What changed in this filing

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Item 1. Financial Statements

2022-11-14 compared with 2022-08-12 · 249 added, 171 removed, 721 unchanged (37% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current assets:

Cash and cash equivalents

Accounts receivable, net of allowance of $ 330,311

Accounts receivable, net of allowance of $ 450,311 and $ 330,311

Unbilled services

Deferred charges

Prepaid expenses and other current assets

31 unchanged sentences

authorized 75,000,000 shares,

5,136,177 shares issued and outstanding

5,136,177 and 5,136,177 shares issued and outstanding

Additional paid-in capital

7 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 3021

Nine Months Ended

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

Software product, net

21 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY

FOR THE THREE MONTHS ENDED JUNE 30, 2022

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2022

Preferred Stock

1 unchanged sentence

Stockholders’

Balance at April 1, 2022

Balance at July 1, 2022

Share-based compensation

Balance at June 30, 2022

FOR THE THREE MONTHS ENDED JUNE 30, 2021

Stock compensation issued for services

Balance at September 30, 2022

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021

Preferred Stock

(Accumulated Deficit)

Stockholders’

Balance at April 1, 2021

Balance at July 1, 2021

Share-based compensation

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

Balance at June 30, 2021

Cash dividend

Balance at September 30, 2021

See accompanying notes to the unaudited condensed consolidated financial statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2022

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

Preferred Stock

3 unchanged sentences

Share-based compensation

Balance at June 30, 2022

FOR THE SIX MONTHS ENDED JUNE 30, 2021

Stock compensation issued for services

Balance at September 30, 2022

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021

Preferred Stock

(Accumulated Deficit)

Stockholders’

2 unchanged sentences

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

Cash dividend

Share-based compensation

Balance at June 30, 2021

Balance at September 30, 2021

See accompanying notes to the unaudited condensed consolidated financial statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

10 unchanged sentences

Unbilled services

Deferred charges

Prepaid expenses and other current assets

6 unchanged sentences

Operating lease obligations

Net cash used in operating activities

Net cash provided by operating activities

Cash flows from investing activities:

5 unchanged sentences

Proceeds from issuance of stock, net of expenses

Payment of cash dividend

Payment of long-term debt

2 unchanged sentences

Net cash (used in) provided by financing activities

Net (decrease) increase in cash

Net increase in cash

Cash, beginning of period

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

For the six months ended June 30, 2022:

For the nine months ended September 30, 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.

4 unchanged sentences

On April 15, 2022, the Company incurred approximately $ 494,383 in financial lease obligations for purchases of equipment.

For the six months ended June 30, 2021:

On September 29, 2022, the Company approved 120,000 shares of common stock in exchange for services.

These shares have not been issued and, as such, only the value of the shares have been recorded to additional paid-in capital.

The shares will be recorded when the shares have actually been issued.

For the nine months ended September 30, 2021:

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

In February 2021, ISM converted the outstanding balance of the ISM Note in the amount of $ 479,112 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 7).

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 7).

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

9 unchanged sentences

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.

See accompanying notes to the unaudited condensed consolidated financial statements.

8 unchanged sentences

(“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”.

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

As a value-added reseller of business application software, we offer solutions for accounting and business management, financial reporting, Enterprise Resource Planning (“ERP”), Human Capital Management (“HCM”), Warehouse Management Systems (“WMS”), Customer Relationship Management (“CRM”), and Business Intelligence (“BI”).

15 unchanged sentences

Basis of Presentation and Principles of Consolidation

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

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, 2022, the results of operations for the three and nine months ended September 30, 2022 and 2021 and cash flows for the nine months ended September 30, 2022 and 2021.

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

15 unchanged sentences

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 six months ended June 30, 2022 and 2021.

No impairment losses were identified or recorded for the three and nine months ended September 30, 2022 and 2021.

Capitalization of Proprietary Developed Software

13 unchanged sentences

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

No impairment losses were identified or recorded for the three and six months ended June 30, 2022 and 2021.

No impairment losses were identified or recorded for the three and nine months ended September 30, 2022 and 2021.

Revenue Recognition

10 unchanged sentences

For the Three Months Ending

September 30,

Software revenue

2 unchanged sentences

Ancillary service revenue

For the Six Months Ending

For the Nine Months Ending

September 30,

Software revenue

7 unchanged sentences

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 June 30, 2022, there was $ 254,785 in deferred maintenance revenues, $ 532,060 in deferred support service revenues and $ 1,765,496 , in deposits for future consulting services.

As of September 30, 2022, there was $ 280,029 in deferred maintenance revenues, $ 540,222 in deferred support service revenues and $ 2,310,031 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.

8 unchanged sentences

Fair Value of Financial Instruments

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

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

After considering such market conditions, we estimate that the fair value of debt approximates its carrying value.

Deferred Charges

The Company defers expenses until such time that the expense is consumed and charged to expense at that time.

The Company accounts for its leases in accordance with ASC 842 Leases.

27 unchanged sentences

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

At June 30, 2022 and December 31, 2021, the Company had cash on deposit of $ 5,243,267 and $ 5,955,840 , respectively, in excess of the federally insured limits of $ 250,000 .

As of June 30, 2022, no one customer represented more than 10% of the total accounts receivable and unbilled services.

At September 30, 2022 and December 31, 2021, the Company had cash on deposit of $ 6,469,256 and $ 5,955,840 , respectively, in excess of the federally insured limits of $ 250,000 .

