Friday, September 25, 2009 5:29:59 PM
8k filed
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 25, 2009 (September 18, 2009)
SPONGETECH DELIVERY SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 333-100925 54-2077231
(State or other jurisdiction
of incorporation) (Commission File Number) (IRS Employer
Identification No.)
10 West 33 rd Street, Suite 518
New York, New York 10001
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code: (212) 695-7850
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
On September 21, 2009, Spongetech Delivery Systems, Inc. (the “Company”) filed with the Secretary of State of the State of Delaware two Certificates of Correction to the Company’s previously filed Certificates of Amendment to Certificate of Incorporation (the “Certificates of Correction”). The Certificates of Correction were filed to cancel the Company’s previously announced 1-for-100 reverse stock split and simultaneous reduction in authorized capital.
Following the filing of the Certificates of Correction, on September 21, 2009, the Company filed a Certificate of Amendment to its Certificate of Incorporation (the “Amendment”) which increases the aggregate number of authorized shares of the Company’s capital stock to 3,068,000,000 shares, consisting of 3,000,000,000 shares of common stock, 28,000,000 shares of Class B stock, and 40,000,000 shares of preferred stock.
The foregoing description of the Certificates of Correction and Amendment is qualified in its entirety by reference to the full text of the Certificates of Correction and Amendment, which are filed as Exhibits 3.1, 3.2 and 3.3, respectively, hereto, are incorporated by reference herein.
On September 22, 2009, the Company issued a press release announcing the postponement of the reverse stock split until the Company files its Annual Report on Form 10-K for the year ended May 31, 2009. A copy of the press release, which the Company is furnishing to the Securities and Exchange Commission (the “SEC”), is attached as Exhibit 99.1 and incorporated by reference herein.
Item 7.01. Regulation FD Disclosure
On September 22, 2009, the Company’s CEO and COO issued a letter to the Company’s shareholders in press release form to provide updates on the Company’s progress and growth plans. A copy of the letter, which the Company is furnishing to the SEC is attached as Exhibit 99.2 and incorporated by reference herein.
Item 8.01. Other Events
On September 18, 2009, the Company received a formal order of investigation issued by the SEC regarding possible securities laws violations by the Company and/or other persons. At this time, it is not possible to predict the outcome of the investigation nor is it possible to assess its impact on the Company. The Company and its officers and directors have received subpoenas requesting the delivery of certain documents. The Company has been cooperating fully, and intends to continue to cooperate fully, with the SEC with respect to its investigation.
Item 9.01. Financial Statements and Exhibits.
Exhibit No. Description
3.1 Certificate of Correction to Certificate of Amendment to Certificate of Incorporation of the Company.
3.2 Certificate of Correction to Certificate of Amendment to Certificate of Incorporation of the Company.
3.3 Certificate of Amendment to Certificate of Incorporation of the Company.
99.1 Press Release, dated September 22, 2009.
99.2 Letter to Shareholders, dated September 22, 2009.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Spongetech Delivery Systems, Inc.
Date: September 25, 2009 By: /s/ Steven Moskowitz
Steven Moskowitz
Chief Operating Officer and Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Description
3.1 Certificate of Correction to Certificate of Amendment to Certificate of Incorporation of the Company.
3.2 Certificate of Correction to Certificate of Amendment to Certificate of Incorporation of the Company.
3.3 Certificate of Amendment to Certificate of Incorporation of the Company.
99.1 Press Release, dated September 22, 2009.
99.2 Letter to Shareholders, dated September 22, 2009.
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Exhibit 3.1
CERTIFICATE OF CORRECTION
OF
CERTIFICATE OF AMENDMENT
OF
SPONGETECH DELIVERY SYSTEMS, INC.
The undersigned, being the Chief Financial Officer of SPONGETECH DELIVERY SYSTEMS, INC., a corporation existing under the laws of the State of Delaware, does hereby certify under the seal of the said corporation as follows:
1. The name of the corporation is Spongetech Delivery Systems, Inc. (the "Corporation").
2. That a Certificate of Amendment to the Certificate of Incorporation of the Corporation was filed by the Secretary of the State of Delaware on September 9, 2009 (the “Certificate of Amendment”) and that said Certificate of Amendment requires correction as permitted by Section 103 of the General Corporation Law of the State of Delaware.
3. The inaccuracy or defect of said Certificate of Amendment is:
The Certificate of Amendment stated that the Corporation’s Certificate of Incorporation was being amended to effect a 1 for 100 reverse stock split of all of the issued and outstanding shares of the Corporation’s capital stock effective as of 5:00 P.M. on September 22, 2009, and simultaneously therewith, the aggregate number of shares which the Corporation was to be authorized to issue was 365,000,000 shares, comprised of 300,000,000 shares of common stock, having a par value of $0.001 per share, 25,000,000 shares of Class B Stock, having a par value of $0.001 per share and 40,000,000 shares of preferred stock, having a par value of $0.001 per share. The Corporation’s Board of Directors has determined it to be in the best interests of the Corporation for strategic purposes to not proceed with these actions at this time.
4. The Certificate of Amendment is hereby rendered null and void.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be hereunto affixed and this Certificate of Correction of the Certificate of Amendment to be signed by Steven Y. Moskowitz, its Chief Financial Officer, this 21 st day of September, 2009.
Spongetech Delivery Systems, Inc.
By: /s/ Steven Y. Moskowitz
Steven Y. Moskowitz, Chief Financial Officer
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Exhibit 3.2
CERTIFICATE OF CORRECTION
OF
CERTIFICATE OF AMENDMENT
OF
SPONGETECH DELIVERY SYSTEMS, INC.
The undersigned, being the Chief Financial Officer of SPONGETECH DELIVERY SYSTEMS, INC., a corporation existing under the laws of the State of Delaware, does hereby certify under the seal of the said corporation as follows:
1. The name of the corporation is Spongetech Delivery Systems, Inc. (the "Corporation").
2. That a Certificate of Amendment to the Certificate of Incorporation of the Corporation was filed by the Secretary of the State of Delaware on August 21, 2009 (the “Certificate of Amendment”), as corrected by a Certificate of Correction of Certificate of Amendment to the Certificate of Incorporation of the Corporation which was filed by the Secretary of the State of Delaware on August 28, 2009 (the “Certificate of Correction”), and that said Certificate of Amendment requires further correction as permitted by Section 103 of the General Corporation Law of the State of Delaware.
3. The inaccuracy or defect of said Certificate of Amendment is:
The Certificate of Amendment, as corrected by the Certificate of Correction, stated that the Corporation’s Certificate of Incorporation was being amended to effect a 1 for 100 reverse stock split of all of the issued and outstanding shares of the Corporation’s capital stock effective as of 5:00 P.M. on September 22, 2009, and simultaneously therewith, the aggregate number of shares which the Corporation was to be authorized to issue was 965,000,000 shares, comprised of 900,000,000 shares of common stock, having a par value of $0.001 per share, 25,000,000 shares of Class B Stock, having a par value of $0.001 per share and 40,000,000 shares of preferred stock, having a par value of $0.001 per share. The Corporation’s Board of Directors has determined it to be in the best interests of the Corporation for strategic purposes to not proceed with these actions at this time.
4. The Certificate of Amendment, as previously corrected by the Certificate of Correction, is hereby rendered null and void.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be hereunto affixed and this Certificate of Correction of the Certificate of Amendment to be signed by Steven Y. Moskowitz, its Chief Financial Officer, this 21 st day of September, 2009.
Spongetech Delivery Systems, Inc.
By: /s/ Steven Y. Moskowitz
Steven Y. Moskowitz, Chief Financial Officer
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Exhibit 3.3
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
SPONGETECH DELIVERY SYSTEMS, INC.
The undersigned, being the Chief Financial Officer of SPONGETECH DELIVERY SYSTEMS, INC., a corporation existing under the laws of the State of Delaware, does hereby certify under the seal of the said corporation as follows:
1. The name of the corporation is Spongetech Delivery Systems, Inc. (the "Corporation"). The date of filing of the Corporation’s original certificate of incorporation with the Secretary of State of Delaware was December 16, 2002.
2. The Certificate of Incorporation of this Corporation shall be amended by changing the Article thereof numbered “FOURTH” so that, as amended, said Article shall be and read as follows:
"ARTICLE IV. CAPITAL STOCK.
The aggregate number of shares of stock of all classes which the Corporation shall have authority to issue is 3,068,000,000, consisting of 3,000,000,000 shares of Common Stock, having a par value of $0.001 per share, 28,000,000 shares of Class B Stock, having a par value of $0.001 per share, and 40,000,000 shares of Preferred Stock, having a par value of $0.001 per share.
