What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-08-08 compared with 2023-05-09 · 267 added, 203 removed, 653 unchanged (42% of the section changed)

6 unchanged sentences

Accounts receivable, net of allowance of $ 422,671 and $ 490,311 as of

March 31, 2023 and December 31, 2022, respectively

June 30, 2023 and December 31, 2022, respectively

Unbilled services

13 unchanged sentences

Long-term debt – current portion

Long-term – related party – current portion

Long-term debt – related party – current portion

Finance lease obligations – current portion

15 unchanged sentences

authorized 75,000,000 shares,

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

December 31, 2022, respectively

5,256,177 and 5,256,177 shares issued and outstanding as of June 30, 2023

and December 31, 2022, respectively

Additional paid-in capital

7 unchanged sentences

Three Months Ended

March 31, 2023

March 31, 2022

Six Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

Software product, net

10 unchanged sentences

Other expense:

Interest expense, net

Interest expense

Total other expense

Income (loss) before taxes

Provision for income taxes

Provision (benefit) for income taxes

Net income (loss)

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

Weighted average shares outstanding:

Net income (loss) per common share:

Weighted average shares:

See accompanying notes to the unaudited condensed consolidated financial statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2023

FOR THE THREE MONTHS ENDED JUNE 30, 2023

Preferred Stock

1 unchanged sentence

Stockholders’

Balance at April 1, 2023

Balance at June 30, 2023

FOR THE THREE MONTHS ENDED JUNE 30, 2022

Preferred Stock

Stockholders’

Balance at April 1, 2022

Share-based compensation

Balance at June 30, 2022

FOR THE SIX MONTHS ENDED JUNE 30, 2023

Preferred Stock

Stockholders’

Balance at January 1, 2023

Share-based compensation

Balance at March 31, 2023

FOR THE THREE MONTHS ENDED MARCH 31, 2022

Balance at June 30, 2023

FOR THE SIX MONTHS ENDED JUNE 30, 2022

Preferred Stock

3 unchanged sentences

Share-based compensation

Balance at March 31, 2022

Balance at June 30, 2022

See accompanying notes to the unaudited condensed consolidated financial statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

Six Months Ended

Cash flows from operating activities:

5 unchanged sentences

Amortization of right of use assets

Provision for bad debts

Bad debt expense

Share-based compensation

4 unchanged sentences

Prepaid expenses and other current assets

Deposits and other assets

Accounts payable

4 unchanged sentences

Net cash used in operating activities

Cash flows used in investing activities:

Cash flows from investing activities:

Purchase of property and equipment

Acquisition of business

Acquisition of assets

Net cash used in investing activities

Cash flows used in financing activities:

Cash flows from financing activities:

Payment of long-term debt

9 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

For the three months ended March 31, 2023:

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

For the six months ended June 30, 2023:

On September 29, 2022, 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 $ 109,840 .

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

On October 12, 2022, 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 $ 106,471 .

For the three months ended March 31, 2022:

On June 2, 2023, the Company entered into an operating lease to extend its lease for its Arizona office with Exeter 17319 DE, LLC.

Accordingly, operating lease right of use assets and operating lease liabilities were recognized in the amount of $ 108,330 during the period ended June 30, 2023.

For the six months ended June 30, 2022:

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

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.

See accompanying notes to the unaudited condensed consolidated financial statements.

15 unchanged sentences

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

The Company’s operations may be affected by the recent and ongoing outbreak of the coronavirus disease 2019 (COVID-19) which in March 2020, was declared a pandemic by the World Health Organization.

In December 2019, a novel strain of coronavirus, which causes the disease known as COVID-19, was reported to have surfaced.

Since then, COVID-19 coronavirus has spread globally.

In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic and the U.S.

Government imposed travel restrictions on travel between the United States, Europe, and certain other countries.

The impact of this pandemic has been, and will likely continue to be, extensive in many aspects of society, which has resulted, and will likely continue to result, in significant disruptions to the global economy as well as businesses and capital markets around the world.

