AI
Friday, August 14, 2009 8:10:19 AM
Time for a recap...
http://www.watervilleresearch.com/spicy-pickle-franchising-inc/
SPKL Research Report
Spicy Pickle Franchising, Inc. (OTCBB: SPKL) was founded by two chefs in Colorado who developed a core culinary inspired menu of great tasting hot and cold sandwiches that separates Spicy Pickle from its competitors. Spicy Pickle is a “Fast Casual” restaurant concept designed to appeal primarily to a daytime population of white collar administrative, managerial and professional people, college students and university personnel, and higher median income families looking for healthy, tasteful and fast meal alternatives. Spicy Pickle serves high quality meats and fine artisan breads, baked fresh daily from scratch, along with a wide choice of eight different cheeses, twenty-two different toppings, and fourteen proprietary spreads to create healthy and delicious panini and sub sandwiches with flavors from around the world. Spicy Pickle meats, poultry and cheeses are preservative free and contain no MSG, additives, fillers or artificial flavors. 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 food, fine service and an enjoyable atmosphere.
Spicy Pickle restaurants provide an up front order and pay system similar to fast food restaurants but a delivery system similar to casual sit down restaurants. Delivery of the customer’s order is 5-7 minutes. Customers can eat and leave at their own pace. There is also take-out and catering available. Spicy Pickle distinguishes itself in three ways:
1.Spicy pickle provides an exceptional variety of high quality choices for the customer to customize their order to fit their dietary needs, taste, or adventurous spirit;
2.They create signature items that have received rave reviews for their flavor profiles, and; they provide healthy, fresh and preservative free products.
Headquartered in Denver, the Company operates 7 corporate Spicy Pickle restaurants and has 32 franchise restaurants of Spicy Pickle in 12 states and is the franchisor to 12 Bread Garden restaurants in the greater Vancouver area. The average sales at each Spicy Pickle are $450,000+ and Bread Garden is $600,000+. With the Bread Garden acquisition the Company, either corporately or franchised has a total of 50 restaurants. The Company believes it needs system-wide sales of approximately $35,000,000 to $40,000,000 to meet break even at the overhead needed to operate a chain of that size and ratio of corporate owned to franchised restaurants. With the acquisition of Bread Garden, the Spicy Pickle system wide sales currently are approximately $24,000,000. The Company expects approximately 12-13 restaurants of both brands slated for opening in the US and Canada through thesecond half of 2009. Although cash flow positive is not anticipated by these openings alone, future franchise salescan bridge that gap. The Spicy Pickle promise is “To give you a reason to come back.”
Bread Garden Urban Cafes Acquisition in October 2008
Spicy Pickle purchased substantially all of the assets of Bread Garden Franchising, Inc. including all of its rights to operate as the franchisor of the 12 Bread Garden Urban Cafes in Western Canada, the US and worldwide. As consideration for the acquisition Spicy Pickle issued 5,177,500 shares of its common stock and warrants to purchase up to 3,038,750 shares of its common stock. Bread Garden is a profitable and growing rapidly with 7 additional franchises in the pipeline. Spicy Pickle took over the existing small Bread Garden franchising office located in downtown Vancouver.
At the present time there are no plans to convert the Bread Garden Urban Cafes to Spicy Pickle restaurants. In fact, some of the Spicy Pickle units will begin to sell breakfast based on the expertise acquired from Bread Garden. Bread Garden Urban Cafes have been operating for approximately 30 years in the Vancouver area. The cafes serve coffee, pastries and breakfast items as well as lunch and dinner along with a wide variety of desserts. The cafes offer Wi-Fi service and are a popular destination throughout the day and evening. As is typical of European style restaurants, the food is displayed in refrigerated glass cases giving customers a visual experience before they choose their menu items.
As a result of the Bread Garden acquisition, Spicy Pickle Franchising, Inc. will:
1.Expand their geographical footprint into Western Canada region where the economy is performing better and has less credit issues in comparison to the United States;
2.Spicy Pickle can now take a very successful coffee, breakfast, pastry and dessert program from the Bread Garden Urban Cafes and import it to the Spicy Pickle model;
3.Spicy Pickle can supplement the Bread Garden breakfast menu with the expansive and fresh lunch menu of Spicy Pickle. Bread Garden Urban Cafes are very popular and have a reputation as an all day coffee house gathering place which adds incremental business throughout the day.
4.Leverage the operational efficiencies of the combined Spicy Pickle and Bread Garden.
The Bread Garden Urban Cafes are well located, many of them having leased space at a time when great locations were still available in Vancouver at reasonable rates. Spicy Pickle will continue to use the Bread Garden name as they have developed a loyal following and enjoy great brand recognition in the region. Bread Garden's branded products are found on the British Columbia ferries and in gas stations around the city, and while these outlets are not part of this transaction, they add tremendously to the brand recognition throughout British Columbia.
Financial Information
Spicy Pickle’s stock started trading on the Bulletin Board under the symbol SPKL in August of 2007. Currently there are approximately 54,000,000 shares outstanding. The shares underlying the convertible preferred, warrants and stock options bring the fully diluted shares to approximately 75,800,000. Of those approximately 6,500,000 represent shares underlying the convertible preferred stock which are currently convertible at $0.85 per share, 3,000,000 represent shares underlying warrants which are exercisable at $0.625 per share and 9,500,000 represent shares underlying warrants which are exercisable at $1.60 per share. The share pricing underlying the conversion and exercise of the warrants are both subject to repricing based on future issuance of stock. The remaining fully diluted shares constitute employee stock options exercisable at varying rates between $.25 and $1.20 tied to their date of grant. Currently there are approximately 5,000 beneficial shareholders.
Spicy Pickle raised an initial $400,000 at startup, several hundred thousand more over the next two years, $2,000,000 in a private offering in the summer of 2006, and an additional $1,800,000 in a self underwritten public offering in the summer of 2007. At the end of 2007 the Company raised just under $6,000,000 in a private convertible preferred stock offering. Additionally, sales of franchises have been used as working capital by the Company although booked as deferred revenue on its financial statements until the restaurant opens. The Company has recently cut back at the corporate office to bring cost in line with the current economy. Spicy Pickle currently employs 17 full time people in the corporate office and 3 in the Bread Garden office.
