What changed in this filing

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Item 1. Financial Statements

2023-05-09 compared with 2022-11-14 · 304 added, 418 removed, 552 unchanged (57% 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 $ 450,311 and $ 330,311

Accounts receivable, net of allowance of $ 514,775 and $ 490,311 as of

March 31, 2023 and December 31, 2022, respectively

Unbilled services

12 unchanged sentences

Accrued interest

Income taxes payable

Long-term debt – current portion

5 unchanged sentences

Long-term debt net of current portion

Long-term – related party - net of current portion

Finance lease obligations net of current portion

10 unchanged sentences

authorized 75,000,000 shares,

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

5,256,177 and 5,256,177 shares issued and outstanding as of March 31, 2023

December 31, 2022, respectively

Additional paid-in capital

7 unchanged sentences

Three Months Ended

Nine Months Ended

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

March 31, 2023

March 31, 2022

Software product, net

8 unchanged sentences

Total selling, general and administrative expenses

(Loss) income from operations

Income (loss) from operations

Other expense:

Interest expense

Interest expense, net

Total other expense

(Loss) income before taxes

(Benefit) provision for income taxes

Net (loss) income

Net (loss) income per common share:

Weighted average shares:

See accompanying notes to the unaudited condensed consolidated financial statements.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2022

Preferred Stock

Stockholders’

Balance at July 1, 2022

Share-based compensation

Stock compensation issued for services

Balance at September 30, 2022

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

Income (loss) before taxes

Provision for income taxes

Net income (loss)

Net income (loss) 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 NINE MONTHS ENDED SEPTEMBER 30, 2022

FOR THE THREE MONTHS ENDED MARCH 31, 2023

Preferred Stock

3 unchanged sentences

Share-based compensation

Stock compensation issued for services

Balance at September 30, 2022

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021

Balance at March 31, 2023

FOR THE THREE MONTHS ENDED MARCH 31, 2022

Preferred Stock

2 unchanged sentences

Balance at January 1, 2022

Issuance of common stock in exchange for convertible debt

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

Cash dividend

Share-based compensation

Balance at September 30, 2021

Balance at March 31, 2022

See accompanying notes to the unaudited condensed consolidated financial statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

Net (loss) income

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

Net income (loss)

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

Deferred income taxes

2 unchanged sentences

Amortization of right of use assets

Bad debt expense

Provision for bad debts

Share-based compensation

4 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 assets

Acquisition of business

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from issuance of stock, net of expenses

Payment of cash dividend

Cash flows used in financing activities:

Payment of long-term debt

Payment of long-term convertible debt

Payment of finance lease obligations

Net cash (used in) provided by financing activities

Net increase in cash

Net cash used in financing activities

Net decrease in cash

Cash, beginning of period

1 unchanged sentence

Cash paid during period for:

See accompanying notes to the unaudited condensed consolidated financial statements.

SILVERSUN TECHNOLOGIES, INC.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

For the nine months ended September 30, 2022:

For the three months ended March 31, 2023:

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

Accordingly, operating lease right of use assets and operating lease liabilities were recognized in the amount of $ 115,313 .

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

Accordingly, operating lease right of use assets and operating lease liabilities were recognized in the amount of $ 114,480 .

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.

3 unchanged sentences

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

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

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.

(“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.

See accompanying notes to the unaudited condensed consolidated financial statements.

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Basis of Presentation and Principles of Consolidation

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position of the Company as of September 30, 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.

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, 2023, the results of operations for the three months ended March 31, 2023 and 2022 and cash flows for the three months ended March 31, 2023 and 2022.

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

The financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and consequently have been condensed and do not include all of the disclosures normally made in an Annual Report on Form 10-K.

The December 31, 2021 balance sheet included herein was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K.

Accordingly, the financial statements included herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 29, 2022.

The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and consequently have been condensed and do not include all of the disclosures normally made in an Annual Report on Form 10-K.

The December 31, 2022 consolidated balance sheet included herein was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K.

Accordingly, the unaudited condensed consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 28, 2023.

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

6 unchanged sentences

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.

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 unaudited condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

The Company maintains cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to federally insured limits.

At times balances may exceed FDIC insured limits.

The Company has not experienced any losses in such accounts.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable consist primarily of invoices for maintenance and professional services.

