What changed in this filing

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Item 1. Financial Statements

2022-05-12 compared with 2021-11-09 · 296 added, 373 removed, 518 unchanged (56% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, 2021

December 31, 2020

Current assets:

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

Cash and cash equivalents

Accounts receivable, net of allowance of $ 330,311

Unbilled services

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Long-term debt – current portion

Long-term convertible debt – current portion

Long-term – related party – current portion

Finance lease obligations – current portion

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Long-term debt net of current portion

Long-term convertible debt net of current portion

Long-term – related party - net of current portion

Finance lease obligations net of current portion

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authorized 75,000,000 shares,

5,136,177 and 4,501,271 shares issued and outstanding, respectively

5,136,177 shares issued and outstanding

Additional paid-in capital

7 unchanged sentences

Three Months Ended

Nine Months Ended

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

March 31, 2022

March 31, 2021

Software product, net

9 unchanged sentences

(Loss) income from operations

Other (expense) income:

Interest expense

Total other (expense) income

Other expense:

Interest expense, net

Total other expense

(Loss) income before taxes

(Benefit) provision for income taxes

Provision for income taxes

Net (loss) income

Net (loss) per common share:

Fully diluted

Weighted average shares:

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

Weighted average shares outstanding:

See accompanying notes to the unaudited condensed consolidated financial statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021

Preferred Stock

Stockholders’

Balance at July 1, 2021

Share-based compensation

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

Cash dividend

Balance at September 30, 2021

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020

FOR THE THREE MONTHS ENDED MARCH 31, 2022

Preferred Stock

1 unchanged sentence

Stockholders’

Balance at July 1, 2020

Balance at January 1, 2022

Share-based compensation

Balance at September 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 NINE MONTHS ENDED SEPTEMBER 30, 2021

Balance at March 31, 2022

FOR THE THREE MONTHS ENDED MARCH 31, 2021

Preferred Stock

4 unchanged sentences

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

Cash dividend

Share-based compensation

Balance at September 30, 2021

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020

Preferred Stock

Stockholders’

Balance at January 1, 2020

Share-based compensation

Balance at September 30, 2020

Balance at March 31, 2021

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 income (loss)

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

Net (loss) income

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

Deferred income taxes

2 unchanged sentences

Amortization of right of use assets

Bad debt recovery

Share-based compensation

3 unchanged sentences

Prepaid expenses and other current assets

Deposits and other assets

Accounts payable

Accrued expenses

Income tax payable

Accrued interest

1 unchanged sentence

Operating lease obligations

Net cash provided by operating activities

Cash flows from investing activities:

Net cash used in operating activities

Cash flows used in investing activities:

Purchase of property and equipment

Acquisition of business

Escrow accounts receivable

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

Net cash used in investing activities

Cash flows (used in) provided by financing activities:

Proceeds from issuance of common stock, net of expenses

Payment of long-term debt

1 unchanged sentence

Payment of finance lease obligations

Net cash provided by (used in) financing activities

Net increase (decrease) in cash

Net cash (used in) provided by financing activities

Net (decrease) increase 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 THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

For the nine months ended September 30, 2021:

For the three months ended March 31, 2022:

On January 1, 2022, the Company entered into an asset purchase agreement with Dynamic Tech Services, Inc (“DTS”) to acquire certain assets of DTS.

The purchase price for the Acquired Assets was $ 1,335,000 , $ 500,000 of which was paid in cash in December 2021 and $ 835,000 of which was paid through the issuance of a four-year $ 835,000 promissory note dated January 1, 2022, paying interest at the rate of 3.25 % per annum (see Note 10).

On January 22, 2022, the Company entered into an agreement to acquire certain assets of NEO3, LLC (“NEO3”).

The purchase price for the customer list was $ 225,000 , $ 150,000 of which was paid in cash and $ 75,000 of which was paid through the issuance of a three-year $75,000 promissory note dated January 22, 2022, paying interest at the rate of 2 % per annum.

The Company also assumed $ 73,672 of prepaid time as part of the consideration for this transaction.

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 $ 479,110 into 119,004 shares of the Company’s common stock.

At September 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 September 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.

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

For the nine months ended September 30, 2020:

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

Accordingly, operating lease right of use assets and operating lease liabilities were recognized in the amount of $ 453,379 .

On January 29, 2020 the Company entered into an operating lease in Greensboro, NC.

Accordingly, operating lease right of use assets and operating lease liabilities were recognized in the amount of $ 104,296 .

On February 1, 2020 the Company entered into an operating lease in East Hanover, NJ.

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

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.

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 (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 (see Note 6).

See accompanying notes to the unaudited condensed consolidated financial statements.

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(“SCS”) and Critical Cyber Defense Corp.

(“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.

(“CCD”) (together with SWK, SCS and SilverSun, the “Company”) is a business application, technology and consulting company providing strategies and solutions to meet our clients’ information, technology and business management needs.

Our services and technologies enable customers to manage, protect and monetize their enterprise assets whether on-premise or in the “Cloud”.

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

We have a dedicated network services practice that provides managed services, cybersecurity, application hosting, disaster recovery, business continuity, cloud and other services.

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

We have a dedicated network services practice that provides managed services, cybersecurity, application hosting, disaster recovery business continuity, cloud migration and other services.

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

The Company is publicly traded and is listed and is traded on the NASDAQ Capital Market under the symbol “SSNT”.

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Possible areas that may be affected include, but are not limited to, disruption to the Company’s customers and revenue, labor workforce, inability of customers to pay outstanding accounts receivable due and owing to the Company as they limit or shut down their businesses, customers seeking relief or extended payment plans relating to accounts receivable due and owing to the Company, unavailability of products and supplies used in operations, and the decline in value of assets held by the Company, including property and equipment.

