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From: Morgan News Peter Morgan <pmorgan@morgan-news.com> | Block address
Subject: METEOR MONITOR: 'Bottom-Fish Tracker' analyzes Meteor/ThoughtShare
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Meteor Monitor's Editor Note: The following electronic newsletter
report,
issued today, is being re-broadcast with the kind permission of John
Kaiser. Meteor Management indicates they will have reaction to it next
week
in a separate broadcast after having a chance to analyze it further.
/Peter
Morgan
--- Rebroadcast Starts Here --
Kaiser Bottom-Fish Tracker 99-037
Copyright 1999 John A Kaiser
October 21, 1999
Meteor Technologies Inc (MMI-C: $0.13)
Tel #: (604) 682-7076
Meteor: proof of concept demonstrated
Synopsis: Meteor Technologies Inc (MMI-C: $0.13) has been weakening
over
the past couple weeks amid uncertainty regarding progress of the
Thoughtshare project's development and to some degree my silence on the
subject. I have been reluctant to say anything further about Meteor
until I
had a chance to see a proof of concept prototype demonstration. I was
in
Vancouver for the earlier part of this week and on Tuesday October 19 I
received a successful demonstration of the Thoughtshare
proof-of-concept
prototype. I am now confident that the Thoughtshare project is on its
way
to becoming a technical success. The prototype successfully logs and
maps
an Internet session. The next development step is cosmetic in that a
more
user-friendly interface must be created for both the tour
making/editing
version and the tour taking version. Thoughtshare management expects to
have a prototype for beta testing ready in about a month. A select
group of
potential users such as myself will put the product through its paces
and
provide the feedback needed to produce a commercial prototype.
Management
expects to have a commercial prototype ready in the second quarter of
2000.
The commercial rollout will be followed by a six month period during
which
TS Tour Maker users will be recruited, and alliances will be struck
with
web sites to provide download facilities for the TS Tour Taker. The
distribution strategy will likely follow that of the Adobe Acrobat
system
where a small group of professionals use Acrobat to create PDF files
which
the masses view after downloading the Acrobat Reader. The tour taker
only
version will be a simple browser plug-in that enables the user to take
any
Thoughtshare tour produced by the tour maker. The TS Tour Taker will be
a
free download just like Acrobat Reader, while the TS Tour Maker will
eventually be a commercial product probably priced below $100. The
ultimate
goal is for every Internet user to be both a tour taker and maker, but
the
starting market for the TS Tour Maker will be professionals like
brokers,
real estate agents, technicians and teachers. By the final quarter of
2000
Thoughtshare should be ready to launch a marketing blitz. I should
caution
readers that I have surmised this game plan by reading between the
lines;
because the Thoughtshare product is still in the early stages of
development, Thoughtshare management is keeping the precise details of
its
marketing strategy close to its chest. The not so good news for my
readers
is that over the next quarter Meteor and Thoughtshare will have to
implement important structural changes whose execution precludes any
significant price increases during this period.
Nobody with financial clout currently has a meaningful stake in Meteor
or
Thoughtshare
The general feedback from the brokerage industry has been that brokers
and
analysts love the story, but hate the structure. That is code for
saying
that they see enormous upside potential, but cannot see how they can
plug
themselves into this profit potential. Meteor has 21.3 million shares
fully
diluted, with full dilution injecting $1.4 million into the treasury.
Of
this amount the core insider group accounts for at best 6 million
shares,
leaving a fairly large float. Such a structure does not represent a
strong
hand for the insiders, though it appeals to me because of the
promotional
leverage the stock would enjoy once the largely grassroots shareholder
base
gains confidence that the Thoughtshare project is fully on track with
competent leadership. For now a key sticking point is that Meteor owns
only
35% of Thoughtshare. Meteor has so far advanced $350,000 to
Thoughtshare,
and has received an extension to the end of October for the final
$150,000
that will vest it for 35%. Another financing is being done to raise up
to
$300,000 for Meteor, and negotiations are underway to place this paper
with
groups interested in arranging the $2 million Thoughtshare will burn
over
the next 12 months.
