Congratulations to Clearly Canadian (OTCBB; CCBEF), as the company’s shares were just upgraded by Beacon Equity Research to a rating of ‘outperform’. The report stated (and as we already knew):

“Clearly Canadian is currently in the process of re-launching its flagship brand of sparkling flavored water. The Company is reintroducing four of the original flavors along with two new zero calorie/zero carbohydrate choices. Since 1988, Clearly Canadian has built an impressive product line consisting of several award-winning, premium beverages targeted at the competitive, alternative beverage market.”

Not to gloat (well, maybe we’ll gloat a little), but Clearly Canadian was on our buy list long before it was on Beacon’s. That’s neither here nor there, though.

The real impact of this news is the additional confirmation of Clearly Canadian’s growing presence in its marketplace, as well as within the investing community. Good news and good stories tend to spread like wildfire, which is how small data nuggets can turn into huge stories over time. As we’ve said in previous blog entries, this is the kind of potential buzz we saw for CCBEF back in March - when we first added the stock to our recommended list. Over the past four months, the Clearly story has indeed gained traction. Of course, as shareholders, this is exactly what we want to see happen.

Better yet, we’re looking for the story to keep gaining traction as the next few months roll along. The progress the company has made in terms of debt restructuring (and elimination), as well as the rejuvenated marketing efforts, have already made an impressive impact. Yet, we keep seeing new and better initiatives from the company. We wouldn’t be surprised to see more and more upgrades like this one in the near future.

Here’s a link to the report: http://www.beaconequityresearch.com/report/20060730225411CCBEF_initial_report.pdf

By the way, Beacon set a target of $6.00 for CCBEF shares. That’s fine, although we may not necessarily agree with the number. A static target like that doesn’t leave any room to make non-static adjustments as new developments arise. Plus, it may be a little self-limiting. Don’t forget, Clearly’s shares had been as high as in the $20’s in the very late 90’s, and were just shy of $300 in 1997.

And speaking of shares, well, a picture really is worth a thousand words. Take look below. The stock is currently trading at $3.51, making good on a stochastic buy signal as well as a MACD buy signal. Plus, volume (not shown) has been much better on the buy side than the sell side lately. Just an FYI…the peak in June was right around $4.50.

The buzz continues to build about Ckrush’s (OTCBB: CKRH) online film project ‘LiveMansion: The Movie’. This time, the company’s initiative is being highlighted in none other than the New York Times. Needless to say, that ain’t bad exposure. 

To read the actual article in the online version of the N.Y. Times, click here (it’s free, although it could take a moment or two to load): http://www.nytimes.com/2006/07/30/weekinreview/30bellafonte.html?ex=1154923200&en=f02ae62e21405cf4&ei=5070&emc=eta1

Rather than rehash what you can read for yourself, we’ll just add this thought…although  the movie project was only announced a few days ago, it’s done a pretty nice job of working its way into the mainstream media. We’ve now seen it mentioned in Variety and the New York Times, which leads us to wonder where the idea might pop up next.

The ‘bigger picture’, though, is how what some regarded as a quirky little internet project has now garnered the attention of some major media outlets. Well, our answer to that is this - LiveMansion isn’t a fluke, quirky, nor a mere curiosity. The concept is solid, and Ckrush hit the nail on the head. Trust us, the New York Times doesn’t waste space or time on anything not news-worthy, which leads is back to our point we made a few days ago….

Ckrush and LiveMansion are the real deal, and a real opportunity for shareholders.

For anyone who was interested in learning more about Ckrush’s (OTCBB: CKRH) newest initiative LiveMansion.com, be sure to check out today’s conference call and simultaneous webcast. At 12 noon EST, Ckrush’s CEO Jeremy Dallow will review recent company events, and detail the expectations and opportunities for the new website. In short, any current or prospective shareholder will get the scoop firsthand.

To participate in the free call, U.S. callers should dial 888-428-4472, and ask to be connected to the Ckrush conference call. International callers should dial 612-288-0318.

If you’d rather listen via the webcast, click on this link: http://www.trilogy-capital.com/autoir/ckrh_autoir.html.

The call is expected last about 30 minutes.