Currently, the Company’s operations have not been materially affected by the ongoing outbreak of the coronavirus disease 2019 (COVID-19).

The ultimate disruption which may be caused by the outbreak is uncertain;

8 unchanged sentences

Basis of Presentation and Principles of Consolidation

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position of the Company as of March 31, 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.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position of the Company as of June 30, 2023, the results of operations for the three and six months ended June 30, 2023 and 2022 and cash flows for the six months ended June 30, 2023 and 2022.

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

24 unchanged sentences

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.

Recoveries of receivables previously written off are recorded as a reduction of bad debt expense when received.

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 326-20-30-2, Financial Instruments – Credit Losses , requiring 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.

4 unchanged sentences

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

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

No impairment losses were identified or recorded for the three or six months ended June 30, 2023 and 2022.

Capitalization of Proprietary Developed Software

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

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

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

15 unchanged sentences

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

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

No impairment losses were identified or recorded for the three and six months ended June 30, 2023 and 2022.

Revenue Recognition

16 unchanged sentences

Ancillary service revenue

For the Six Months Ending

Software revenue

Professional consulting

Maintenance revenue

Ancillary service revenue

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue Recognition (Continued)

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 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 June 30, 2023, there was $ 372,520 in deferred maintenance revenues, $ 512,475 in deferred support service revenues and $ 2,478,659 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.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

3 unchanged sentences

Fair Value of Financial Instruments

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 Company estimates that the fair value of all financial instruments at June 30, 2023 and December 31, 2022, as defined in ASC 852 “ 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 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.

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

3 unchanged sentences

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

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

The Company leases office space and equipment.

The Company leases office space, space for our data centers and equipment.

The Company concludes on whether an arrangement is a lease at inception.

14 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.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Concentrations

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

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.

At June 30, 2023 and December 31, 2022, the Company had cash on deposit of $ 6,030,908 and $ 7,050,862 , respectively, in excess of the federally insured limits of $ 250,000 .

As of June 30, 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 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.

For the six months ended June 30, 2023 and 2022, the Company’s top ten customers accounted for 10 % ($ 2,681,200 ) and 9 % ($ 1,856,981 ), respectively, of total revenues.

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

For the three months ended March 31, 2023 and 2022 purchases from one supplier through a “channel partner” agreement were approximately 14 % and 11 % of cost of revenues, respectively.

For the six months ended June 30, 2023 and 2022 purchases from one supplier through a “channel partner” agreement were approximately 14 % and 14 % of cost of revenues, respectively.

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

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

As of June 30, 2023, one supplier represented approximately 22 % 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 March 31, 2023, the Company believes it has no significant risk related to its concentration of credit risk related to accounts receivable.

As of June 30, 2023, the Company believes it has no significant risk related to its concentration of credit risk related to accounts receivable.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Property and Equipment

16 unchanged sentences

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 March 31, 2023 and December 31, 2022.

There were no liabilities for uncertain tax positions at June 30, 2023 and December 31, 2022.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Fair Value Measurement

30 unchanged sentences

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

For the three and six months ended June 30, 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 and six months ended June 30, 2022, since the Company has a net loss, the effect of common stock equivalents is anti-dilutive, and, as such, common stock equivalents have been excluded from the calculation.

June 30, 2023

June 30, 2022

Basic net income (loss) per share computation:

7 unchanged sentences

Diluted net income (loss) per share

June 30, 2023

June 30, 2022

Basic net income (loss) per share computation:

Net income (loss)

Weighted-average common shares outstanding

Basic net income (loss) per share

Diluted net income (loss):

Net income (loss)

Weighted-average common shares outstanding

Total adjusted weighted-average shares

Diluted net income (loss)per share

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

March 31, 2023

March 31, 2022

June 30, 2023

June 30, 2022

Stock options

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

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

June 30, 2023

June 30, 2022

Stock options

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

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 – ALLOWANCE FOR EXPECTED CREDIT LOSSES

12 unchanged sentences

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.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Roll-forward of Allowance for Doubtful Accounts

The following table represents the roll-forward of the allowance for doubtful accounts for the six months ended June 30, 2023 and the year ended December 31, 2022:

June 30, 2023

December 31, 2022

4 unchanged sentences

Property and equipment is summarized as follows:

March 31, 2023

June 30, 2023

December 31, 2022

3 unchanged sentences

Property and equipment, net

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

Depreciation and amortization expense related to these assets for the three and six months ended June 30, 2023 were $ 85,529 and $ 178,070 , respectively, as compared to $ 96,582 and $ 195,007 for the three and six months ended June 30, 2022.

