I think I said this before, but it bears repeating. If you knew nothing else about Spongetech other than the fact that for the 9 months ending Feb 28, 2009 they reported $31 M in Sales revenues and had $14 M in Accounts Receivable on the books as of the end of the reporting period, that A/R number, all by itself, should stop you dead in your tracks.
This is a company that has major problems collecting the cash associated with the sales they're reporing -- that's what the increase in A/R tells you.
The people who love this stock will say "But this is a growth company in a high growth mode, so increases in Accounts Receivable are inevitable" and to some extent, they are.
However, Spongetech is cash constrained. And companies that are in a high growth mode need all the cash they can get to finance inventory build, to finance A/R growth, to finance additional staff, additional marketing, and so forth. Remember that the company only had $35k of cash in the bank as of February 28, 2009. So if cash is such a precious and scarce commodity at Spongetech, why would they let their creditors get a free ride by not paying their bills on time?
And by the way, Spongetech makes a big deal of the fact that they've signed up new customers with Walgreen's, Autozone, and other retailers. But all of those companies are set up to pay invoices net within 30 days of the invoice date.
So do all the people who love this stock really think Spongetech booked $14 M in sales between Jan 30, 2009 - Feb 28, 2009?
No? Me either.
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