Go / No-Go Agent

Go / No-Go: Project Sentinel

Recommendation (up front)

GO, but as a capped phase, not a full diligence commitment. Spend two to three weeks and no more than a small part of the $15,000 on three kill-tests. If any fails, stop.

Confidence: moderate. The business may be worth buying; the record cannot yet say.

1. The case for proceeding

• Size and sector fit your buy-box: reported EBITDA $1.08M, adjusted $1.42M (FS p.4), in a code-driven service (CIM p.5).
• A large share of revenue sits with contracted accounts: 78% on the seller's definition (CIM p.7, p.22).
• Revenue has risen across the periods shown: $5.34M, $5.78M, $6.21M (FS p.2), +8.2% and +7.4% (mine).
• The seller discloses the main risks himself: licence, data export, change of control, concentration (CIM p.14, p.16, p.19, p.23). That makes them easier to test than hidden ones.

2. The case against

• The CIM contradicts itself on concentration: "no single customer" above 15% (CIM p.8) versus Northgate at about 22%, $1,366,000 (CIM p.9). The top ten are about 61%.
• Every job runs under the founder's personal licence (CIM p.14). No transfer path is documented.
• Earnings quality: $340,000 of add-backs is 31.5% of reported EBITDA (mine), and the revenue base is $260,000 above the tax return (Tax p.1; mine).
• The fit score is 7 of 16, with the three zeros all in the documents.

3. What must be true, and how to confirm

Northgate's agreement is long enough and assignable. Confirm: read the contract; ask for term, renewal date and any consent clause (CIM p.19 says this has not been reviewed). Pass mark (my suggested floor, adjust to yours): at least two years remaining and no unconsented termination on sale.
2.

The licence can be transferred or replaced. Confirm: the state's rule in writing and a named person who could hold it. Pass mark: a path measured in months you can bridge with a seller transition period.
3.

Underwritable EBITDA stays at or above $1.21M. That is adjusted EBITDA less the $210,000 owner add-back (mine). Confirm: ledger support for the $65,000, $41,000 and $24,000 and the owner's actual pay. Pass mark: $130,000 of non-owner add-backs documented.

4. What is known and what is assumed

• Known (from documents): figures above, with the tax-return gap and the 22%.
• Assumed: that the periods align, that prior years are in the order written, that reported EBITDA is for the TTM (FS p.4 does not say).
• Missing: asking price, margins, contract terms, cash flow.

If the answer is "no"

Stop on the first failed test and tell the broker plainly. Do not buy more time by asking for more documents.

This is an analytical aid and not investment, legal, tax or accounting advice. The Project Sentinel documents are synthetic test data.