The powers, preferences and the relative, participating, optional and other rights and the qualifications, limitations and restrictions thereof, of each class of stock, and the express grant of authority to the Board of Directors to fix by resolution the designations and the powers, preferences and rights of each share of Preferred Stock and the qualifications, limitations and restrictions thereof, which are not fixed by this Certificate of Incorporation, are as follows:
A. Common Stock and Class B Stock.
I. Dividends, etc. Subject to the rights of the holders of Preferred Stock, and subject to any other provisions of this Certificate of Incorporation, as amended from time to time, holders of Common Stock and Class B Stock shall be entitled to receive such dividends and other distributions in cash, stock or property of the Corporation as may be declared thereon by the Board of Directors from time to time out of assets or funds of the Corporation legally available therefor, provided that in the case of cash dividends, if at any time a cash dividend is paid on the Common Stock, a cash dividend will also be paid on the Class B Stock in an amount per share Class B Stock equal to 90% of the amount of the cash dividends paid on each share of the Common Stock (rounded down, if necessary, to the nearest one-hundredth of a cent), and provided that in no event shall dividends and other distributions be paid on any of the Common Stock and Class B Stock unless the other such classes of stock also receive dividends subject to the above provisions for the requirement of the respective higher cash dividends for Common Stock, and provided, further, that in the case of dividends or other distributions payable in stock of the Corporation other than Preferred Stock, including distributions pursuant to stock splits or divisions of stock of the Corporation other than Preferred Stock, which occur after the initial issuance of shares of Class B Stock by the Corporation, except as specifically provided herein, only shares of Common Stock shall be distributed with respect to Common Stock, only shares of Class B Stock in an amount per share equal to the amount per share paid with respect to the Common Stock shall be distributed with respect to the Class B Stock, except that the Board of Directors may declare a distribution of Class B Stock proportionately to all holders of Common Stock and Class B Stock, and that, in the case of any combination or reclassification of the Common Stock, the shares of Class B Stock shall also be combined or reclassified, so that the number of shares of Class B Stock outstanding immediately following such combination or reclassification shall bear the same relationship to the number of shares of Class B Stock outstanding immediately prior to such combination or reclassification as the number of shares of Common Stock outstanding immediately following such combination or reclassification bears to the number of shares of Common Stock outstanding immediately prior to such combination or reclassification.
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II. Voting. (a) At every meeting of the stockholders every holder of Common Stock shall be entitled to one (1) vote in person or by proxy for each share of Common Stock, standing in his name on the transfer books of the Corporation and every holder of Class B Stock shall be entitled to one hundred (100) votes in person or by proxy for each share of Class B Stock standing in his name on the transfer books of the Corporation.
(b) The provisions of this Article IV of the Certificate of Incorporation shall not be modified, revised, altered or amended, repealed or rescinded in whole or in part, without the affirmative vote of a voting majority of the shares of the Common Stock and of a voting majority of the shares of the Class B Stock, each voting separately as a class.
(c) The Corporation may not effect or consummate:
(1) any merger or consolidation of the Corporation with or into any other corporation;
(2) any sale, lease, exchange or other disposition of all or substantially all of the assets of the Corporation to or with any other person; or
(3) any dissolution of the Corporation,
unless and until such transaction is authorized by the vote, if any, required by Delaware law; and unless and until such transaction is authorized by a majority of the voting power of the shares of Common Stock and of Class B Stock entitled to vote, each voting separately as a class, but the foregoing shall not apply to any merger or other transaction described in the preceding subparagraphs (1) and (2) if the other party to the merger or other transaction is a Subsidiary of the Corporation.
For purposes of this paragraph (c) a "Subsidiary" is any corporation more than 50% of the voting securities of which are owned directly or indirectly by the Corporation; and a "person" is any individual, partnership, corporation or entity.
(d) Every reference in this Certificate of Incorporation to a majority or other proportion of shares of stock shall refer to such majority or other proportion of the votes of such shares of stock.
(e) Except as may be otherwise required by law or by this Article IV, the holders of Common Stock and Class B Stock shall vote together as a single class, subject to any voting rights which may be granted to holders of Preferred Stock.
III. Transfer.
(a) No person holding shares of Class B Stock of record (hereinafter called a "Class B Holder") may transfer, and the Corporation shall not register the transfer of, such shares of Class B Stock, as Class B Stock, whether by sale, assignment, gift, bequest, appointment or otherwise, except to a Permitted Transferee and any attempted transfer of shares not permitted hereunder shall be converted into Common Stock as provided by subsection (d) of this Section III. A Permitted Transferee shall mean, with respect to each person from time to time shown as the record holder of shares of Class B Stock:
(i) In the case of a Class B Holder who is a natural person;
(A) The spouse of such Class B Holder and any lineal ancestor and descendant of such spouse, any lineal ancestor or descendant of such Class B Holder's parents, including adopted children and any spouse of such lineal descendant or ancestor and such spouse's lineal ancestors and descendants (which ancestors and descendants, their spouses and any lineal ancestors and descendants of such spouse, the Class B Holder, and his or her spouse are herein collectively referred to as "Class B Holder's Family Members");
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(B) The trustee of a trust (including a voting trust) principally for the benefit of such Class B Holder, such Class B Holder's Family Members and/or one or more of his or her other Permitted Transferees described in each subclause of this clause (i) other than this subclause (B), provided that such trust may also grant a general or special power of appointment to one or more of such Class B Holder's Family Members and may permit trust assets to be used to pay taxes, legacies and other obligations of the trust or of the estates of one or more of such Class B Holder's Family Members payable by reason of the death of any of such Family Members;
(C) A corporation if a majority of the beneficial ownership of outstanding capital stock of such corporation which is entitled to vote for the election of directors is owned by, or a partnership if a majority of the beneficial ownership of the partnership is held by, the Class B Holder or his or her Permitted Transferees determined under this clause (I), provided that if by reason of any change in the ownership of such stock or partnership interests, such corporation or partnership would no longer qualify as a Permitted Transferee, all shares of Class B Stock then held by such corporation or partnership shall, upon the election of the Corporation given by written notice to such corporation or partnership, without further act on anyone's part, be converted into shares of Common Stock effective upon the date of the giving of such notice, and stock certificates formerly representing such shares of Class B Stock shall thereupon and thereafter be deemed to represent the like number of shares of Common Stock; and
(D) The estate of such Class B Holder.
(ii) In the case of a Class B Holder holding the shares of Class B Stock in question as trustee pursuant to a trust (other than a trust described in clause (iii) below), "Permitted Transferee" means (A) any person transferring Class B Stock to such trust and (B) any Permitted Transferee of any such transferor determined pursuant to clause (i) above.
(iii) In the case of a Class B Holder holding the shares of Class B Stock in question as trustee pursuant to a trust which was irrevocable on the record date (hereinafter in this Section III called the "Record Date") for determining the persons to whom the Class B Stock is first issued by the Corporation, "Permitted Transferee" means (A) any person to whom or for whose benefit principal may be distributed either during or at the end of the term of such trust whether by power of appointment or otherwise and (B) any Permitted Transferee of any such person determined pursuant to clause (i) above.
(iv) In the case of a Class B Holder which is a corporation or partnership acquiring record and beneficial ownership of the shares of Class B Stock in question upon its initial issuance by the Corporation, "Permitted Transferee" means (A) any partner of such partnership, or stockholder of such corporation, on the Record Date, (B) any person transferring such shares of Class B Stock to such corporation or partnership, and (C) any Permitted Transferee of any such person, partner, or stockholder referred to in subclauses (A) and (B) of this clause (iv), determined under clause (i) above.
(v) In the case of a Class B Holder which is a corporation or partnership (other than a corporation or partnership described in clause (iv) above) holding record and beneficial ownership of the shares of Class B Stock in question, "Permitted Transferee" means (A) any person transferring such shares of Class B Stock to such corporation or partnership and (B) any Permitted Transferee of any such transferor determined under clause (i) above.
(vi) In the case of a Class B Holder which is the estate of a deceased Class B Holder, or which is the estate of a bankrupt or insolvent Class B Holder, which holds record and beneficial ownership of the shares of Class B Stock in question, "Permitted Transferee" means a Permitted Transferee of such deceased, bankrupt or insolvent Class B Holder as determined pursuant to clause (i), (ii), (iii), (iv) or (v) above, as the case may be.
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(b) Notwithstanding anything to the contrary set forth herein, any Class B Holder may pledge such Holder's share of Class B Stock to a pledge pursuant to a bona fide pledge of such shares as collateral security for indebtedness due to the pledgee, provided that such shares shall not be transferred to or registered in the name of the pledgee and shall remain subject to the provisions of this Section III. In the event of foreclosure or other similar action by the pledgee, such pledged shares of Class B Stock may only be transferred to a Permitted Tr nsferee of the pledgor or converted into shares of Common Stock, as the pledgee may elect.
(c) For purposes of this Section III:
(i) The relationship of any person that is derived by or through legal adoption shall be considered a natural one.
(ii) Each joint owner of shares of Class B Stock shall be considered a "Class B Holder" of such shares.
(iii) A minor for whom shares of Class B Stock are held pursuant to a Uniform Gifts to Minors Act or similar law shall be considered a Class B Holder of such shares.
(iv) Unless otherwise specified, the term "person" means both natural persons and legal entities.
(v) Without derogating from the election conferred upon the Corporation pursuant to subclause (C) of clause (i) above, each reference to a corporation shall include any successor corporation resulting from merger or consolidation and each reference to a partnership shall include any successor partnership resulting from the death or withdrawal of a partner.
(d) Any transfer of shares of Class B Stock not permitted hereunder shall result in the conversion of the transferee's shares of Class B Stock into shares of Common Stock, effective the date on which certificates representing such shares are presented for transfer on the books of the Corporation. The Corporation may, in connection with preparing a list of stockholders entitled to vote at any meeting of stockholders, or as a condition to the transfer or the registration of shares of Class B Stock on the Corporation's books, require the furnishing of such affidavits or other proof as it deems necessary to establish that any person is the beneficial owner of shares of Class B Stock or is a Permitted Transferee.
(e) Shares of Class B Stock shall be registered in the names of the beneficial owners thereof and not in "street" or "nominee" name. For this purpose, a "beneficial owner" of any shares of Class B Stock shall mean a person who, or an entity which, possesses the power, either singly or jointly, to direct the voting or disposition of such shares. The Corporation shall note on the certificates for shares of Class B Stock the restrictions on transfer and registration of transfer imposed by this Section III.
