Struther's Resource/Tech Report - V11 #5.0 - March 29, 2005
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* In this issue: search technology
* new pick, Scientigo - MKTE
The next Big Thing in search technology
I am sure you know about Ask Jeeves, just bought out for $1.8 billion last week and of course the big fan fare of the Google IPO. These companies have been enormous bonanzas for investors because they have some good internet search technology. We live in an information world and good search technology to filter through the mounds of information is critical. This is why these technology search companies are worth billions.
Increasing numbers of Web surfers are going to alternative search engines, which specialize in finding certain kinds of information or offering additional capabilities to well-known search sites.
Entrepreneurs say venture capitalists are sinking new money into search startups. Tech pundits believe that if one area has lots of room to grow, it's search, given that advertising sales in the field alone are expected to increase more than 40% this year.
"I do believe there's every opportunity for another company to become another Google," says Ken Cassar, an analyst with researcher Nielsen/Net Ratings in New York.
Thanks to a tip from an associate of mine, I believe I have come across the company with the next big thing in search technology. The potential here is enormous because this company has a tiny market cap of just US$14.0 million and the market could put a value on this of $1 or $2 billion when it finds out about them. This means we have a chance to make $100 for every $1 invested, it is like being a seed investor in Google.
Scientigo .......... Nasdaq OTC: MKTE ....................... Recent Price US$1.85
52 week trading range $0.94 to $2.25
Shares outstanding 6.9 million
The company is changing their name from Market Central to Scientigo
Highlights
* company just in infancy, investors not aware yet, a chance to get in on the ground floor
* world class management team just assembled, that includes Google's former counsel
* $10 million and 40 man-years invested in development, 4 patents granted, 1 pending, and 6-8 in development.
* potential to make $50 for every $1 invested if Scientigo's search technology makes it to the main stream and becomes recognized by the major search technology companies.
* Ask Jeeves was just bought out for $1.8 billion. In 2003, Yahoo paid $1.6 Billion for Overture. Google has a market cap of $83 billion. This gives you an idea of the blue sky potential.
Headquartered in Charlotte, North Carolina, ScientigoTM is the world’s leader in intelligent Business Process Automation technologies, specializing in developing and licensing intellectual property to partners whose products and services complement our technologies for the benefit of clients. These customizable solutions enable organizations to convert data from a processing and storage burden into a competitive advantage, whether structured, semi-structured, or unstructured, whether it is in paper or digital form, and regardless of volume. With over $10 million and 40 man-years invested in development, they have 4 patents granted, 1 pending, and 6-8 in development. In addition, the Company provides customer support and professional services to support its products.
The company is in its infancy, just restructuring and has assembled their management team, the next step will probably be an equity financing to strengthen the balance sheet
On Nov. 23, 2004, the company was know as Market Central, Inc. (OTCBB:MKTE) and they announced that their two largest shareholders William Goldstein and Glen Hammer have agreed to surrender a combined total of 5,880,740 common stock representing approximately 45% of the outstanding common stock of the Company. The surrendered shares come from Messrs. Hammer and Goldstein's personal holdings. This shareholder friendly action effectively reduces the Company's issued and outstanding common shares from approximately 12,536,000 to 6,656,000.
On February 17, 2005, Mr. Hoyt Lowder, Senior Vice President of FMI Corporation, and Mr. Ron Attkison, Chairman, Chief Executive Officer and President of Jones, Byrd & Attkisson, Inc. ("JBA") were elected to the Board of Directors of the Company to fill vacancies on the board.
On Feb. 2, 2005, ScientigoTM assembles a team (that includes Google's former counsel) of Sterne, Kessler, Goldstein & Fox, P.L.L.C; Wilson Sonsini Goodrich & Rosati, P.C. and Inflexion Point Strategy LLC to Assist with Implementation
This is a formation of a team of leading intellectual property advisors that will assist the company with intellectual property planning, identifying parties interested in the Company's intellectual property and structuring possible transactions.
Management
I have included a lot of info on management and those behind the company with links to further background info, because I think the people are very key to MKTE's future
The Company has retained Sterne, Kessler, Goldstein & Fox, P.L.L.C. ("SKGF"), Wilson Sonsini Goodrich & Rosati ("WSGR"), and Inflexion Point Strategy LLC to support this effort. The team will be led by Doyal Bryant, CEO and Paul Odom, Chief Scientist overseeing the development of Market Central's patents; Robert G. Sterne, Founder and Director, SKGF; Donald J. Featherstone, Director, SKGF; Trevor Chaplick, Partner, WSGR; Michael Raschid, Partner; WSGR; and Ron Laurie, Co-Founder and Managing Director, Inflexion Point Strategy.
