Dow Jones 12745.88 -120.90 2:31 pm PDT, May 10, 2008 NASDAQ 2445.52 -5.72 For info, visit access.smallcapnetwork.com S & P 500 1388.28 -9.40 Change your subscription status here Russell 2000 720.05 +0.50 VOLUME 08 : ISSUE 45 A Bigger & Better SmallCapNetwork.com As promised, today we're going to take a look at Bio-Matrix's numbers, which will ultimately determine our valuations (and price target) for the stock. We did the same back in March when we first started looking at the company, though our projections were based on average industry-wide pricing. This time, we've got some pricing information straight from the company. Let's just say out estimates were solidified. First though, I want to draw your attention to something you may have already noticed - a lot more commentary (and not just small cap) on the home page.  We've been ramping up the breadth and depth of our site in an effort to be a complete resource to investors. Though small cap stocks will continue to be the focal point, we know it's not the only thing on our readers' minds.  As you'll see, we're going to submit ongoing columns regarding the market's short term direction, the economy, hot sectors, and more.  Be sure to check out the Small Cap Network home page if you haven't seen it yet. We think it's going to help you make and/or save even more investment dollars.  Now, about Bio-Matrix Scientific Group...    Crunching Bio-Matrix's Numbers Want a better idea of what kind of revenue Bio-Matrix Scientific Group (OTCBB: BMSN) is likely to be pulling in? We've got the scoop right here. Our comments stem from this week's news release...the one where the company provided a specific 'per unit' pricing range for each processed and stored sample. Though the company left it at that, our job as analysts/commentators prompted us to bridge the gap between that information and 'what it means to investors'. Our initial near-term (12 month) revenue projection of $4 million to $8 million - and longer-term projection of $30 million annually - was based on the company having four cryogenic tanks ready to go, and an average annual storage fee of $200 per specimen. The annual cost wasn't provided by Bio-Matrix, but from our own research. As it turns out, our digging was basically on target. The company spelled out in detail how much they'd collect each year for each kind of specimen stored in their facility. On the low end were blood specimens, which the company expects to store for a fee of $100 to $150 per year. Stem cell storage is a little higher on the scale; Bio-Matrix expects to collect between $200 and $250 per year for storing those samples. The average of all those numbers is $175 per year, though storing more stem cell specimens could pull the actual 'average' higher ...closer to $200 (like we originally said). The other factor we know for sure is how many samples they'd be able to store right now - it's 150,000. So, the math here is fairly straight-forward....150,000 specimens multiplied by an annual charge of $200 equals $30 million in annual revenue. Now, they're not likely to get to those figures in 2008, since the year is close to being half over and they have to process and place samples in the tanks before they can start billing for them. I'd say they could reach that max capacity in a couple of years though. That's why we added the near-term expectation - to give us all an idea of what's going to happen between now and then.  Though I've not been factoring in the one-time processing charges into the revenue model, I want to now. Why? It's even bigger bucks for the company.  Those one-time processing (first year) fees range anywhere from $400 to $2500. If they can take care of just 5000 samples in 2008 - a mere 3.3% of their current capacity - I estimate that could mean revenues of around $7 million...and they'd just be getting started. They'd still collect annual storage fees on those samples in 2009, on top of any more first-time charges from 2009's new samples. Not only is revenue renewed each year, but the number of revenue-bearing units can be increased every year.  Now think about this...they could bump up the capacity of their facility to store up to one million samples. Again, it's not likely to happen in 2008 or 2009, but eventually that could equate to well over $100 million in annual revenue. Let's not even start thinking that far down the road though - the near-term numbers are impressive enough on their own.  In light of the above math, the company's current market cap of $16 million is bordering on bizarre. No complaints though - it's a chance for any other investors to get an early entry on what we think could be a significant winner over the next 12 to 24 months. That said, I don't want to imply I think there's plenty of time here to jump in and capture the biggest part of any gain.  We rarely scream 'now now now' about a stock. Great ideas tend to be great ideas for a long time. Though we do think Bio-Matrix is a great long-term holding, there's also a time-sensitive issue in force with the stock...this tissue bank license we've talked about at length.  Long story short - the license they've applied for with the State of California, if granted, will be given to the company immediately after the inspection is done. At that point, the Bio-Matrix stem call storage lab is open for business...in the blink of an eye. Some might say the 'safe' move is to see if they do indeed get the license. We wouldn't entirely disagree, but by the same token, sometimes being 'safe' also means being left out in the cold on a stock's rally. At the same time, if the potential long-term revenue was only a few million bucks, we might agree it was a risk not worth taking. That's not the case here though. You saw the numbers above; the risk is what it is, but we feel the possible reward with Bio-Matrix is unusually large. A $16 million dollar company that could be doing somewhere around $30 million (or more) in a few years? That looks like a nice risk/reward ratio to us. As always the choice is yours, but I like this opportunity more and more every day.   We Value Your Feedback   Got comments, questions or suggestions? Send 'em on over: Email the Editor If you wish to send a written request or inquiry, please send it to our physical address: TGR Group, LLC 4653 Carmel Mtn Rd Suite 308 #402 San Diego, CA 92130 SpongeTech Close to a Breakout of its Own I don't know if it was being featured on 'The Price is Right' that prompted Thursday's big surge from our bulletin board stock pick SpongeTech Delivery Systems (OTCBB: SPNG), but it may have helped. Or, maybe it was CEO Michael Metter's letter to shareholders. Frankly, it doesn't entirely matter what the reason is, because I think SpongeTech's sales and revenue results merit this small cap stock's gain. It's about time we saw this breakout attempt.  In short, we saw a high-volume gain on Thursday ...though major accumulation isn't entirely new here. The other thing we saw was new - a move above the 200 day moving average line, for the first time since there's been enough data to actually calculate a 200 day moving average line. There may be one more hurdle, though I don't really think it will be a problem. February's peak was 4.9 cents ...a line that acted as a ceiling for several days before sending the stock back to multi-year lows. This time seems to be different, in that we have plenty of volume supporting the rally this time. If we see SPNG hit 5 cents, it may be a good time to start accumulating even more. By the way, my confidence level in the stock is largely driven by Michael Metter's letter this week. He didn't tell us anything we didn't believe already, but it was a nice confirmation of our expectation. Basically, Metter said the company was on track to ship $3.3 million worth of sponges in their fourth quarter (which ends on May 31st). Annualized, that's $13.2 million in sales per year. Yet, the backlog is still bigger; it's about $20 million at this point. I suspect we'll see several quarters of significant growth from here. As a reminder, they did $1.22 million in sales last quarter, and posted decisive profits. I expect to see higher sales translate into higher earnings this time around. This is shaping up to be another solid pick as the company enters its high-growth stage.  Subscribe Information is power and timely information is profitable. Become informed and profit from Small Cap Network Profiles and Trading Alerts by becoming a Preferred Member today. There is no cost associated with your email subscription. Add your email address below and make sure to check your email inbox and confirm your opt-in request to start receiving the Small Cap Network Email Newsletter on a regular basis. To ensure newsletter delivery, you can add any additional email addresses you may have to the Small Cap Network Member List. Receiving the Small Cap Network Newsletter in multiple locations is the best way of making sure you don't miss the next investing or trading opportunity! 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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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