Business context and reporting period
The supplied filing is SilverSun Technologies, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2014. This does not match the request metadata naming QXO, Inc.; verify the issuer before relying on this summary. SilverSun provides business software, implementation and consulting, and managed IT services, and pursues growth through proprietary products and acquisitions.
Financial performance and position
- Revenue: $4.925 million, up 21.8% from $4.045 million. Service revenue was $4.315 million; software product revenue was $610,000.
- Profit and margins: Gross profit was $2.105 million, with a 42.7% gross margin versus 40.4%. Operating income was $202,000 (4.1% margin), versus $132,000. Net income was $121,000 versus $116,000; reported basic and diluted earnings per share were $0.00.
- Cash flow: Operating cash flow was $401,000, down from $471,000. Investing activities used no cash; financing activities used $57,000, mainly debt and lease repayments. Cash increased $344,000 to $1.107 million.
- Liquidity: Current assets were $2.996 million and current liabilities $4.064 million, implying negative working capital of about $1.068 million and a current ratio of about 0.74. The company reported $750,000 available on its revolving credit line and compliance with covenants.
- Debt and obligations: Bank term-loan balance was $237,522; a related-party note was $20,000. Capital lease obligations totaled about $87,735. No revolving-line balance was reported. The term loan and credit facility are secured by substantially all company assets and guaranteed by the CEO.
Material changes versus the prior comparable period
Revenue grew primarily from maintenance agreements, software sales, and Sage ERP X3 implementations. Higher consulting and managed-services revenue contributed to improved gross margin. General and administrative expense rose 56.7% to $1.093 million, mainly from payroll, rent, utilities, bank fees, and office costs; selling and marketing expense was nearly flat. Lower term-loan interest expense helped reduce other expense. Despite higher operating income, net income increased only modestly, in part because the 2014 quarter included a $70,911 income-tax provision.
Outlook, risks, contingencies, and unusual items
- Management said it expected adequate liquidity for at least the next 12 months, citing business growth and credit availability, and expected no significant liquidity impact from the subsequent ESC acquisition. No quantitative earnings or revenue guidance was provided.
- On May 6, 2014, after quarter-end, the company acquired ESC Software assets for a $350,000 five-year note bearing 2% interest and assumed certain liabilities. The deal also included a three-year employment agreement with $162,000 annual base salary and 600,000 options at a $0.15 exercise price, vesting 20% per year over five years.
- In February, the company granted 1.5 million employee options; estimated grant-date value was $115,488, with compensation recognized over approximately four years.
- Management identified acquisition and funding needs, competition, and dependence on estimates and assumptions as relevant uncertainties. The company reported no material litigation, no material off-balance-sheet arrangements, no derivatives or hedging, and no material changes to previously disclosed risk factors. Disclosure controls were judged effective.
Important facts for investors to verify
- Confirm the issuer: the filing is for SilverSun Technologies, Inc. (ticker SSNT in the filing), not QXO, Inc.
- Review the full filing and subsequent disclosures for ESC’s assumed liabilities, integration results, and the acquisition’s effect on liquidity and earnings.
- Assess the company’s negative working capital, reliance on secured credit availability, debt maturities in 2015, and covenant compliance.
- Evaluate the sustainability of revenue growth and gross-margin improvement against rising general and administrative expenses.
- Check the effects of share issuance and option grants on dilution; the filing reports 118,176,976 shares outstanding as of May 5, 2014.