing operations

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.

For the three months ended March 31, 2021 and 2020, the average market prices for the periods ended are less than the exercise price of all the outstanding stock options, therefore, the inclusion of the stock options would be anti-dilutive.

For the three months ended March 31, 2020, since the effect of common stock equivalents is anti-dilutive with respect to losses, the convertible promissory notes have also been excluded from the Company’s computation of net loss per common share for continuing operations, therefore, basic and diluted net loss per common share for the three months ended March 31, 2020 are the same.

For the three months ended March 31, 2021 since the convertible promissory notes have been converted into common stock, they have been excluded in the Company’s computation of net income (loss) per common share.

March 31, 2021

March 31, 2020

Basic net income (loss) per share computation:

Net income (loss)

Weighted-average common shares outstanding

Basic net loss per share

Diluted net income (loss) from continuing operations per share computation:

Net income (loss) per above

Basic net income (loss) per share

Diluted net income (loss) per share computation:

Net income (loss)

Weighted-average common shares outstanding

Incremental shares for convertible promissory notes

Incremental shares attributable to assumed conversion of stock options and

Total adjusted weighted-average shares

Diluted net income (loss) per share

The following table summarizes securities that, if exercised, would have an anti-dilutive effect on earnings (loss) per share.

September 30, 2020

September 30, 2019

Stock options

Convertible promissory notes

Total potential dilutive securities not included in loss per share

September 30, 2020

September 30, 2019

The following table summarizes securities that, if exercised, would have an anti-dilutive effect on income (loss) per share.

March 31, 2021

March 31, 2020

Stock options

Convertible promissory notes

Total potential dilutive securities not included in loss per share

Total potential dilutive securities not included in income (loss) per share

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment is summarized as follows:

September 30, 2020

December 31, 2020

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Property and equipment, net

Depreciation and amortization expense related to these assets was $74,846 and $240,479, respectively for the three and nine months ended September 30, 2020 as compared to $91,622 and $252,734 for the three and nine months ended September 30, 2019.

Depreciation and amortization expense related to these assets for the three months ended March 31, 2021 and 2020 was $78,304 and $84,563, respectively.

SILVERSUN TECHNOLOGIES, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 – PROPERTY AND EQUIPMENT (Continued)

Property and equipment under finance leases are summarized as follows:

September 30, 2020

December 31, 2019

Equipment, furniture and fixtures

Accumulated amortization

Property and equipment, net

NOTE 5 – INTANGIBLE ASSETS

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The components of intangible assets are as follows:

September 30, 2020

March 31, 2021

December 31, 2020

Estimated Useful Lives

Proprietary developed software

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accumulated amortization

Amortization expense related to the above intangible assets for the three and nine months ended September 30, 2020 was $104,211 and $288,157, respectively as compared to $86,487 and $286,173 for the three and nine months ended September 30, 2019.

Impairment on tangible assets were $0 for the three and nine months ended September 30, 2020 and $236,860 for the three and nine months ended September 30, 2019, respectively.

Amortization expense related to the above intangible assets was $120,237 and $91,973, respectively, the three months ended March 31, 2021 and 2020.

The Company expects future amortization expense to be the following:

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NOTE 6 – CONVERTIBLE DEBT AND LONG-TERM DEBT, RELATED PARTY AND PPP LOAN

On July 6, 2015, SWK acquired certain assets of ProductiveTech Inc.

(“PTI”) pursuant to an Asset Purchase Agreement for cash of $500,000 and a promissory note for $600,000 (the “PTI Note”).

The PTI Note is due in 60 months from the closing date and bears interest at a rate of two and one half (2.5%) percent per annum.

Monthly payments including interest are $10,645.

At September 30, 2020 and December 31, 2019, the outstanding balance on the PTI Note was $0 and $73,899, respectively.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – CONVERTIBLE DEBT AND LONG-TERM DEBT, RELATED PARTY AND PPP LOAN (Continued)

On May 31, 2018, SWK acquired certain assets of Info Sys Management, Inc.

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The ISM Note has an optional conversion feature whereby the holder may, at its sole and exclusive option, elect to convert, at any time and from time to time, until payment in full of the ISM Note, all of the outstanding principal amount of the ISM Note, plus accrued interest, into shares (the “Conversion Shares”) of the Company’s Common Stock, (“Common Stock”) at per share price equal to $4.03, a price equal to the average closing price of its Common Stock for the five (5) trading days immediately preceding the issuance date of the ISM Note (the “Fixed Conversion Price”).

At September 30, 2020 and December 31, 2019 the outstanding balance on the ISM Note was $562,342 and $710,420 respectively.