With the overall market being less than impressive the last couple of months, a lot of readers have been asking about ways to defend against broad market weakness. Well, we could write a book on how to play defense with your portfolio (although it wouldn’t be the first book on the topic). Some of the initial ideas that come to mind are the obvious ones…set tight stops, sell short, buy puts, etc. All of them are great ideas, and we may even detail those strategies in a later blog entry. For today however, we just want to throw out a hedging idea you may not be quite  as familiar with.

We’re going to make one basic assumption here - any reader who’s interested in our serious small cap ideas also probably has a brokerage account in which they can actually trade stocks. If you have that ability, you almost certainly have trading access to a number of mutual funds.

We’re looking for one kind of fund in particular…an inverse and leveraged fund. The most notable fund company with such a fund is Rydex - they actually have several of these funds. ProFunds offers them too, although their options aren’t quite as numerous as with Rydex. (And no, this isn’t an endorsement of either of the companies…they’re just convenient examples.)

If you’re not familiar with the concept of a leveraged fund, it’s actually easy to grasp. A leveraged fund is an index fund designed to move with the index, but by a greater degree. In most cases, the degree of leveraged movement is 2 to 1. Or in other words, for every percentage point the S&P 500 gains, the 2:1 leveraged fund gains 2 percentage points. Of course, if the SPX falls by 2 percent, the leveraged fund falls by 4 percent. See the potential as well as the risk?

Enter inverse funds. An ‘inverted’ fund moves in the opposite direction of an index. For every percentage point the S&P 500 loses, an inverted fund will gain a percentage point. Adding in the leverage, this fund would gain 2 percentage points for every percentage point the SPX lost. Again, do you see the potential, as well as the risk?

OK, so where does the hedge against a bearish market come in? Let’s take a look at a realistic example. Let’s just say your current portfolio is 2/3 invested in long positions, and 1/3 of the portfolio is held as cash. Assuming your stocks ‘mirror’ the market on a day-to-day basis (which 75% of stocks do), if the market is sinking, odds are your portfolio is sinking by about 2/3 of that rate. While it’s great to see your losses aren’t as big as the market’s losses, (1) that’s only the case because your potential gains are also limited to 2/3 of the market’s gains, and (2) you’re still losing ground.

So, if the market sinks by 6%, your account only sinks by 4%. Check out the math on a hypothetical $100,000 account.

[ ($66,666 x 6% loss) + ($33,333 x 0% loss) ] = $62,666 + $33,333 = $95,999
(or 4% lower than the initial $100,000)

But what if you used that remaining cash position (1/3 of the account) to make a short term purchase of an inverse leveraged (2:1) fund? If the market lost the same 6%, the fund would gain 12%. And more importantly, your account would lose no ground.

[ ($66,666 x 6% loss) + ($33,333 x 12% gain) ] = $62,666 + $37,333 = $100,000
(or equal to the initial $100,000)

The immediate upside is clear, with several potential ‘bigger picture’ fringe benefits included. One of them is simply that this strategy allows you to ride out rough periods, without forcing you to bail out of stocks because the short-term pain has gotten too great. Another plus is the technique can buy you time when things are unclear, and you want to see how things shake out over a few days.

Anyway, if you’re serious about hedging a long-only portfolio, this is definitely worth a thought. By the way, the short-term redemption fees usually don’t apply for funds like this…just be sure to check with the fund and/or your broker first, as the fees or commissions may affect how often you choose to hedge with funds.

As always, a caveat…..

This is obviously not a long-term solution. In fact, in our example, it was pretty much guaranteed to be a zero-sum game no matter which direction the market went. So, you don’t want to stay hedged longer than you have to. Otherwise, you’ll literally go nowhere. But, for those looming short-term pullbacks, this can be an easy way to play defense. The trick (as always) is knowing when to add or remove the hedge.

On Tuesday we mentioned Ckrush’s (OTCBB: CKRH) plan to allow Livemansion.com participants to create and direct the website’s first feature. ‘LiveMansion: The Movie’. Well, Ckrush released a few more details yesterday about the production process.

There are three different participatory routes for LiveMansion members…

1) They can audition to become the director, through the online self-nomination process. Anyone can be nominated, but only the top submissions will make it to the next level…to actually shoot a short film. From that group, site members will narrow the submissions down to five candidates, who will then each shoot a specific scene from the film. Then, from those five submissions, LiveMansion users will narrow it down to one director.

