VirTra Systems posted its year end numbers yesterday. There was a lot to like about the company’s achievements in 2004, but not a lot to like about the numbers.
VTSI achieved $1.33 million in revenues, a 35% increase over the previous year. For a company of this size, 35% annual growth is relatively anemic in my view. Based on these numbers, I would have to guess they have not gotten the go ahead to start manufacturing the 17 unit order they received from the Mexican FBI.
VTSI turned a profit on paper, but this is far from a profitable company. $5 million of their profits came from forgiveness of debt. Most of their long term debt was converted to equity. I estimate their actual cash loss to be somewhere in the $2.3 million range after taking out all the non cash items.
On the plus side, VTSI seems to have made a some very saavy strategic decisions in ’04. The technology change to the 3D Hi-Def environment has the industry buzzing about the technology. Nobody has anything remotely like what they offer. They got a lot of very favorable coverage in the media- TV, print, et al.
In addition, Chairman Kelly Jones put together a very favorable arrangement on the debt conversion on behalf of the shareholders. They eradicated $5 million in debt with a dilution factor far in excess of the market value of the company. This is a huge win for shareholders, and sets the table for a financially healthy company as the top line grows.
Here’s a look at the price performance of the stock on a weekly basis since the OTC Journal has been covering the company. We had a lot of fun in the first six months. Since that time, the stock has been grinding in a range without making much progress in either direction.
Despite the going concern letter from the auditor, I am not concerned about the company’s financial status. They have consistently raised cash from an equity line with an institutional investor. It is the least dilutive way to raise money with equity. They have renewed this relationship for another $8 million. They only draw cash when they really need it, thereby minimizing the toxic effect on the shareholders.
The DOD has a great deal of interest in their products. However, the US Military is simply out of money at this time. I believe order flow will begin when the supplemental budget passes, and they could get tremendous order flow from the US Military once they have the fiscal ’06 money in hand.
If you own stock in VTSI you are betting that the groundwork the company laid with the US Military in ’04 will translate into significant orders and top line growth in ’05.
Dear ED.. Any news on the DOD budget that pertains to VTSI… and how soon do you think any positive outcome will arrive for VTSI.
Editor: I have heard in May, but I can’t confirm it. I am told they have orders coming out of the supplemental budget, with many more to follow out of next year’s budget on October 1.
virtra systems has had no news on military contracts and i wanted your opinion on a few things. (1)why their competitors are signing contracts, (2) is there still high interest in virtras military 4g systems, (3) how large could virtras contracts be once the budget passes, (4) where do you see this company in three years regarding military contracts, immersa dome sales and applications and finally annual revenue.
Editor: Teeroy- thanks for your questions, which perfectly summarize what everyone wants to know. I have the answers to nearly all your questions, but I cannot share them with you at this time because the company has not publicly disclosed this information, so it would be a violation of SEC regs.
I can say that if the company receives all the orders that it has been promised by one of the branches of the US Military, I expect the company to do very well. I know there won’t be any orders until the supplemental budget passes.
Here’s my key thought for you. Once the supplemental budget passes, if you don’t read about order flow within 30 days, the long term future of the company could be in jeapardy. If the orders come, you are looking at a two year window in time of massive expansion. I can’t make any guaranttees about which way it will go, but I know the company has a high level of confidence.
HI-any new commentary on VTSI restructure-the Share price has got wacked but seems to be improving
Editor: Don’t follow it anymore.