What changed in this filing

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Item 1. Financial Statements

2021-08-10 compared with 2021-05-11 · 316 added, 174 removed, 553 unchanged (47% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, 2021

June 30, 2021

December 31, 2020

Current assets:

Accounts receivable, net of allowance of $375,000

Accounts receivable, net of allowance of $ 325,000 and $ 375,000 , respectively

Unbilled services

34 unchanged sentences

Additional paid-in capital

Accumulated deficit

Retained earnings (accumulated deficit)

Total stockholders’ equity

5 unchanged sentences

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 3020

Software product, net

9 unchanged sentences

Income (loss) from operations

Other (expense) income:

Interest income (expense)

Other income (expense):

Interest expense

Total other income (expense)

2 unchanged sentences

Net income (loss)

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

Weighted average shares outstanding:

Net income (loss) per common share:

Fully diluted

Weighted average shares:

See accompanying notes to the unaudited condensed consolidated financial statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2021

FOR THE THREE MONTHS ENDED JUNE 30, 2021

Preferred Stock

(Accumulated Deficit)

Stockholders’

Balance at April 1, 2021

Share-based compensation

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

Balance at June 30, 2021

FOR THE THREE MONTHS ENDED JUNE 30, 2020

Preferred Stock

Stockholders’

Balance at April 1, 2020

Share-based compensation

Balance at June 30, 2020

See accompanying notes to the unaudited condensed consolidated financial statements.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2021

Preferred Stock

(Accumulated Deficit)

Stockholders’

Balance at January 1, 2021

2 unchanged sentences

Share-based compensation

Balance at March 31, 2021

FOR THE THREE MONTHS ENDED MARCH 31, 2020

Balance at June 30, 2021

FOR THE SIX MONTHS ENDED JUNE 30, 2020

Preferred Stock

3 unchanged sentences

Share-based compensation

Balance at March 31, 2020

Balance at June 30, 2020

See accompanying notes to the unaudited condensed consolidated financial statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

Six Months Ended

Cash flows from operating activities:

Net income (loss)

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

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

Deferred income taxes

8 unchanged sentences

Prepaid expenses and other current assets

Deposits and other assets

Accounts payable

4 unchanged sentences

Operating lease obligations

Net cash used in operating activities

Net cash (used in) provided by operating activities

Cash flows from investing activities:

Purchase of property and equipment

Acquisition of business

Escrow accounts receivable

Net cash provided by investing activities

Net cash (used in) provided by investing activities

Cash flows from financing activities:

Payment of cash dividend

Proceeds from PPP loan

Payment of PPP loan

Proceeds from issuance of stock, net of expenses

10 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND 2020

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

For the three months ended March 31, 2021:

For the six months ended June 30, 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 $ 479,110 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).

At June 30, 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:

At June 30, 2021 and December 31, 2020, the outstanding balances on the Nellnube Note were $-0- and $ 204,995 respectively (see Note 6).

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

(“CTS”) pursuant to an Asset Purchase Agreement for a promissory note in the aggregate principal 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 percent ( 2.0 %) per annum.

On May 1, 2021, SWK acquired certain assets of PeopleSense, Inc.

(“PSI”) pursuant to an Asset Purchase Agreement for cash of $ 145,703 , customer deposits related to prepaid time from clients in the amount of $ 99,938 , and the issuance of a promissory note in the aggregate principal amount of $ 450,000 (the “PSI Note”).

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

The Company entered into an operating lease for equipment with Atmosera, Inc.

Accordingly, operating lease right of use assets and operating lease liabilities were recognized in the amount of $ 90,245 .

The Company entered into an operating lease for equipment with Cologix USA, Inc.

Accordingly, operating lease right of use assets and operating lease liabilities were recognized in the amount of $ 18,412 .

On June 18, 2021, the Company incurred approximately $ 134,097 in financial lease obligations for purchases of equipment.

For the six months ended June 30, 2020:

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

27 unchanged sentences

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 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.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position of the Company as of June 30, 2021, the results of operations for the three and six months ended June 30, 2021 and 2020 and cash flows for the six months ended June 30, 2021 and 2020.

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

5 unchanged sentences

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.

SILVERSUN TECHNOLOGIES, INC.

2 unchanged sentences

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Use of Estimates

Actual results could differ from those estimates.