2) They can have a role as a producer. All LiveMansion members will have an opportunity to help produce, but the degree of impact any participant has on the film will depend on the number of ‘producer points’ he or she has earned in the process. Producers will have a say in who makes the cut in the casting call.

3) They can enter the open casting call. Again, the casting call will be a multi-staged process, with each round getting more and more involved. The field will be narrowed to a final list of potential cast members who will ultimately have to make a short film of themselves playing out one of the scenes from the film. The ‘producers’ will collectively vote to narrow the field down to the final eight characters of the movie. 

As for plot or story details, the only thing Ckrush has said so far is ‘The Movie’ will be a “thriller set in the underground world of mega-mansion, rave-style parties.” We’re not quite sure what that means, but it sure sounds like fun.

As for the stock, we’re not surprised to see it revving its engines again, on the heels of all this exciting news. The current price of 30 cents is well off of July’s low of 18 cents, and we’re starting to see a lot of higher highs and higher lows (the MACD lines tell the whole story). We said it last Friday and again on Tuesday, but we’ll say it again now…as word of the LiveMansion venture spreads, the market’s interest in Ckrush’s stock is going to grow exponentially.  

Remember a few weeks ago when we mentioned Commerce Planet (OTCBB: CPNE) had acquired a printing company? If not, it may be worth re-reading by clicking here (keep in mind that as of then, the company was still called NeWave). We made a tongue-in-cheek joke at the time…what was a perfectly good internet company going to do with a printing outfit? Of course it was all in jest, since we understood and agreed with the tactic - to cut costs by meeting the printing needs in-house. And, maybe it would be a nice way to diversify NeWave’s all-online divisions by throwing a non-virtual business into the mix.

Well, the first tactic paid off immediately, but the second tactic - to use the printing division as its own stand-alone venture - just became a heck of a lot more viable. Over the last month, Commerce Planet’s printing division, One Source Imaging, has done over $500,000 worth of business with a new customer. According to CPNE’s president Michael Hill, One Source Imaging is experiencing record growth. Congratulations.

Although the bulk of the company’s revenues are still expected to stem from online activities, having a nice little printing operation on the side is obviously can to provide a little gravy on the side.

Oh, and by the way, shares are on the move again (not that they needed a lot of help). They took a well-deserved break last week, but the lower Bollinger Band (20 day) once again served as a springboard, putting CPNE shares back into their longer-term uptrend. Since we initiated coverage on Commerce Planet on March 22nd, shares are up 186%…and still rising. 

Although we don’t get to talk about it too much here at the SmallCap Digest, being in the right sector can often be just as important as being in the right stock. In famed Bill O’Neil’s book ‘How To Make Money In Stocks’, his research concludes between 30% to 50% of any stock’s movement is rooted in its sector, as opposed to moving on its own merit. We wouldn’t argue those numbers. Of course, extrapolating from the data leads us to another conclusion…if you’re in the right sector(s), the wind is at your back. If you’re in the wrong sector(s), the deck is stacked against you.

On the other hand, it’s just as important to acknowledge the strongest individual stock trends - whether up or down - can and do defy the sector odds. So, don’t avoid a great stock in a weak sector just because it’s in a weak sector. Just factor the sector trend in appropriately.

With that, we’ll just leave you with the most recent sector-based return data for several relevant timeframes. These are ranked by one-month performance, but there are important clues in the data of all the timeframes mentioned. As for how to use specifically the data, that’s up to you. In general, we’d recommend looking for long-term trendw that seem like they could persist. And, look for new short-term trends that seem to run counter to the long-term trend…those might be new breakouts or breakdowns.

Anyway, it’s just food for thought. Take a look for yourself - you may even find another helpful hint we haven’t mentioned. 

By the way, we’d be amiss if we didn’t mention one more thing…the smaller the company, the less influential its sector is. Obviously this tendency has an impact on us and the stocks we follow (for better or worse, depending on the case). The phenomenon is mostly attributable to the fact that these smaller companies are usually off the radar, so to speak.

In any case, it always makes sense to at least look at the sector and determine whether or not you’re swimming upstream. It’s also nice to have the sector-based perspective if you’ve got a position not going your way in the short run. How so? Maybe that particular trade isn’t the wrong stock; perhaps it’s just suffering from some short-term bearish sector influence.

