Vertical Computer Systems Inc. (OTCMKTS:VCSY) Wakes Up

Generally speaking, Vertical Computer Systems Inc. (OTCMKTS:VCSY) has been following an upward trend over the last couple of months and this was particularly noticeable during the first days of October. Seven sessions (only one of which closed in the red) and some increased volumes resulted in massive gains. At one point, the ticker even managed to reach $0.10 per share, but after two devastating sessions on October 10 and October 11, it plummeted below $0.06.

During the following weeks, volumes subsided and the price movement remained as unpredictable as ever. We have seen another surge over the last couple of days, however, so we decided to investigate and see what’s going on.

At first, the reasons for the initial surge, the heavy drop and the sudden awakening from Wednesday and Thursday seem somewhat hard to spot. The company has been providing software solutions for quite a while and we can see that they have been generating decent amounts of revenue over the past few years, but unfortunately, they have yet to turn a profit. The fact that they have less than $37 thousand in the bank and the colossal working capital deficit make for a pretty horrific balance sheet as well, which could explain the price of less than $0.10 per share.

The investors are not that bothered with the operations, however. When you go through the message boards, you’ll see that what they are counting on, is not VCSY‘s clever products or their expert management team, but rather, the outcome of a couple of patent infringement lawsuits.

As we mentioned in our previous articles, VCSY have filed some complaints against big companies like LG Electronics Inc, Interwoven and Samsung Electronics Co, Ltd. When we were covering the ticker’s movement at the beginning of the month, we mentioned that there isn’t a whole lot of information available on the internet about the cases and we were struggling to see why traders seemed so excited back then. In fact, all we had to rely on was the message boards and the special web pages dedicated to the company and its patent infringement lawsuits.

Right now, the price is heading North once again and the forums are just as active as they were two weeks ago. Again, people are talking about hearings that should take place soon and about settlement agreements with rumors of a positive end of the LG proceedings being particularly intense.

Once again, however, we could find absolutely no documents, court rulings or anything that could definitively show us that VCSY will manage to gain something out of all the legal actions. The company itself seems to be keeping pretty quiet about the outcome of the lawsuits which does seem somewhat odd considering the amount of money regular investors are putting on the line.

They did publish a press release on Wednesday, but it’s related to a new patent that was recently issued and the management team fail to explain whether it will, in some way, help them with the infringement complaints.

Early trading today suggests that we’re in for another green session. About an hour after the opening bell the ticker is up 17% and if this trend continues, it might be standing at the door of $0.10 once again in the near future. Let’s not forget, however, that it’s currently drawing a chart pretty similar to the one we were seeing before the October 11 drop.

If the company updates people on the developments and if the news is good, the price will certainly go up. The more the silence continues, however, the bigger the likelihood of a drop is. Make sure you weight the risks carefully and perform the necessary amount of due diligence before jumping in.

A definite plus point is the lack of a paid promotion. Endeavor IP Inc (OTCBB:ENIP), another patent play recently became the target of a $1 million pump and although the initial hype did give the price a boost, the momentum seems to be running out.