SPKL Shares as of April 14, 2009
Industry
Fast Casual Dining
Stock Price - SPKL
$0.16
52 Week Range
$0.14-1.01
Shares Outstanding
54.4 MM
Public Share Float
28.5 MM
Market Capitalization
9.0 MM
Cash 12/31/08
$287,000
Total Assets 12/31/08
$5.6 MM
Equity 12/31/08
$3.2 MM
Income Statement for FYE 12/31/08
- Restaurant sales
$3.1 MM*
- Franchise fees & royalties
$1.3 MM
Revenue
$4.4 MM*
Restaurant Operating Cost
$3.7 MM
General+Admin+Dep Cost
$6.3 MM
Income Before Tax
($5.6 MM)
* Reflects 7 corporate owned franchises. Some were acquired during 2008.
History of Spicy Pickle
Spicy Pickle was founded in 1999 by Tony Walker and Kevin Morrison who were employed at a fine dining Italian restaurant where employees were taken to Italy once a year on culinary and wine tasting tours. From this experience the founders developed the idea and menu for a sandwich shop that did not serve the usual fare. The first Spicy Pickle opened in mid 1999 just south of downtown Denver in an older undeveloped area. It quickly established a cult following offering 6 Panini sandwiches along with a build your own sandwich menu. By late 2001 two additional restaurants were opened and in early 2003 the founders partnered with CEO Marc Geman to establish Spicy Pickle Franchising, LLC, a company organized to franchise, own and operate Spicy Pickle Restaurants. Between the three they combined decades of culinary and restaurant operations experience along with legal and franchise experience.
Spicy Pickle in the Current Fast Casual Dining Market
Spicy Pickle has been recognized several times in the trade publications as a restaurant serving interesting and unusual food. In 2006 Spicy Pickle was awarded the Hot Concept award by Nations Restaurant News for its innovative menu. By early 2008 Spicy Pickle is ranked in the top 25% of fast casual restaurants according to Fast Casual Magazine. These awards and recognition suggest that Spicy Pickle has the right ingredients to become a major player in the Fast Casual segment of the restaurant industry.
Spicy Pickle is in the early stages of its brand identity but has developed a name and reputation for delivering great tasting food with interesting flavor profiles and providing a sought after customization of meals. Spicy Pickle has reached a state of brand identification where people differentiate their products from other sandwich and food shops and affirmatively seek them out. This has been shown by the significant repeat business of customers which from surveys is 1 to 3 times a month for 75% of the customers and 4 to 7 times a month for 16% of the customers.
Fast Casual dining is the fastest growing segment of the restaurant industry because it offers the value proposition of speed of service close to fast food without the extensive pre-preparation, but quality that is closer to sit down dining and meals prepared to order. Fast Casual appeals to baby boomers and GenXers with over 75% of the customers in the age range of 25 to 54. The Company competes in the sandwich and daytime meal category along with a large and in some cases very well established concepts that also provide a lunch and day time population meal alternative for the customer. This includes bakery cafes, burgers, noodle based meals, salad, Mexican, Asian and other ethnic foods.
Everywhere consumers turn, retailers and restaurateurs are touting the value of a dollar. That doesn’t mean all Fast Casuals are going by way of McDonald’s and Burger King, but it does mean operators are recognizing the importance of strategically priced menu items. Quiznos, Boston Market, Togo’s, Daphne’s Greek Café and Moe’s Southwest Grill have all within the past year launched menu items priced at $5 or less.
Fast Casual operators have built their businesses and their reputations on quality products, distinctive atmospheres and décor. More recently, reduced portion sizes have played a role in the shaping of fast casual menu items. Moe’s launched its Joey Jr. value meal in early January 2009 for the price of $4.99. The meal, which features a smaller portion size than its other menu items, includes chips, salsa and a drink.
According to theNational Restaurant Association’s 2009 Restaurant Industry Forecast, the top trend for both full and quick-service restaurants is expanded focus on value. Restaurant customers interviewed by the association in November 2008 said they would frequent a full or quick-service restaurant more if it provided a variety of dining discounts. Other top draws included smaller portions for a lower price. Smaller portion sizes can lead the way for ticket add-ons, even when a customer orders a meal or bundle. The goal is not to reduce the check average, but provide items that would ideally add to the check. The absence of beverages from some meal bundles also serves to drive check averages without making customers feel shortchanged.
Spicy Pickel is addressing dining options for its customers under a menu option called Picklenomics. Customers can choose from a variety of meats and cheeses on ciabatta rolls with lettuce, tomato, mayo and mustard for approximately 20% less than the signature items. They can choose two items between half sandwiches, soups, salads and chips plus a 22 ounce fountain soda.
Fast Casual hasn't always been such a strong contender for American stomachs and wallets. Historically the restaurant industry has had three main sectors: fast-food, casual dining, and fine dining, each with corresponding price points - $5 to $6, $10 to $12, and $20 and higher, respectively. "Fast Casual really hit the radar over the last three to four years," says Paul G. Fetscher, CCIM, president of Great American Brokerage in Long Beach, N.Y. "There was a gap in the restaurant market. People were spending $4 to $5 at [fast-food] restaurants or $10 at sit-down places."
Fast-casual is expected to increase between 10.8 percent and 12.5 percent in 2009, according to a report by Technomic, a Chicago-based food industry consulting and research company. Most likely this growth will come at the expense of fine dining. Fast Casual's acceptance indicates America's growing taste for high-quality food prepared quickly. And there are plenty of investors that want a piece of the pie. Big chains such as Chipotle and Panera are experiencing yearly same-store increases of 33 percent and 29.7 percent respectively, according to Technomic.
Some Fast Casual concepts seek investment capital from or are sought out by larger fast-food companies. This relationship offers additional money, the ability to buy more property, and a wealth of real estate knowledge, say restaurant industry watchers in a BusinessWeek report. McDonald's bought into Chipotle in 1998 when Chipotle founder and CEO Steve Ells asked for financing. Since then, McDonald's has sold its shares, but the backing allowed Chipotle to expand. Other big-time backers of fast-casual chains include Wendy's International's investment in Baja Fresh Mexican Grill, Café Express, and Pasta Pomodoro; McDonald's ownership of Boston Market; and Jack in the Box's ownership of Qdoba Mexican Grill. The business of serving high-quality food faster than casual-dining restaurants will continue to grow. With consumers spending 44 percent of their food budget on eating out, a proportion that is expected to rise to 53 percent in the next four years, according to a National Restaurant Association study, Fast Casual will continue to crop up as a valuable investment opportunity in markets across the U.S.