IV. Conversion Rights.
(a) Subject to the terms and conditions of this Section IV, each share of Class B Stock shall be convertible at any time or from time to time, at the option of the respective holder thereof, at the office of any transfer agent for Class B Stock, and at such other place or places, if any, as the Board of Directors may designate, or, if the Board of Directors shall fail so to designate, at the principal office of the Corporation (attention of the Secretary of the Corporation), into one (1) fully paid and nonassessable share of Common Stock. Upon conversion, the Corporation shall make no payment or adjustment on account of dividends accrued or in arrears on Class B Stock surrendered for conversion or on account of any dividends on the Common Stock issuable on such conversion. Before any holder of Class B Stock shall be entitled to convert the same into Common Stock, he shall surrender the certificate or certificates for such Class B Stock at the office of said transfer agent (or other place as provided above), which certificate or certificates, if the Corporation shall so request, shall be duly endorsed to the Corporation or in blank or accompanied by proper instruments of transfer to the Corporation or in blank) (such endorsements or instruments of transfer to be in form satisfactory to the Corporation), and shall give written notice to the Corporation at said office that he elects so to convert said Class B Stock in accordance with the terms of this Section IV, and shall state in writing therein the name or names in which he wishes the certificate or certificates for Common Stock to be issued. Every such notice of election to convert shall constitute a contract between the holder of such Class B Stock and the Corporation, whereby the holder of such Class B Stock shall be deemed to subscribe for the amount of Common Stock which he shall be entitled to receive upon such conversion, and, in satisfaction of such subscription, to deposit the Class B Stock to be converted and to release the Corporation from all liability thereunder, and thereby the Corporation shall be deemed to agree that the surrender of the certificate or certificates therefor and the extinguishment of liability thereon shall constitute full payment of such subscription for Common Stock to be issued upon such conversion. The Corporation will as soon as practicable after such deposit of a certificate or certificates for Class B Stock, accompanied by the written notice and the statement above prescribed, issue and deliver at the office of said transfer agent (or other place as provided above) to the person for whose account such Class B Stock was so surrendered, or to his nominee or nominees, a certificate or certificates for the number of full shares of Common Stock to which he shall be entitled as aforesaid. Subject to the provisions of subsection (c) of this Section IV, such conversion shall be deemed to have been made as of the date of such surrender of the Class B Stock to be converted; and the person or persons entitled to receive the Common Stock issuable upon conversion of such Class B Stock shall be treated for all purposes as the record holder or holders of such Common Stock on such date.
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(b) The issuance of certificates for shares of Common Stock upon conversion of shares of Class B Stock shall be made without charge for any stamp or other similar tax in respect of such issuance. However, if any such certificate is to be issued in a name other than that of the holder of the share or shares of Class B Stock converted, the person or persons requesting the issuance thereof shall pay to the Corporation the amount of any tax which may be payable in respect of any transfer involved in such issuance or shall establish to the satisfaction of the Corporation that such tax has been paid.
(c) The Corporation shall not be required to convert Class B Stock and no surrender of Class B Stock shall be effective for that purpose, while the stock transfer books of the Corporation are closed for any purpose; but the surrender of Class B Stock for conversion during any period while such books are so closed shall become effective for conversion immediately upon the reopening of such books, as if the conversion had been made on the date such Class B Stock was surrendered.
(d) The Corporation covenants that it will at all times reserve and keep available, solely for the purpose of issue upon conversion of the outstanding shares of Class B Stock, such number of shares of Common Stock as shall be issuable upon the conversion of all such outstanding shares, provided that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of the conversion of the outstanding shares of Class B Stock by delivery of shares of Common Stock which are held in the treasury of the Corporation. The Corporation covenants that if any shares of Common Stock, required to be reserved for purposes of conversion hereunder, require registration with or approval of any governmental authority under any federal or state law before such shares of Common Stock may be issued upon conversion, the Corporation will use its best efforts to cause such shares to be duly registered or approved, as the case may be. The Corporation will endeavor to list the shares of Common Stock required to be delivered upon conversion prior to such delivery upon each national securities exchange, if any, upon which the outstanding Common Stock is listed at the time of such delivery. The Corporation covenants that all shares of Common Stock which shall be issued upon conversion of the shares of Class B Stock, will, upon issue, be fully paid and nonassessable and not entitled to any preemptive rights.
V. Liquidation Rights. In the event of any dissolution, liquidation or winding up of the affairs of the Corporation, whether voluntary or involuntary, after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of each series of Preferred Stock shall be entitled to receive, out of the net assets of the Corporation, an amount for each share equal to the amount fixed and determined by the Board of Directors in any resolution or resolutions providing for the issuance of any particular series of Preferred Stock, plus an amount equal to all dividends accrued and unpaid on shares of such series to the date fixed for distribution, and no more, before any of the assets of the Corporation shall be distributed or paid over to the holders of Common Stock. After payment in full of said amounts to the holders of Preferred Stock of all series, the remaining assets and funds of the Corporation shall be divided among and paid ratably to the holders of Common Stock and Class B Stock (considered for this purpose as one class). If, upon such dissolution, liquidation or winding up, the assets of the Corporation distributable as aforesaid among the holders of Preferred Stock of all series shall be insufficient to permit full payment to them of said preferential amounts, then such assets shall be distributed among such holders, first in the order of their respective preferences, and second, as to such holders who are next entitled to such assets and who rank equally with regard to such assets, ratably in proportion to the respective total amounts which they shall be entitled to receive as provided in this Section V. A merger or consolidation of the Corporation with or into any other corporation or a sale or conveyance of all or any part of the assets of the Corporation (which shall not in fact result in the liquidation of the Corporation and the distribution of assets to stockholders) shall not be deemed to be a voluntary or involuntary liquidation or dissolution or winding up of the Corporation within the meaning of this Section V.
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B. Preferred Stock.
The Board of Directors is authorized, subject to limitations prescribed by law and the provisions of this Article IV, to provide for the issuance of the preferred shares in series, and by filing a certificate pursuant to the General Corporation Law of Delaware, to establish the number of shares to be included in each such series, and to fix the designations, relative rights, preferences and limitations of the shares of each such series. The authority of the Board with respect to each series shall include, but not be limited to, determination of the following:
(a) The number of shares constituting that series and the distinctive designations of that series;
(b) The dividend rate on the shares of that series, whether dividends shall be cumulative and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series;
(c) Whether that series shall have voting rights, in addition to the voting rights provided by law and, if so, the terms of such voting rights;
(d) Whether that series shall have conversion privileges and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates;
(f) Whether that series shall have a sinking fund for the redemption or purchase of shares of that series and, if so, the terms and amount of such sinking fund;
(g) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of that series;
(h) Any other relative rights, preferences and limitations of that series.
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Dividends on outstanding preferred shares shall be declared and paid, or set apart for payment, before any dividends shall be declared and paid, or set apart for payment, on the common shares with respect to the dividend period.
Any and all such shares issued, and for which the full consideration has been paid or delivered shall be deemed fully paid stock and the holder of such shares shall not be liable for any further call or assessment or any other payment thereon.
C. Authorized Shares of Capital Stock.
Except as may be provided in the terms and conditions fixed by the Board of Directors for any series of Preferred Stock, and in addition to any other vote that may be required by statute, stock exchange regulations, this Certificate of Incorporation or any amendment hereof, the number of authorized shares of any class or classes of stock of the Corporation may be increased or decreased by the affirmative vote of the holders of a majority of the outstanding shares of stock of the Corporation entitled to vote."
4. The Amendment of the Certificate of Incorporation herein certified has been duly adopted by the unanimous written consent of the Corporation's Board of Directors and the holders of at least a majority of the Corporation's outstanding voting capital stock, such percentage being not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, in accordance with the provisions of Sections 141(f), 228 and 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be hereunto affixed and this Certificate of Amendment of the Corporation's Certificate of Incorporation to be signed by Steven Y. Moskowitz, its Chief Financial Officer, this 21 st day of September, 2009.
Spongetech Delivery Systems, Inc.
By: /s/ Steven Y. Moskowitz
Steven Y. Moskowitz, Chief Financial Officer
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Exhibit 99.1
SPONGETECH® DELIVERY SYSTEMS CANCELS
REVERSE STOCK SPLIT
NEW YORK, NY – September 22, 2009 – SpongeTech® Delivery Systems, Inc. (“SpongeTech”) “The Smarter Sponge™”, (OTCBB: SPNGE) today announced that its Board of Directors has decided to cancel its previously announced reverse stock split until after the Form 10-K for the Company’s fiscal year 2009 has been filed.
CEO Michael Metter said, “We originally planned for the reverse stock split to take effect after the filing of our Form 10-K for fiscal 2009 to give our shareholders the opportunity to evaluate our financial performance and growth prospects first. In light of the delay in filing, we have decided that to proceed with the reverse stock split would not be in the best interests of our shareholders.”
About SpongeTech® Delivery Systems, Inc.
SpongeTech® Delivery Systems, Inc. designs, produces, and markets unique lines of reusable cleaning products for Car Care, Child Care, Home Care and Pet Care usages. These sponge-like products utilize SpongeTech®'s proprietary, patent and patent-pending technologies and other technologies involving hydrophilic (liquid-absorbing) foam, polyurethane matrices or other ingredients. The Company's sponge-like products are pre-loaded with specially formulated ingredients such as soap, conditioner and/or wax that are released when the sponge is soaked and applied to a surface with minimal pressure. SpongeTech is currently exploring additional applications for its technology in the health, beauty, and medical markets. SpongeTech® Delivery Systems, Inc. intends to globally brand its products as The Smarter Sponge™ .