However, we currently do not expect a significant impact on our results of operations in the future due to COVID-19.

We currently do not expect a significant impact on our results of operations in the future due to Russia’s invasion of Ukraine, as we have minimal business in Russia and Ukraine, both directly and indirectly.

However, following the invasion, the U.S.

and other countries imposed significant sanctions against the Russian government and many Russian companies and individuals.

Although the Company does not have significant operations in Russia, the sanctions could impact the Company’s business in other countries and could have a negative impact on the Company’s future revenue and that of its customers, either of which could adversely affect the Company’s business and financial results.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position of the Company as of September 30, 2021, the results of operations for the three and nine months ended September 30, 2021 and 2020 and cash flows for the nine months ended September 30, 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 March 31, 2022, the results of operations for the three months ended March 31, 2022 and 2021 and cash flows for the three months ended March 31, 2022 and 2021.

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

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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.

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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 and nine months ended September 30, 2021 and 2020.

No impairment losses were identified or recorded for the three months ended March 31, 2022 and 2021.

Capitalization of Proprietary Developed Software

Software development costs are accounted for in accordance with ASC 985-20, Software — Costs of Software to be Sold, Leased or Marketed .

Software development costs are accounted for in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC), ASC 985-20, Software — Costs of Software to be Sold, Leased or Marketed .

Costs associated with the planning and designing phase of software development are expensed as incurred.

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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, 2021 and 2020.

No impairment losses were identified or recorded for the three months ended March 31, 2022 and 2021.

Revenue Recognition

The Financial Accounting Standards Board “FASB” issued ASU 2014-09, Revenue from Contracts with Customers:

Topic 606 which superseded nearly all existing revenue recognition guidance under GAAP.

The core principle of Topic 606 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services.

Topic 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation, among others.

Topic 606 also provides guidance on the recognition of costs related to obtaining customer contracts.

With the adoption of ASC 606, the Company has elected the significant financing component practical expedient.

The Company has elected the significant financing component practical expedient in accordance with ASC 606, Revenue from Contracts with Customers.

In determining the transaction price, the Company does not adjust the promised amount of consideration for the effects of a significant financing component as the Company expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

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Components of revenue:

For the Three Months Ending

September 30,

Software revenue

Professional consulting

Maintenance revenue

Ancillary service revenue

For the Nine Months Ending

September 30,

For the Three Months Ended

Software revenue

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Deferred revenues consist of maintenance on proprietary products (contract liabilities), customer telephone support services (contract liabilities) and deposits for future consulting services that 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, 2021, there was $ 685,271 in deferred maintenance and deferred support service revenues and $ 1,614,919 , in deposits for future consulting services.

As of December 31, 2020, there was $ 475,610 in deferred maintenance and deferred support services, and $ 1,563,631 in deposits for future consulting services.

As of March 31, 2022, there was $ 275,301 in deferred maintenance revenues, $ 364,408 in deferred support service revenues and $ 1,902,096 , in deposits for future consulting services.

As of December 31, 2021, there was $ 291,468 in deferred maintenance, $ 398,382 in deferred support services, and $ 1,785,733 in deposits for future consulting services.

Sales commissions relating to service revenues are considered incremental and recoverable costs of obtaining a project with our customer.

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Fair Value of Financial Instruments

The Company estimates that the fair value of all financial instruments at September 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 Company estimates that the fair value of all financial instruments at March 31, 2022 and December 31, 2021, as defined in 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 unaudited condensed consolidated balance sheets as of September 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.

The carrying amounts reported in the unaudited condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021 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.

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The Company has lease agreements with lease and non-lease components, which are generally accounted for separately.

The Company finances purchases of hardware and computer equipment through finance lease agreements.

Finance lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date.

Cash and Cash Equivalents

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The Company has not experienced any losses in such accounts.

Concentrations

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

At September 30, 2021 and December 31, 2020, the Company had cash on deposit of $ 6,381,238 and $ 5,900,593 , respectively, in excess of the federally insured limits of $ 250,000 .

SILVERSUN TECHNOLOGIES, INC.

2 unchanged sentences

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

As of September 30, 2021, no one customer represented more than 10% of the total accounts receivable and unbilled services.

Concentrations

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

At March 31, 2022 and December 31, 2021, the Company had cash on deposit of $ 5,774,424 and $ 5,955,840 , respectively, in excess of the federally insured limits of $ 250,000 .

As of March 31, 2022, no one customer represented more than 10% of the total accounts receivable and unbilled services.

As of December 31, 2021, no one customer represented more than 10% of the total accounts receivable and unbilled services.

For the nine months ended September 30, 2021 and 2020, the Company’s top ten customers accounted for 10 % ($ 3,037,542 ) and 11 % ($ 3,157,125 ), respectively, of total revenues.

For the three months ended March 31, 2022 and 2021, the Company’s top ten customers accounted for 11 % ($ 1,218,890 ) and 14 % ($ 1,499,790 ), 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, 2021 and 2020, purchases from one supplier through a “channel partner” agreement were approximately 14 % 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, 2021, one supplier represented approximately 15 % of total accounts payable.

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

For the three months ended March 31, 2022 purchases from one supplier through a “channel partner” agreement were approximately 11 % of cost of revenues.

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

The channel partner agreements are for a one-year term and automatically renews for an additional one-year term on the anniversary of the agreement’s effective date.

As of March 31, 2022, one supplier represented approximately 13 % of total accounts payable.

For the year ended December 31, 2021, one supplier represented approximately 24 % of total 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, 2021, the Company believes it has no significant risk related to its concentration of accounts receivable.

As of March 31, 2022, the Company believes it has no significant risk related to its concentration of accounts receivable.

Accounts Receivable

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When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is included in the unaudited condensed consolidated statements of operations.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

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

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

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

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

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as net operating loss carryforwards.