Scientigo has a growing intellectual property portfolio that includes patents, patent applications and innovations that may be of interest to parties involved in search technologies, XML applications and other data management applications. The recent auction of the CommerceOne patent portfolio related to XML applications sold for over $15 million highlights the potential value of IP assets in this area.
"There are many approaches to monetizing IP assets, and we believe Market Central is approaching and preparing itself for the next wave in IP asset management. Many people, lawyers in particular, are still looking at IP assets as a bundle of legal rights that you need to assert in court in order to get some money out of them," Bryant said. However, he said "some leading companies, like ours, are starting to use those intangible assets to create new businesses and market their technologies."
As my associate put it to me - " You do not assemble a world class intellectual property team as follows (includes Google's counsel!!!!) to sit on their thumbs !!!!!!!!!!!!!" I provided background on these people with links if you prefer to learn some more detail on them.
Doyal Bryant, CEO
Mr. Bryant has over 25 years experience in senior corporate management, product development, financing, operations and sales in all of the Company's combined product areas. He joined Market Central when the Company acquired Convey Systems in which Mr. Bryant was an owner and President and CEO. Prior to Convey, Mr. Bryant held senior management or ownership positions in companies that provided financial and technical due diligence services for major investment banking firms with transactions valued at over $300 million. He played an integral part in the growth and development of major telecommunication companies such as ZTEL, Premiere Technologies, CommSouth, Talk.Com, PrimeTec International, and ATMNet. His companies have developed international joint venture agreements and investment transactions for Voice, VoIP, and Internet related services in Canada , Mexico , Australia , Japan , Hong Kong , as well as several European and South American countries. Mr. Bryant holds a B.S. in business administration from Drury College in Missouri and has performed additional studies at Oxford University in England.
Mickey Clark, CFO
Mr. Clark has been the Company's VP of Finance since February 2001 and a director since July 10, 2001. From 1999 to 2001, Mr. Clark served as Vice President of Finance for Gibralter and other entities comprising Gibralter Publishing, Inc. Mr. Clark served as President of Kane Realty from 1994 through 2001, and was also President of Parallel Corporation from 1991 through June 2002. Mr. Clark's experience includes more than 25 years in numerous financial and accounting roles, including 11 years with Price Waterhouse and five years in the venture capital arena. Mr. Clark has a Bachelor's degree in Business Administration from the University of North Carolina at Chapel Hill .
Paul Odom, SVP of Software Applications and Solutions
Mr. Odom was formerly the Founder, President, and Chief Technology Officer of Pliant Technologies Inc. where he created a revolutionary information management technology. He joined Market Central when the assets of Pliant were acquired by the Company in 2003. Before forming Pliant Technologies Inc., he was Vice President of Magisys Inc. where he led the design and implementation of software applications for oil field operations. As Manager of Process Systems Software for M. W. Kellogg from 1988 to 1994, he had the responsibility for the development of software to automate engineering design processes. In addition, Mr. Odom has more than 16 years of experience in leading edge software applications development in the Oil and Gas industry, working with Dixie Corporation, ARCO Chemical Company, and The Standard Oil Company of Ohio . Mr. Odom has a Bachelor's degree in Chemical Engineering from the University of Arizona and currently holds 5 patents in the area of information management and engineering.
Dale Field, EVP, Strategic Planning and Operations
Mr. Field began his career at Dominion Bancshares where he distinguished himself as the top graduate of the company’s three-month financial training program. Subsequently, at Deloitte Consulting, he focused initially on finance, operations and strategy, and soon added technology to his skill-set by leading implementations of ERP and Supply Chain solutions, as well as developing strategies and methodologies for the emerging e-business market. Dale later served at VP of Operations and Solutions for Intelligenxia, an Intelligent Document Recognition software company focused on solving the problems associated with unstructured data management. There, he managed the professional services organization and oversaw the development of tools and methodologies to ensure consistent results and satisfied customers. He also packaged software and services into marketable solutions, and developed the collateral material and pricing models to go along with delivery of these solutions. Most Recently, Dale was a founding partner with Asset Growth Strategies, a venture capital and venture consulting firm, where he contributed to the success of a number of entrepreneurial firms. Dale earned a bachelor’s degree in Finance from The University of Alabama and an MBA from Tulane University with a full-tuition fellowship. Dale also attended post-graduate executive education classes at Northwestern University.