Safe Harbor Statement
Under The Private Securities Litigation Reform Act of 1995: The statements in this press release that relate to the Company's expectations with regard to the future impact on the Company's results from new products in development are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The results anticipated by any or all of these forward-looking statements may not occur. Additional risks and uncertainties are set forth in the Company's Annual Report on Form 10-KSB for the fiscal year ended May 31, 2008 and the Company's Quarterly Report on Form 10-Q for the third fiscal quarter ended February 28, 2009. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events or changes in the Company's plans or expectations.
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Contacts:
Lippert/Heilshorn & Associates
212-838-3777
Harriet Fried / Jody Burfening (Investors)
SpongeTech@lhai.com
Adam Handelsman (Media)
ahandelsman@lhai.com
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Exhibit 99.2
SPONGETECH(R) DELIVERY SYSTEMS ANNOUNCES RELEASE OF LETTER TO SHAREHOLDERS TO UPDATE INVESTORS ON COMPANY ACHIEVEMENTS AND STRATEGY
Sep. 22, 2009 (Business Wire) -- SpongeTech® Delivery Systems, Inc. (“SpongeTech”) “The Smarter Sponge™”, (OTCBB: SPNGE) announced today that the Company’s CEO and COO had written a letter to shareholders updating them regarding the company’s progress and growth plans. The letter is posted on the Company’s website and is reproduced below:
Dear Shareholder,
We want to address various questions many of you have asked over the past few weeks and to share with you our plans to grow the business and create shareholder value.
Since the beginning of fiscal 2009, we have transformed SpongeTech from an early-stage company with limited brand awareness and distribution reach to a company selling a broadened portfolio of products through multiple distribution channels supported by a host of very successful marketing campaigns and promotional activities. We are proud of the progress we’ve made and have many plans to continue to expand our business.
As you know, we have not yet filed our Form 10-K for our company’s fiscal year 2009, which ended May 31, 2009. The requirement that caused the delay – that our new independent auditor, Robison, Hill & Co., retained as a result of the resignation of our previous auditor, Drakeford & Drakeford, LLC, due to the revocation of Drakeford’s registration by the Public Accounting Oversight Board, must re-audit our financial statements for fiscal 2008 – is as frustrating to us as it is for you, our shareholders. While we realize it would be helpful to offer you an estimated filing date, our current independent auditors have asked us to give them the flexibility to do a thorough job, and we are working with them to complete the necessary steps as quickly as possible. We have retained Deloitte & Touche beginning with the fiscal year 2010 to serve as our accountants. We also decided to cancel our previously announced reverse stock split until after the Form 10-K for fiscal year 2009 has been filed. In the meantime, we will use this letter to bring you up to date on our many accomplishments during fiscal 2009, ended May 31, 2009,and our actions and plans to accelerate SpongeTech’s growth in fiscal 2010, ending May 31, 2010.
Acquisitions/Investments
· We acquired Dicon Technologies, LLC on July 9 for $4.5 million in cash plus approximately $0.5 million of working capital that we assumed upon closing the transaction to further vertically integrate SpongeTech’s research, development and manufacturing processes. Dicon Technologies specializes in research and development of products derived from hydrophilic urethane chemistry.
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· We have agreed to invest approximately $4 million in GetFugu, a technology company focused on developing mobile search tools. Terms of the deal are being finalized and, subject to the successful completion of our due diligence, we expect to announce the completed transaction by the end of calendar 2009. Our investment resulted from GetFugu’s successful customization of its mobile-based web search and e-commerce technology for SpongeTech. We plan to use GetFugu’s ground-breaking, carrier-agnostic mobile phone-based technology to drive more traffic to our already-successful on-line store website, www.spongetech.com. We are currently on GetFugu’s beta site.
Expanded Product Offering
· We added a Child Care product line to our portfolio of reusable cleaning products for Car Care, Home Care, Medical Care and Pet Care usages. To date, we have developed 33 product SKUs using our technology in these market segments.
· We launched SpongeBob SquarePants soap-filed bath sponges for kids in partnership with Nickelodeon and Viacom Consumer Products.
· As a result of the Dicon acquisition, we added 40 products for use in the cosmetics, footwear and medical markets, bringing our product portfolio to a consolidated total of 73 items. The new products include Dryz Intellitemp, a patented hydrophilic matrix that regulates temperature, provides antimicrobial protection and uses Super Absorbent Polymer (SAP) to manage moisture. This material is currently being used by several leading footwear and sports equipment manufacturers.
· We have developed a Pink Panther-themed product under a licensing arrangement with MGM Consumer Products and expect to roll these products out by the end of calendar 2009.
Extended the Company’s Distribution Reach
· With the purchase of Dicon in July 2009, Spongetech increased our consolidated distributor/customers during the first quarter of fiscal 2010, which encompasses June 2009 through August 2009) by 55 accounts. This is a 27% increase in new accounts since the end of our fiscal year 2009.
· We have shipped products to CVS Caremark, Kroger, Petco, PetSmart, Ace Hardware, Walgreens and other supermarkets and convenience stores. During the first quarter of fiscal 2010, we received orders from customers, including BJ’s Wholesale Club, ShopRite and Cosco.
· We signed a licensing agreement to partner with Nickelodeon & Viacom Consumer Products to create SpongeBob SquarePants soap-infused bath sponges in the U.S. and Canada.
· We presented our products on QVC and Home Shopping Network and continue to explore possibilities with them.
· We signed agreements to license the SpongeTech name with two manufacturers of cleaning products: Green Bridge Industries for the sale of the SpongeTech® Stain Remover Pens; and Organic Products Solutions for home care, car care and industrial/commercial cleaning products.
· We enhanced our e-commerce site to make it more convenient for people to purchase our products online.
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Boosted Marketing and Promotional Activities
· We expanded our sports sponsorship portfolio by entering into agreements with 26 Major League Baseball teams for the 2009 season and 8 National Football League teams for the 2009-2010 season.
· We were also a sponsor of the United States Tennis Association and its premier event, the 2009 US Open, and are working on return on investment strategies to complement our sports marketing initiatives.
· We are continuing our nationwide advertising campaign, which includes TV and radio spots, print ads, retail store flyers, professional sports sponsorships and ads, internet advertising, and charitable functions. During 2009, our marketing campaign was ranked in the top 10 list of advertisements by the Jordan Whitney Report and the Infomercial Monitoring Service, Inc. (IMS) Report.
Since the end of fiscal year 2009, we have seen increasing re-orders from existing customers, strong sell-through rates and growing enthusiasm for our products as we continue to penetrate new distribution channels and create greater awareness for our products. Whereas two years ago, SpongeTech was a company with less than $10 million in revenue, we expect to report approximately $50 million in revenue for fiscal 2009.
In fiscal 2010, we are continuing to expand our distribution reach and, aided by our acquisition of Dicon and its strong R&D capabilities, introduce new products. To further raise brand awareness of The Smarter Sponge™, we plan to significantly increase our marketing and advertising budget. A portion of this budget will be used to attend a greater number of trade shows, including the Specialty Equipment Market Association show for the first time, Licensing International Expo, Automotive Aftermarket Products Expo, Global Market Development Center’s General Merchandise Marketing Conference and other national and regional shows. We also plan to enhance the packaging of our products.
We will also continue to extend our distribution reach by adding new distributors, including SpongeTech Europe, which we formed in August 2009 to enhance our already-strong presence in that market. In addition, we plan to leverage Dicon’s established channels of distribution including food, drug and mass merchandise stores such as CVS, Walgreens, Kmart and Wal-Mart and also to sign new licensing arrangements. By the end of fiscal 2010, we expect to have secured product placement in over 100,000 retail doors nationwide. Finally, using our enhanced research and product development capabilities, we plan to move forward more aggressively to expand our product offering particularly in our Home Care, Pet Care and Car Care product lines. For example, as part of our license agreement with Nickelodeon & Viacom Consumer Products, we are putting the finishing touches on a product for the Nickelodeon character, Dora the Explorer.
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In closing, our goal remains to establish SpongeTech as a first-class global consumer goods company known for its innovative products, creative marketing and promotional campaigns, and distribution strength. We appreciate your keen interest and support for our products and business and look forward to reporting our fiscal 2009 results as soon as possible.
Michael Metter, Chief Executive Officer
Steven Moskowitz, Chief Operating Officer
About SpongeTech® Delivery Systems, Inc.
SpongeTech® Delivery Systems, Inc. designs, produces, and markets unique lines of reusable cleaning products for Car Care, Child Care, Home Care and Pet Care usages. These sponge-like products utilize SpongeTech®'s proprietary, patent and patent-pending technologies and other technologies involving hydrophilic (liquid-absorbing) foam, polyurethane matrices or other ingredients. The Company's sponge-like products are pre-loaded with specially formulated ingredients such as soap, conditioner and/or wax that are released when the sponge is soaked and applied to a surface with minimal pressure. SpongeTech is currently exploring additional applications for its technology in the health, beauty, and medical markets. SpongeTech® Delivery Systems, Inc. intends to globally brand its products as The Smarter Sponge™ .
Safe Harbor Statement
Under The Private Securities Litigation Reform Act of 1995: The statements in this press release that relate to the Company's expectations with regard to the future impact on the Company's results from new products in development are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The results anticipated by any or all of these forward-looking statements may not occur. Additional risks and uncertainties are set forth in the Company's Annual Report on Form 10-KSB for the fiscal year ended May 31, 2008 and the Company's Quarterly Report on Form 10-Q for the third fiscal quarter ended February 28, 2009. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events or changes in the Company's plans or expectations.