As of September 30, 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 six months ended June 30, 2022 and 2021, the Company’s top ten customers accounted for 9 % ($ 1,856,981 ) and 11 % ($ 2,283,248 ), respectively, of total revenues.

For the nine months ended September 30, 2022 and 2021, the Company’s top ten customers accounted for 8 % ($ 2,449,875 ) and 10 % ($ 3,037,542 ), respectively, of total revenues.

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

For the six months ended June 30, 2022 and 2021 purchases from one supplier through a “channel partner” agreement were approximately 14 % and 14 % of cost of revenues, respectively.

For the nine months ended September 30, 2022 and 2021 purchases from one supplier through a “channel partner” agreement were approximately 14 % and 14 % of cost of revenues, respectively.

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

As of June 30, 2022, one supplier represented approximately 26 % of total accounts payable.

As of September 30, 2022, one supplier represented approximately 19 % 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 June 30, 2022, the Company believes it has no significant risk related to its concentration of credit risk related to accounts receivable.

As of September 30, 2022, the Company believes it has no significant risk related to its concentration of credit risk related to accounts receivable.

Accounts Receivable

32 unchanged sentences

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 June 30, 2022 and December 31, 2021.

There were no liabilities for uncertain tax positions at September 30, 2022 and December 31, 2021.

Fair Value Measurement

10 unchanged sentences

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 using Level 3 inputs, as discussed in Note 5 and 10.

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

SILVERSUN TECHNOLOGIES, INC.

22 unchanged sentences

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 June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses - Measurement of Credit Losses on Financial Instruments,” which changes the way companies evaluate credit losses for most financial assets and certain other instruments.

For receivables, and other short-term financial instruments, companies will be required to use a new forward-looking “expected loss” model to evaluate impairment, potentially resulting in earlier recognition of allowances for losses.

The new standard also requires enhanced disclosures, including the requirement to disclose the information used to track credit quality by year of origination.

2016-13 will be effective for the Company in the first quarter 2023.

Early adoption of the new standard is permitted;

however, Stabilis has not elected to early adopt the standard.

We are currently evaluating the effect that the new standard will have on our consolidated financial statements, if any.

Recent Authoritative Pronouncements

6 unchanged sentences

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 and six months ended June 30, 2022, 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 and six months ended June 30, 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 June 30, 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.

June 30, 2022

June 30, 2021

Basic net (loss) income per share computation:

Net (loss) income

For the three and nine months ended September 30, 2022, 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 and nine months ended September 30, 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 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.

September 30, 2022

September 30, 2021

Basic net loss per share computation:

Weighted-average common shares outstanding

Basic net (loss) income per share

Diluted net (loss) income per share computation:

Net (loss) income per above

Basic net loss per share

Diluted net loss per share computation:

Net loss per above

Weighted-average common shares outstanding

Incremental shares for warrants and convertible promissory notes

Total adjusted weighted-average shares

Diluted net (loss) income per share

June 30, 2022

June 30, 2021

Basic net (loss) income per share computation:

Net (loss) income

Diluted net loss per share

September 30, 2022

September 30, 2021

Basic net loss per share computation:

Weighted-average common shares outstanding

Basic net (loss) income per share

Diluted net (loss) income:

Net (loss) income

Basic net loss per share

Diluted net loss:

Weighted-average common shares outstanding

1 unchanged sentence

Total adjusted weighted-average shares

Diluted net (loss) income per share

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

June 30, 2022

June 30, 2021

Stock options

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

Diluted net loss per share

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

June 30, 2022

June 30, 2021

September 30, 2022

September 30, 2021

Stock options

3 unchanged sentences

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 (loss) income per share.

September 30, 2022

September 30, 2021

Stock options

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

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment is summarized as follows:

June 30, 2022

September 30, 2022

December 31, 2021

3 unchanged sentences

Property and equipment, net

Depreciation and amortization expense related to these assets for the three and six months ended June 30, 2022 were $ 96,582 and $ 195,007 , respectively, as compared to $ 79,317 and $ 157,619 for the three and six months ended June 30, 2021.

Depreciation and amortization expense related to these assets for the three and nine months ended September 30, 2022 were $ 96,713 and $ 291,720 , respectively, as compared to $ 90,921 and $ 248,540 for the three and nine months ended September 30, 2021.

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

June 30, 2022

September 30, 2022

December 31, 2021

11 unchanged sentences

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 (see Note 10).

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – INTANGIBLE ASSETS (Continued)

The components of intangible assets are as follows:

June 30, 2022

September 30, 2022

December 31, 2021

3 unchanged sentences

accumulated amortization

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – INTANGIBLE ASSETS (continued)

Amortization expense related to the above intangible assets for the three and six months ended June 30, 2022 was $ 186,365 and $ 376,822 , respectively, as compared to $ 131,502 and $ 251,739 for the three and six months ended June 30, 2021.

Amortization expense related to the above intangible assets for the three and nine months ended September 30, 2022 was $ 193,042 and $ 569,864 , respectively, as compared to $ 132,285 and $ 388,024 for the three and nine months ended September 30, 2021.

The Company expects future amortization expense to be the following:

Remainder of 2022

NOTE 6 – DEFERRED CHARGES

Deferred charges represent expenses related to the merger (see Note 15), and will be charged against the proceeds when the merger is consummated.