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federal and state jurisdictions.

There were no liabilities for uncertain tax positions at September 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)

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

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

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

There were no liabilities for uncertain tax positions at March 31, 2022 and December 31, 2021.

Fair Value Measurement

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

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.

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

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

The Company’s goodwill and intangibles are measured at fair-value on a non-recurring basis using Level 3 inputs, as discussed in Note 5 and 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 June 2016, the FASB issued ASU No.

2016-13 Financial Instruments -Credit Losses (Topic 326), Measurement of Credit Losses on Financial Statements.

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

This 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.

2019-12, Income Taxes - simplifying the accounting for income taxes (Topic 740), which is meant to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740, Income Taxes.

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

This 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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The guidance also includes targeted improvements to the disclosures for convertible instruments and earnings per share.

ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020.

The Company is evaluating the impact of the adoption on its consolidated financial statements.

This was adopted on January 1, 2022 and did not have a significant impact on our consolidated financial position and consolidated results of operations.

In October 2021, the FASB issued ASU No.

2021-08, “Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” This ASU requires contract assets and contract liabilities (e.g.

deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, "Revenue from Contracts with Customers".

Generally, this new guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree.

Historically, such amounts were recognized by the acquirer at fair value in purchase accounting.

The guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Early adoption is permitted, including in interim periods, for any financial statements that have not yet been issued.

This was adopted on January 1, 2022 and did not have a significant impact on our consolidated financial position and consolidated results of operations.

Recent Authoritative Pronouncements

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – NET INCOME (LOSS) PER COMMON SHARE

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

Diluted income per common share is based on net income, 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 nine months ended September 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 three months ended September 30, 2021, common stock equivalents have been excluded from the computation since the effect of common stock equivalents is anti-dilutive with respect to the loss.

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

For the three and nine months ended September 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.

September 30, 2021

September 30, 2020

NOTE 3 – NET (LOSS) INCOME PER COMMON SHARE

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

Diluted (loss) income per common share is based on net (loss) 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, 2022 and 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.

In addition, for the three months ended March 31, 2022, since the Company has a net loss, the effect of common stock equivalents is anti-dilutive, and, as such, common stock equivalents have been excluded from the calculation.

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

March 31, 2022

March 31, 2021

Basic net (loss) income per share computation:

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Net (loss) income per above

Interest on convertible debt

Net (loss) income

Weighted-average common shares outstanding

Incremental shares for warrants and convertible promissory notes

Incremental shares attributable to assumed conversion of stock options and warrants

Total adjusted weighted-average shares

Diluted net (loss) income per share

September 30, 2021

September 30, 2020

Basic net income (loss):

Net income (loss)

Weighted-average common shares outstanding

Basic net income (loss) per share

Diluted net income (loss):

Net income (loss) per above

Net income (loss)

Weighted-average common shares outstanding

Incremental shares for warrants

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 income (loss) per share.

September 30, 2021

September 30, 2020

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

March 31, 2022

March 31, 2021

Stock options

Total potential dilutive securities not included in (loss) income 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.

September 30, 2021

September 30, 2020

Stock options

Convertible promissory notes

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, 2021

March 31, 2022

December 31, 2021

3 unchanged sentences

Property and equipment, net

Depreciation and amortization expense related to these assets was $ 90,921 and $ 248,540 , respectively, for the three and nine months ended September 30, 2021 as compared to $ 74,846 and $ 240,479 for the three and nine months ended September 30, 2020.

Depreciation and amortization expense related to these assets for the three months ended March 31, 2022 and 2021 was $ 98,425 and $ 78,304 , respectively.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 – PROPERTY AND EQUIPMENT (continued)

Property and equipment under finance leases (included in Note 7) are summarized as follows:

March 31, 2022

December 31, 2021

Equipment, furniture, and fixtures

Accumulated amortization

Property and equipment, net

NOTE 5 – INTANGIBLE ASSETS

1 unchanged sentence

Amortization is computed using the straight-line method over the estimated useful lives.

On January 19, 2022, SWK acquired the customer list of NEO3, LLC (“NEO3”) pursuant to an Asset Purchase Agreement for the customer list for $ 150,000 cash and the issuance of a promissory note in the aggregate principal amount of $ 75,000 (the “NEO3 Note”).

The NEO3 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 $ 2,148 .

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

The components of intangible assets are as follows:

September 30, 2021

March 31, 2022

December 31, 2021

3 unchanged sentences

accumulated amortization

Amortization expense related to the above intangible assets for the three and nine months ended September 30, 2021 was $ 132,285 and $ 388,024 , respectively, as compared to $ 104,211 and $ 288,157 for the three and nine months ended September 30, 2020.

Amortization expense related to the above intangible assets was $ 190,457 and $ 120,237 for the three months ended March 31, 2022 and 2021, respectively.

The Company expects future amortization expense to be the following:

3 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 6 – LONG-TERM AND RELATED PARTY DEBT

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

4 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 September 30, 2021 and December 31, 2020, the outstanding balances on the ISM Note were $-0- and $ 512,487 , respectively.

At March 31, 2022 and December 31, 2021, the outstanding balances on the ISM Note were $-0- and $- 0 -, 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 September 30, 2021 and December 31, 2020, the outstanding balances on the Nellnube Note were $-0- and $ 204,995 , respectively.

At March 31, 2022 and December 31, 2021, the outstanding balances on the Nellnube Note were $-0- and $-0-, respectively.

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

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

This long-term debt is considered related party debt as a holder is a current employee of the Company.

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

Monthly payments including interest are $ 4,984 .

At September 30, 2021 and December 31, 2020, the outstanding balances on the PIT Note were $ 19,852 and $ 64,040 , respectively.

At March 31, 2022 and December 31, 2021, the outstanding balances on the PIT Note were $-0- and $ 4,975 , respectively.