The Real Estate
One of the most attractive aspects of Fast Casual is the propensity to make a lot of money in a small space. Typically the space requirements for this sector are small but the concepts bring high customer counts, making this sector favorable to nearby tenants in retail developments. Fast Casual's ability to draw customers to a mall or area makes them a popular tenant with landlords as well. Location can mean the difference between lunchtime crowds or empty tables for a Fast Casual concept. Restaurants that value freshness must locate in areas that get enough traffic to sell items quickly to ensure they remain fresh. Like many other Fast Casual concepts Spicy Pickle and Bread Garden competes for approximately 2,000 sq. ft. of high visibility end cap locations with adequate ingress, egress and parking. This market is competitive, even with the economic slowdown, and landlords often hold out for larger users or higher rates. This part of the process, site selection and lease negotiation leading to possession, is the longest step in the timeline from franchisee signing to restaurant opening, and takes 6 to 8 months of the 10 to 12 month process. Commercial real estate prices have come down substantially, which bodes well for the long term profitability of future franchisees. Those with the financial strength to move forward are now in a position to negotiate very favorable terms in prime locations. The lack of financing for current and potential franchisees continues to be a roadblock to more rapid expansion and new franchise sales.
Corporate Strategy
The strategy of Spicy Pickle consists of four parts:
1.Attracting Multi-Unit experienced operators;
2.Owning and operating corporate markets;
3.Leveraging growth by finding other multi-unit concepts or complementary products that can be converted or run with Spicy Pickle’s existing infrastructure;
4.Find alternative venues that offer exceptional brand recognition opportunities.
Each of these provides an opportunity to expand the Spicy Pickle concept or culinary menu into new territories which brings immediate benefits in terms of distribution arrangements, vendor agreements, manufacturing discounts and rebates, marketing concentration, and in the case of a conversion or alternative venue, more public awareness of the brand. A typical Spicy Pickle will cost between $300,000 to $350,000 fully built and ready for operation. The same is true of Bread Garden. Training cost, working capital, grand opening marketing costs and initial inventory are separate. Average volumes of Spicy Pickle are currently approximately $450,000 with about 20% of the restaurants having annualized revenue of greater than $600,000. Average unit volumes of Bread Gardens are slightly above $600,000 with one unit doing in excess of $1 million dollars Canadian. Where sales to costs are 2 times and more, there is a tremendous opportunity for a good operator to realize a good return on a relatively small investment. Spicy Pickle believes that experienced multi-unit operators and franchisees will be able to leverage the concept in their existing development areas where they already operate fast food or casual dining restaurants. This franchisee allows the Company to keep its overhead in check.
To be a successful concept, Spicy Pickle must both own and operate restaurants and have a selective franchisee program. The Company believes that it should operate and control a corporate market in the Denver metropolitan area. Several of the early Spicy Pickle franchisees were in this market and Spicy Pickle has already purchased four restaurants from franchisees and built three others for a Colorado corporate owned market of 7 restaurants, with a goal of of achieveing sufficient diversity to roll out new menu options, point of purchase materials, and layouts before rolling such programs out nationally. Spicy Pickle also has an opportunity to purchase some of the Bread Garden restaurants which are under control of the family that sold the concept to Spicy Pickle. The Company is considering Vancouver, Canada as a potential second corporate market starting with the purchase of the largest sales volume restaurant located in downtown Vancouver. Bread Garden has a similar expansion opportunity starting in Western Canada and could grow to well over 50 restaurants in the British Columbia and Alberta markets.
Early franchise sales were made in several cases to franchisees with limited or no restaurant experience. These were the only candidates that knew of Spicy Pickle and that was mostly due to local patronage. The early Denver based restaurants, as well as two of the three original restaurants which were subsequently sold to a franchisee, were, until 2008, all operated by franchisees. Subsequent franchise sales, mostly out of state, were made to restaurant experienced franchisees although not necessarily franchisees who operated multi-unit developments. Many of these franchisees were managers, area managers, back of the house personnel or people in the food service business. The more recent sales have been to the strategic group of franchisees that are capable of expanding the system, improving unit volumes, and developing a territory in a reasonable period of time. These franchisees are the ones with multi-unit experience. They are well financed, have infrastructure to open, market and operate multiple restaurants.
Certain venues offer an opportunity to expose the Spicy Pickle brand and concept to a wide variety of the general population. Some of these, like sports venues, are more local in nature and generally require a significant payment of sales, rent or front end fees making the opportunity more a marketing decision than an economic decision. Other venues, although expensive, can produce sales volume far above the typical strip mall locations that are home to most fast casual concepts. Among these airports rank the highest due to the large audience to which the concept is exposed. Accordingly Spicy Pickle has aggressively sought airport venues both for Spicy Pickle and Bread Garden.
In the case of Bread Garden Spicy Pickle has successfully secured a location in the new Air Canada terminal being built in Vancouver, Canada. This terminal will serve all Canadian citizens flying international routes encompassing all cross-Canada traffic that is connecting for overseas or other North and South American destinations. The Company is also building a franchise in the Kamloops airport in British Columbia. In the US, Spicy Pickle has joined with HMS Host to respond to an RFP for a space at the Denver International Airport on Terminal B which is wholly occupied by United Air Lines. This is the busiest terminal at DIA by far. Partnering with HMS Host provides a few advantages to the Company. In the first instance the venue must be operated 7 days a week and 18 or more hours per day making employee shift management both difficult and expensive. Host Marriott already runs venues in these airports, including DIA, and therefore their employee base is already present and can be cross trained as needed. They are also familiar with the food distribution issues at the airports and can piggy back Spicy Pickle specialty items on their daily deliveries. Additionally security at airports adds to the burden. Secondly Host Marriott offers Spicy Pickle an opportunity to open other Spicy Pickles in some of the 108 other airports that they service.
Management
To attract and support qualified franchisees and run successful corporate markets the Company needs to have personnel in place capable of both operating corporate restaurants as well as helping franchisees initially open their market and then provide ongoing culinary, operational and marketing assistance. Accordingly the Company has built a solid infrastructure of personnel seasoned in the restaurant and franchise industry and is capable with few add-ons of running both corporate and supporting franchise restaurants in excess of 100 combined corporate and franchised restaurants.