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

At March 31, 2021 and December 31, 2020, the outstanding balances on the ISM Note were $-0- and $512,487 respectively.

On May 31, 2018, Secure Cloud Services acquired certain assets of Nellnube, Inc.

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The Nellnube Note has an optional conversion feature whereby the holder may, at its sole and exclusive option, elect to convert, at any time and from time to time, all of the outstanding principal amount of the Nellnube Note, plus accrued interest, into shares (the “Conversion Shares”) of the Company’s Common Stock, (“Common Stock”) at per share price equal to $4.03 (the “Fixed Conversion Price”).

At September 30, 2020 and December 31, 2019 the outstanding balance on the Nellnube Note was $224,936 and $284,168 respectively.

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

At March 31, 2021 and December 31, 2020, the outstanding balances on the Nellnube Note were $-0- and $204,995 respectively.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – CONVERTIBLE DEBT AND LONG-TERM DEBT, RELATED PARTY AND PPP LOAN (continued)

On January 1, 2019, SWK acquired certain assets of Partners in Technology, Inc.

2 unchanged sentences

Monthly payments including interest are $4,984.

At September 30, 2020 and December 31, 2019 the outstanding balance on the PIT Note was $78,622 and $121,968 respectively.

At March 31, 2021 and December 31, 2020, the outstanding balances on the PIT Note were $49,384 and $64,040 respectively.

On July 31, 2020, the Company acquired certain assets of Prairie Technology Solutions Group, LLC (“Prairie Tech”) pursuant to an Asset Purchase Agreement.

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Prairie Tech Note 3 has a term of three (3) years and is not subject to a downward adjustment.

At September 30, 2020 the outstanding balance on the PT notes were $310,000.

At September 30, 2020, future payments of long term debt are as follows:

At March 31, 2021 and December 31, 2020, the outstanding balances on the PT Notes were $310,000 and $310,000 respectively.

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 March 31, 2021 and December 31, 2020, the outstanding balances on the CMS Note were $146,994 and $160,821 respectively.

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 March 31, 2021 and December 31, 2020, the outstanding balances on the BSS Note were $219,038 and $230,000 respectively.

Total convertible debt and long-term debt balances at March 31, 2021 and December 31, 2020 were $725,416 and $1,482,343, respectively, of which $253,121 and $545,000 was classified as current portion at March 31, 2021 and December 31, 2020, respectively.

At March 31, 2021, future payments of long-term debt are as follows:

Remainder of 2021

On April 9, 2020, SWK Technologies, Inc.

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

(the “Company”), issued a promissory note (the “Note”) to JPMorgan Chase Bank, N.A., in the principal aggregate amount of $3,150,832 (the “PPP Loan”) pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).

The PPP Loan had a two-year term and an interest at a rate of 0.98% per annum.

Monthly principal and interest payments were deferred for six months after the date of disbursement.

The PPP Loan could be prepaid at any time prior to maturity with no prepayment penalties.

SWK 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.

SILVERSUN TECHNOLOGIES, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – CONVERTIBLE DEBT AND LONG-TERM DEBT, RELATED PARTY AND PPP LOAN (Continued)

Beginning seven months from the date of the PPP Loan SWK was required to make 24 monthly payments of principal and interest in the amount of $132,629.

Under the terms of the CARES Act, PPP loan recipients could apply for and be granted forgiveness for all or a portion of loan granted under the program.

Such forgiveness would be determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and any payments of mortgage interest, rent, and utilities.

No assurance was provided that SWK would obtain forgiveness of the PPP Loan in whole or in part.

At the time the Company applied for the PPP Loan, the Company believed it qualified to receive the funds pursuant to the PPP.

However, on April 23, 2020, subsequent to the Company’s receipt of the PPP Loan, the SBA, in consultation with the Department of Treasury, issued new guidance that creates uncertainty regarding the qualification requirements for a PPP loan for public companies, and provided a safe harbor whereby a public company could repay its PPP loan without consequence by May 7, 2020.

On May 5, 2020, the SBA issued additional guidance, whereby they extended the safe harbor date until first May 14, 2020, and then subsequently extended to May 18, 2020, and furthermore committed to provide additional guidance relative to a public’s company ability to retain its PPP loan.

The Company reviewed the new guidance and subsequently returned the full amount of the loan on May 18, 2020.