Solution: merge the two in conjunction with a substantial financing
A consensus is emerging that Meteor and Thoughtshare should merge so as
to
put 100% of the project into Meteor. In a worst case Meteor and
Thoughtshare merge so that Meteor shareholders end up with 35% and
Thoughtshare founders with 65% of the new company. Based on the 16.9
million shares currently issued a merger on these terms would boost
outstanding shares to about 48 million with the dozen or so
Thoughtshare
founders owning 31 million free trading and restricted shares. Such an
arrangement would probably not be good for Meteor shareholders because
it
would shift the funding responsibility into the hands of the dominant
shareholders, namely the Thoughtshare founders. That would be
counterproductive because the reason the Thoughtshare founders did a
deal
with Meteor in the first place was to secure outside help in funding a
project which until very recently was purely conceptual. Negotiations
are
underway to work out merger terms that create a balance between the
project
developers and the financial backers. A merger by itself does not solve
the
financing problem, so part of the discussions now underway include a
post
merger financing. The part of this talk I overheard which did not
appeal to
me was that the merger will involve a rollback for Meteor. If Meteor
gets
rolled back 5:1 my readers who bought in at around $0.20 will end up
with a
$1 post-rollback cost base. That has me immediately thinking about the
typical post-rollback fade back to $0.20 unless a large financing is
done
in conjunction with the merger. I must warn my readers that the biggest
risk for them is that Meteor falls victim to the standard brokerage
industry jerkaround strategy where financing promises are made and not
delivered until the stock price has drifted much lower and the
financing
price has been renegotiated. The weakness in Meteor's market is partly
a
reflection of the market's realization that Meteor has a grassroots
shareholder base missing heavy hitters who can make the necessary
financing
drop into place even if it means reaching into their own pockets.
However,
this stigma could vanish very abruptly because the Thoughtshare story
has
the sort of scope that could attract investors with the clout to turn
the
stock into a NASDAQ Internet darling.
To get Silicon Valley's attention you must build it first
Assuming Meteor and Thoughtshare do merge and get financed at $1 in
post-rollback prices, the stage is set to take the stock to the NASDAQ
market, which requires a minimum US $5 per share price. Based on the
above
5:1 rollback and merger scenario this would imply a market cap of about
$70
million. Such a market cap is par for the course in OTC Bulletin Board
promotions, but only a realistic target for a play like Thoughtshare if
it
is achieved in conjunction with a $20 million plus financing. For this
to
happen Thoughtshare has to lurch onto the Silicon Valley radar screen.
To
get Silicon Valley's attention these days you have to turn your
business
plan into a reality, for Silicon Valley is already buried in conceptual
business plans. The promotional strategy for Thoughtshare is not about
convincing everybody about what a wonderful concept it has. The
promotional
strategy is to get the TS Tour Makers into the hands of professionals
like
brokers, real estate agents and teachers, and get the Internet masses
taking the tours made by the professionals. When Silicon Valley sees
the
viral growth of a product that works, it will be at Thoughtshare's door
in
an instant. What intrigues me about Thoughtshare is that it is a
Canadian
born concept with "world-class" potential that is a sitting duck to be
co-opted by the Americans. In the meantime it is an IPO in progress
with
the difference that anybody who figures out the story's potential can
freely buy the stock.
You cannot fund losses through equity if your stock is trending down
I should point out that the recent irrational phase of Internet mania
is
shifting to a greater concern for the business model behind Dot.Com
companies. Losses generated to command market share can only be funded
through equity if the stock is in an uptrend. Many of the Internet
Goliaths
are trending down or going sideways. Before funding losses in such an
environment investors want to see a vision for future cash flow.
