rrufff - I have the same concern about dilution.
After HQSM issued the 5M options to insiders last December I sent an email to Jean-Pierre Dallaire the following February. He said the Option Plan was structured for a 3-year period and they would not issue any more options to insiders over the next 3 years. There were only 5M options in the plan and all 5M were issued to insiders in December. So I'm waiting to see if insiders get more options before the end of this year. He said they would only issue more options if they did an acquisition. I think the 5M shares covering those options were registered in September 2005.
The Oct 6 Roadmap PR said HQSM had expanded its profile through "...expanded sales of product and shares to investors as far away as Russia, Holland the UK and France". I sent emails to Dallaire and Sporns asking how many shares had been issued to these investors and at what share price? Or if they could at least say when they would issue a PR with more details. Never got a reply to that, so guess we will just have to wait for the 10-K to find out.
They gave 10M shares to Alps, but I am comfortable with the financial arrangement they have with them. According to an email I got from Sporns (questions I had regarding the Alps plan), HQSM will only pay 3% per year (15% over 5 years) of any amounts they borrow IF they take advantage of the guarantee provided by Alps. Using the guarantee can get them money at lower interest rates, he said they are looking at an offer of libor plus 1.75%. So they would be paying 4.75% per year plus libor (don't know where that is right now). I guess this seems reasonable.
So, I'm pretty comfortable with the financing end of it. Waiting to see if they end up diluting more.
My main concern at this point is how fast HQSM will increase their bottom line. I don't get the impression they will be increasing the bottom line significantly, one reason the analyst is giving them a target price of only $1.25. Revenue in Q3 increased 115%, but profit before the one-time bad debt recovery only increased 22%. I was hoping for a stronger bottom line. Even without all the dilution the bottom line would only have been about 0.019,
So far revenue for the first 9 months is $18.04M, EPS is only 0.02. If they just match last year's Q4 revenue (I would expect them to do somewhat better), FY05 revenue would be $30.87M. Have no idea what FY05 EPS might be, not expecting much.
But if they do start selling more directly to customers increasing their margins, then there may be some hope for a half way decent bottom line in FY06.
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