NOTE 7 – FINANCE LEASE OBLIGATIONS

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The related obligations are based upon the present value of the future minimum lease payments with the following:

September 30, 2020

March 31, 2021

December 31, 2020

Weighted average remaining lease term

Weighted average interest rate

At September 30, 2020 future payments under finance leases are as follows:

At March 31, 2021 future payments under finance leases are as follows:

March 31, 2021

Remainder of 2021

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NOTE 8 – OPERATING LEASE LIABILITY

The Company leases office space in ten different locations with monthly payments ranging from $720 to $10,044 which expire at various dates through March 2025.

The Company leases office space in nine different locations with monthly payments ranging from $744 to $10,279 which expire at various dates through April 2025.

The Company also leases equipment with a monthly payment of $10,279 which expires February 2024.

2 unchanged sentences

The Company used incremental borrowing rates as of January 1, 2019 for operating leases that commenced prior to that date.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 – OPERATING LEASE LIABILITY (Continued)

The Company's weighted average remaining lease term and weighted average discount rate for operating leases as of September 30, 2020 are as follows:

September 30, 2020

The Company's weighted average remaining lease term and weighted average discount rate for operating leases as of March 31, 2021 are as follows:

March 31, 2021

December 31, 2020

Weighted average remaining lease term

Weighted average discount rate

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 unaudited condensed consolidated balance sheet as of September 30, 2020:

Remainder 2021

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Long-term operating lease liabilities

Total rent expense under operating leases for the three and nine months ended September 30, 2020 was $134,147 and $397,416 as compared to $100,764 and $315,235 for the three and nine months ended September 30, 2019.

Total rent expense under operating leases for the three months ended March 31, 2021 and 2020 was $161,814 and $111,681, respectively.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – EQUITY

On December 24, 2018, the Company announced the payment of a $0.05 special cash dividend per share of Common Stock.

The dividend payments announced in December were paid out on January 14, 2019 for an aggregate amount of approximately $225,038, which was applied against additional paid in capital and included in accrued expenses at December 31, 2018.

Common Stock At-The-Market Sales Program

On October 1, 2020, the Company entered into an At Market Issuance Sales Agreement (the “2020 At Market Agreement”) with a H.C.

Wainwright &Co.

(the “Sales Agent”) under which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $3,489,499 from time to time through the Sales Agent.

Sales of the Company’s common stock through the Sales Agent, if any, will be made by any method that is deemed an “at the market” offering as defined by the U.S.

Securities and Exchange Commission.

The Company will pay to the Sales Agent a commission rate equal to 3.0% of the gross proceeds from the sale of any shares of common stock sold through the Sales Agent under the 2020 At Market Agreement.

Shares of common stock sold under the 2020 At Market Agreement were made pursuant to the Company’s Registration Statement on Form S-3 (File No.

333-249238), filed with the Securities and Exchange Commission (the “SEC”) on October 2, 2020, as amended, and declared effective on October 23, 2020 (the “2020 Registration Statement”), and the prospectus included in the 2020 Registration Statement.

In February 2021, 393,300 shares of Common Stock were issued and sold generating $3,382,352, excluding legal expenses.

No shares remain eligible for sale under the 2020 At Market Agreement.

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 (see Note 6).

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 (see Note 6).

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.

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The Company expects to finance the program from existing cash resources.

As of September 30, 2020 and December 31, 2019, no repurchases have been made.

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.

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.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – EQUITY (Continued)

A summary of the status of the Company’s stock option plans for the fiscal years ended December 31, 2019 and the nine months ending September 30, 2020 and changes during the years are presented below (in number of options):

Exercise Price

Average Remaining

Contractual Term

Intrinsic Value

Outstanding options at January 1, 2019

Options granted

Options canceled/forfeited

Outstanding options at December 31, 2019

Options granted

Options exercised

Options canceled/forfeited/expired

Outstanding options at September 30, 2020

Vested Options:

September 30, 2020:

December 31, 2019:

As of September 30, 2020, the unamortized compensation expense for stock options was $0.

The following table summarizes the warrants transactions:

Weighted Average

Exercise Price

Average Remaining

Contractual Term

Balance, January 1, 2019

Outstanding and Exercisable December 31, 2019

Outstanding and Exercisable September 30, 2020

As of March 31, 2021, no repurchases have been made.

Stock Options

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 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 of time from date of grant to expiration.

The risk-free interest rate is based on the U.S.

Treasury yield in effect at the time of grant.

On March 29, 2021, 99,990 stock options were granted with an exercise price of $6.53 per option and have a five-year term with a two-year vesting period at 50% per annum.

The fair value of stock options granted was $4.888 per option on the date of grant using the Black Scholes option-pricing model with the following assumptions:

Dividend Yield

Risk-free Interest Rate

For the three months ended March 31, 2021, the Company recorded share-based compensation expense of $992 as compared to $3,399 for the three months ended March 31, 2020.

