SEC Filing Summary: Trey Resources, Inc. (10-Q)
Business Context and Reporting Period
This is a Quarterly Report (Form 10-Q) for Trey Resources, Inc. for the period ended March 31, 2008. The Company, a smaller reporting company traded on the OTCBB under symbol "TYRIA," operates primarily through its subsidiary SWK Technologies, Inc. The business focuses on business software, information technology consulting, and value-added reselling of licensed accounting software (Sage Software) and proprietary supply-chain software ("MAPADOC").
Key Financial Metrics
| Metric | Q1 2008 | Q1 2007 |
|---|---|---|
| Net Sales | $1,949,890 | $2,118,358 |
| Gross Profit | $695,831 | $798,904 |
| Gross Margin | 35.7% | 37.7% |
| Net Loss | $(195,751) | $(191,593) |
| Cash from Operations | $186,266 | $246,603 |
| Cash and Equivalents (End of Period) | $237,579 | $633,813 |
| Total Current Liabilities | $5,607,808 | $5,493,016 |
| Stockholders' Deficit | $(4,031,074) | $(3,913,587) |
Debt and Liquidity: The Company holds approximately $1.59 million in principal on convertible debentures and $110,000 on a line of credit. Current liabilities exceed current assets by approximately $4.5 million.
Material Changes vs. Prior Period
- Revenue Decline: Sales decreased by $168,468 (8.0%) compared to Q1 2007, attributed to tightening financial markets and delayed client purchasing decisions.
- Expense Reduction: Total operating expenses decreased by $41,497 due to management tightening expense controls.
- Non-Cash Financing: The Company issued 626,111,111 shares of Class A Common Stock to convert $70,100 of principal on convertible debentures held by YA Global Investments.
- Derivative Liability: The derivative liability associated with convertible debentures was revalued to $213,935, resulting in a gain on revaluation of $2,562 for the quarter.
Outlook, Risks, and Contingencies
- Going Concern: Management has raised substantial doubt about the Company's ability to continue as a going concern due to recurring losses and a working capital deficit. The Company requires additional financing to sustain operations beyond the next 6 months.
- Defaults: As of March 31, 2008, the Company is in default on two secured convertible debentures issued to YA Global Investments (total principal $1,404,447). Management is negotiating to cure the default.
- Related Party Obligations: Significant amounts are owed to related parties, including unpaid salaries and one-time payments to the Chairman and CEO, totaling over $1.4 million combined.
- Outlook: The Company plans to achieve profitability through acquisitions in the business software market and by increasing sales to existing customers, though no assurances are given regarding success.
Investor Verification Checklist
- Default Status: Verify the current status of negotiations with YA Global Investments regarding the defaulted debentures and potential acceleration of debt.
- Liquidity Runway: Confirm the Company's ability to secure the additional capital required to fund operations beyond the estimated 6-month runway.
- Related Party Deferrals: Review the terms of the deferred compensation agreements with executive officers and the likelihood of future cash outflows or equity dilution to settle these debts.
- Revenue Sustainability: Assess the impact of the economic downturn on the Company's core software reselling business and the validity of the "tightening expense controls" strategy.
- Share Dilution: Monitor the conversion features of the outstanding debentures, which allow conversion at 90% of the lowest closing bid price, potentially causing significant dilution.