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

This long-term debt is considered related party debt as a holder is a current employee of the Company.

The Prairie Tech Notes bear interest at a rate of 4 % per annum.

Prairie Tech Note 1 has a term of one (1) year and is subject to downward adjustment based on whether certain revenue milestones are achieved.

Prairie Tech Note 1 had a term of one (1) year and was subject to downward adjustment based on whether certain revenue milestones are achieved.

In July 2021, the Company waived its rights to any downward adjustments on these notes, and agreed to pay the full face amount, plus interest, on those notes on the date of maturity.

1 unchanged sentence

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

At September 30, 2021 and December 31, 2020, the outstanding balances on the PT Notes were $ 206,667 and $ 310,000 , respectively.

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

At March 31, 2022 and December 31, 2021, the outstanding balances on the PT Notes were $ 206,667 and $ 206,667 , 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 .

1 unchanged sentence

Monthly payments including interest are $ 4,869 .

At September 30, 2021 and December 31, 2020, the outstanding balances on the CMS Note were $ 119,133 and $ 160,821 , respectively.

At March 31, 2022 and December 31, 2021, the outstanding balances on the CMS Note were $ 90,991 and $ 105,097 , 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 September 30, 2021 and December 31, 2020, the outstanding balances on the BSS Note were $ 196,948 and $ 230,000 , respectively.

At March 31, 2022 and December 31, 2021, the outstanding balances on the BSS Note were $ 174,636 and $ 185,820 , respectively.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – LONG-TERM AND RELATED PARTY DEBT (continued)

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

2 unchanged sentences

Monthly payments including interest are $ 3,724 .

At September 30, 2021, the outstanding balance on the CTS Note was $ 112,407 .

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 March 31, 2022 and December 31, 2021, the outstanding balance on the CTS Note was $ 91,101 and $ 101,781 , respectively.

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

2 unchanged sentences

Monthly payments including interest are $ 12,889 .

At September 30, 2021, the outstanding balance on the CTS Note was $ 401,322 .

Total convertible debt and long-term debt balances at September 30, 2021 and December 31, 2020 were $ 1,056,329 and $ 1,482,343 , respectively, of which $ 415,419 and $ 545,000 was classified as current portion at September 30, 2021 and December 31, 2020, respectively.

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

At March 31, 2022 and December 31, 2021, the outstanding balance on the PSI Note was $ 327,694 and $ 364,600 , respectively.

On January 1, 2022, SWK acquired certain assets of Dynamic Tech Services, Inc.

(“DTSI”) pursuant to an Asset Purchase Agreement for $ 500,000 cash and the issuance of a promissory note in the aggregate principal amount of $ 835,000 (the “DTSI Note”).

The DTSI Note bears interest at a rate of three and one-quarter percent ( 3.25 %) per annum.

The principal amount of the Note is subject to a downward adjustment in the event the Company loses any subscription renewal revenue during the one-year period immediately following the Effective Date from any persons that were customers of DTS immediately prior to the Effective Date (the “DTS Customers”).

Any such downward adjustment will be determined by calculating the percentage of loss of Acumatica subscription renewals during the one-year period immediately following the Effective Date from DTS Customers.

In the event that subscription renewal revenue received from DTS Customers during the one-year period immediately following the Effective Date is less than 95% of the subscription renewal revenue received by DTS from DTS Customers during the one-year period immediately preceding the Effective Date, the principal amount of the Note will be reduced.

The measuring period for any downward adjustment will be as of the one-year anniversary of the Effective Date.

Notwithstanding the foregoing, under no circumstances will the principal amount of the Note be reduced by reason of such downward adjustment by more than $150,000 ( i.e.

, to a principal amount below $685,000).

The Note will be amortized as follows:

The first payment of principal and interest due under the Note, which will be an annual payment, is due and payable on January 1, 2023, after the revised principal amount of the Buyer Note is determined and thereafter, payments will be made quarterly in twelve equal installments.

At March 31, 2022, the outstanding balance on the DTSI Note was $ 835,000 (see Note 10).

The NEO3 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 $ 2,148 .

At March 31, 2022 the outstanding balances on the NEO3 Note was $ 70,950 .

Total long-term and related party debt balances at March 31, 2022 and December 31, 2021 were $ 1,797,039 and $ 968,940 , respectively, of which $ 631,834 and $ 402,005 was classified as current portion at March 31, 2022 and December 31, 2021, respectively.

At March 31, 2022, future payments of long-term debt are as follows:

Remainder of 2022

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

(the “Lender”), 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”).

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.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 – FINANCE LEASE OBLIGATIONS

1 unchanged sentence

The equipment has been capitalized and is included in property and equipment in the accompanying unaudited condensed consolidated balance sheets.

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

September 30,

The weighted average interest rate as of March 31, 2022 was 9.4 % and the following weighted-average lease term:

March 31, 2022

December 31, 2021

Weighted average remaining lease term

Weighted average interest rate

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

September 30, 2021

At March 31, 2022 future payments under finance leases are as follows:

March 31, 2022

Remainder of 2022

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 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.

The Company leases office space in eleven different locations with monthly payments ranging from $ 744 to $ 10,279 which expire at various dates through April 2024.

The Company's leases generally do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities.

The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease.

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

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

September 30, 2021

The asset and liability was valued using an weighted average interest rate of 4.77 %.

The Company's weighted average remaining lease term for operating leases as of March 31, 2022 is as follows:

March 31, 2022

December 31, 2021

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, 2021:

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 – OPERATING LEASE LIABILITY (continued)

Remainder 2022

4 unchanged sentences

Long-term operating lease liabilities

Total rent expense under for the three and nine months ended September 30, 2021 was $ 125,635 and $ 444,858 , respectively, as compared to $ 134,147 and $ 397,416 for the three and nine months ended September 30, 2020, respectively.