Marc N. Geman - President/CEO, Chairman of the Board of Directors
Mr. Geman is the President/CEO and a Member of the Board of Directors of SPF. From 1994 to 1998, he was President of Pretzelmaker a national franchisor of soft pretzels that he built from a handful to over 240 stores and sold to Mrs. Fields Cookies, Inc. in November 1998. Prior to SPF Mr. Geman was an officer, and director of both Bayview Technology Group a company that developed energy efficient products, and in the early 90’s of Portfolio Management Consultants, Inc., an investment advisory firm managing assets for high net worth individuals. Mr. Geman has been a licensed attorney since 1973.
Anthony S. Walker - COO, Member of the Board of Directors
Mr. Walker is the COO and a Member of the Board of Directors of SPF since its inception in January 2003. Together with Mr. Morrison, he is a co-founder of the predecessor company that in August 1999 started operating SPICY PICKLE Restaurants in Denver, Colorado. From 1996 until 1999, Mr. Walker was a chef at the Barolo Grill, a fine dining restaurant in Denver, Colorado. Mr. Walker has been recognized in magazines such as The New York Times, Cucina Italiana and Nations Restaurant News.
Kevin T. Morrison - Chief Culinary Officer/Director of Baking
Mr. Morrison is the Chief Culinary Officer of SPF since its inception in January 2003. He is also a co-founder of the Spicy Pickle concept and opened the first SPICY PICKLE Restaurant in 1999, in Denver, Colorado. From 1995 until August 2000, Mr. Morrison owned and operated a wholesale food distribution business, Red Tomato Specialty Produce, in Denver, Colorado. Kevin was a former Chief Di Cuisine of Vinci restaurant in Chicago and Sous Chef of Barolo Grill in Denver. He currently holds a seat on the California Almond Board Culinary Panel for 2007.
Arnold Tinter - CFO
Mr. Tinter is a Certified Public Accountant with over 35 years of experience in the field of accounting, management and financial consulting. From 2001 through 2003 Mr. Tinter was CFO of a privately held distributor of energy saving products. From 2003 through the present Mr. Tinter has been a consultant providing services in the areas of strategic planning, capital formation and mergers and acquisition. In addition to his consulting services he currently serves as CFO for Spicy Pickle Franchising Inc. Mr. Tinter is a graduate of C.W. Post College, Brookville, New York. He received a Bachelor of Science degree with a major in accounting.
Prospects for the Future
The following is a summary of existing expansion possibilities for the remainder of 2009 and possibly into 2010:
Spicy Pickle update:
■Houston franchisee has signed a lease for their first site and is actively pursuing additional locations. The first site will open April 19, 2009.
■Las Vegas franchisee is finalizing lease negotiations for a second location.
■After a long negotiation our San Antonio franchisee terminated their first lease when the landlord refused to accept the previously agreed to terms, and is actively looking again for a first location.
■Los Angeles franchisee continues to seek a first location for this market.
■The Naperville, Illinois franchisee is under construction.
■The Chicago location in Lincoln Park, which was a Company-owned restaurant, was sold to a new franchisee, and they are now operating that location with improved sales due to the local ownership.
■A new franchisee in the Denver area has relocated and is under construction.
Bread Garden Urban Café update:
The Bread Garden chain in Vancouver is not experiencing the same credit barriers to expansion, and is therefore positioned for more rapid expansion. The following is a list of Bread Garden activity in the Vancouver area:
■A new Bread Garden Urban Café is now open at the University of British Columbia.
■A new space will be ready for occupancy in the Vancouver airport this spring, and is expected to open July 1, 2009 in time for the 2010 Winter Olympic Games.
■The concession for the Kamloops Airport in British Columbia has been obtained, and the existing restaurant will be converted starting May 1, 2009 into a Bread Garden Urban Café.
■The Bread Garden Urban Café in North Vancouver has closed and was replaced by the drive through location in nearby Cloverdale.
■Bread Garden has signed a lease for the new Canadian Broadcasting Company Building located in downtown Vancouver which will be ready for delivery this spring.
■Two new downtown locations in Vancouver.
■New location at the popular Whistler Ski Mountain.
■Summer of 2009, a new location is Brisbane, Australia will open.
The Bread Garden Urban Café chain continues to grow. Existing restaurants are upgrading and refreshing their menu items.
Waterville Investment Research, and affiliates (WR), publishes reports providing information on selected companies. WR is not a registered investment advisor or broker-dealer. These reports are provided as an information service only, and the statements and opinions in these reports should not be construed as an offer or solicitation to buy or sell any security. WR accepts no liability for any loss arising from an investor's reliance on or use of these reports. An investment in any company is considered to be highly speculative and should not be considered unless a person can afford a complete loss of investment. WR or an affiliate of WR has been/will be or may be compensated in Rule 144 stock of the Company for the publication and circulation of these reports. The maximum amount charged by WR is $75,000 in Rule 144 stock per report. WR intends to sell all or a portion of the of the Rule 144 stock in accordance with all securities laws, which prevents WR from selling stock for a period of one year. WR, as a matter of internal policy, will not buy or sell shares of Company(s) stock in the open market. These reports contain forward-looking statements, which involve risks, and uncertainties that may cause actual results to differ materially from those set forth in the forward-looking statements. For further details concerning these risks and uncertainties, see the SEC filings of the individual Companies including the company's most recent annual and quarterly reports. Copyright © 2002 - 2009 Waterville Investment Research, Inc. All rights reserved.
Copyright © 2002 - 2009 Waterville Investment Research. All rights Reserved.Waterville Investment Research, and affiliates (WR), publishes reports providing information on selected companies. WR is not a registered investment advisor or broker-dealer. These reports are provided as an information service only, and the statements and opinions in these reports should not be construed as an offer or solicitation to buy or sell any security. WR accepts no liability for any loss arising from an investor's reliance on or use of these reports. An investment in any company is considered to be highly speculative and should not be considered unless a person can afford a complete loss of investment. WR or an affiliate of WR has been/will be or may be compensated in Rule 144 stock of the Company for the publication and circulation of these reports. The maximum amount charged by WR is $75,000 in Rule 144 stock per report. WR intends to sell all or a portion of the of the Rule 144 stock in accordance with all securities laws, which prevents WR from selling stock for a period of six months to one year depending on the Bulletin Board and Pink Sheets regulations. WR, as a matter of internal policy, will not buy or sell shares of Company(s) stock in the open market. These reports contains forward-looking statements, which involve risks, and uncertainties that may cause actual results to differ materially from those set forth in the forward-looking statements. For further details concerning these risks and uncertainties, see the SEC filings of the individual Companies including the company's most recent annual and quarterly reports.