Full payment for software ordered by customers is primarily due in advance of ordering from the software supplier.

Payments for maintenance and support plan renewals are due before the beginning of the maintenance period.

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

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

Accounts are written off against the allowance when deemed uncollectable.

Recoveries of receivables previously written off are recorded as a reduction of bad debt expense when received ASC 326-20-30-2 requires a reporting entity to use a pooled approach to estimate expected credit losses for financial assets with similar risk characteristics.

If a financial asset does not share similar risk characteristics with other financial assets held by the reporting entity, the allowance for credit losses should be determined on an individual basis.

Similar risk characteristics for trade receivables may include customer credit rating, trade receivable aging category (e.g., 30-90 days past due), industry, geographical location of the customer, product line, and other factors that may influence the likelihood of the customer not being able to pay for the goods or services.

The Company utilizes this individual approach for its trade receivables and unbilled services as each customer does not share similar risks.

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, 2022 and 2021.

No impairment losses were identified or recorded for the three months ended March 31, 2023 and 2022.

Capitalization of Proprietary Developed Software

9 unchanged sentences

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 general and administrative expenses.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Definite Lived Intangible Assets and Long-lived Assets

2 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 nine months ended September 30, 2022 and 2021.

No impairment losses were identified or recorded for the three months ended March 31, 2023 and 2022.

Revenue Recognition

1 unchanged sentence

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.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The Company determines revenue recognition through the following 5 steps:

Identify the contract with a customer;

Identify the performance obligations in the contract;

Determine the transaction price;

Allocate the transaction price to the performance obligation in the contract;

Recognize revenue when or as the entity satisfies a performance obligation

Software product revenue is recognized when the product is delivered to the customer and the Company’s performance obligation is fulfilled.

3 unchanged sentences

For the Three Months Ending

September 30,

Software revenue

2 unchanged sentences

Ancillary service revenue

For the Nine Months Ending

September 30,

Software revenue

Professional consulting

Maintenance revenue

Ancillary service revenue

Unbilled Services

3 unchanged sentences

Deferred revenues consist of maintenance on proprietary products (contract liabilities), customer telephone support services (contract liabilities) and deposits for future consulting services 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, 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 March 31, 2023, there was $ 403,850 in deferred maintenance revenues, $ 522,693 in deferred support service revenues and $ 3,050,031 in deposits for future consulting services.

As of December 31, 2022, there was $ 460,709 in deferred maintenance, $ 472,266 in deferred support services, and $ 2,824,115 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.

These commissions are calculated based on estimated revenue to be generated over the life of the project.

These costs are deferred and expensed as the service revenue is earned.

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

SILVERSUN TECHNOLOGIES, INC.

2 unchanged sentences

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue Recognition (Continued)

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

These commissions are calculated based on estimated revenue to be generated over the life of the project.

These costs are deferred and expensed as the service revenue is earned.

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

Fair Value of Financial Instruments

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 Company estimates that the fair value of all financial instruments at March 31, 2023 and December 31, 2022, 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, 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.

The carrying amounts reported in the unaudited condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022 for cash, accounts receivable, and accounts payable approximate the fair value because of the immediate or short-term maturity of these financial instruments.

For 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.

1 unchanged sentence

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

Deferred charges represent expenses related to the merger (see Note 14) and will be charged against the proceeds when the merger is consummated.

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

16 unchanged sentences

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

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

The Company maintains cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to federally insured limits.

At times balances may exceed FDIC insured limits.

The Company has not experienced any losses in such accounts.

SILVERSUN TECHNOLOGIES, INC.

4 unchanged sentences

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

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.

At March 31, 2023 and December 31, 2022, the Company had cash on deposit of $ 5,690,968 and $ 7,050,862 , respectively, in excess of the federally insured limits of $ 250,000 .

As of March 31, 2023, no one customer represented more than 10% of the total accounts receivable and unbilled services.

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

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.

For the three months ended March 31, 2023 and 2022, the Company’s top ten customers accounted for 10 % ($ 1,329,501 ) and 11 % ($ 1,218,890 ), 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, 2022 and 2021 purchases from one supplier through a “channel partner” agreement were approximately 14 % and 14 % of cost of revenues, respectively.

For the three months ended March 31, 2023 and 2022 purchases from one supplier through a “channel partner” agreement were approximately 14 % and 11 % 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 September 30, 2022, one supplier represented approximately 19 % of total accounts payable.

