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SpongeTech's
Got The Midas Touch |
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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.
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SpongeTech's
Midas Touch Expands to Print |
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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:
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February 16th: Limited national TV advertising begins
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March
4th: $2.75 million order received (backlog around $19 million)
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March
19th: TV ad campaign expanded to 44 states
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April
8th: SpongeTech featured on QVC
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April
9th: Sponsorship of Yankees July 28th home game announced
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April
15th: Q3's revenue of $1.3 million tops Q2 total of $331K (backlog now
at $18 million)
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April
29th: Receives a $7.5 million order (backlog now around $24 million)
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May 1st:
Website traffic increase by 250% after sponsorship of Mets game is announced
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May 7th:
SpongeTech's sponges featured on 'The Price is Right' game show
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May 8th:
Expected revenue for Q4 is $3.3 million
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May 13th:
New York Mets game sponsored by SpongeTech
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May 20th:
Television commercial now to play in all 50 states
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May 22nd:
$4.9 million order received (backlog now around $27 million)
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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...
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The
Clock is Ticking for Bio-Matrix Investments |
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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.
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