Wednesday, March 18, 2009 2:09:43 AM
SpongeTech ® Delivery Systems, Inc. : A “Squeaky Clean” Start Up Company?
I’ve been dealing in the public markets for nearly 12 years now and for the first time, I’ve finally found a small cap company that “gets it”. This company in not focused on its share price, they are focused on building revenue. They understand that revenue and profit is what dictates market price for their stock. I only wish more small caps would start to “get it” so they too can be successful.
The company I am talking about is SpongeTech (SPNG:OTCBB) SpongeTech(R) Delivery Systems is a company which designs, produces, and markets a unique line of reusable cleaning products for household use. These sponge-based products utilize SpongeTech(R)'s proprietary, patent (and patent-pending) technologies involving hydrophilic (liquid absorbing) foam and polyurethane matrices. The Company's sponges are specially configured with an outer contact layer and an inner matrix, the latter of which comes pre-loaded with specially formulated soaps and wax that are released when the sponge is wetted and applied to a surface with minimal pressure. The Company's current product line is designed for Car Care and Pet Care, however, SpongeTech(R) is currently exploring additional applications for its technology including an anti-bacterial, kitchen and bath cleaner, as well as a unique 'foaming' bath sponge for children.
Over the years, I cannot even begin to tell you how many times I have preached “focus on building your company and your stock price will take care of itself”. Well, that’s not an entirely accurate statement either. Unfortunately, the small caps are not as regulated as your listed companies and face market forces that aren’t as common with your listed companies. The “market forces” I am referring to are such things like uncontrolled naked shorting, rolling shorts and market manipulation. Oh and let’s not forget dilution, the sometimes necessary evil to growing your business.
You may be asking, what does this have to do with SpongeTech? When I first became familiar with this company it was due to the volume of shares it was trading on a daily basis. I watched it for a while and then thought…hmm, let’s take a look at this company and see what they are doing. My first thought was, (having been a basher that even holds the distinct honor of having been sued for bashing, however I prevailed), it’s a scam and they’ve hired a ton of stock promoters.
What I found is a company that is doing a lot of things RIGHT and realizes the importance of advertising. I mean the traditional methods of advertising and marketing of their PRODUCTS. Go to this company’s website www.spongetech.com and look at the forums they have chosen to get the word out that they EXIST.
When a small cap goes public, they have to have some way of letting the public at large know that they exist. Otherwise, how can people be expected to buy their products, much less consider them for investment purposes. Advertising and marketing of the company’s PRODUCTS and/or SERVICES. That’s how you do it! This company “gets it” !!!
In the company’s most recent 10Q filed on Jan. 14, 2009, the company reported, for six months ending Nov. 30, 2008, $6,483,892 in advertising and promotion fees (unaudited) and a NET income of 3,397,038 (unaudited). That’s not the only thing I found interesting in the 10Q. I also found this:
As of January 13, 2009, the Company had 1,170,332,648 shares of common stock issued and outstanding. The Company intends to return to the treasury and cancel an aggregate of 3,265,050 shares that were repurchased under the publicly announced repurchase plan through December 31, 2008 and an additional 76,623,293 shares that were purchased by certain of our affiliates through December 31, 2008 who have agreed to return these shares to treasury. In addition, the Company intends to return to the treasury and cancel an additional 133,577,066 shares that were returned to the Company by a principal shareholder. Thus, the Company will have an aggregate of 960,132,289 shares of common stock outstanding after giving effect to the cancellation of the shares to be returned to the treasury described above. For a complete description of the shares to be returned to treasury and cancelled(see Part II. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds). http://pinksheets.com/edgar/GetFilingHtml?FilingID=6346743
This tells me that the company is also addressing the concerns of dilution. So, although share price is not their PRIMARY focus, it is obviously something they do pay attention to and are concerned about.
I have heard rumors that this company also suspects a large short position, remember those adverse “market conditions” I mentioned earlier. Since I have no direct contact with the company, I cannot confirm of deny this rumor. However, something everybody should know is that FINRA offers a service to those companies that suspect a short position. FINRA has a department of “Short Specialists” that can and will conduct an audit of a company if they suspect illegal shorting activity. Perhaps this is something SpongeTech will consider looking in to.
So, to recap here, so far, we have a company that 1) understands the value and importance of traditional advertising, 2) is generating significant revenue and 3) is concerned about shareholder value and dilution. Not bad.