Contacts:
Lippert/Heilshorn & Associates
212-838-3777
Harriet Fried / Jody Burfening (Investors)
SpongeTech@lhai.com
Adam Handelsman (Media)
ahandelsman@lhai.com
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 25, 2009 (September 18, 2009)
SPONGETECH DELIVERY SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 333-100925 54-2077231
(State or other jurisdiction
of incorporation) (Commission File Number) (IRS Employer
Identification No.)
10 West 33 rd Street, Suite 518
New York, New York 10001
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code: (212) 695-7850
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
On September 21, 2009, Spongetech Delivery Systems, Inc. (the “Company”) filed with the Secretary of State of the State of Delaware two Certificates of Correction to the Company’s previously filed Certificates of Amendment to Certificate of Incorporation (the “Certificates of Correction”). The Certificates of Correction were filed to cancel the Company’s previously announced 1-for-100 reverse stock split and simultaneous reduction in authorized capital.
Following the filing of the Certificates of Correction, on September 21, 2009, the Company filed a Certificate of Amendment to its Certificate of Incorporation (the “Amendment”) which increases the aggregate number of authorized shares of the Company’s capital stock to 3,068,000,000 shares, consisting of 3,000,000,000 shares of common stock, 28,000,000 shares of Class B stock, and 40,000,000 shares of preferred stock.
The foregoing description of the Certificates of Correction and Amendment is qualified in its entirety by reference to the full text of the Certificates of Correction and Amendment, which are filed as Exhibits 3.1, 3.2 and 3.3, respectively, hereto, are incorporated by reference herein.
On September 22, 2009, the Company issued a press release announcing the postponement of the reverse stock split until the Company files its Annual Report on Form 10-K for the year ended May 31, 2009. A copy of the press release, which the Company is furnishing to the Securities and Exchange Commission (the “SEC”), is attached as Exhibit 99.1 and incorporated by reference herein.
Item 7.01. Regulation FD Disclosure
On September 22, 2009, the Company’s CEO and COO issued a letter to the Company’s shareholders in press release form to provide updates on the Company’s progress and growth plans. A copy of the letter, which the Company is furnishing to the SEC is attached as Exhibit 99.2 and incorporated by reference herein.
Item 8.01. Other Events
On September 18, 2009, the Company received a formal order of investigation issued by the SEC regarding possible securities laws violations by the Company and/or other persons. At this time, it is not possible to predict the outcome of the investigation nor is it possible to assess its impact on the Company. The Company and its officers and directors have received subpoenas requesting the delivery of certain documents. The Company has been cooperating fully, and intends to continue to cooperate fully, with the SEC with respect to its investigation.
Item 9.01. Financial Statements and Exhibits.
Exhibit No. Description
3.1 Certificate of Correction to Certificate of Amendment to Certificate of Incorporation of the Company.
3.2 Certificate of Correction to Certificate of Amendment to Certificate of Incorporation of the Company.
3.3 Certificate of Amendment to Certificate of Incorporation of the Company.
99.1 Press Release, dated September 22, 2009.
99.2 Letter to Shareholders, dated September 22, 2009.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Spongetech Delivery Systems, Inc.
Date: September 25, 2009 By: /s/ Steven Moskowitz
Steven Moskowitz
Chief Operating Officer and Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Description
3.1 Certificate of Correction to Certificate of Amendment to Certificate of Incorporation of the Company.
3.2 Certificate of Correction to Certificate of Amendment to Certificate of Incorporation of the Company.
3.3 Certificate of Amendment to Certificate of Incorporation of the Company.
99.1 Press Release, dated September 22, 2009.
99.2 Letter to Shareholders, dated September 22, 2009.
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Exhibit 3.1
CERTIFICATE OF CORRECTION
OF
CERTIFICATE OF AMENDMENT
OF
SPONGETECH DELIVERY SYSTEMS, INC.
The undersigned, being the Chief Financial Officer of SPONGETECH DELIVERY SYSTEMS, INC., a corporation existing under the laws of the State of Delaware, does hereby certify under the seal of the said corporation as follows:
1. The name of the corporation is Spongetech Delivery Systems, Inc. (the "Corporation").
2. That a Certificate of Amendment to the Certificate of Incorporation of the Corporation was filed by the Secretary of the State of Delaware on September 9, 2009 (the “Certificate of Amendment”) and that said Certificate of Amendment requires correction as permitted by Section 103 of the General Corporation Law of the State of Delaware.
3. The inaccuracy or defect of said Certificate of Amendment is:
The Certificate of Amendment stated that the Corporation’s Certificate of Incorporation was being amended to effect a 1 for 100 reverse stock split of all of the issued and outstanding shares of the Corporation’s capital stock effective as of 5:00 P.M. on September 22, 2009, and simultaneously therewith, the aggregate number of shares which the Corporation was to be authorized to issue was 365,000,000 shares, comprised of 300,000,000 shares of common stock, having a par value of $0.001 per share, 25,000,000 shares of Class B Stock, having a par value of $0.001 per share and 40,000,000 shares of preferred stock, having a par value of $0.001 per share. The Corporation’s Board of Directors has determined it to be in the best interests of the Corporation for strategic purposes to not proceed with these actions at this time.
4. The Certificate of Amendment is hereby rendered null and void.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be hereunto affixed and this Certificate of Correction of the Certificate of Amendment to be signed by Steven Y. Moskowitz, its Chief Financial Officer, this 21 st day of September, 2009.
Spongetech Delivery Systems, Inc.
By: /s/ Steven Y. Moskowitz
Steven Y. Moskowitz, Chief Financial Officer
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Exhibit 3.2
CERTIFICATE OF CORRECTION
OF
CERTIFICATE OF AMENDMENT
OF
SPONGETECH DELIVERY SYSTEMS, INC.
The undersigned, being the Chief Financial Officer of SPONGETECH DELIVERY SYSTEMS, INC., a corporation existing under the laws of the State of Delaware, does hereby certify under the seal of the said corporation as follows:
1. The name of the corporation is Spongetech Delivery Systems, Inc. (the "Corporation").
2. That a Certificate of Amendment to the Certificate of Incorporation of the Corporation was filed by the Secretary of the State of Delaware on August 21, 2009 (the “Certificate of Amendment”), as corrected by a Certificate of Correction of Certificate of Amendment to the Certificate of Incorporation of the Corporation which was filed by the Secretary of the State of Delaware on August 28, 2009 (the “Certificate of Correction”), and that said Certificate of Amendment requires further correction as permitted by Section 103 of the General Corporation Law of the State of Delaware.
3. The inaccuracy or defect of said Certificate of Amendment is:
The Certificate of Amendment, as corrected by the Certificate of Correction, stated that the Corporation’s Certificate of Incorporation was being amended to effect a 1 for 100 reverse stock split of all of the issued and outstanding shares of the Corporation’s capital stock effective as of 5:00 P.M. on September 22, 2009, and simultaneously therewith, the aggregate number of shares which the Corporation was to be authorized to issue was 965,000,000 shares, comprised of 900,000,000 shares of common stock, having a par value of $0.001 per share, 25,000,000 shares of Class B Stock, having a par value of $0.001 per share and 40,000,000 shares of preferred stock, having a par value of $0.001 per share. The Corporation’s Board of Directors has determined it to be in the best interests of the Corporation for strategic purposes to not proceed with these actions at this time.
4. The Certificate of Amendment, as previously corrected by the Certificate of Correction, is hereby rendered null and void.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be hereunto affixed and this Certificate of Correction of the Certificate of Amendment to be signed by Steven Y. Moskowitz, its Chief Financial Officer, this 21 st day of September, 2009.
Spongetech Delivery Systems, Inc.
By: /s/ Steven Y. Moskowitz
Steven Y. Moskowitz, Chief Financial Officer
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Exhibit 3.3
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
SPONGETECH DELIVERY SYSTEMS, INC.
The undersigned, being the Chief Financial Officer of SPONGETECH DELIVERY SYSTEMS, INC., a corporation existing under the laws of the State of Delaware, does hereby certify under the seal of the said corporation as follows:
1. The name of the corporation is Spongetech Delivery Systems, Inc. (the "Corporation"). The date of filing of the Corporation’s original certificate of incorporation with the Secretary of State of Delaware was December 16, 2002.
2. The Certificate of Incorporation of this Corporation shall be amended by changing the Article thereof numbered “FOURTH” so that, as amended, said Article shall be and read as follows:
"ARTICLE IV. CAPITAL STOCK.
The aggregate number of shares of stock of all classes which the Corporation shall have authority to issue is 3,068,000,000, consisting of 3,000,000,000 shares of Common Stock, having a par value of $0.001 per share, 28,000,000 shares of Class B Stock, having a par value of $0.001 per share, and 40,000,000 shares of Preferred Stock, having a par value of $0.001 per share.