Goodwill is the excess of acquisition cost of an acquired entity over the fair value of the identifiable net assets acquired.

1 unchanged sentence

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 months ended March 31, 2021 and 2020.

No impairment losses were identified or recorded for the three and six months ended June 30, 2021 and 2020.

Capitalization of proprietary developed software

13 unchanged sentences

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 months ended March 31, 2021 and 2020.

No impairment losses were identified or recorded for the three and six months ended June 30, 2021 and 2020.

Revenue Recognition

19 unchanged sentences

Ancillary service revenue

For the Six Months Ending

Software revenue

Professional consulting

Maintenance revenue

Ancillary service revenue

Unbilled Services

3 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 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 June 30, 2021, there was $ 184,970 in deferred maintenance, $ 395,251 in deferred support services, and $ 1,889,590 , 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.

3 unchanged sentences

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

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 Company estimates that the fair value of all financial instruments at June 30, 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.

The carrying amounts reported in the unaudited condensed consolidated balance sheets as of June 30, 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.

21 unchanged sentences

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

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.

At June 30, 2021 and December 31, 2020, the Company had cash on deposit of $ 8,524,717 and $ 5,900,593 , respectively, in excess of the federally insured limits of $ 250,000 .

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

As of June 30, 2021, no one customer represented more than 10% 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.

For the six months ended June 30, 2021 and 2020, the Company’s top ten customers accounted for 11 % ($ 2,283,248 ) and 12 % ($ 2,433,153 ), respectively, of total revenues.

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

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.

For the six months ended June 30, 2021 and 2020, purchases from one supplier through a “channel partner” agreement were approximately 14 % and 14 % 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 March 31, 2021, two suppliers represented approximately 25% of total accounts payable.

As of June 30, 2021, one supplier represented approximately 13 % 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 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

As of June 30, 2021, the Company believes it has no significant risk related to its concentration of accounts receivable.

Accounts Receivable

3 unchanged sentences

Terms under our professional service agreements are generally 50% due in advance and the balance on completion of the services.

The Company maintains an allowance for bad debt estimated by considering a number of factors, including the length of time the amounts are past due, the Company’s previous loss history and the customer’s current ability to pay its obligations.

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.

14 unchanged sentences

federal and state jurisdictions.

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

There were no liabilities for uncertain tax positions at June 30, 2021 and December 31, 2020.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Fair Value Measurement

9 unchanged sentences

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

27 unchanged sentences

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 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:

For the six months ended June 30, 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 June 30, 2021, 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 six months ended June 30, 2020, since the effect of common stock equivalents is anti-dilutive with respect to the loss, the convertible promissory notes have also been excluded from the Company’s computation of net loss per common share.

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

For the three and six months ended June 30, 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.

June 30, 2021

June 30, 2020

Basic net income per share computation:

Weighted-average common shares outstanding

Basic net income per share

Diluted net income per share computation:

Net income per above

Interest on convertible debt

Weighted-average common shares outstanding

Incremental shares for warrants and convertible promissory notes

Total adjusted weighted-average shares

Diluted net income per share

June 30, 2021

June 30, 2020

Basic net income (loss):

Net income (loss)

1 unchanged sentence

Basic net income (loss) per share

Diluted net income (loss) per share computation:

Diluted net income (loss):

Net income (loss) per above

Net income (loss)

Weighted-average common shares outstanding

Incremental shares attributable to assumed conversion of stock options and

Incremental shares for warrants

Total adjusted weighted-average shares

1 unchanged sentence

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

June 30, 2021

June 30, 2020

Stock options

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

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

June 30, 2021

June 30, 2020

Stock options

Convertible promissory notes

2 unchanged sentences

Property and equipment is summarized as follows:

June 30, 2021

December 31, 2020

3 unchanged sentences

Property and equipment, net

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.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Depreciation and amortization expense related to these assets was $ 79,317 and $ 157,619 , respectively, for the three and six months ended June 30, 2021 as compared to $ 81,070 and $ 165,633 for the three and six months ended June 30, 2020.

NOTE 5 – INTANGIBLE ASSETS

2 unchanged sentences

The components of intangible assets are as follows:

March 31, 2021

June 30, 2021

December 31, 2020

3 unchanged sentences

accumulated amortization

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

Amortization expense related to the above intangible assets for the three and six months ended June 30, 2021 was $ 131,502 and $ 251,739 , respectively, as compared to $ 91,974 and $ 183,946 for the three and six months ended June 30, 2020.

