Vialogy’s NASA technology hasn’t delivered for shareholders

An RNS on Tuesday caught my eye from a company that I first wrote about in early 2011 called Vialogy – up to recently an oil and gas seismic analysis specialist.

It announced it was issuing 1.1 billion shares to raise £1.1  million in a placing with an open offer to raise a further £519,000 through another 0.519 billion shares to explore corporate opportunities and for working capital. It has decided to adopt of an expanded investing policy focusing in the facilities management and support services sectors. Now that’s what I call dilution and demonstrating that this company is probably on its last legs!

Vialogy’s shares have fallen over 90% in the last 12 months to 0.16p and back in February 2011 when they came on my radar they were trading at 3.88p. In 2010 they traded briefly over 8p. Traded on AIM, the market cap is currently £1.66 million.

The company was originally founded in 1999 with the help of a small UK listed incubator, BioProjects International backed Jim Slater, and Angel investor Terry Bond.  BioProjects ultimately merged with ViaLogy in 2003.

Vialogy acquired patents that are based on a quantum algorithm which improves the detection of minute signals in noisy backgrounds. These patents originally arose as a result of the work done at NASA who were trying to filter out weak signals sent back from spacecraft back to Earth from background interference. Vialogy launched its QuantumRD system in 2008 to identify the density and extent of oil deposits as well as potential new drill targets.

The last few months has been a tumultuous one for Vialogy and its long suffering shareholders with its suite of patents failing to deliver revenues, with the resulting red ink on the P&L ultimately resulting in a significant capital reorganisation, departure of management (including long serving Chairman Terry Bond) and a change in the focus of the company from oil and gas to facilities management.

The Interim Report for the six-month period to 30 September 2013, published in early December 2013, showed a loss for the period of £1,130,356. In the year to March 2013, the company lost £4.66 million.  The company only managed to sell £61,000 in this period, with operating costs of over £1 million a large burden on shareholders given the lack of success in winning big contracts, though deals had been signed with French geoscience company CGG, Chevron and a subsidiary of Singapore’s Gente Oil Global. The previous years had shown losses of between £5 and £6 million every year.

The change in focus meant that the QuantumRD system has now been hived off to ViaLogy Energy Corp. (VEC) with an exclusive, perpetual worldwide licence. VEC is a newly incorporated company in Delaware, with plans to operate in Pasadena and Houston, USA, formed by Dr Sandeep Gulati, Director, on behalf of ViaLogy PLC. The VEC Transfer meant that ViaLogy received new VEC shares representing 75 per cent. of the issued share capital of VEC. VEC intends to raise money this year with a valuation of $20 million.

So for Vialogy in 2014 now much depends on VEC’s success in sourcing funding and gaining further contracts and the new management’s ability to exploit its new position in facilities management. Given the limited cash at the companies disposal I am struggling to see how Vialogy can establish a credible position in this sector as a major acquisition is clearly not on the cards at this time. Quite a mess and if VEC doesn’t deliver then its probably goodbye and in the meantime don’t expect this to be the last of the fund raisings. Terry Bond said he was stepping down for “the business to benefit from a younger pair of hands on the helm”. Lets hope new directors Adam Reynolds, Robert Dean and Nick Mustoe have plenty of energy!

As I feared 3 years ago, a record of placing after placing, lack of progress on winning big business doesn’t offset for clever technology. Good luck to the new management and to those participating in the open offer!