Although we’re not going to follow it past this mention of it today, we wanted to throw out a quick stock name that caught our eye…maybe it will catch yours too.

Rent-Way (NYSE: RWY) has been the proverbial ‘Little Engine That Could’ recently, shrugging off broad market weakness, and doing its own thing instead. It just so happens that ‘thing’ is a well-paced but very respectable 30% gain since the end of last year. (By the way, the same can’t be said for very many other stocks.) The exciting part is the likelihood of a continued uptrend. Shares never over-heated. Therefore, they never invited a heavy dose of profit-taking. Instead, the stock has made a habit of finding support at its 50 day line once it crawled back above it last December. The icing on the cake is the cross back above the 200 day line several weeks ago.

Fundamentally, the scenario is ok too. Quarterly earnings growth, at -66% (year over year) leaves a little to be desired, but revenue growth is a decent 4.5%. The margin of 6.7% is also just ok, but the huge improvement in its P/E ratio at least merits a closer look at Rent-Way. The trailing twelve-month P/E is a hefty 96.7, but the forward-looking (estimated) P/E is 17.5. Overall, the numbers appear mediocre on the surface, yet, somebody clearly knows something.

We’ll warn you now…volatility is higher than average, and a thinly-traded stock like this can stop and turn on a dime. But, as it stands right now, the combination of RWY’s chart with its fundamental results is compelling enough for us mention it.

Like we said, this is a one-time look only. You’re on your own for targets and stops too. But, if you’re looking for additional ideas above and beyond our featured companies, Rent-Way is worth doing a little homework on.

One of the biggest challenges our featured small cap companies face (or any small cap company, for that matter) is not corporate performance, but in getting the attention of the investing community. So, when we learned Novelos’ (OTCBB: NVLT) corporate profile now appears in Standard and Poor’s listing of corporate records, we were ecstatic. This is something of a milestone for the company, and should go far in putting Novelos’ name - and shares - on the map of the investing world.

Don’t hear us wrong - Novelos is not primed to instantaneously become the next Microsoft or Dell…even those companies didn’t break into the large cap world overnight. We’re just saying the S&P listing is yet another feather in NVLT’s visibility cap. Why? Just think of it as another set of potential investors who will be exposed to all the great work Novelos is doing. Or to be more direct, it makes it a lot more likely that your shares will move higher because demand for them is growing.

For current owners, it hasn’t exactly been easy the last few weeks - as the stock has basically mirrored the weakness of the overall market. The current price of 72 cents represents a 52-week low. However, we’re still very encouraged by the recent volume data appearing on the lower portion of our weekly chart. The bullish volume (the green bars) have remained tall, while the bearish volume (the red bars) have been smaller than the bullish bars…with each bearish volume bar also getting progressively smaller. It’s subtle, and provides no specific idea of when a rebound might come. But all the same, it’s a sign of there being more interested buyers than sellers. Remain patient. And by the way, if you’re not in a position yet, 72 cents is a tremendous price.

On The Go Technologies Group (OTCBB: OGHC) has a new sales director. John Pietrocupa , formerly of General Electric’s IT division and Compucom, is now On The Go’s sales director of the enterprise division. The enterprise division is focused on international banking, hotel, pharmaceutical, insurance, and automotive sectors. In simplest terms, that’s right up John’s alley. We think it’s a good fit, and should help enhance On The Go’s bottom line.

By the way, we’ll also remind you On The Go is on a sales roll. The company has shipped out some major orders in the last several weeks, which could lead to some pretty surprising results (in a good way) when quarterly earnings are released. Be sure to check out OGHC’s recent blog entries as a reminder of the big orders the company has landed in just the last couple of months. Now, with a former sales executive from a blue-chip company stepping in, we’re expecting revenue to keep growing exponentially.

As for the stock, it hasn’t been an easy trip to take over the last few weeks. However, the bigger picture has to be remembered. OGHC’s recent chart doesn’t look all that different than the market. Given that 3 out of 4 stocks move the same direction as the market, we have to allow for some general weakness within our positions every now and then. We still contend On The Go shares have tremendous potential - especially if the overall market gets righted.