The Company expects future amortization expense to be the following:

Remainder of 2021

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

5 unchanged sentences

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.

At June 30, 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.

4 unchanged sentences

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)

At June 30, 2021 and December 31, 2020, the outstanding balances on the Nellnube Note were $-0- and $ 204,995 respectively.

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

2 unchanged sentences

Monthly payments including interest are $ 4,984 .

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

At June 30, 2021 and December 31, 2020, the outstanding balances on the PIT Note were $ 34,655 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.

4 unchanged sentences

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

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

At June 30, 2021 and December 31, 2020, the outstanding balances on the PT Notes were $ 310,000 and $ 310,000 respectively.

On July 31, 2021, the Company paid Note 1 and accrued interest in the amount of $ 107,543 .

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 .

1 unchanged sentence

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.

At June 30, 2021 and December 31, 2020, the outstanding balances on the CMS Note were $ 133,098 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”).

1 unchanged sentence

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:

At June 30, 2021 and December 31, 2020, the outstanding balances on the BSS Note were $ 208,020 and $ 230,000 respectively.

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

(“CTS”) pursuant to an Asset Purchase Agreement for a promissory note in the aggregate principal 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 percent ( 2.0 %) per annum.

Monthly payments including interest are $ 3,724 .

At June 30, 2021, the outstanding balance on the CTS Note was $ 122,980 .

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 1, 2021, SWK acquired certain assets of PeopleSense, Inc.

The PSI 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 $ 12,889 .

At June 30, 2021, the outstanding balance on the CTS Note was $ 437,861 .

Total convertible debt and long-term debt balances at June 30, 2021 and December 31, 2020 were $ 1,246,614 and $ 1,482,343 , respectively, of which $ 428,765 and $ 545,000 was classified as current portion at June 30, 2021 and December 31, 2020, respectively.

At June 30, 2021, future payments of long-term debt are as follows:

Remainder of 2021

6 unchanged sentences

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

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 – FINANCE LEASE OBLIGATIONS

2 unchanged sentences

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

March 31, 2021

June 30, 2021

December 31, 2020

1 unchanged sentence

Weighted average interest rate

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

March 31, 2021

At June 30, 2021 future payments under finance leases are as follows:

June 30, 2021

Remainder of 2021

4 unchanged sentences

Long-term finance lease obligation

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 – OPERATING LEASE LIABILITY

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 leases office space in ten different locations with monthly payments ranging from $ 655 to $ 9,617 which expire at various dates through March 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.

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

The Company's weighted average remaining lease term and weighted average discount rate for operating leases as of June 30, 2021 are as follows:

June 30, 2021

December 31, 2020

1 unchanged sentence

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 March 31, 2021:

Remainder 2021

4 unchanged sentences

Long-term operating lease liabilities

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

Total rent expense under for the three and six months ended June 30, 2021 was $ 157,509 and $ 319,323 , respectively, as compared to $ 134,485 and $ 263,270 for the three and six months ended June 30, 2020, respectively.

NOTE 9 – EQUITY

10 unchanged sentences

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

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – EQUITY Continued)

Equity (continued)

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.

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.

In June 2021, 65,452 shares of Common Stock were issued and sold generating $ 722,116 , excluding legal expenses.

In July 2021, an additional 9,548 shares of Common Stock were issued and sold generating $ 106,108 , excluding legal expenses.

Conversion of Convertible Debt

In February 2021, ISM converted the outstanding balance of the loan in the amount of $ 479,110 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).

Stock Repurchase Program

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.

3 unchanged sentences

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

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

As of June 30, 2021, no repurchases have been made.

Stock Options

9 unchanged sentences

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.

For the three and six months ended June 30, 2021, the Company recorded share-based compensation expense of $ 48,940 and $ 49,932 , respectively, as compared to $ 3,399 and $ 6,798 for the three and six months ended June 30, 2020.

As of June 30, 2021 and December 31, 2020, the unamortized compensation expense for stock options was $ 341,073 and $-0-, respectively.

Unamortized compensation expense is expected to be recognized over a weighted-average period of 1.5 years.

SILVERSUN TECHNOLOGIES, INC.