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

March 31, 2023

June 30, 2023

December 31, 2022

2 unchanged sentences

Property and equipment, net

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – INTANGIBLE ASSETS

7 unchanged sentences

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

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – INTANGIBLE ASSETS (Continued)

The components of intangible assets are as follows:

March 31, 2023

June 30, 2023

December 31, 2022

3 unchanged sentences

accumulated amortization

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.

Amortization expense related to the above intangible assets for the three and six months ended June 30, 2023 was $ 161,961 and $ 323,922 , respectively, as compared to $ 186,365 and $ 376,822 for the three and six months ended June 30, 2022.

The Company expects future amortization expense to be the following:

8 unchanged sentences

Prairie Tech Note 2 has a term of two (2) years and is also subject to downward adjustment based on whether certain revenue milestones are achieved.

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

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

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

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

At March 31, 2023 and December 31, 2022, the outstanding balances on the PT Notes were $ 103,333 and $ 103,333 , respectively.

At June 30, 2023 and December 31, 2022, the outstanding balances on the PT Notes were $ 103,333 and $ 103,333 , respectively.

On July 1, 2023, the Company repaid the outstanding balance of $ 103,333 and accrued interest.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

On October 1, 2020, SWK acquired certain assets of Computer Management Services, LLC, (“CMS”) pursuant to an Asset Purchase Agreement for cash of $ 410 , clients’ deposits related to technical support in the amount of $ 50,115 , prepaid time from clients in the amount of $ 67,073 , and the issuance of a promissory note in the aggregate principal amount of $ 170,000 (the “CMS Note”) for a total of $ 287,598 .

1 unchanged sentence

Monthly payments including interest are $ 4,869 .

At March 31, 2023 and December 31, 2022, the outstanding balances on the CMS Note were $ 33,858 and $ 48,249 , respectively.

At June 30, 2023 and December 31, 2022, the outstanding balances on the CMS Note were $ 19,396 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 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)

At June 30, 2023 and December 31, 2022, the outstanding balances on the BSS Note were $ 117,872 and $ 140,748 , respectively.

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

2 unchanged sentences

Monthly payments including interest are $ 3,724 .

At March 31, 2023 and December 31, 2022, the outstanding balances on the CTS Note were $ 47,846 and $ 58,741 , respectively.

At June 30, 2023 and December 31, 2022, the outstanding balances on the CTS Note were $ 36,896 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 March 31, 2023 and December 31, 2022, the outstanding balances on the PSI Note were $ 178,213 and $ 215,863 , respectively.

At June 30, 2023 and December 31, 2022, the outstanding balances on the PSI Note were $ 140,373 and $ 215,863 , respectively.

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

1 unchanged sentence

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

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

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

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

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

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

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

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

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

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

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

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

The Note will be amortized as follows:

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

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

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

The Note was amortized as follows:

The first payment of principal and interest due under the Note, which was an annual payment, was due and paid on January 1, 2023.

and thereafter, payments will be made quarterly in twelve equal installments.

At June 30, 2023 and December 31, 2022, the outstanding balances on the DTSI Note was $ 574,062 and $ 835,000 , respectively (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”).

1 unchanged sentence

Monthly payments including interest are $ 2,148 .

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:

At June 30, 2023 and December 31, 2022, the outstanding balance on the NEO3 Note was $ 40,144 and $ 52,559 , respectively.

Total long-term and related party debt balances at June 30, 2023 and December 31, 2022 were $ 1,032,076 and $ 1,454,493 , respectively, of which $ 580,402 and $ 783,479 was classified as current portion at June 30, 2023 and December 31, 2022, respectively.

