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| SSVE.OB > SEC Filings for SSVE.OB > Form 10-Q on 14-Apr-2009 | All Recent SEC Filings |
14-Apr-2009
Quarterly Report
Forward-Looking Statements
Certain statements, other than purely historical information, including
estimates, projections, statements relating to our business plans, objectives,
and expected operating results, and the assumptions upon which those statements
are based, are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements generally are identified by the words "believes,"
"project," "expects," "anticipates," "estimates," "intends," "strategy," "plan,"
"may," "will," "would," "will be," "will continue," "will likely result," and
similar expressions. We intend such forward-looking statements to be covered by
the safe-harbor provisions for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995, and are including this
statement for purposes of complying with those safe-harbor
provisions. Forward-looking statements are based on current expectations and
assumptions that are subject to risks and uncertainties which may cause actual
results to differ materially from the forward-looking statements. Our ability to
predict results or the actual effect of future plans or strategies is inherently
uncertain. Factors which could have a material adverse affect on our operations
and future prospects on a consolidated basis include, but are not limited to:
changes in economic conditions, legislative/regulatory changes, availability of
capital, interest rates, competition, and generally accepted accounting
principles. These risks and uncertainties should also be considered in
evaluating forward-looking statements and undue reliance should not be placed on
such statements. We undertake no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise. Further information concerning our business, including
additional factors that could materially affect our financial results, is
included herein and in our other filings with the SEC.
Overview
We provide offshore business process outsourcing, or BPO, services which we deliver primarily to U.S.-based clients from our facilities in the Philippines. BPO services involves contracting with an external organization to take primary responsibility for providing a business process or function, such as customer management, transcription and captioning, processing services, human resources, procurement, logistics support, finance and accounting, engineering, facilities management, information technology and training. These customer care services and solutions are provided by our skilled customer service representatives to small and mid-sized companies in the healthcare, communication, business services, financial services, publishing, and travel and entertainment industries.
Our Facilities
The Philippines
From our inception in May of 2007, we have continued executing our strategy to aggressively grow our business while continuing to optimize capacity of our existing facility. We began operations at our interim facility in Cebu, Philippines. This was a 5,000 sq. ft facility with 125 seats (workstations) for our dedicated employee services. However, in the first three quarters of 2007, we completed the build-out of our primary facility in the Philippines and transitioned operations from our interim facility that we had leased pending completion of the new site. Our new 9,000 sq. ft. primary facility is able to accommodate 326 workstations for our dedicated employee services. This expanded facility can accommodate 400-600 employees; depending upon utilization needs, we are able to operate 24 hours per day, 7 days per week. This is nearly three times the previous location's capacity. The lease on our new facility is for 5 years at the rate of approximately $3,750 per month.
Furniture and desktop technology continue to be added to this new facility as necessary to establish production seats to meet client demands.
We plan to reach capacity at our current center within the next 1-3 months. To address this we have acquired additional space within our current building to accommodate an additional 100 seats (workstations). We will seek additional capacity through additional centers to meet excess demand. Our revised plan is to continue to add space and capacity to keep up with demand. We continue to scale up to larger more recognized clients and this should help accelerate our growth even further. We have a very robust pipeline that includes clients with the potential of over $1 million revenue annually in size.
Boca Raton, Florida
During the current reporting period, we purchased an investment property in Boca Raton, Florida for a total of $267,832.68. We anticipate that in the near future this investment opportunity will double as new office space to extend our market reach and provide additional support and services that are critical to our expanding customer base and partner channel. We chose Boca Raton because of the many talented financial and mortgage professionals displaced by the financial crisis and the ability to attract and retain these sales professionals with our lucrative residual income model. We hope to attract these professionals to service our BPO operations and complement our existing staff in the Philippines. We have a team of three sales professionals at our Boca Raton, Florida office.
Our Service Representatives
As of February 28, 2009, we had approximately 240 of the 326 workstations operating in our new facility in the Philippines. We increased our full-time employee count and have a backlog of potential candidates to select from. We plan to hire additional employees as needed until we reach capacity, at which point we will look to acquire space for further expansion.
We have a remotely viewable camera system that allows our clients to watch their "dedicated employee" working live with 8 full color cameras viewable from our website. We believe this provides significant value to our clients and potential clients in adding a visual aspect to our services.
Sales and Marketing
Our sales and marketing support group is and will continue to be responsible for increasing the awareness of our services in the marketplace and generating meetings with prospective clients through leads, sales calls, membership in industry associations, web-based marketing, public relations activity, attendance at trade shows and participation in industry conferences and events. We market our services through our website at www.SupportSave.com. We also run 30 second commercials on CNBC through the Dish Network.
We have thus far marketed our services through our website, online advertising and direct contact via email. In the next 12 months, our plan is to continue to expand our indirect channels through resellers, partners and affiliates. This allows us to greatly reduce our sales and marketing expense while broadening our reach. Under our current model our resellers mark up our price and keep the difference, our margins are not impacted and our volume is increased through resellers.