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The purchase price has been allocated to customer list with an estimated life of fifteen years .

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

(“CTS”) pursuant to an Asset Purchase Agreement for a promissory note in the aggregate principal 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 percent ( 2.0 %) per annum.

Monthly payments including interest are $ 3,724 .

The purchase price has been allocated to customer list with an estimated life of fifteen years .

On May 1, 2021, SWK acquired certain assets of PeopleSense, Inc.

The PSI 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 $ 12,889 .

At June 30, 2021, the outstanding balance on the CTS Note was $ 437,861 .

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 the current and prior year acquisitions:

(Preliminary)

Cash consideration

Total purchase price

Deposits and other assets

Customer List

Operating Lease Right-of-Use Assets

Total assets acquired

Deferred revenue

Contingent liability

Operating lease liability

Net assets acquired

The purchase of PSI was initially allocated, based on the Company’s estimate of fair value, to intangible assets, which are expected to consist primarily of customers lists with an estimated life of seven 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 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.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 of Prairie Technology Solutions Group, LLS (“PT”), acquired July 31, 2020, Computer Management Services, LLC (CMS”), acquired October 1, 2020, Business Software Solutions (“BSS”), acquired December 1, 2020, CT-Solution, Inc.

(“CTS”), acquired April 1, 2021, and PeopleSense, Inc.

(“PSI), acquired May 1, 2021, 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 and six months ended June 30, 2020 as if the acquisitions occurred on January 1, 2020.

For the three and six months ended June 30, 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

March 31, 2020

June 30, 2021

Three Months Ended

June 30, 2020

Cost of revenues

Operating expenses

Loss before taxes

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

Income before taxes

Basic and diluted income per common share

Six Months Ended

June 30, 2021

Six Months Ended

June 30, 2020

Cost of revenues

Operating expenses

Income (loss) before taxes

Net income (loss)

Basic and diluted income (loss) per common share

The Company’s unaudited condensed consolidated financial statements for the three and six ended June 30, 2021 include the actual results of PT, CMS and BSS.

The Company’s unaudited condensed consolidated financial statements for the three months ended June 30, 2021 included the actual results for CTS and actual results for two months for PSI.

For three months ended June 30, 2021 pro-forma results above include two months of results for PSI.

For the six months ended June 30, 2021 pro-forma results above include three months of results of CTS and four months of PSI.

For the three months ended June 30, 2021, there is $ 8,282 of estimated amortization expense and $ 699 of estimated interest expense included for PSI in the pro-forma results.

For the six months ended June 30, 2021, $ 4,644 of estimated amortization expense and $ 606 of estimated interest expense is included in the pro-forma results for CTS and $ 24,844 of estimated amortization and $ 2,098 of estimated interest expense included for PSI in the pro-forma results.

For the three months ended June 30, 2020, there is $ 10,149 of estimated amortization expense and $ 3,126 of estimated interest expense included in the pro-forma results for PT, $ 6,864 of estimated amortization expense and $ 5,560 ,of estimated interest expense included in the pro-forma results for CMS, $ 8,214 of estimated amortization expense and $ 1,104 ,of estimated interest expense included in the pro-forma results for BSS, $ 4,644 of estimated amortization expense and $ 606 of estimated interest expense is included in the pro-forma results for CTS, and $ 24,845 of estimated amortization expense and $ 2,098 of estimated interest expense is included in the pro-forma results for PSI.

For the six months ended June 30, 2020, there is $ 20,298 of estimated amortization expense and $ 6,252 of estimated interest expense included in the pro-forma results for PT, $ 13,728 of estimated amortization expense and $ 11,120 ,of estimated interest expense included in the pro-forma results for CMS, $ 16,428 of estimated amortization expense and $ 2,209 of estimated interest expense included in the pro-forma results for BSS, $ 9,288 of estimated amortization expense and $ 1,212 of estimated interest expense is included in the pro-forma results for CTS, and $ 49,689 of estimated amortization expense and $ 4,196 of estimated interest expense is included in the pro-forma results for PSI.

SILVERSUN TECHNOLOGIES, INC.

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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 Company has federal net operating loss (“NOL”) carryforwards of approximately $ 5,100,000 as of June 30, 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 a portion 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.

The Company had approximately $ 828,000 and $ 1.04 million in deferred tax assets at June 30, 2021 and December 31, 2020, respectively.