At June 30, 2023, future payments of long-term debt are as follows:

Remainder of 2023

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 – FINANCE LEASE OBLIGATIONS

1 unchanged sentence

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

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

March 31, 2023

The weighted average interest rate as of June 30, 2023 was 7.24 % and the following weighted-average lease term:

June 30, 2023

December 31, 2022

Weighted average remaining lease term

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

At June 30, 2023 future payments under finance leases are as follows:

June 30, 2023

Remainder of 2023

5 unchanged sentences

NOTE 9 – OPERATING LEASE LIABILITY

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 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 September 30, 2026.

On September 29, 2022, 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 $ 109,840 during the period ended June 30, 2023.

On October 12, 2022, 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 $ 106,471 during the period ended June 30, 2023.

On June 2, 2023, the Company entered into an operating lease to extend its lease for its Arizona office with Exeter 17319 DE, LLC.

Accordingly, operating lease right of use assets and operating lease liabilities were recognized for the extension in the amount of $ 108,330 during the period ended June 30, 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.

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

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

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

March 31, 2023

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

The Company's weighted average remaining lease term for operating leases as of June 30, 2023 and December 31, 2022 are as follows:

June 30, 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 March 31, 2023:

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – OPERATING LEASE LIABILITY (Continued)

Remainder 2023

4 unchanged sentences

Long-term operating lease liabilities

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.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Total rent expense under operating leases for the three and six months ended June 30, 2023 was $ 103,213 and $ 213,080 , respectively, as compared to $ 123,086 and $ 258,217 for the three and six months ended June 30, 2022, respectively.

NOTE 10 – EQUITY

6 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 March 31, 2023, no repurchases have been made.

As of June 30, 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 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):

There were no stock options granted for the six months ended June 30, 2023.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – EQUITY (Continued)

A summary of the status of the Company’s stock option plans for the six months ended June 30, 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 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.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Outstanding options at June 30, 2023

For the three and six months ended June 30, 2023, the Company recorded share-based compensation expense of $-0- and $ 41,497 , respectively, as compared to $ 45,945 and $ 91,890 for the three and six months ended June 30, 2022.

As of June 30, 2023 and December 31, 2022, the unamortized compensation expense for stock options was $-0- and $ 41,497 , respectively.

NOTE 11 – BUSINESS COMBINATIONS

1 unchanged sentence

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

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

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

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

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

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 Note was amortized as follows:

The first payment of principal and interest due under the Note, which will be an annual payment, was due and paid on January 1, 2023, and thereafter, payments will be made quarterly in twelve equal installments.

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.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 – BUSINESS COMBINATIONS (Continued)

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

5 unchanged sentences

Net assets acquired

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.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company’s unaudited condensed consolidated financial statements for the three and six months ended June 30, 2023 and 2022 include the actual results of DTS, and as such, pro forma results are not required.

NOTE 12 – INCOME TAXES

3 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 $ 5,000,000 as of March 31, 2023, 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 June 30, 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 $ 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.

The Company had approximately $ 886,000 and $ 1,106,000 in deferred tax assets at June 30, 2023 and December 31, 2022, respectively.

The decrease in the deferred tax asset is due to provision for income taxes, which will reduce our NOL carryforward and the receipt of state and federal refunds.

For the three and six months ended June 30, 2023, the Company’s Federal and State provision requirements were calculated based on the estimated tax rate.

For the three and six months ended June 30, 2023, the Company recorded tax provisions of $ 95,481 and $ 170,272 , respectively, as compared to tax benefits of $ 15,280 and $ 13,192 for the three and six months ended June 30, 2022, respectively.

These increases in the tax provision are primarily the result of the increase in income before taxes for the three and six months ended June 30, 2023 as compared to the three and six months ended June 30, 2022.

NOTE 13 – RELATED PARTY TRANSACTIONS

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.

At June 30, 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 June 30, 2023 and December 31, 2022, the outstanding balances of this debt were $ 103,333 and $ 103,333 , respectively.