NOTE 7 – LONG-TERM AND RELATED PARTY DEBT

5 unchanged sentences

In February 2021, ISM converted the outstanding balance of the ISM Note in the amount of $ 479,112 into 119,004 shares of the Company’s common stock.

At June 30, 2022 and December 31, 2021, the outstanding balances on the ISM Note were $-0- and $- 0 -, respectively.

At September 30, 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.

2 unchanged sentences

Monthly payments including interest are $ 7,011 .

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

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

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 June 30, 2022 and December 31, 2021, the outstanding balances on the Nellnube Note were $-0- and $-0-, respectively.

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

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 – LONG-TERM AND RELATED PARTY DEBT (Continued)

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

3 unchanged sentences

Monthly payments including interest were $ 4,984 .

At June 30, 2022 and December 31, 2021, the outstanding balances on the PIT Note were $-0- and $ 4,975 , respectively.

At September 30, 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.

7 unchanged sentences

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

At June 30, 2022 and December 31, 2021, the outstanding balances on the PT Notes were $ 206,666 and $ 206,666 , respectively.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

On August 4, 2022, the Company paid Note 2 and accrued interest in the amount of $ 111,924 .

At September 30, 2022 and December 31, 2021, the outstanding balances on the PT Notes were $ 103,333 and $ 206,666 , 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 June 30, 2022 and December 31, 2021, the outstanding balances on the CMS Note were $ 76,815 and $ 105,097 , respectively.

At September 30, 2022 and December 31, 2021, the outstanding balances on the CMS Note were $ 62,568 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 June 30, 2022 and December 31, 2021, the outstanding balances on the BSS Note were $ 163,397 and $ 185,820 , respectively.

At September 30, 2022 and December 31, 2021, the outstanding balances on the BSS Note were $ 152,101 and $ 185,820 , respectively.

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

2 unchanged sentences

Monthly payments including interest are $ 3,724 .

At June 30, 2022 and December 31, 2021, the outstanding balances on the CTS Note were $ 80,368 and $ 101,781 , respectively.

At September 30, 2022 and December 31, 2021, the outstanding balances on the CTS Note were $ 69,581 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 June 30, 2022 and December 31, 2021, the outstanding balances on the PSI Note were $ 290,603 and $ 364,600 , respectively.

At September 30, 2022 and December 31, 2021, the outstanding balances on the PSI Note were $ 253,328 and $ 364,600 , respectively.

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

9 unchanged sentences

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 June 30, 2022, the outstanding balance on the DTSI Note was $ 835,000 (see Note 10).

At September 30, 2022, the outstanding balance on the DTSI Note was $ 835,000 (see Note 10).

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 – LONG-TERM AND RELATED PARTY DEBT (Continued)

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”).

1 unchanged sentence

Monthly payments including interest are $ 2,148 .

At June 30, 2022 the outstanding balance on the NEO3 Note was $ 64,851 .

Total long-term and related party debt balances at June 30, 2022 and December 31, 2021 were $ 1,717,700 and $ 968,940 , respectively, of which $ 633,436 and $ 402,005 was classified as current portion at June 30, 2022 and December 31, 2021, respectively.

At June 30, 2022, future payments of long-term debt are as follows:

At September 30, 2022 the outstanding balance on the NEO3 Note was $ 58,720 .

Total long-term and related party debt balances at September 30, 2022 and December 31, 2021 were $ 1,534,631 and $ 968,940 , respectively, of which $ 634,739 and $ 402,005 was classified as current portion at September 30, 2022 and December 31, 2021, respectively.

At September 30, 2022, future payments of long-term debt are as follows:

Remainder of 2022

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 – 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 weighted average interest rate as of June 30, 2022 was 7.03 % and the following weighted-average lease term:

June 30, 2022

The weighted average interest rate as of September 30, 2022 was 7.03 % and the following weighted-average lease term:

September 30, 2022

December 31, 2021

Weighted average remaining lease term

At June 30, 2022 future payments under finance leases are as follows:

June 30, 2022

At September 30, 2022 future payments under finance leases are as follows:

September 30, 2022

Remainder of 2022

4 unchanged sentences

Long-term finance lease obligation

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – OPERATING LEASE LIABILITY

The Company leases office space in five different locations and also has an equipment lease rental with monthly payments ranging from $ 1,190 to $ 10,279 which expire at various dates through April 2024.

The Company leases space in five different locations and also has an equipment lease rental with monthly payments ranging from $ 1,190 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.

1 unchanged sentence

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 June 30, 2022 is as follows:

June 30, 2022

The Company's weighted average remaining lease term for operating leases as of September 30, 2022 is as follows:

September 30, 2022

December 31, 2021

Weighted average remaining lease term

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 June 30, 2022:

Remainder 2022

4 unchanged sentences

Long-term operating lease liabilities

Total rent expense under operating leases for the three and six months ended June 30, 2022 was $ 92,884 and $ 212,213 , respectively, as compared to $ 157,509 and $ 319,323 for the three and six months ended June 30, 2021, respectively.

Total rent expense under operating leases for the three and nine months ended September 30, 2022 was $ 85,706 and $ 297,919 , respectively, as compared to $ 125,635 and $ 444,858 for the three and nine months ended September 30, 2021, respectively.

SILVERSUN TECHNOLOGIES, INC.