As of March 31, 2023, one supplier represented approximately 25 % of total accounts payable.

For the year ended December 31, 2022, one supplier represented approximately 28 % 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, 2022, the Company believes it has no significant risk related to its concentration of credit risk related to accounts receivable.

Accounts Receivable

Accounts receivable consist primarily of invoices for maintenance and professional services.

Full payment for software ordered by customers is primarily due in advance of ordering from the software supplier.

Payments for maintenance and support plan renewals are due before the beginning of the maintenance period.

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

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

Accounts are written off against the allowance when deemed uncollectable.

As of March 31, 2023, the Company believes it has no significant risk related to its concentration of credit risk related to accounts receivable.

Property and Equipment

3 unchanged sentences

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”.

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

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

7 unchanged sentences

The effect on deferred tax assets and liabilities of a change in tax rates or laws is recognized in operations in the period that includes the enactment date.

The Company accounts for uncertainties in income taxes under ASC 740-10-50 which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

ASC 740-10 requires that the Company determine whether the benefits of its tax positions are more-likely-than-not of being sustained upon audit based on the technical merits of the tax position.

The Company recognizes the impact of an uncertain income tax position taken on its income tax return at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes (Continued)

The Company has federal net operating loss (“NOL”) carryforwards which are subject to limitations under Section 382 of the Internal Revenue Code.

6 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 September 30, 2022 and December 31, 2021.

There were no liabilities for uncertain tax positions at March 31, 2023 and December 31, 2022.

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 at acquisition, 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)

The Company’s goodwill and intangibles are measured at fair-value using Level 3 inputs at acquisition, as discussed in Notes 6 and 11.

Stock-Based Compensation

5 unchanged sentences

Recently Adopted 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).

The update simplifies the accounting for convertible debt instruments and convertible preferred stock by reducing the number of accounting models and limiting the number of embedded conversion features separately recognized from the primary contract.

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

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.

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.

For receivables, and other short-term financial instruments, companies are 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.

This standard was adopted on January 1, 2023 and did not have a significant impact on our consolidated financial position and consolidated results of operations.

Recent Authoritative Pronouncements

3 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 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 per share

Diluted net loss per share computation:

Net loss per above

Weighted-average common shares outstanding

Total adjusted weighted-average shares

Diluted net loss per share

September 30, 2022

September 30, 2021

Basic net loss per share computation:

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

For the three months ended March 31, 2023 and 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 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.

March 31, 2023

March 31, 2022

Basic net income (loss) per share computation:

Net income (loss)

Weighted-average common shares outstanding

Basic net loss per share

Diluted net loss:

Basic net income (loss) per share

Diluted net income (loss) per share computation:

Net income (loss) per above

Weighted-average common shares outstanding

Incremental shares for warrants

Total adjusted weighted-average shares

Diluted net loss per share

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

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.

March 31, 2023

March 31, 2022

Stock options

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

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

NOTE 4 – ALLOWANCE FOR EXPECTED CREDIT LOSSES

Trade receivables and unbilled services with customers are financial assets analyzed by the Company under the expected credit loss model.

To measure expected credit losses, trade receivables are grouped based on shared risk characteristics (i.e., the relevant industry sector and customer's geographical location) and days past due (i.e., delinquency status), while considering the following, if appropriate:

Customers in the same geographical location share similar risk characteristics associated with the macroeconomic environment of their region.

The expected credit loss rate is likely to increase as receivables move to older aging buckets.

The Company used the following aging categories to estimate the risk of delinquency status:

(i) 0 days past due;

(ii) 1-30 days past due;

(iii) 31-60 days past due;

(iv) 61-90 days past due;

and (v) over 90 days past due.

If a financial asset does not share similar risk characteristics with other financial assets held by the reporting entity, the allowance for credit losses should be determined on an individual basis.

The Company, for the most part, utilizes this individual approach for its trade receivables and unbilled services as each customer does not share similar risks.

SILVERSUN TECHNOLOGIES, INC.