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – MERGER

12 unchanged sentences

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 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)

The proposed Mergers are subject to the receipt of any applicable regulatory approvals, the approval of SilverSun's and Rhodium's respective stockholders, and other customary closing conditions.

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.

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, April 28, 2023 and July 11, 2023 and as may be further amended in the future.

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

13 unchanged sentences

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

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – MERGER (Continued)

On July 11, 2023, SilverSun Technologies, Inc.

(the “Company”) entered into the Fifth 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 September 30, 2023.

The Amendment also removes Section 7.06 from the Agreement.

This section had provided for the payment of a $ 5,000,000 termination fee by the Company or Rhodium, as applicable, upon certain enumerated termination events.

Following such removal, the Company and Rhodium continue to retain all other legal remedies available to them upon such termination events.

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.

5 unchanged sentences

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.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

4 unchanged sentences

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

SILVERSUN TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – MERGER (Continued)

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

7 unchanged sentences

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

NOTE 15 – SUBSEQUENT EVENTS

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.

NOTE 15 – SUBSEQUENT EVENT

On August 4, 2023 , the Board of Directors approved the payment of a $ 0.20 special cash dividend per share of Common Stock to shareholders of record August 18, 2023 .

The dividend will be paid on August 25, 2023 .

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

19 unchanged sentences

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.

The growth of our customer base is accomplished via our traditional sales and 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.

63 unchanged sentences

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.

During the first six months 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 and Six Months Ended June 30, 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.

1 unchanged sentence

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.

During the six months ended June 30, 2023 the Company continued to expand its customer base, which we believe provides a basis for future growth.

Revenues increased 21.8% to $26.4 million for the six months ended June 30, 2023 as compared to $21.7 million for the corresponding period in 2022.

Our Acumatica and Sage product revenue continues to grow, and we are excited about the opportunity for growth with our Sage Intacct product.

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.

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

The Company’s strategies are focused on assisting our customers in their digital transformation in this new environment.

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

For the three months ended 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 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.

The proposed business combination is expected to close in 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).

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.

For the three and six months ended June 30, 2023, revenues increased $2,619,198 (24.6%) and $4,723,092 (21.8%) to $13,257,271 and $26,385,009, respectively, as compared to $10,638,073 and $21,661,917, respectively, for the three and six months ended June 30, 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.

Software revenues increased $515,939 (18.5%) and $1,227,306 (22.8%) to $3,298,020 and $6,620,349 for the three and six months ended June 30, 2023, respectively, as compared to $2,782,081 and $5,393,043 for the three and six months ended June 30, 2022, respectively, primarily because of an increase in our ERP software sales, especially for Acumatica and Sage Intacct.

Service revenue increased $2,103,259 (26.8%) and $3,495,786 (21.5%) to $9,959,251 and $19,764,660 for the three and six months ended June 30, 2023, respectively, as compared to $7,855,992 and $16,268,874 for the three and six months ended June 30, 2022.

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

Recruiting in 2021 and 2022 was a difficult challenge, but our efforts to increase our consulting staff with additional resources, as well as system improvements has yielded a positive result in our financial performance.

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.

Gross profit for the three and six months ended June 30, 2023 increased $1,057,877 (25.6%) and $1,710,570 (19.4%) to $5,185,145 and $10,542,705, respectively, as compared to $4,127,268 and $8,832,135 for the three and six months ended June 30, 2022.

For the three months ended June 30, 2023, the overall gross profit percentage was 39.1% as compared to 38.8% for the three months ended June 30, 2022.

For the six months ended June 30, 2023, the overall gross profit percentage was 40.0% as compared to 40.8% for the six months ended June 30, 2022.

The gross profit attributed to software revenues increased $174,751 (15.9%) and $478,422 (21.9%) to $1,270,559 and $2,660,613, respectively, for the three and six months ended June 30, 2023 as compared to $1,095,808 and $2,182,191 for the three and six months ended June 30, 2022, due mostly to the increased volume of software sold.

