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A description of the content follows : The end of the year is right around the corner, and I for one am glad. We've been itching to close the books on a handful of our followings, and perhaps benefit from a tax loss (since they didn't benefit us in many other ways). At the same time, there are also a few names we want to be sure to keep. A new calendar year is the perfect excuse to put all of it in writing.

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Russell 2000 767.54 +11.41 VOLUME 07 : ISSUE 118
Small Cap Network - Cleaning House For 2008

The end of the year is right around the corner, and I for one am glad. We've been itching to close the books on a handful of our followings, and perhaps benefit from a tax loss (since they didn't benefit us in many other ways). At the same time, there are also a few names we want to be sure to keep. A new calendar year is the perfect excuse to put all of it in writing. 
 

The Year In Review

Though the year isn't completely over yet, I think we're close enough now to start looking at results. I gotta' say, it wasn't the best year for stocks in general. Year-to-date, the NASDAQ is up 7.8%, the S&P 500 is up 3.0%, and the Dow is up 6.5%. 

How did micro-caps fare in 2007? The smallest 20% of exchange-listed company stocks are lower, by an average of 7.4%.

That last data nugget - the tepid performance of most micro caps - prompts a whole 'nother discussion I can't get into right now. I'll just have to say micro cap stocks have an on/off switch, and it's been mostly off lately. We'll come back to that idea in another edition.

As for our stock picks, we had a decent collection of trades to write home about. Though the last few days have been rough, Titan Global shares had been nearly twice as high as our entry level. The same goes for Stockgroup. Spicy Pickle should have meant a gain of at least 60% for anybody who acted on our suggestion. 

We're not a bit surprised we did well with non-small-cap ideas. We picked Overstock.com (NASDAQ: OSTK) in front of a 32% gain, and racked up a 34.2% gain with our Merck (NYSE: MRK) pick. Our Tenet Healthcare (NYSE: THC) pick is currently up 26.6%, but is still technically an 'open' trading idea. 

It's a good thing we had those large cap ideas for you too - to help offset a few small cap ideas we could have done without. Zupintra comes to mind, as does Clearly Canadian and Orchestra Therapeutics. (You had your protective stops in place, right?)

I think it also needs to be said you should be benchmarking your small and micro cap trades against an appropriate index. After all, the world of micro cap trading is an entirely different beast. When it's hot, it's great. When it's cold, well, you just have to be prepared for that too...knowing that short-term volatility is part of long-term outperformance. Be sure to check out the chart at the bottom of today's write-up for more on that topic. 

With this in mind, here's what we think makes the most sense in trying to position ourselves for the point on time when the micro cap switch is flipped back 'on'...which may not be too far off.
 

Stocks To Dump

Just because you have an unrealized investment loss doesn't mean you should inherently take it in the current tax year. But, if the stock doesn't look like it's going to turn around anytime soon, then it might make sense to go ahead and reap the tax benefit of a loss. Be sure to consult your tax advisor first about it (or make sure you know the tax consequences of doing so), but here are the stocks we feel just aren't worth holding as 2007 turns into 2008:

Clearly Canadian (OTCBB: CCBEF) - If you're spending money to acquire ancillary companies, you at least need to maintain pro-forma sales. Where's the payoff we've been waiting for here? Incredibly, bottled water sales are down...Clearly's proverbial bread and butter. 

Orchestra Therapeutics (OCHT.PK) - Geez, what a debacle this turned out to be. I can deal with the fact that the trials weren't going stellar. I can deal with the fact that they over-promised and didn't deliver. I can't deal with the fact that they spoke about how positively a key development project was going, and then two weeks later decided to close shop completely. Thanks for the warning..NOT. Joseph O'Neill went from hero to zero in my book.

Zupintra Corporation: (OTCBB: ZUPC) - Zupintra's ability to over-promise and under-deliver makes Orchestra's ability to do the same look like child's play. You can change the company's name and focus all you want - eventually you have to make some money doing whatever it is you've decided to do that year. How could you not know you needed letters of credit to do telecom business, and how could you not get them for months? (To our knowledge, they still don't have them.) 

Enigma Software (OTCBB: ENGM) - Actually, I kind of feel sorry for these guys. They just produced their best weekly subscription/renewal rate they've ever had last week, so they can clearly grow the business. They just can't get out from under the thumb of a tough financing deal. Unfortunately, my sympathy can't make the stock go higher. Bye-bye Enigma.

After today, you won't see these tickers on our website, and I doubt we'll ever even bother talking about 'em again. 
 

Stocks We're Keeping In Our Back Pocket

These stocks have been on our official coverage list for a while, but won't be after today. However, since we like the story behind each one, we intend to continue following them. We just had to make room on our web page for upcoming ideas.

Titan Global (OTCBB: TTGL) - Let me get this straight....2008's projected sales are $740 million, and the current market cap is only $72 million? That's basically all I need to know - I see a huge bargain, and likely a major rebound on the horizon. 

CEL-SCI (AMEX: CVM) - Intends to enter Phase III testing of their Multikine head-and-neck cancer treatment in early 2008.