As of March 31, 2021 and December 31, 2020, the unamortized compensation expense for stock options was $392,359 and $0, respectively.

SILVERSUN TECHNOLOGIES, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – BUSINESS COMBINATION

On January 1, 2019, SWK acquired certain assets of Partners in Technology, Inc.

(“PIT”) pursuant to an Asset Purchase Agreement in exchange for cash of $60,000 and a promissory note in the aggregate principal amount of $174,000 (“PIT Note”).

The PIT Note is due in 36 months from the closing date and bears interest at a rate of two percent (2.0%).

NOTE 10 – BUSINESS COMBINATIONS

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 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 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 this acquisition to create synergies by combining operations and expanding geographic market share and product offerings.

The following summarizes the purchase price allocation for the prior year’s acquisition and the preliminary purchase price allocation for the current year acquisition:

PT (preliminary)

Cash consideration

Total purchase price

Customer List

Deposits and other assets

Accounts receivable

Operating lease right-of-use asset

Total assets acquired

Deferred revenue

Operating lease liability

Net assets acquired

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – BUSINESS COMBINATION (Continued)

The following unaudited pro forma information does not purport to present what the Company’s actual results would have been had the PT acquisition 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 three and nine months ended September 30, 2020 and 2019 as if the PT acquisition occurred on January 1, 2019.

Operating expenses have been increased for the amortization expense associated with the estimated fair value adjustment as of September 30, 2019 of expected definite lived intangible assets and interest on the notes payable.

Three Months Ended

September 30, 2020

The following unaudited pro forma information does not purport to present what the Company’s actual results would have been had the acquisitions of Prairie Technology Solutions Group, LLS (“PT”), acquired July 31, 2020, Computer Management Services, LLC (CMS”), acquired October 1, 2020 and Business Software Solutions (“BSS”), acquired December 1, 2020, occurred on January 1, 2020, nor is the financial information indicative of the results of future operations.

The following table represents the unaudited condensed consolidated pro forma results of operations for the three months ended March 31, 2020 as if the acquisitions occurred on January 1, 2020.

For the three months ended March 31, 2020, operating expenses have been increased for the amortization expense of expected definite lived intangible assets and interest on the notes payable.

Three Months Ended

September 30, 2019

Cost of revenues

Operating expenses

Income (loss) before taxes

Net income (loss)

Basic and diluted income per common share

Nine Months Ended

September 30, 2020

Nine Months Ended

September 30, 2019

March 31, 2020

Cost of revenues

1 unchanged sentence

Loss before taxes

Basic and diluted income per common share

The Company’s unaudited condensed consolidated financial statements for the three and nine months ending September 30, 2020 and 2019 include the actual results of PIT since the date of acquisition, January 1, 2019.

The three months ended September 30, 2020 pro-forma results above include one month of results of PT.

The nine months ended September 30, 2020 pro-forma results above include seven months of PT.

For the three months ending September 30, 2020, there is $6,118 of estimated amortization expense and $1,033 of estimated interest expense included in the PT pro-forma results.

For the nine months ending September 30, 2020, there is $42,829 of estimated amortization expense and $7,231 of estimated interest expense included in the PT pro-forma results.

For the three months ending September 30, 2019, there is $18,355 of estimated amortization expense and $3,099 of estimated interest expense included in the PT pro-forma results.

For the nine months ending September 30, 2019, there is $55,066 of estimated amortization expense and $9,297 of estimated interest expense included in the PT pro-forma results.

For the three and nine months ended September 30, 2020, the PT operations had a net income before taxes of $0 which represented two months operations that was included in the Company’s Condensed Unaudited Consolidated Statement of Income.

This consisted of $193,463 in revenues, $106,405 in cost of revenues, and $87,058 in operating expenses.

NOTE 11 – INCOME TAXES

The recognized deferred tax asset is based upon the expected utilization of its benefit from future taxable income.

The Company has federal net operating loss (“NOL”) carryforwards of approximately $6,177,000 as of September 30, 2020, which is subject to limitations under Section 382 of the Internal Revenue Code.

These carryforward losses are available to offset future taxable income and begin to expire in the year 2024 to 2033.

Basic and diluted loss per common share

The Company’s unaudited condensed consolidated financial statements for the three ended March 31, 2021 include the actual results of PT, CMS and BSS.

