There are a number of factors that an investor has to weigh before feeling comfortable with putting their money in a development stage company and chief among those factors is how close that company is to generating revenue. While activity surrounding Revolutionary Concepts, Inc. (PINKSHEETS: REVO) has picked up over the past couple weeks, thanks in large part to a few press releases, investors should take the time to determine if the company, which up to this point hasn’t generated their first dollar since inception in 2005, is anywhere close to taking that critical step.
What REVO has done is define their focus, which is to design and develop a product they known as Eye Talk Communicator which will serve “as an entry management system and gives users the ability to remotely and interactively monitor via two-way communication and control an IP camera while using a personal communication device.” Additionally, “uses for the device include medical applications, sporting component, and infant care technology.”
Having a clear focus is obviously important for any development stage company and the fact that REVO has been able to identify what it is that they believe will take them from where they are now to where they want to be is significant but how close are they to getting where they want to be? Judging by their November 30, 2011 press release in which they announced they had “completed the Definition Phase of the Schedule of Work (SOW) for the EyeTalk technology and, along with SIS Development, has initiated the Design Phase.”
It should be noted that REVO has identified five separate phases of the product development stage for EyeTalk technology, those being Phase 0- Product Definition; Phase 1- Design; Phase 2- Implementation; Phase 3- Test; and Phase 4- Delivery. While Ronald Carter, company President and CEO played up the completion of the Product Definition phase, saying “The successful completion of Phase 0 by SIS Development provides RCI with product requirements and a clear blueprint for product development,” the reality is the remaining phases will require significant time and money to complete.
REVO is by no means on the cusp of “Delivery” and while they made some waves on Wednesday with the announcement that they had “signed a letter of intent to enter into an acquisition agreement with Security Solutions and Management (SSM) of Charlotte, NC,” this doesn’t really speed up the product development of EyeTalk.
Carter commented about the news, “The acquisition presents a teaming opportunity for RCI. The management of SSM is a direct Federal contractor, and has numerous municipal and Fortune 500 customers. They also bring prior experience in founding and managing successful high tech start up companies,” but it should be noted that this was simply a letter of intent to enter into an acquisition agreement; the deal isn’t done just yet. As investors are well aware anything can happen and that could subsequently stall or completely eliminate any deal from ever happening.
The uncertainty of the letter of intent aside, there are other concerns that should be understood before considering REVO as an investment. For one, what exactly is the value of their planned product? While they list the primary benefit for the user as “the ability to remotely and interactively monitor via two-way communication and control an IP camera while using a personal communication device” they don’t really explain the value. In the company’s November 30, 2011 press release announcing the completion of Phase 0 Carter stated “With over 8,000 home invasions per day in the US, property crime is on the rise. In this multi-billion dollar industry RCI’s focus is on developing a superior solution in both performance and quality.”
REVO is billing the EyeTalk system as a preemptive and preventative as opposed to reactive and responsive solution but does that mean when you’re away from your home you get alerted in real-time that somebody is breaking into your home and you can respond or do users have to be monitoring the home at the moment of the home invasion? The EyeTalk system will record and archive video data, video and audio records so that is certainly an advantage but how that’s a preemptive and preventative measure isn’t fully understandable.
Then there is the question of infrastructure and cost and while REVO stated in their most recent quarterly filing “The EyeTalk system does not require wiring from the exterior of the building to its interior however in new construction wired systems are anticipated. Our management believes that the system, when fully implemented, will be relatively inexpensive to install and maintain.” Relative is a subjective word and the cost could actually be quite significant in the minds of potential customers.
Just on the home/business security front REVO is facing serious competition from much larger and better financed companies including established names like ADT, AT&T, Pinkerton’s and others. These companies also offer remote monitoring and, as pointed out by REVO, “both Cisco and IBM are developing new hardware and software applications for remote monitoring that, if successful, could have profound implications for the industry.”
REVO is already in a precarious financial position given the fact they haven’t generated any revenue to date while seeing their net loss increase from $696,951 for the three month period ending September 30, 2010 to $1,028,108 for the same three month period in 2011. They have also seen a decrease in assets while their total liabilities have climbed.
Shares have seen some volatility over the past week, hitting a high of 0.073 last Thursday but sinking down to a low of 0.022 on that same day before closing at 0.032. On Monday shares hit a 52-week low of 0.012 but by the close of Tuesday shares were at 0.020 and on Wednesday those shares closed up more than 60% at 0.033. That kind of volatility is a clear sign that REVO is simply unpredictable at the moment. Knowing that it will be some time before they ever complete the five development stages of the EyeTalk system it may be a good idea to wait this one out until things start to settle.