The following discussion should be read in conjunction with the risks set forth in Item 1A hereof and our financial statements and notes thereto appearing elsewhere in this report.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This Form 10-K for the year ended December 31, 2011 contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements may be identified by the use of forward-looking terminology, such as "may", "shall", "could", "expect", "estimate", "anticipate", "predict", "probable", "possible", "should", "continue", or similar terms, variations of those terms or the negative of those terms. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and are considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements.

The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements.

Overview

QUADRANT 4 SYSTEMS CORPORATION ("Quadrant 4 Systems", "we", "us", "our", or the "Company") is a publicly held company engaged in the information technology sector. The Company was incorporated by the Florida Department of State on May 9, 1990 as Sun Express Group, Inc.; changed the business focus from an operating company to a business development company in March 2005 and returned to an operating company in May 2006. During 2008 through May, 2010, the Company developed and sold CCTV camera systems for security applications. In May 2010, the Company announced it was changing its business model and, in June 2010, the Company acquired a new business involving IT consulting. This consulting business was greater in size than the existing businesses so the opportunity was treated by the Company as a material shift in its business model and disclosed in a Current Report on form 8-K on June 2010. At present, the Company has completed the acquisition of certain assets including the assets of Cornerstone Information Systems, Inc., Orionsoft, Inc., Resource Mine, Inc., Integrated Systems Solutions, Inc., all of which are engaged in the primary core business of the Company. That area of business is the primary focus of the Company's business model and is discussed in detail below.

Business Strategy

Quadrant 4 Systems Corporation plans to expand its focus in the IT and ITES market segments through a series of strategic business combinations. The Company intends to establish a full spectrum of IT services that include consulting, products and solutions specific to Healthcare, Retail and Financial Services industries. To implement this new strategy, the Company has begun discussion with certain individuals that bring significant existing experience and relationships in the chosen vertical segments to join the management team and/or participate in some advisory capacity at various levels.

Many US corporations have deferred upgrading and implementing IT infrastructure projects during the most-recent economic downturn. As a result, Quadrant 4 Systems believes that there is a pent-up demand for IT services that include consulting and implementation to help these clients remain efficient and competitive during the recovery time. The Company believes the best way to accomplish its strategic goals will be to initially seek to establish an IT services company platform by acquiring a set of profitable assets with history, track record and satisfied client base. After building the initial platform to launch the new business plan, the Company believes that it will be able to rapidly grow in targeted sectors by attracting additional assets to the Company with subsequent acquisitions. The Company intends to exploit current market conditions where many small and medium size IT services companies (with revenues in the range of $5mm to $50mm), both public and privately held, with "marquee" client relationships would fit with the Company's strategic consolidation initiative. During the past year, the Company has identified and begun negotiations with several targets that qualify for Quadrant 4 Systems' criteria for acquisition and business combination.

Following acquisition of the projected assets and their integration, the Company intends to focus on organic growth both in adding additional revenues from existing clients and also adding new clients.

Core Business

Ultimately, the Company believes that it limit all future development and sales of security hardware and focus its efforts as a provider of IT services. The Company intends to provide IT consulting services; managed services; software product architecture; software development, maintenance and outsourcing and industry-specific software solutions primarily to enterprises engaged in the Financial Services, Retail and Healthcare sectors.

Competition

While the Company currently operates in a highly competitive industry, we believe the Company will be able to compete effectively against well-capitalized competitors that have extensive experience, established distribution channels and facilities by building a scalable yet robust platform that allows the Company to be responsive to the needs of its customers with quality services with competitive pricing, a well-developed recruiting and retention model that ultimately provides a successful delivery to the customers.

Management's Discussion and Analysis of Financial Condition and Results of Operations

As a result of recent acquisitions, the Company is actively executing on its business model which consists of delivery of consulting services in the targeted market segments. The nature of our model involves engaging employees and consultants to provide services to our customers with billing accrued and due in normal billing cycles. We incur debt to meet payroll obligations, the largest component of our expenses, and service debt with the payments received from our customers. Many of our employees and consultants are assisted in the immigration process which process is an expense component. The Company utilizes few major capital items in the delivery of its services and requires no significant plant expenses beyond ordinary commercial office space for both use by the employees on a limited basis and the back-office support for those employees. Our financial statements reflect primarily income from billing for our consulting services and expenses incurred to pay employees and consultants, including financing to meet payroll in anticipation of receipt of billing income from customers as well as general administration expenses to manage the Company.