For the three months ended June 30, 2023, the gross profit percentage on software revenue was 38.5% as compared to 39.4% for the three months ended June 30, 2022.

For the six months ended June 30, 2023, the gross profit percentage on software revenue was 40.2% as compared to 40.5% for the six months ended June 30, 2022.

The gross profit attributed to services increased $883,126 (29.1%) and $1,232,148 (18.5%) to $3,914,586 and $7,882,092 for the three and six months ended June 30, 2023 as compared to $3,031,460 and $6,649,944 for the three and six months ended June 30, 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.

For the three months ended June 30, 2023, the gross profit percentage on service revenue was 39.3% as compared to 38.6% for the three months ended June 30, 2022.

For the six months ended June 30, 2023, the gross profit percentage on service revenue was 39.9% as compared to 40.9% for the six months ended June 30, 2022.

Operating 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.

Selling and marketing expenses increased $288,565 (15.6%) and $691,457 (19.1%) to $2,141,468 and $4,320,171, respectively, for the three and six months ended June 30, 2023 as compared to $1,852,903 and $3,628,714 for the three and six months ended June 30, 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 $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.

General and administrative expenses increased $312,639 (15.1%) and $231,690 (4.9%) to $2,383,784 and $4,943,812, respectively, for the three and six months ended June 30, 2023 as compared to $2,071,145 and $4,712,122 for the three and six months ended June 30, 2022.

This increase in expenses for the three months ended June 30, 2023 is a result of salary increases and an increase in accrued compensation, offset partially by a decrease in credit card fees.

For the six months ended June 30, 2023, general and administrative expenses increased primarily as a result of salary increases and increased accrued compensation, offset partially by a decrease in credit card fees, lower rent and recruitment expenses, as well as lower state excise taxes.

Share-based compensation decreased $45,945 (100%) and $50,393 (54.8%) for the three and six months ended June 30, 2023 to $-0- and $41,497, respectively, as compared to $45,945 and $91,890 for the three and six months ended June 30, 2022.

Depreciation and amortization expense decreased $32,892 (13.9%) and $86,947 (17.4%) to $203,629 and $411,424 for the three and six months ended June 30, 2023 as compared to $236,521 and $498,371 for the three and six months ended June 30, 2022.

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

1 unchanged sentence

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.

As a result of the above, for the three and six months ended June 30, 2023, the Company had net income from operations of $456,264 and $825,801, respectively, as compared to losses from operations of $79,246 and $98,962 for the three and six months ended June 30, 2022.

Liquidity and Capital Resources

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.

While our Company has not been significantly impacted because of the economic 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.

1 unchanged sentence

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

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

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

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

5 unchanged sentences

and (v) the activities of competitors.

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

In addition to exploring potential acquisitions, product additions and investments, we continue to add new customers and increase sales to existing customers.

Management also explores opportunities 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 June 30, 2023, future payments of long-term debt are as follows:

Remainder of 2023

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 working capital was $3,957,224 at June 30, 2023 as compared to $2,946,349 at December 31, 2022 mostly due to lower accounts payable and deferred revenue.

During the six months ended June 30, 2023, the Company had a net decrease in cash of $878,851.

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

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.

Operating activities for the six months ended June 30, 2023 used $323,786 of cash as compared to using $485,308 of cash for the same period in 2022.

The decrease in cash used in operating activities is primarily due to the improvement in cash from operations, excluding the non-cash items, such as depreciation, amortization, and share-based compensation, decreases in accounts receivable and prepaid and other current assets offset partially by an increase in deferred charges for expenses related to the impending merger, accounts payable and deferred revenues.

Cash used in investing activities:

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.

Investing activities for the six months ended June 30, 2023 used cash of $23,860 as compared to using $180,549 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).

1 unchanged sentence

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.

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.

Financing activities for the six months ended June 30, 2023 used cash of $531,205 as compared to using cash in the amount of $274,586 for the same period in 2022.

The increase in cash used 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 recent economic uncertainty and its effects on the business in the coming quarters.

For the six months ended June 30, 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 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.

During the six months ended June 30, 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.

2 unchanged sentences

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