Between 1998 to 2002, Ysmael "Yael" Yuzon and Reynaldo "Gosh" Dilay, both from Ateneo High School, met through the school's theater guild, Teatro Baguntao. Yael was then the frontman of a rock band called White Chapel. Nevertheless, he decided to form a band with Gosh and two other members of the theater guild. They named the group Sponge after R.S. Surtee's Mr. Sponge's Sporting Tour. The band won in several high school competitions boosting their popularity not just in their school but in other campuses, as well.

Some members of the old lineup left and were replaced by Christopher "Chris" Cantada and Erwin "Armo" Armovit. The latter is the guitarist of another band Rampqueen, which was managed also by Sponge's manager Raymond Fabul. Later however, they learned about a Detroit grunge band already using the name Sponge. "But we wanted to keep the word Sponge in our band name because people have already associated us with that name," according to Yael. "So we decided to add 'Cola', since it's an easy enough word to remember." Sponge Cola was officially born in summer of 2002.