Dow Jones 12433.48 +49.59 6:33 am PST, January 29, 2008 NASDAQ 2361.34 +11.43 For info, visit access.smallcapnetwork.com S & P 500 1361.03 +7.06 Change your subscription status here Russell 2000 702.39 +0.00 VOLUME 08 : ISSUE 9 New Sponge Makes Big Splash For Small Cap  Ya' know, if there's actually a recession on the horizon, you sure wouldn't know it by the way one of our profiled companies is growing its top line. And I don't mean by just a little bit. This company just launched a new product line, and increased their to-be-filled orders by about 15% pretty much instantaneously.  If that doesn't grab your attention, then I hope at least this does - there's also a major misunderstanding about this company's sales forecasts - orders are in hand, and the organization should have no problem delivering the goods. Some semantics may have made it seem otherwise. We'll examine that tidbit in detail too.   A Small Cap 'Cleaning Up' With Sponges I wasn't kidding when I said this company was growing its revenue stream with the throttle wide open - Spongetech Delivery Solutions (OTCBB: SPNG) just received $2.4 million in orders. That's a nice little increase of my previous unbooked-sales-log estimate, which totaled about $15.5 million at the time. For any newcomers, Spongetech's claim to fame is embedding a multi-use sponge with soap - a convenience proposition. Their first product was a soap/wax auto sponge that was a big hit within the automotive world.  Well, they just sold $2.4 million worth of a new product line right out of the gate.  How does a company do that? It was actually something I mentioned in passing a couple few times since we've started following Spongetech, though in retrospect I wish I had really pounded the table. In short, they launched their children's bath sponges and pet shampoo sponge, tapping into two other brilliant target markets. Though the press release (below) didn't say it, I think it's worth mentioning now there's yet another line of sponges on the radar - kitchen sponges. I have to wonder if that launch will be just as well received. I suspect we'll find out soon enough. Anyway, the point is simple. Spongetech is successfully selling the product, yet the size of these playing fields leaves enormous room for growth. With today's orders, I believe the dollar amount of unshipped/unbooked orders is probably around $17 million; the goods will be delivered over the next twelve months. In March, sales should be ramped up even further when their products are featured on QVC. The company's market cap, by comparison, is $2.3 million. Do the math here...do you think SPNG is an incredible value with a projected price/sales ratio of about 0.13? Most companies' P/S ratios are somewhere between 2.0 and 3.0.   Setting The Record Straight When I was talking to one of the head guys at Spongetech yesterday, he brought up something I wanted to clarify with all of our readers ASAP. Why? Not understanding some terminology the company (and I, admittedly) have been using may have led you to underestimate their capacity.  Since we began keeping tabs on Spongetech, we've also been touting their growing sales 'backlog'. Some investors have interpreted that as the company being unable to deliver all the orders they've been receiving. The term backlog, however, doesn't indicate a lack of capacity - it's simply a description of orders scheduled for delivery at later dates. See, major retailers don't always have a lot of room for tons of inventory, even if they know they can sell through it quickly. They want to go ahead now and reserve their sponges for future delivery. The reason it matters to investors? Spongetech doesn't book sales until they ship the product. However, that doesn't mean the sales aren't on the way; that roughly $17 million or so in the sales backlog represents firm orders for various sponges to be delivered over the next year or so. Though we haven't heard the question from any of you guys, I just wanted to make sure each of you understood what was meant.    Trading SPNG - It's All Relative No matter what your experience may be with owning SPNG shares, I think you have to admit the company is doing their part. The forecasted top line is getting progressively bigger, and we already know gross margins are wide (about 87%, according to last quarter's filings).  Nonetheless, the market's tide can push any stock around. That's why you have to take the last few weeks with a grain of salt when it comes to your stocks, including Spongetech. While the nearby chart looks about like what you'd expect in the midst of a major market correction, we've still seen several days of accumulation. Interestingly, we've not seen any major distribution days since early December.  