1 unchanged sentence

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 – ALLOWANCE FOR EXPECTED CREDIT LOSSES (Continued)

Rollforward of Allowance for Doubtful Accounts

The following table represents the rollforward of the allowance for doubtful accounts for the three months ended March 31, 2023 and the year ended December 31, 2022:

March 31, 2023

December 31, 2022

Balance at beginning of period

Current period provision for expected losses

Balance at end of period

NOTE 5 – PROPERTY AND EQUIPMENT

Property and equipment is summarized as follows:

September 30, 2022

March 31, 2023

December 31, 2022

3 unchanged sentences

Property and equipment, net

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.

Depreciation and amortization expense related to these assets for the three months ended March 31, 2023 and 2022 were $ 92,541 and $ 98,425 .

Property and equipment under finance leases (included in Note 8) are summarized as follows:

September 30, 2022

March 31, 2023

December 31, 2022

5 unchanged sentences

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

On January 1, 2022 (“Effective Date”), 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 (see Note 11).

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”).

2 unchanged sentences

The purchase price has been recorded as an intangible asset with an estimated life of seven years .

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

SILVERSUN TECHNOLOGIES, INC.

3 unchanged sentences

The components of intangible assets are as follows:

September 30, 2022

March 31, 2023

December 31, 2022

3 unchanged sentences

accumulated amortization

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.

Amortization expense related to the above intangible assets for the three months ended March 31, 2023 and 2022 was $ 161,961 and $ 190,457 , respectively.

The Company expects future amortization expense to be the following:

Remainder of 2023

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

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

(“ISM”) pursuant to an Asset Purchase Agreement for cash of $ 300,000 and a promissory note issued in the aggregate principal amount of $ 1,000,000 (the “ISM Note”).

The ISM Note is due five years from the closing date and bears interest at a rate of two percent (2%) per annum.

Monthly payments including interest are $ 17,528 .

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

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, 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.

(“Nellnube”) pursuant to an Asset Purchase Agreement for a promissory note issued in the aggregate principal amount of $ 400,000 (the “Nellnube Note”).

The Nellnube Note is due five years from the closing date and bears interest at a rate of two percent (2%) per annum.

Monthly payments including interest are $ 7,011 .

The Nellnube Note has an optional conversion feature 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 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.

(“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 were $ 4,984 .

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.

8 unchanged sentences

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.

At March 31, 2023 and December 31, 2022, the outstanding balances on the PT Notes were $ 103,333 and $ 103,333 , 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, 2022 and December 31, 2021, the outstanding balances on the CMS Note were $ 62,568 and $ 105,097 , respectively.

At March 31, 2023 and December 31, 2022, the outstanding balances on the CMS Note were $ 33,858 and $ 48,249 , 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, 2022 and December 31, 2021, the outstanding balances on the BSS Note were $ 152,101 and $ 185,820 , respectively.

At March 31, 2023 and December 31, 2022, the outstanding balances on the BSS Note were $ 129,339 and $ 140,748 , respectively.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 – 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, 2022 and December 31, 2021, the outstanding balances on the CTS Note were $ 69,581 and $ 101,781 , respectively.

At March 31, 2023 and December 31, 2022, the outstanding balances on the CTS Note were $ 47,846 and $ 58,741 , 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, 2022 and December 31, 2021, the outstanding balances on the PSI Note were $ 253,328 and $ 364,600 , respectively.

At March 31, 2023 and December 31, 2022, the outstanding balances on the PSI Note were $ 178,213 and $ 215,863 , 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 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)

At March 31, 2023 and December 31, 2022, the outstanding balances on the DTSI Note was $ 626,250 and $ 835,000 , respectively (see Note 11).

1 unchanged sentence

Monthly payments including interest are $ 2,148 .

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:

At March 31, 2023 and December 31, 2022, the outstanding balance on the NEO3 Note was $ 46,366 and $ 52,559 , respectively.

Total long-term and related party debt balances at March 31, 2023 and December 31, 2022 were $ 1,165,205 and $ 1,454,493 , respectively, of which $ 613,863 and $ 783,479 was classified as current portion at March 31, 2023 and December 31, 2022, respectively.

At March 31, 2023, future payments of long-term debt are as follows:

Remainder of 2023

2 unchanged sentences

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 September 30, 2022 was 7.03 % and the following weighted-average lease term:

September 30, 2022

The weighted average interest rate as of March 31, 2023 was 7.27 % and the following weighted-average lease term:

March 31, 2023

December 31, 2022

Weighted average remaining lease term

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

September 30, 2022

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 – FINANCE LEASE OBLIGATIONS (Continued)

At March 31, 2023 future payments under finance leases are as follows:

March 31, 2023

Remainder of 2023

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 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 four different locations and also has an equipment lease rental with monthly payments ranging from $ 3,180 to $ 10,279 which expire at various dates through October 2025.

