Spongetech Delivery Systems Inc (fka SPNGQ)

[harvard homeboy]

man from beantown,

SPNG doesn't have high enough margins to do squat. The margins previously reported were 20% pretax and they were a work of accounting fiction.

Put the company's financial statements on a GAAP-compliant basis, reflect the cost to shareholders of all the stock option grants given to Moskowitz and Metter at 40% discounts to fair market value, which should have been done to comply with SFAS 123 (and which you won't find mentioned anywhere in SPNG's financial statements) and the company is awash in red ink and negative EPS.

We already know the operating cash flow for the nine months ending Feb 28 2009 showed the same thing. Just back out the $9.7 million of proceeds from the sale of stock, which is clearly a financing cash flow and was added into the operating cash flow section by SPNG with a footnote telling the readers it's a non-operating source of funds, and all of a sudden SPNG's negative operating cash flow number of 170k morphs into a negative $9.9 million instead.

Long story short, SPNG's margins have been negative from day one and are shrouded in accounting gimmickry to convey the appearance of economic viability.

Many of the folks who are long this stock don't understand the basics of accrual accounting, and my guess is that was an intentional part of the pump phase for this stock.