My next step was to actually go out and see if their claims of “having products on the shelves” was true. I went to the local Walgreens and looked on the cleaning aid isle…nothing there. I looked in the automotive section…nothing there. Hmm, I wasn’t ready to give up so I asked to speak to the store manager. I explained to her that I had been told that SpongeTech Car Kits are a product they carry but that I was unable to find it in the store. I asked her if she had any way of telling me if ANY Walgreens carried the product. She stated that in fact she did and promptly headed to the computer.
She pulled up the product “SPONGETECH” and at this point I had stepped behind the counter with her. At the top of her screen, the system showed that there were 3 items “on hand” at another location.
There were about 15 or maybe 20 more locations listed below the location that had the 3 “on hand” and the column for the number “on hand” was blank.
Then, below those 15 or 20, there were more stores listed and in the column for “on hand” I saw the words “no activity”.
I questioned the manager about entries or lack thereof in the column for “on hand” and she stated that the stores with nothing in the “on hand” column simply didn’t have product in stock at that time but that at some point and time they have had product. The stores that indicated “no activity” have never carried the product in their location.
So, still not being satisfied, I asked her for the address of store that was showing “3 on hand”. The address was 6006 Beach Blvd, Jacksonville, Fl. It was about 11 miles away from where I was but I thought, what the heck, let’s take a ride.
I arrived at the store, looked in the cleaning aids and automotive sections…nothing. Again, I asked for the manager. I told her what I was looking for and that the store close to my house had indicated that her store had “3 on hand” then I asked her if there was any way she could search her system to find out exactly where in the store the product would be. She headed off to the computer and when she returned she stated that the products should be located in the “On TV” section of the store. She then walked over to that section with me and WAALAA, there it was….SpongeTech 3 Pack Combo Car Wash System. As soon as I got home, I called a friend of mine that has been following SpongeTech and relayed my findings. Last I heard, he was headed out to pick up a kit of his own.
For all you nay sayers…I took pictures with my cell phone. Call the store, I’ve given you the address. If the clerk answering the phone can’t help you, ask to speak to the manager and have the manager look in their system to see if they carry the product. Even if you are told that no, they don’t carry the product, take it one step further and ask if it’s possible that they are just sold out, is it something they have stocked before. Be persistent and I think you will like the results.
To summarize, what I found through all my skepticism is a company that 1) understands the value and importance of traditional advertising, 2) is generating significant revenue and 3) is concerned about shareholder value and dilution and last but not least 4) actually has a real product in the stores, on the shelves.
Way to go SpongeTech !!!
Here are the pictures I took:
I’ve been dealing in the public markets for nearly 12 years now and for the first time, I’ve finally found a small cap company that “gets it”. This company in not focused on its share price, they are focused on building revenue. They understand that revenue and profit is what dictates market price for their stock. I only wish more small caps would start to “get it” so they too can be successful.
The company I am talking about is SpongeTech (SPNG:OTCBB) SpongeTech(R) Delivery Systems is a company which designs, produces, and markets a unique line of reusable cleaning products for household use. These sponge-based products utilize SpongeTech(R)'s proprietary, patent (and patent-pending) technologies involving hydrophilic (liquid absorbing) foam and polyurethane matrices. The Company's sponges are specially configured with an outer contact layer and an inner matrix, the latter of which comes pre-loaded with specially formulated soaps and wax that are released when the sponge is wetted and applied to a surface with minimal pressure. The Company's current product line is designed for Car Care and Pet Care, however, SpongeTech(R) is currently exploring additional applications for its technology including an anti-bacterial, kitchen and bath cleaner, as well as a unique 'foaming' bath sponge for children.
Over the years, I cannot even begin to tell you how many times I have preached “focus on building your company and your stock price will take care of itself”. Well, that’s not an entirely accurate statement either. Unfortunately, the small caps are not as regulated as your listed companies and face market forces that aren’t as common with your listed companies. The “market forces” I am referring to are such things like uncontrolled naked shorting, rolling shorts and market manipulation. Oh and let’s not forget dilution, the sometimes necessary evil to growing your business.
You may be asking, what does this have to do with SpongeTech? When I first became familiar with this company it was due to the volume of shares it was trading on a daily basis. I watched it for a while and then thought…hmm, let’s take a look at this company and see what they are doing. My first thought was, (having been a basher that even holds the distinct honor of having been sued for bashing, however I prevailed), it’s a scam and they’ve hired a ton of stock promoters.
What I found is a company that is doing a lot of things RIGHT and realizes the importance of advertising. I mean the traditional methods of advertising and marketing of their PRODUCTS. Go to this company’s website www.spongetech.com and look at the forums they have chosen to get the word out that they EXIST.