So far that hasn't helped current owners, but I feel it points to an underlying bullish opinion of SPNG. In other words, I want to see how this chart shapes up in a decent market environment. I suspect Spongetech's strong fundamentals will manifest themselves on the chart once the market isn't so pre-occupied with all this gloom and doom. Timing - as always - is the key. My same mental milestones still apply: getting above 6 cents could be big, and getting above 12 should be even bigger. Here's the official press release.    SpongeTech Receives $2,385,000 in New Orders for the New Pet Sponges and New Children's Sponges!!! SpongeTech Sells 270,000 Units of the New Pet and Children's Sponges with the SpongeTech-nology in Them!!  NEW YORK--(BUSINESS WIRE)--SpongeTech Delivery Systems, Inc. (OTCBB: SPNG) today announced they received an order last Friday for $2,385,000. That's 270,000 units for the new Children's and Pet Sponges. The pet sponge is a no tears, tangle-free shampoo for pets that leaves a lustrous sheen. The children's sponge is a no tears bath wash called the "Puddle Pals Children's Sponge"  The first 12,000 units of "Puddle Pals Children's Sponge" are scheduled for delivery July 25, 2008, with an additional 12,000 units per month for the next two months, for a total of 36,000 units. The Pet Sponges' first 68,000 units are scheduled for delivery September 15, 2008, with another 68,000 units on October 15, 2008, and a balance of 98,000 units on November 15, 2008, for a total of 234,000 units.  The company has had many calls and e-mails about the back orders and when the company is going to fill them. The company does not have back orders. They have orders with scheduled fill times and pending deliveries. The orders are filled on a pre-determined schedule so the distributors and retailers are not 'sitting' on product, and they determine when they want the merchandise. The orders are then shipped as scheduled.  Steven Moskowitz SpongeTech COO said, "I am pleased to see the new products finally hit the market place, and I expect new products sales will continue to grow over the next few months. We are working on new products with new companies, and we will update the shareholders as we move forward. As shareholders, we are all happy with the new product roll-outs!! We are now a three product company."  For more information please contact Investor Relations at 1-877- SPONGE T for Bill Young or visit the company website at: www.spongetech.com.  About Spongetech Delivery Systems  Spongetech Delivery Systems is a development stage company which designs, produces, markets and distributes cleaning products for vehicular use utilizing patented technology relating to sponges containing hydrophilic (liquid absorbing) foam polyurethane matrices. The Company's sponges are specially configured with an outer contact layer and an inner matrix, which is loaded with specially formulated soaps and wax that are released when the sponge is applied to a surface with minimal pressure. The Company's products are currently designed specifically for vehicular cleaning use. However, the Company is exploring the possibility of using its patented technology for the development of sponges for other uses, including for use with anti-bacterial, bath and kitchen soaps for household uses, as well as for use as a children's bath foam sponge. "Safe Harbor Statement"  Under The Private Securities Litigation Reform Act of 1995: The statements in the 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 year ended December 31, 2005, the Company's Quarterly Report on Form 10-QSB for the first quarter ended March 31, 2006. 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.  Contact:  Spongetech Delivery Systems, Inc.  Investor Relations:  Bill Young, 1-877-776-6438  wayoung55@aol.com   We Value Your Feedback   Got comments, questions or suggestions? Send 'em on over: Email the Editor If you wish to send a written request or inquiry, please send it to our physical address: TGR Group, LLC 4653 Carmel Mtn Rd Suite 308 #402 San Diego, CA 92130 Subscribe Information is power and timely information is profitable. Become informed and profit from Small Cap Network Profiles and Trading Alerts by becoming a Preferred Member today. There is no cost associated with your email subscription. Add your email address below and make sure to check your email inbox and confirm your opt-in request to start receiving the Small Cap Network Email Newsletter on a regular basis. To ensure newsletter delivery, you can add any additional email addresses you may have to the Small Cap Network Member List. Receiving the Small Cap Network Newsletter in multiple locations is the best way of making sure you don't miss the next investing or trading opportunity! For web based email addresses, the Small Cap Network recommends @yahoo.com or @aol.com for timely and reliable email newsletter delivery. Subscribe Here Note: Your email address will be kept strictly confidential, and will not be shared with any other entity for any purpose at any time. If you no longer wish to receive the Small Cap Network Newsletter, simply follow the instructions located at the bottom of every Small Cap Network Newsletter Edition. Refer A Friend  If you find the Small Cap Network Newsletter informative and profitable, please forward our newsletter alert service to like-minded friends and associates who share similar market interests.   