For the six months ended June 30, 2021, the Company’s Federal and State provision requirements were calculated based on the estimated tax rate.

For the six months ended June 30, 2021, the Company recorded a tax provision of $ 195,017 as compared to a tax benefit from the net loss before taxes for the six months ended June 30, 2020 in the amount of $ 78,382 .

NOTE 12 – RELATED PARTY TRANSACTIONS

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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.

As of June 30, 2021 and December 31, 2020, the outstanding balance for the long-term convertible debt was $-0- and $ 717,482 , respectively.

At June 30, 2021 and December 31, 2020, certain long-term debt is considered related party liabilities holders are current employees of the Company.

As of June 30, 2021 and December 31, 2020, the outstanding balances of this debt were $ 344,655 and $ 374,039 , respectively.

NOTE 13 – SUBSEQUENT EVENTS

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.

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.

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

In July 2021, an additional 9,548 shares of Common Stock were issued and sold generating $ 106,108 , excluding legal expenses.

On June 21, 2021 , the Company announced the payment of a $ 0.60 special cash dividend per share of Common Stock to shareholders of record July 9, 2021 .

The dividend was paid on July 16, 2021 in the amount of $ 3,081,706 .

On August 4, 2021, the Company incurred approximately $ 58,644 in financial lease obligations for purchases of equipment.

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

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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.

The growth of our customer base is accomplished via both 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.

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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.

Results of Operations for the Three and Six Months Ended June 30, 2021 and 2020.

During the six months ended June 30, 2021 the Company continued to expand its customer base, which prior to Covid-19 we believed would provide a basis for future growth, as revenues increased 6.9% as compared to the same six-month period in the prior 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 to try and minimize risk of any potential downturn for shareholders as well the health, safety and wellbeing of its employees and customers.

For the three months ended June 30, 2021, revenues increased $556,264 (5.8)% to $10,229,209 as compared to $9,672,945 for the three ended June 30, 2020.

This increase is mostly attributed to an increase in recurring and service revenues partially offset by a decline in software sales.

For the six months ended June 30, 2021, revenues increased $1,356,209 (6.9%) to $21,108,677 as compared to $19,752,468 for the six months ended June 30, 2020, respectively.

The increase is mostly attributed to the increase in recurring and service revenues.

Software sales decreased $165,212 (8.6%) to $1,761,485 for the three months ended June 30, 2021 as compared to $1,926,697 for the three months ended June 30, 2020 due to the timing of orders.

For the six months ended June 30, 2021, software sales increased $69,629 (1.9%) to $3,765,496 as compared to $3,695,867 for the six months ended June 30, 2020 as a result of an increase in our ERP software sales offset partially by a decrease in third party software revenues.

Service revenue increased by $721,476 (9.3%) and $1,286,580 (8.0%) to $8,467,724 and $17,3343,181 for the three and six months ended June 30, 2021, respectively, as compared to $7,746,248 and $16,056,601 for the three and six months ended June 30, 2020, respectively.

These increases are mainly attributed to increases managed services and application hosting as we continue to focus in this area due to the needs of our customers’ digital transformation and the further requirement of customers to have the ability of their organizations to work remotely, particularly during the Covid pandemic.

Gross profit for the three and six months ended June 30, 2021 increased $332,075 (8.4%) and $1,226,403 (15.7%) to $4,270,680 and $9,017,217, respectively, as compared to $3,981,605 and $7,790,814 for the three and six months ended June 30, 2020, respectively.

For the three months ended June 30, 2021, the overall gross profit percentage was 41.7% as compared to 40.7% for the three months ended June 30, 2020.

For the six months ended June 30, 2021, the overall gross profit percentage was 42.7% as compared to 39.4% for the six months ended June 30, 2020.

The gross profit attributed to software sales increased $82,435 (11.9%) and $296,614 (22.2%) to $775,967 and $1,629,924 for the three and six months ended June 30, 2021, respectively, as compared to $693,532 and $1,333,310 for the three and six months ended June 30, 2020.

This increase is due to sales of software with higher gross profits.

The gross profit attributed to services increased $249,640 (7.7%) and $929,789 (14.4%) to $3,494,713 and $7,387,293 for the three and six months ended June 30, 2021, respectively, as compared to $3,245,073 and $6,457,504 for the three and six months ended June 30, 2020, respectively.

