| Significant Accounting Policies [Text Block] | NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position of the Company as of March 31, 2024, the results of operations for the three months ended March 31, 2024 and 2023 and cash flows for the three months ended March 31, 2024 and 2023. These results are not necessarily indicative of the results to be expected for the full year. 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, 2023 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, 2023, filed with the SEC on March 14, 2024. The accompanying unaudited condensed consolidated financial statements include the accounts of SilverSun and its wholly owned subsidiaries. These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. All significant inter-company transactions and accounts have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the 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 Credit Losses 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. Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 326-20-30-2, Financial Instruments 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. Goodwill Goodwill is the excess of acquisition cost of an acquired entity over the fair value of the identifiable net assets acquired. Goodwill is not amortized but tested for impairment annually or whenever indicators of impairment exist. 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. The Company completed its impairment analysis as of March 31, 2024. No impairment losses were identified or recorded for the three months ended March 31, 2024 and 2023. Capitalization of Proprietary Developed Software Software development costs are accounted for in accordance with the ASC 985-20, Software Costs of Software to be Sold, Leased or Marketed Business Combinations We account for business combinations under the acquisition method of accounting. This method requires the recording of acquired assets and assumed liabilities at their acquisition date fair values. The excess of the purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Results of operations related to business combinations are included prospectively beginning with the date of acquisition and transaction costs related to business combinations are recorded within general and administrative expenses. Definite Lived Intangible Assets and Long-lived Assets Purchased intangible assets are recorded at fair value using an independent valuation at the date of acquisition and are amortized over the useful lives of the asset using the straight-line amortization method. The Company assesses potential impairment of its intangible assets and other long-lived assets when there is evidence that recent events or changes in circumstances have made recovery of an asset’s carrying value unlikely. 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, 2024 and 2023, respectively. Revenue Recognition The Company has elected the significant financing component practical expedient in accordance with ASC 606, Revenue from Contracts with Customers. 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; and
●
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. Service revenue is recognized when professional consulting, maintenance or other ancillary services are provided to the customer. Most of our service revenue is based on time arrangements which require the client to pay based on the number of hours worked at agreed-upon rates. We recognize revenues for these arrangements based on hours incurred and contracted rates utilizing a right-to-invoice practical expedient because we have a right to consideration for services completed to date. For all performance obligations related to contracts with a duration for less than one year, the Company has elected to apply the optional exemption provided in ASC Topic 606 and, therefore, is not required to disclose the aggregate amount of transaction price allocated to performance obligations that are unsatisfied or partially satisfied at the end of the reporting period. With respect to professional, maintenance, and ancillary services revenue that are included in deferred revenue, these revenues are earned and recognized over the contractual or stated period, which generally ranges three to 12 months. Deferred revenue also includes deposits for future consulting, which are recognized when earned and billed to customer. Maintenance and subscription revenue is recognized on a gross basis when the Company primarily acts as the principal in these transactions. Maintenance and subscription revenue is recognized on a net basis when the Company primarily acts as an agent in a transaction. Shipping and handling costs charged to customers are classified as revenue, and the shipping and handling costs incurred are included in cost of revenues. Components of revenue:
For the Three Months Ending March 31,
2024
2023
Software revenue $ 3,480,001 $ 3,322,329
Professional consulting 4,904,370 4,336,632
Maintenance revenue 1,573,023 1,382,969
Ancillary service revenue 4,478,161 4,085,808
$ 14,435,555 $ 13,127,738 Unbilled Services The Company recognizes revenue on its professional services as those services are performed. Unbilled services (contract assets) represent the revenue recognized but not yet invoiced. Deferred Revenues 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, 2024, there was $787,825 in deferred maintenance and support services and $2,848,545 in deposits for future consulting services. As of December 31, 2023, there was $943,011 in deferred maintenance and support services, and $2,218,071 in deposits for future consulting services. The following table represents the roll-forward of the deferred revenue for the three months ended March 31, 2024 and the year ended December 31, 2023:
Deferred Maintenance and Support Services March 31, 2024
Deposits for Future Consulting March 31, 2024
Deferred Maintenance and Support Services December 31, 2023
Deposits for Future Consulting December 31, 2023
Balance at beginning of period $ 943,011 $ 2,218,071 $ 932,975 $ 2,824,115
Cash received 324,948 1,468,222 1,925,174 5,314,942
Revenue recognized (480,134 ) (837,748 ) (1,915,138 ) (5,920,986 )
