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Cashin'
In On The Ugly Side of Wine |
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For
centuries wine has been a profitable industry. In fact, wine so
engrained into our society now, the Wine Institute (yes, a legitimate
organization) estimates wine sales totaled $26 billion in the
U.S. alone a couple of years ago. That's a lot of dollars up for
grabs. Of course, where there's money, you'll eventually find crooks.
 The
crime - and the potential profit if you can prevent the crime -
is counterfeit wine. If the industry experts are right in their
assumption that 5% of wines are fakes (i.e. the wine isn't what the label
says it is), then about $1.3 billion worth of sham wine is purchased
each year in the United States.
Needless
to say, that's not good for legitimate vineyards; a marred name in the
wine industry is the kiss-of-death. As such, I think these wineries
are going to be willing to spend good money to make sure they can demonstrate
the wine in the bottle is the real deal.
Thus
enters Applied DNA.
I'm
not going go into my whole background story again about who Applied
DNA (OTCBB: APDN) is and what they do. Here it is in a nutshell
- they've developed a way to identify counterfeit goods by looking for
a particular strand of plant DNA. As you can imagine, it would be virtually
impossible to replicate the company's DNA. Therefore, it can't be 'beat'
by even the craftiest of counterfeiters.
Did
you catch the key tidbit there? Applied DNA's technology can identify
a specific strand of plant DNA. What is wine ultimately
made of? Grapes. Yes, Applied DNA's BioMaterial Genotyping ability
will provide a way of determining where a wine came from, geographically.
It
doesn't get any more bullet-proof than that.
 The
press release also mentions the other tool they'll be able to offer - a
label for the outside of the bottle rather than a test for the contents
inside the bottle. I suspect the exterior label will look and act a
lot like the anti-counterfeit label we've already seen Applied DNA provide
for Jaguar and other manufacturers.
Very
cool stuff, and as the wine industry continues to attract new fans, the
prevention of counterfeiting will become critical to vintners' and retailers'
credibility.
So,
I'm back to something I've said the last few times I've looked at Applied
DNA ...there's a market for this product. They posted sales of $252K
last quarter - the fourth straight quarter of increased revenue,
and more than twice as much revenue as three quarters earlier. Now
you can add the wine industry to the list of potential buyers.
Anyway,
the reason I bring it up at all is not to preach about the merits of authentic
wine. I just wanted to let you know Applied DNA's CEO James Hayward was
going to be interviewed on NPR's 'American Public Radio's Marketplace'
on Friday at 6:30 pm. Check www.npr.org
to find your local station. Or, you can hear it from the company's website,
www.adnas.com,
after NPR airs the interview.
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Just
Goes to Show You, Advertising Works |
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I'm
not surprised to be telling what I'm about to -I'm just surprised
to be telling you so soon.
 It
was only a week and a half ago I was writing that SpongeTech
Delivery Systems (OTCBB: SPNG) was starting a nationwide television
commercial campaign to kick-start sales of their 'Uncle Norman'
pet bath sponge. Today I'm telling you something even more exciting -
it worked.
The
initial order placed in April (before the product even launched) was
for $7.5 million. In the last few days - since the ads started -
$3.5 million worth of new orders have been received.
Like
the press release said, the company can't tell us many of the details.
I'm not sure why, but I suspect it has something to do with vendors not
wanting to share competitive information. Fair enough.
What
I'm floored by is the speed with which this all happened. One week,
and
we already see $3.5 million worth of new orders? I knew the pet business
was a booming one, generating $41 billion worth of sales in the United
States last year. I'm just surprised how quickly SpongeTech was able to
carve out a big hunk of that pie.
For
those of you keeping score at home, this should put the 12-18 month sales
backlog somewhere between $34.2 million and $37.7 million, depending on
how many sponges they've shipped out since August 8th.
Also
for those of you keeping score at home, the market cap is still right around
$13 million. If you're familiar with the concept of price/sales ratios,
you'll know that's SpongeTech's got a wildly low one.
 On
the flipside, I know a big dose of potential dilution has made some of
you nervous (me included), as they've financed the marketing effort via
issuing stock. In their defense, the marketing effort has clearly more
than paid off. It's still no fun for an investor to see their position
diluted though. That said, I think I have the pinnacle question on the
matter...
On
a per-share basis, are you better off with the benefits of any dilution,
or are you better off without it, knowing they wouldn't have been able
to finance any kind of marketing?
Personally
I think the upside far outweighs the downside, but that's a decision you'll
have to make for yourself.
On
a related note, I think it's getting close to time for SpongeTech's Q4
and full-year numbers. I'm not specifically looking for revenue
and income; I'm quite certain we'll see a whole lot of both. What
I'd like to see is some cash. If either of the pending
buy-backs are going to happen, they'll need some money to do it.
Just
for reference, the company said at one time they were looking for sales
of about $3.87 million in the fourth quarter. Based on the existing backlog,
I'm also looking for nice increases in each of the next four quarters
as well.
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