Because I
have received many inquiries about the cash flow model for
Thoughtshare,
let me offer a few speculations as to how I think Thoughtshare can
become
not just a big revenue producer, but also a cash flow producer. I say
speculations because management for strategic reasons is not revealing
its
actual plans. So keep in mind that I am not speaking for management,
but
from the point of view of somebody who has thought carefully about the
implications of the Thoughtshare product.
Thoughtshare and the Adobe Acrobat revenue model
The TS Tour Taker (these are names I have given to the products, which
do
not have actual names yet), which makes it easy for an Internet user to
visit a pre-arranged sequence of Internet pages annotated by the tour
organizer, is not going to make any money because it will be free. I
would
expect the Tour Taker to become as ubiquitous as Acrobat Reader, of
which
there are over 100 million now sitting on people's computers. The first
revenue model for Thoughtshare comes from the software used to make the
tours. The TS Tour Maker will initially also be free, though once it is
fully developed with lots of bells and whistles, it might retail for
some
modest amount below US $100 per unit. Just as the sales of Acrobat are
driven by the increasing installed base of the readers, so the growth
of
the free TS Tour Taker installations will drive demand for the TS Tour
Maker. The number of people who produce documents that need to be
converted
to PDF files, however, is much smaller than the number of people who
might
want to become Internet content organizers. At this point we can only
speculate about the numbers. For example, what's 10 million users times
$50?
The portal-eyeballs advertising revenue model
A second revenue model for Thoughtshare would be the development of an
Internet site that serves as a parkade for TS tours listed through some
sort of classification scheme. Such a site would be a search engine not
for
specific pages on the Internet, but for the tours or "knowledge
objects"
that string together thematically linked web pages. So rather than
punching
"gold" into Yahoo and coming up with a bunch of sites like the World
Gold
Council, you might check thoughtshare.com to see what useful gold sites
and
pages within them somebody like Frank Veneroso has pulled together into
a
"tour". Whereas the indices of the main search engines that point to
related web page addresses are built anonymously by workers or
software,
the Thoughtshare index is populated by items custom created by experts
and
celebrities who either already have name brand value, or might even
achieve
brand name status by virtue of their Thoughtshare tours.
Thoughtshare.com
could thus become a significant portal with very high eyeball traffic
that
can attract banner advertising. Advertising can be sold not just for
the
home page, but also linked to actual tours or sections within the
classification index. Such advertising would be targeted at whatever
theme
or need the eyeballs are chasing when they check out a tour. I myself
am
rather skeptical about the future of Internet advertising, but I seem
to be
in the minority. Others may see huge revenue potential in
Thoughtshare's
tour parkade. What sort of market caps are search engine portals
commanding
these days? Have they dropped below $1 billion yet?
The tour parkade licensing revenue model
I see more revenue potential in a third model whereby Thoughtshare
licenses
its tour parkade to any web site that wants it. One of the special
features
of a TS Tour likely to emerge is that it will have special hooks that
allow
it to dock on a TS tour parkade. The parkade in turn will have features
that count the number of visitors to a tour, allow them to vote on the
tour, and offer a unique discussion thread related to the tour or
"knowledge object" that allows a community to develop that is specific
to a
tour. The TS Tour is more than just a sequence of url addresses and
footnotes it appears to the read-only TS Tour Taker. When grabbed by a
TS
Tour Maker it becomes live in the sense that it can be modified. The
reason
Thoughtshare has given its tours the awful name of "knowledge objects"
is
because the inventors are scientists with a deep appreciation of how a
TS
tour can become a very efficient vehicle for an intellectual discourse
that
create new knowledge. Thoughtshare is much more than a Word document
filled
with hyperlinks separated by descriptive text. What if Thoughtshare
licensed its Thoughtshare.com parkade to every one of the millions of
obscure web sites such as the kind created by Geocities? Every one of
these
sites has a small community of visitors, all of whom wish the content
at
Joe's Home Page would change a little more frequently. By adding the TS
parkade to the site (ie hit a tour parkade button and down drops the
tour
search engine for that parkade) the regulars have a chance to surf the
Internet, make their own special tour, and post it in the parkade so
that
the other regulars can share the best of that recent surfing session.
