Business context and reporting period
The supplied filing is SilverSun Technologies, Inc.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2013; it is not identified as a QXO, Inc. filing. SilverSun provides business software, consulting, support, and managed IT services, and pursues growth through proprietary products and acquisitions.
Financial results and liquidity
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | $4.375 million, up 26.1% year over year | $12.290 million, up 30.1% |
| Gross profit / margin | $1.631 million / 37.3%, versus $1.387 million / 40.0% | $4.873 million / 39.6%, versus $3.867 million / 40.9% |
| Operating income (loss) | $(62,084), versus $119,212 | $146,895, versus $(886,160) |
| Net income (loss) | $(82,219), versus $102,808 | $95,496, versus $(939,414) |
| Operating cash flow | $862,003 for nine months, versus $153,463 |
At September 30, cash was $938,008, compared with $4,483 at December 31, 2012. Current assets were $2.326 million and current liabilities $3.780 million, a working-capital deficit of approximately $1.454 million. Total liabilities were $3.973 million; stockholders’ deficit was $631,295. The balance sheet included $320,750 of term debt, $94,992 of capital lease obligations, and $20,000 payable to a related party. The $750,000 revolving credit line was undrawn and fully available at quarter-end. The company reported compliance with loan covenants.
Investing activities used $31,375 and financing activities provided $102,897 during the first nine months. Cash increased by $933,525. No income tax provision was recorded. The filing does not present a separate EBITDA figure.
Changes versus prior period
Nine-month revenue and gross profit grew, and results moved from a substantial prior-year loss to modest net income. The comparison was affected by $1.132 million in share-based compensation in the first nine months of 2012, versus $34,212 in 2013. Third-quarter operating performance declined to a loss despite higher revenue, as selling expense rose 77.1% to $926,738. Gross margin fell in both the quarter and nine-month period, which management attributed in part to changing sales mix.
Outlook, commentary, and risks
Management said it believed available cash, business growth, and credit availability were adequate to fund operating plans for at least the next 12 months. No numerical earnings or revenue guidance was provided. Management cited increased maintenance agreements, software sales, Sage ERP X3 implementations, and continued craft-brewery solution sales as growth drivers, while noting increased sales and marketing investment. Acquisitions or investments may require additional cash or equity. The August 2013 credit facility is secured by substantially all company assets, guaranteed by the CEO, and carries a monthly monitoring fee; the term loan bears 8% interest and requires monthly payments of $15,776.
The company terminated negotiations for a proposed VICOR Business Services acquisition in the third quarter and incurred $5,000 in related costs. It reported no material litigation, no material changes to previously disclosed risk factors, and no material off-balance-sheet arrangements. Management reported effective disclosure controls and no material changes in internal control over financial reporting.
Investor verification points
- Verify the issuer and filing identity: the source is SilverSun Technologies, Inc., although the request names QXO, Inc.
- Assess the working-capital deficit and reliance on the secured credit facility, despite management’s stated 12-month liquidity outlook.
- Review the third-quarter selling expense increase and gross-margin declines, and whether sales growth can translate into sustained operating profitability.
- Confirm debt repayment terms, covenant requirements, and the CEO’s guarantee of the bank facilities.
- Consider the effect of prior-year share-based compensation on year-over-year earnings comparisons and share-count changes.