When a small cap goes public, they have to have some way of letting the public at large know that they exist. Otherwise, how can people be expected to buy their products, much less consider them for investment purposes. Advertising and marketing of the company’s PRODUCTS and/or SERVICES. That’s how you do it! This company “gets it” !!!
In the company’s most recent 10Q filed on Jan. 14, 2009, the company reported, for six months ending Nov. 30, 2008, $6,483,892 in advertising and promotion fees (unaudited) and a NET income of 3,397,038 (unaudited). That’s not the only thing I found interesting in the 10Q. I also found this:
As of January 13, 2009, the Company had 1,170,332,648 shares of common stock issued and outstanding. The Company intends to return to the treasury and cancel an aggregate of 3,265,050 shares that were repurchased under the publicly announced repurchase plan through December 31, 2008 and an additional 76,623,293 shares that were purchased by certain of our affiliates through December 31, 2008 who have agreed to return these shares to treasury. In addition, the Company intends to return to the treasury and cancel an additional 133,577,066 shares that were returned to the Company by a principal shareholder. Thus, the Company will have an aggregate of 960,132,289 shares of common stock outstanding after giving effect to the cancellation of the shares to be returned to the treasury described above. For a complete description of the shares to be returned to treasury and cancelled(see Part II. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds). http://pinksheets.com/edgar/GetFilingHtml?FilingID=6346743
This tells me that the company is also addressing the concerns of dilution. So, although share price is not their PRIMARY focus, it is obviously something they do pay attention to and are concerned about.
I have heard rumors that this company also suspects a large short position, remember those adverse “market conditions” I mentioned earlier. Since I have no direct contact with the company, I cannot confirm of deny this rumor. However, something everybody should know is that FINRA offers a service to those companies that suspect a short position. FINRA has a department of “Short Specialists” that can and will conduct an audit of a company if they suspect illegal shorting activity. Perhaps this is something SpongeTech will consider looking in to.
So, to recap here, so far, we have a company that 1) understands the value and importance of traditional advertising, 2) is generating significant revenue and 3) is concerned about shareholder value and dilution. Not bad.
My next step was to actually go out and see if their claims of “having products on the shelves” was true. I went to the local Walgreens and looked on the cleaning aid isle…nothing there. I looked in the automotive section…nothing there. Hmm, I wasn’t ready to give up so I asked to speak to the store manager. I explained to her that I had been told that SpongeTech Car Kits are a product they carry but that I was unable to find it in the store. I asked her if she had any way of telling me if ANY Walgreens carried the product. She stated that in fact she did and promptly headed to the computer.
She pulled up the product “SPONGETECH” and at this point I had stepped behind the counter with her. At the top of her screen, the system showed that there were 3 items “on hand” at another location.
There were about 15 or maybe 20 more locations listed below the location that had the 3 “on hand” and the column for the number “on hand” was blank.
Then, below those 15 or 20, there were more stores listed and in the column for “on hand” I saw the words “no activity”.
I questioned the manager about entries or lack thereof in the column for “on hand” and she stated that the stores with nothing in the “on hand” column simply didn’t have product in stock at that time but that at some point and time they have had product. The stores that indicated “no activity” have never carried the product in their location.
So, still not being satisfied, I asked her for the address of store that was showing “3 on hand”. The address was 6006 Beach Blvd, Jacksonville, Fl. It was about 11 miles away from where I was but I thought, what the heck, let’s take a ride.
I arrived at the store, looked in the cleaning aids and automotive sections…nothing. Again, I asked for the manager. I told her what I was looking for and that the store close to my house had indicated that her store had “3 on hand” then I asked her if there was any way she could search her system to find out exactly where in the store the product would be. She headed off to the computer and when she returned she stated that the products should be located in the “On TV” section of the store. She then walked over to that section with me and WAALAA, there it was….SpongeTech 3 Pack Combo Car Wash System. As soon as I got home, I called a friend of mine that has been following SpongeTech and relayed my findings. Last I heard, he was headed out to pick up a kit of his own.
For all you nay sayers…I took pictures with my cell phone. Call the store, I’ve given you the address. If the clerk answering the phone can’t help you, ask to speak to the manager and have the manager look in their system to see if they carry the product. Even if you are told that no, they don’t carry the product, take it one step further and ask if it’s possible that they are just sold out, is it something they have stocked before. Be persistent and I think you will like the results.
To summarize, what I found through all my skepticism is a company that 1) understands the value and importance of traditional advertising, 2) is generating significant revenue and 3) is concerned about shareholder value and dilution and last but not least 4) actually has a real product in the stores, on the shelves.
Way to go SpongeTech !!!
Here are the pictures I took:
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