http://www.watervilleresearch.com/spicy-pickle-franchising-inc/
SPKL Research Report
Spicy Pickle Franchising, Inc. (OTCBB: SPKL) was founded by two chefs in Colorado who developed a core culinary inspired menu of great tasting hot and cold sandwiches that separates Spicy Pickle from its competitors. Spicy Pickle is a “Fast Casual” restaurant concept designed to appeal primarily to a daytime population of white collar administrative, managerial and professional people, college students and university personnel, and higher median income families looking for healthy, tasteful and fast meal alternatives. Spicy Pickle serves high quality meats and fine artisan breads, baked fresh daily from scratch, along with a wide choice of eight different cheeses, twenty-two different toppings, and fourteen proprietary spreads to create healthy and delicious panini and sub sandwiches with flavors from around the world. Spicy Pickle meats, poultry and cheeses are preservative free and contain no MSG, additives, fillers or artificial flavors. 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 food, fine service and an enjoyable atmosphere.
Spicy Pickle restaurants provide an up front order and pay system similar to fast food restaurants but a delivery system similar to casual sit down restaurants. Delivery of the customer’s order is 5-7 minutes. Customers can eat and leave at their own pace. There is also take-out and catering available. Spicy Pickle distinguishes itself in three ways:
1.Spicy pickle provides an exceptional variety of high quality choices for the customer to customize their order to fit their dietary needs, taste, or adventurous spirit;
2.They create signature items that have received rave reviews for their flavor profiles, and; they provide healthy, fresh and preservative free products.
Headquartered in Denver, the Company operates 7 corporate Spicy Pickle restaurants and has 32 franchise restaurants of Spicy Pickle in 12 states and is the franchisor to 12 Bread Garden restaurants in the greater Vancouver area. The average sales at each Spicy Pickle are $450,000+ and Bread Garden is $600,000+. With the Bread Garden acquisition the Company, either corporately or franchised has a total of 50 restaurants. The Company believes it needs system-wide sales of approximately $35,000,000 to $40,000,000 to meet break even at the overhead needed to operate a chain of that size and ratio of corporate owned to franchised restaurants. With the acquisition of Bread Garden, the Spicy Pickle system wide sales currently are approximately $24,000,000. The Company expects approximately 12-13 restaurants of both brands slated for opening in the US and Canada through thesecond half of 2009. Although cash flow positive is not anticipated by these openings alone, future franchise salescan bridge that gap. The Spicy Pickle promise is “To give you a reason to come back.”
Bread Garden Urban Cafes Acquisition in October 2008
Spicy Pickle purchased substantially all of the assets of Bread Garden Franchising, Inc. including all of its rights to operate as the franchisor of the 12 Bread Garden Urban Cafes in Western Canada, the US and worldwide. As consideration for the acquisition Spicy Pickle issued 5,177,500 shares of its common stock and warrants to purchase up to 3,038,750 shares of its common stock. Bread Garden is a profitable and growing rapidly with 7 additional franchises in the pipeline. Spicy Pickle took over the existing small Bread Garden franchising office located in downtown Vancouver.
At the present time there are no plans to convert the Bread Garden Urban Cafes to Spicy Pickle restaurants. In fact, some of the Spicy Pickle units will begin to sell breakfast based on the expertise acquired from Bread Garden. Bread Garden Urban Cafes have been operating for approximately 30 years in the Vancouver area. The cafes serve coffee, pastries and breakfast items as well as lunch and dinner along with a wide variety of desserts. The cafes offer Wi-Fi service and are a popular destination throughout the day and evening. As is typical of European style restaurants, the food is displayed in refrigerated glass cases giving customers a visual experience before they choose their menu items.
As a result of the Bread Garden acquisition, Spicy Pickle Franchising, Inc. will:
1.Expand their geographical footprint into Western Canada region where the economy is performing better and has less credit issues in comparison to the United States;
2.Spicy Pickle can now take a very successful coffee, breakfast, pastry and dessert program from the Bread Garden Urban Cafes and import it to the Spicy Pickle model;
3.Spicy Pickle can supplement the Bread Garden breakfast menu with the expansive and fresh lunch menu of Spicy Pickle. Bread Garden Urban Cafes are very popular and have a reputation as an all day coffee house gathering place which adds incremental business throughout the day.
4.Leverage the operational efficiencies of the combined Spicy Pickle and Bread Garden.
The Bread Garden Urban Cafes are well located, many of them having leased space at a time when great locations were still available in Vancouver at reasonable rates. Spicy Pickle will continue to use the Bread Garden name as they have developed a loyal following and enjoy great brand recognition in the region. Bread Garden's branded products are found on the British Columbia ferries and in gas stations around the city, and while these outlets are not part of this transaction, they add tremendously to the brand recognition throughout British Columbia.
Financial Information
Spicy Pickle’s stock started trading on the Bulletin Board under the symbol SPKL in August of 2007. Currently there are approximately 54,000,000 shares outstanding. The shares underlying the convertible preferred, warrants and stock options bring the fully diluted shares to approximately 75,800,000. Of those approximately 6,500,000 represent shares underlying the convertible preferred stock which are currently convertible at $0.85 per share, 3,000,000 represent shares underlying warrants which are exercisable at $0.625 per share and 9,500,000 represent shares underlying warrants which are exercisable at $1.60 per share. The share pricing underlying the conversion and exercise of the warrants are both subject to repricing based on future issuance of stock. The remaining fully diluted shares constitute employee stock options exercisable at varying rates between $.25 and $1.20 tied to their date of grant. Currently there are approximately 5,000 beneficial shareholders.
Spicy Pickle raised an initial $400,000 at startup, several hundred thousand more over the next two years, $2,000,000 in a private offering in the summer of 2006, and an additional $1,800,000 in a self underwritten public offering in the summer of 2007. At the end of 2007 the Company raised just under $6,000,000 in a private convertible preferred stock offering. Additionally, sales of franchises have been used as working capital by the Company although booked as deferred revenue on its financial statements until the restaurant opens. The Company has recently cut back at the corporate office to bring cost in line with the current economy. Spicy Pickle currently employs 17 full time people in the corporate office and 3 in the Bread Garden office.
