Email : info@otcjournal.com
URL : http://www.otcjournal.com
To
OTC Journal Members:
Despite coming through a year stock
market investors would like to forget, finished off by the worst 1st calendar
quarter in the history of the NASDAQ, the OTC Journal is
finally back on a profit roll with a major breakthrough over the past 10
days.
This year we have suggested our members
accumulate three stocks, and two of them are well above January 1st levels.
MedGrup
(OTC BB: CODX) announced outstanding year end results this past week,
and is up 95% since the first trading day of the year.
Energy
Power Systems (OTC BB: EYPSF) recently has been on a tear up the charts.
The
stock closed at $1.50 just 15 trading days ago, and has seen seen a high
of $3.75 on huge volume.
March's profile is our first this
year in the beaten down technology arena. Despite Wall Street's severe
abuse of technology stocks, this company has leading edge proprietary technology
for an emerging revolution. The stock is near its all time low, and the
company is in the midst of a major commercial breakout. We may be early
for a recovery in the technology sector, but we'd rather present this idea
to you one month too early as opposed to one day too late.
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March
Profile: XML Global Technologies (OTC BB: XMLG) |
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Stock Listing: OTC BB: XMLG (XMLG.OB
on Yahoo!)
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Shares Issued and Outstanding:
27.5
million
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Estimated Public Float: 6 to 7 million
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Closing Price and Volume: $.92 on
106,100 shares
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Market Capitalization: $27 Million
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52 High and Low: $3.75/$.56
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Click
Here for a current stock chart
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Web Site: http://www.xmlglobal.com
We have been hearing about "XML"
for over a year. It really caught our attention when we read that Bill
Gates, in his opening address at last November's Comdex Show stated
the following:
“If there
was one thing that I thought was key in this last year it is the rise in
XML. I’ll talk a lot tonight about how I believe both Microsoft and the
industry should really bet their future around XML. The standards around
XML are key to where we need to go.”
Bill Gates – Comdex 2000 Keynote Speech, Las Vegas
In a recent survey by IDG Research
Services Group of 500 Chief Information Officers, it was projected
spending on XML will increase 86% this year over last. 78%
of companies surveyed use, or are considering using XML, up from
20% last June.
David Hilal, and analyst with Friedman,
Billings, Ramsey & Co., recently described XML as the Holy Grail
of eCommerce.
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What
Is XML? |
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XML is an acronym which stands
for Extensible Markup Language. XML is a markup language
for documents containing structured information. Both content (words, pictures,
etc.) and some indication of what role the content plays are contained
in structured information. Almost all documents have some structure. A
markup language is a mechanism to identify structures in a document. XML
defines
a standard way to ad markup to documents.
XML was created for richly
structured documents and stored data to be used over the web within a structure
common to all viewing parties. The only viable alternatives,
HTML
and SGML, are not practical for this purpose. The use of XML
is expected to grow rapidly over the next five years, just as the popularity
and use of HTML has grown over the last five years.
HTML stands for "Hypertext
Markup Language". HTML is the language which allows developers
to present electronic media (i.e. web pages, email) in color, bold, and
different size text. It allows the OTC Journal to look like a magazine,
but definitely has limitations. XML opens a whole new door to the
Internet and its capabilities which HTML is incapable of filling.
XML is a standardized simplified
language, which allows richly structured documents and legacy data of all
kinds to easily understand each other. Two examples of the use of XML
are the NASDAQ quote feed and the SEC's EDGAR System.
Dozens of commercial stock quote
providers pull their data from the NASDAQ quote feed. The information
comes to them in XML. The same is true of EDGAR- all the
EDGAR
pages are written in XML. This universal language makes it
easy for public companies to file their documents in the SEC Electronic
Filing System, and thus provide all viewers the ability to review the documentation
in a common format.
The development of XML was
completed in 1998 by the non-profit World Wide Web Consortium (http://www.w3c.org/).
Software developers are introducing commercial products, and sales of
XML based technologies are beginning to ramp up now.
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The
Problem- Legacy Systems |
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Throughout the prosperous decade
of the 90's major corporations invested billions in computer infrastructures
to handle every aspect of running their businesses.