The powers, preferences and the relative, participating, optional and other rights and the qualifications, limitations and restrictions thereof, of each class of stock, and the express grant of authority to the Board of Directors to fix by resolution the designations and the powers, preferences and rights of each share of Preferred Stock and the qualifications, limitations and restrictions thereof, which are not fixed by this Certificate of Incorporation, are as follows:
A. Common Stock and Class B Stock.
I. Dividends, etc. Subject to the rights of the holders of Preferred Stock, and subject to any other provisions of this Certificate of Incorporation, as amended from time to time, holders of Common Stock and Class B Stock shall be entitled to receive such dividends and other distributions in cash, stock or property of the Corporation as may be declared thereon by the Board of Directors from time to time out of assets or funds of the Corporation legally available therefor, provided that in the case of cash dividends, if at any time a cash dividend is paid on the Common Stock, a cash dividend will also be paid on the Class B Stock in an amount per share Class B Stock equal to 90% of the amount of the cash dividends paid on each share of the Common Stock (rounded down, if necessary, to the nearest one-hundredth of a cent), and provided that in no event shall dividends and other distributions be paid on any of the Common Stock and Class B Stock unless the other such classes of stock also receive dividends subject to the above provisions for the requirement of the respective higher cash dividends for Common Stock, and provided, further, that in the case of dividends or other distributions payable in stock of the Corporation other than Preferred Stock, including distributions pursuant to stock splits or divisions of stock of the Corporation other than Preferred Stock, which occur after the initial issuance of shares of Class B Stock by the Corporation, except as specifically provided herein, only shares of Common Stock shall be distributed with respect to Common Stock, only shares of Class B Stock in an amount per share equal to the amount per share paid with respect to the Common Stock shall be distributed with respect to the Class B Stock, except that the Board of Directors may declare a distribution of Class B Stock proportionately to all holders of Common Stock and Class B Stock, and that, in the case of any combination or reclassification of the Common Stock, the shares of Class B Stock shall also be combined or reclassified, so that the number of shares of Class B Stock outstanding immediately following such combination or reclassification shall bear the same relationship to the number of shares of Class B Stock outstanding immediately prior to such combination or reclassification as the number of shares of Common Stock outstanding immediately following such combination or reclassification bears to the number of shares of Common Stock outstanding immediately prior to such combination or reclassification.
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II. Voting. (a) At every meeting of the stockholders every holder of Common Stock shall be entitled to one (1) vote in person or by proxy for each share of Common Stock, standing in his name on the transfer books of the Corporation and every holder of Class B Stock shall be entitled to one hundred (100) votes in person or by proxy for each share of Class B Stock standing in his name on the transfer books of the Corporation.
(b) The provisions of this Article IV of the Certificate of Incorporation shall not be modified, revised, altered or amended, repealed or rescinded in whole or in part, without the affirmative vote of a voting majority of the shares of the Common Stock and of a voting majority of the shares of the Class B Stock, each voting separately as a class.
(c) The Corporation may not effect or consummate:
(1) any merger or consolidation of the Corporation with or into any other corporation;
(2) any sale, lease, exchange or other disposition of all or substantially all of the assets of the Corporation to or with any other person; or
(3) any dissolution of the Corporation,
unless and until such transaction is authorized by the vote, if any, required by Delaware law; and unless and until such transaction is authorized by a majority of the voting power of the shares of Common Stock and of Class B Stock entitled to vote, each voting separately as a class, but the foregoing shall not apply to any merger or other transaction described in the preceding subparagraphs (1) and (2) if the other party to the merger or other transaction is a Subsidiary of the Corporation.
For purposes of this paragraph (c) a "Subsidiary" is any corporation more than 50% of the voting securities of which are owned directly or indirectly by the Corporation; and a "person" is any individual, partnership, corporation or entity.
(d) Every reference in this Certificate of Incorporation to a majority or other proportion of shares of stock shall refer to such majority or other proportion of the votes of such shares of stock.
(e) Except as may be otherwise required by law or by this Article IV, the holders of Common Stock and Class B Stock shall vote together as a single class, subject to any voting rights which may be granted to holders of Preferred Stock.
III. Transfer.
(a) No person holding shares of Class B Stock of record (hereinafter called a "Class B Holder") may transfer, and the Corporation shall not register the transfer of, such shares of Class B Stock, as Class B Stock, whether by sale, assignment, gift, bequest, appointment or otherwise, except to a Permitted Transferee and any attempted transfer of shares not permitted hereunder shall be converted into Common Stock as provided by subsection (d) of this Section III. A Permitted Transferee shall mean, with respect to each person from time to time shown as the record holder of shares of Class B Stock:
(i) In the case of a Class B Holder who is a natural person;
(A) The spouse of such Class B Holder and any lineal ancestor and descendant of such spouse, any lineal ancestor or descendant of such Class B Holder's parents, including adopted children and any spouse of such lineal descendant or ancestor and such spouse's lineal ancestors and descendants (which ancestors and descendants, their spouses and any lineal ancestors and descendants of such spouse, the Class B Holder, and his or her spouse are herein collectively referred to as "Class B Holder's Family Members");
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(B) The trustee of a trust (including a voting trust) principally for the benefit of such Class B Holder, such Class B Holder's Family Members and/or one or more of his or her other Permitted Transferees described in each subclause of this clause (i) other than this subclause (B), provided that such trust may also grant a general or special power of appointment to one or more of such Class B Holder's Family Members and may permit trust assets to be used to pay taxes, legacies and other obligations of the trust or of the estates of one or more of such Class B Holder's Family Members payable by reason of the death of any of such Family Members;
(C) A corporation if a majority of the beneficial ownership of outstanding capital stock of such corporation which is entitled to vote for the election of directors is owned by, or a partnership if a majority of the beneficial ownership of the partnership is held by, the Class B Holder or his or her Permitted Transferees determined under this clause (I), provided that if by reason of any change in the ownership of such stock or partnership interests, such corporation or partnership would no longer qualify as a Permitted Transferee, all shares of Class B Stock then held by such corporation or partnership shall, upon the election of the Corporation given by written notice to such corporation or partnership, without further act on anyone's part, be converted into shares of Common Stock effective upon the date of the giving of such notice, and stock certificates formerly representing such shares of Class B Stock shall thereupon and thereafter be deemed to represent the like number of shares of Common Stock; and
(D) The estate of such Class B Holder.
(ii) In the case of a Class B Holder holding the shares of Class B Stock in question as trustee pursuant to a trust (other than a trust described in clause (iii) below), "Permitted Transferee" means (A) any person transferring Class B Stock to such trust and (B) any Permitted Transferee of any such transferor determined pursuant to clause (i) above.
(iii) In the case of a Class B Holder holding the shares of Class B Stock in question as trustee pursuant to a trust which was irrevocable on the record date (hereinafter in this Section III called the "Record Date") for determining the persons to whom the Class B Stock is first issued by the Corporation, "Permitted Transferee" means (A) any person to whom or for whose benefit principal may be distributed either during or at the end of the term of such trust whether by power of appointment or otherwise and (B) any Permitted Transferee of any such person determined pursuant to clause (i) above.
(iv) In the case of a Class B Holder which is a corporation or partnership acquiring record and beneficial ownership of the shares of Class B Stock in question upon its initial issuance by the Corporation, "Permitted Transferee" means (A) any partner of such partnership, or stockholder of such corporation, on the Record Date, (B) any person transferring such shares of Class B Stock to such corporation or partnership, and (C) any Permitted Transferee of any such person, partner, or stockholder referred to in subclauses (A) and (B) of this clause (iv), determined under clause (i) above.
(v) In the case of a Class B Holder which is a corporation or partnership (other than a corporation or partnership described in clause (iv) above) holding record and beneficial ownership of the shares of Class B Stock in question, "Permitted Transferee" means (A) any person transferring such shares of Class B Stock to such corporation or partnership and (B) any Permitted Transferee of any such transferor determined under clause (i) above.
(vi) In the case of a Class B Holder which is the estate of a deceased Class B Holder, or which is the estate of a bankrupt or insolvent Class B Holder, which holds record and beneficial ownership of the shares of Class B Stock in question, "Permitted Transferee" means a Permitted Transferee of such deceased, bankrupt or insolvent Class B Holder as determined pursuant to clause (i), (ii), (iii), (iv) or (v) above, as the case may be.
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(b) Notwithstanding anything to the contrary set forth herein, any Class B Holder may pledge such Holder's share of Class B Stock to a pledge pursuant to a bona fide pledge of such shares as collateral security for indebtedness due to the pledgee, provided that such shares shall not be transferred to or registered in the name of the pledgee and shall remain subject to the provisions of this Section III. In the event of foreclosure or other similar action by the pledgee, such pledged shares of Class B Stock may only be transferred to a Permitted Tr nsferee of the pledgor or converted into shares of Common Stock, as the pledgee may elect.
(c) For purposes of this Section III:
(i) The relationship of any person that is derived by or through legal adoption shall be considered a natural one.
(ii) Each joint owner of shares of Class B Stock shall be considered a "Class B Holder" of such shares.
(iii) A minor for whom shares of Class B Stock are held pursuant to a Uniform Gifts to Minors Act or similar law shall be considered a Class B Holder of such shares.
(iv) Unless otherwise specified, the term "person" means both natural persons and legal entities.
(v) Without derogating from the election conferred upon the Corporation pursuant to subclause (C) of clause (i) above, each reference to a corporation shall include any successor corporation resulting from merger or consolidation and each reference to a partnership shall include any successor partnership resulting from the death or withdrawal of a partner.
(d) Any transfer of shares of Class B Stock not permitted hereunder shall result in the conversion of the transferee's shares of Class B Stock into shares of Common Stock, effective the date on which certificates representing such shares are presented for transfer on the books of the Corporation. The Corporation may, in connection with preparing a list of stockholders entitled to vote at any meeting of stockholders, or as a condition to the transfer or the registration of shares of Class B Stock on the Corporation's books, require the furnishing of such affidavits or other proof as it deems necessary to establish that any person is the beneficial owner of shares of Class B Stock or is a Permitted Transferee.
(e) Shares of Class B Stock shall be registered in the names of the beneficial owners thereof and not in "street" or "nominee" name. For this purpose, a "beneficial owner" of any shares of Class B Stock shall mean a person who, or an entity which, possesses the power, either singly or jointly, to direct the voting or disposition of such shares. The Corporation shall note on the certificates for shares of Class B Stock the restrictions on transfer and registration of transfer imposed by this Section III.