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

Accordingly, operating lease right of use assets and operating lease liabilities were recognized in the amount of $ 115,313 during the period ended March 31, 2023.

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

Accordingly, operating lease right of use assets and operating lease liabilities were recognized in the amount of $ 114,480 during the period ended March 31, 2023.

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 September 30, 2022 is as follows:

September 30, 2022

The Company's weighted average remaining lease term for operating leases as of March 31, 2023 and December 31, 2022 are as follows:

March 31, 2023

December 31, 2022

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 September 30, 2022:

Remainder 2023

4 unchanged sentences

Long-term operating lease liabilities

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.

Total rent expense under operating leases for the three months ended March 31, 2023 and 2022 was $ 82,666 and $ 119,329 , respectively.

SILVERSUN TECHNOLOGIES, INC.

2 unchanged sentences

NOTE 10 – EQUITY

Common Stock At-The-Market Sales Program

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

Wainwright & Co.

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

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

Securities and Exchange Commission.

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

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

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

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

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

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

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

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

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

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

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

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

In July 2021, an additional 9,548 shares of Common Stock were issued and sold generating $ 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 .

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

In February 2021, ISM converted the outstanding balance of the loan in the amount of $ 479,112 into 119,004 shares of the Company’s common stock (see Note 7).

In February 2021, Nellnube converted the outstanding balance of the loan in the amount of $ 191,645 into 47,602 shares of the Company’s common stock (see Note 7).

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – EQUITY (Continued)

Stock Repurchase Program

5 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 September 30, 2022, no repurchases have been made.

As of March 31, 2023, 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 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):

There were no stock options granted for the three months ended March 31, 2023.

A summary of the status of the Company’s stock option plans for the three months ended March 31, 2023 and the year ended December 31, 2022 and changes during the periods are presented below (in number of options):

Exercise Price

5 unchanged sentences

Options canceled/forfeited

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.

These warrants expired in March 2022.

Outstanding options at March 31, 2023

For the three months ended March 31, 2023, the Company recorded share-based compensation expense of $ 41,497 as compared to $ 45,945 for the three months ended March 31, 2022.

As of March 31, 2023 and December 31, 2022, the unamortized compensation expense for stock options was $- 0 - and $ 41,497 , respectively.

SILVERSUN TECHNOLOGIES, INC.

2 unchanged sentences

NOTE 11 – BUSINESS COMBINATIONS

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

(“CTS”) pursuant to an Asset Purchase Agreement for a promissory note in the aggregate principal amount of $ 130,000 (the “CTS Note”).

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

Monthly payments including interest are $ 3,724 .

At 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 .

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

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

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.

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

6 unchanged sentences

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

The Note will be amortized as follows:

There was no downward adjustment necessary as measured on the one-year anniversary of the note, January 1, 2023.

The Note is 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 11 – BUSINESS COMBINATIONS (Continued)

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

(Preliminary)

Upon completion of an independent valuation, the allocation of the purchase price was $ 1,207,000 to customer lists with the excess purchase consideration of $ 128,000 being allocated to goodwill.

The Company expects its acquisitions to create synergies by combining operations and expanding geographic market share and product offerings.

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

Cash consideration

3 unchanged sentences

Deferred revenue

Contingent liability

Operating lease liability

Net assets acquired

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 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

(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 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 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.

The Company’s unaudited condensed consolidated financial statements for the three months ended March 31, 2023 and 2022 include the actual results of DTS, and as such, pro forma results are not required.

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 $ 5,500,000 as of September 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 $ 5,000,000 as of March 31, 2023, 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 $ 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.

The Company had approximately $ 1,024,000 and $ 1,106,000 in deferred tax assets at March 31, 2023 and December 31, 2022, respectively.

For the three months ended March 31, 2023, the Company’s Federal and State provision requirements were calculated based on the estimated tax rate.

For the three months ended March 31, 2023, the Company recorded a tax provision of $ 74,791 as compared to $ 2,088 for the three months ended March 31, 2022.