SPKL Shares as of April 14, 2009
Industry
Fast Casual Dining
Stock Price - SPKL
$0.16
52 Week Range
$0.14-1.01
Shares Outstanding
54.4 MM
Public Share Float
28.5 MM
Market Capitalization
9.0 MM
Cash 12/31/08
$287,000
Total Assets 12/31/08
$5.6 MM
Equity 12/31/08
$3.2 MM
Income Statement for FYE 12/31/08
- Restaurant sales
$3.1 MM*
- Franchise fees & royalties
$1.3 MM
Revenue
$4.4 MM*
Restaurant Operating Cost
$3.7 MM
General+Admin+Dep Cost
$6.3 MM
Income Before Tax
($5.6 MM)
* Reflects 7 corporate owned franchises. Some were acquired during 2008.
History of Spicy Pickle
Spicy Pickle was founded in 1999 by Tony Walker and Kevin Morrison who were employed at a fine dining Italian restaurant where employees were taken to Italy once a year on culinary and wine tasting tours. From this experience the founders developed the idea and menu for a sandwich shop that did not serve the usual fare. The first Spicy Pickle opened in mid 1999 just south of downtown Denver in an older undeveloped area. It quickly established a cult following offering 6 Panini sandwiches along with a build your own sandwich menu. By late 2001 two additional restaurants were opened and in early 2003 the founders partnered with CEO Marc Geman to establish Spicy Pickle Franchising, LLC, a company organized to franchise, own and operate Spicy Pickle Restaurants. Between the three they combined decades of culinary and restaurant operations experience along with legal and franchise experience.
Spicy Pickle in the Current Fast Casual Dining Market
Spicy Pickle has been recognized several times in the trade publications as a restaurant serving interesting and unusual food. In 2006 Spicy Pickle was awarded the Hot Concept award by Nations Restaurant News for its innovative menu. By early 2008 Spicy Pickle is ranked in the top 25% of fast casual restaurants according to Fast Casual Magazine. These awards and recognition suggest that Spicy Pickle has the right ingredients to become a major player in the Fast Casual segment of the restaurant industry.
Spicy Pickle is in the early stages of its brand identity but has developed a name and reputation for delivering great tasting food with interesting flavor profiles and providing a sought after customization of meals. Spicy Pickle has reached a state of brand identification where people differentiate their products from other sandwich and food shops and affirmatively seek them out. This has been shown by the significant repeat business of customers which from surveys is 1 to 3 times a month for 75% of the customers and 4 to 7 times a month for 16% of the customers.
Fast Casual dining is the fastest growing segment of the restaurant industry because it offers the value proposition of speed of service close to fast food without the extensive pre-preparation, but quality that is closer to sit down dining and meals prepared to order. Fast Casual appeals to baby boomers and GenXers with over 75% of the customers in the age range of 25 to 54. The Company competes in the sandwich and daytime meal category along with a large and in some cases very well established concepts that also provide a lunch and day time population meal alternative for the customer. This includes bakery cafes, burgers, noodle based meals, salad, Mexican, Asian and other ethnic foods.
Everywhere consumers turn, retailers and restaurateurs are touting the value of a dollar. That doesn’t mean all Fast Casuals are going by way of McDonald’s and Burger King, but it does mean operators are recognizing the importance of strategically priced menu items. Quiznos, Boston Market, Togo’s, Daphne’s Greek Café and Moe’s Southwest Grill have all within the past year launched menu items priced at $5 or less.
Fast Casual operators have built their businesses and their reputations on quality products, distinctive atmospheres and décor. More recently, reduced portion sizes have played a role in the shaping of fast casual menu items. Moe’s launched its Joey Jr. value meal in early January 2009 for the price of $4.99. The meal, which features a smaller portion size than its other menu items, includes chips, salsa and a drink.
According to theNational Restaurant Association’s 2009 Restaurant Industry Forecast, the top trend for both full and quick-service restaurants is expanded focus on value. Restaurant customers interviewed by the association in November 2008 said they would frequent a full or quick-service restaurant more if it provided a variety of dining discounts. Other top draws included smaller portions for a lower price. Smaller portion sizes can lead the way for ticket add-ons, even when a customer orders a meal or bundle. The goal is not to reduce the check average, but provide items that would ideally add to the check. The absence of beverages from some meal bundles also serves to drive check averages without making customers feel shortchanged.
Spicy Pickel is addressing dining options for its customers under a menu option called Picklenomics. Customers can choose from a variety of meats and cheeses on ciabatta rolls with lettuce, tomato, mayo and mustard for approximately 20% less than the signature items. They can choose two items between half sandwiches, soups, salads and chips plus a 22 ounce fountain soda.
Fast Casual hasn't always been such a strong contender for American stomachs and wallets. Historically the restaurant industry has had three main sectors: fast-food, casual dining, and fine dining, each with corresponding price points - $5 to $6, $10 to $12, and $20 and higher, respectively. "Fast Casual really hit the radar over the last three to four years," says Paul G. Fetscher, CCIM, president of Great American Brokerage in Long Beach, N.Y. "There was a gap in the restaurant market. People were spending $4 to $5 at [fast-food] restaurants or $10 at sit-down places."
Fast-casual is expected to increase between 10.8 percent and 12.5 percent in 2009, according to a report by Technomic, a Chicago-based food industry consulting and research company. Most likely this growth will come at the expense of fine dining. Fast Casual's acceptance indicates America's growing taste for high-quality food prepared quickly. And there are plenty of investors that want a piece of the pie. Big chains such as Chipotle and Panera are experiencing yearly same-store increases of 33 percent and 29.7 percent respectively, according to Technomic.
Some Fast Casual concepts seek investment capital from or are sought out by larger fast-food companies. This relationship offers additional money, the ability to buy more property, and a wealth of real estate knowledge, say restaurant industry watchers in a BusinessWeek report. McDonald's bought into Chipotle in 1998 when Chipotle founder and CEO Steve Ells asked for financing. Since then, McDonald's has sold its shares, but the backing allowed Chipotle to expand. Other big-time backers of fast-casual chains include Wendy's International's investment in Baja Fresh Mexican Grill, Café Express, and Pasta Pomodoro; McDonald's ownership of Boston Market; and Jack in the Box's ownership of Qdoba Mexican Grill. The business of serving high-quality food faster than casual-dining restaurants will continue to grow. With consumers spending 44 percent of their food budget on eating out, a proportion that is expected to rise to 53 percent in the next four years, according to a National Restaurant Association study, Fast Casual will continue to crop up as a valuable investment opportunity in markets across the U.S.