Balance at end of period $ 787,825 $ 2,848,545 $ 943,011 $ 2,218,071 Deposits for future consulting increased as a result of our increase in customer deposits as a result of increase in business. Commissions 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 March 31, 2024 and December 31, 2023, as defined in ASC 852 “ Financial Instruments The carrying amounts reported in the unaudited condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023 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. Deferred Charges 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 transactions contemplated by the A&R Investment Agreement (see Note 13), and these costs will be deferred until, and charged at, such time that the expenses are consumed and charged to expense, which, if the transactions contemplated by the A&R Investment Agreement are consummated, would be at the time such transactions are consummated. Leases The Company accounts for its leases in accordance with ASC 842, Leases The Company has assessed its contracts and concluded that its leases consist of finance and operating leases. Operating leases are included in operating lease right-of-use (ROU) assets, current portion of operating lease liabilities, and operating lease liabilities in the Company’s unaudited condensed consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company determines an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate represents a significant judgment that is based on an analysis of the Company’s credit rating, country risk, treasury and corporate bond yields, as well as comparison to the Company’s borrowing rate on its most recent loan. The Company uses the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. The Company finances purchases of hardware and computer equipment through finance lease agreements. Finance lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. Concentrations The Company maintains its cash with various institutions, which exceed federally insured limits throughout the year. At March 31, 2024 and December 31, 2023, the Company had cash on deposit of $5,303,136 and $4,904,148, respectively, in excess of the federally insured limits of $250,000. As of March 31, 2024, no one customer represented more than 10% of the total accounts receivable and unbilled services. As of December 31, 2023, no one customer represented more than 10% of the total accounts receivable and unbilled services. For the three months ended March 31, 2024 and 2023, the Company’s top ten customers accounted for 12% ($1,774,413) and 10% ($1,329,501), 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, 2024 and 2023 purchases from one supplier through a “channel partner” agreement were approximately 15% 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, 2024, a legal firm represented approximately 51% of total accounts payable and one supplier represented approximately 18% of total accounts payable. For the year ended December 31, 2023, one supplier represented approximately 23% 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, 2024, the Company believes it has no significant risk related to its concentration of credit risk related to accounts receivable. Property and Equipment Property and equipment is stated at cost, net of accumulated depreciation and amortization. Depreciation is computed using the straight-line method based upon the estimated useful lives of the assets, generally three to seven years. Maintenance and repairs that do not materially add to the value of the equipment nor appreciably prolong its life are charged to expense as incurred. 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. Income Taxes The Company accounts for income taxes using the asset and liability method described in ASC 740, “ Income Taxes Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as net operating loss carryforwards. Based on ASU 2015-17, all deferred tax assets or liabilities are classified as long-term. Valuation allowances are established against deferred tax assets if it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. 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. The Company has federal net operating loss (“NOL”) carryforwards which are subject to limitations under Section 382 of the Internal Revenue Code. The Company files income tax returns in the U.S. federal and state jurisdictions. Tax years 2020 to 2023 remain open to examination for both the U.S. federal and state jurisdictions. Despite the Company’s belief that its tax return positions are consistent with applicable tax laws, one or more positions may be challenged by taxing authorities. Settlement of any challenge can result in no change, a complete disallowance, or some partial adjustment reached through negotiations or litigation. Interest and penalties related to income tax matters, if applicable, will be recognized as income tax expense. There were no liabilities for uncertain tax positions at March 31, 2024 and December 31, 2023. Fair Value Measurement The accounting standards define fair value and establish a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use on unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is as follows: Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2: Observable prices that are based on inputs not quoted on active markets but corroborated by market data. Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. The Company’s current financial assets and liabilities approximate fair value due to their short-term nature and include cash, accounts receivable, accounts payable, and accrued liabilities. The carrying value of longer-term leases and debt obligations approximate fair value as their stated interest rates approximate the rates currently available. The Company’s goodwill and intangibles are measured at fair-value using Level 3 inputs at acquisition, as discussed in Notes 6 and 11. Stock-Based Compensation Compensation expense related to share-based transactions, including employee stock options, is measured and recognized in the financial statements based on a determination of the fair value. The grant date fair value is determined using the Black-Scholes-Merton (“Black-Scholes”) pricing model. For employee stock options, the Company recognizes expense over the requisite service period on a straight-line basis (generally the vesting period of the equity grant). The Company’s option pricing model requires the input of highly subjective assumptions, including the expected stock price volatility and expected term. Any changes in these highly subjective assumptions significantly impact stock-based compensation expense. Recent Authoritative Pronouncements In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures No recently issued accounting pronouncements had or are expected to have a material impact on the Company’s unaudited condensed consolidated financial statements. |
