from w-w-bb:

19.01.2007 - Total Rocketscience

The third and final company making up our Risk / Reward trilogy on shares for 2007 has so many investment negatives that most observers might not even give it more than a cursory glance. Although quoted on the London AIM market, it is based on the other side of the World, has reported revenues and cash flow of diddly squat and, more importantly, operates in an area of expertise so deep in boffinland that you need to be at least a 5 star techie to venture anywhere near it.

What originally persuaded us to give it a second look was the fact that legendary Stockmarket investor, Jim Slater, was pouring money into it via several successive rounds of financing. As we all know, Mr. Slater is a qualified accountant and hugely experienced corporate financier but clearly he is more at home in leafy Surrey than in the technologically rarified atmosphere of Southern California. However, he must have gleaned enough about what the company actually did to get extremely excited about it. In fact, by last Autumn, he had grown to like it so much that, to paraphrase the immortal Victor Kiam, he bought the remaining 51 % of the company that his vehicle, Original Investments, didn't already own.

The company in question was VIALOGY and, ever since it was fully reversed into Original just before Christmas, Slater's loyal band of followers have seen their highly speculative penny punt move on to the calculated risk category and been duly rewarded with a 50% shareprice improvement. We first latched on to this situation last April when we wrote a piece entitled The Cisco Kid ( see news archive ). To recap briefly, the company was set up by some brainboxes who had earlier worked together on supercomputing projects for NASA. Led by Dr. Sandip Gulati, the team appeared to have perfected software to detect and enhance extremely weak signals previously obscured by background noise. This may not seem particularly earthshattering to the layman but, apparently, the applications for this technology are not only revolutionary but almost limitless which suggests that an exponential rise in licensing income could well lie ahead.

Big news clearly travels fast on the Eastern seaboard because global behemoths Cisco and Boeing have already enlisted Vialogy to work on 2 major government inspired projects and these are just the ones that the company have been allowed to talk about publicly. As we reported in April, Cisco has contracted Vialogy to help with its IPICS programme which seeks to make sure that all emergency services and government agencies can communicate with each other quickly via computers and phones. The need to address this obvious requirement was highlighted by 9 / 11 when communications between different departments with different systems proved chaotic.

For its part, Boeing has recently confirmed that Vialogy has delivered a tenfold improvement in the accuracy and efficiency of the types of gyroscopes it uses in spacecraft and missile navigational systems. It is also known that both Cisco and Boeing see a major role for the technology in such areas as border controls and missile defence systems. Elsewhere a much smaller Texan company, Evolution Petroleum, is applying the technology to improving seismic evaluation of oil and gas deposits.

This initial clutch of applications is almost certainly just the tip of a very large iceberg that is going to float into view over the next few years and all that is required is a little patience. At todays price of 5.5p, Vialogy is valued at a mere 22m. To justify this valuation, the company would have to be earning say 2 million pretax. With cash reserves of 3 million and its heavyweight partners funding the projects it is involved in, Vialogy should be able to get through to breakeven without further recourse to shareholders. We would expect this stage to be reached sometime over the next 12 months. Thereafter, profits could / should escalate very dramatically as new applications and licensing income start to snowball.

On a two year view, shareholders could be rewarded extremely handsomely indeed. Vialogy is in so many ways akin to last weeks selection, CORAC. Both are now moving from the development stage to commercialization with the scales tipping away from blue sky risk towards the reality of cash flow. Both have mindblowing upside potential yet both have current shareprice action that makes drying paint look positively orgasmic. Although this presents an opportunity for latecomers, it is a frustrating byproduct of both companies involvement with highly sensitive technology and powerful, publicity shy partners. Moreover, the present lack of any meaningful numbers together with the sheer scale of future potential makes any serious stockbroker research well nigh impossible. All this will resolve itself in due course but, as they say in the Grolsch advert, all good things come to those who wait.

