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.

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......

ViaLogy PLC

Result of AGM



The Board of ViaLogy PLC (AIM: VIY), a leading innovator of network-centric,
real time signal processing platforms for sensor applications, is pleased to
confirm that at its Annual General Meeting held today at 1000hrs, all
resolutions were duly passed.



The Board also disclosed that a pilot project has been initiated with a large
broadband supplier to demonstrate ViaLogy's capability to assist in the
provision of managed services in the areas of 'remote monitoring', 'physical
security and access control', and 'asset tracking'. An update on this project
will be provided in due course.

Bones
Didn't realise u were in these as well - must give 'em a wide berth.

No - still biding my time to see which way the wind blows after today's rather luke warm effort - happy to get 'em about 6p :)

Shame u can't make the Xmas do - not sure myself yet - depends on a couple of things.

MG - you know me, ever decreasing circles :)

I'm back at base, having attended the AGM yesterday - more later.

But for now: I was actually very encouraged by what I heard, and was pleased to have the chance of meeting the directors (they were very approachable and happy to mingle freely, which I see as a good sign). Although I don't think these shares are about to skyrocket, there could be a chance we'll hear more about the Broadband trials before the year is out, and that would certainly have an effect on the sp.

Well done Toya , and thanks for going . Looking foward to your report .

Toya
Is that spin talk to say that it was a total non-event. I thought everyone was talking up the AGM as when all was going to be revealed and the share price would sky rocket.

If you go look at lots of posts in the last few weeks all the holders were ramping up the AGM and reckoned it was the last chance to get in before VIY took off etc. etc.

Sounds like a bit of damp squid to me - so plenty of time to get in over the coming year so I think I'll carry on waiting for a better entry point.

Don't get me wrong, I like the story - just still a little early and probably still a bit high to get in.

The broadband trials will just be the start of it . All good things are worth waiting for .

like turkeys and Christmas!

I've put notes on the AGM as a separate thread, so as not to break up the flow of discussions here.

Thanks for the AGM summary. Certainly helps to understand the business a bit more.

Thanks for the report Toya .

You're welcome - glad it makes sense to you.

a post from A D V F N




-I attended the AGM on Tuesday and was impressed with what I heard.
-There is always a danger that one can be seduced by events of this nature, but I hope I'm cynical enough to try to see through to the meat of the matter!

-It would have been nice, for sure, if at the AGM Vialogy announced that block-buster order. I think it will come, btw, but what I heard was very solid progress being made on a number of fronts and a confidence that this would give results.

-Specifically I was encouraged by the military initiative, where i understand VIY are in a class of one, in terms of the technology they provide. At an expected $750K per base (source:SP note) and 700 bases to go for, with 80% margins, clearly you would only need a modest number of bases for this to be serious business.

-Again, the initiative with one or USA's largest broadband supplier could bear dividends.

-Then they are also looking to integrate SPM and mSPM into the equipment of a top global security company, massive potential again.

-VIY personnel are, as we speak, in Taiwan looking to get VIY's tech into the massive and fast growing RFID market.

-then there is border security, where SPM is being tested for inclusion in that programme.

-There are other projects and initiatives going on where VIY are precluded from saying too much, or even anything!

-One things these different applications and sectors all have in common, is they are all large and rapidly growing markets and VIY stands an excellent chance of being an important part of that.

-My one on one talks with the directors after the meeting confirmed to me the confidence they have, and that that confidence is based on the very real activities now going on

-It was the first time I had heard Bob Dean speak, clearly he needs to deliver, but given his past background and confident and authorative approach, I think he will.

-this is not as good as listening to the guy, but I hope it comes a close second!

-I have done the transcript in good faith, but, as ever, dyor!

Vialogy AGM, Bob Deans presentation.

TB Introduces BD

Bob Dean has a remarkable track record and he has hit the ground running. He has been with us since the beginning of October, which is weeks, but he has known about the Company for some time because he was a non executive director of the Company. He was with SAIC. He knows the Company well, he left a superb position at SAIC to join this Company because he can see the huge potential that we can all see.

BD.