For the three months ending March 31, 2020, there is $10,149 of estimated amortization expense and $3,110 of estimated interest expense included in the PT pro-forma results, $6,864 of estimated amortization expense and $827,of estimated interest expense included in the CMS pro-forma results, and $8,214 of estimated amortization expense and $1,132,of estimated interest expense included in the BSS pro-forma results

For the three months ended March 31, 2021, the Prairie Tech, CMS & BSS operations had a net income before taxes of $107,796 which represented three months of operations for Prairie, CMS and BSS that were included in the Company’s Unaudited Condensed Consolidated Statement of Operations for the three months ended March 31, 2021.

This consisted of approximately $524,640 in revenues, $285,329 in cost of revenues and $131,515 in operating expenses

SILVERSUN TECHNOLOGIES, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

Income tax provision (benefit) from continuing operations:

Nine Months Ended

September 30,

State and local

Total current tax provision

State and local

Total deferred tax provision (benefit)

Total provision (benefit)

For the nine months ended September 30, 2020, the Company’s Federal and State provision requirements were calculated based on the estimated tax rate.

The Federal effective rate is higher than the statutory rate primarily due to Incentive Stock Options (ISO) and 50% of meals, 100% entertainment expense which are not tax deductible.

The benefit from continuing operations for the nine months ended September 30, 2020 was $46,904.

The effective tax rate consists primarily of the 21% federal statutory tax rate and a blended 5% state and local tax rate.

NOTE 11 – INCOME TAXES

FASB ASC 740-10, “Accounting for Uncertainty in Income Taxes” (“ASC 740-10”) 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.

The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions.

The Company does not have any unrecognized tax benefits.

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 $5,700,000 as of March 31, 2021, which is subject to limitations under Section 382 of the Internal Revenue Code.

These carryforward losses are available to offset future taxable income and begin to expire in the year 2024 to 2033.

The tax effect of temporary differences, primarily net operating loss carryforwards, asset reserves and depreciation, gave rise to the Company’s deferred tax asset.

Deferred income taxes are recognized for the tax consequence of such temporary differences at the enacted tax rate expected to be in effect when the differences reverse.

The Company had approximately $911,000 and $1.04 million in deferred tax assets at March 31, 2021 and December 31, 2020, respectively.

For the three months ended March 31, 2021, the Company’s Federal and State provision requirements were calculated based on the estimated tax rate.

For the three months ended March 31, 2021, the Company recorded a tax provision of $128,569 as compared to a tax benefit from the net loss before taxes for the three months ended March 31, 2020 in the amount of $89,750.

NOTE 12 – RELATED PARTY TRANSACTIONS

As of September 30, 2020, and December 31, 2019, long term debt and long term convertible debt issued in conjunction with various acquisitions are considered related party liabilities as holders are current employees of the Company, see Note 6.

NOTE 13 – SALE OF EDI PRACTICE

On August 26, 2019 the Company entered into that certain Asset Purchase Agreement (the “Asset Purchase Agreement”) by and among the Company, SPS Commerce, Inc., as buyer (“Buyer” or “SPS”), and SWK, as seller (the “Seller”), pursuant to which the Buyer has agreed to acquire from the Seller certain assets (all intellectual property and accounts receivable) related to the MAPADOC business, which was the EDI practice.

In consideration for the Acquired Assets (as defined in the Asset Purchase Agreement), at closing, SPS:

(i) paid Seller $10,350,000 in cash (the “Initial Cash Payment”);

and (ii) delivered $1,150,000 to an escrow account (the “Escrowed Property”) pursuant to the terms and conditions of that certain Escrow Agreement dated August 26, 2019 (the “Escrow Agreement”), for an aggregate consideration of $11,500,000 (the “Purchase Price”).

Pursuant to the terms and conditions of that certain Escrow Agreement entered into in connection with the Asset Purchase Agreement, portions of the Escrowed Property will be released at six months and at twelve months following the date of closing of the Asset Purchase Agreement, to the extent that no indemnity claims against the Escrowed Property have been filed by the Buyer.

On February 28, 2020, the Company received the first half of the escrow agreement ($575,000), per the agreement.

There was also an adjustment to the Working Capital and an additional $162,868 was added to the gain on the sale of Mapadoc which was recognized in 2019 and paid in February 2020.

On August 31, 2020, the Company received the second half of the escrow agreement ($575,000), per the agreement.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – DISCONTINUED OPERATIONS

The financial results of our EDI Practice (“Mapadoc”) through September 30, 2019 are presented as discontinued operations.

The following table presents the financial results of “Mapadoc.”

