Dow Jones 12348.21 -28.77 9:45 am PST, February 16, 2008 NASDAQ 2321.80 -10.74 For info, visit access.smallcapnetwork.com S & P 500 1349.99 +1.13 Change your subscription status here Russell 2000 701.52 -3.80 VOLUME 08 : ISSUE 15 SpongeTech Now 'As Seen On TV', Applied DNA Reports Q1 I've got some of the 411 on our next small cap trading idea ...barring anything unforeseen happening between now and then, look for it on Wednesday or Thursday (probably Thursday) of this coming week. Some of the numbers here are just incredible; I really think you're going to want to own some of this stock. I don't want to say too much, but it's an energy idea. This company does something relatively common within the energy world, but applies a higher-than-average standard in order to raise their odds of success. That will all make more sense when we finally publish the company's profile. We should have one more newsletter between now and that one, so I might be able to give you a specific launch time beforehand. By the way, U.S. markets are closed Monday, but that doesn't mean we won't be sending an edition then. It would be then or Tuesday. In the meantime, there are a couple of things from Applied DNA and SpongeTech to share. One is earnings, and the other is a likely generator of earnings.    SpongeTech Coming Soon To A TV Near You! I hope you've been paying close attention to the recent SpongeTech Delivery Systems (OTCBB: SPNG) saga. The story has been getting better and better for shareholders as shares continue to appreciate, but I think the best is yet to come. The chart looks ten times healthier than it did two weeks ago, and the corporation is still supporting the move with real results. The latest chapter in the story came yesterday when SpongeTech announced their TV commercials would begin on Monday - President's Day.  We've talked about it before, but couldn't get into too much depth because - frankly - we didn't have any real details. Now we do have some details, and I have to say it sounds like the television spots could have quite an impact on the company's top line. Here's the plan - there are six cable networks airing the ads, with a combined regular viewership of just a little under 150 million subscribers. Some of the networks include Fox College Sports, NBA TV, and Discovery Military. They all target the ideal audience for an auto-wash sponge - males between the ages of 25 and 54. The average TV viewer of these stations is likely to see the commercial at least a few times over the next six months, which should be sufficient enough to prompt orders. I can't stress enough how huge this is for SpongeTech, and by extension, its shareholders. This could mean millions of sudden high-margin revenue, where the company had basically none. I don't know what kind of result SpongeTech expects, but I think even a very modest response rate of 0.5% of those 150 million consumers (about 700K buyers) would still be a windfall. At an average online price of about $10 per multiple-use sponge (3 for $20), that translates into revenues of somewhere around $7 million. Now, size that big increase up with the 12-18 month order pipeline (meaning orders are in hand and scheduled) of about $16 million. And, that backlog was built up without television ads.  The other upside is the big margins you get with direct marketing. There's no wholesale pricing to cut into profits, since they'll be selling the sponges directly from their own website or over the phone.  By the way, the market cap is now around $3.6 million. I think that's about as undervalued as I've ever seen for any company looking at this kind if revenue potential. That's not even the best part of the story though. The nearby chart is what gets me pumped.  On Wednesday morning we mentioned SPNG had broken above a short-term resistance line, as well as a key moving average line for the first time since November. Had you bought in at that morning's opening price of 2.4 cents, you'd now be up 33%...shares closed at 3.2 cents on Friday.  More importantly, they're still rallying right past all that resistance. I don't want to belabor the whole 'heavy short interest' topic again - most of you have become very familiar with it through my recent comments. I just want to reiterate I believe that drag on the stock is in the past. I don't think it's a coincidence the stock started to move so well the very day SPNG fell off the exchange's list of stocks with a large dose of short positions. If the chart and recent news doesn't make you want to get in, I don't know what will.    Applied DNA Files Q1 Report Some of you may have caught the fact that Applied DNA (OTCBB: APDN) filed their Q1 report in Friday after the market closed. I'm pretty sure the company held off on any press release to accommodate the market holiday, so I'm looking for the official company announcement early in the coming week. However, since it's on EDGAR, it's 'out there' for us to talk about. Applied DNA drove $123K in sales last quarter, versus none for the same quarter a year earlier. Just for perspective, the company did $122K in the previous quarter (Q4 of last fiscal year).  What I don't have is a breakdown of where the sales came from (Supima, the cash-in-transit deal, Dermal Rx, etc.). Maybe the press release will add those details. Even if it doesn't though, this is the second quarter this young upstart has put real dollars on their top line.  I've mentioned a couple of times already I feel we're really watching this company's birth right now. They've had the technology for a while, but its commercialization is very recent. However, given the nature of the need for what they do, I think the company's sales are only scratching the surface (counterfeiting is annually a $600 billion problem, globally). Hence, I'm looking for better and better quarters going forward. Based on the recent chart, I don't seem to be the only one who feels that way. APDN reached a high 22 cents last week...much better than January's low of 9 cents.  The higher-volume rally also pushed shares past a big resistance line at 17 cents. The rally appears to be taking a breather, but the stock is starting to look pretty comfortable with staying above 17 cents. Though we saw lower closes later in the week, you can also see APDN has been closing well off its daily lows, and in the upper portion of its daily range. We issued our alert when shares were trading at 12 cents, and we're ahead of that level by about 50%. Not bad, but I think there's room for more upside - the recent lull may be a nice, quiet entry point. Though our long-term target is still 36 cents, I see a potential ceiling at 27 cents. We'll deal with that when we get to it.  Anyway, I just wanted to give all of you early notice...most everyone else won't know about their Q1 until the press release comes out. Have a great and safe long weekend. Also, be sure to keep an eye out for the next newsletter - we may have some specifics about the small cap trading idea coming later in the 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. To the degrees enumerated herein, SCN should not be regarded as an independent publication.  Click Here or go to http://access.smallcapnetwork.com/compensation_disclosure/ to view our compensation on every company we have ever covered, or visit the following web address: http://access.smallcapnetwork.com/profile_disclosure/ for our full profiles and http://access.smallcapnetwork.com/alert_disclosure/ for Trading Alerts.  TGR Group, LLC has been paid a fee of $30,000 cash and 750,000 shares of newly issued restricted stock by Spongetech Delivery Systems Inc. for coverage of the Company. Additionally, one of the managing Members of TGR Group, LLC has purchased 150,000 shares of Spongetech Delivery Systems, Inc. in the open market with an average cost basis of $.035 cents per share. 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