SpongeTech Delivery Systems Inc. (SPNG) 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 SPNG’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. SPNG is exploring additional applications for its technology in the health, beauty and medical markets. It plans to globally brand its company as America’s Cleaning Company. The Company was founded in 1999 and is based in New York, New York.

Share Statistics 10-Jul-09)			FY 2007	FY 2008	% Chg	Q3 FY 08	Q3 FY 09	% Chg
Symbol	SPNG	Revenue, $Mn	0.1	5.6	5500%	1.3	13.2	915%
Current price	$0.11	Gross marg.	0.0%	62.5%	62.5%	84.6%	48.5%	-36.1%
52wk Range:	0.01 – 0.29	Oper. margin	-800%	21.4%	821.4%	15.4%	17.4%	2.0%
Avg Vol (3m):	90,278,200	Net margin	-800%	21.4%	821.4%	15.4%	11.4%	-4.0%
Market Cap.	75.90M
Dil. Shares Outst.	722.87M	EPS, $	-0.020	0.012	n/m	0.002	0.001	-50.0%

Source: Reuters.com, SEC Filings. FY ending May 31.

SPNG reported sales of $13.2 million for the third quarter ended February 28, 2009, a 915% increase over revenues reported for the same quarter last year. Net income for the third quarter of 2009 was more than $2,250,000, compared to a net income of $188,482 for the comparative 2008 quarter, reflecting exponential growth over the same period last year.

For the nine-month period ended February 28, 2009, the Company reported revenues of about $31 million, compared to $1.6 million for the comparative period of 2008. Net income for the nine-month period ended February 28, 2009, was more than $6,250,000, compared to a net income of $197,150 for the comparative period of 2008.

As of February 28, 2009, SPNG had cash in the amount of $34,570 as compared to $19,387 at May 31, 2008. SPNG’s working capital at February 28, 2009, was $19,647,742 as compared to $4,919,367 working capital at May 31, 2008. The Company has no outside debt. The Company may require external financing to fund the inventory and receivables growth to support the solid new customer additions.

Shares of SPNG skyrocketed after the Company announced a strong third quarter for fiscal 2009 and solid new orders additions in May and June. SPNG shares surged 425%, from $0.02 at May 1, to $0.105 at July 10.

SPNG recently announced it expects robust revenue and earnings growth to continue into Q4 FY 2009, FY 2010 and beyond.

SPNG manufactures and distributes specially configured sponges containing an outer contact layer and an inner matrix, which is loaded with formulated soaps or soap and wax. When the sponge is applied to a surface with minimal pressure, the soap is applied to the surface. The Company’s technology offers significant cost savings to consumers since the wash and wax are built into the sponge; the consumer doesn’t need to purchase these products separately.

Following strong Q3 FY2009, the Company continued to announce new orders and customers’ addition. In May, SPNG has secured approximately $10 million in new orders. For the month of June the Company reported approximately $13.65 million of purchase orders. While, for the month of July the Company has secured approximately $6.9 million in new orders to date.

The Company’s products are being ordered by various retail outlets throughout North America, including drugstores, supermarkets, membership warehouse clubs and big box stores. The Company’s products are being distributed through CVS, Kroger, Ace Hardware, Bashas’, Price Chopper Strauss Auto, Walgreens, Costco and other distributors.

In July, SPNG announced it has acquired Dicon Technologies for $4.45 million in cash only. Dicon Technologies is a company that specializes in research and development of products derived from hydrophilic urethane chemistry. Dicon currently sells various products, including private label brands for multiple industries through established channels of distribution in the United States, including traditional food, drug and mass market stores such as CVS, Walgreens, Kmart and Wal-Mart, as well as direct sales to large commercial clients, all of which SpongeTech intends to immediately utilize. In addition to the U.S. distribution, Dicon currently has distribution in Asia.

According to Freedonia Group, U.S. demand for industrial and institutional cleaning chemicals is projected to increase 3.8% annually to $10 billion by 2010. Increased spending reflects the growing popularity of multifunctional cleaning chemicals offering sanitizing and other benefits, as well as reduced labor costs for janitorial and other cleaning operations.

Source: http://stockcharts.com/h-sc/ui

SPNG is below its 13-day moving average. This bearish sign is even more significant because the moving average is also trending lower.

SPNG’s MACD is indicating a weak bearish signal. Although the indicator is above the critical level of 0, which implies the underlying moving averages are bullish, the MACD has crossed below its nine-day moving average or signal line. This suggests that positive momentum has begun to slow.

SPNG has been relatively stable recently. This is evidenced by the width of its Bollinger Bands, which are tighter than normal. Additionally, SPNG is trading within its Bollinger Bands. This is a normal condition and suggests the stock is neither overbought nor oversold relative to the recent price action.

The Company is traded with discount to peer group P/E and P/S multiples, mainly due to lack of visibility in the investment community. The solid revenue and profitability growth anticipated by the management, could attract the attention of institutional investors and push the Company’s shares to be traded closer to peer group median multiples.

Company Name	Ticker	Price per	Mrkt. Cap.	P/E		P/S
Jul-10-2009	symbol	Share, $	$ Mn	2009	2010	2009	2010
Ecolab Inc.	ECL	37.31	8,820	18.94	16.66	1.48	1.39
Clorox Co.	CLX	56.30	7,830	14.82	13.50	1.44	1.42
Church & Dwight Co. Inc.	CHD	53.29	3,740	15.86	14.17	1.51	1.45
Stepan Co.	SCL	41.59	402	15.01	14.64	0.31	0.29
Procter and Gamble	PG	52.22	152,210	12.35	13.89	1.90	1.88
Unilever plc	UL	23.26	16,230	14.63	11.63	0.31	0.31
Median				14.92	14.03	1.46	1.41
SpongeTech Delivery Systems	SPNG	0.105	76	9.49	4.54	1.65	0.85

Source: Thomson Financial, Analyst estimates

NET SHARE PURCHASE ACTIVITY

Insider Purchases – Last 6 Months Shares Trans Purchases N/A N/A Sales N/A N/A Net Shares Purchased (Sold) N/A N/A Total Insider Shares Held N/A N/A % Net Shares Purchased (Sold) N/A N/A

Net Institutional Purchases – Prior Qtr to Latest Qtr Shares Net Shares Purchased (Sold) N/A % Change in Institutional Shares Held N/A

Data provided by Thomson Financial

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