NSS ~ Counterfeiting Stock ~ MM Games Played

[P2O I'm from MO]

Time for the NSS SPNG'ers to put up or shut up...

(credit to loanranger)

NOTICE TO SHAREHOLDERS

A portion of individuals holding equity positions in Spongetech Delivery Systems, Inc. (the “Debtor”) have vigorously expressed their desire that the Trustee pursue claims against alleged “naked short sellers” (collectively, the “NSS”) amongst other alleged or potential claims the Debtor may possess. Please allow this Notice to provide a brief explanation of the current status of the bankruptcy proceeding and of the Trustee's future intentions.

On May 19, 2011, the Bankruptcy Court entered an Order approving the Trustee’s employment of Reid Collins & Tsai LLP (“Reid Collins”) as special litigation counsel. Reid Collins will be pursuing certain of the Debtor’s potential litigation claims against various entities and individuals, including but not limited to, the Debtor’s alleged interest in a loan entered into between RM Enterprises, Inc. and Business Talk Radio, on a strict contingency fee basis. Reid Collins has already reviewed all of the Debtor’s potential claims, and has elected not to pursue certain of them because they are (a) unfounded, (b) too costly to pursue in light of the potential net benefit to the estate, or (c) for various other reasons.

The Trustee has repeatedly stated, and it is an absolute fact, that the Debtor cannot defend, and has no defenses to the claims asserted against the Debtor, by the Securities and Exchange Commission (the “Commission”). Moreover, de-registration of the Debtor's common shares, regardless of the Trustee’s consent, is inevitable. The stipulations (the “Stipulations”) that the Trustee entered into with the Commission circumvent and cap certain administrative expenses that have accumulated and will continue to accumulate against the Debtor’s estate.

As you know, the Trustee has consistently taken the position that the rehabilitation of the Debtor’s public shell does not represent a viable source of recovery to the Debtor's estate or its creditors, because of, among other issues: (i) the costs associated with bringing the required filings (i.e. 10k’s and 10Q’s) current; (ii) the fact that there is no viable business; and (iii) other related obstacles associated with such rehabilitation. Separate from those rehabilitation needs, the Trustee was informed that he cannot solicit offers for the public shell without running afoul of applicable securities laws.

The Trustee has also consistently contended that the alleged claims against the NSS, if they exist at all, actually belong directly to individual shareholders who were impacted by those naked short sales. Furthermore, the Trustee has maintained that the shareholders are free to pursue potential claims against the NSS at their own expense. It is the opinion of the Trustee’s retained professionals, including Reid Collins, that the Debtor’s claims against alleged the NSS, if they exist at all, appear to be tenuous at best, and would be expensive to prosecute. Moreover, suits against the NSS would not likely result in a significant recovery to the Debtor's creditors.

THEREFORE, PLEASE TAKE NOTICE THAT, the Trustee will be accepting and evaluating any serious offer to purchase the alleged claims purportedly held by the Debtor against certain unknown individuals and entities that engaged in alleged "naked short sales" of the Debtor's common shares, at unspecified times, in unspecified quantities and to unspecified individuals or entities (the "Alleged NSS Claims").

PLEASE TAKE FURTHER NOTICE THAT, with regard to your potential interest in the Alleged NSS Claims, the Trustee cannot evaluate the seriousness of that interest without additional information. Therefore, any offer you may make must (a) be in writing, (b) offer a substantial monetary benefit to Spongetech's estate, (c) be "as is,
where is and with all faults" and with no representations or warranties by the Trustee of any kind or nature, (d) must recognize the speculative nature of the transactions and accept full responsibility therefor, (e) provide acknowledgment that the Trustee assumes no, and expressly disclaims any, obligation to assist the successful bidder in any regard, (f) be accompanied by an opinion of competent legal counsel expressing an opinion concerning, among other things, the structure and viability of any such purchase, (g) be accompanied by evidence, such as current bank statements or a letter from a financial institution evidencing the ability to fully fund and close on any offer, (h) be accompanied by a good faith deposit in the sum of 10% of the offer in readily available funds to be held in escrow pending the approval of the sale which would be refundable in the event that you were not the successful bidder (the “Deposit”), and (i) be received by the Trustee no later than June 30, 2011 at 4:00 p.m. (EST) (the “Expiration Date”).

PLEASE TAKE FURTHER NOTICE THAT, neither the Trustee nor his counsel can offer any legal or other advice regarding the nature or content of your offer, or regarding whether to purchase the Alleged NSS Claims.

PLEASE TAKE FURTHER NOTICE THAT, extension of the Expiration Date can be obtained from the Trustee, at the Trustee’s sole discretion, and only upon the showing of serious intent to make an offer, including but not limited to delivery of the Deposit.

PLEASE TAKE FURTHER NOTICE THAT, any sale of the Alleged NSS Claims, will, of course, (a) be conducted in accordance with the provisions of the United States Bankruptcy Code and applicable securities laws, if any, (b) be subject to auction procedures to be agreed upon between the Trustee and any stalking horse bidder and (c) be subject to approval by Judge Bernstein.

PLEASE TAKE FURTHER NOTICE THAT, the Trustee reserves his right to evaluate each offer, if any, and make a determination regarding its viability and benefit to the estate and also reserves his right to reject any offers in his business judgment.

PLEASE BE GUIDED ACCORDINGLY.