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.

the reality is that the costs of a rights issue are just prohibitive
dilution is very modest, 10%, and that is a fact of life for small companies that are not yet profit making.
Considering many ftse100 companies have done rights at a far greater discount to VIY, i think VIY have done exceptionaly well to get this away in what are still difficult times to be raising capital.
There is absolutely no indication that VIY are 'quite happy to dump on current holders'. By securing further funds, they have secured the future for all shareholders.
You could buy these for 1.5p a few months ago, so a placing at 4p ain't a bad result at all.
Also, there is no evidence, one way or the other, that placing shares are being sold now. If any placees wanted to sell, I would suggest it would have been done weeks ago, as the placing would have taken several weeks to organise.

notlob, the point I am making is that ALL shareholders participate in a rights issue not just a select few, and you also want me to believe that none of the placing shares are being sold now, of course there's no evidence to suggest they are, and none to say they aren't.
2517

2517GEORGE
point I am making is that a rights issue for a 2m raise is prohibitively expensive, think at the last agm they said it would cost around 400K+, so it is simply not feasable, as much as we would like it to be. That is the reality.

Not saying that none of the placing shares are being sold now, point I am making is

1) We simply have no way of telling

2) If a placee wished to sell, chances are they would have pre-sold, thats obvious, there is no need to wait for their stock allocation and then sell, that is a riskier strategy.

3) fact that the placing was over-subscribed indicates an enthusiasm for the strong story here, and there is a lot more than 30% profits on offer, so, i think, the chances are most who participated in the placing will be looking at something much more substantial, but thats just my view.

400k may be, if fully underwritten. Ref the over-subscription, of course it would be give me 80p and I'll let you have a 1, wouldn't you want some of that?
I bought VIY in April @ 4.diddley squat, the accuracy of their technology appears compelling and whilst I know b----- all about oil exploration I imagine this technology could be used instead seizmic readings, or have I got the wrong end of the stick. Thanks for the debate notlob, I know you post often here and it's generally very readable content.
2517

thanks for your kind comments, 2517GEORGE

Basically the technology fuses together the current data sets that oil operators normally obtain, such as seismic, and by using Vialogy's patented and unique technology, QRI, are able to give the oil operators much more information than has previously been possible.

That information includes size and porosity of the reservoir and , crucially, the best place to drill for maximum and efficient recovery.

The bottom line here is VIY reckon they can push up the odds of finding commercial oil from the current 4 in 10 to something like 7 or 8 in 10, possibly even up to 9 in 10. Nothing is ever 100% succesful, but if, for example, they could push it from 4 in 10 to 8 in 10, a 100% improvement would be worth a whole lot of money, especially as oil wells in the US cost $500K+ a go.

http://www.vialogy.com/pdfs/QuantumRD_2009_overview.pdf

http://www.moneyam.com/InvestorsRoom/posts.php?tid=14368#lastread

digging deep - shove off and don't be a plonker!

RNS Barclays acquire a further 2 mil shares.

they can have my 64 shares if they want, at a modest 20p each - i'ld even settle for 10p!

cynic better call them quickly.

you're right, or everyone will be dumping!

A good start today , good news on its way ?

Must be something in the wind - over 3m traded already and sp going up.

Interesting to look at the long-term chart here:





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They did say their products would get worldwide demand !

A good run since yesterday's afternoon.
Today the Indicator MACD has gone positive on the chart, crossing UP and through divergence

6.25p +0.75p

Tipped in RHPS last night ..................

"And from my Three Tiny Oil Stocks... report, I am really excited about both Oxford Catalysts (ticker: OCG) and especially Vialogy (ticker: VIY).

There is still time to buy into Vialogy and Im targeting 20p on that one. From the current share price, if we reach that, were looking at a potential gain of some 263% - another three-bagger opportunity!"

Looks like a lot of people must had read that article:
Up 22% so far today, and 14m traded

Funny enough, this is the sort of stock that could do a PXS...imagine what the sp would do upon successful trials that are going on at the moment...this little company would have the likes of BP, Shell and so on knocking at the door....you would have to have crowd control at their offices...it's a possibility....

That's sort of what we've been saying for a while RF... Life's a dream...