The Real Estate
One of the most attractive aspects of Fast Casual is the propensity to make a lot of money in a small space. Typically the space requirements for this sector are small but the concepts bring high customer counts, making this sector favorable to nearby tenants in retail developments. Fast Casual's ability to draw customers to a mall or area makes them a popular tenant with landlords as well. Location can mean the difference between lunchtime crowds or empty tables for a Fast Casual concept. Restaurants that value freshness must locate in areas that get enough traffic to sell items quickly to ensure they remain fresh. Like many other Fast Casual concepts Spicy Pickle and Bread Garden competes for approximately 2,000 sq. ft. of high visibility end cap locations with adequate ingress, egress and parking. This market is competitive, even with the economic slowdown, and landlords often hold out for larger users or higher rates. This part of the process, site selection and lease negotiation leading to possession, is the longest step in the timeline from franchisee signing to restaurant opening, and takes 6 to 8 months of the 10 to 12 month process. Commercial real estate prices have come down substantially, which bodes well for the long term profitability of future franchisees. Those with the financial strength to move forward are now in a position to negotiate very favorable terms in prime locations. The lack of financing for current and potential franchisees continues to be a roadblock to more rapid expansion and new franchise sales.
Corporate Strategy
The strategy of Spicy Pickle consists of four parts:
1.Attracting Multi-Unit experienced operators;
2.Owning and operating corporate markets;
3.Leveraging growth by finding other multi-unit concepts or complementary products that can be converted or run with Spicy Pickle’s existing infrastructure;
4.Find alternative venues that offer exceptional brand recognition opportunities.
Each of these provides an opportunity to expand the Spicy Pickle concept or culinary menu into new territories which brings immediate benefits in terms of distribution arrangements, vendor agreements, manufacturing discounts and rebates, marketing concentration, and in the case of a conversion or alternative venue, more public awareness of the brand. A typical Spicy Pickle will cost between $300,000 to $350,000 fully built and ready for operation. The same is true of Bread Garden. Training cost, working capital, grand opening marketing costs and initial inventory are separate. Average volumes of Spicy Pickle are currently approximately $450,000 with about 20% of the restaurants having annualized revenue of greater than $600,000. Average unit volumes of Bread Gardens are slightly above $600,000 with one unit doing in excess of $1 million dollars Canadian. Where sales to costs are 2 times and more, there is a tremendous opportunity for a good operator to realize a good return on a relatively small investment. Spicy Pickle believes that experienced multi-unit operators and franchisees will be able to leverage the concept in their existing development areas where they already operate fast food or casual dining restaurants. This franchisee allows the Company to keep its overhead in check.
To be a successful concept, Spicy Pickle must both own and operate restaurants and have a selective franchisee program. The Company believes that it should operate and control a corporate market in the Denver metropolitan area. Several of the early Spicy Pickle franchisees were in this market and Spicy Pickle has already purchased four restaurants from franchisees and built three others for a Colorado corporate owned market of 7 restaurants, with a goal of of achieveing sufficient diversity to roll out new menu options, point of purchase materials, and layouts before rolling such programs out nationally. Spicy Pickle also has an opportunity to purchase some of the Bread Garden restaurants which are under control of the family that sold the concept to Spicy Pickle. The Company is considering Vancouver, Canada as a potential second corporate market starting with the purchase of the largest sales volume restaurant located in downtown Vancouver. Bread Garden has a similar expansion opportunity starting in Western Canada and could grow to well over 50 restaurants in the British Columbia and Alberta markets.
Early franchise sales were made in several cases to franchisees with limited or no restaurant experience. These were the only candidates that knew of Spicy Pickle and that was mostly due to local patronage. The early Denver based restaurants, as well as two of the three original restaurants which were subsequently sold to a franchisee, were, until 2008, all operated by franchisees. Subsequent franchise sales, mostly out of state, were made to restaurant experienced franchisees although not necessarily franchisees who operated multi-unit developments. Many of these franchisees were managers, area managers, back of the house personnel or people in the food service business. The more recent sales have been to the strategic group of franchisees that are capable of expanding the system, improving unit volumes, and developing a territory in a reasonable period of time. These franchisees are the ones with multi-unit experience. They are well financed, have infrastructure to open, market and operate multiple restaurants.
Certain venues offer an opportunity to expose the Spicy Pickle brand and concept to a wide variety of the general population. Some of these, like sports venues, are more local in nature and generally require a significant payment of sales, rent or front end fees making the opportunity more a marketing decision than an economic decision. Other venues, although expensive, can produce sales volume far above the typical strip mall locations that are home to most fast casual concepts. Among these airports rank the highest due to the large audience to which the concept is exposed. Accordingly Spicy Pickle has aggressively sought airport venues both for Spicy Pickle and Bread Garden.
In the case of Bread Garden Spicy Pickle has successfully secured a location in the new Air Canada terminal being built in Vancouver, Canada. This terminal will serve all Canadian citizens flying international routes encompassing all cross-Canada traffic that is connecting for overseas or other North and South American destinations. The Company is also building a franchise in the Kamloops airport in British Columbia. In the US, Spicy Pickle has joined with HMS Host to respond to an RFP for a space at the Denver International Airport on Terminal B which is wholly occupied by United Air Lines. This is the busiest terminal at DIA by far. Partnering with HMS Host provides a few advantages to the Company. In the first instance the venue must be operated 7 days a week and 18 or more hours per day making employee shift management both difficult and expensive. Host Marriott already runs venues in these airports, including DIA, and therefore their employee base is already present and can be cross trained as needed. They are also familiar with the food distribution issues at the airports and can piggy back Spicy Pickle specialty items on their daily deliveries. Additionally security at airports adds to the burden. Secondly Host Marriott offers Spicy Pickle an opportunity to open other Spicy Pickles in some of the 108 other airports that they service.
Management
To attract and support qualified franchisees and run successful corporate markets the Company needs to have personnel in place capable of both operating corporate restaurants as well as helping franchisees initially open their market and then provide ongoing culinary, operational and marketing assistance. Accordingly the Company has built a solid infrastructure of personnel seasoned in the restaurant and franchise industry and is capable with few add-ons of running both corporate and supporting franchise restaurants in excess of 100 combined corporate and franchised restaurants.