IV. Conversion Rights.
(a) Subject to the terms and conditions of this Section IV, each share of Class B Stock shall be convertible at any time or from time to time, at the option of the respective holder thereof, at the office of any transfer agent for Class B Stock, and at such other place or places, if any, as the Board of Directors may designate, or, if the Board of Directors shall fail so to designate, at the principal office of the Corporation (attention of the Secretary of the Corporation), into one (1) fully paid and nonassessable share of Common Stock. Upon conversion, the Corporation shall make no payment or adjustment on account of dividends accrued or in arrears on Class B Stock surrendered for conversion or on account of any dividends on the Common Stock issuable on such conversion. Before any holder of Class B Stock shall be entitled to convert the same into Common Stock, he shall surrender the certificate or certificates for such Class B Stock at the office of said transfer agent (or other place as provided above), which certificate or certificates, if the Corporation shall so request, shall be duly endorsed to the Corporation or in blank or accompanied by proper instruments of transfer to the Corporation or in blank) (such endorsements or instruments of transfer to be in form satisfactory to the Corporation), and shall give written notice to the Corporation at said office that he elects so to convert said Class B Stock in accordance with the terms of this Section IV, and shall state in writing therein the name or names in which he wishes the certificate or certificates for Common Stock to be issued. Every such notice of election to convert shall constitute a contract between the holder of such Class B Stock and the Corporation, whereby the holder of such Class B Stock shall be deemed to subscribe for the amount of Common Stock which he shall be entitled to receive upon such conversion, and, in satisfaction of such subscription, to deposit the Class B Stock to be converted and to release the Corporation from all liability thereunder, and thereby the Corporation shall be deemed to agree that the surrender of the certificate or certificates therefor and the extinguishment of liability thereon shall constitute full payment of such subscription for Common Stock to be issued upon such conversion. The Corporation will as soon as practicable after such deposit of a certificate or certificates for Class B Stock, accompanied by the written notice and the statement above prescribed, issue and deliver at the office of said transfer agent (or other place as provided above) to the person for whose account such Class B Stock was so surrendered, or to his nominee or nominees, a certificate or certificates for the number of full shares of Common Stock to which he shall be entitled as aforesaid. Subject to the provisions of subsection (c) of this Section IV, such conversion shall be deemed to have been made as of the date of such surrender of the Class B Stock to be converted; and the person or persons entitled to receive the Common Stock issuable upon conversion of such Class B Stock shall be treated for all purposes as the record holder or holders of such Common Stock on such date.
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(b) The issuance of certificates for shares of Common Stock upon conversion of shares of Class B Stock shall be made without charge for any stamp or other similar tax in respect of such issuance. However, if any such certificate is to be issued in a name other than that of the holder of the share or shares of Class B Stock converted, the person or persons requesting the issuance thereof shall pay to the Corporation the amount of any tax which may be payable in respect of any transfer involved in such issuance or shall establish to the satisfaction of the Corporation that such tax has been paid.
(c) The Corporation shall not be required to convert Class B Stock and no surrender of Class B Stock shall be effective for that purpose, while the stock transfer books of the Corporation are closed for any purpose; but the surrender of Class B Stock for conversion during any period while such books are so closed shall become effective for conversion immediately upon the reopening of such books, as if the conversion had been made on the date such Class B Stock was surrendered.
(d) The Corporation covenants that it will at all times reserve and keep available, solely for the purpose of issue upon conversion of the outstanding shares of Class B Stock, such number of shares of Common Stock as shall be issuable upon the conversion of all such outstanding shares, provided that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of the conversion of the outstanding shares of Class B Stock by delivery of shares of Common Stock which are held in the treasury of the Corporation. The Corporation covenants that if any shares of Common Stock, required to be reserved for purposes of conversion hereunder, require registration with or approval of any governmental authority under any federal or state law before such shares of Common Stock may be issued upon conversion, the Corporation will use its best efforts to cause such shares to be duly registered or approved, as the case may be. The Corporation will endeavor to list the shares of Common Stock required to be delivered upon conversion prior to such delivery upon each national securities exchange, if any, upon which the outstanding Common Stock is listed at the time of such delivery. The Corporation covenants that all shares of Common Stock which shall be issued upon conversion of the shares of Class B Stock, will, upon issue, be fully paid and nonassessable and not entitled to any preemptive rights.
V. Liquidation Rights. In the event of any dissolution, liquidation or winding up of the affairs of the Corporation, whether voluntary or involuntary, after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of each series of Preferred Stock shall be entitled to receive, out of the net assets of the Corporation, an amount for each share equal to the amount fixed and determined by the Board of Directors in any resolution or resolutions providing for the issuance of any particular series of Preferred Stock, plus an amount equal to all dividends accrued and unpaid on shares of such series to the date fixed for distribution, and no more, before any of the assets of the Corporation shall be distributed or paid over to the holders of Common Stock. After payment in full of said amounts to the holders of Preferred Stock of all series, the remaining assets and funds of the Corporation shall be divided among and paid ratably to the holders of Common Stock and Class B Stock (considered for this purpose as one class). If, upon such dissolution, liquidation or winding up, the assets of the Corporation distributable as aforesaid among the holders of Preferred Stock of all series shall be insufficient to permit full payment to them of said preferential amounts, then such assets shall be distributed among such holders, first in the order of their respective preferences, and second, as to such holders who are next entitled to such assets and who rank equally with regard to such assets, ratably in proportion to the respective total amounts which they shall be entitled to receive as provided in this Section V. A merger or consolidation of the Corporation with or into any other corporation or a sale or conveyance of all or any part of the assets of the Corporation (which shall not in fact result in the liquidation of the Corporation and the distribution of assets to stockholders) shall not be deemed to be a voluntary or involuntary liquidation or dissolution or winding up of the Corporation within the meaning of this Section V.
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B. Preferred Stock.
The Board of Directors is authorized, subject to limitations prescribed by law and the provisions of this Article IV, to provide for the issuance of the preferred shares in series, and by filing a certificate pursuant to the General Corporation Law of Delaware, to establish the number of shares to be included in each such series, and to fix the designations, relative rights, preferences and limitations of the shares of each such series. The authority of the Board with respect to each series shall include, but not be limited to, determination of the following:
(a) The number of shares constituting that series and the distinctive designations of that series;
(b) The dividend rate on the shares of that series, whether dividends shall be cumulative and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series;
(c) Whether that series shall have voting rights, in addition to the voting rights provided by law and, if so, the terms of such voting rights;
(d) Whether that series shall have conversion privileges and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates;
(f) Whether that series shall have a sinking fund for the redemption or purchase of shares of that series and, if so, the terms and amount of such sinking fund;
(g) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of that series;
(h) Any other relative rights, preferences and limitations of that series.
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Dividends on outstanding preferred shares shall be declared and paid, or set apart for payment, before any dividends shall be declared and paid, or set apart for payment, on the common shares with respect to the dividend period.
Any and all such shares issued, and for which the full consideration has been paid or delivered shall be deemed fully paid stock and the holder of such shares shall not be liable for any further call or assessment or any other payment thereon.
C. Authorized Shares of Capital Stock.
Except as may be provided in the terms and conditions fixed by the Board of Directors for any series of Preferred Stock, and in addition to any other vote that may be required by statute, stock exchange regulations, this Certificate of Incorporation or any amendment hereof, the number of authorized shares of any class or classes of stock of the Corporation may be increased or decreased by the affirmative vote of the holders of a majority of the outstanding shares of stock of the Corporation entitled to vote."
4. The Amendment of the Certificate of Incorporation herein certified has been duly adopted by the unanimous written consent of the Corporation's Board of Directors and the holders of at least a majority of the Corporation's outstanding voting capital stock, such percentage being not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, in accordance with the provisions of Sections 141(f), 228 and 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be hereunto affixed and this Certificate of Amendment of the Corporation's Certificate of Incorporation to be signed by Steven Y. Moskowitz, its Chief Financial Officer, this 21 st day of September, 2009.
Spongetech Delivery Systems, Inc.
By: /s/ Steven Y. Moskowitz
Steven Y. Moskowitz, Chief Financial Officer
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Exhibit 99.1
SPONGETECH® DELIVERY SYSTEMS CANCELS
REVERSE STOCK SPLIT
NEW YORK, NY – September 22, 2009 – SpongeTech® Delivery Systems, Inc. (“SpongeTech”) “The Smarter Sponge™”, (OTCBB: SPNGE) today announced that its Board of Directors has decided to cancel its previously announced reverse stock split until after the Form 10-K for the Company’s fiscal year 2009 has been filed.
CEO Michael Metter said, “We originally planned for the reverse stock split to take effect after the filing of our Form 10-K for fiscal 2009 to give our shareholders the opportunity to evaluate our financial performance and growth prospects first. In light of the delay in filing, we have decided that to proceed with the reverse stock split would not be in the best interests of our shareholders.”
About SpongeTech® Delivery Systems, Inc.
SpongeTech® Delivery Systems, Inc. designs, produces, and markets unique lines of reusable cleaning products for Car Care, Child Care, Home Care and Pet Care usages. These sponge-like products utilize SpongeTech®'s proprietary, patent and patent-pending technologies and other technologies involving hydrophilic (liquid-absorbing) foam, polyurethane matrices or other ingredients. The Company's sponge-like products are pre-loaded with specially formulated ingredients such as soap, conditioner and/or wax that are released when the sponge is soaked and applied to a surface with minimal pressure. SpongeTech is currently exploring additional applications for its technology in the health, beauty, and medical markets. SpongeTech® Delivery Systems, Inc. intends to globally brand its products as The Smarter Sponge™ .
