Qfor red chipjanconf

Confidential | Copyright © Q4 Systems Corporation

Q4 Systems Management Presentation RedChip Emerging Growth Showcase January 2014

Dhru Desai, Executive Chairman Dr. Nandu Thondavadi, CEO December 2013


Safe Harbor Statement

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This partial discussion of the statements of financial condition and operations of the Company should be read in conjunction with the condensed consolidated financial statements and related notes contained in the Company’s latest quarterly report on Form 10-Q as filed with the Securities and Exchange Commission. Various remarks about the Company’s future expectations, plans and prospects constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Such remarks are valid only as of today, and the Company disclaims any obligation to update this information. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Company’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission. In addition, today’s presentation and Webcast may include non-GAAP financial measures within the meaning of SEC Regulation G.


Our Vision

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Innovative SMAC Technology Platforms for

Disruptive Business Models

Social media Mobility Analytics Cloud computing


Corporate Data – At a glance

� Name: Q4 Systems Corporation � Ticker: OTC QB – QFOR � Shares: 83.5 MM (10% institutional, 20% real public float, 25% strategic

holders and 45% affiliates and insiders) � Revenue & EBITDA: $37 MM / $4.5 MM (run-rate) � Corporate Counsels: Ellenoff Grossman&Shole LLP /Kelly Drye Warren � Auditors: Sassetti & Co. � Transfer Agent: Securities Transfer Crop

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Management & Board

�  Dhru Desai – Executive Chairman & CFO �  30-years experience successfully building private & public companies in IT & telecom �  Founder & CEO of Cronus Technologies – later acquired by Cisco

�  Nandu Thondavadi, Ph.D. – CEO �  Founder of Global Technology Ventures – an M&A advisory to the IT sector �  Served in various roles with companies such as EDS, Square D, Coleman and others �  Former professor at the Kellogg School of Management, Northwestern University

�  Robert Steele, Chief Sales and Marketing Officer �  30 years veteran in health care, insurance and technology sector, NFL player

�  Thomas Sawyer, Ph.D. – Director �  Senior executive with more than 40-years public company experience, Technology advisor to 3 presidents of

USA.

�  Eric Gurr, CPA. – Director �  Senior executive with more than 25-years public and private company experience in Telecom

sector in USA and China, previously president and CEO NACT, NetTrue, Shanghai Bell JV. 5


Credentials

Global Delivery Center Q4 Qualifiers !  4 Near site state-of-the-art facilities

including 1 in Southeast, MI !  4 state-of-the-art global delivery

centers !  20% of workforce with media and

publishing domain expertise

!  40% of our clients are associated with us for more than 7+ years !  Industry leading attrition rate of <8%

!  70% of workforce have global work experience

! Competencies covering legacy to next generation technologies

Q4 Location Statistics

Ops/technical resources 700 21% Growth

Customers 115 17% Growth

Revenue 40+mil 60% Growth

2013 Growth

20Mil hours of ADM Services 5Mil hours of IMS Services

9Mil hours of Consulting Services 300+ Content Driven Websites

64,000 Servers 400,000 Service Desk Users

74,000 Network Devices 22,000 Data Bases

6000 TBs Storage 1.5M Batch Jobs

Cloud Footprint ! Over 40 IPs owned in SaaS,

mobile servicing enterprises ! Vertical focus cloud solutions

for Retail, Publishing, Automobile, Healthcare

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Our Customers Enjoy ! Succeeded in reducing IT cost by

70% for a large M&P client ! Achieved 50% reduction in cost-to-

serve over 6 years time for a large manufacturing client

! Reduced IT OPEX by 60% in 5 years for a large discreet manufacturing client


Technology Stack

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2013 Performance

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Third Quarter Revenue (millions)

Gross Margin

6.5

9.1

0 2 4 6 8

10

3Q12 3Q13

Nine-Month Revenue (millions)

19.9

28.1

0

10

20

30

9 mths '12 9 mths '13

Third Quarter EBITDA (millions)

0.5

1.1

0

0.5

1

1.5

3Q12 3Q13

22.7% 28.6%

0.0%

10.0%

20.0%

30.0%

40.0%

3Q12 3Q13


Business Units

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SMAC


Growth Target

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$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$0

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

$120,000,000

2010 2011 2012 2013 2014 2015 2016

Q4 Consulting

Q4 Solutions

Q4 Cloud

Q4 Health

EBITDA Revenues


Key Clients

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Overall Market Opportunity

Convergence of SMAC Technologies

into Platform offering

• Healthcare IT – Market Place/ Exchanges, Disintermediation and Consumerism, “Regulated Retail”

• Retail IT – Multi/Omni Channel, SMAC enabled supply chain, distribution and retail commerce

Verticals with most Disruption

opportunities

$5 trillion in IT Spend by 2020

(SMAC and Exchanges)

