SEC Filing Summary
Entity mismatch: The supplied filing is SilverSun Technologies, Inc. (NASDAQ: SSNT), not QXO, Inc. It is a Form 10-Q for the quarter ended September 30, 2020, filed November 10, 2020. The financial statements are unaudited.
Business context and reporting period
SilverSun provides business software, technology and consulting services, including ERP solutions, professional services, managed IT, cybersecurity and cloud services. Results compare the three and nine months ended September 30, 2020 with the corresponding 2019 periods. The former EDI/MAPADOC practice is reported as discontinued operations after its sale in August 2019.
Financial performance and position
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $10.16 million | $10.11 million | $29.91 million | $28.53 million |
| Gross profit | $4.05 million | $3.70 million | $11.84 million | $10.96 million |
| Gross margin | 39.89% | 36.61% | 39.59% | 38.39% |
| Income (loss) from continuing operations | $55,205 | ($949,873) | ($203,396) | ($1.55 million) |
| Net income (loss) | $55,205 | $7.67 million | ($203,396) | $7.76 million |
2019 net income included $9.31 million from discontinued operations, including a $10.14 million gain on the EDI practice sale; reported net income is therefore not directly comparable with 2020. Q3 revenue was nearly flat year over year, while nine-month revenue increased 4.83%. Management attributed growth to consulting and software sales; Q3 software revenue fell 12.24%, partly offset by service revenue growth. Higher gross profit and lower general and administrative expenses improved continuing-operation results.
For the nine months, operating cash flow from continuing operations was $247,135, versus cash used of $1.20 million in 2019. Investing activities provided $867,005, including release of $1.15 million of sale escrow, while financing activities used $2.70 million, primarily reflecting the $2.25 million special dividend. Cash declined $1.59 million to $7.07 million.
At September 30, 2020, total assets were $17.17 million, current assets $10.00 million and current liabilities $6.71 million; working capital was approximately $3.28 million. Total liabilities were $8.47 million. Acquisition-related long-term and convertible notes totaled approximately $1.18 million; finance lease obligations were $218,845 and operating lease liabilities were $1.41 million. The company reported no line of credit or other credit facility.
Material changes versus prior comparable periods
- Nine-month revenue rose 4.83% and gross margin improved 1.20 percentage points. Continuing-operation loss narrowed from $1.55 million to $203,396.
- Q3 continuing operations moved to a modest profit from a $949,873 loss. Lower G&A expenses, including reduced travel and other costs during the pandemic, contributed to the improvement.
- The EDI practice sale boosted 2019 results and cash flows; 2020 results contain no discontinued-operation income. The remaining $1.15 million sale escrow was received in two installments in 2020.
- The company acquired Prairie Technology assets in July for $185,000 cash and three notes totaling $310,000. Its preliminary purchase-price allocation included customer-list intangibles and remains subject to valuation work.
Outlook, risks, contingencies and unusual items
- Management said it believed available liquidity, including funds from the MAPADOC sale, was adequate for at least the next 12 months, but warned that the effects of COVID-19 could undermine that assessment. It provided no quantified revenue or earnings guidance.
- COVID-19 risks include reduced customer spending or payment capacity, delayed on-site consulting, employee and supply disruptions, and adverse effects on operations and cash flows. Management said the ultimate impact was uncertain and that cost reductions and other funding sources were being explored.
- The company received a $3.15 million PPP loan in April 2020 but returned the full amount on May 18 after regulatory guidance created uncertainty about public-company eligibility. Management noted potential competitive disadvantage versus private competitors able to retain PPP funds.
- After quarter-end, SilverSun entered an at-the-market equity sales agreement allowing up to $3,489,499 in common-stock sales, subject to a 3% sales commission; no shares had been issued under it as reported. It also acquired certain CMS assets for a $170,000 note and nominal cash consideration.
- The CFO gave notice of resignation effective November 13, 2020. The company reported no material litigation, debt defaults, or material changes in internal control; disclosure controls were assessed as effective.
- Federal NOL carryforwards were approximately $6.18 million and are subject to Section 382 limitations. Management’s ability to realize deferred tax assets depends on future taxable income.
Important facts for investors to verify
- Confirm the intended issuer: this filing is for SilverSun Technologies (SSNT), not QXO, Inc.
- Assess whether the modest continuing-operation profit in Q3 and improved nine-month loss are sustainable, given pandemic exposure and the absence of quantified guidance.
- Review cash needs, scheduled debt and lease payments, and the impact of the $2.25 million dividend; the company has no credit facility.
- Monitor potential dilution and financing capacity under the $3.49 million at-the-market agreement, as well as the Prairie Tech and post-quarter CMS acquisitions.
- Separate recurring operating performance from 2019’s EDI sale gain when comparing periods, and confirm the final purchase-price allocation for Prairie Tech.