Metal Storm sets sights on revenue
22may04 HS
METAL Storm has established a new subsidiary to commercialise production of a civilian handgun that could start generating revenue for the cash-burning electronic ballistics company by 2006.
Shareholders at the annual meeting in Brisbane were also told the company was in its strongest financial position following last month's $21.5 million institutional placement.
Chief executive Chuck Vehlow told shareholders the company was focused on development of 40mm and 9mm calibre products, with priority applications including a grenade launcher, fire-fighting system and smart gun.
"A consumer version of the company's Variable Lethality Enforcement handgun for the general US market has the potential to be a significant money earner for the company over the next decade," he said.
"Revenue could commence in 2006. We are today announcing the formation of a US subsidiary company that has been structured specifically to capitalise on the demand for the commercial version of the O'Dwyer VLE electronic handgun."
However, shareholders berated the board at yesterday's periodically comical meeting for offering stock to institutional investors last month at a price they would have gladly paid given the chance.
One shareholder drew loud applause after telling interim chairman Terry O'Dwyer he had "felt betrayed" by the board's decision to offer institutions stock at 35 a share.
Shareholders, he lamented, "expected better judgment" from their directors considering the 45 offer price of a share purchase plan last September when only half the $15 million target had been raised.
"Why couldn't the SPP have been at 35," he asked, before suggesting that the plan might have been more strongly supported at the lower price.
Mr O'Dwyer, who devoted a significant part of his address explaining the rationale for the way the capital raising was handled, said the directors "understood the sentiments expressed" and were doing their best to unlock value for all shareholders.
Another more persistent critic during the 3 3/4-hour meeting was Sydney latecomer Graeme Strang, who quickly made up for lost time after spending 17 hours on a bus to air grievances about his investment.
Mr Strang owns almost 900,000 Metal Storm options which cost him about $135,000. The problem is that they expire in September this year and are well out of the money at present given the 65 exercise price.
Suffice to say Mr Strang was not amused by the impact of the recent placement's pricing on the value of his options which others like him cannot afford to exercise and will have to either sell at a substantial loss or let lapse.
"Is it possible that the company can use some of the funds raised to buy the options at say 15 . . . or stand in the market and put a floor under the share price," he wanted to know.
"No," was the short answer from Mr O'Dwyer, who pointed out that it was inappropriate for a company which was burning through $650,000 a month to be funding a share buyback.
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