23 unchanged sentences

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

On September 29, 2022, the Board of Directors approved the issuance of 120,000 of common stock in exchange for services at the fair market price of $ 2.48 per share, the closing price as of September 28, 2022.

These shares have not been issued and, as such, only the value of the shares have been recorded to additional paid-in capital.

The shares will be recorded when the shares have actually been issued.

Conversion of Convertible Debt

12 unchanged sentences

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 June 30, 2022, no repurchases have been made.

As of September 30, 2022, no repurchases have been made.

Stock Options

5 unchanged sentences

Treasury yield in effect at the time of grant.

There were no stock options granted for the six months ended June 30, 2022.

A summary of the status of the Company’s stock option plans for the six months ended June 30, 2022 and the years ended December 31, 2021 and changes during the periods are presented below (in number of options):

There were no stock options granted for the nine months ended September 30, 2022.

A summary of the status of the Company’s stock option plans for the nine months ended September 30, 2022 and the year ended December 31, 2021 and changes during the periods are presented below (in number of options):

Exercise Price

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Options canceled/forfeited

Outstanding options at June 30, 2022

For the three and six months ended June 30, 2022, the Company recorded share-based compensation expense of $ 45,945 and $ 91,890 , respectively, as compared to $ 48,940 and $ 49,932 for the three and six months ended June 30, 2021, respectively.

As of June 30,2022 and December 31, 2021, the unamortized compensation expense for stock options was $ 136,826 and $ 228,726 , respectively.

The unamortized balance at June 30, 2022 will be amortized over the next 9 months and 1.25 years for the balance at December 31, 2021.

Outstanding options at September 30, 2022

For the three and nine months ended September 30, 2022, the Company recorded share-based compensation expense of $ 44,185 and $ 136,075 , respectively, as compared to $ 48,878 and $ 98,810 for the three and nine months ended September 30, 2021, respectively.

As of September 30,2022 and December 31, 2021, the unamortized compensation expense for stock options was $ 87,402 and $ 228,726 , respectively.

The unamortized balance at September 30, 2022 will be amortized over the next 6 months and 1.25 years 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.

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Monthly payments including interest are $ 3,724 .

At September 30, 2022, the outstanding balances on the CTS Note was $ 69,581 .

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

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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.

At June 30, 2022, the outstanding balance on the PSI Note was $ 327,694 .

At September 30, 2022, the outstanding balance on the PSI Note was $ 253,228 .

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.

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(“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 and six months ended June 30, 2021 as if the acquisitions occurred on January 1, 2021.

For the three and six months ended June 30, 2021, operating expenses have been increased for the amortization expense of expected definite lived intangible assets and interest on the notes payable.

June 30, 2021

The following table represents the unaudited condensed consolidated pro forma results of operations for the three and nine months ended September 30, 2021 as if the acquisitions occurred on January 1, 2021.

For the three and nine months ended September 30, 2021, operating expenses have been increased for the amortization expense of expected definite lived intangible assets and interest on the notes payable.

September 30, 2021

Cost of revenues

Operating expenses

Income before taxes

(Loss) income before taxes

Net (loss) income

Basic and diluted income per common share

The Company’s unaudited condensed consolidated financial statements for the three and six months ended June 30, 2022 include the actual results of CTS, PSI and DTS, and as such, pro forma results are not required.

For the three months ended June 30, 2021, there is $ 5,733 of estimated amortization expense and $ 808 of estimated interest expense included in the pro-forma results for PSI, and $ 47,679 of estimated amortization expense and $ 6,784 of estimated interest expense included in the pro-forma results for DTS.

For the six months ended June 30, 2021, there is $ 4,644 of estimated amortization expense and $ 631 of estimated interest expense included in the pro-forma results for CTS, $ 33,126 of estimated amortization expense and $ 2,967 of estimated interest expense included in the pro-forma results for PSI, and $ 95,358 of estimated amortization expense and $ 13,569 of estimated interest expense included in the pro-forma results for DTS.

For the three months ended June 30, 2022, the CTI, PSI and DTS operations had a net income before taxes of $ 119,519 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 June 30, 2022.

The Company’s unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2022 include the actual results of CTS, PSI and DTS, and as such, pro forma results are not required.

The Company’s unaudited condensed consolidated financial statements for the three months ended September 30, 2021 include the actual results of CTS and PSI, and as such, pro forma results are not required.

For the three months ended September 30, 2021, there is $ 47,679 of estimated amortization expense and $ 6,785 of estimated interest expense included in the pro-forma results for DTS.

For the nine months ended September 30, 2021, there is $ 4,644 of estimated amortization expense and $ 631 of estimated interest expense included in the pro-forma results for CTS, $ 36,254 of estimated amortization expense and $ 2,966 of estimated interest expense included in the pro-forma results for PSI, and $ 143,037 of estimated amortization expense and $ 20,354 of estimated interest expense included in the pro-forma results for DTS.

For the three months ended September 30, 2022, the CTI, PSI and DTS operations had a net income before taxes of $ 87,533 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 September 30, 2022.

This consisted of approximately $ 590,156 in revenues, $ 331,438 in cost of revenues and $ 171,165 in expenses.

For the six months ended June 30, 2022, the CTI, PSI and DTS operations had a net income before taxes of $ 233,145 which represented six months of operations for CTI, PSI and DTS that were included in the Company’s Unaudited Condensed Consolidated Statement of Operations for the six months ended June 30, 2022.