BioCurex (OTCBB: BOCX) - Getting closer and closer to commercialization of their point-of-care cancer screening test.

MIV Therapeutics (OTCBB: MIVT) - Their next-generation coated heart stents are now in at least 15 patients; news of their efficacy should trickle in over the next few months.

Challenger Powerboats (OTCBB: CPBI) - We came real close to putting this one on the cut list, but for some reason Challenger keeps hanging on...by a thread. We certainly can't advocate an entry right now, but the missing ingredient - sales growth - may finally be starting to materialize. After a reverse split and a total makeover last year, we'll give the stock just a little more time to produce. More to come as the story unfolds.

See anything interesting about three of the five? They're biotech companies. Part of the reason we're willing to keep those stocks on our radar for so long is that it can take a long time (as in years) for a biotech R&D project to bear fruit. When they do though, look out above. We'll give them some extra time for that reason. 
 

Names We're Taking With Us Into 2008

Stockgroup Information Systems (OTCBB: SWEB) - Perhaps against my better judgment, we'll give them the benefit of the doubt despite a lousy last quarter.

Spongetech Delivery Systems (OTCBB: SPNG) - Just to reiterate a point made a few weeks ago, Spongetech did $64K in sales last quarter, but has a sales backlog of $14 million for the next twelve months. More great news came today.

Marine Growth Ventures (OTCBB: MGRW) - Whether the stock reflects it or not, this company is doing its part. I guess the market wants to wait and see every last shred of proof. Fine, but I think MGRW shares are just one announcement away from popping like a cork...leaving non-owners behind. 

Applied DNA (OTCBB: APDN) - An interesting early-stage idea, they're really the only players at their level in their arena (anti-counterfeiting). They've paired their volatile sales of anti-piracy technology with less volatile sales of personal products ingredients (DermalRX). I think both are winners, but so far it hasn't done me or anybody else any good. We'll keep it around for now, but we need to see some proof of life real soon. No worries if you're holding it - just don't add more yet. 

Spicy Pickle (OTCBB: SPKL) - There's nothing I like better than a company that does what it says it will, and gets the stock to respond as well. This one just keeps getting better. 

Smart Energy (OTCBB: SMGY) - Talk about a slow start. In their defense though, sales seem to be picking up finally. The recent deal with All-Star and the pending union with Carter are just a couple of things that could spark SMGY, so we'll keep them on the watchlist for now. The problem is, it still may not be enough. This one is on the bubble. Like APDN, we're not heading for the exit, but we are a little suspicious. 

Tenet Healthcare (NYSE: THC) - This isn't actually one of our small cap picks - it's just a stock we liked a few weeks ago, and have done quite well with so far (up 26%). We'll see it through to the end. 
 

Final Thoughts

Like I mentioned above, micro caps and small cap stocks often trade with an all-or-nothing attitude. When they're turned on, it's great. When they're turned off, it's not great. However, you never really know for sure which mode we're in until well after the fact. That's why we constantly bring new ideas to your attention - to make sure you've got the creme of the crop names when small cap lightning strikes.

If you're looking for a reminder of why we're more than willing to remain focused on small cap companies, the nearby chart says it all. Over the long-haul, they just outperform the rest of the market. (If you want the full-screen chart, just click here.)

With that being said, I really think a small cap revival is around the corner. They've been beaten up for a while now, but I've seen it before - investors love change. When they grow bored or unimpressed by the other groups, they'll start shopping in the small cap space again.

Plus, it's gettin' to be about that time for a Santa Claus rally and the so-called January effect. Both have the potential be very rewarding to traders who are willing to step in before everybody else. 

Have a great and safe holiday season!
 

 
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Spongetech Validated By Massive Re-Order
We've been chronicling the saga of this small cap stock for only a couple of weeks now, but I've got to say Spongetech (SPNG) has already impressed the heck out of me. Today we got another layer of good news - South American Trading Company just submitted a huge re-order for the company's multi-use auto-wash sponge. 

I don't want to blow it out of proportion, but the fact that this company (proverbially and literally) 'came back for more' after receiving a smaller order in September provides good evidence of demand for the product. 

As it turns out, I'm not the only person who agrees. The president of SA Trading said the sponges had only "scratched the surface" of their potential in that market. Moreover, he put his money where his mouth is. Specifically, he put $2.4 million worth (wholesale) of sponges into his inventory. (Money speaks much louder than words.)

As of our last look, the company had a backlog of $14 million in product, to be delivered over the next twelve months. I'm sure they shipped some between the and now, but I'm guessing this brings the twelve-month backlog up to the $15-$16 million range. Considering the market cap is now around $1.5 million, I feel SPNG is way undervalued....trading about 1/20 of what I think it should be. Compare the P/S ratio to any other company - it's just crazy. 

The other big consideration here has been the likelihood of a lot of short interest. The short-sellers ended up winning the battle we discussed back on December 4th, ultimately stopping us out of our SPNG trade. However, we've also heard all the short sellers have been looking to make an exit after the stock started to respond to good news over the last several days. The high-volume churn yesterday may have been them doing just that. 