Total rent expense under operating leases for the three months ended March 31, 2022 and 2021 was $ 119,329 and $ 161,814 , 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.

8 unchanged sentences

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

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – EQUITY Continued)

Conversion of Convertible Debt

7 unchanged sentences

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

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

On November 5, 2021, the Board of Directors voted to increase the authorized amount of the buyback from $2 million to $ 5 million.

As of March 31, 2022, no repurchases have been made.

Stock Options

5 unchanged sentences

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.

During the period ended September 30, 2021, 3,000 stock options were forfeited at an exercise price of $ 6.53 .

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

There were no stock options granted for the three months ended March 31, 2022.

As of March 31, 2022, there are 165,620 outstanding stock options with an average exercise price of $ 6.2575 .

For the three months ended March 31, 2022 and 2021, the Company recorded share-based compensation expense of $ 45,945 and $ 992 , respectively.

As of March 31,2022 and December 31, 2021, the unamortized compensation expense for stock options was $ 182,771 and $ 228,716 , respectively.

The remaining amount will be amortized over the next year for the balance at March 31, 2022, and 1.25 for the balance at December 31, 2021.

As of December 31, 2021, the Company had outstanding warrants outstanding to purchase 4,988 shares of the Company’s common stock at an exercise price of $ 4.01 per share.

These warrants expired in March 2022.

SILVERSUN TECHNOLOGIES, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – EQUITY Continued)

Stock Options (continued)

For the three and nine months ended September 30, 2021, the Company recorded share-based compensation expense of $ 48,878 and $ 98,810 , respectively, as compared to $ 3,396 and $ 10,194 for the three and nine months ended September 30, 2020.

As of September 30, 2021 and December 31, 2020, the unamortized compensation expense for stock options was $ 283,428 and $-0-, respectively.

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

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

At September 30, 2021 and December 31, 2020, the outstanding balances on the BSS Note were $ 196,948 and $ 230,000 , respectively.

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

2 unchanged sentences

Monthly payments including interest are $ 3,724 .

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

At September 30, 2021, the outstanding balance on the CTS Note was $ 112,407 .

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

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

1 unchanged sentence

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 September 30, 2021, the outstanding balance on the PSI Note was $ 401,322 .

At March 31, 2022, the outstanding balance on the PSI Note was $ 327,694 .

The allocation of the purchase price to customer list with an estimated life of seven years which is deductible for tax purposes, has been based on an independent valuation.

The valuation showed an increase of $ 71,359 above the purchase price, which was recorded as a gain on bargain purchase in the consolidated statement of operations as the independent valuation exceeded the purchase price.

On January 1, 2022, the Company entered into an asset purchase agreement with Dynamic Tech Services, Inc (“DTS”) to acquire certain assets of DTS.

The purchase price for the Acquired Assets was $ 1,335,000 , $ 500,000 of which was paid in cash and $ 835,000 of which was paid through the issuance of a four-year $835,000 promissory note dated January 1, 2022, paying interest at the rate of 3.25 % per annum.

The measuring period for any downward adjustment will be as of the one-year anniversary of the Effective Date.

Notwithstanding the foregoing, under no circumstances will the principal amount of the Note be reduced by reason of such downward adjustment by more than $150,000 ( i.e.

, to a principal amount below $685,000).

The Note will be amortized as follows:

The purchase price has been allocated to customer list 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 Company expects these acquisitions to create synergies by combining operations and expanding geographic market share and product offerings.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – BUSINESS COMBINATIONS (continued)

The following summarizes the purchase price allocation for the current and prior year acquisitions:

2 unchanged sentences

Total purchase price

Deposits and other assets

Customer list

Operating lease right-of-use assets

Total assets acquired

3 unchanged sentences

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.

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 nine months ended September 30, 2020 as if the acquisitions occurred on January 1, 2020.

For the three and nine months ended September 30, 2020, operating expenses have been increased for the amortization expense of expected definite lived intangible assets and interest on the notes payable.

The following unaudited pro forma information does not purport to present what the Company’s actual results would have been had the acquisitions of CT-Solution, Inc.

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

(“PSI), acquired May 1, 2021, and DTS, acquired January 1, 2022.

occurred on January 1, 2021, 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, 2022 and 2021 as if the acquisitions occurred on January 1, 2021.

For the three months ended March 31, 2021, 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, 2020

Cost of revenues

Operating expenses

Income (loss) before taxes

Net income (loss)

Basic and diluted income (loss) per common share

Nine Months Ended

September 30, 2021

Nine Months Ended

September 30, 2020

March 31, 2021

Cost of revenues

3 unchanged sentences

Basic and diluted income (loss) per common share

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

For the nine months ended September 30, 2021 pro-forma results above include six months of results of CTS and five months of PSI.

For the nine months ended September 30, 2021, $ 4,644 of estimated amortization expense and $ 606 of estimated interest expense is included in the pro-forma results for CTS and $ 33,126 of estimated amortization and $ 2,797 of estimated interest expense included for PSI in the pro-forma results.

For the three months ended September 30, 2020, there is $ 10,149 of estimated amortization expense and $ 979 of estimated interest expense included in the pro-forma results for PT, $ 6,864 of estimated amortization expense and $ 5,457 ,of estimated interest expense included in the pro-forma results for CMS, $ 8,214 of estimated amortization expense and $ 1,105 ,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 $ 24,844 of estimated amortization expense and $ 1,822 of estimated interest expense is included in the pro-forma results for PSI.

