Dow Jones 12479.63 -145.99 11:49 am PDT, May 26, 2008 NASDAQ 2444.67 -19.91 For info, visit access.smallcapnetwork.com S & P 500 1375.93 -18.42 Change your subscription status here Russell 2000 724.10 -8.91 VOLUME 08 : ISSUE 49 SpongeTech's Got The Midas Touch Happy Memorial Day everyone. I hope all of you are enjoying your time off and able to spend some time with family and friends. It's a day off for me as well, but there were a couple of things I wanted to convey while we weren't too distracted by other things. (Besides, I'm somehow able to get a lot more done when the market's not open.) The first point is about SpongeTech Delivery Systems (OTCBB: SPNG). They've been gaining momentum lately; I want to recap a few of those highlights in case you missed 'em. The second point is about Bio-Matrix Scientific Group (OTCBB: BMSN). We've not heard a lot from them the last several days, but that may well be the quiet before the storm.    SpongeTech's Midas Touch Expands to Print After Friday's news, the Midas touch analogy popped into my head and I couldn't get it out. Maybe by writing it I can clear my mind of it. What I mean by 'SpongeTech's Got The Midas Touch' is just that everything they seem to have done in the way of marketing has paid off in terms of sales. The increase in cash flow has allowed them to do even more marketing, which in turn increased sales by even more. In other words, it's a ripple effect...one drop has started a cycle of expanding concentric circles.  Check out the timeline, bearing in mind the 12-18 month sales backlog was standing at $14 million when we first started watching the company:     February 16th: Limited national TV advertising begins  March 4th: $2.75 million order received (backlog around $19 million)  March 19th: TV ad campaign expanded to 44 states  April 8th: SpongeTech featured on QVC  April 9th: Sponsorship of Yankees July 28th home game announced  April 15th: Q3's revenue of $1.3 million tops Q2 total of $331K (backlog now at $18 million)  April 29th: Receives a $7.5 million order (backlog now around $24 million)  May 1st: Website traffic increase by 250% after sponsorship of Mets game is announced  May 7th: SpongeTech's sponges featured on 'The Price is Right' game show  May 8th: Expected revenue for Q4 is $3.3 million  May 13th: New York Mets game sponsored by SpongeTech  May 20th: Television commercial now to play in all 50 states  May 22nd: $4.9 million order received (backlog now around $27 million)  May 23rd: SpongeTech ads to be inserted in several national magazines  Do you see what I see? Progress. They're ramping up their marketing effort, and getting traction with it.  By my count, they've basically doubled their sales backlog in the last six months. They're on track to more than double last quarter's revenue total. And, they swung to a pretty wide profit last quarter. A bigger top line this time around should translate into an even bigger bottom line. The last line in the timeline - the magazine ad inserts - is a new venue for them, but I have no reason to think they'll get any less results with it. In fact, I think we'll see current sales and the backlog jump yet again in the near future. As for the stock, same story. SPNG continues to push higher, attacking resistance at 5 cents. Based on the way the buying volume has grown though, I think it's a matter of 'when' and not 'if'. That's not the only thing the stock (and its investors) have going for it though. At the current price of 4.5 cents per share, the market cap is now $8.8 million. With a projected 12 month backlog of, say $18 million, that's a projected price/sales ratio of 0.5. Folks, the 'average' P/S ratio is more like 2.0...and that includes unprofitable companies. SpongeTech is profitable on top of being undervalued. I know I've said almost all of this before, but the magazine ad news just prompted me to say it again. I don't want any of our readers to not have a clear understanding of what the rest of the market seems to be missing. You ultimately have to be the judge, but as far as I'm concerned, SpongeTech remains a huge opportunity.  Speaking of huge opportunities...   The Clock is Ticking for Bio-Matrix Investments While we've heard tons of news about SpongeTech, the fact that we've heard very little from Bio-Matrix lately makes me wonder if this is the calm before the storm.  The last time we heard anything really significant from them was May 5th, when they announced they'd filed some paperwork with the California Health Department (though the May 13th preferred stock dividend news was pretty big as well).  This paperwork is what will ultimately prompt a 'tissue bank' licensing inspection, and hopefully get them officially started on their cryogenic stem cell storage venture. We didn't get a specific timeframe from the company, but we figured it would only be a few weeks before we heard something. Here was the issue with the news though - we won't hear about them successfully passing their inspection until after the fact. Well, that was three weeks ago, which may well mean the window of opportunity is more than half closed. Heck, it may be 80% closed; we just don't know. The point is, I don't want this one to slip past any of you speculators just because it fell off your radars. As always, nobody really knows how the inspection will go. Based on what we've seen from the company so far though, we think the potential reward easily justifies the risk. In the meantime, I like the way the stock's been acting...more up than down. Maybe an omen? I'll see if I can get an update on Bio-Matrix. If I can, look for it later this week.     We Value Your Feedback   Got comments, questions or suggestions? 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For web based email addresses, the Small Cap Network recommends @yahoo.com or @aol.com for timely and reliable email newsletter delivery. D I S C L A I M E R: The Small Cap Network, its website and email newsletter (hereafter, cumulatively referred to as "SCN") , is an independent electronic publication committed to providing its readers with factual information on select publicly traded companies. SCN is owned and operated by TGR Group, LLC ("TGR"). All companies are chosen on the basis of certain financial analysis and other pertinent criteria with a view toward maximizing the upside potential for investors while minimizing the downside risk, whenever possible. Moreover, as detailed below, TGR accepts compensation from third party consultants and/or companies, which it features in the publication and circulation of SCN. 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