Good morning, a real pleasure to be with shareholders this morning, I hope in my presentation I can convey a bit of the enthusiasm and confidence I feel about the Company and its technology and products.
My job is to give you an overview of the last year and I want to say we have had a year of real accomplishment. I think at the end of this briefing you will have at least as clear an image as I have of the companys strategy and road map for the next year, all of which has been made possible with what we have accomplished over the past. Most importantly we completed product development of four products, I will say a bit more about each of these in a moment.

Our sensor policy manager, our micro sensor policy manager, our MPEX electronic eye, our QRI products.
We have a clear set of products now, clearly identifiable and differentiated in the market place and a clear focus on those market segments where these products are immediately relevant. We launched and completed key R&D products as reflected by the productisation of these technologies. We brought aboard some key technical and senior business people, among the latter myself of course. We have established some very important strategic business relationships which I will share with you in a moment and we are on course to reach our operating plan financial objectives.

Our four products

Let me just say a few words about each of these, to try to put them in the context from which I come and give you a sense of the way I understand.

SPM

If you imagine a campus of three or four buildings that has installed a security system including video surveillance cameras, thermal sensors to show heat patterNs, people , differentiated from the ambient weather temperature for example, including hvax(?) sensors, pipe pressure sensors, acoustic sensors, any type of sensors, all centralised into a control panel, our SPM allows the operator to programme each of these sensors to see something specific event, as opposed to just monitoring everything thats going on and then to programme that sensor not only to see the event but to alert the monitor in a central control panel. So, for example, if you can imagine the system of video cameras ,as it turns out most video cameras that are installed, this includes London, by the way, are really only looked at after the fact,video movie pictures are taken and analysed subsequently, was there anything in there that we should have seen and not seen. This technology in combination with our micro SPM does is allow you to programme the camera to say look for a red Rolls Royce circling Picadilly. Among other things, this takes a lot of labour out of the monitoring loop, not only do you catch things in real time, butyou can also reduce your labour costs, after all, I guess there are 10,000 cameras here in London, you cant have 10,000 or 5,000 people watching these cameras continually.

Out MPEX electronic eye is quite a revolutionary piece of technology. There are 8 cameras mounted around a core that give you a field of view of 360degrees, this box is mounted on a missile or a global hawker-unmanned aerial vehicle, travelling at up to twice the speed of sound, each of these cameras is able to watch that 360 field of view and and find something you a re looking for, on a missile it would be a target, on a global hawk surveillance mission looking for troop formations on the ground, buildings on the ground, tanks on the ground and so on.

Our QRI is probably the most revolutionary piece of this picture, Imagine any sensor, acoustic listening to a sound and trying to hear it clearly, a camera trying to read an image clearly. In each case the acoustic signal pattern, the video pattern is obscured by something, rain, dust, night and so on. This technology allows you to extract the signal, to actually see a signal below the noise pattern, to extract a signal from a very high noise or clutter pattern. We think its absolutely revolutionary and has applications well beyond the market segments we are looking at the moment.

These are our markets

Integrated Security-this is known to people inside this industry as Integrated Security Solutions, taking that enterprise configuration I talked about earlier and deciding what sensors are more effective, where they ought to be, how they tie together and how they ought to queue one another. For example, if you slide your magnetic identification card into a access control point and you are not the person the card says you are we can queue the camera to turn on your face and somebody can see wether its you are not, its an automatic queueing system.

Integrated security for military bases, for borders, we have a major effort going on in the US now run by Boeing that is called SBI Net that is designed to secure the US- Mexican border from illegal entry .

Energy Infrastructure, oilfields, well platforms on the ocean,

Public Safety-detecting contaminants in the water supply, trace contaminants, in the food supply, detecting toxic gases in ambient air space, identity management. One hears a lot about Identity Management in the UK these days with the forthcoming UK ID card programme, that is precisely what we are talking about here, how do you know that someone is who he or she say they are.. You know because youve got facial recognition algorithms, youve got the standard finger print and palm print algorithms, youve got iris algorithms. Our technology allows you again to set up an automatic queueing system.
If someone isnt the person that these biometric say he or she is, set up a queuing system and also the QRI will see patterns, finger print, eye recognition, that are not , if you will, readable by a standard sensor.

Geo seismology, we are pursuing an effort to establish the fact that we can produce data out of secondary oil field , used oil fields that locate residual and remaining oil in the field.

