Vertical Computer Systems, Inc. (OTCMKTS:VCSY) Ended the Party

Something broke in the mechanism of Vertical Computer Systems, Inc. (OTCMKTS:VCSY) and the otherwise cheerful ticker slid by more than 35% on Friday, starting the new week with a lower opening as well. More than 13 million shares were shed in two days, sinking the stock to 5 cents. Dollar volumes late last week reached $603,000, and selling started on Thursday. VCSY1014.png

VCSY was not promoted in our database, and it relied mostly on press releases to boost investors’ interest. It is one of the latest tickers from the tech trend to rise to visibility, entice investors and hang around a three-years’ peak, achieved extremely quickly. Unfortunately, the fallout was also fast.IWSY1014.png

VCSY was boosted by the rise in cloud services, and rose just like many other companies that prop up the infrastructure of modern web-based activities. The company produces specialized HR and efficiency software through its subsidiaries.

But VCSY is burdened by $13 million in debt. And the nearly 1 billion shares outstanding, along with the market cap of $58 million seem a bit inflated for the company. The only thing supporting the ticker was the great online discussion going on, centered around the viability of the company. As for viability, the company holds:

  • cash: $36 thousand
  • current assets: $480 thousand
  • current liabilities: $13 million (!!!)
  • quarterly revenue: $1.4 million
  • quarterly net loss: $114 thousand VPIG1014.png

But before VCSY could reap more publicity from its lawsuits for patent infringement against giants such as LG Electronics Inc, Interwoven, Inc (now a subsidiary of Hewlett-Packard Company (NYSE:HPQ)) and Samsung Electronics Co., Ltd., the day of the crash came.

The new week will show where VCSY will be taken, since the company was so far a great unknown.

Several other tech stocks rose to high levels on unprecedented interest. Unfortunately, those gains are rarely stable. ImageWare Systems, Inc. (OTCMKTS:IWSY) shot up to above $2.40, only to slide back to $1.50 in recent weeks.

Another rather solid stock was Virtual Piggy, Inc. (OTCBB:VPIG), rose without the benefit of a promotion, simply following a solid business model of providing online small transaction services. Still, the climb deteriorated, sinking back the ticker to the $1 levels after peaking out at $3.75.

No level of technological expertise or promise can guarantee a stock its stability. If you like the sector, keep in mind that corrections happen to even the best of stocks, so avoid investing beyond a comfortable time horizon and a well-chosen amount of money.

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