For the nine months ended September 30, 2020, there is $ 30,447 of estimated amortization expense and $ 7,231 of estimated interest expense included in the pro-forma results for PT, $ 20,592 of estimated amortization expense and $ 16,577 ,of estimated interest expense included in the pro-forma results for CMS, $ 24,642 of estimated amortization expense and $ 3,314 of estimated interest expense included in the pro-forma results for BSS, $ 13,932 of estimated amortization expense and $ 1,818 of estimated interest expense is included in the pro-forma results for CTS, and $ 74,533 of estimated amortization expense and $ 6,018 of estimated interest expense is included in the pro-forma results for PSI.

The Company’s unaudited condensed consolidated financial statements for the three months ended March 31, 2022 include the actual results of CTS, PSI and DTS, and as such, no pro forma results are required.

For the three months ended March 31, 2021, there is $ 4,644 of estimated amortization expense and $ 631 of estimated interest expense included in the pro-forma results for CTS, $ 27,393 of estimated amortization expense and $ 2,159 of estimated interest expense included in the pro-forma results for PSI, and $ 47,679 of estimated amortization expense and $ 6,785 of estimated interest expense included in the pro-forma results for DTS.

For the three months ended March 31, 2022, the CTI, PSI and DTS operations had a net income before taxes of $ 113,626 which represented three months of operations for CTI, PSI and DTS that were included in the Company’s Unaudited Condensed Consolidated Statement of Operations for the three months ended March 31, 2022.

This consisted of approximately $ 632,866 in revenues, $ 343,587 in cost of revenues and $ 175,653 in expenses.

SILVERSUN TECHNOLOGIES, INC.

6 unchanged sentences

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 $ 5,400,000 as of September 30, 2021, which is subject to limitations under Section 382 of the Internal Revenue Code.

The Company has federal net operating loss (“NOL”) carryforwards of approximately $ 5,400,000 as of March 31, 2022, 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 2025 to 2033.

1 unchanged sentence

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 $ 897,000 and $ 1.04 million in deferred tax assets at September 30, 2021 and December 31, 2020, respectively.

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

For the nine months ended September 30, 2021, the Company recorded a tax provision of $ 126,381 as compared to a tax benefit from the net loss before taxes for the nine months ended September 30, 2020 in the amount of $ 46,904 .

The Company had approximately $ 989 ,000 and $ 991 ,000 in deferred tax assets at March 31, 2022 and December 31, 2021, respectively.

For the three months ended March 31, 2022, the Company’s Federal and State provision requirements were calculated based on the estimated tax rate.

For the three months ended March 31, 2022, the Company recorded a tax provision of $ 2,088 as compared to a tax provision of $ 128,569 for the three months ended March 31, 2021.

NOTE 12 – RELATED PARTY TRANSACTIONS

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

At September 30, 2021 and December 31, 2020, certain long-term debt is considered related party liabilities holders, including Prairie, Tech, Partners in Technology, Nellnube and ISM.

are current employees of the Company.

As of September 30, 2021 and December 31, 2020, the outstanding balances of this debt were $ 226,519 and $ 374,039 , respectively.

At March 31, 2022 and December 31, 2021, certain long-term debt is considered related party liabilities as holders, including Prairie, Tech and Partners in Technology, are current employees of the Company.

As of March 31, 2022 and December 31, 2021, the outstanding balances of this debt were $ 206,667 and $ 211,642 , respectively.

NOTE 13 – SALE OF PRODUCT LINE

On November 10, 2021, SWK entered into an Asset Purchase Agreement with Net@Work, Inc.

(“NAW”) pursuant to which NAW acquired from SWK certain assets related to the component of SWK’s business devoted to selling and supporting the Sage X3 software application published by Sage Software, Inc.

for small and middle market companies in North America.

In consideration for the assets, NAW paid SWK $ 250,000 in cash and entered into a Revenue Share Agreement (“RSA”) with SWK.

Pursuant to the RSA, NAW agreed to pay to SWK, for limited periods of time ranging from 12 to 60 months, transitional compensation measured by reference to gross revenues or gross profits (as applicable) generated by NAW from its sales of products or services after the Effective Date to customers of the Business.

In consideration for such transitional compensation, SWK agreed to assist NAW for a period of time after the Effective Date with such transitional services as may be reasonably requested by NAW and reasonably acceptable to SWK or otherwise required for the operation of the Business, including (a) implementing a smooth and orderly transfer of the Business and the Acquired Assets from SWK to NAW, (b) making introductions to customers of the Business as and when requested by NAW, (c) familiarizing NAW with the files of each of the customers as may be reasonably required, and (d) acclimating NAW to the Business.

The specific products and services giving rise to transitional compensation payments under the RSA include (i) annual maintenance renewals by customers, (ii) software, cross-sell software and migration software sales to customers, (iii) consulting services performed for customers, (iv) annual managed services contracts sold to customers, (v) hosting contracts sold to customers, (vi) e-commerce projects sold to customers, and (vii) new customer referrals.

NOTE 14 – SUBSEQUENT EVENTS

On October 14, 2021 71,630 stock options were granted to directors and officers at an exercise price of $ 5.90 per option, the closing price on October 14, 2021, and have a five-year term and are vested at time of grant.

On November 5, 2021, the Company’s Board of Directors approved a five-year extension through September of 2028 of the employment agreement with Mark Meller, the Company’s Chief Executive Officer and President under the same terms and conditions.

On April 15, 2022, the Company incurred approximately $ 494,275 in financial lease obligations for purchases of equipment.

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

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

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

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

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

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

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

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

We are a business application, technology and consulting company providing strategies and solutions to meet our clients’ information, technology and business management needs.

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

Our core business is divided into the following practice areas:

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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 provide comprehensive IT managed services, Infrastructure-as-a-Service, cybersecurity, business continuity, disaster recovery, data back-up, network maintenance and service upgrades designed to eliminate the IT concerns of our customers.

We are a Microsoft Solutions Provider.

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

Results of Operations for the Three and Nine Months Ended September 30, 2021 and 2020.