Ensure Newsletter Delivery  To ensure newsletter delivery, you can add any additional email addresses you may have to the Small Cap Network Member List. Receiving the Small Cap Network Newsletter in multiple locations is the best way of making sure you don't miss the next investing or trading opportunity! For web based email addresses, the Small Cap Network recommends @yahoo.com or @aol.com for timely and reliable email newsletter delivery. D I S C L A I M E R: The Small Cap Network, its website and email newsletter (hereafter, cumulatively referred to as "SCN") , is an independent electronic publication committed to providing its readers with factual information on select publicly traded companies. SCN is owned and operated by TGR Group, LLC ("TGR"). All companies are chosen on the basis of certain financial analysis and other pertinent criteria with a view toward maximizing the upside potential for investors while minimizing the downside risk, whenever possible. Moreover, as detailed below, TGR accepts compensation from third party consultants and/or companies, which it features in the publication and circulation of SCN. To the degrees enumerated herein, SCN should not be regarded as an independent publication.  Click Here or go to http://access.smallcapnetwork.com/compensation_disclosure/ to view our compensation on every company we have ever covered, or visit the following web address: http://access.smallcapnetwork.com/profile_disclosure/ for our full profiles and http://access.smallcapnetwork.com/alert_disclosure/ for Trading Alerts.  TGR Group, LLC has been paid a fee of $30,000 cash and 750,000 shares of newly issued restricted stock by Spongetech Delivery Systems Inc. for coverage of the Company. Additionally, one of the managing Members of TGR Group, LLC has purchased 150,000 shares of Spongetech Delivery Systems, Inc. in the open market with an average cost basis of $.035 cents per share. From time to time TGR sells shares received as compensation for coverage of client companies. Shares received are sold in the open market. Since the shares are received as compensation for services as previously disclosed, and not for investment purposes, TGR does not view the sale of the shares as contradictory to any opinions delivered in the content. This should be viewed as a conflict of interest by shareholders or prospective shareholders of the client companies.  TGR, its Members and Members' families, are forbidden by company policy to own, buy, sell or otherwise trade stock for their own benefit in the companies who appear in the publication unless specifically disclosed.  All statements and expressions are the sole opinions of TGR and are subject to change without notice. A profile, description, or other mention of a company within SCN is neither an offer nor solicitation to buy or sell any securities mentioned. While we believe all sources of information to be factual and reliable, in no way do we represent or guarantee the accuracy thereof, nor the statements made herein.  The profiles, critiques, and other editorial content of SCN may contain statements that appear foward relating to the expected capabilities of the companies mentioned herein.  THE READER SHOULD VERIFY ALL CLAIMS AND DO THEIR OWN DUE DILIGENCE BEFORE INVESTING IN ANY SECURITIES MENTIONED. INVESTING IN SECURITIES IS SPECULATIVE AND CARRIES A HIGH DEGREE OF RISK. THE INFORMATION FOUND IN THIS PROFILE IS PROTECTED BY THE COPYRIGHT LAWS OF THE UNITED STATES AND MAY NOT BE COPIED, OR REPRODUCED IN ANY WAY WITHOUT THE EXPRESSED, WRITTEN CONSENT OF TGR.  We encourage our readers to invest carefully and read the investor information available at the web sites of the Securities and Exchange Commission ("SEC") at http://www.sec.gov and/or the National Association of Securities Dealers ("NASD") at http://www.nasd.com. We also strongly recommend that you read the SEC advisory to investors concerning Internet Stock Fraud, which can be found at http://www.sec.gov/consumer/cyberfr.htm. Readers can review all public filings by companies at the SEC's EDGAR page. The NASD has published information on how to invest carefully at its web site.