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[QUOTE]Originally posted by whizknock: [QB] Form 10-Q for TREY RESOURCES http://biz.yahoo.com/e/090814/tyria.ob10-q.html 14-Aug-2009 Quarterly Report ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION Readers should read the following discussion in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this filing as well as our audited consolidated financial statements and related notes for the year ending December 31, 2008 filed with Form 10-K. The following discussion contains forward-looking statements. Please see "Forward Looking Statements - Cautionary Factors" for a discussion of uncertainties, risks and assumptions associated with these financial statements Overview With the acquisition of SWK in 2004, the Board of Directors decided that Trey will focus on the business software and information technology consulting market, and is looking to acquire other companies in this industry. SWK Technologies, Inc., Trey's wholly owned subsidiary and the surviving company from the acquisition and merger with SWK, Inc., is a New Jersey-based information technology company, value added reseller, and master developer of licensed accounting software published by Sage Software. SWK Technologies also publishes its own proprietary supply-chain software, the Electronic Data Interchange (EDI) solution "MAPADOC." SWK Technologies sells services and products to various end users, manufacturers, wholesalers and distribution industry clients located throughout the United States, along with network services provided by the Company. On June 2, 2006, SWK Technologies, Inc. completed the acquisition of certain assets of AMP-Best Consulting, Inc. of Syracuse, New York. AMP-Best Consulting, Inc. is an information technology company and value added reseller of licensed accounting software published by Sage Software. AMP-Best Consulting, Inc. sells services and products to various end users, manufacturers, wholesalers and distribution industry clients located throughout the United States, with special emphasis on companies located in the upstate New York region. Management is uncertain that it can generate sufficient cash to sustain its operations in the next twelve months, or beyond. It is unclear whether the acquisition of SWK, Inc. will result in a reasonably successful operating business and can give no assurances that we will be able to generate sufficient revenues to be profitable, obtain adequate capital funding or continue as a going concern. Six months ended June 30, 2009 as compared to the six months ended June 30, 2008 Since the acquisition of SWK, Inc., on June 2, 2004, all revenues reported by Trey are derived from the sales and service of Sage Software and MAPADOC products to various end users, manufacturers, wholesalers and distribution industry clients located throughout the United States, along with network services provided by the Company. Revenues for the six months ended June 30, 2009 increased $12,595 (0.3%) to $3,890,189 as compared to $3,877,594 for the six months ended June 30, 2008. These sales were all generated by the Company's operating subsidiary, SWK Technologies ("SWKT"). This increase is primarily due to increased consulting revenues offset mostly by decreases in software sales and revenues derived from maintenance agreements. Gross profit for the six months ended June 30, 2009 increased $168,806 (11.9%) to $1,584,652 as compared to $1,415,846 for the six months ended June 30, 2008. For the six months ended June 30, 2009 the gross profit percentage was 40.7% as compared to 36.5% for the six months ended June 30, 2008. The mix of products being sold by the company changes from time to time, and sometimes causes the overall gross margin percentage to vary. Sales of the larger Sage Software products carries lower gross margin percentage as the relative discount percentage from the supplier decreases. The change in sales mix resulted in gross profit being higher as a percent of sales. Total operating expenses increased $143,928 (8.9%) to $1,766,777 for the six months ended June 30, 2009 as compared to $1,622,849 for the six months ended June 30, 2008. This increase is mainly attributed to the increase in selling expenses. Total other income (expense) for the six months ended June 30, 2009 was income of $751,852 as compared to an expense of $1,536,574 for the six months ended June 30, 2008. The increase in other income primarily reflects other income for the forgiveness of debt associated with the settlement with Mr. Mahoney (see Note 10 to the Financial Statements) lower loss on the valuation of derivatives. For six months ended June 30, 2009 the Company had net income of $569,727 as compared to a net loss of $1,743,577 for the six months ended June 30, 2008. The change in net income (loss) was the result of the factors discussed above. Three months ended June 30, 2009 as compared to the three months ended June 30, 2008 Revenues for the three months ended June 30, 2009 decreased $126,298 (6.6%) to $1,801,406 as compared to $1,927,704 for the three months ended June 30, 2008. These sales were all generated by the Company's operating subsidiary, SWK Technologies ("SWKT"). This decrease is primarily due to lower software sales and revenues derived from maintenance agreements offset partially by an increase in consulting revenues. Gross profit for the three months ended June 30, 2009 increased $23,762 (3.3%) to $743,777 as compared to $720,015 for the three months ended June 30, 2008. For the three months ended June 30, 2009 the gross profit percentage was 41.3% as compared to 37.4% for the three months ended June 30, 2008. The mix of products being sold by the company changes from time to time, and sometimes causes the overall gross margin percentage to vary. Sales of the larger Sage Software products carries lower gross margin percentage as the relative discount percentage from the supplier decreases. The change in sales mix resulted in gross profit being higher as a percent of sales. -------------------------------------------------------------------------------- Table of Contents Total operating expenses decreased $24,255 (2.9%) to $804,210 for the three months ended June 30, 2009 as compared to $828,465 for the three months ended June 30, 2008. This decrease is mainly attributed to the decrease in bad debt expenses, officers' salaries and professional fees offset mostly by an increase in selling expenses. Total other income (expense) for the three months ended June 30, 2009 was income of $603,115 as compared to an expense of $1,439,376 for the three months ended June 30, 2008. The increase in other income primarily reflects other income for the forgiveness of debt associated with the settlement with Mr. Mahoney (see Note 10 to the Financial Statements) lower loss on the valuation of derivatives. For three months ended June 30, 2009 the Company had net income of $542,682 as compared to a net loss of $1,547,826 for the six months ended June 30, 2008. The change in net income (loss) was the result of the factors discussed above. Liquidity and