Pulled off of ragingbull.com vxtk board (referenced link).....great overview....
This guy apparently put out a buy today after the market closed...good luck to all! (Finally)
Financial writers (if I may call myself one), can very often seem wrapped up in the numbers of a company. Revenues, earnings per share, current ratios, debt, equity - we got a million of 'em.
But behind any balance sheet is the very human story of how each company was someone's vision before the first penny was earned. Often that person has navigated the uncharted river of developing and/or marketing a totally new product or service, building staffs, morale and distribution networks, and all within a constantly morphing background of competition, legislation, and buying habits. And did I mention keeping shareholders happy?
Such multi-faceted people are some of the most interesting, brightest and best-educated among us, and Small Cap derives immense pleasure finding, observing and reporting on the progress of young aggressive growth companies.
Occasionally, a story develops that deserves attention beyond financial or business circles. One in which the people at a company persevere through time, battling giant multi-nationals and all manner of problems to ultimately launch an important product. Veronex Technologies, Inc. may be on the verge of authoring just such a story - and if they are indeed successful, one hopes the recognition they receive will match the resistance they faced en route.
Readers would be aware that what the world confronts on January 1, 2000 are buried lines of bad computer code embedded within our blood supply - our computer systems. 0f course, businesses have always confronted code each time they have needed to change what their software does. The state of computer code just gets worse and worse as there are now approximately 700 BILLION lines of code out there in 1500 different programming languages. Internal or outside programmers are regularly required to fix, upgrade, or implement any changes to corporate software.
Veronex believes their new software product, I/Nova, can do for computer networks, what Microsoft Word templates did for report and resume writers, and what programs like Front Page did for people who wanted to build web pages, but didn't know code. Veronex believes it has the finest option for any company ready to move past the traditional software problems- and that its' I/Nova software represents a paradigm shift worldwide. The I/Nova System is quickly customized for use by utilizing templates, rather than computer code. Six thousand banks in Asia have just said they agree. Veronex Technologies has already started implementing the e-commerce system for these banks - and the many thousands of branches that they represent.
It is very much the David and Goliath story, as Veronex secured the contract over IBM. The contract is substantial, long-term and possibly the beginning of a Great Awareness that there is indeed, Another Way. The company continues to accept major challenges, as the implementation is scheduled to largely be completed by January 1, 2000, a job that some say would take five years worth of traditional code work. The I/Nova system is not only Y2K ready, but is viewed as an important Y2K solution by users.
Veronex's course has not always been lined with roses. Formerly International Veronex Resources Ltd., the company entered into a Farmout Agreement with Triton Oil (NYSE: OIL) in 1988 which would have resulted in substantial revenues from the Enim Oil Project in Indonesia. Starting in 1989, the companies have been suing and countersuing each other for ten years, and it would appear they are not yet done.
Veronex forcefully contended that Triton did not fulfill its legal obligation to invest $24 million dollars in the venture. Undeterred by initial rulings against the company, Veronex Chairman, CEO and CFO, David Hite was able to uncover memos supporting his original contention following a final judgement against Veronex. The next court date of Veronex vs. Triton is scheduled for September of this year and alleges that Triton perpetrated a fraud upon the court, and that Triton falsified accounting records for the Enim Project, among other things. Veronex' suit against its original law firm in the case was settled for a net cash payment of $5.2 million dollars, which the law firm has paid in full.
Small Cap was impressed with the tenacity level demonstrated by Veronex in this case, and understands that during the most difficult legal times, this publicly traded company was down to 2 employees - current Chairman David Hite and current Investor Relations contact, David Wooldridge. So how did Veronex Technologies, Inc. arrive on the scene as a possibly prominent software company with 40 employees and growing?
On January 14, 1997, the Company, watching for other opportunities in the marketplace, entered into a Property Purchase Agreement with Thomas J. Price, a software developer, to acquire certain software technology "including, but not limited to, an information management application system, including a source program analyzer (collectively referred to as the I/Nova System)". The agreement called for Veronex to pay a fee of $20,000 and to issue up to 12,000,000 shares of Common Stock to acquire the system.
Mr. Price, a renowned software developer, is to receive the vast majority of his shares as the system earns revenues for the company. Mr. Price is now the very active President and Chief Operating Officer of Veronex, and is currently in the Far East installing his I/Nova software for the Asian banks mentioned above.
The Company continues to sign Strategic Alliance Partners and Distribution Partners that have licensed the I/Nova System for significant fees. Veronex, which has always been fully reporting, had revenues of $15,417,000 for the quarter ending 11/30/98, up from $210,000 in the same period in 1997! The revenues for the nine months ending 11/30/98 were $16,500,000 for 1998 compared to $250,000 for the same period in 1997. Earnings per share were $1.04. So one can ascertain the company is truly in the midst of dramatic changes. Fourth quarter results and final numbers for the fiscal year ending February 28, 1999 are due soon (officially Veronex is a Canadian company not required to report until August 28, 1999).
RECOMMENDATION: One must wonder how a stock that earned $1.04 for the first nine months of the fiscal year can be available for $3.00. My initial thought is that investors are either unaware of this dramatic story, or uncertain about possible dilution relating to shares used to purchase the I/Nova System. Small Cap sees that the company would have roughly .34/share in earnings fully diluted (about 24 million shares)- with another quarter of possible (and even probable) earnings to go. At a very low multiple of 30 for a software company that finds itself with a hand like this, the stock probably should be $10 right now. And if the company's belief in their I/Nova product indeed turns out to be even 1/10th validated in the marketplace, the stock has not even warmed up yet. It's extremely hard to set targets for this stock - but Small Cap thinks revenues can be huge - just for the Asian bank contract, which is based on percentages of transactions for years to come. We are going to take this in stages and observe progress. Let's give the market a little time to digest what they have here, and just say the first target is $10 by year's end. Personally, I think that's way too low, but it just seems we should take this in stages and see if confirmation of our assessment arrives with the annual report in a few weeks. In addition, I tend to prefer a bit of conservatism in such matters - we can always adjust upwardly as we go.
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