Forum Archive Index - February 2004

["Cristine Kerr" <criskerr@optusnet.com.au>]

Hi again Pete,

 

I'll address both:

 

1) Zylotech has secured one defence material contract to conduct a study into the carriage and launch of sonobuoys by an Independent UAV (unmanned ariel vehicle) platform. This work involves the Strategic Airborne Sonar Program (SASP) as announced to ASX on 7.11.03. NB For anyone considering Zylotech, this announcement is 'must read' material along with anything else they can find on Zylotech as it discusses Zylotech's exclusive right to commercialize a vertical take-off and landing UAV. (Have to admit I don't know anything about UAV's, however; this prospect really appeals to me.)

 

Govt does have long sales cycles but Zylotech's potential includes their complete product range which is suited to far more than just defence application.eg; their 23.10.03 teaming announcement with Fujitsu on closed circuit TV (CCTV) video surveillance {digital and Internet Protocol (IP) enabled and facilitated by Zylotech's IP smartcam IP video server} for Manly Council.

 

'Digital and internet protocol enabled' means the video can be viewed remotely in 'real-time' on any PC monitor that is connected to any broadband network that supports IP. Also, access to the system can be provided via IP address, access authority and password. This means in times of need, direct access can be provided to Police, Fire or other emergency service providers.

 

It's possible there is a large number of antiquated analogue video surveillance systems in use. Zylotech's system can be utilised as a new installation, or alternately; it can be implemented as an upgrade to an existing installation because Zylotech's system supports conversion of analogue video signals to digital and IP. For potential customers considering an upgrade, this means it would reduce their cost because they would not need to replace all of their analogue video cameras with digital cameras.

 

Potential customers, therefore; include anyone who is considering a video surveillance system, or; anyone thinking of upgrading an analogue video surveillance system. As you would appreciate, this is not just limited to councils but would also include any organisation that needs to protect its human or material resources from theft, malicious damage, etc. For example; one of Zylotech's recent sales involved a dredging platform.

 

Their sonobuoys also have applications other than defence, eg; oyster farming, etc.

 

In my opinion, Zylotech's business model, R & D activities, product range, potential markets, and progress to-date hold promise of revenue regardless of additional Govt contracts which (depending on their size) could add substantial icing to the cake.

 

2) Agreed, volume selling by a large investor is a possibility but I don't see it as a large risk. Firstly because of Zylotech's potential - why would they sell?. Secondly; Investika is a major shareholder but their holding is only 12.9%. (I checked directly with them on 27.1.04 and was impressed with their fast and courteous response:- They confirmed their holding as at 27.1.04 was 12.9%.) Of course, they could always buy more.

 

For those unaware, Investika was/is (unsure of present position) also a major shareholder of Quicktrak. Quicktrak developed a product that competes with Global Positioning System (GPS), however; the Quiktrak system necessitates investment in LAN-based (local area network) infrastructure where GPS does not. This diminishes Quicktrak's capacity to compete commercially. With GPS all you need is one hand-held device. Can't comment on cost comparison or which of the two may be better suited to defence application.

 

Suffice to say these are two very different companies with different profiles.

 

As always there is risk to weigh up so your own homework is a must.

 

Hey Pete - hope this helps,

Cris

 

 

---

 

Two worries on this one

1.The very long sales cycle with Govt agencies esp defence.

2.The major shareholders consistently trade stock in their companies so any
gains could be soaked up by volume selling from them.(Investika,Quicktrak,)

 

Pete

---

Hi Pete,


  Hope the following helps explain my personal enthusiasm for this opportunity,
and why I believe their is a high probability of good returns on the stock and
the 6c options.


  In their half-year 30 June '03 report, the company stated;

  ' ... We expect that both the aforementioned commercialization activities and
our membership of the ADF Team Australia supplier group will lead to a
significant increase in revenue in the future and we plan to continue with an
active R&D programme to broaden the product and technology base of the company.
... ' (extract 30 June '03 report).


  For me, the statement is highly credible based on the following:


  1) Revenue up 32.10% (half year report 30 June '03) - 19% drop in sales
revenues due to delays in govt projects but propped up by 'AusIndustry R&D &
export grant' of $400K (Sonacom was essentially a R&D entity prior to Zylotech
acquisition in Aug '02)

  2) Loss also up; 87.31%; but as a company that spends on research and
development this is par for the course

  3) Have not seen any entry related to debt exposure which is a big 'plus' for
me - development has been funded by share issues

  4) Zylotech is a member of Team Australia Supplier Group to provide Aust
Defence Force with airborne acoustic sensor requirements

  5) Demonstrations of long-life acoustic surveillance solution SeaWatch SW1
(released on schedule June '03) for commercial and civil defence coastal
surveillance were scheduled over last two quarters

  6) Second release - short-life rechargeable version - completion, testing and
release to market end 2003

  7) Commercialization Programme in place to appoint additional resellers in
Aust and overseas + major teaming alliances with major organisations, eg;
Fujitsu (refer ASX announcements); to push-market their acoustic and video
surveillance solutions and facilitate bidding on govt tenders


  We will soon hear details of Zylotech's Renounceable Rights Issue, 1:4 offer
@ 1c each + 1 free attaching option (exercisable at 6c and expiring March
2006). For me, this company has presented me with a fabulous 'ground floor'
opportunity.

  With regard to the above, the present political climate, the business they
are in, etc, etc, etc, I find it hard to believe the price will not be many
multiples of the 6c option price within 2 years, i.e.; by March 2006. (Just my
own opinion which is worth what you paid for it!!!)

  Shares are trading .013 - .014 cents and the draw for me is the major
potential upside.

  Obviously there is risk attached to this stock and if my expectations are
dashed by bad news, I have to also be prepared for the downside as must any
other investor considering this stock.

  For anyone interested, I recommend a long surf of their website to take in
all the related info, including financial and Defence Magazine media release,
etc, etc, to get a better feel for this company's potential or risk, and for
the shareholder opportunity soon to be offered.


  Regards,
  Cris

---

    Hey Cristine

    I also am looking at Zylotech ...

    You mentioned in previous posting:
    "the likelihood the share price will rise above 6c by March 2005"

    Are there some projected earnigs out for Zylotech somewhere?  What makes you
    think it might rise to above 6c?  Is it just that they have set the price
    for the options at 6c or someother reason?

    Thanks, Pete Cossey


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