Business context and reporting period
Filing identity: The supplied filing is SilverSun Technologies, Inc.’s unaudited Form 10-Q for the quarter ended June 30, 2013—not a filing identified as QXO, Inc. or 2013 Q2 in the request metadata. SilverSun provides business software, consulting, support, and IT services, and pursues growth through proprietary products and acquisitions.
Financial results and position
| Metric | Q2 2013 | Q2 2012 | Six months 2013 | Six months 2012 |
|---|---|---|---|---|
| Revenue | $3.871 million | $3.071 million | $7.915 million | $5.980 million |
| Gross profit | $1.607 million | $1.297 million | $3.242 million | $2.481 million |
| Gross margin | 41.5% | 42.2% | 41.0% | 41.5% |
| Operating income (loss) | $77,339 | ($319,781) | $208,979 | ($1.005 million) |
| Net income (loss) | $62,185 | ($334,031) | $177,715 | ($1.042 million) |
| Operating cash flow | Not presented quarterly | $286,880 | ($58,158) |
At June 30, 2013, cash was $57,573; current assets were $1.496 million and current liabilities $3.182 million, a working-capital deficit of approximately $1.686 million. The bank line had no outstanding balance and $741,936 available. Capital lease obligations were $108,234 current, and related-party notes payable were $20,000. Stockholders’ deficit was $599,480.
Material changes versus the prior comparable period
- Six-month revenue rose 32.4%; management attributed growth to existing-business sales, maintenance agreements, software sales, and HighTower, which contributed $750,073 of six-month revenue.
- Six-month results turned profitable, mainly reflecting revenue growth and substantially lower share-based compensation than in 2012. The 2012 comparison included significant stock-based compensation expense.
- Gross margin eased to 41.0% for the half year from 41.5%, which management attributed in part to changing product mix.
- Operating cash flow improved to $286,880, while investing used $29,179 and financing used $204,611, including repayment of the $178,633 bank-line balance.
Outlook, risks, contingencies, and unusual items
- Management said available liquidity and the credit line should fund operating plans for at least 12 months; it provided no specific numerical earnings or revenue guidance.
- A June 2013 letter of intent to acquire VICOR Business Services expired July 31, 2013, but negotiations were continuing. No definitive agreement or completed transaction was reported.
- On August 1, 2013, after quarter-end, the company arranged a two-year, up-to-$750,000 receivables-based line at prime plus 1.75% and a $350,000, two-year term loan at 8%, with monthly payments of $15,776.
- Management cited potential acquisition, staffing, sales and marketing, technology, and competitive needs as factors affecting future funding requirements. It reported no material change in previously disclosed risk factors, no material litigation, and no material off-balance-sheet arrangements.
- The company reported effective disclosure controls and no material change in internal control over financial reporting during the quarter. It reported compliance with the existing facility’s financial covenants at June 30.
Important facts for investors to verify
- Confirm the issuer and period: the source is SilverSun Technologies’ Q2 2013 10-Q, notwithstanding the QXO metadata.
- Review the terms, borrowing availability, covenants, and cash-flow effects of the post-quarter-end credit line and term loan.
- Check whether the VICOR negotiations resulted in a definitive agreement or acquisition, and the transaction’s financing and expected contribution.
- Assess whether operating cash generation can support the working-capital deficit and planned growth, including acquisitions.
- Reconcile reported growth and profitability with HighTower’s contribution, lower share-based compensation, and the modest decline in gross margin.