ViaLogy PLC
('ViaLogy' or 'the Company')

Grant of Options


ViaLogy (LSE: VIY), a leading innovator of real-time network-centric signal
processing platforms, announces that it has granted options to subscribe for
Ordinary Shares of 1p each in the Company ('Ordinary Shares'), exercisable at a
price of 8.38p per share, to the following Directors of the Company under the
ViaLogy plc International Share Option Plan:


Director Number of Shares under Option


Dr R W Dean 21,133,168
Dr S Gulati 4,000,000

The options will vest and become exercisable in respect of one third of the
Ordinary Shares over which they are granted on the first, second and third
anniversaries of the date of grant.

In addition, the Company announces that it has granted options to subscribe for
Ordinary Shares, exercisable at a price of 8.38p per share, to the following
Directors of the Company:

Director Number of Shares under Option


M. Kelly 403,500
P. Reynolds 403,500

The options will vest and become exercisable in respect of one third of the
Ordinary Shares over which they are granted on the first, second and third
anniversaries of the date of grant.



Looks like they are feathering their nests .

Looks like it could be a big day on tues .

Not a holder but I'm not sure about the options offer - it could mean they are cushioning the blow allowing Directors to be able to buy at a level only just above the current market. Thereagain, there could be howls of annoyance if the share price soars and they have just sorted themselves a rather good deal - only a week before the announcement - the results of which they already know - would smack of financial irregularity in my book - should have done it a couple of months ago.

Still looking to get into these cheap - not prepared to risk getting in now if there is a 50/50 chance I might get them at half the price.

Fliper: I'm not quite sure of the implications of the Options. Presumably if they are "feathering their nests" then they expect to be able to make a good profit on these Options, which means they expect the share price to rise.

In their Final Results Statement of 28 September, they did say: "You will not be surprised to learn that we have adopted a new Employee Option Plan to encourage and reward their creativity and commitment." Would it be unusual, therefore, to grant Options to the directors? - does not seem unreasonable to me, and would be preferable to having to pay them a huge salary that would be unrelated to results and a burden on overheads etc.

I guess I'm just too naive and not (yet) sufficiently cynical. Anyway, I shall await Tuesday's meeting with interest - it'll be the first AGM I've attended so no doubt a good education!

see you there, toya

Oh good - it would be fun to meet you!

Steady there you two!!! Stay focussed! :o)

I am - profits is what I'm looking for!

It will be good to have feedback from the AGM Toya .

I'll try and take copious notes and do some sort of a write-up for you.

LONDON(Thomson Financial)

Seymour Pierce has upped its stance on Vialogy plc. to "BUY" from "OUTPERFORM" citing its progress in its bid to commercialise its patented technology as a boon.

Seymour Pierce noted that ,until now,Vialogy has engaged primarily in research and development activities relating to network-centric,real-time signal processing from sensors.

It added that initial product releases include SPM,MicroSPM,and MPX and said it is now forecasting revenue of $1.3m in the year to March 2008,rising to $5m and $11m in 2009 and 2010 respectively.

Upgrading to "BUY" the broker said gross margins are expected to be high around 80% plus.

That looks like a good margin to me! I see the sp is moving up today: 9.0-9.5, up 5.71%

Can't wait for the AGM tomorrow!

keep an eye out for me, Toya.

Looking foward to your reports .

Morning All - bright sunny start to the day here in London; let's hope it augurs well for what the Vialogy guys have to say.

I'll try and post some notes tomorrow - won't get home till late tonight. Notlob: I guess you'll be wearing a pink carnation??

even warmer and sunnier here in Dubai! ..... unfortunately, winging my way back to UK this afternoon

Ah - I thought you were perhaps working in a different time zone, or else an insomniac.

my brain is often well-separated from my body as you may have noticed

Hmmmmmm
So it's all gonna happen next year - don't think this is what investors wanted to hear at this time. I thought we were gonna hear that they were already starting to make some money - doesn't look like it - but those attending the AGM might tell a different story. We'll see.

Might get my chance to pick some of these up on the cheap after all.

Go on MG, I dare you!

PS Shame the Xmas do is int' North this year. Can't stretch to wearing a smog mask I'm afraid......