This increase in the tax provision is primarily the result of the increase in income before taxes for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.

NOTE 13 – RELATED PARTY TRANSACTIONS

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

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.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

At March 31, 2023 and December 31, 2022, certain long-term debt is considered a related party liability as a holder of Prairie Tech is current employee of the Company.

As of March 31, 2023 and December 31, 2022, the outstanding balances of this debt were $ 103,333 and $ 103,333 , respectively.

NOTE 14 – MERGER

3 unchanged sentences

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 cash dividend of $1.50 per share, which equates to $7,884,266 in the aggregate;

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

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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 proposed Mergers are expected to close in the first half of 2023, subject to the receipt of any applicable regulatory approvals, the approval of SilverSun's and Rhodium's respective stockholders, and other customary closing conditions.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – MERGER (Continued)

Prior to the Mergers, SilverSun will hold a special meeting of its shareholders as of a pre-Merger record date to be determined (the “Special Meeting”).

At the Special Meeting, the SilverSun stockholders will be asked to vote on the proposals set forth in the Form S-4 Registration Statement of SilverSun (the “Form S-4”) filed on October 19, 2022, as amended on January 9, 2023, February 14, 2023, April 4, 2023 and April 28, 2023 and as may be further amended in the future.

These proposals include, but are not limited to, approval of (i) the Mergers;

(ii) the Amended and Restated Certificate of Incorporation (and the matters covered thereby including the Reverse Stock Split);

(iii) the Separation and Distribution Agreement;

(iv) the SilverSun Technologies, Inc.

2023 Omnibus Incentive Plan;

(v) the share issuances related to the Mergers requiring Nasdaq approval;

and (vi) the post-Merger board nominees.

These proposals are set forth in greater detail in the Form S-4.

The Mergers are conditioned upon the approval of the Merger Proposal, subject to terms of the Merger Agreement.

If the Merger Proposal is not approved, the other proposals (except the adjournment proposal, as described in the S-4 ) will not be presented to the shareholders for a vote.

Similarly, approval of the Merger proposal is subject to the approval of the Amended and Restated Certificate of Incorporation proposal, the Separation and Distribution.

On March 13, 2023, SilverSun Technologies, Inc.

(the “Company”) entered into the Third Amendment to Merger Agreement (the “Amendment”) with Rhodium Enterprises Acquisition Corp., a Delaware corporation and direct wholly owned subsidiary of the Company, Rhodium Enterprises Acquisition LLC, a Delaware limited liability company and direct wholly owned subsidiary of the Company, and Rhodium Enterprises, Inc., a Delaware corporation (“Rhodium”), amending that certain Agreement and Plan of Merger, dated as of September 29, 2022 by and among the parties referenced above (as amended from time to time, the “Merger Agreement”).

The Amendment provides that the Merger Agreement may be terminated, and the transactions abandoned, by either the Company or Rhodium at any time before the First Effective Time (as defined in the Merger Agreement), by written notice from one to the other if the closing has not occurred on or before June 30, 2023.

No other provisions of the Merger Agreement were modified by the Amendment.

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;

The Merger Agreement may be terminated, and the transactions abandoned, by either SilverSun or Rhodium at any time before the effective time of the merger , by written notice from one to the other if (i) the Closing has not occurred on or before June 30, 2023 or such later date mutually agreed to by SilverSun and Rhodium (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;

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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.

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.

SILVERSUN TECHNOLOGIES, INC.

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NOTE 14 – MERGER (Continued)

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.

SilverSun Technologies Holdings, Inc.

filed its Form 10 with the SEC on December 23, 2022.

The Form 10 was withdrawn on February 21, 2023 because the financial statements contained therein were stale.

SilverSun Technologies Holdings, Inc.

refiled the Form 10 on March 3, 2023.

On May 1, 2023, the Form 10 was withdrawn as the contemplated merger has not yet occurred.

On April 4, 2023, the Company filed Amendment 3 to its Form S-4 Registration Statement with the SEC.

On April 28, 2023 the Company filed Amendment 4 to its Form S-4 Registration Statement with the SEC.

Set forth below is the description of each class of securities of SilverSun Technologies, Inc.

(the “Company”) outstanding as of December 31, 2022.

The following description summarizes the most important terms of these securities.