Robert Maze, VP, Business Development
Mr. Maze is a 27 year veteran in technical sales and sales management across multiple industries. Maze has expertise in building and managing ‘new’ sales organizations; including responsibilities for strategic planning and day-to-day management of direct and indirect sales organizations. As former VP of Sales & Marketing for an invoice document processing and management firm, Maze completely reinvented its strategic marketing and sales plans resulting in 63% growth within 24 months. In addition, during an eight-year tenure at MCI, in a senior sales management capacity, Maze oversaw daily management of three Global 1000 companies: Johnson Controls, Dow Chemical, and Dow Corning; collectively valued at more than $150M in annual revenues. Maze’s extensive, cross-industry management experience involved major companies, such as: MCI, Bell Canada, NYNEX, and Southwestern Bell; Texas Airlines (owner of Continental & Eastern Airlines); and the U.S. Air Force. Maze has experienced several start-up companies; including the seed company dba LDDS Communications, Inc. that later acquired MCI Telecom. Corp., dba LDDS Worldcom. Maze is an honors graduate of Southwest University of Louisiana with a BS in Electronic Engineering. He has studied Computer Science and Applied Engineering abroad. He is also a veteran of the U.S. Air Force with specialization in Applied Electronics.
Robert Greene Sterne, Practice Areas, Electrical, Patent, Software
Mr. Sterne specializes in intellectual property issues in the electronics, computer, telecommunications, Internet, e-commerce and business method technology areas. With advanced technical training in electronics from Tufts University, he has over 20 years of legal experience in all aspects of IP including strategic planning, protection, licensing and litigation. He is internationally recognized as an expert on software and business method patents, having been the lead attorney for IBM in the Federal Circuit test case that led to the USPTO Software Patent Guidelines.
skgf.com
Donald J. Featherstone
Practice Areas: Electrical, Mechanical, Software, Internet, Client Counseling, Business Methods, Nanotechnology
Mr. Featherstone is a former patent examiner with over fifteen years of patent preparation and prosecution experience. He counsels a wide range of clients from start-ups and emerging growth companies to billion dollar multi-national corporations. He emphasizes the interaction between business practices and intellectual property to help his clients leverage their IP and create shareholder value. In addition to strategic portfolio creation, management and exploitation, Mr. Featherstone performs patentability, state-of-the art, infringement and validity opinions, drafts technology agreements, and performs IP audits and due diligence investigations.
skgf.com
Wilson Sonsini Goodrich & Rosati ("WSGR")--Google legal counsel !!!!
nylawyer.com
cooley.com
Michael I. Raschid, IP Technology Transactions, Intellectual Property
Michael I. Raschid heads the technology transactions practice in Wilson Sonsini Goodrich & Rosati's Reston, Virginia, office. His practice focuses on the representation of technology companies, from start-ups to Fortune 500 enterprises. He has advised companies in the information technology, telecommunications, semiconductor, biotechnology, pharmaceutical, and life sciences industries. Michael has handled a wide range of technology-related transactions for his clients, including joint ventures, strategic alliances, and outsourcing agreements, as well as manufacturing, marketing, and distribution arrangements. He also has assisted clients with numerous technology and content licensing transactions.
The mature clients in the technology and life sciences industries Michael represents (and has represented at prior firms) include America Online, Cargill, Gateway, Monsanto, Motorola, G.D. Searle, and Siebel Systems.
wsgr.com
Trevor Chaplick, Partner, WSGR
wsgr.com
Background of Ron Laurie:
BSIE U.C. Berkeley, JD U.S.F. Ron has worked in Silicon Valley for over 40 years, first as a software engineer and then as one of the nation's top intellectual property lawyers. As an attorney, Ron advised computer, communications, semiconductor, media and financial services companies on IP strategy—a subject he taught at Stanford and U.C. Berkeley law schools—with a focus on the strategic use of IP assets in complex business transactions. Ron was a founding partner of the Silicon Valley offices of Skadden Arps and Weil Gotshal, and led IP teams in some of the largest technology deals in history, worth over $50 billion. Ron has been listed in virtually every peer review survey of leading IP lawyers including Top 25 California IP Lawyers, Best Lawyers in America, America's Leading Business Lawyers, Global Counsel 3000, and International Who's Who of Business Lawyers.
Technology
Scientigo's technology can be broken into three categories:
Intelligent Content Integration, Intelligent Document Recognition and Intelligent Classification and Search
Intelligent Classification and Search
This can be used on all digitized data formats and the search can be intent based and personally relevant. The search can be categorized as automatic topification or taxonomy population (scientific classification). It features topic vs. word identification, synonym, misspelling and nickname identification.
You will find that if you do a search with any of the major search engines you will normally be returned tens' of thousands of hits on the related topic. It can be quite challenging narrowing down the field of search.