Mapadoc Income Statement for the three and nine months ended September 30, 2019

3 Months Ending September 30, 2019

9 Months Ending September 30, 2019

Software product, net

Total revenues, net

Cost of revenues:

Cost of revenues

Selling, general and administrative expenses:

Selling and marketing expenses

General and administrative expenses

Depreciation and amortization expenses

Total selling, general and administrative expenses

Income from discontinued operations

Gain from sale of discontinued operations

Provision for income taxes

Income from discontinued operations

As of December 31, 2020, long-term convertible debt issued in conjunction with various acquisitions are considered related party liabilities as holders are current employees of the Company, see Note 6.

In February 2021, the outstanding balances of the loans were converted into common stock of the Company.

As of March 31, 2021 and December 31, 2020, the outstanding balance for the long-term convertible debt was $-0- and $717,482, respectively.

At March 31, 2021 and December 31, 2020, certain long-term debt is considered related party liabilities holders are current employees of the Company.

As of March 31, 2021 and December 31, 2020, the outstanding balances of this debt were $359,384 and $374,039, respectively.

NOTE 13 – SUBSEQUENT EVENTS

On October 1, 2020, the Company entered into an At Market Issuance Sales Agreement (the “2020 At Market Agreement”) with a sales agent (the “Sales Agent”) under which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $3,489,499 from time to time through the Sales Agent.

Sales of the Company’s common stock through the Sales Agent, if any, will be made by any method that is deemed an “at the market” offering as defined by the U.S.

Securities and Exchange Commission.

On April 1, 2021, the Company acquired certain assets of CT-Solution, Inc.

(“CTS”) pursuant to an Asset Purchase Agreement.

In consideration for the acquired assets, the Company issued a promissory note to CTS in the principal aggregate amount of $130,000 (the “CTS Note”).

The CTS 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 $3,724.

On May 1, 2021, the Company acquired certain assets of Peoplesense, Inc.

(“Peoplesense”) pursuant to an Asset Purchase Agreement.

In consideration for the acquired assets, the Company paid $145,703 in cash and issued a promissory note to Peoplesense in the principal aggregate amount of $450,000, and assumed liabilities in the amount of $104,297 in the form of customer deposits related to prepaid time and/or technical support.

The Peoplesense 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 $12,889.

In April 2021, the Company entered into an At Market Issuance Sales Agreement (the “2021 At Market Agreement”) with H.C wainwright & Co.

(the “Sales Agent”) under which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $3,308,842 from time to time through the Sales Agent.

Sales of the Company’s common stock through the Sales Agent, if any, will be made by any method that is deemed an “at the market” offering as defined by the SEC.

The Company will pay to the Sales Agent a commission rate equal to 3.0% of the gross proceeds from the sale of any shares of common stock sold through the Sales Agent under the 2021 At Market Agreement.

The Company has not issued any common stock pursuant to the 2020 At Market Agreement.

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 $470 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.

Shares of common stock sold under the 2021 At Market Agreement are made pursuant to the Company’s Registration Statement on Form S-3 (File No.

333-249238), filed with the Securities and Exchange Commission (the “SEC”) on October 2, 2020, as amended, and declared effective on October 23, 2020 (the “2020 Registration Statement”), the prospectus included in the 2020 Registration Statement and the related prospectus supplement dated February 26, 2021.

No shares have been sold pursuant to the 2021 At Market Agreement.

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

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

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

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

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

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

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

Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks contained in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, relating to the Company’s industry, the Company’s operations and results of operations, and any businesses that the Company may acquire.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

We are 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 various ERP enhancements.

Our value-added services focus on consulting and professional services, specialized programming, training, and technical support.

We have a dedicated Information Technology (“IT”) network services practice that provides managed services, Infrastructure-as-a-Service, cybersecurity, application hosting, disaster recovery, business continuity, cloud and other services.

Our customers are nationwide, with concentrations in the New York/New Jersey metropolitan area, Arizona, Southern California, North Carolina, Washington, Oregon and Illinois.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations (continued).

Our core business is divided into the following practice areas:

ERP (Enterprise Resource Management) and Accounting Software

We are a value-added reseller for a number of industry-leading ERP applications.

We are a Sage Software Authorized Business Partner and Sage Certified Gold Development Partner.

We believe we are among the largest Sage partners in North America, with a sales and implementation presence complemented by a scalable software development practice for customizations and enhancements.

Due to the growing demand for cloud-based ERP solutions, we also have in our ERP portfolio Acumatica, a browser-based ERP solution that can be offered on premise, in the public cloud, or in a private cloud.

We develop and resell a variety of add-on solutions to all our ERP and accounting packages that help customize the installation to our customers’ needs and streamline their operations.