Support is now at 10 cents, and you can see how shares have been in a consolidation mode since pulling back in June. Plus, seeing all that room for recovery - from just a few weeks ago - makes the current price of 11 cents a very enticing entry level.

Clearly Canadian (OTCBB: CCBEF) has just taken another major step towards putting its destiny in its own hands.  The company had been in litigation proceedings since 1997 over a disputed debt incurred by subsidiary Blue Mountain Springs LTD. The former owners of Blue Mountain said Clearly Canadian was responsible for a debt owed by Blue Mountain when Blue Mountain was acquired by Clearly Canadian.  The two parties have come to an agreement over the debt, with part of it being paid in cash, and part of it being paid with shares and warrants.

The exciting part for current shareholders is not so much how the proverbial monkey has been taken off of Clearly’s back, but rather that the debt has been taken off the books.  As a result of the settlement, Clearly Canadian is essentially debt free…and has a pretty large cash position to boot ($5.3 million to be exact).

While the dissolved debt won’t affect cash flows or the income statement, it will significantly enhance the balance sheet.  And from a less technical perspective, the company will now be able to focus more on sales and marketing without needing to worry about distractions like this lawsuit.

The long-term benefit of the settlement will ultimately be better credit.  Clearly Canadian will have a much easier time securing loans and financing deals, since a potential lender isn’t going to see a big question mark on the company’s books.  And as we’ve seen so far, the company has made very wise and effective use of cash resources when they were available (e.g. the financing secured a couple of weeks ago to boost delivery and distribution efforts during this peak selling season).

Here’s the release…

CLEARLY CANADIAN SIGNIFICANTLY IMPROVES FINANCIAL POSITION

VANCOUVER, B.C., July 25, 2006 - CLEARLY CANADIAN BEVERAGE CORPORATION (OTCBB: CCBEF) is pleased to announce that on the heels of its recent financings and settlement of outstanding litigation, it is now, aside from regular trade payables, effectively debt free and has increased its current cash position to more than US $5.3 million.

Brent Lokash, President of Clearly Canadian stated, “We now have a very strong financial foundation which could accelerate our efforts towards broadening distribution, increasing availability of our product lines, exploring all profitable alternatives related to our brand name and implementing our stated strategic initiatives.”

The litigation which the Company has settled relates to the majority portion of a claim surrounding its subsidiary, Blue Mountain Springs Ltd (Blue Mountain).  This litigation was commenced in 1997 and involved, in part, a claim against the Company and Blue Mountain to repay an outstanding CDN $1.75 million debt owed by the Company to the former owners of Blue Mountain.  The Company had withheld payment of this debt in order to set off a claim against the Company made in connection with the Company’s purchase of Blue Mountain.  At the time of settlement, the former owners of Blue Mountain were claiming the Company owed them approximately CDN $3.0 million, comprised mostly of the principal and interest on the outstanding debt.

This settlement allows the Company to retire the CDN $1.75 million debt currently on its balance sheet.  In consideration, the Company has issued 624,314 common shares and warrants to purchase 100,000 common shares at $2.00 per share.  The right to sell these common shares will vest in six traunches over a three year period.

Continued Lokash, “This settlement represents a great accomplishment for the Company.  For almost 10 years, valuable monetary and human resources of the Company have been diverted to deal with this litigation.  This settlement allows the Company to extinguish a significant debt for less than is being claimed against the Company and allows the new management team to focus on the positive aspects of developing new business and products.” 

About Clearly Canadian
Based in Vancouver, B.C., Clearly Canadian Beverage Corporation markets premium alternative beverages and products, including Clearly Canadian(r) sparkling flavoured water and Clearly Canadian O+2(r) oxygen enhanced water beverage which are distributed in the United States, Canada and various other countries.  Since its inception, the Clearly Canadian brand has sold over 90 million cases equating to over 2 billion bottles worldwide. Additional information about Clearly Canadian may be obtained at www.clearly.ca.
 