The systems in existence today are
referred to as "Legacy Systems". In the past, large contractors
custom designed computer systems for specific businesses. In order to interact
with other entities in the normal course of business (i.e. customers and
suppliers) via computer, complicated EDIs (electronic data interchanges)
have
been developed which are extremely expensive and time consuming to implement,
and not standardized for the Web.
For example, one company's Legacy
System may have an entry for "Unit Price". A supplier's system
may identify the same item as "Unit Cost". Their computers cannot
talk to each other because their legacy systems identify the same item
with a different hard code and format.
In order to allow the two computers
to talk to each other, a complicated custom designed EDI (electronic
data interexchange) needs to be implemented at significant cost. This
customization is required so each company's legacy system can talk to the
other. Industry experts estimate approximately $84 billion of corporate
IT budgets have been spent developing EDIs.
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The
Solution- ebXML (Electronic Business Extensible Markup Language) |
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It is widely anticipated ebXML
will replace EDI. The United Nations body for International Trade
facilitation is endorsing and intimately involved in the International
Standardization of ebXML. It's deployment is viewed as critical
to the future of eBusiness. More information can be found at www.ebxml.org.
Eventually there will be one International
Computer syntax language by which all systems can talk to each other easily
and smoothly. It would be the same as all people on Earth speaking the
same language. Right now, the process of translating one computer language
to another is as complex as translating English into Chinese.
If the United Nations, Microsoft,
Oracle, and many other household corporate names have their way, XML
will become the universal syntax language of computer systems. Small companies
developing new technologies with XML, will grow dramatically, especially
if they have proprietary technology and talented people.
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XML
Global Technologies (OTC BB: XMLG)- Our Choice in this Space |
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More than 250 people representing
35 companies and 15 governments met in Vancouver, British Columbia during
the week of February 12th, 2001. The guest list included representatives
from the following companies:
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IBM
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Sun Microsystems
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Microsoft
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Oracle
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Arriba
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Commerce One
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SAP
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KPMG
The meeting was hosted by XML
Global Technologies (OTC BB: XMLG), a company we believe is on
the cutting edge of the XML revolution, and the subject of this
profile. The purpose of this meeting was to set International standards
for XML to ease the exchange of electronic data and trade between
companies.
XML Global was founded in
May of 1999. The company successfully raised $12 million in two
rounds of financing. In the first round investors purchased
4.5 million shares at $1. In the second round 5 million shares were sold
at $1.50.
The company's initial 12 employees
have now become 64, and they have spent the last two years investing this
capital to develop XML based commercial applications.
The investment is just beginning
to pay off in the form of recent contracts. On February 15th the company
announced a major breakthrough in the form of a contract with the United
States Government Defense Finance Accounting Service. Click
Here to read the full text of the press release.
Other contracts are beginning to
roll in as evidenced in increasing sales.
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XML
Global's Current Product Offerings |
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XML Global has a suite of
three products offerings which form a basic framework on which to build
an e-Business environment. Two products have been granted patents and one
is patent pending.
The three products which make up
the GoXML Foundation are as follows:
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GoXML Search- Introduced
in July of 1999 as the company's first product, GoXML Search is
a scalable, context-based search engine which delivers precise results.
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GoXML Transform- a transformation
engine for dynamic exchange of XML, EDI, and other data formats.
This products helps companies convert their existing Legacy Systems to
XML.
This is much like teaching a person multiple languages.
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GoXML DB- No comprehensive
system would be complete without a way to store and sort data. GoXML
DB is database management software with a high-performance query engine.
This suite of product offerings is designed
to provide tools for XML development and deployment. Other system
developers will use the tools to design for their customers. The
company anticipates 80% of its revenues will come from licensing fees.
The other 20% will come from service contracts where XML Global
will use its own tools to create solutions for its customers. For techies
with an understanding of this, you can find more details at the XML
Global web site: www.xmlglobal.com.
Wall Street loves the license fee
business model. If successful, licensed software generates substantial
profit margins as all the development costs have been absorbed.
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Financial
Outlook |
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Sales are growing rapidly and now
becoming significant. The company achieved $53,000 in its first fiscal
year of sales (June 2000 year end). In the second quarter of 2001 (December)
the company achieved $327,000 in revenues, very high percentage growth.