Critical Accounting Estimates and Policies

General

The Consolidated Financial Statements of the Company are prepared in accordance with U.S. generally accepted accounting principles, which require management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, net revenue and expenses, and the disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Senior management has discussed the development, selection and disclosure of these estimates with the Board of Directors who serve as our audit committee.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably likely to occur could materially impact the financial statements. Management believes the following critical accounting policies reflect the significant estimates and assumptions used in the preparation of the Consolidated Financial Statements.

A summary of significant accounting policies is included in Note 3 to the consolidated financial statements included elsewhere in this Report. We believe that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition. The following are a summary of the significant accounting estimates and policies.

Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. We have made estimates for doubtful accounts of accounts receivable, fair values of our customer lists and the estimated useful lives for the amortization of our customer lists. Management believes that the accounting estimates employed and the resulting balances are reasonable; however, actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the value of customer lists and other intangible assets, values which are not readily apparent from other sources.

Fair Value of Financial Instruments. The Company considers the carrying amounts of financial instruments, including cash, accounts receivable and accounts payable and accrued expenses to approximate their fair values because of their relatively short maturities and notes payable.

Accounts and Unbilled Receivables. Accounts and unbilled receivables consist of amounts due from customers. The Company records a provision for doubtful receivables, if necessary, to allow for any amounts which may be unrecoverable, which is based upon an analysis of the Company's prior collection experience, customer creditworthiness and current economic trends.

Intangible Assets. Intangible assets are recorded at fair value and amortized on the straight-line method over the estimated useful lives of the related assets. The carrying value of intangible assets are reviewed for impairment by management at least annually or upon the occurrence of an event which may indicate that the carrying amount may be greater than its fair value. If impaired, the Company will write-down the intangible assets for such impairment. In addition, the useful life of the intangible assets will be evaluated by management at least annually or upon the occurrence of an event which may indicate that the useful life may have changed. Customer lists were valued based on management's forecast of expected future net cash flows, with revenues based on projected revenues from customers acquired and are being amortized over five years.

Revenue Recognition. Revenue is recognized when it has persuasive evidence of an arrangement, the fee is fixed and determinable, performance of service has occurred and collection is reasonably assured. Revenue is recognized in the period the services are provided.

Results of Operations

For a discussion of factors that could impact operating results, see the section entitled "Risk Factors" in Item 1A, which is incorporated herein by reference. Revenue is recognized when the service is provided.

The Company acquired new assets in transactions which materially affected the amount of reported income from continuing operations. The revenues, expenses and income reflect the new assets. Acquisition of these new assets resulted in material increases in revenues, expenses and income but these increases are not attributed to changes in pricing or profitability of such business underlying the assets compared to prior periods of such businesses but rather the acquisition, in toto, of such assets and businesses. To that extent, a reliance on comparison data from the period prior to acquisition of such businesses compared with the period following such acquisitions may not be a reliable predictor of future performance. The data does not indicate any material effect of inflation or price increases or decreases.

                            Year Ended December 31,
                            2011               2010           Increase/ Decrease        Percent
Revenue                 $  29,141,433      $  15,233,596      $        13,907,837              91 %
Cost of Revenue           (22,265,260 )      (12,883,772 )             (9,381,488 )            73 %
Gross Margin                6,876,173          2,349,824                4,526,349             193 %
General and
administrative
expenses                   (2,262,420 )         (900,119 )             (1,362,301 )           151 %
Amortization and
impairment of
intangible assets          (3,132,666 )       (3,002,549 )               (130,117 )             4 %
Interest expense           (1,629,743 )         (725,566 )               (904,177 )           125 %

Net loss                $    (148,656 )    $  (2,278,410 )    $         2,427,066             106 %

REVENUES

Revenues for the year ended December 31, 2011 were $29,141,433 compared to revenues for the year ended December 31, 2010 of $15,233,596. The increase in revenues of $13,907,837 was primarily due to the acquisition of Quadrant 4 Solutions, Inc. in the first quarter of 2011 and the expansion of the core businesses to include SaaS and other solutions tools. Revenues were comprised of service-related sales of software programming, consulting and development services.

COST OF REVENUES

The increase in cost of revenues of $9,381,488 was due to the increased number of consultants and employees resulting from the acquisition of assets. Cost of revenues is comprised primarily of the direct costs of labor and related expenses.

GROSS MARGIN

The increase in gross margin resulted primarily from improvement in costs (based on the project mix as a result of the acquisitions). The change in project mix resulted in an increase in gross margin percentage from 15% in 2010 to 24% in 2011.