Forward Looking Statements
Statements in this news release that are not historical facts are forward-looking statements that are subject to risks and uncertainties.  Words such as “expects”, “intends”, “plans”, “may”, “could”, “should”, “anticipates”, “likely”, “believes”, “estimates”, “potential”, “predicts”, “continue” and words of similar import also identify forward-looking statements.  Forward-looking statements are based on current facts and analysis and other information that are based on forecasts of future results, estimates of amounts not yet determined and assumptions of management, including, but not limited to, the Company’s belief that a strong financial foundation could accelerate its efforts towards broadening distribution, increasing availability of its product lines, exploring all profitable alternatives related to its brand name, developing new business and product lines and implementing its stated strategic initiatives.  These assumptions are subject to many risks, and actual results may differ materially from those currently anticipated.  These risks include, by way of example and not in limitation, general economic conditions, changing beverage consumption trends of consumers, the Company’s ability to generate sufficient cash flows to support general operating activities and capital expansion plans, competition, pricing and availability of raw materials, the Company’s ability to maintain the current and future retail listings for its beverage products and to maintain favorable supply, production and distribution arrangements, laws and regulations and changes thereto that may affect the way the Company’s products are manufactured, distributed and sold and other factors beyond the reasonable control of the Company. Additional information on factors that may affect the business and financial results of the Company can be found in filings of the Company with the U.S. Securities and Exchange Commission and with the British Columbia and Ontario Securities Commissions.

For Investor Relations contact:
E-mail: investor@clearly.ca
Tel: 1 (800) 983-0993

For Marketing contact:
Email: smanson@clearly.ca
Tel: 1 (604) 742-5314

Wow, what a past few days! Oil and gold are all over the map, as is the U.S. dollar. We would never even claim to be commodity or currency experts, but we do want to share our technical read on all three. Maybe some of you can squeeze out a trade or two from our observations.

Oil

Crude oil futures (light) ran all the way up to $80 per barrel last week on Middle East fears. But, the type and size of runup was nothing new. Over the last two years, each of those rallies has been met with a commensurate pullback to a long-term support line. Despite the panic, we’re taking a cue from the last three days worth of price decline, and saying crude futures are likely to once again retest that support line. It’s currently at $66.50, but rises slightly each day. By the time it might actually be reached, it could be closer to $68.00 or so.

Longer-term, we still contend oil could go as high as $100. Between persistent turmoil in the OPEC region and the newly-realized vulnerability we have to hurricane-related threats to domestic oil production, it shouldn’t be a surprise to see it happen. However (and as we’re clearly counting on today), it’s not going to get there in a straight line.

(By the way, if the support line breaks, it would be a significant shift in the price trend as well as a major reason for consumers to rest easy. In other words, it could potentially be bullish for the rest of (non-oil-related) the market. However, it’s only a long-shot chance at this point.)

Gold

We distinctly remember a self-proclaimed expert a few months ago saying gold was going to $2000. Eventually it will happen, but for anybody who thought it was going to happen then (or soon), you’re in a world of hurt right now. Spot gold prices recently peaked at $665 (June 14th). That’s impressive, but there are two problems for the gold bulls. First, gold is now $26 under that peak. And second, that peak of $665 is a lower high…meaning there wasn’t enough buying to even come close to matching May’s high of $716. You can’t get to $2000 if you can’t first make it past $716; we’re tapering off from an effort that wasn’t even strong enough to challenge previous resistance.

There are actually several justifiable support lines for spot gold. Two of them, though, are practically converged at $569. By the time spot prices could actually test them, they’d be closer to the $580-$590 range. Once there, we’ll have another decision to make, but there’s still the potential $50 tumble between now and then.

U.S. Dollar

In general, the U.S. dollar is getting stronger now, but that’s a relatively young uptrend - it was falling (badly) for most of Q2. A support line for the U.S. Dollar Index finally came into the picture in mid-May (around the 84 level) after we saw a pretty clear head-and-shoulders pattern lead to the foretold decline of the index. Based on the support, and the dollar’s inconsistent nature recently, we expect to see the index keep rising from here, and perhaps move as high as just under 100 (for starters). On the other hand, we still don’t expect currency trading to be any less choppy than it has been lately.

By now it’s no secret Execute Sports’ (OTCBB: EXCS) core strategy is in developing the right alliances. We recently read about the wake skate partnership with Jet Pilot, the exclusive deal with Eagle Rider (a motorcycle gear retailer), and the agreement with Rincon Distribution (a supplier to over 500 retail stores). Aside from being high-profile ventures, they also just make good sense. True to form, Execute has cracked yet another nut…this one with a slight twist.