The rapidly expanding information pool is restricting search users ability to find the information that they want based on their initial queries. The missing ingredient in the current search technology is relevance. The average user puts in 1.8 words in the initial query and gets back anywhere from 1,000 to 100,000 or even millions of hits. Even the best technologies are limited and inefficient when attempting to create true relevance at this scale. The algorithms used today by existing search engines produce results that amount to an arbitrary guess at what the user had in mind.
The easiest way to understand Scientigo's technology is to think of it as a progressive smart search that aids you in narrowing down this initial huge field of search quickly and efficiently.
In Scientigo's(R) words, the IDR solution significantly reduces labor time and costs for document processing by automating the verification and data extraction process through the use of advanced artificial intelligence algorithms that get smarter with usage through machine learning.
"Our technologies rely, not on one technological advantage, but a powerful combination of tagging, storage, and analytical advances that allow us to apply complex identification and retrieval algorithms to large volumes of data in either a distributed or centrally managed environment, regardless of the degree to which the data is structured or unstructured.
We believe these will soon prove to be revolutionary capabilities that will provide industry transforming solutions, providing significantly higher value than the more evolutionary application of technology to merely automate existing processes, as is most often the case."
Last week, Market Central, Inc., (d.b.a. Scientigo), announced an initial licensing agreement for its IDR software solution to Digital Convergence Partners, Inc. (DCPi).
Scientigo(R) will provide its IDR solution to DCPi for data extraction from image files of paper documents uploaded to an Internet portal to facilitate content search and retrieval.
Matthew Dedes, President and CEO of DCPi commented, "We, at Digital Convergence Partners Inc. (DCPi), have selected Scientigo's(R) IDR application to integrate and enhance our offerings for effective and economical content management services. The vision of DCPi(TM) is to provide a fully comprehensive range of document management services comparable to those offered by large scale service companies, but at a more competitive price, while still delivering the highest degree of accuracy, quality, and personal attention to our customer's individual needs."
"With DCPi's extensive knowledge of the industry we are extremely excited that they have chosen Scientigo(R) to provide our state of the art automated intelligent data capture solution. This relationship validates the market demand and acceptance for our technology and next generation products. As we partner with, and license our solutions to, leading organizations we feel confident that our technology and solutions will soon become an industry standard and an implementation imperative for organizations wishing to stay ahead of competition." stated, Doyal Bryant, CEO of Scientigo.
Financial
Currently the balance sheet is in sad shape. There is little cash and outstanding debt of about $3 million with another $4 million in liabilities. At this point in time, revenues are not very strong with about $1.4 million in the last reported 3 months.
You have to realize that this is a company in transition and from speaking to CEO Doyal Bryant, getting the balance sheet in order is a priority. I think we will see news on this very soon. There is only 7 million shares outstanding so an equity financing would easily accomplish this and not be very dilutive.
Summary
Have a look at this article and you can see how it might be quite advantageous for one of these big players to swallow up Scientigo, at some point down the road.
technologyreview.com
It is early days for this company and it is at a point of transition into something that could become very large in an investors mind. This creates the opportunity and we probably won't recognize the company in several months.
I identified RIMM, Research in Motion long before anyone knew what a Blackberry was, because I believed their technology was leading edge and had a big future. We bought the stock at $7, sold at $100 and it actually went to $200 Canadian dollars.
This is a theme I want to keep alive for tech picks in this newsletter. My tech newsletter was originally called 'Future Tech' as it featured young technology companies that had strong potential for leading edge and market dominant technology in their particular tech sector.
Scientigo has this potential. Their search technology could find it's way into the leading internet search portals and a technology solution among the largest tech companies, like IBM and Microsoft. It will not be an easy road or a sure bet, but to me it looks like they have the technology, they now have the management and funding should not be a problem. The risk lies in whether or not they can execute or some better technology beats them to the market.
When I spoke with CEO Doyal Bryant he indicated they have several pilot projects and test programs ongoing with their technology and he seemed very optimistic that there would be good news on this front before long. If Scientigo starts announcing deals/partnerships etc. with big name tech companies, this stock could quickly go much higher.
In the information age that has everyone on information over load, good search technology is being recognized as something very important and the market place is putting a high value on this. That gives Scientigo the potential to obtain a market cap of several $billion instead of the minuscule $14 million currently. That means potential for us as investors to possibly make much more than ten times on our investment at these levels.
Doyal Bryant told me his job was to create shareholder value and their goal is to get onto a major exchange, like AMEX or NASDAQ main market as the company progresses. It looks to me that the right ingredients are in place at this particular juncture.
The stock has basically been trading sideways, between $1 and $2 for the past year. The stock has started a new uptrend, the first key resistance will be around the $2.00 mark
Contact: Vince Buczek, 301-751-1457
vbuczek@scientigo.com
Web site scientigo.com
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