Spongetech Delivery Systems, Inc. (fka SPNGQ)

[stoxmagic]

Rsq,

From the beginning, we're talking about a company incorporated as Romantic Scents, Inc. Which changed its name to RSI Enterprises, Inc. Which changed its name to Spongetech International Ltd. A SPAC (Special Purpose Acquisition Company) was then formed. A company named Nexgen Acquisitions VIII, Inc. with RM Enterprises International, Inc. receiving 12m shares of said company. Thereby becoming the majority stockholder. Spongetech International Ltd. then acquired Nexgen Acquisitions VIII, Inc. via a reverse merger. The resulting public company then changed its name to Spongetech Delivery Systems, Inc. With RM Enterprises, thereafter, retaining approximately 63% ownership in terms of the Outstanding common stock of SPNG. Majority shareholder status.

The whole idea being about RM Enterprises (Mr. Moskowitz) joining forces with a promotion powerhouse (Mr. Metter) and building a successful public company based on products utilizing, via a licensing agreement, a certain patented technology. Products holding tremendous mass appeal promise in the consumer goods and services sector. And, so far, so good. No argument. Onward and upward.

And as for RM Enterprises as a temporary source of operating and growth/expansion capital?

And very simple...

The situation, at its most basic, being viewable as a series of private placements. Mr. Metter having, some time back, made it abundantly clear that, in launching the new operational focus on product development, the successful securing of a bank loan, on favorable terms, was a no-go. Company fundamentals just weren't there. And so RM Enterprises, SPNG management themselves, has since been funding the company's business plan. And kudos. Risking their own capital in bringing value to all involved. And with risk in mind we have the fact of the 40% discount issue. A 40% discount to market level at the relevant times of issuance.

The issuances to RM Enterprises amounting to collateral. Loan collateral. The involved issuances being complete with a restrictive legend attached. And issued at the stated 40% discount in light of risk. That market level could see a significant, and sustained, downturn post-issuance. Business being business, after all. Risk/reward. Our knowing about the buyback agreement but anything could happen. So, proceeding in terms of risk at all times. Management is, again, putting their own money on the line. And how many of the company's shareholders actually appreciate that reality? Seeing things clearly? Kudos indeed.

In SPNG we have first rate management. Steadfastly determined to give P&G an eventual run for its money. And, so far, so good. No argument.

With our having talked about RM Enterprises fading, eventually, from the picture.

And with that said we have…

(Mr. Metter)

'We are proud to announce that our Company is now cash flow positive and can finance our immediate growth from the cash generated within. We have been in negotiation with two banking institutions that could potentially provide us with accounts receivable financing, if and when needed for the future growth of our Company. However we hope that future cash requirements for product development, marketing, production, and financing of inventories and receivables can and will be generated internally.'

It being as talked about. About self-sustaining operations. Sufficient cash flows from ongoing operations to dismiss all obligations. Operational nirvana. Debt free. Management hoping to avoid any encumbrances. Organic operations. Organic growth/expansion. And getting there with each passing day. Synergies. Economies of scale. Significant period-over-period advancement. Kudos absolutely.

These boards providing a valuable service. No argument. But with a need of having performed the necessary DD. Being armed with actual fact as much as possible.

CM...

Yes.

Precisely as outlined. And a good example relates to a certain TV commercial having aired a while back. And how did management proceed? Well, they proceeded as talked about. Equity application. A little over 40m shares of stock being placed in an escrow account as collateral. The referenced commercial not being produced in the absence of cost. Stock that was eventually returned to the company. The associated debt settled on a cash basis. There being simply no way to take a startup/development stage company to fully operating status in the absence of applying equity.

And with that said we have...

'It should be noted that on March 10 we petitioned the State of Delaware to increase the 'authorized' common shares to 1.5 billion from 1.25 billion. While we have no present intention to issue more shares, we acted on the advice of legal counsel to increase the authorization to provide for possible future acquisitions, shareholder dividends, or other corporate purposes.'

As equity is ongoingly applied, as earlier talked about, it becomes necessary to see to it that a 'room to maneuver' situation always exists. And no. The equity underlying the talked about agreements isn't issued. Would be issued only under circumstances of a default relative to payment obligations. The ongoing increases to the Authorized being about increasing shareholder value. Not decreasing said value. All being well.

While on the multinational question it's, again, very simple. A matter, again, of DD. Why, that is, the name of the 'new major retailer in Canada' wasn't mentioned in the PR you reference. Mr. Metter having outlined the associated reasoning several times previously...

'The purchase contacts between these retailers and SpongeTech(R) prohibits us from mentioning their names until the products are in place on the store shelves.'

And lastly...

Approximately $10m was spent on marketing during the first nine months of fiscal '09. With fiscal '09 gross revenues projected to well exceed $50m. And, together, representing the undeniable i.e., an exemplary return on investment. And, so, small wonder why the fiscal '10 ramping up to the $20m area. Situation speaking for itself. Gross margin expectations and all.

In following the SPNG bouncing ball, we have the undeniable fact that management rightly focuses, at all times, on minimizing overhead while pursuing every available option relative to establishing new sales and distribution channels. Global consideration. With every marketing effort leading to ever-greater company visibility. All to the good.

Carol, et al….

Okay.

We'll take a closer look.

And going back to September of last year we have...

(Mr. Metter)

'With such a volatile stock market comes tremendous opportunity. In light of that, coupled with the change in the SEC shorting rules, the Board has decided to increase our corporate stock buyback in the open market from 25,000,000 shares to 50,000,000 shares effective immediately. We have to date purchased in the open market over 10,000,000 shares thus leaving 40,000,000 more shares to buy.'

