Net Loss Significantly Reduced for Third Quarter and Nine Months; Successful Financing Boosts Balance Sheet
DENVER, CO--(Marketwire - November 19, 2009) - Spicy Pickle Franchising, Inc. (OTCBB: SPKL), fast casual restaurant operator serving all natural premium meat and poultry and other fresh products and franchisor under its Spicy Pickle and Bread Garden Urban Café brands today announced its results for the third quarter and nine months ended September 30, 2009.
The Company reported that its cost cutting in these difficult economic times have significantly reduced its net loss and coupled with its recent financing have helped to greatly improve its balance sheet as of September 30, 2009 despite lower revenues being recognized by the operating restaurants.
Chairman and CEO Marc Geman noted that, "The last three quarters have been stable in terms of system-wide sales which include both the Bread Garden Urban Cafés and the Spicy Pickle Restaurants with a very slight increases so hopefully with the addition of a few new restaurants both at Spicy Pickle and Bread Garden going into next year we will start 2010 with positive momentum. Moreover our royalty collection does not include all the system-wide revenues because a few of the newer restaurants that have opened were not paying royalties immediately upon opening but will now be reflected in coming quarters. We are working hard to improve sales at existing restaurants by providing a comprehensive catering program for the restaurants along with some new marketing and branding materials to distinguish Spicy Pickle as the premier sandwich shop in the country along with similar efforts for the Bread Garden Urban Cafes in British Columbia. Our lower overhead and significantly strengthened balance sheet have us much better prepared to weather the continuing weak economy and push out an aggressive marketing program.
"Our overhead reductions have minimized our losses and we will continue to closely monitor our costs. We ended the quarter with $1,228,000 in cash and we believe we have the necessary funds to continue to execute our plan."
For the third quarter, total revenue amounted to $954,188 versus $1,368,295 in the year ago quarter. For the nine months, revenue totaled $3,181,641 compared with $3,219,502.
Seven of the 37 Spicy Pickle restaurants are Company owned as of this quarter but the Company had 8 restaurants for the quarter ending September 30, 2008. Comparable sales were consequently affected in the quarter as it operated one less restaurant than a year ago. In 2008 the Company operated and included in its Company owned store numbers the interim operation of the Chicago store which was resold to a franchisee in late 2008 who is successfully operating it now. In addition, sales at existing restaurants were off due to nationwide economic conditions.
Bakery sales dropped as it was selling to fewer customers. The company arranged for three restaurants to get bread from other sources where distance made it impractical to service them from the Company's bakery. In addition, due to lower restaurant sales, franchisees and Company owned, bread sales were lower.
Royalty fees from franchisees, an important ongoing component of revenue, increased to $219,434 in this year's third quarter from $204,054 in the year ago quarter due primarily to the inclusion of the Bread Garden Urban Café restaurants since late 2008. However, total "franchise fees and royalty revenue" decreased in the quarter due to minimal restaurant openings in that period which resulted in just a small portion of "deferred franchise fees" to be included in revenue. For the nine months of 2009, franchise fees and royalty revenue increased to $1,094,367 from $913,216 in the nine months of 2008.
General and administrative expenses in the quarter were reduced to $707,149 from $1,568,461 in the quarter a year ago and to $2,055,138 for this year's nine months versus $5,046,315 for the nine months of 2008. Restaurant and bakery operating costs were also lower at $771,530 in the quarter this year compared with $1,149,443 in last year's same quarter. Those costs were down to $2,349,511 in the nine months this year from $2,719,404 for the same period last year.
The loss from operations for the third quarter of 2009 was reduced to $554,550 from $1,356,774 in 2008, and for the nine months in 2009 it was reduced to $1,314,514 from $4,566,620 in 2008. The net comprehensive loss (after foreign currency exchange gain and dividends on preferred stock) for the third quarter was greatly reduced to $608,190 from $1,429,355 in the year ago quarter. For the nine months, the net comprehensive loss was $1,563,840, down sharply from $4,756,579 in the first three quarters last year.
At September 30, 2009, the company had working capital of $312,150 versus a working capital deficit of almost a million dollars at the same point a year ago. Among key ingredients were an asset of $1,228,000 cash and equivalents and a liability of $668,329 of deferred franchise revenue which does not represent a cash liability. The company had total assets of $6,187,720 on September 30, 2009 and shareholders' equity of $3,679,478. The balance sheet improvement was due to a $2.2 million equity offering in September of this year. Also, in the first nine months of this year two company directors increased their line of credit to the company to $800,000 and then converted that plus interest into a convertible promissory note.
The following is a summary of the financial information
Balance Sheet Data: 2009
Total current assets $ 1,619,749
Total assets $ 6,187,720
Current liabilities $ 1,307,599
Total stockholders' equity $ 3,679,478
Statement of Operations Data:
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
----------- ----------- ----------- -----------
Revenues $ 954,188 $ 1,368,295 $ 3,181,641 $ 3,219,502
Operating costs and
expenses $ 1,508,738 $ 2,725,069 $ 4,496,155 $ 7,786,122
Net loss $ (570,911) $(1,360,401) $(1,363,138) $(4,530,329)
Comprehensive (loss) $ (608,190) $(1,429,355) $(1,570,875) $(4,756,579)
Net (loss) per common
share $ (0.01) $ (0.03) $ (0.03) $ (0.10)
Founded in 1999, Spicy Pickle Franchising, Inc. (OTCBB: SPKL) serves high quality meats and fine artisan breads, baked fresh daily, along with a wide choice of eight cheeses, twenty-two toppings, and fourteen proprietary spreads to create healthy and delicious panini and sub sandwiches with flavors from around the world. As a leading "fast-casual" concept, Spicy Pickle offers menu items that are far beyond traditional fast food but without the price point of casual dining. The hallmark of a Spicy Pickle restaurant is quality, service and an enjoyable atmosphere. The company is headquartered in Denver, Colorado, with restaurants open across 11 states and more in development nationwide. Spicy Pickle Franchising, Inc. also operates as franchisor for Bread Garden Urban Cafes, a concept with restaurants in the metropolitan Vancouver, Canada area. Bread Garden Urban Cafes serve coffee, pastries and breakfast items as well as lunch and dinner along with a wide variety of desserts.
Certain statements in this press release, including statements regarding the number of restaurants we intend to open, are forward-looking statements. We use words such as "anticipate," "believe," "could," "should," "estimate," "expect," "intend," "may," "predict," "project," "target," and similar terms and phrases, including references to assumptions, to identify forward-looking statements. The forward-looking statements in this press release are based on information available to us as of the date any such statements are made and we assume no obligation to update these forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements. These risks and uncertainties include, but are not limited to, the following: factors that could affect our ability to achieve and manage our planned expansion, such as the availability of a sufficient number of suitable new restaurant sites and the availability of qualified franchisees and employees; risks relating to our expansion into new markets; the risk of food-borne illnesses and other health concerns about our food products; changes in the availability and costs of food; changes in consumer preferences, general economic conditions or consumer discretionary spending; the impact of federal, state or local government regulations relating to our franchisees and employees, and the sale of food or alcoholic beverages; the impact of litigation; our ability to protect our name and logo and other proprietary information; the potential effects of inclement weather; the effect of competition in the restaurant industry; and other risk factors described from time to time in our SEC reports.