Quadrant 4 Systems Corp (OTCMKTS:QFOR) Climbs Further
There are sectors like the medical marijuana business and the 3D printing-related technology that create quite a lot of buzz among OTC investors, but eventually die out a little bit. Unlike them, the IT industry is a constant source of excitement. Everyone knows that there’s money to be made from it and that’s why there are so many small cap companies working in this particular sector. Quadrant 4 Systems Corp (OTCMKTS:QFOR) is one such company and seems to be among the industry’s more solid OTC representatives.
Things have been particularly busy around QFOR over the last couple of months. Some acquisitions were made at the beginning of 2013 and when the 10-Q for the second quarter confirmed that things are going along nicely, investors reacted and the price started climbing the charts at a rapid rate.
The ticker has been on another major rally over the last couple of weeks. Announcements of new contracts and partnerships, about increased exposure, and other positive developments sent QFOR on something of a winning spree which culminated yesterday when more than $464 thousand worth of shares changed hands while the price made another significant surge. It managed to briefly go above the $1 per share barrier and although it finished the day at $0.93, shareholders are confident that it will manage to sustain the positive trend.
The report for the third quarter went online on November 13 and it has also played a role in QFOR‘s ascend. As the company informed us in a press release, the revenues have registered a 40% increase year-over-year and it’s quite clear that traders are taking note. That said, there are some problems as well. Here’s a rundown of the strengths and weaknesses:
- cash: $47 thousand
- current assets: $6.6 million
- current liabilities: $11.8 million
- quarterly revenue: $9.1 million
- quarterly net loss: $836 thousand
The lack of significant cash resources shouldn’t be that much of a worry since QFOR have a revolving line of credit in place. The huge liabilities, however, could put a spanner in the works. In fact, when you compare the latest 10-Q with the one covering the same period of 2012, you’ll see that the current portion of the debt has increased by more than 80%. As a result, they now have a working capital deficit that is four times bigger than last year’s one.
On the positive side, it seems that they are working hard on keeping the expenses at bay. Despite the bigger revenues, the net loss has shrunk by about 9% year-over-year, but despite this, it’s still significant and some more cost-cutting will need to be done.
That brings us on to the awareness campaign that started a couple of months ago and is carried out by Red Chip Companies. Some email alerts have drawn in investors and most of them also link to a couple of interviews with Dhru Desai, QFOR‘s Chairman of the Board and CFO. According to the fine print, QFOR themselves pay an undisclosed monthly cash fee and have given Red Chip half a million restricted shares as well as 250 thousand stock options. A report was also put together and it gives the ticker a price target of $7 per share.
We’ll let you decide whether this is a realistic projection, but what really bothers us is the necessity of such a campaign. More precisely, the lack of such. We reckon that coming up with a way of turning the loss into a profit is far more important than promoting the company’s stock. What’s more, as you probably know, OTC tickers are extremely volatile and, as North American Oil & Gas Corp (OTCBB:NAMG)’s chart shows, the raised awareness could wreak havoc with the performance. We reckon that this is something well worth keeping in mind while making your investment decision.