GENERAL AND ADMINISTATIVE EXPENSES

The increase in general and administrative expenses of $1,362,301 was due to the increased staffing, management and overhead costs associated with the acquisition of assets. General and administrative expenses are comprised primarily of management and administrative payroll and related costs, office costs, overhead, staffing and support costs of the Company.

AMORTIZATION AND WRITE-DOWN OF INTANGIBLE ASSETS

The increase in amortization expenses of $130,117 was due to increased amortization expenses from intangible assets acquired in 2011 (the amount of which approximately doubled in connection with the acquisitions. Amortization expenses in 2010 included $1,500,000 for the impairment of the acquired customer list wherein the carrying value of the customer list was more than the calculated fair market value of the customer list.

INTEREST

The increase of interest costs of $904,177 was due to the additional long term debt of the seller's note payable and the increase of the note payable
- revolver on the increased accounts receivable resulting from the acquisition of assets and derivative expenses.

Net loss decreased as a result of the overall increase in revenues due to the various acquisitions.

Earnings before interest, taxes, depreciation and amortization ("EBITDA") for the year ended December 31, 2011 and December 31, 2010 is calculated as follows:

                                     December 31, 2011        December 31, 2010
     Net Loss (GAAP Basis)            $        (148,656 )      $      (2,278,410 )
     Interest expense                         1,629,743                  725,566

     Amortization expense                     3,132,666                1,502,459
     Impairment of customer lists                     -                1,500,000
     Income Taxes
     EBITDA                           $       4,613,753        $       1,449,615

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2011, we had an accumulated deficit of $3,558,285 as compared to $3,409,629 at December 31, 2010. As of December 31, 2011, we had a working capital deficit of $1,158,368 as compared to $1,511,744 at December 31, 2010.

We have no material commitments for capital expenditures.

Net cash used in operations for the year ended December 31, 2011 was $(1,635,931) as compared to net cash used in operations of $(1,816,521) primarily relating to a higher gross margin.

Cash flows used in investing operations of $850,000 was from the cash required to acquire the assets in 2010. The acquisition of assets in 2011 did not require any cash.

Net cash provided by financing activities was $2,660,118 during for 2011 as compared to cash provided by financing activities of $2,726,576 in 2010. The small decrease in borrowings in 2011 compared to 2010 was due primarily due to increased borrowing during 2010 to provide the cash to commence our business.

The Company was reliant on proceeds from the sale of stock in both 2011 and 2010 and proceeds from borrowing in 2010 to provide working capital. A tightening of capital markets can reduce or eliminate funding sources causing in a decrease in our liquidity and an inability to generate revenues from new lending activities.

Liquidity. The Company is continuing to expand its IT business operations through acquisitions and organic internal growth. Acquisitions of target company assets will require additional financing. Currently the Company anticipates that additional financing to fund these acquisitions of assets will be provided by sales of stock or borrowings. Also, the Company is exploring alternatives for its trade receivable factoring which carries a very high interest rate. Refinancing of this receivable factoring financing will reduce the Company's interest expenses thereby increasing the Company's liquidity position.

The Company believes its resources are adequate to fund operations for the next 12 months.

As of December 31, 2011, Contractual Obligations were as follows:

                                                                   Payments due by period
                                                                                                              More than 5
    Contractual obligations           Total          Less than 1 year        1-3 years        3-5 years          years
Long-term debt obligations1       $   8,474,494     $          500,000     $   7,974,494             -0-               -0-
Capital lease obligations                                                                            -0-               -0-
Operating lease obligations                 -0-                    -0-               -0-             -0-               -0-
Notes payable - other                   140,000                140,000               -0-             -0-               -0-
Notes payable - revolver              4,309,317                                4,309,317
Other long-term liabilities
reflected on the Registrant's
Balance Sheet                               -0-                    -0-               -0-             -0-               -0-
                          Total   $  12,923,811     $          640,000     $  12,283,811             -0-               -0-

1 This includes the obligations to the sellers of certain assets.

Impact of Inflation.

The services provided by the Company are generally comprised of consulting services provided by our employees and consultants for whom we incur payroll and other expenses. These expenses can increase with overall inflation which will generally impact all segments of the economy and result in increased revenue from an increase in the rate at which the services of our employees and consultants are billed. This minimizes the impact of inflation. However, inflation may cause companies to cut back on the purchase of consulting services. The Company does not acquire or maintain inventories that present a risk due to inflation.

Off Balance Sheet Arrangements

There are no off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.