With fewer people interested in keeping it lower now, I think SPNG has the green light to go higher. I'm not diving in just yet though...I want to be sure we don't get a repeat of December 4th and 5th. But, I really like this stock under 3 cents, especially with sales firing on all cylinders. 

Here's the press release. Click here for a chart

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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://www.smallcapnetwork.com/compensation_disclosure.html to view our compensation on every company we have ever covered, or visit the following web address: http://www.smallcapnetwork.com/profile_disclosure.html for our full profiles and http://www.smallcapnetwork.com/short_term_alerts.html 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 100,000 shares of Spongetech Delivery Systems, Inc. in the open market with an average cost basis of $.035 cents per share.

TGR Group, LLC has been paid a fee of $30,000 cash and 100,000 shares of newly issued restricted stock by Marine Growth Ventures, Inc. for coverage of the Company.

TGR Group, LLC has been paid a fee of $30,000 cash and 1,000,000 shares of newly issued restricted stock by Applied DNA Sciences Inc. for coverage of the Company. 

TGR Group, LLC has been compensated 200,000 shares of newly issued restricted stock by Enigma Software Group, Inc. for coverage of the Company.

Larry Isen, the editor and publisher of the OTC Journal, through various entities he controls, has purchased 1,200,441 shares of Spicy Pickle at an average cost of $.2125 per share. These purchases were made in Spicy Pickle private offerings. The aforementioned purchases were made between August of 2005 and August of 2006. On 12/15/07, on entity controlled by Larry Isen participated in an additional financing wherein 12 shares of convertible preferred, converting at $.85 into 120,000 shares and 90,000 warrants with an exercise price of $1.60 were purchased. In addition, Larry Isen has received 785,000 shares of Spicy Pickle common stock for consulting services. In addition, MarketByte LLC, an entity controlled by Larry Isen, has received a fee of $30,000 cash, and 300,000 newly issued restricted shares for coverage of Spicy Pickle. TGR Group LLC, the publisher of the Small Cap Network, has received $30,000 and 300,000 newly issued restricted shares for coverage of Spicy Pickle. Mr. Isen is an affiliate of TGR Group. In addition, two other individuals affiliated with TGR Group have purchased a total of 300,000 shares at $.25 per share and received an additional 70,000 for consulting services. Current positions of the aforementioned can be found at www.otcjournal.com and www.smallcapnetwork.com in the Spicy Pickle information section. 

TGR Group, LLC has been paid a fee of $30,000 cash and 350,000 shares of newly issued restricted stock by Smart Energy Solutions for coverage of the Company.

TGR Group, LLC has been paid a fee of $30,000 cash and 1,000,000 shares of newly issued restricted stock by Zupintra Corporation, Inc. for coverage of the Company.

On January 19th, 2007 TGR Group LLC entered into an agreement with Stock Group Media, Inc. (a wholly-owned subsidiary of Stock Group Information Systems, Inc.) whereby Stock Group Media, Inc. will provide $50,000 worth of advertising and marketing services to TGR Group, LLC in exchange for coverage of Stock Group Information Systems, Inc. on the Small Cap Network web site and newsletter.

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TGR Group, LLC has been paid a fee of $30,000 cash and 100,000 shares (reverse split adjusted 12/20/06) of newly issued restricted stock by Orchestra Therapeutics, Inc. for coverage of the Company.

TGR Group LLC has been paid a fee of $30,000 and pledged 150,000 warrants with an exercise price of $2, currently convertible into restricted shares of Clearly Canadian, by Level III Research, for its coverage of Clearly Canadian. The aforementioned shares have become eligible to be free trading as a result of a registration statement.

TGR Group LLC has been paid a fee of $25,000 and 150,000 shares of newly issued restricted stock by Cel-Sci for coverage of the Company. The aforementioned 150,000 restricted shares have become free trading under SEC rule 144. Additionally, back in November of 2002, TGR Group LLC was paid a fee of $25,000 and 250,000 shares of newly issued restricted stock of Cel-Sci for coverage of the company until November of 2003. The aforementioned 250,000 restricted shares became free trading under SEC rule 144 and were sold in the open market prior to the company entering into a new contract agreement with TGR Group in February of 2006. 

From March of 2005 through July of 2006, TGR Group LLC was paid a fee of $40,000 by MIV Therapeutics for coverage of the company. In addition, TGR Group LLC was also awarded 272,000 warrants with an exercise price of $.26 by Trilogy Capital Partners for coverage of MIV Therapeutics. All of the aforementioned warrants have been exercised and shares have been sold in the open market. On April 3rd of 2007, MIV Therapeutics renewed coverage and paid TGR Group, LLC $30,000 in cash and 100,000 warrants, convertible into restricted shares at $.50. In addition, TGR Group has been awarded 190,000 warrants, convertible at $.50 into free trading shares, by Trilogy Capital Partners for coverage of the company.

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