And finally tagged asset monitoring, this is what is becoming the global practice of radio frequency identification , namely attaching a radio frequency signaller to a container , a ship, a truck and being able to monitor both the location and the fact that someone may be tampering with that particular asset.


Many of you have probably heard of Gartner incorporated, Gartner is a US firm, but globally probably the most authorative market analysis on information technology and related issues.
We asked them to come in about a month ago and sit with us for a day , weve talked to them a lot since, look at the technology, look at what we had and validate our own assumptions about our markets , help us identify the competition out there, because there is always competition, and help us assess our business potential. We are in the process of doing that. What I am showing you here is partly their draft conclusions, but they are opportune in as much as we are having our AGM today.

Basically Gartner concluded that the applications market for these technologies as described earlier are large, undergoing rapid growth and global. And we are in the process of actually sizing those, putting a dollar or pound value on these markets. I dont have that for you today. The priority markets they pointed our attention to are Integrated Security, Identity Management and Public Safety, the three that I talked about earlier. Thats not to say that the other markets arent large and growing and valuable to us , just to say that they didnt focus on them in this phase of their work.
They emphasised there was stiff competition in all of these markets but they concluded that our technology offered performance advantages to our customers, our customers being the firms to whom we would sell our technology for embedding in larger products.
Time to market is important, the point there is this technology is changing rapidly, as it always does , we got to get it out in the market and of course weve got to keep adapting the technology, improving the technology itself. They concluded we serve as a cost effective highly leverage factor when our products are incorporated into larger integrated solutions and they felt we would be attractive both to large system integrators, a Lockheed or a Boeing, EDS and sensor providers, that is to say designers and manufacturers of cameras, acoustic sensors, thermal sensors.

Our selling points we get pretty technical here- so I wont dwell on these, but our technology , you here a lot of promises in the world of technology and hi-tech, as you know. The fact is they concluded that our technology was at a technology readiness level of 9. This is a scale we use in the US, originally developed by NASA, if Im not mistaken, to peg the commercial reign of technologies on the market. We are a nine out of nine. We offer with our SPM product a million lines of code, Gartner puts this closer to success because while someone can always repeat the engineering process, the fact is were two or three years ahead in having produced the code and some significant millions of dollar number in saving we can provide a purchaser.

We can build a sensor adaptor for any new sensor in 72 hours, that is to say if you are the person that is watching your acoustic sensor or listening to a building at night and you want to raise or lower the level of dBs you are looking at, we can change that, we can change the policy that is applied to the individual sensor in 72 hours, re-configure it in effect. In many cases these sensor policy changes can be re-configured by the end user, they dont have to come back to us, and by the way this is all a software upload, we dont have to physically interact with the sensor. This is an important point, we can upgrade existing networks, if youve got a thousand cameras out there we can deal with those cameras, even if they are legacy equipment, older equipment , in other words, we dont have to install new cameras, so there is both a cost saving here and an immediate benefit in upgrading the system. Another important point, we can reduce the labour cost of any sensor system , we can take your ten thousand sensors and reduce them down to a single control panel that one individual can monitor and finally our use of QRI enables us to interpret signals that otherwise wouldnt be discernible or alertable for that matter by a normal sensor not using QRI.

Our strategy

Keep it simple
We are positioning ourselves as a preferred supplier to companies that are offering integrated security solutions in this expanding market.

We are partnering with key system integrators and Im going to say a bit more specific about that in a minute, and sensor manufacturers as a win factor in their commercial bids and bids to the US Govt. Weve got to maintain our technology leadership, Ive mentioned before, through our own continued research and development and product development. its our intention to sell directly not just to system integrators and sensor developers but to the US Govt and were having considerable success in that , we go right to the Govt, our goal is to have them designate Vialogy as a directed sub-contractor to the larger sub-contractors who are providing the overall solution. They do that on the strength of our technology, regardless who they choose to provide the larger package to them, they want to see us included in that package and finally most of these markets, as Im sure you gather, are global markets, the camera surveillance business is booming and growing astronomically around the world so the global markets are naturally drawing us.


Let me say a bit about our current activities.
I mentioned that our objective is to partner with major companies targeting large markets where we offer them a discriminator in their solution sale.. This is a bit of a hackneyed term, but these are integrated solutions, off the shelf pieces of equipment and technology fused together to provide a solution to an overall problem.

