CrowdGather Focused on Breakeven

Zacks Small Cap Research

By Ken Nagy, CFA

CrowdGather, Inc. (CRWG) is an Internet company that specializes in the development and hosting of forum based Web sites.The firm endeavors to monetize a network of online forums and message boards. Forums remain a much undervalued part of the internet pie with $4.5 billion and CrowdGather is the only public company dedicated to monetizing this area.  More page results equate to more revenue as page views have jumped from 12 million to 220 million per month through several mergers. The Company’s focus is now on monetizing its own forum advertising inventory as well the termination of the previous Adisn revenue model.

On April 10, 2013, the Woodland Hills, California based company, announced it closed on its initial tranche of Series B convertible preferred financing.

The Company received the preliminary $300,000 or $1.00 per share of Preferred Stock and anticipates closing on an additional $300,000 by July 12, 2013. The remaining $400,000 may be purchased at the option of the current investor, or other qualified investors if the current investor does not purchase the remaining $400,000 by October 12, 2013.

The Series B Preferred Stock carries an annual dividend rate of 10% per share of Preferred Stock and is convertible into common shares of CrowdGather, Inc. at a conversion rate of 20 shares of common stock for each share of Preferred Stock. Additionally, the Preferred Stock may be redeemed by the Company at any time at a redemption price equal to 120% of the amount received from the Series B financing. However, the investors in the Series B financing have the option to convert their Preferred Stock into common shares in lieu of accepting the redemption.

It should be noted that this financing comes with a directive for CrowdGather to restructure its business for the maximum operational efficiency and leverage.

While staying focused on improving revenues, management is committed to reducing costs and is working toward creating automated solutions and efficiencies throughout the business that will allow significantly reduced overhead. Management has already begun cost reductions and will attempt to reduce cash expenses by over 40% while maintaining current revenue levels.

By October of 2013, management intends to reduce annualized operating expenses from a $4.0 million run rate to approximately $2.5 million. Management believes it can achieve this without significantly impacting revenues, and therefore move the Company closer to breakeven.

Furthermore, management believes that the financing coupled with the cost reductions will assist in placing the Company in position in which it has the greatest flexibility to help improve shareholder value and that the negotiated investment terms provide CrowdGather sufficient capital to streamline and refine its business.

A copy of the latest research report can be downloaded here >> CrowdGather Report 

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