This summary does not purport to be complete and is qualified in its entirety by the provisions of our Certificate of Incorporation and our Bylaws, copies of which have been previously filed with the Securities and Exchange Commission and are incorporated by reference into the Annual Report on Form 10-K for the year ended December 31, 2022.

You should refer to our Articles of Incorporation, Bylaws and the applicable provisions of the Delaware General Corporation Law for a complete description.

Common stock, par value $ 0.00001 per share (the “Common Stock”) is the only class of our securities currently registered under Section 12 of the Securities Exchange Act of 1934 (the “Exchange Act”).

Our Common Stock is listed on the Nasdaq Capital Market under the symbol “SSNT.”

NOTE 15 – SUBSEQUENT EVENTS

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

On April 4, 2023, the Company filed Amendment 3 to its Form S-4 Registration Statement with the SEC.

On April 28, 2023 the Company filed Amendment 4 to its Form S-4 Registration Statement with the SEC.

On May 1, 2023, the Form 10 was withdrawn as the contemplated merger has not yet occurred.

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

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

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

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

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

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

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

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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, 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.

Investing in the acquisition of other companies and proprietary business management solutions has been an important growth strategy for our Company, allowing us to rapidly expand into new geographic markets and create new and exciting profit centers.

To date, we have completed a series of strategic ventures that have served to fundamentally strengthen our Company’s operating platform and materially expand our footprint to nearly every U.S.

More specifically, over the past fifteen years, we have outright acquired select assets of or entered into revenue sharing agreements with Business Tech Solutions Group, Inc.;

Wolen Katz Associates;

AMP-BEST Consulting, Inc.;

Micro-Point, Inc.;

HighTower, Inc.;

Point Solutions, LLC;

SGEN, LLC., ESC, Inc., 2000 SOFT, Inc., Productive Tech Inc., The Macabe Associates, Oates & Co;

Pinsight Technology, Inc.;

Info Sys Management, Inc., Nellnube, Inc., Partners in Technology Inc., Prairie Technology Solutions Group, Inc., Computer Management Services, LLC, Business Software Solutions, PeopleSense, Inc., and more recently Dynamic Tech Services, Inc.

and NEO3, LLC.

Additionally, it is our intention to continue to increase our business by seeking additional opportunities through potential acquisitions, revenue sharing arrangements, partnerships or investments.

Such acquisitions, revenue sharing arrangements, partnerships or investments may consume cash reserves or require additional cash or equity.

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

(i) strategic acquisitions or investments;

(ii) an increase to current company personnel;

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

(iv) technological advances;

and (v) the activities of competitors.

During the first quarter of 2023, the Company continued to expand its customer base and growth trend which we believe will provide a basis for future growth.

Results of Operations for the Three Months Ended March 31, 2023 and 2022.

Our strategy is to grow our business through organic growth of our software applications, technology solutions and managed services, as well as expansion through acquisitions.

We have established a national presence via our internal marketing, sales programs, and acquisitions and now have ERP customers throughout most of the United States.

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 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.

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

During the three months ended March 31, 2023 the Company continued to expand its customer base, which we believe provides a basis for future growth.

Revenues increased 19.1% to $13.1 million for the three months ended March 31, 2023 as compared to $11.0 million for the corresponding period in 2022, 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 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.

For the three months ended March 31, 2023, 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.

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 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 $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.

(“Rhodium”), an industrial-scale digital asset technology company utilizing proprietary technologies to mine bitcoin (see Note 14 to Notes to Condensed Consolidated Financial Statements).

The proposed business combination is expected to close in the first half of 2023, subject to the receipt of any applicable regulatory approvals, the approval of SilverSun's and Rhodium's respective stockholders, and other customary closing conditions.

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, 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.

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.

For the three months ended March 31, 2023, revenues increased $2,103,894 (19.1%) to $13,127,738 as compared to $11,023,844 for the three months ended March 31, 2022.

This increase is mostly attributed to an increase in professional consulting revenues as well as an increase in software revenue.

Software revenues increased $711,367 (27.2%) to $3,322,329 for the three months ended March 31, 2023 as compared to $2,610,962 for the three months ended March 31, 2022, primarily as a result of an increase in our ERP software sales, especially for Acumatica and Sage Intacct.

