VOLUME 01: ISSUE 05 Dow Jones 9,344.16 -66.29 6:30 pm EST, Friday, October 12, 2001 NASDAQ 1,703.40 + 1.93 For info, visit access.smallcapnetwork.com S & P 500 1,091.65 -  5.78 To be removed, please click here. Russell 2000   428.59  - 2.45     To SmallCap Network Members: We appreciate the opportunity to present an "Anatomy of a Micro Cap Winner" as part of today's WEEKEND OUTLOOK EDITION. The SmallCap Network is committed to providing valuable insights to our Members with this special look at one of this year's micro cap success stories. The Company we will evaluate is NMT Medical, Inc. (NASDAQ: NMTI.) Shareholders who bought NMTI stock in early 2000 between $2.75-$6.00 per share may NOT consider it such a "major" success. However, in this case timing of the purchase proved to be very critical.  Before we get into our analysis, here are some important facts regarding this issue:      1) At the close of trading on January 2, 2001, NMTI closed at $0.94.      2) This week's closing price of $5.30 puts NMTI up 463% since January 2.        3) NMTI now trades 9.09% above its 13-day EMA*      4) And 37.92% above its 50-day EMA*. With this year's impressive performance, investors who picked up NMTI shares in early January have experienced a phenomenal performance run through a very treacherous market. Here's the SmallCap Network's breakdown on NMT Medical, Inc. Their business is Medical Equipment and Supplies. NMT Medical designs, develops, and markets innovative medical devices that utilize advanced technologies delivered by minimally invasive procedures. The Company's products are designed to offer alternative approaches to existing complex treatments. This reduces patient trauma, shortens procedure, hospitalization, and recovery times, and lowers overall treatment costs.  The Company's cardiovascular business unit provides the cardiologist, radiologist, and vascular surgeon with proprietary catheter-based implant technologies that minimize or prevent the risk of embolic events. The cardiovascular business unit also serves the pediatric cardiologist with a broad range of cardiac septal repair implants delivered with non-surgical catheter techniques. As seen in the chart below, NMTI gave shareholders a pretty rough ride in 2000. While the Russell 2000 was trending lower, NMTI fell from over $6.00 (not shown) per share to the low $2.00 range before bouncing back over $4.00 one last time in July.  Much of the decline in the stock in the second half last year was the result of overall market conditions, senior management turmoil and change, and a $7.1 million second quarter write-down of assets related to the Company's Neurosciences Division.  On September 25, 2000, the Company announced a senior management change. Everyone knows the mantra for real estate success is "location, location, location." In small and micro caps, the success mantra is "management, management, management." This factor was probably the most critical to NMTI's turnaround this year.  On September 25,2000, Mr. John E. Ahern was brought in as President, CEO, and Chairman of the Board of NMTI. Investors who dug into the details of this announcement learned Mr. Ahern was previously VP of Emerging Technologies at C.R. Bard, Inc. (NYSE: BCR.)  Mr. Ahern was responsible for identifying, investing in, and managing early-stage emerging technologies and companies at BCR. He was with them for thirteen years and held senior marketing and strategic planning positions in three of the Companies cardiovascular divisions. However, the immediate impact of Mr. Ahern's appointment was lost on the market.  The Company's third quarter release on November 8, 2000 contained some very revealing data. The Company's new CardioSEAL® product produced a 28% increase in unit sales and a 62% increase in dollar sales over the same prior year period. These results were masked by a 20% decrease in sales of the Company's neurological products.  NMTI shares experienced continued selling pressure trading down to a year-end low of $0.75. With 11 million shares outstanding, NMTI's total market capitalization at the end of 2000 was $8.25 million. On a pro forma basis, the Company lost $0.88/share on sales of $36.5 million last year, meaning their market cap stood at just under 25% of sales.  Fourth quarter pro forma net income exclusive of charges was $0.02/share. Sales of CardioSEAL® devices were up 40% over the prior year quarter, and a solid improvement over third quarter results. By this time the NMTI turnaround was picking up momentum. The stock hit a closing high of $2.00 per share on March 8, 2001.  On May 4, 2001, NMTI announced 2001 first quarter results posting slightly higher total sales and $0.02/share in net income up from $0.01/share from the first quarter of 2000. Micro and small cap issues were performing quite well during this period as observed on the left side of the Russell 2000 chart below.  On August 8, 2001, NMTI announced continued improvement in second quarter results. The stock staged another breakout performance, spiking up to an intra-day high of $4.10 on August 21.  Another breakthrough event occurred on September 12, when the Circulatory Systems Devices Panel of the FDA recommended the CardioSEAL® Septal Occluder System be approved for use in patients with congenital ventricular septal defects not approachable with surgery. This recommendation now puts the Company's Premarket Approval Application back to the FDA for final approval. When the stock market finally bottomed out on September 21, NMTI hit a closing low of $3.01. This provided yet another excellent opportunity for investors to step up to the plate. Those that did realized an 80% profit between September 22 and October 4's closing price of $5.44.  We don't know how NMTI will perform in the future, and the stock has had a tremendous run up this year. This situation merely serves as an excellent example of the type of Company we've been talking about in past issues of the SmallCap Digest.  To recap, here's what made NMTI one of this year's big success stories:          1) A POSITIVE MANAGEMENT CHANGE--STRONG MANAGEMENT          2) Steady sales increases in PROPRIETARY NEW PRODUCTS          3) Consecutive quarterly improvement in FINANCIAL PERFORMANCE          4) NEW PRODUCTS poised to serve NEW MARKETS          5) LOW MARKET CAP relative to SALES  In conclusion, these five important factors led to a dramatic rise in shareholder value this year. Certainly these AREN'T the only factors.  We encourage SmallCap Network Members to seek Companies with similar attributes when positioning small or micro cap stocks for their portfolios. We look forward to providing you with some similar ideas in the near future, so keep an eye on your Inbox.  * EMA = Exponential Moving Average, a weighted moving average that gives greater value to recent prices and lesser value to older prices in its calculation. WEEKEND OUTLOOK Stocks were weak on the day, with the Dow Jones Industrial Average ending modestly lower, while the NASDAQ posted a marginal gain. Final statistics are posted at the top of today's issue. September retail sales tumbled 2.4% and dropped 1.6% excluding automobile sales as consensus estimates were expecting 0.8% and 0.6% respectively.  The dismal numbers reflect the somber mood of American consumers following the September 11 terrorist attacks. The October and November statistics will be widely anticipated as economists attempt to quantify the effects of events past, present, and future. Today's big story was the report of another anthrax incident at NBC offices in New York that did little to boost investor confidence.  On the NASDAQ, a rally in the networking sector helped boost tech shares, as Juniper Networks posted a $0.10 third quarter profit. This topped consensus estimates of $0.07 and led to a 20% increase in the value of Juniper's stock. Other tech sectors showed weakness today after rallying for the better part of the week.  The popular averages have posted a significant rebound since the lows posted on September 21, and today's weakness suggests the possibility the recent rally may be out of steam. We anticipate weakness ahead next week and encourage Members to proceed accordingly.                               * * * * * * * * * * * * * * * * *  If you'd like to update, change, or add a new email address please click here.     D I S C L A I M E R : The SmallCap Digest is an independent electronic publication committed to providing our readers with factual information on selected  publicly traded companies. SmallCap Digest is not a registered investment advisor or broker dealer. 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