Spicy Pickle Franchising, Inc. Receives Additional Revolving Credit Line; Reports First Quarter Results

Spicy Pickle Franchising, Inc. (OTCBB: SPKL), fast casual restaurant operator and franchisor of its Spicy Pickle and Bread Garden Urban Café brands, announced it has secured a $2,000,000 revolving credit line for operating capital.

The line is in the form of a convertible promissory note and secured loan agreement. Any outstanding indebtedness bears interest at the rate of 10%. The note will mature May 1, 2013 unless extended. The first interest only payment will not be due until September 1, 2010.

The conversion price is set at 10.5 cents, the closing share price on the date the note was signed. For every two shares received upon conversion, if any, the holder will receive a warrant to purchase one share at an initial price of 120% of the stock price during the 10 trading days prior to the election to convert. The warrant would expire in five years.

The company also reported that on May 13, 2010, it filed its first quarter 10Q with the Securities and Exchange Commission.

Revenue for the quarter ended March 31, 2010 totaled $973,151, down slightly from $1,003,595 in the year ago quarter. Franchise fees and royalties rose to $354,454 compared with $304,975 in the first quarter 2009. The company noted that most of the revenue is derived from the company's seven owned restaurants. In May, 2010, Spicy Pickle closed one of its restaurants and is looking for a site to relocate it. 

Total restaurant and bakery operating costs were down slightly in the quarter, however, general and administrative expenses rose to $1,025,543 from $695,486, mainly due to stock based compensation expenses. Employee stock option expense was $129,879 in the quarter this year vs. $12,259 in the prior year's quarter and a $165,000 expense was recorded for shares issued to employees in lieu of salary. 

The company's net loss attributable to common shareholders for the first quarter was $864,366 versus $588,650 in the year ago quarter, equal to one cent a share in both years, based on 82,494,274 weighted average shares outstanding in the quarter this year and 54,369,497 for the same three months last year.

For the quarter ended March 31, not reflecting the cash from the note, the company had total assets of $5.4 million with current assets of $952,000 and current liabilities of $1,795,000. Of its current liabilities, $610,500 was deferred franchise fee revenue and not a cash liability. These funds are taken into revenue when the franchisee opens the restaurant but they are available immediately as working capital. Shareholders' equity totaled $2.77 million, equal to 3.4 cents a share.

Just joining the company as CEO in April this year, Mark Laramie stated, "We view our first quarter efforts as building a foundation from which to grow and prosper. We are optimistic that we have the basic ingredients for a successful restaurant franchise company and we will be working diligently to improve Spicy Pickle's operations and results." Mr. Laramie also commented that "Some of our most positive elements include our proven brands, our greatly strengthened board, our committed management team and our strong franchise operators."

 



Source: Spicy Pickle / Nevistas


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