Officially named ‘The Council’, this division of Execute sports will provide marketing, research, and business development services for other action sports manufacturers and distributors. In other words, they’re going to tap into their own expertise (and they are experts) to help other companies mirror Execute’s success. The Council intends to provide the industry with a “fresh approach to marketing through providing customers with the ability to design and produce their own branded products, in addition to connecting brands with athletes and the creation of high-impact print and multimedia campaigns”. Per Todd Pitcher, President of Execute Sports, the venture is described as “providing customers with a broad range of services, ranging from web and interactive media to creating branded and private label solutions around products that we have also developed and built for them, to consulting services.'’

Our take, to put it in gen-X and gen-Y terms, is ‘cool’. It’s a new revenue source, but not one that poses a lot of risk. Execute’s top staff is already doing (heck, living) this stuff anyway, so there’s minimal cost to the company. And, perhaps along the way (and this is what we think the ultimate benefit will be), Execute will be able to develop even more alliances. There are no public forecasts or potential bottom line impacts “The Council” may have on Execute Sports’ balance sheet. However, it’s a low-risk/high-potential effort that should be exciting to see developed.

As for the stock, it’s been quietly cranking out gains over the last few days, perhaps gearing up for a bigger move soon (the calm before the storm?). That’s why we’d recommend getting in now…26 cents is a great price, especially when shares are making higher lows, and keep pressing upward. If/when the resistance at 26 cents breaks, the flood gates could open and send shares up like a rocket. 

If you’re looking for a long-shot with better than average long-shot odds, you might want to look at…auto makers (here’s where you cringe).

We know, we know…the last three years have just been horrible. The Dow Jones Automobile Index ($DJUSAU) fell from a high of 312.68 in early 2004 to a low of 145.55, hit just this past March. Yeah, that’s more than a 50% pullback, and yeah, everybody says steer clear of the industry now. Call us contrarian, but that’s precisely the best time to buy a stock - when nobody else wants it. By that point, either everyone has already decided against buying it, or they’ve already sold it. Either way, the only interested parties left now are the buyers. You know what happens when that’s the case.

In fact, the car makers may have already turned the corner. The Dow Jones Auto Index closed above its 200 day line last month for the first time since mid-2004. And, it’s up by 8.2% over the last 15 weeks. The S&P 500, for comparison, is down by 2.3% during that time. On top of that, the auto index really does look like it’s coming out of its bear trend and working on a rally. In fact, we’ve seen a bullish MACD indication since early this year. Take a look at the chart…you might be surprised.

There’s no doubt this sector brings a unique risk to the table. Then again, it’s a unique opportunity. And based on the chart we see right now, the odds just got a lot better for the buyers.

Fundamentals? Yeah, we acknowledge the problem, but this could very well be a scenario where the charts reflect future fundamentals - not the current ones. And fundamentally speaking, it’s hard to believe things could be much worse than they are now.

Cel-Sci Corporation (AMEX: CVM) has just submitted results for the first half of their fiscal 2006. There were some noteworthy changes we saw on a quarterly and six-month (year-over-year) basis, but overall, nothing was a show-stopper.

One of the biggest changes between last quarter (ending March 31st) and the end of last fiscal year was the cancellation of over $800,000 in derivative liabilities. Total liabilities now are less than 1/3 of what they were just six months ago.

Revenue was down, as some of the company’s funding grants expired in the last few months. Cel-Sci is pro-actively seeking other grant funding. And, administrative expenses were up, mostly as a result of employee stock option expenses. That’s the flipside of the major reduction in the derivative liabilities total.

For the complete 10Q report, click here.

In the meantime, shares have been working on a base at 78 cents. Thay had dipped as low as 73 cents in mid-June, but have managed to tread water while the rest of the market has been suffering. They’re up slightly today, but from a bigger-picture view, we think this could be the foundation for a longer-term (and quite large) bullish move. Getting past resistance at 92 cents and 97 cents - the two most recent peaks - will be critical.

Cha-Ching! On The Go Technologies (OTCBB: OGHC) just shipped $313,400 worth of goods to an internet television distribution company with an international footprint. Is that a big deal? Definitely! Just for perspective, don’t forget On The Go’s biggest sale ever was the $827,000 order placed about a month ago. The dollar amount here isn’t quite as high, but on a relative basis, it’s still a nice little padding for the top (and bottom) line.