We have also formulated a plan to reduce exposure to risk of currency fluctuations and weakness in the US dollar through non-deliverable forward contracts. We hope to implement this plan in the next nine months. During the fiscal year we executed Non-deliverable forward contracts between the USD and the Philippine Peso to protect our business and clients from further weakness in the US Dollar.
Research and Development
We will not be conducting any product research or development during the next 12 months.
Results of Operations for the three months ended February 28, 2009 and 2008
To become more profitable and competitive, we have to attract more clients, sell our services and generate more revenues.
Our revenue reported for the three months ended February 28, 2009 was $491,692, compared with $338,540 for the three months ended February 29, 2008. Our revenue reported for the nine months ended February 28, 2009 was $1,358,006, compared with $672,861 for the nine months ended February 29, 2008.
Our revenue generated for all periods was attributable to the sale of our BPO services. The increase in revenues for the three and nine months ended February 28, 2009 from the same periods in 2008 is attributable to an increase in the sale of our BPO services as a result of expanding our facilities and operations.
Returns and allowances are refunds for services not provided. Returns and allowances for the three months ended February 28, 2009 amounted to $6,637, compared with $5,631 for the same period ended February 29, 2008. Returns and allowances for the nine months ended February 28, 2009 amounted to $41,405, compared with $14,733 for the same period ended February 29, 2008. We experienced more returns and allowances in the three and nine months ended February 28, 2009 compared with the same periods 2008 as a result of our increased customer base.
Our revenue less returns and allowances is our total revenue. Total revenue for the three months ended February 28, 2009 was $485,055, compared with $332,909 for the same period ended February 29, 2008. Total revenue for the nine months ended February 28, 2009 was $1,316,601, compared with $658,128 for the same period ended February 29, 2008.
Our operating expenses for the three months ended February 28, 2009 was $371,861, compared with $218,171 for the same period ended February 29, 2008. The increase in our operating expenses for the three months ended February 28, 2009 compared with February 29, 2008 is mainly attributable to increased payment for commissions, computer services, depreciation, dues and subscriptions, employee benefits, internet, rent, salaries, telephone, travel and utilities expenses. The increase was caused by increased operational activity.
Our operating expenses for the nine months ended February 28, 2009 was $1,220,027, compared with $461,497 for the period ended February 29, 2008. The increase in our operating expenses for the nine months ended February 28, 2009 compared with the same period 2008 is mainly attributable to increased payment for bank charges, commissions, computer services, consulting, depreciation, dues and subscriptions, internet, licenses and fees, rent, salaries, telephone, travel and utilities. The increase was caused by increased operational activity.
We had other expenses of $69,199 for the three months ended February 28, 2009. Other expenses for this period consisted mainly of $45,859 in losses from currency hedging transactions and $24,000 as a result of federal income tax expenses. In comparison, we experienced other expenses of $27,931 for the three months ended February 29, 2008. Other expenses for this period consisted mainly of $29,550 as a result of federal income tax expenses.
We had other income of $38,087 for the nine months ended February 28, 2009. Other income consisted of interest from cash balances on deposit at a financial institution of $4,863 added with $4,906 from other income, $15,699 for gains on the sale of investments and $119,000 in federal income tax benefits, offset by losses from currency hedging transactions in the amount of $106,381. In comparison, we experienced other expenses of $47,737 as a result of federal income tax expenses of $50,225 offset by interest income of $2,488 for the nine months ended February 29, 2008.
We had net income of $43,995 for the three months ended February 28, 2009, compared with net income of $86,807 for the three months ended February 29, 2008. We had net income of $134,661 for the nine months ended February 28, 2009, compared with net income of $148,904 for the nine months ended February 29, 2008. We have been operating with a positive cash flow since inception, albeit reduced in 2009 compared with 2008.
Liquidity and Capital Resources
As at February 28, 2009, we had $396,274 in current assets and $46,075 in current liabilities. On February 28, 2009, we had working capital of $350,199.
Operating activities provided $276,382 in cash for nine months ended February 28, 2009. Our stock based compensation expense of $222,000 net income of $134,661, along with depreciation of $42,564 and accounts payable of $32,463 were the primary components of our positive operating cash flow, offset mainly by deferred income tax of $119,000. Cash flows used by investing activities during the nine months ended February 28, 2009 was $460,856 for the purchase of property and equipment and changes in investment in marketable securities, combined with a currency translation adjustment. Cash flows provided by financing activities during the nine months ended February 28, 2009 was $0.
Currently, our primary source of liquidity is cash flows provided by our operations. We will not require additional capital to execute our plan, unless we expand into additional facilities or grow through the acquisition of complementary businesses. Our current cash flows from operations are sufficient to meet our working capital requirements over the next 12 months.
Off Balance Sheet Arrangements
As of February 28, 2009, there were no off balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
A smaller reporting company is not required to provide the information required by this Item.
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