Capital Resources We are currently seeking additional operating income opportunities through potential acquisitions or investments. Such acquisitions or investments may consume cash reserves or require additional cash or equity. Our working capital and additional funding requirements will depend upon numerous factors, including: (i) strategic acquisitions or investments; (ii) an increase to current company personnel; (iii) the level of resources that we devote to sales and marketing capabilities; (iv) technological advances; and (v) the activities of competitors. The Company has suffered recurring losses and current liabilities exceeded current assets by approximately $4.7 million, as of June 30, 2009, and, as such, will require financing for working capital to meet its operating obligations. These matters raise substantial doubt about the Company's ability to continue as a going concern. The recoverability of a major portion of the recorded asset amounts shown in the accompanying condensed consolidated balance sheet is dependent upon continued operations of the Company, which in turn, is dependent upon the Company's ability to raise capital and/or generate positive cash flows from operations. In addition to developing new products, obtaining new customers and increasing sales to existing customers, management plans to achieve profitability through acquisitions of companies in the business software and information technology consulting market with solid revenue streams, established customer bases, and generate positive cash flow. We anticipate that we will require financing on an ongoing basis for the foreseeable future. On December 30, 2005, the Company entered into a Securities Purchase Agreement with Cornell Capital Partners, LP (n/k/a/ YA Global Investments "YA Global"). Pursuant to such purchase agreement, YA Global purchased $2,359,047 of secured convertible debentures which shall be convertible into shares of the Company's Class A common stock. Pursuant to the Securities Purchase Agreement, two Secured Convertible Debentures were issued on December 30, 2005 for an aggregate of $1,759,047. A portion of this financing was used to convert promissory notes and accrued interest therefrom equal to $1,159,047 into new secured convertible debentures and the balance was new financing in the form of secured convertible debentures equal to $600,000 with interest payable at the rate of 7.5% per annum to be issued and sold on the closing of this Securities Purchase Agreement and a second secured convertible debenture equal to $600,000 with interest payable at the rate of 7.5% per annum to be issued and sold two business days prior to the filing of the registration statement that will register the common stock shares issuable upon conversion of the secured convertible debentures. The debentures were due on December 30, 2007 and May 2, 2008, respectively, and carry an interest rate of 7.5% per annum. The principal and accrued interest on the debentures are convertible into shares of Class A Common Stock at a price per share equal to 90% of the lowest closing bid price of our Class A Common Stock for the thirty trading days immediately preceding conversion. The aggregate balance due of the YA Global debentures at June 30, 2009 is $1,559,100 for principal and $494,978 for interest. As of June 31, 2009, the Company is in default of all the YA Global debentures and continues to negotiate with YA Global to cure the default. During the six months ended June 30, 2009, Trey had a net increase in cash of $17,426. Trey's principal sources and uses of funds were as follows: Cash provided by (used in) operating activities. Trey had used cash in operating activities of $26,111 for the six months ended June 30, 2009, a decrease of $417,887 as compared to cash provided by operating activities of $391,776 for the six months ended June 30, 2008. This decrease is primarily attributed to the decrease in accounts payable and accrued expenses. Management has been keeping tight control on the cash and expenses and has been leveraging their funding needs through related party accounts. Cash provided by (used in) investing activities. Investing activities for the six months ended June 30, 2009 provided cash of $143,702 as compared to $67,379 for the six months ended June 30, 2008. The Company received $150,000 from the sale of shares of SWK Technologies during the six months ended June 30, 2009 partially offset by the purchase of property and equipment as compared to receiving $67,379 from cash redemptions of the notes receivable for the same period in the prior year. Cash provided by (used in) financing activities. Financing activities in the six months ended June 30, 2009 used a total of $100,165 in cash as compared to using $257,481 of cash for the three months ended June 30, 2008. This decline in cash used in financing activities is the result of lower repayments from notes payable, convertible debentures and capital leases. -------------------------------------------------------------------------------- Table of Contents Off Balance Sheet Arrangements During the six months ended June 30, 2009, we did not engage in any material off-balance sheet activities nor have any relationships or arrangements with unconsolidated entities established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities nor do we have any commitment or intent to provide additional funding to any such entities. Forward Looking Statements - Cautionary Factors Certain information included in this Form 10-Q and other materials filed or to be filed by us with the Securities and Exchange Commission (as well as information included in oral or written statements made by us or on our behalf), may contain forward-looking statements about our current and expected performance trends, growth plans, business goals and other matters. These statements may be contained in our filings with the Securities and Exchange Commission, in our press releases, in other written communications, and in oral statements made by or with the approval of one of our authorized officers. Information set forth in this discussion and analysis contains various "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The Private Securities Litigation Reform Act of 1995 (the "Act") provides certain "safe harbor" provisions for forward-looking statements. The reader is cautioned that such forward-looking statements are based on information available at the time and/or management's good faith belief with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements. Forward-looking statements speak only as of the date the statement was made. We assume no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information. Forward-looking statements are typically identified by the use of terms such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "might," "plan," "predict," "project," "should," "will," and similar words, although some forward-looking statements are expressed differently. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. [/QB][/QUOTE]
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