For the nine months ended September 30, 2022, the CTI, PSI and DTS operations had a net income before taxes of $ 320,697 which represented nine months of operations for CTI, PSI and DTS that were included in the Company’s Unaudited Condensed Consolidated Statement of Operations for the nine months ended September 30, 2022.

This consisted of approximately $ 1,945,123 in revenues, $ 1,087,419 in cost of revenues and $ 537,007 in expenses.

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

The Company has federal net operating loss (“NOL”) carryforwards of approximately $ 5,400,000 as of June 30, 2022, which is subject to limitations under Section 382 of the Internal Revenue Code.

The Company has federal net operating loss (“NOL”) carryforwards of approximately $ 5,500,000 as of September 30, 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.

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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 $ 1,004 ,000 and $ 991 ,000 in deferred tax assets at June 30, 2022 and December 31, 2021, respectively.

For the three and six months ended June 30, 2022, the Company’s Federal and State provision requirements were calculated based on the estimated tax rate.

For the three and six months ended June 30, 2022, the Company recorded tax benefits of $ 15,280 and $ 13,192 , respectively, as compared tax provisions of $ 66,448 and $ 195,017 for the three and six months ended June 30, 2021.

The Company had approximately $ 986 ,000 and $ 991 ,000 in deferred tax assets at September 30, 2022 and December 31, 2021, respectively.

For the three and nine months ended September 30, 2022, the Company’s Federal and State provision requirements were calculated based on the estimated tax rate.

For the three months ended September 30, 2022, the Company recorded tax a benefit of $ 7,061 as compared to a tax benefit of $ 68,636 for the three months ended September 30, 2021.

For the nine months ended September 30, 2022, the Company recorded a tax benefit of $ 20,253 as compared to a tax provision of $ 126,381 for the nine months ended September 30, 2021.

NOTE 13 – RELATED PARTY TRANSACTIONS

At June 30, 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 June 30, 2022 and December 31, 2021, the outstanding balances of this debt were $ 206,666 and $ 211,642 , respectively.

At September 30, 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 September 30, 2022 and December 31, 2021, the outstanding balances of this debt were $ 103,333 and $ 211,642 , respectively.

NOTE 14 – SALE OF PRODUCT LINE

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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.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 – MERGER

On September 29, 2022, the Company entered into a definitive agreement and plan of merger (the “Merger Agreement”) with Rhodium Enterprises, Inc.

(“Rhodium”), an industrial-scale digital asset technology company utilizing proprietary technologies to mine bitcoin.

Under the terms of the Merger Agreement, which has been unanimously approved by the Boards of Directors of both SilverSun and Rhodium, upon the consummation of the business combination, the Company will receive $ 10 million in cash and will retain 3.2 % equity in SilverSun upon consummation of the merger.

Each holder of an outstanding share of SilverSun common stock will receive:

A cash dividend of at least $1.50 per share, which equates to approximately $8.5 million in the aggregate;

A stock dividend of one share of SilverSun Technologies Holdings, Inc.

("HoldCo"), a recently formed subsidiary of SilverSun.

HoldCo's sole assets are its 100% ownership of SWK and SCS (together the "Subsidiaries"), which Subsidiaries accounted for the large majority of SilverSun's revenue in 2021.

It is expected that the capital structure of HoldCo will roughly approximate the current capital structure of SilverSun;

Following the consummation of the business combination, the business of the Subsidiaries will continue to be operated consistent with past practices.

The current management and Board of Directors of SilverSun, including Mark Meller, the Chief Executive Officer of both SilverSun and SWK, will continue in their current roles at both HoldCo and the Subsidiaries.

HoldCo will apply for public listing and the shares distributed in the stock dividend will be registered pursuant to a Form 10 that will be filed by HoldCo with the SEC (subject to regulatory and exchange regulations and approvals);

The shares of SilverSun's common stock to be retained by the current SilverSun stockholders following the consummation of the business combination will collectively represent approximately 3.2% of SilverSun's pro forma common equity ownership.

The proposed business combination is expected to close by year-end of 2022, subject to the receipt of any applicable regulatory approvals, the approval of SilverSun's and Rhodium's respective stockholders, and other customary closing conditions.

The Merger Agreement may be terminated, whether before or after obtaining the requisite vote of SilverSun shareholders, by mutual written consent of SilverSun and Rhodium.

The Merger Agreement may be terminated, and the transactions abandoned, by either SilverSun or Rhodium at any time before the First Effective Time (Merger Sub I shall be merged with and into Rhodium), by written notice from one to the other if (i) the Closing has not occurred on or before March 31, 2023 (the “Termination Date”), except that the right to terminate the Merger Agreement for this reason is not available to any party who is then in material breach of the Merger Agreement;

(ii) the requisite vote of SilverSun shareholders has not been obtained by reason of the failure to obtain the required vote at the SilverSun Shareholders’ Meeting (or any adjournment or postponement of such meeting) duly convened for such purpose, except that the right to terminate the Merger Agreement for this reason shall not be available to SilverSun where the failure to obtain the requisite vote has been caused by the action or failure to act of any of the SilverSun Entities or such action or failure to act constitutes a material breach by any of the SilverSun Entities of the Merger Agreement;

or (iii) any law or order is enacted, issued, promulgated or entered by a governmental authority of competent jurisdiction (including Nasdaq) that permanently enjoins, or otherwise prohibits the consummation of the transactions, and (in the case of any order) such order has become final and non-appealable.