Service revenue increased $1,392,527 (16.6%) to $9,805,409 for the three months ended March 31, 2023 as compared to $8,412,882 the three months ended March 31, 2022.

This increase is mainly attributed to the increase in professional services, especially for our Acumatica, Sage 100, Sage Intacct and Custom products as well as an increase in our hosting services.

Our efforts to increase and train our internal consulting staff as well as system improvements has yielded a positive result.

We have also utilized some outside contractors to assist in projects because of our growth.

Gross profit for the three months ended March 31, 2023 increased $652,693 (13.9%) to $5,357,560 as compared to $4,704,867 for the three months ended March 31, 2022.

For the three months ended March 31, 2023, the overall gross profit percentage was 40.8% as compared to 42.7% for the three months ended March 31, 2022.

The gross profit attributed to software revenues increased $303,671 (28.0%) to $1,390,054 for the three ended March 31, 2023 as compared to $1,086,383 for the three months ended March 31, 2022, due mostly to the increased volume of software sold.

For the three months ended March 31, 2023, the gross profit percentage on software revenue was 41.8% as compared to 41.6% for the three months ended March 31, 2022.

The gross profit attributed to services increased $349,022 (9.6%) to $3,967,506 for the three months ended March 31, 2023 as compared to $3,618,484 for the three months ended March 31, 2022.

This increase is attributed to revenue increases in professional services and application hosting.

This was partially offset by lower gross profit for professional consulting.

For the three months ended March 31, 2023, the gross profit percentage on service revenue was 40.5% as compared to 43.0% for the three months ended March 31, 2022.

Operating expenses

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.

Selling and marketing expenses increased $402,892 (22.7%) to $2,178,703 for the three months ended March 31, 2023 as compared to $1,775,811 for the three months ended March 31, 2022.

This increase is primarily due to increased salary increases, new personnel, higher commissions to employees as a result of the increased revenues as well as increased travel expenses associated with attendance at trade shows and conferences.

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 $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.

General and administrative expenses decreased $80,949 (3.1%) to $2,560,028 for the three months ended March 31, 2023 as compared to $2,640,977 for the three months ended March 31, 2022.

This decrease is a result of several factors, including a decrease in credit card fees, lower rent and supply expenses as well as lower state excise taxes offset partially by salary increases and higher travel, bad debt and license expenses.

Share-based compensation decreased $4,448 to $41,497 for the three months ended March 31, 2023 as compared to $45,945 for the three months ended March 31, 2022.

Depreciation and amortization expense decreased $54,055 to $207,795 for the three months ended March 31, 2023 as compared to $261,850 for the three and months ended March 31, 2022.

This decrease is primarily due to the lower amortization of intangible assets as a result of certain intangible assets being fully amortized.

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 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.

Income (loss) income from operations

As a result of the above, for the three months ended March 31, 2023, the Company had net income from operations of $369,537 as compared to a loss from operations of $19,716 for the three months ended March 31, 2022.

Liquidity and Capital Resources

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

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

The uncertainty on the economy continues to create uncertainty for the Company in the coming months and quarters.

While our Company has not been significantly impacted because of this uncertainty nor from the impact of Covid-19, the potential negative impact on our business, in the future, is impossible to determine at this point, although it is likely that we could suffer negative consequences as many companies go out of business or decrease their technology spending.

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

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

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

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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.

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

At March 31, 2023, future payments of long-term and related party debt are as follows:

Remainder of 2023

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 working capital was $3,361,829 at March 31, 2023 and cash on hand at March 31, 2023 was $6,875,779.

During the three months ended March 31, 2023, the Company had a net decrease in cash of $1,132,854.

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, 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 operating activities:

Operating activities for the three months ended March 31, 2023 used $783,062 of cash as compared to using $8,246 of cash for the same period in 2022.

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

Cash used in investing activities:

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.

Investing activities for the three months ended March 31, 2023 used cash of $4,979 as compared to using $180,548 cash for the same period in 2022, primarily as a result of lower acquisition costs for new businesses and 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 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.

Cash used in financing activities:

Financing activities for the three months ended March 31, 2023 used cash of $344,813 as compared to using cash in the amount of $138,890 for the same period in 2022.

The increase in cash used is is because of the higher payments of long-term debt associated with prior acquisitions.

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 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.

For the three months ended March 31, 2023, 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, 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 three months ended March 31, 2023 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