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Regulatory Trends

• Affordable Care Act • Changes in underwriting requirements

Employer Trends

• Fixed Contribution Model – similar to 401k shift 20 years ago

• 80% employees & over 50% employers groups will prefer health exchange

Market Trends

• Consolidation an Disintermediation

• Aggregation - Multicarrier, Health & Non-Health products

• Consumerism – Control, Freedom and Flexibility

Economics

• Compelling case for Market Places

• Private Exchanges moving ahead with little reliance on Obama Care

• Technology will improve cost and efficiency

Health Exchange – Drivers and Opportunities

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Opportunity to become Amazon.com of Healthcare Disruption


External Interface

Exchange Platform Functionality

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Reach and Teach TM

Market Place

Exchange Administration

Portfolio based Recommendation

Mem

ber

Acq

uisi

tion M

ember

Engagement Employer

Mgmt

Reports & Analytics

•  Supports Medical, Dental, Vision, LTD, STD

•  Responsive Design •  Payment Gateway Integration •  Social Media Integration

•  Member Engagement over social media – Quiz, surveys etc…

•  Exchange and Wellness TV •  Targeted Advertisements •  Social sentiment analysis

1Invoice TM

•  Consolidated invoice •  Bill Payments •  Reconciliation •  Fee Administration •  Disbursements and Adjustments

Exchange Models

Indi

vidu

al E

xcha

nge

Gro

up E

xcha

nge

Insu

rer O

pera

ted

Ret

aile

r Ope

rate

d

Sin

gle

& M

ulti

Car

rier

Cla

ims

: FS

A,

HS

A

Fede

ral E

xcha

nge

HR

/ Pay

roll

Car

riers


PRIVATE EXCHANGE

QHIX

EMPLOYEES

CARRIERS / PAYORS EMPLOYERS GROUPS

ADMIN SUPPORT

BROKERS / AGENCIES

•  Shop, Compare, Planning •  Unified Access to Benefits/

Wellness market place

All Benefit products •  Health/ non-Health •  Wealth & Wellness •  Insurance / non- Insurance

•  Call Center •  Web/Chat •  Retail

•  Aggregation & Branding •  Dis-Intermediation

•  Consolidated Billing •  Custom Contributions •  Beyond Traditional

Benefits

ExchangeFunctionality


Health Exchange Opportunity

Addressable Market

Over 100 million people looking to

buy insurance through Exchanges

QFOR aims for at least 5% share (5 million covered

lives over next 36 months)

Revenue Model

$2 - $6 per member per month (PMPM)

Distribution Model

Private Label with 20 large insurance

brokers

Exclusive strategic arrangement with Health and Non-Health Insurance

Carriers

JV with HR, Payroll and Third Party Administrators

Status Fully Functional

exchange commercially

available TODAY

50,000 members enrolled, 4

Exchange partners in implementation

In discussion with 5 of 9 smaller Blue Cross and 4 other

tier 2 carriers


Investment Highlights

Rapidly Growing Market Opportunity

Dynamic Industry Verticals

Growth Stage Company

Robust Product Technology and Sales Pipeline

Superior Business Model

Significantly Undervalued

SMAC IT Market expected to grow at a CAGR rate of 38% through 2020

Healthcare >> Evolving “Market Place” and Exchange models Retail >> Multi Channel Retail platforms

Continuous 13 quarters of EBITDA positive result; 100+ blue chip clients and deployed technology platform; 700+ strong delivery organization

Proprietary IP-protected technology portfolio; Market leader in Health Exchange platforms; Many $1M+ revenue opportunities in sales pipeline

Scalable deployment with non-linear cost structure; Recurring revenue; Blend of product and services revenue

Trading @ 1.5x Revenue/11.8x EBITDA; Against target peer group comps at 4.0x Revenue & 15x-25x EBITDA; Tower Watson acquired Liazon for $215M


Peer Comparison

Name Ticker Price USD

Market Cap (MM)

P/S (TTM)

Fwd. P/S

EV/EBITDA (TTM)

Rev. (TTM)

Fwd. Sales Growth (YoY)

Xhibit Corp. XBTC 1.60 174.7 3.2x N/A N/A 45.1 N/A

Callidus Software CALD 10.91 442.6 4.7x 3.5x N/A 94.2 16.9%

Jive Software JIVE 10.93 762.33 5.2x 4.3x N/A 139.0 29.9%

Datawatch Corp. DWCH 33.66 238.9 7.4x 5.0x N/A 30.3 42.9%

Wageworks WAGE 58.00 2,009.3 8.9x 8.4x 52.6x 210.9 25.1%

Benefitfocus BNFT 48.05 1,196.8 12.1x 9.2x N/A 96.7 26.1%

Cornerstone Ondemand CSOD 49.97 2,584.94 15.3x 10.3x N/A 166.7 56.9%

Median 7.4x 6.7x 52.6x 26.1%

Q4 Systems QFOR 0.64 53.5 1.5x 0.9x 13.8x 34.8 67.4%

As of November 29, 2013

SOURCE: Bloomberg

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Thank You

Dhru Desai, Executive Chairman [email protected] Dr. Nandu Thondavadi, CEO [email protected]