To OTC Journal Members:
 

Year End Wrap Ups in December

Here's another year end review coupled with some great news and a stock breaking out.

VirTra Systems announced the results of its recent efforts to convert its long standing and overwhelming debt to equity in a very favorable arrangement for shareholders. As it turns out, the company's efforts have been rewarded, and the stock is responding in kind. A perfect way to end the year for VTSI.

Next year we are also going to be introducing a new component to the OTC Journal service which will provide live commentary during active trading days. This should help us maximize return and minimize trading mistakes. Stand by for more details before year's end. We are working on the technology right now.
 

Vitra Systems (OTC BB: VTSI); Long Awaited Breakout Triggered By Debt Conversion

The IVR-360 is driving this company in the right direction. VTSI has made lemonade from lemons. The company has always been a front runner in virtual reality technology, but could never figure out how to commercialize its knowledge- until now.

16 months ago VTSI announced it would take its many years of expertise and use it to create "Judgemental-Use-Of-Force" simulators for the military and domestic security and police. This has turned out to be the right product at the right time.

Several months after announcing their new direction, the stock made a multi year high of $.47, pulled back towards the end of 2003, and has been range bound for all of 2004- until today.

VTSI broke out of its multi month range between $.30 and $.41. In early trading today the stock hit a high of $.46- an new 52 week high and just a couple of pennies below a new all time high.

VTSI's excessive debt load has been a major negative for the stock, and kept many potential new shareholders away. Yesterday, the company announced preliminary results from it's offer to the old debt holders, and the results have lit a fire under the stock.

Here's the most current facts I have relating to the debt conversion:

• VTSI will be issuing 5.2 million new shares (about 10% dilution)
• This newly issued shares will reduce the company's debt by 70%; $10 million in debt will become $3 million.
• Only 318,000 of the 5.2 million share have asked for their shares to be free trading immediately.
• Only 265,000 of the 5.2 million shares have asked to be free trading in 6 to 12 months.
• 4.7 million of the 5.2 million shares will not be free trading for 12 to 18 months.
• VTSI has eliminated $7 million in debt for a little over $2 million in stock, and an infinitesimal 318,000 shares are all that could hit the market in the near future.

88% of all the debt holders have agreed to participate. 4% cannot be located, and the statute of limitations will run out on their debt. The company is attempting to persuade the remaining 8% in order to achieve a debt free status. Based on past performance, I like their chances.

Here is a chart of VTSI throughout 2004. The upper and lower blue lines represent the range for the stock throughout most of 2004. It bumped up against the upper blue line three times before finally breaking through.

Technically, this is an extremely bullish sign. I believe the stock has finally broken out of its trading range and is positioned to start making some new highs. Pullbacks should be viewed as an opportunity to accumulate, and a drop below the $.40 level will be heaven sent for anyone looking to add to or open a new position.

This idea has been particularly frustrating throughout the course of 2004. The company has delivered outstanding corporate performance, but the stock has spent the year grinding in a range. Many small companies don't deliver performance. It is particularly frustrating when one does deliver, but the stock doesn't trade up.

The latest version of the simulators is is being well received by the military community. The have introduced Blue Tooth technology in the weapons used in the simulators. The have taken 360 degree high definition scenarios to a new level. Now, in one fell swoop they have eliminated 70% of their long term debt.

The chart tells me this stock is going higher. Demand is increasing and supply is decreasing. The company has raised money this year out of an equity line which is nearly depleted. This will help mitigate supply. Also, a large renegade seller and one of the original founders has left the company and sold all of his stock. This supply is now gone. Very little supply could hit the market in the next year from the debt conversion. The supply/demand dynamic has shifted favorably for price appreciation.

VTSI opened 2004 at $.34. As I write today's edition, the stock is trading at $.42- net gain ytd: 31%. While on paper this seems pretty good, I view it as anemic vs the corporate developments throughout the year. The best is yet to come.

Watch for 2004's accomplishments to be reflected in the stock price in 2005. I believe the next major order announcement will take the stock into the $.50 plus range- I just don't know when it is going to be.

Chairman Kelly Jones is going to be conducting a conference call next Monday to discuss both the debt conversion and the company's future. If you have any interest, I strongly recommend you tune in. If you can't make the live version, listen to the recorded version after the event.

Here is today's press release with instructions for the conference call:
 

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