Value-Added Services for ERP

We go beyond simply reselling software packages;

we have a consulting and professional services organization that manages the process as we move from the sales stage into implementation, go live, and production.

We work inside our customers’ organizations to ensure all software and IT solutions are enhancing their business needs.

A significant portion of our services revenue comes from continuing to work with existing customers as their business needs change, upgrading from one version of software to another, or providing additional software solutions to help them manage their business and grow their revenue.

We have a dedicated help desk team that fields hundreds of calls every week.

Our custom programming department builds specialized software packages as well as “off the shelf” enhancements and time and billing software.

IT Managed Network Services and Business Consulting

We provide IT managed services, Infrastructure-as-a-Service, cybersecurity, business continuity, disaster recovery, data back-up, network maintenance and service upgrades for our business clients.

We are a Microsoft Solutions Provider.

Our staff includes engineers who maintain certifications from Microsoft and Sage Software.

They are Microsoft Certified Systems Engineers and Microsoft Certified Professionals, and they provide a host of services for our clients, including remote network monitoring, server implementation, support and assistance, operation and maintenance of large central systems, technical design of network infrastructure, technical troubleshooting for large scale problems, network and server security, and backup, archiving, and storage of data from servers.

There are numerous competitors, both larger and smaller, nationally and locally, with whom we compete in this market.

Cybersecurity

We provide enterprise level security services to the mid-market.

Our cybersecurity-as-a-service offering includes a security operations center, incident response, cybersecurity assessments, and hacking simulations.

The service is particularly well-suited for customers in compliance-driven and regulated industries, including financial services, pension administration, insurance, and the land and title sector.

Application Hosting

Application hosting is a type of SaaS (Software-as-a-Service) hosting solution that allows applications to be available from a remote cloud infrastructure and to be accessed by users through the internet.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations (continued).

Results of Operations for the Three Months Ended March 31, 2021 and 2020.

During the three months ended March 31, 2021 the Company continued to expand its customer base, which prior to Covid-19 we believed would provide a basis for future growth.

For the three months ended March 31, 2021, revenues increased 7.9% as compared to the same period in the prior year, and net income increased to $354,679 as compared to a net loss of $292,155 for the same period last year.

The Company continues to monitor the Covid-19 situation as it pertains to the disruption of our business and growth in future quarters and will take steps, if necessary, to establish mitigation strategies in order to try and minimize risk of any potential downturn for shareholders as well the health, safety and wellbeing of its employees and customers.

Revenues for the three months ended March 31, 2021 increased $799,944 (7.9%) to $10,879,468 as compared to $10,079,524 for the three months ended March 31, 2020.

The increase for the three months ended March 31, 2021, is attributed to the increase in software revenue and commission income as well as increases in revenues for managed services and application hosting.

Software sales increased $234,840 (13.3%) to $2,004,011 for the three months ended March 31, 2021 as compared to $1,769,171 for the three months ended March 31, 2020 due to an overall increase in business as we continue to penetrate the market.

Service revenue increased by $565,104 (6.8%) to $8,875,457 for the three months ended March 31, 2021 from $8,310,353 for the same period in 2020.

This increase is mainly attributed to increases managed services and application hosting as we continue to focus in this area due to the expertise and customers acquired in our acquisitions.

Gross profit for the three months ended March 31, 2021 increased $894,327 (23.2%) to $4,746,537 as compared to $3,852,210 for the three months ended March 31, 2020.

For the three months ended March 31, 2021, the overall gross profit percentage was 43.6% as compared to 38.2% for the period ended March 31, 2020.

The gross profit attributed to software sales increased $214,178 (33.5%) to $853,957 for the three months ended March 31, 2021 as compared to $639,779 for the three months ended March 31, 2020.

This increase is due to sales of software with higher gross profits and the increase in revenues.

The gross profit attributed to services increased $680,149 (21.2%,) to $3,892,580 for the three months ended March 31, 2021 as compared to $3,212,431 for the three months ended March 31, 2020.

This increase is attributed to revenue increases in managed services and application hosting, which provide for higher profit margins, and increases in commission and maintenance revenue for the period.

Operating Expenses

Selling and marketing expenses decreased $222,016 (11.4%) to $1,719,308 for the three months ended March 31, 2021 from $1,941,324 for the three months ended March 31, 2020.

This decrease is primarily due to lower travel and entertainment expense and reduced attendance at conferences and trade shows as we were still doing some travel in the first quarter of 2020 in addition to a slight reduction in payroll related expenses as a result departmental changes for various employees, thereby reducing salary and benefit expense.