The Merger Agreement may be terminated, and the transactions abandoned, by SilverSun at any time before the First Effective Time, if (i) Rhodium breaches any of its representations, warranties, covenants or agreements contained in the Merger Agreement, which breach (a) would give rise to the failure to satisfy the general closing conditions or the closing conditions to the obligations of SilverSun at the Closing and (b) such breach cannot be cured by the Termination Date, or, if curable, has not been cured by Rhodium within the earlier of (A) 30 days after Rhodium’s receipt of written notice of such breach from SilverSun and (B) three business days prior to the Termination Date, subject to certain conditions;

or (ii) all of the general closing conditions and the closing conditions to the obligations of Rhodium at the Closing have been satisfied (other than any condition the failure of which to be satisfied has been principally caused by the breach of the Merger Agreement by Rhodium or any of its affiliates and conditions that, by their nature, are to be satisfied at Closing and which are, at the time of termination, capable of being satisfied) and Rhodium has failed to fulfill its obligations and agreements contained in the Merger Agreement to consummate the Closing within three business days following written notice of such satisfaction from SilverSun and SilverSun is ready, willing and able to consummate the Closing.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 – MERGER (Continued)

If the Merger Agreement is validly terminated pursuant to the termination section of the Merger Agreement, except as provided below, it shall become void and of no further force and effect, with no liability (except as provided below) on the part of any party (or any stockholder, affiliate or representative of such party), except that, if such termination results from (a) fraud or (b) the willful and material (i) failure of any party to perform its covenants, obligations or agreements contained in the Merger Agreement or (ii) breach by any party of its representations or warranties contained in the Merger Agreement, then such party shall be liable for any damages incurred or suffered by the other parties as a result of such failure or breach.

SilverSun shall pay, or cause to be paid, to Rhodium (or its designee(s)) by wire transfer of immediately available funds an amount equal to $ 5,000,000 , if the Merger Agreement is terminated by Rhodium pursuant to the unilateral termination provisions in favor Rhodium described above.

Rhodium shall pay, or cause to be paid, to SilverSun (or its designee(s)) by wire transfer of immediately available funds an amount equal to $ 5,000,000 , if the Merger Agreement is terminated by SilverSun pursuant to the unilateral termination provisions in favor of SilverSun described above.

NOTE 16 – SUBSEQUENT EVENTS

On November 1, 2022, the Company filed its Form 10 with the SEC to register the Company’s securities.

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

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

Results of Operations for the Three and Six Months Ended June 30, 2022 and 2021.

Results of Operations for the Three and Nine Months Ended September 30, 2022 and 2021.

Our strategy is to grow our business through a combination of intra-company growth of our software applications, technology solutions and managed services, as well as expansion through acquisitions.

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To remain competitive and continue to grow, we continue to invest resources in our product development, marketing, and sales capabilities, and we expect to continue to do so in the future.

During the six months ended June 30, 2022 the Company continued to expand its customer base, which we believe provides a basis for future growth.

Revenues increased 2.6% to $21.7 million for the six months ended June 30, 2022 as compared to $21.1 million for the period in 2021, despite the current economic conditions as we continue to grow our customer base.

During the nine months ended September 30, 2022 the Company continued to expand its customer base, which we believe provides a basis for future growth.

Revenues increased 4.4% to $32.6 million for the nine months ended September 30, 2022 as compared to $31.2 million for the period in 2021, despite the current economic conditions, as we continue to grow our customer base.

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 six months ended June 30, 2022, inflation has impacted the Company’s profitability, as it has resulted in increased costs necessary to recruit and retain personnel.

For the nine months ended September 30, 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.

For the three months ended June 30, 2022, revenues increased $408,864 (4.0)% to $10,638,073 as compared to $10,229,209 for the three ended June 30, 2021.

On September 29, 2022, the Company entered into a definitive agreement and plan of merger (the “Merger Agreement”) with Rhodium Enterprises, Inc.

(“Rhodium”), an industrial-scale digital asset technology company utilizing proprietary technologies to mine bitcoin (see above).

For further information please read the Form 8-K filed with the SEC on October 3, 2022 and the Form S-4, the Registration Statement, which provides information regarding the merger.

For the three months ended September 30, 2022, revenues increased $807,505 (8.0)% to $10,917,159 as compared to $10,109,654 for the three months ended September 30, 2021.

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

For the six months ended June 30, 2022, revenues increased $553,240 (2.6%) to $21,661,917 as compared to $21,108,677 for the six months ended June 30, 2021, respectively.

For the nine months ended September 30, 2022, revenues increased $1,360,745 (4.4%) to $32,579,076 as compared to $31,218,331 for the nine months ended September 30, 2021, respectively.

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

Software sales increased $1,020,596 (57.9%) and $1,627,547 (43.2%) to $2,782,081 and $5,393,043 for the three and six months ended June 30, 2022, respectively, as compared to $1,761,485 and $3,765,496 for the three and six months ended June 30, 2021, respectively, due to the timing of orders, primarily as a result of an increase in our ERP software sales

Service revenue decreased $611,732 (7.2%) and $1,074,307 (6.2%) to $7,855,992 and $16,268,874 for the three and six months ended June 30, 2022, respectively, as compared to $8,467,724 and $17,343,181 for the three and six months ended June 30, 2021, respectively.