We are in negotiation with a top global security company and camera supplier, again my apologies but our agreement says we cant mention names, and our objectives here is to insert SPM and mSPM into there cameras and video surveillance networks as a component part, a kind of Vialogy inside approach to this.

We are in the midst of a pilot with one of N.Americas largest open broadband network operators. So they are sitting on miles and miles of fibre optic cable and wireless networks, they want to take that pipe and provide managed services over the pipe and one of the things they want to do is provide an enterprise security, so if you go back to my example of the three or four buildings, this company would go and design your system, tell you which sensors you needed ,install them then mange the system over the pipe that runs into those enterprises that they now use primarily for telephony and voice. We see this as a repeatable model, if we can be successful in this case , and this company, by the way, is operating in Europe as well, we see this as a repeatable model that we can take to other network operators who are sitting on top of other similar fibre optic pipe.

Heres something I can mention, we are under contract with the Taiwan Industrial Technology Research Institute which in Taiwan is an all important half-way house between the research laboratory technology development and Taiwanese Industry and our job there, we have a pilot underway, we have people on site as we speak, it to successfully demonstrate SPM for use in their radio frequency indentification solutions then work work them in transferring this technology, this product to some of Taiwans largest shipping and container services companies .We do not have direct contact with these folks yet, were working through TITRI this hopefully opening t e door for us for the RFID market.

This is an example of a project that is on-going with the Government, the Govt has stood up in the wake of 9/11 in an effort to protect our military bases, to set up perimeter security systems that protect against chemical , biological, nuclear, radiological nuclear and explosive intrusions that provide physical security monitoring and access control. This is an experiment of which we are a central part and if we are successful here we see the possibilities of deploying this overall system, which will be provided by one of the larger companies, but we will be part of it , we hope, to a number of US bases world-wide. There are approx. 700 military bases world wide, Im not saying this system is going to go to all those bases, but those that are considered most vulnerable. Its a key line item in our Congressional budget authorisation for the military.

We are in agreement with another major system integrator to test SPM for insertion into their border security systems, I mentioned a moment ago our on-going efforts to secure the Mexican border to be able to detect unwanted or illegal intrusions and this would be a programme that we would target to be a piece of.

(Question from Audience: Is that Boeing? BD: I cant say, there are probably three or four candidates that one could plug in there)

Finally we are in the process of, these are all on-going activities, to put our QRI software into a new optical sensor being developed by a Fortune 100 Company. This would allow them to detect using a sensor at a distance to detect an unwanted substance, gas or an explosive emission or something, because again the QRI allows you to extract the pattern from a distance where as the sensor in itself cant do that.

(Q form audience, I know you cant give us IDs, but what about time-line? BD: 4-6 months. Q That includes some revenue in 4-6 months
BD: yes, it will include revenue before 4- 6 months, if we are successful)

Now looking ahead, my last chart.

The basic point I want to leave with you is all of our efforts and all of our energies are devoted to establishing partnerships with larger companies. There are probably 20 key , focal companies in the system integrator category and 20 in the, Im picking those numbers out of the air, its somewhere between 10 and 20, who are sensor manufacturers this is our objective, to be Vialogy inside and we believe we give them considerable leverage and advantage in the market place. We will maintain our focus with them jointly on the large markets and projects. In a small company like this focus focus focus is everything in my view and Im not going to let us be diverted into things where there are obvious applications for the products and the technologies because I believe the pay of is here, the major firms and the large markets. And I use projects here because there are Goverment projects that we want to be a part of. Often the Govt projects like border protection or enterprise are precursors to the technology being used commercially, so its a way in to the commercial market.

And finally Im going to devote a lot of attention with my team to focusing on the execution of the business and the business process and ensuring as we go forward and we start to execute on commercial contracts we have the business discipline necessary to do that well.

That ends my presentation.

All good stuff , onward and upwards .

Thanks Notlob for posting this here. It completely confirms my positive impressions on the day also.

[And by the way - I never did spot your pink carnation]

i think you could see a lot of blood today, not only here but everywhere in general ..... lots of margin calls and of course it's friday too so everyone (many!) will be shutting all positions prior to w/e

Thanks for that cheery note, Cynic! I think I might go out and play, rather than watch all that goriness.