Marc N. Geman - President/CEO, Chairman of the Board of Directors
Mr. Geman is the President/CEO and a Member of the Board of Directors of SPF. From 1994 to 1998, he was President of Pretzelmaker a national franchisor of soft pretzels that he built from a handful to over 240 stores and sold to Mrs. Fields Cookies, Inc. in November 1998. Prior to SPF Mr. Geman was an officer, and director of both Bayview Technology Group a company that developed energy efficient products, and in the early 90’s of Portfolio Management Consultants, Inc., an investment advisory firm managing assets for high net worth individuals. Mr. Geman has been a licensed attorney since 1973.
Anthony S. Walker - COO, Member of the Board of Directors
Mr. Walker is the COO and a Member of the Board of Directors of SPF since its inception in January 2003. Together with Mr. Morrison, he is a co-founder of the predecessor company that in August 1999 started operating SPICY PICKLE Restaurants in Denver, Colorado. From 1996 until 1999, Mr. Walker was a chef at the Barolo Grill, a fine dining restaurant in Denver, Colorado. Mr. Walker has been recognized in magazines such as The New York Times, Cucina Italiana and Nations Restaurant News.
Kevin T. Morrison - Chief Culinary Officer/Director of Baking
Mr. Morrison is the Chief Culinary Officer of SPF since its inception in January 2003. He is also a co-founder of the Spicy Pickle concept and opened the first SPICY PICKLE Restaurant in 1999, in Denver, Colorado. From 1995 until August 2000, Mr. Morrison owned and operated a wholesale food distribution business, Red Tomato Specialty Produce, in Denver, Colorado. Kevin was a former Chief Di Cuisine of Vinci restaurant in Chicago and Sous Chef of Barolo Grill in Denver. He currently holds a seat on the California Almond Board Culinary Panel for 2007.
Arnold Tinter - CFO
Mr. Tinter is a Certified Public Accountant with over 35 years of experience in the field of accounting, management and financial consulting. From 2001 through 2003 Mr. Tinter was CFO of a privately held distributor of energy saving products. From 2003 through the present Mr. Tinter has been a consultant providing services in the areas of strategic planning, capital formation and mergers and acquisition. In addition to his consulting services he currently serves as CFO for Spicy Pickle Franchising Inc. Mr. Tinter is a graduate of C.W. Post College, Brookville, New York. He received a Bachelor of Science degree with a major in accounting.
Prospects for the Future
The following is a summary of existing expansion possibilities for the remainder of 2009 and possibly into 2010:
Spicy Pickle update:
■Houston franchisee has signed a lease for their first site and is actively pursuing additional locations. The first site will open April 19, 2009.
■Las Vegas franchisee is finalizing lease negotiations for a second location.
■After a long negotiation our San Antonio franchisee terminated their first lease when the landlord refused to accept the previously agreed to terms, and is actively looking again for a first location.
■Los Angeles franchisee continues to seek a first location for this market.
■The Naperville, Illinois franchisee is under construction.
■The Chicago location in Lincoln Park, which was a Company-owned restaurant, was sold to a new franchisee, and they are now operating that location with improved sales due to the local ownership.
■A new franchisee in the Denver area has relocated and is under construction.
Bread Garden Urban Café update:
The Bread Garden chain in Vancouver is not experiencing the same credit barriers to expansion, and is therefore positioned for more rapid expansion. The following is a list of Bread Garden activity in the Vancouver area:
■A new Bread Garden Urban Café is now open at the University of British Columbia.
■A new space will be ready for occupancy in the Vancouver airport this spring, and is expected to open July 1, 2009 in time for the 2010 Winter Olympic Games.
■The concession for the Kamloops Airport in British Columbia has been obtained, and the existing restaurant will be converted starting May 1, 2009 into a Bread Garden Urban Café.
■The Bread Garden Urban Café in North Vancouver has closed and was replaced by the drive through location in nearby Cloverdale.
■Bread Garden has signed a lease for the new Canadian Broadcasting Company Building located in downtown Vancouver which will be ready for delivery this spring.
■Two new downtown locations in Vancouver.
■New location at the popular Whistler Ski Mountain.
■Summer of 2009, a new location is Brisbane, Australia will open.
The Bread Garden Urban Café chain continues to grow. Existing restaurants are upgrading and refreshing their menu items.
Waterville Investment Research, and affiliates (WR), publishes reports providing information on selected companies. WR is not a registered investment advisor or broker-dealer. These reports are provided as an information service only, and the statements and opinions in these reports should not be construed as an offer or solicitation to buy or sell any security. WR accepts no liability for any loss arising from an investor's reliance on or use of these reports. An investment in any company is considered to be highly speculative and should not be considered unless a person can afford a complete loss of investment. WR or an affiliate of WR has been/will be or may be compensated in Rule 144 stock of the Company for the publication and circulation of these reports. The maximum amount charged by WR is $75,000 in Rule 144 stock per report. WR intends to sell all or a portion of the of the Rule 144 stock in accordance with all securities laws, which prevents WR from selling stock for a period of one year. WR, as a matter of internal policy, will not buy or sell shares of Company(s) stock in the open market. These reports contain forward-looking statements, which involve risks, and uncertainties that may cause actual results to differ materially from those set forth in the forward-looking statements. For further details concerning these risks and uncertainties, see the SEC filings of the individual Companies including the company's most recent annual and quarterly reports. Copyright © 2002 - 2009 Waterville Investment Research, Inc. All rights reserved.
Copyright © 2002 - 2009 Waterville Investment Research. All rights Reserved.Waterville Investment Research, and affiliates (WR), publishes reports providing information on selected companies. WR is not a registered investment advisor or broker-dealer. These reports are provided as an information service only, and the statements and opinions in these reports should not be construed as an offer or solicitation to buy or sell any security. WR accepts no liability for any loss arising from an investor's reliance on or use of these reports. An investment in any company is considered to be highly speculative and should not be considered unless a person can afford a complete loss of investment. WR or an affiliate of WR has been/will be or may be compensated in Rule 144 stock of the Company for the publication and circulation of these reports. The maximum amount charged by WR is $75,000 in Rule 144 stock per report. WR intends to sell all or a portion of the of the Rule 144 stock in accordance with all securities laws, which prevents WR from selling stock for a period of six months to one year depending on the Bulletin Board and Pink Sheets regulations. WR, as a matter of internal policy, will not buy or sell shares of Company(s) stock in the open market. These reports contains forward-looking statements, which involve risks, and uncertainties that may cause actual results to differ materially from those set forth in the forward-looking statements. For further details concerning these risks and uncertainties, see the SEC filings of the individual Companies including the company's most recent annual and quarterly reports.
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