During the nine months ended September 30, 2021 the Company continued to expand its customer base, which we believe provides a basis for future growth, as revenues increased 4.4% as compared to the same nine-month period in the prior year.

Results of Operations for the Three Months Ended March 31, 2022 and 2021.

During the three months ended March 31, 2022 the Company continued to expand its customer base, which we believe provides a basis for future growth.

Revenues exceeded $11 million for the quarter, but software sales, mostly with our Acumatica solution, increased 30.3% over the first quarter of 2021.

This increase in software sales should provide a basis for increased services in the months to come.

The Company continues to monitor the Covid-19 situation as it pertains to the disruption of our business, and that of some of our customers, 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.

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We believe the new “work from home environment” (workforce of the future), coupled with the continued rise of E-Commerce and security and compliance could help drive our future revenues.

For the three months ended September 30, 2021, revenues decreased $49,498 (0.5%) to $10,109,654 as compared to $10,159,152 for the three ended September 30, 2020.

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

The decrease in sales is also partially attributed to delays in business from certain customers due to supply-chain issues that have temporarily created cash flow issues within their businesses.

For the nine months ended September 30, 2021, revenues increased $1,306,712 (4.4%) to $31,218,331 as compared to $29,911,619 for the nine months ended September 30, 2020.

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

Software sales decreased $85,678 (5.2%) to $1,553,567 for the three months ended September 30, 2021 as compared to $1,639,245 for the three months ended September 30, 2020 primarily due to the timing of orders.

For the nine months ended September 30, 2021, software sales decreased $16,049 (0.3%) to $5,319,063 as compared to $5,335,112 for the nine months ended September 30, 2020, representing a slight decrease from the prior year.

Service revenue increased by $36,180 (0.4%) and $1,322,761 (5.4%) to $8,556,087 and $25,899,268 for the three and nine months ended September 30, 2021, respectively, as compared to $8,519,907 and $24,576,507 for the three and nine months ended September 30, 2020, respectively.

These increases are mainly attributed to increases in 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 months ended September 30, 2021 decreased $112,683 (2.8%) to $3,939,308 as compared to $4,051,991 for the three months ended September 30, 2020.

For the three months ended September 30, 2021, the overall gross profit percentage was 39.0% as compared to 39.9% for the three months ended September 30, 2020.

Gross profit for the nine months ended September 30, 2021 increased $1,113,721 (9.4%) to $12,956,525 as compared to $11,842,804 for the nine months ended September 30, 2020.

For the nine months ended September 30, 2021, the overall gross profit percentage was 41.5% as compared to 39.6% for the nine months ended September 30, 2020.

The gross profit attributed to software sales decreased $12,632 (1.9%) to $665,309 for the three ended September 30, 2021 as compared to $677,941 for the three months ended September 30, 2020, due mostly to the slightly lower sales.

The gross profit attributed to software sales increased $283,982 (14.1%) to $2,295,233 for the nine ended September 30, 2021 as compared to $2,011,251 for the nine months ended September 30, 2020 due mostly to the increased sale of higher margin products.

The gross profit attributed to services decreased $100,051 (3.0%) to $3,273,999 for the three months ended September 30, 2021 as compared to $3,374,050 for the three months ended September 30, 2020.

This decrease is mostly due to costs associated with the learning curve of new employees, who were hired to accommodate our growth as well as higher compensation costs plus an increase in vacation and personal time off experienced during the quarter.

The gross profit attributed to services increased $829,739 (8.4%) to $10,661,292 for the nine months ended September 30, 2021 as compared to $9,831,553 for the nine months ended September 30, 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 offset partially by costs associated with the learning curve of new employees, who were hired to accommodate our growth.

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

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

For the three months ended March 31, 2022, revenues increased $144,376 (1.3%) to $11,023,844 as compared to $10,879,468 for the three ended March 31, 2021.

This increase is mostly attributed to an increase in software sales, offset partially by a decrease in service revenues.

Software sales increased $606,951 (30.3%) to $2,610,962 for the three months ended March 31, 2022 as compared to $2,004,011 for the three months ended March 31, 2021, primarily due to an increase in revenues for our Acumatica solution.

Service revenue decreased by $462,575 (5.2%) for the three months ended March 31, 2022 to $8,412,882 as compared to $8,875,457 for the three months ended March 31, 2021.

This decrease is mainly attributed to lower consulting, primarily as a result of having to train new but inexperienced employees, who were hired to accommodate our growth as well as a decrease in maintenance revenues.

Gross profit for the three months ended March 31, 2022 decreased $41,670 (0.9%) to $4,704,867 as compared to $4,746,537 for the three months ended March 31, 2021.

For the three months ended March 31, 2022, the overall gross profit percentage was 42.7% as compared to 43.6% for the three months ended March 31, 2021.

The gross profit attributed to software sales increased $232,426 (27.2%) to $1,086,383 for the three ended March 31, 2022 as compared to $853,957 for the three months ended March 31, 2021, due mostly to the increased revenues.

The gross profit attributed to services decreased $274,096 (7.0%) to $3,618,484 for the three months ended March 31, 2022 as compared to $3,892,580 for the three months ended March 31, 2021.

This decrease is mostly due to costs associated with the training of new but inexperienced employees, who were hired to accommodate our growth, as well as higher compensation costs plus an increase in vacation and personal time off experienced during the quarter.

Operating expenses

Selling and marketing expenses decreased $49,823 (2.8%) and $391,205 (7.2%) to $1,702,496 and $5,035,910 for the three and nine months ended September 30, 2021, respectively, as compared to $1,752,319 and $5,427,115 for the three and nine months ended September 30, 2020, respectively.

This decrease is primarily due to lower travel and entertainment expense and reduced attendance at conferences and trade shows and lower marketing expenses.