These decreases are mainly attributed to lower maintenance revenues and lower consulting revenues, primarily because of project delays and postponements on the part of our customers as a result of challenges within their own businesses, including employee retention and general economic conditions impacting their organizations.

Gross profit for the three and six months ended June 30, 2022 decreased $143,412 (3.4%) and $185,082 (2.1%) to $4,127,268 and $8,832,135, respectively, as compared to $4,270,680 and $9,017,217 for the three and six months ended June 30, 2021, respectively.

For the three months ended June 30, 2022, the overall gross profit percentage was 38.8% as compared to 41.7% for the three months ended June 30, 2021.

For the six months ended June 30, 2022, the overall gross profit percentage was 40.8% as compared to 42.7% for the six months ended June 30, 2021.

The gross profit attributed to software sales increased $319,841 (41.2%) and $552,267 (33.9%) to $1,095,808 and $2,182,191 for the three and six ended June 30, 2022 as compared to $775,967 and $1,629,924 for the three and six months ended June 30, 2021, due mostly to the increased volume of software sold.

The gross profit attributed to services decreased $463,253 (13.3%) and $737,349 (10.0%) to $3,031,460 and $6,649,944 for the three and six months ended June 30, 2022 as compared to $3,494,713 and $7,387,293 for the three and six months ended June 30, 2021.

This decrease is mostly due to higher costs associated with increasing pay and benefits to employees to retain and recruit their services and to address inflationary pressures in the overall economy, plus the training of new employees, who were hired to accommodate our growth, and who are not as yet as billable as our more experienced team.

Software sales increased $928,921 (59.8%) and $2,556,468 (48.1%) to $2,482,488 and $7,875,531 for the three and nine months ended September 30, 2022, respectively, as compared to $1,553,567 and $5,319,063 for the three and nine months ended September 30, 2021, respectively, primarily as a result of an increase in our ERP software sales.

Service revenue decreased $121,416 (1.4%) and $1,195,723 (4.6%) to $8,434,671 and $24,703,545 for the three and nine months ended September 30, 2022, respectively, as compared to $8,556,087 and $25,899,268 for the three and nine months ended September 30, 2021, respectively.

These decreases are mainly attributed to lower maintenance revenues and lower consulting revenues, primarily because of project delays as a result of staffing and training, and postponements on the part of our customers as a result of challenges within their own businesses, including employee retention and general economic conditions impacting their organizations.

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

Results of Operations for the Three and Six Months Ended June 30, 2022 and 2021 (continued).

Results of Operations for the Three and Nine Months Ended September 30, 2022 and 2021 (Continued).

Gross profit for the three and nine months ended September 30, 2022 increased $489,261 (12.4%) and $304,179 (2.3%) to $4,428,569 and $13,260,704, respectively, as compared to $3,939,308 and $12,956,525 for the three and nine months ended September 30, 2021, respectively.

For the three months ended September 30, 2022, the overall gross profit percentage was 40.6% as compared to 39.0% for the three months ended September 30, 2021.

For the nine months ended September 30, 2022, the overall gross profit percentage was 40.7% as compared to 41.5% for the nine months ended September 30, 2021.

The gross profit attributed to software sales increased $219,959 (33.1%) and $772,226 (33.6%) to $885,268 and $3,067,459 for the three and nine ended September 30, 2022 as compared to $665,309 and $2,295,233 for the three and nine months ended September 30, 2021, due mostly to the increased volume of software sold.

The gross profit attributed to services increased $269,302 (8.2%) to $3,543,301 for the three months ended September as compared to $3,273,999 for the three months ended September 30, 2021.

This increase is attributed to revenue increases in managed services and application hosting and an increase in commission revenue for the period.

This was partially offset by lower gross profit for professional consulting, which is a result of lower revenue and costs associated with project delays caused by staffing and training issues, and the learning curve of new employees, who were hired to accommodate our growth.

In addition, we have experienced project delays and postponements on the part of our customers because of challenges within their own businesses, including employee retention and general economic conditions impacting their organizations.

The gross profit attributed to services decreased $468,047 (4.4%) to $10,193,245 for the nine months ended September 30, 2022 as compared to $10,661,292 for the nine months ended September 30, 2021.

Operating expenses

Selling and marketing expenses increased $238,797 (14.8%) and $295,300 (8.9%) to $1,852,903 and $3,628,714 for the three and six months ended June 30, 2022 as compared to $1,614,106 and $3,333,414 for the three and six months ended June 30, 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 decreased $122,132 (5.6%) to $2,071,145 for the three months ended June 30, 2022 as compared to $2,193,277 for the three months ended June 30, 2021.

These decreases were partially offset by higher excise taxes and dues and subscriptions costs.

General and administrative expenses increased $183,927 (4.1%) to $4,712,122 for the six months ended June 30, 2022 as compared to $4,528,195 for the six months ended June 30, 2021.

This increase is a result of several factors, including an increase in state excise and local taxes, dues and subscriptions, such increases partially offset by lower rent expenses.

Share-based compensation decreased $2,995 to $45,945 for the three months ended June 30, 2022 as compared to $48,940 for the three months ended June 30, 2021.

Share-based compensation increased $41,958 to $91,890 for the six months ended June 30, 2022 as compared to $49,932 for the six months ended June 30, 2021.