This decrease was partially offset by an increase in online advertising expenses.

General and administrative expenses increased $208,777 (9.8%) to $2,434,918 for the three months ended March 31, 2021 as compared to $2,126,141 for the three months ending March 31, 2020.

This is primarily as a result of increases in payroll related expenses related to both additional personnel and departmental changes for various employees, which increased salary and benefit expense.

These increases were partially offset by lower travel and entertainment expenses.

Depreciation and amortization expense increased $21,510 for the three months ended March 31, 2021 to $198,046 as compared to $176,536 for the three months ended March 31, 2020.

This increase is primarily due to the additional amortization of intangible assets related to the new acquisitions.

Income (loss) from operations

As a result of the above, for the three months ended March 31, 2021, the Company had income from operations of $493,273 as compared to a loss from operations of $395,190 for the three months ended March 31, 2020.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations (continued).

Liquidity and Capital Resources

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

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

The Company currently has no line of credit or other credit facility with any lender.

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

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

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

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

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

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

(i) strategic acquisitions or investments;

(ii) an increase to current company personnel;

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

(iv) technological advances;

and (v) the activities of competitors.

In 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.

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

On April 1, 2021, the Company acquired certain assets of CT-Solution, Inc.

(“CTS”) pursuant to an Asset Purchase Agreement.

In consideration for the acquired assets, the Company issued a promissory note to CTS in the principal aggregate amount of $130,000 (the CTS Note”).

The CTS 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 $3,724.

On October 12, 2020, Ms.

Christine Dye informed the Board of Directors of Silversun Technologies, Inc.

(the “Company”) that she was resigning from her position as Chief Financial Officer of the Company, effective as of November 13, 2020 (the “CFO Transition”).

In April 2021, the Company entered into the “2021 At Market Agreement with H.C wainwright & Co.

(the “Sales Agent”) under which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $3,308,842 from time to time through the Sales Agent.

Sales of the Company’s common stock through the Sales Agent, if any, will be made by any method that is deemed an “at the market” offering as defined by the SEC.

Shares of common stock sold under the 2021 At Market Agreement are made pursuant to the Company’s Registration Statement on Form S-3 (File No.

333-249238), filed with the Securities and Exchange Commission (the “SEC”) on October 2, 2020, as amended, and declared effective on October 23, 2020 (the “2020 Registration Statement”), the prospectus included in the 2020 Registration Statement and the related prospectus supplement dated February 26, 2021.

No shares have been sold pursuant to the 2021 At Market Agreement.

As of March 31, 2021, the Company has $725,416 notes outstanding from acquisitions occurring between 2019 and 2020.

Future payments on these notes are as follows:

Remainder of 2021

During the three months ended March 31, 2021, the Company had a net increase in cash of $2,760,720.

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

Cash provided used in operating activities

Operating activities for the three months ended March 31, 2021 used cash of $500,461 as compared to using cash of $296,665 for the same period in 2020.

This increase in cash used is primarily due to increases in unbilled services, prepaid expenses and other current assets and deferred revenues, offset partially by the increase in operating income for the period.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations (continued).

Liquidity and Capital Resources (continued)

Cash provided by investing activities

Investing activities for the three months ended March 31, 2021 provided cash of $-0- as compared to $527,988 for the same period in 2020.

For the three months ended March 31, 2020, escrowed proceeds of $575,000 were received from the sale of the EDI practice in August 2019.

Cash used in financing activities

Financing activities for the three months ended March 31, 2021 provided cash of $3,261,181 as compared to using cash in the amount of $2,408,541 for the same period in 2020.

The increase in cash is attributed to the received net proceeds of $3,382,352 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 in February 2021.

For the three months ended March 31, 2020, the Company paid a dividend to its shareholders which did not occur during the current year.

The Company believes that as a result of the growth in business, and the funds available from the proceeds from the sale of common stock, it has adequate liquidity to fund its operating plans for at least the next twelve months, provided, however, that the Company cannot currently quantify the uncertainty related to the recent pandemic and its effects on the business in the coming quarters.

The belief that the Company has sufficient liquidity may be incorrect as the impact of Covid-19 becomes clearer over the coming months and quarters.

There was no significant impact on the Company’s operations as a result of inflation for the three months ended March 31, 2021.

Off Balance Sheet Arrangements

During the three months ended March 31, 2021 or for fiscal 2020, we did not engage in any material off-balance sheet activities or have any relationships or arrangements with unconsolidated entities established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

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

Quantitative and Qualitative Disclosures About Market Risk

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

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

What changed 10-Q

Item 1. Financial Statements