SEC v Spongetech Et Al Doc 257 Filed 08 Jan 13

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff,

v.

SPONGETECH DELIVERY SYSTEMS, INC., RM ENTERPRISES INTERNATIONAL, INC., STEVEN Y. MOSKOWITZ, MICHAEL E. METTER, GEORGE SPERANZA, JOEL PENSLEY, and JACK HALPERIN,

Defendants,

and

BLUE STAR MEDIA GROUP, INC., BUSINESSTALKRADIO.NET ACQUISITION CORP.

Relief Defendants.

NOW COMES Plaintiff, Securities and Exchange Commission ("SEC") and

Relief Defendant, BusinessTalkRadio.Net Acquisition Corp ("BTR"), and such parties

hereby state as follows:

WHEREAS by an order entered on or about July 18,2012, Michael Craven (the

"Receiver") was appointed as Receiver of BTR and its affiliates by the Delaware Co~rt of

Chancery;

WHEREAS, the Receiver is in the process of selling BTR' s assets and has

worked hard to manage and market the assets of BTR for the benefit of BTR and all of

BTR's creditors;

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Case 1:10-cv-02031-DLI-JMA Document 257 Filed 01/08/13 Page 1 of 6 PageID #: 6572

WHEREAS, the SEC and Solution Funding, LLC support the work of the

Receiver to continue the sale of assets and the interim management of BTR's assets for

the benefit of all creditors;

WHEREAS, pursuant to the joint stipulation of BTR and the SEC, with the

consent of Solution Funding and the Trustee in Bankruptcy for Spongetech Delivery

Systems, Inc., entered by order of this Court on June 20, 2012, proceeds, net of

reasonable closing costs, from the sale of BTR assets are held in the Court Registry

Investment System Account ("CRIS Account");

WHEREAS, BTR's cash flow from operations is insufficient to fund certain

operating cost deficits which BTR' s management allowed to accrue in the months

preceding the Receiver's appointment, including accruals of back rent with respect to a

number of BTR office and tower locations;

WHERAS, BTR's management prior to the appointment of the Receiver allowed

substantial operating cost deficits to accrue with respect to critical areas of BTR's

operations and did so in a manner that has engendered a reluctance on the part of BTR's

critical vendors to deal with BTR on a commercially feasible basis without a showing by

BTR of bona fides in the form of some payment towards these accruals;

WHEREAS, the SEC and the Receiver previously entered into a stipulation on or

about November 8, 2012, pursuant to which funds were released from the CRIS Account

for the purpose of covering certain operational expenses, which stipulation was approved

by order of the Court entered on or about November 13,2012;

WHEREAS, the vast majority of the funds released from the CRIS account have

been strategically distributed to critical vendors and landlords that are essential to

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maintaining BTR as an operating entity so that it may continue to be marketed as a going

concern and preserve the value of BTR for its creditors;

WHEREAS, subsequent to this Court's November 13,2012 order, BTR was able

to proceed to the closing of the sale of its Las Vegas Assets, and BTR is depositing

$624,3 I 7.03 to the CRrS account;

WHEREAS, the Receiver is continuing to market the Debtor's two major

remaining assets: a radio station in the northeast and the network assets;

WHEREAS, the Receiver presently projects that if the assets can be preserved as

a going concern, then it is likely that additional proceeds in excess of those realized from

the sale of the Las Vegas assets may be realized;

WHEREAS, the Receiver has in place agreements with critical vendors who have

agreed to continue to provide essential services to BTR in return for negotiated monthly

payments;

WHEREAS, the funds released pursuant to the First Stipulation are insufficient to

bring BTR current on all critical leases and vendors, and BTR's cash flow continues to be

insufficient to fund the negotiated monthly critical leases and vendors on an ongoing

basis;

WHEREAS, the Receiver believes that a monthly return of capital from the CRrS

Account for the purpose of paying certain of BTR's operating cost accruals will

significantly aid in restoring vendor confidence in BTR for the Receiver, allowing the

Receiver to increase the stability of BTR's operations pending the Receiver's sale of

BTR's assets and thereby increase the Receiver's ability to avoid the unnecessary loss of

asset value due to the withholding of services by one or more of BTR' s critical vendors;

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WHEREAS, the Receiver has determined that a portion of sales proceeds held in

the CRlS Account should be applied to accrued operating cost deficits, such as accrued

rent, in order to preserve a greater amount of asset value, so that payment may be made to

critical vendors on or about the first day of each month beginning in January 2013;

WHEREAS, in the event the Receiver is unable to access the CRIS Account to

obtain these funds for operating expenses, it is believed by the Receiver, the SEC, and

Solution Funding that significant asset value may be lost; and

WHEREAS, Solution Funding, LLC consents to the release of funds to BTR and

the Trustee in Bankruptcy of Spongetech Delivery Systems, Inc. has no objection to the

release of such funds.

NOW THEREFORE, it is hereby stipulated and agreed, by and between the

parties, subject to the approval of the Court that:

1. Funds (the "Monthly Disbursement") shall be distributed in immediately available

funds from the CRlS Account to the Receiver on a monthly basis, for purposes of paying

certain critical vendors, as set forth below:

Date of Disbursement Amount December 26,2012 $31,700.00

January 25, 2013 $26,400.00 February 22, 2013 $26,400.00

2. The Monthly Disbursement may be decreased by any of the following methods:

a. A notice filed by the Receiver with the Court that the amount of funds

required to continue to be paid to critical vendors has decreased. In the event such notice

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s/DLI

is filed, the subsequent Monthly Disbursements will be reduced by the amount specified

in the notice.

b. A stipulation between the Receiver and the SEC filed with the Court.

c. In the event the Receiver and the SEC do not agree on whether the

Monthly Disbursement continues to be necessary, the party claiming that the Monthly

Disbursement is no longer necessary shall file a motion with the Court requesting that the

Court determine whether the Monthly Disbursement continues to be necessary, and

specifically setting forth all facts and legal bases for the movant's claim that the Monthly

Disbursement is no longer necessary. The party continuing to claim that the Monthly

Disbursement is necessary shall have fourteen (14) days to respond to any such motion,

and the movant shall have seven (7) days to reply to any such response. The Court will

promptly address and determine any such motion and may order additional briefing or

other proceedings as the Court may deem appropriate and may, at its discretion, refer

such motion to a United States Magistrate Judge for initial decision and recommendation

in order to expedite resolution of the motion.

3. This stipulation and order is without prejudice to any further stipulation and/or

order for the release of funds from the CRIS Account.

U.S. SECURITIES AND EXCHANGE COMMISSION

lsI Paul W. Kisslinger Paul W. Kisslinger 100 F. Street N.E. Washington, DC 20549 Telephone: (202) 551-4427 Facsimile: (202) 772-9292 Email: [email protected]

Attorney for U.S. Securities and Exchange

MORRIS JAMES LLP

lsI Brett D. Fallon Brett D. Fallon (DE Bar No. 2480) 500 Delaware Avenue, Suite 1500 P. O. Box 2306 Wilmington, DE 19899-2306 Telephone: (302) 888-6888 Facsimile: (302) 571-1750 Email: [email protected]

Commission Attorneys for Michael Craven, not in his individual

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SO ORDERED this

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capacity but solely in his capacity as Receiver for BusinessTalkRadio.Net Acquisition Corp.

1. IRIZARR

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Documents

SEC v Spongetech Et Al Doc 257 Filed 08 Jan 13