And for those who are still trying to figure out what ‘internet television distribution’ is, that’s just the fancy way of saying ‘we can show you cable TV on your computer just using an internet connection’. The benefit to the user is obviously mobility. Hence the name ‘On The Go Technologies’.

As for the stock, June wasn’t great, but we’ve managed to move back above the 3×3 displaced moving average, which is at least a good start on a bounce. It also helps to see both of the stochastic lines moving up and out of the oversold zone. The pump is primed - let’s see if we can get some traction this time.

Although ‘firing on all cylinders’ is a little cliché, it‘s still a fitting description of Execute Sports’ (OTCBB: EXCS) last few months. The company really is firing on all of its proverbial cylinders. For instance, last Friday, we learned how June’s online sales of wetsuits and vests were three times as strong as March’s revenues (when the online sales venue was launched). That was announced just a few days after a partnership was forged with Jet Pilot to begin production of a new wake skate line. Before that, Execute saw a 51% (year-over-year) increase in European sales of Academy snowboards. And even before that, we saw comparable increases of domestic snowboard sales. See the trend?

So, it’s no surprise today to learn Execute’s private-label XPS flotation vest sales through Bass Pro (a leading water-related retailer) are up in a major way. On a year-over-year basis, they’re up by 63%. Same-store sales of XPS vests are up 45%. Either way you slice it, it’s a huge increase in market share, and should ultimately be a huge win for the company was well as shareholders.

Although shares haven’t been well-loved by the market recently, you have to weigh the current momentum against the perpetual improvements in the company’s top lines…something’s got to give soon. We still suspect investors are going to be impressed by real results, and end up pushing this stock higher with a solid buying effort. In fact, we may already be seeing early hints of such an effort. Although it hasn’t necessarily moved higher recently, a clear support base has been established at 23 cents. That just may be the springboard the stock needs, now that it’s been in a consolidation mode since late June.

More of the same from Commerce Planet (OTCBB: CPNE), which is good news when you’re on a roll like they are.

In Q2 of this year, Commerce Planet reigned in 125,000 new paid subscribers. It was a record, of course, but that’s nothing new for this online purchasing club. Take a look back at all the recent blog entries…it’s the same story over and over again. The company just keeps growing.

In simplest terms, this is still an incredible opportunity. The company is firing on all cylinders, and the stock is responding accordingly. Although we’ve mostly focused on the daily chart with recent blog entries on CPNE, the short-term uptrend has now turned into something a little bigger. So, today we’re going to back out to a weekly chart to really illustrate the kind of potential we see.

Currently at 50 cents, CPNE shares are 31 cents higher than where they were when our coverage began on March 22nd. That 163% gain is nice, but pales in comparison to the kind of room this stock has left to recover. CPNE shares had been almost as high as $2.00 in February of last year, and tried to establish a base around $1.50 shortly after that. Although that support ultimately did not hold at the time, it actually worked out better for us - we were able to recommend it at what was basically the low for the year (before shares started to run back up again).

You asked for it, you got it.

Although we can’t answer every question we get here at the SmallCap Digest, if it’s something all of us can learn from, then we’re more than happy to share our thoughts.

On Friday, we got this question….

Thanks for all your well written and helpful emails.

I have a suggestion for a topic which you may have covered and I have missed.

How about a few tips on doing due diligence. I go through financials as well as I know how; check on S-8’s, Form 4’s, A. S and O.S, debentures etc., but, one thing I don’t know how to do is how to conduct a telephone conversation with IR or in some cases the CEO. I am puzzled at what questions I should ask. Part of the reason for that is I know they are restricted in what they can say without an official news release or PR. So I am asking for suggestions on what questions I can ask that they can answer that will help the investor / trader make a decision on whether to buy or not.

Thanks again and please keep up the good work.

Great question. Real due diligence is tough, for the very reason you said -an investor relations department can’t tell you anything they can’t tell anybody else. So, even though you’re being thorough, you may not really have an edge. But still, you gotta’ try, since you never know when you’ll get that little snipplet of information (or find an angle you hadn’t really thought of) that could make a very big difference in how a company’s stock performs.