In addition, we experienced 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 $224,990 (11.1%) and $645,797 (10.5%) to $2,251,467 and $6,779,662 for the three and nine months ended September 30, 2021, respectively, as compared to $2,026,477 and $6,133,865 for the three and nine-months ended September 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.

Share-based compensation increased $45,482 and $88,616 for the three and nine months to $48,878 and $98,810 for the three and nine months ended September 30, 2021 as compared to $3,396 and $10,194 for the three and nine months ended September 30, 2020, respectively.

Selling and marketing expenses increased $56,503 (3.3%) to $1,775,811 for the three months ended March 31, 2022 as compared to $1,719,308 for the three months ended March 31, 2021.

This increase is primarily due to increased attendance at trade shows and associated travel and entertainment expense, plus outside sales expenses offset partially by lower advertising expenses.

General and administrative expenses increased $306,059 (13.1%) to $2,640,977 for the three months ended March 31, 2022 as compared to $2,334,918 for the three months ended March 31, 2021.

This increase is a result of several factors, including increases in payroll expenses necessary to both retain and recruit personnel, and departmental changes for various employees which involved moving their compensation between cost of revenues and administrative expenses as well as an increase in credit card fees and state excise taxes.

These cost increases were partially offset by lower rent and utility expenses.

Share-based compensation increased $44,953 to $45,945 for the three months ended March 31, 2022 as compared to $992 for the three months ended March 31, 2021.

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

Depreciation and amortization expense increased $47,708 and $106,628 to $226,765 and $635,264 for the three and nine months ended September 30, 2021, respectively, as compared to $179,057 and $528,636 for the three and nine months ended September 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 September 30, 2021, the Company had a loss from operations of $290,298 as compared to income from operations of $90,742 for the three months ended September 30, 2020.

For the nine months ended September 30, 2021, the Company had net income from operations of $406,879 as compared to a loss from operations of $257,006 for the nine months ended September 30, 2020.

Depreciation and amortization expense increased $63,804 to $261,850 for the three months ended March 31, 2022 as compared to $198,046 for the three months ended March 31, 2021.

This increase is primarily due to the additional amortization of intangible assets related to the new acquisitions and increased depreciation related to equipment purchases over the last 12 months.

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

Results of Operations for the Three Months Ended March 31, 2022 and 2021 (continued).

(Loss) Income from operations

As a result of the above, for the three months ended March 31, 2022, the Company had a loss from operations of $19,716 as compared to income from operations of $493,273 for the three months ended March 31, 2021.

Liquidity and Capital Resources

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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, suffer from supply-chain issues 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.

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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.

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

We continue to review and look for additional operating income opportunities through potential acquisitions or investments.

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

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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.

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

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

Liquidity and Capital Resources (continued)

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 $76,436, net of 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.

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

At March 31, 2022, future payments of long-term debt are as follows:

Remainder of 2022

During the nine months ended September 30, 2021, the Company had a net increase in cash of $656,820.

The Company’s working capital was $2,635,467 at March 31, 2022 and cash on hand at March 31, 2022 was $6,486,433.

During the three months ended March 31, 2022, the Company had a net decrease in cash of $327,684.

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

Cash provided by operating activities

Operating activities for the nine months ended September 30, 2021 provided cash of $276,644 as compared to providing cash of $247,135 for the same period in 2020.

This increase in cash provided by operating activities is primarily due to increase in operating income and change in unbilled services offset mostly by the increase in prepaid expenses and other current assets and the change in income taxes payable.

Cash (used in) provided by investing activities

Investing activities for the nine months ended September 30, 2021 used cash of $264,832 as compared to providing cash of $867,005 for the same period in 2020.

For the nine months ended September 30, 2021, the Company acquired PSI and paid $145,703 in cash as part of the transaction (see Note 10) as well as purchased $119,129 of property and equipment.

For the nine months ended September 30, 2020, escrowed proceeds of $1,150,000 were received from the sale of the EDI practice in August 2019 offset by cash used to acquired businesses for $185,000 and the purchases of property and equipment in the amount of $97,995.

Cash used in operating activities:

Operating activities for the three months ended March 31, 2022 used cash of $8,246 as compared to using cash of $500,461 for the same period in 2021.

This decrease in cash used in operating activities is primarily due to the decrease in accounts receivable, decrease in deferred revenue and increase in accounts payable offset partially by the decrease in operating income.

Cash used in investing activities:

Investing activities for the three months ended March 31, 2022 used cash of $180,548 as compared to using no cash for the same period in 2021.

For the three months ended March 31, 2022, the Company paid $150,000 for the assets of NEO3 and purchases of $30,548 for property and equipment.

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

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

Liquidity and Capital Resources (continued)

Cash (used in) provided by financing activities:

Financing activities for the nine months ended September 30, 2021 provided cash of $645,008 as compared to using cash in the amount of $2,699,946 for the same period in 2020.

The increase in cash provided is attributed to the received net proceeds of $4,180,904 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 offset partially by a higher dividend payment to shareholders.

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.

Financing activities for the three months ended March 31, 2022 used cash of $138,890 as compared to providing cash in the amount of $3,261,181 for the same period in 2021.

The decrease in cash provided is attributed to the received net proceeds 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 three months ended March 31, 2021.

The Company believes that as a result of the growth in business, and the funds on hand, 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 nine months ended September 30, 2021.

For the three months ended March 31, 2022, inflation has impacted the Company’s profitability, as it has resulted in increased costs necessary to recruit and retain personnel.

As the Company returns back to its pre-Covid marketing and trade show schedules, the higher costs of travel and meals will also have a negative impact on the Company’s profitability.

Off Balance Sheet Arrangements

During the nine months ended September 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.

During the three months ended March 31, 2022 or for fiscal 2022, 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