[ coupled with the change in the SEC shorting rules ]

And an SEC press release addressing that which Mr. Metter is referencing...

http://www.sec.gov/news/press/2008/2008-204.htm

The referenced passage [ bracketed ] telling us that Mr. Metter was confident that the referenced SEC rules/regs. amendments would halt any continued creation of phantom shares. And, earlier, I posted a comment speaking to an open market buyback program being a less than astute move under circumstances of routine massive creation of phantom shares.

And we'll continue the discussion below, but first...

(Mr. Metter from September 2008)

'Management believes that our stock has been influenced by the illegal practice of 'naked short selling'. These people, or entities, are trying to undermine the shareholders' confidence in our Company, trying to induce you to sell your stock, and, in simple terms, hoping that if you do they will be able to buy back their short position sale at a significantly lower price. They use detailed and complicated systems, and even sell from overseas through other exchanges, to sell nonexistent shares all day long trying to create a disparity between legitimate buy and sell orders.'

'These unscrupulous entities strategize to create stock price erosion in an effort to try to force us to continue to dilute the Company to raise funds. As you know, we have invested significant money into our Company and hold a large position in stock that is not registered and cannot be sold. The float of the Company is significantly lower than the authorized and outstanding shares issued by the transfer agent. There are upwards of 300,000,000 shares that cannot, and will not, be sold into the market that could affect price dilution of our security.'

And, again, we're talking September 2008. A time when the overall market level dynamics were a lot different than has been the case more recently. Our having already discussed the subtleties. The natural market forces of supply and demand. After all, were there massive amounts of phantom shares being generated ongoingly, the upside would be minimal. Not a rocket to a high of $0.2851.

And, so, okay.

In conclusion...

There's been, understandably, no creation of phantom shares of late. In line with overall trading dynamics. In line with SEC rules/regs. amendments. And supported by Mr. Metter (see above).

But earlier? Pre-September 2008?

My personal perspective having changed at this point. In line with new information having recently come my way regarding the company's shareholder base. That while the current reality is as outlined i.e., all is well, there is very likely an 'entrenched' phantom shares position having been created pre-September 2008. And despite the SEC rules/regs. amendments, and the grandfather provision having been eliminated, there is collusion among involved parties to keep said position hidden.

And as for the extent of the miscreancy?

Not likely exceeding 200m 'shares'. In line with overall trading dynamics reflecting natural market forces. Any/all shorting of late having been of the legitimate variety. Albeit underlain by manipulation. As for the exact numbers? We shall see. As for the MOASS? Management is maneuvering accordingly. Continuing to tighten the Outstanding count. Poised to expose to the DTCC and the SEC the phantom position realities. Forcing covering via a number of potential means involving certificates, CUSIP number, cash dividend, etc.

And as for where we are? The good ol' BB?

Well, don't be misled. Follow the bouncing ball...

(Mr. Metter on the subject of the ongoing buybacks.)

'The management team feels that these mechanical steps to reduce the outstanding number of shares will be a positive step in changing the current trading pattern of our stock.'

(Mr. Moskowitz)

'The management is committed and prepared to support any and all permissible actions to maintain the fundamental value of our common stock.'

Management is, very much, concerned about value/valuation. Very much unhappy about the recent manipulation. The fallout. Steadfastly determined to precipitate a rapid return to the pre-manipulation trading dynamics. Our recent PR's reflective of that determination. Don't be misled. In order to fully leverage the phantom shares position, it's necessary for market level to, at the very least, ongoingly reflect in line with company true value circumstance. And, so, expect management to continue in that vein. Overcoming the manipulation. The fallout. The PR parade to very much continue. And strengthen. The setting of the record straight. Onward and upward.

And whether management turns to M&A as the means of achieving the senior listing, we can't say. But does relying on the MOASS, in concert with operational and fundamental realities, as the means of achieving the needed initial listing pps represent a truly sound approach?

We wait. We find out. Just how management proceeds/intends to proceed.

And thank you.

Fred...

Good thoughts.

And...

'America's Cleaning Company(TM) to Begin Nationwide Sales of SpongeBob SquarePants, Dora the Explorer, and Go, Diego Go! Children's Bathing and Sunscreen Sponges. Celebrating SpongeBob SquarePants' Tenth Anniversary, This Will be the First Time the Pop Culture Phenomenon Appears as a Soap-Infused Sponge.'

SpongeBob will be... "HUGE!!!"

A little something I've seen presented in a number of recent posts. Courtesy of folks having been party to kids' reactions.

And, indeed, we have the audited numbers on the way. Fiscal '09 reality. That which will facilitate, in line with share structure detail, arriving at a fitting valuation. And then on to projections and guidance detail. Forward periods' realities. Company true value circumstance. Current value and future value taken together. The senior listing. The effect of applicable multiples. An initial earnings multiple of at least 19x.

The coming numbers, in the absence of all doubt, will see a host of top-tier ratings services covering America's Cleaning Company. Worthwhile analytical coverage. As opposed to that of self-serving bloggers bent on twisting the truth in order to fill their own pockets at the expense of the innocent.

While the prospect of a buyout looms ever larger. The coming opportunity to analyze America's Cleaning Company on a year-over-year basis. The advancement. Fiscal '08. Fiscal '09. The periods following management's decision to change operational focus to product development. The bottom line result of same.

The prospect of a buyout looming ever larger. A suitor(s) making the overture before a prohibitive value/valuation circumstance is in evidence. Sooner than later.

Management receives a fitting buyout offer? And market level will soar!

The reality being that an investment in America's Cleaning Company is a no-brainer. And, particularly, at the current cost of admission. There being no shortage of potential events poised to yield a truly massive ROI. Near-term reality.

Total risk/reward no-brainer.

Nowhere to go but up.

Next trading week on the way.

Holding understandably tight.