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.

Selling and marketing expenses decreased $119,366 (6.9%) and $341,381 (9.3%) to $1,614,106 and $3,333,414 for the three and six months ended June 30, 2021, respectively, as compared to $1,733,472 and $3,674,795 for the three and six months ended June 30, 2020, respectively.

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 early part of 2020, lower marketing expenses, in addition to a slight reduction in payroll related expenses as a result departmental changes for various employees, thereby reducing salary and benefit expense.

General and administrative expenses increased $212,029 (10.7%) and $420,806 (10.2%) to $2,193,277 and $4,528,195 for the three and six months ended June 30, 2021, respectively, as compared to $1,981,248 and $4,107,389 for the three and six-months ended June 30, 2020, respectively.

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.

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

Results of Operations for the Three and Six Months Ended June 30, 2021 and 2020 (continued).

Operating Expenses (continued)

Share-based compensation increased $45,541 and $43,134 for the three and six months to $48,940 and $49,932 for the three and six months ended June 30, 2021 as compared to $3,399 and $6,798 for the three and six months ended June 30, 2020, respectively.

The increase is due to the issuance of stock options at the end of March 2021.

Depreciation and amortization expense increased $37,409 and $58,920 to $210,453 and $408,499 for the three and six months ended June 30, 2021, respectively, as compared to $173,044 and $349,579 for the three and six months ended June 30, 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).

As a result of the above, for the three months ended June 30, 2021, the Company had income from operations of $203,904 as compared to income from operations of $47,442 for the three months ended June 30, 2020.

For the six months ended June 30, 2021, the Company had net income from operations of $697,177 as compared to a loss from operations of $347,747 for the six months ended June 30, 2020.

Liquidity and Capital Resources

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and (v) the activities of competitors.

In February 2021, ISM converted the outstanding balance of the loan in the amount of $479,110 into 119,004 shares of the Company’s common stock.

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.

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 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.

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.

In June 2021, 65,452 shares of Common Stock were issued and sold generating $722,116 under The At Market Agreement, excluding legal expenses.

In July 2021, an additional 9,548 shares of Common Stock were issued and sold generating $106,108, excluding legal expenses.

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

Liquidity and Capital Resources

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.

4 unchanged sentences

Monthly payments including interest are $3,724.

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.

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.

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.

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:

On May 1, 2021, SWK acquired certain assets of PeopleSense, Inc.

(“PSI”) pursuant to an Asset Purchase Agreement for cash of $145,703, customer deposits related to prepaid time from clients in the amount of $99,938, and the issuance of a promissory note in the aggregate principal amount of $450,000 (the “PSI Note”).

The PSI 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 $12,889.

At June 30, 2021, future payments of long-term debt 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.

During the six months ended June 30, 2021, the Company had a net increase in cash of $2,831,944.

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.

Cash (used in) provided by operating activities

Operating activities for the six months ended June 30, 2021 used cash of $838,824 as compared to providing cash of $270,375 for the same period in 2020.

This increase in cash used is primarily due to increase in prepaid expenses and other current assets, mostly as a result of an amount due from a vendor of approximately $871,000 (paid in July 2021), lower accounts receivable and the change in income taxes payable offset partially by the increase in operating income for the period.

Cash (used in) provided by investing activities

Investing activities for the six months ended June 30, 2021 used cash of $217,824 as compared to providing cash of $496,142 for the same period in 2020.

For the six months ended June 30, 2021, the Company acquired PSI and paid $145,703 in cash as part of the transaction (see Note 10).

For the six months ended June 30, 2020, escrowed proceeds of $575,000 were received from the sale of the EDI practice in August 2019.

Cash provided by (used in) financing activities

Financing activities for the six months ended June 30, 2021 provided cash of $3,888,592 as compared to using cash in the amount of $2,565,888 for the same period in 2020.

The increase in cash is attributed to the received net proceeds of $4,104,468 from the sale of common stock under its Registration Statement on Form S-3 and the previously disclosed At Market Issuance Sales Agreement with a sales agent.

During the six months ended June 30, 2020, the Company paid a dividend to its shareholders which did not occur during the six months ended June 30, 2021.

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.

There was no significant impact on the Company’s operations as a result of inflation for the six months ended June 30, 2021.

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

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.

During the six months ended June 30, 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.

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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