Selling and marketing expenses increased $314,354 (18.5%) and $609,654 (12.1%) to $2,016,850 and $5,645,564 for the three and nine months ended September 30, 2022 as compared to $1,702,496 and $5,035,910 for the three and nine months ended September 30, 2021.

This increase is primarily due to increased travel and entertainment expenses associated with attendance with trade shows and conferences, increased commission expenses as a result of increased software sales, which should benefit our professional consulting area in future months plus outside sales expenses.

This was partially offset by lower advertising expenses and sponsorship fees received for our conferences that help offset the costs.

General and administrative expenses decreased $6,845 (0.3%) to $2,244,622 for the three months ended September 30, 2022 as compared to $2,251,467 for the three months ended September 30, 2021.

This decrease is a result of payroll and payroll-related expenses and departmental changes for various employees which involved moving their compensation between cost of revenues and administrative expenses as well as a lower rent, professional fees, license fees and credit card charges, mostly offset by higher recruitment costs, outside services fees, bad debt expense and excise taxes.

General and administrative expenses increased $177,082 (2.6%) to $6,956,744 for the nine months ended September 30, 2022 as compared to $6,779,662 for the nine months ended September 30, 2021.

This increase is a result of several factors, including an increase in state excise taxes, bad debt expense and dues and subscriptions, such increases partially offset by lower rent expenses.

Share-based compensation decreased $4,693 to $44,185 for the three months ended September 30, 2022 as compared to $48,878 for the three months ended September 30, 2021.

Share-based compensation increased $37,265 to $136,075 for the nine months ended September 30, 2022 as compared to $98,810 for the nine months ended September 30, 2021.

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

Depreciation and amortization expense increased $26,068 and $89,872 to $236,521 and $498,371 for the three and six months ended June 30, 2022 as compared to $210,453 and $408,499 for the three and months ended June 30, 2021.

Depreciation and amortization expense increased $13,757 and $103,629 to $240,522 and $738,893 for the three and nine months ended September 30, 2022 as compared to $226,765 and $635,264 for the three and months ended September 30, 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).

(Loss) income from operations

As a result of the above, for the three months ended June 30, 2022, the Company had a loss from operations of $79,246 as compared to income from operations of $203,904 for the three months ended June 30, 2021.

As a result of the above, for the six months ended June 30, 2022, the Company had a loss from operations of $98,962 as compared to income from operations of $697,177 for the six months ended June 30, 2021.

As a result of the above, for the three months ended September 30, 2022, the Company had a loss from operations of $117,610 as compared to a loss from operations of $290,298 for the three months ended September 30, 2021.

As a result of the above, for the nine months ended September 30, 2022, the Company had a loss from operations of $216,572 as compared to income from operations of $406,879 for the nine months ended September 30, 2021.

Liquidity and Capital Resources

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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.

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

Liquidity and Capital Resources (continued)

At June 30, 2022, future payments of long-term debt are as follows:

At September 30, 2022, future payments of long-term debt are as follows:

Remainder of 2022

The Company’s working capital was $2,749,833 at June 30, 2022 and cash on hand at June 30, 2022 was $5,873,674.

During the six months ended June 30, 2022, the Company had a net decrease in cash of $940,443.

The Company’s working capital was $2,930,651 at September 30, 2022 and cash on hand at September 30, 2022 was $7,232,158.

During the nine months ended September 30, 2022, the Company had a net increase in cash of $418,041.

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

Cash used in operating activities:

Operating activities for the six months ended June 30, 2022 used cash of $485,308 as compared to using cash of $838,824 for the same period in 2021.

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

Cash provided by operating activities:

Operating activities for the nine months ended September 30, 2022 provided cash of $1,127,302 as compared to providing cash of $276,644 for the same period in 2021.

This increase in cash provided by operating activities is primarily due to the increase in deferred revenue, accounts payable and improvement from cash from operations, excluding the non-cash items, such as depreciation, amortization, share-based compensation and bad debt expense, offset partially by the increases in accounts payable and deferred charges.

Cash used in investing activities:

Investing activities for the six months ended June 30, 2022 used cash of $180,549 as compared to using $217,824 cash for the same period in 2021, primarily as a result of lower purchases of property and equipment.

Investing activities for the nine months ended September 30, 2022 used cash of $188,741 as compared to using $264,832 cash for the same period in 2021, primarily as a result of lower purchases of property and equipment.

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

Liquidity and Capital Resources (continued)

Cash (used in) provided by financing activities:

Financing activities for the six months ended June 30, 2022 used cash of $274,586 as compared to providing cash in the amount of $3,888,592 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 six months ended June 30, 2021.

Financing activities for the nine months ended September 30, 2022 used cash of $520,520 as compared to providing cash in the amount of $645,008 for the same period in 2021.

The decrease in cash provided is attributed to the fact that the Company received no proceeds from the sale of common stock for the nine months ended September 30, 2022, whereas it 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 nine months ended September 30, 2021.

The cash received from the sale of stock was offset mostly by the payment of a cash dividend in 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.

For the six months ended June 30, 2022, inflation has impacted the Company’s profitability, as it has resulted in increased costs necessary to recruit and retain personnel.

For the nine months ended September 30, 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 six months ended June 30, 2022 or for fiscal 2021, 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 nine months ended September 30, 2022 or for fiscal 2021, 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.

2 unchanged sentences

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What changed 10-Q

Item 1. Financial Statements