In fiscal year 2001 (June) the company
is on track to achieve just under $2 million in sales. Although
there have been no formal projections published, management is very comfortable
predicting they will achieve over $10 million in sales in fiscal
2002 which begins July 1st of this year.
XML Global is the only company
we are currently featuring that is not profitable. We have been reluctant
to feature any microcap companies needing to raise capital in this market
environment, as financing can be extremely detrimental to share values
with investment capital so scarce.
XML Global currently has just
over $6 million in cash. They currently burn about $300,000 monthly in
expenses. Therefore, at the current burn rate the company would last 20
months before running out of money if there were no sales.
However, the company is on track
to enjoy just under $2 million in sales this fiscal year. Sales
in excess of $10 million are anticipated for fiscal 2002.
The company is adding employees to
fill demand right now, so monthly expenses will go up. Based on reasonable
sales projections the company should turn cash flow positive once we know
they are on track to achieve more than $5 million in annual
sales. We believe the company will turn the corner to cash flow positive
in the Fall, and still have about $4 million in cash in the bank.
Once positive cash flow is achieved the risk of owning this stock is greatly
reduced.
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Valuation |
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One year ago it would have been no
problem to see this stock trading at $5 in the near term, but this
is a different market. Comparisons to two recent mergers help us set reasonable
expectations for the future value of the company.
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On February 15th, Iona (NASDAQ: IONA)
signed
a definitive agreement to purchase Netfish in a stock deal valued
at $270 million. Netfish has 70 employees and is doing
about $7 million in annual sales. Netfish is a company which specialized
in XML technology.
Click
Here to read the press release.
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On March 21st, Citrix Systems
(NASDAQ: CTXS), announced a definitive agreement to acquire Sequoia
Software in an all cash transaction of $184 million. Sequoia
Software, an Enterprise Portal company with expertise in the XML arena,
is doing $19 million in annual sales. Here is a direct quote from Mark
Templeton, the president of Citrix: "Using Sequoia's XML-pure portal
technology, we will help our customers get the best that the Windows and
Web worlds offer, and aggregate digital information into a 'Virtual Workplace'
-- the promise of access to any application over any network and any device,
quickly, easily, securely and cost-effectively." Click
Here to read the press release.
Based on these recent transactions it
is easy to see XML Global having a value of $200 million sometime
during 2002. Using the current number of shares issued this would put the
stock in the $7.50 range, 750% above today's levels.
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Conclusion |
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After two years of R&D and substantial
investment, XML Global is now turning the corner from a start up
to a commercially viable company. With the stock near an all time low,
this is the ideal time to invest. Currently, the stock has little or no
following.
The company is now making a commitment
to bring its story to the investment community. The OTC Journal
is fortunate to be the first to introduce this company to a national audience,
which gives our members a competitive advantage.
The stock has been very illiquid
until now. 4.5 million shares are free trading with a cost basis on $1.
Undoubtedly some of that stock will be for sale when the stock trades more
volume.
However, those wealthy investors
in at $1 and $1.50 have been waiting for over a year, and individual investors
now have the opportunity to own the stock below their cost just as the
company is turning the corner to commercial success.
We don't see much downside. If these
investors had needed the cash they would have sold at a loss already.
Despite the global slow down in IT
spending by behemoth corporations, XML will be rapidly adopted because
it
saves companies money by reducing their overhead.
If you like this company we suggest
you begin to Accumulate the stock anywhere at $1 or less
with a six month target price of $2. This is a very conservative
guess and based primarily on challenging market conditions. A home run
is possible anytime within the next year with the stock in the $7.50
to $8 range.
Before making any investment decision
based on an idea from the OTC Journal, please take the time to read
our Mission Statement, found on our home page at www.otcjournal.com.
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Have
Some Fun |
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Even if you have never heard the
term XML, it is the language running some of the software in your
computer. Try the following experiment:
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Place your cursor over the Start
Button and right click on your mouse.
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Select Find from the menu that
pops up by left clicking it on your mouse.
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In the Named window that pops
up type in *.xml
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Make sure the Look In line is
set to your hard drive.
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Left Click on Find Now, and see
how many files come up.
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