If
desired, posting and tour taking rights can be password controlled by
the
web site. The parkade makes it easy for the web site's owners to
highlight
pages within complex sites without actually meddling with the site
itself.
The parkade also has obvious applications for corporate or government
Intranets.
Thoughtshare as the new baby of Internet intellectuals
The proliferation of these parkades would result in a mind-boggling
interweaving of the Internet, which would acquire an organizational
structure far surpassing that which the search engines currently
provide.
It would be a massive setback for the control freak search engine
portals
who force anybody who wants to find something to parade past their
banner
adds. Thoughtshare has the capacity to capture the imagination of
Internet
intellectuals who abhor the current drive towards the Internet's Big
Brother commercialization. Importantly for all those obscure web sites,
the
task of changing the content available at your home page is shifted
into
the hands of everybody else. Every web site with a TS parkade has the
potential to become a watering hole for a community united by some
aspect
of that web site, a community whose individual members draw the fruits
of
their isolated wanderings on the Internet back to share with the rest
of
the community. What will it be worth to the webmaster to have the TS
parkade as part of his site? In the beginning the target will be larger
web
sites that can afford a higher license fee. The parkades themselves can
have different capacities that allow for cheaper license fees for
smaller
web sites down the road. Thanks to the activity monitoring function of
the
TS parkade the webmaster might even be able to sell some advertising
space
on his site. A hundred bucks for each of the million plus web sites?
Thoughtshare is an orphan waiting to be adopted by multi-millionaire
Internet pioneers who have been marginalized by the very success of
their
original creations. If it should come to intellectual fencing about the
more cerebral aspects of Thoughtshare, founder Steven Forth is well
equipped to hold his own with the Internet's leading lights.
Fold it into Netscape or Internet Explorer via strategic buyout by AOL
or
Microsoft
None of these products behind the second and third revenue model exist
at
this stage, though they are certainly on Thoughtshare's drawing board.
It
is worth noting that management has told me that I have only scratched
the
surface in terms of possibilities they have considered. The fourth
revenue
model that becomes obvious from the plausibility of the first three is
that
Thoughtshare has to be owned by one of the browser giants, Microsoft or
America Online. The Thoughtshare functionality really should be part of
Netscape or Internet Explorer. Why it isn't already is very puzzling to
me
because the need for a Thoughtshare tour maker and taker is so obvious.
But
in talking to Dr John Dill, the SFU scientist who oversaw the $6
million
research program at Simon Fraser University that created the CZWeb
mapping
process that is the foundation of the TS Tour Maker, it has become
apparent
to me that while the Thoughtshare concept is astonishingly simple, the
technology that makes the tour editing a simple task is anything but
simple. The tour making concept has to be user-friendly or it is
worthless.
That is the edge Thoughtshare has over the competition. If Thoughtshare
can
develop commercial prototypes for its Thoughtshare system and rapidly
achieve a high profile, one of the browser biggies will move quickly to
buy
out the company and incorporate the tour maker/taker capacity into
their
browser. What is the strategic premium a Microsoft might pay to scoop
its
rival, America Online? It certainly would be more than the $10 million
market cap that a merged Meteor/Thoughtshare would have based on
current
prices.
Accumulate Meteor passively while we await the reorganization
So what should bottom-fishers do? Obviously, until a merger agreement
and
follow-up financing agreement is in place, chasing the stock above
$0.25
would be counterproductive. Canaccord continues to be a heavy seller of
paper purchased during the Alberta diamond play days. I suggest that
bottom-fishers accumulate Meteor passively and cross their fingers that
the
pieces get tied together into a package which will turn into a
Juggernaut
in the new year. While nothing goes smoothly, all the parties involved
are
convinced of Thoughtshare's enormous potential, but they also
understand
that the window of opportunity must be exploited now or somebody else
will
beat them to it.
*John Kaiser owns 310,000 shares of Meteor
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