Safe Harbor Statement
Under The Private Securities Litigation Reform Act of 1995: The statements in this press release that relate to the Company's expectations with regard to the future impact on the Company's results from new products in development are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The results anticipated by any or all of these forward-looking statements may not occur. Additional risks and uncertainties are set forth in the Company's Annual Report on Form 10-KSB for the fiscal year ended May 31, 2008 and the Company's Quarterly Report on Form 10-Q for the third fiscal quarter ended February 28, 2009. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events or changes in the Company's plans or expectations.
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Contacts:
Lippert/Heilshorn & Associates
212-838-3777
Harriet Fried / Jody Burfening (Investors)
SpongeTech@lhai.com
Adam Handelsman (Media)
ahandelsman@lhai.com
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Exhibit 99.2
SPONGETECH(R) DELIVERY SYSTEMS ANNOUNCES RELEASE OF LETTER TO SHAREHOLDERS TO UPDATE INVESTORS ON COMPANY ACHIEVEMENTS AND STRATEGY
Sep. 22, 2009 (Business Wire) -- SpongeTech® Delivery Systems, Inc. (“SpongeTech”) “The Smarter Sponge™”, (OTCBB: SPNGE) announced today that the Company’s CEO and COO had written a letter to shareholders updating them regarding the company’s progress and growth plans. The letter is posted on the Company’s website and is reproduced below:
Dear Shareholder,
We want to address various questions many of you have asked over the past few weeks and to share with you our plans to grow the business and create shareholder value.
Since the beginning of fiscal 2009, we have transformed SpongeTech from an early-stage company with limited brand awareness and distribution reach to a company selling a broadened portfolio of products through multiple distribution channels supported by a host of very successful marketing campaigns and promotional activities. We are proud of the progress we’ve made and have many plans to continue to expand our business.
As you know, we have not yet filed our Form 10-K for our company’s fiscal year 2009, which ended May 31, 2009. The requirement that caused the delay – that our new independent auditor, Robison, Hill & Co., retained as a result of the resignation of our previous auditor, Drakeford & Drakeford, LLC, due to the revocation of Drakeford’s registration by the Public Accounting Oversight Board, must re-audit our financial statements for fiscal 2008 – is as frustrating to us as it is for you, our shareholders. While we realize it would be helpful to offer you an estimated filing date, our current independent auditors have asked us to give them the flexibility to do a thorough job, and we are working with them to complete the necessary steps as quickly as possible. We have retained Deloitte & Touche beginning with the fiscal year 2010 to serve as our accountants. We also decided to cancel our previously announced reverse stock split until after the Form 10-K for fiscal year 2009 has been filed. In the meantime, we will use this letter to bring you up to date on our many accomplishments during fiscal 2009, ended May 31, 2009,and our actions and plans to accelerate SpongeTech’s growth in fiscal 2010, ending May 31, 2010.
Acquisitions/Investments
· We acquired Dicon Technologies, LLC on July 9 for $4.5 million in cash plus approximately $0.5 million of working capital that we assumed upon closing the transaction to further vertically integrate SpongeTech’s research, development and manufacturing processes. Dicon Technologies specializes in research and development of products derived from hydrophilic urethane chemistry.
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· We have agreed to invest approximately $4 million in GetFugu, a technology company focused on developing mobile search tools. Terms of the deal are being finalized and, subject to the successful completion of our due diligence, we expect to announce the completed transaction by the end of calendar 2009. Our investment resulted from GetFugu’s successful customization of its mobile-based web search and e-commerce technology for SpongeTech. We plan to use GetFugu’s ground-breaking, carrier-agnostic mobile phone-based technology to drive more traffic to our already-successful on-line store website, www.spongetech.com. We are currently on GetFugu’s beta site.
Expanded Product Offering
· We added a Child Care product line to our portfolio of reusable cleaning products for Car Care, Home Care, Medical Care and Pet Care usages. To date, we have developed 33 product SKUs using our technology in these market segments.
· We launched SpongeBob SquarePants soap-filed bath sponges for kids in partnership with Nickelodeon and Viacom Consumer Products.
· As a result of the Dicon acquisition, we added 40 products for use in the cosmetics, footwear and medical markets, bringing our product portfolio to a consolidated total of 73 items. The new products include Dryz Intellitemp, a patented hydrophilic matrix that regulates temperature, provides antimicrobial protection and uses Super Absorbent Polymer (SAP) to manage moisture. This material is currently being used by several leading footwear and sports equipment manufacturers.
· We have developed a Pink Panther-themed product under a licensing arrangement with MGM Consumer Products and expect to roll these products out by the end of calendar 2009.
Extended the Company’s Distribution Reach
· With the purchase of Dicon in July 2009, Spongetech increased our consolidated distributor/customers during the first quarter of fiscal 2010, which encompasses June 2009 through August 2009) by 55 accounts. This is a 27% increase in new accounts since the end of our fiscal year 2009.
· We have shipped products to CVS Caremark, Kroger, Petco, PetSmart, Ace Hardware, Walgreens and other supermarkets and convenience stores. During the first quarter of fiscal 2010, we received orders from customers, including BJ’s Wholesale Club, ShopRite and Cosco.
· We signed a licensing agreement to partner with Nickelodeon & Viacom Consumer Products to create SpongeBob SquarePants soap-infused bath sponges in the U.S. and Canada.
· We presented our products on QVC and Home Shopping Network and continue to explore possibilities with them.
· We signed agreements to license the SpongeTech name with two manufacturers of cleaning products: Green Bridge Industries for the sale of the SpongeTech® Stain Remover Pens; and Organic Products Solutions for home care, car care and industrial/commercial cleaning products.
· We enhanced our e-commerce site to make it more convenient for people to purchase our products online.
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Boosted Marketing and Promotional Activities
· We expanded our sports sponsorship portfolio by entering into agreements with 26 Major League Baseball teams for the 2009 season and 8 National Football League teams for the 2009-2010 season.
· We were also a sponsor of the United States Tennis Association and its premier event, the 2009 US Open, and are working on return on investment strategies to complement our sports marketing initiatives.
· We are continuing our nationwide advertising campaign, which includes TV and radio spots, print ads, retail store flyers, professional sports sponsorships and ads, internet advertising, and charitable functions. During 2009, our marketing campaign was ranked in the top 10 list of advertisements by the Jordan Whitney Report and the Infomercial Monitoring Service, Inc. (IMS) Report.
Since the end of fiscal year 2009, we have seen increasing re-orders from existing customers, strong sell-through rates and growing enthusiasm for our products as we continue to penetrate new distribution channels and create greater awareness for our products. Whereas two years ago, SpongeTech was a company with less than $10 million in revenue, we expect to report approximately $50 million in revenue for fiscal 2009.
In fiscal 2010, we are continuing to expand our distribution reach and, aided by our acquisition of Dicon and its strong R&D capabilities, introduce new products. To further raise brand awareness of The Smarter Sponge™, we plan to significantly increase our marketing and advertising budget. A portion of this budget will be used to attend a greater number of trade shows, including the Specialty Equipment Market Association show for the first time, Licensing International Expo, Automotive Aftermarket Products Expo, Global Market Development Center’s General Merchandise Marketing Conference and other national and regional shows. We also plan to enhance the packaging of our products.
We will also continue to extend our distribution reach by adding new distributors, including SpongeTech Europe, which we formed in August 2009 to enhance our already-strong presence in that market. In addition, we plan to leverage Dicon’s established channels of distribution including food, drug and mass merchandise stores such as CVS, Walgreens, Kmart and Wal-Mart and also to sign new licensing arrangements. By the end of fiscal 2010, we expect to have secured product placement in over 100,000 retail doors nationwide. Finally, using our enhanced research and product development capabilities, we plan to move forward more aggressively to expand our product offering particularly in our Home Care, Pet Care and Car Care product lines. For example, as part of our license agreement with Nickelodeon & Viacom Consumer Products, we are putting the finishing touches on a product for the Nickelodeon character, Dora the Explorer.
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In closing, our goal remains to establish SpongeTech as a first-class global consumer goods company known for its innovative products, creative marketing and promotional campaigns, and distribution strength. We appreciate your keen interest and support for our products and business and look forward to reporting our fiscal 2009 results as soon as possible.
Michael Metter, Chief Executive Officer
Steven Moskowitz, Chief Operating Officer
About SpongeTech® Delivery Systems, Inc.
SpongeTech® Delivery Systems, Inc. designs, produces, and markets unique lines of reusable cleaning products for Car Care, Child Care, Home Care and Pet Care usages. These sponge-like products utilize SpongeTech®'s proprietary, patent and patent-pending technologies and other technologies involving hydrophilic (liquid-absorbing) foam, polyurethane matrices or other ingredients. The Company's sponge-like products are pre-loaded with specially formulated ingredients such as soap, conditioner and/or wax that are released when the sponge is soaked and applied to a surface with minimal pressure. SpongeTech is currently exploring additional applications for its technology in the health, beauty, and medical markets. SpongeTech® Delivery Systems, Inc. intends to globally brand its products as The Smarter Sponge™ .
Safe Harbor Statement
Under The Private Securities Litigation Reform Act of 1995: The statements in this press release that relate to the Company's expectations with regard to the future impact on the Company's results from new products in development are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The results anticipated by any or all of these forward-looking statements may not occur. Additional risks and uncertainties are set forth in the Company's Annual Report on Form 10-KSB for the fiscal year ended May 31, 2008 and the Company's Quarterly Report on Form 10-Q for the third fiscal quarter ended February 28, 2009. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events or changes in the Company's plans or expectations.
Contacts:
Lippert/Heilshorn & Associates
212-838-3777
Harriet Fried / Jody Burfening (Investors)
SpongeTech@lhai.com
Adam Handelsman (Media)
ahandelsman@lhai.com
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