Replies to post #14831 on DD Support Board and Research Team

[PianoMan75]

Great stock, honest CEO, audited 10K just released, much verified DD on the SMKY board. Do you have DD to suggest otherwise?

[SRV-90]

Interesting read from the latest 10-K

We have entered into a sale/leaseback transaction with respect to our smoker-oven, which creates risk of loss if we default and may inhibit our cash flow.

In July 2011,we entered into a Purchase and Lease Agreement with SMKY Asset Fund LLC, or the Lessor, related to our smoker-oven system. Pursuant to this Purchase and Lease Agreement we sold the smoker-oven system to the Lessor and are required to pay rent equal to the lesser of (a) $0.20 per pound of product produced using the smoker-oven, or (b) the amount necessary to generate a 30% return on the sum of the purchase price and $5,000. This rent will diminish our cash flow as we begin to generate revenue, and there is some risk that we will default under the lease and forfeit any right to use the smoker-ovens that are the foundation of our business.

We cannot repurchase the smoker-oven system until the first date after July 25, 2014 that the market price of our common stock has exceeded $0.50 for thirty trading days. The repurchase price is a number of shares of common stock with a fair market value equal to 20 times the sum of (a) the purchase price, plus (b) $5,000. If our market price does not exceed $0.50 for thirty trading days we will be unable to repurchase our smoker-oven system (and will be required to continue to pay rent), and any repurchase of the smoker-oven system will be dilutive to our shareholders.

They are solely basing their hope on stock price which usually means they will try and cause it to rise...JMO.

Our ability to issue preferred stock and common stock may significantly dilute ownership and voting power, negatively affect the price of our common stock and inhibit hostile takeovers.

Under our Articles of Incorporation, as amended, we are authorized to issue up to 10 million shares of preferred stock and 200 million shares of common stock without seeking stockholder approval. Our board of directors has the authority to create various series of preferred stock with such voting and other rights superior to those of our common stock and to issue such stock without stockholder approval. Any issuance of such preferred stock or common stock would dilute the ownership and voting power of existing holders of our common stock and may have a negative effect on the price of our common stock. The issuance of preferred stock without stockholder approval may also be used by management to stop or delay a change of control, or might discourage third parties from seeking a change of control of our company, even though some stockholders or potential investors may view possible takeover attempts as potentially beneficial to our stockholders.

They are a No Information Pink Sheet and losing money..

Liquidity and Capital Resources

As of December 31, 2010, we had cash and cash equivalents of $10 and a working capital deficit of $1,114,905, as compared to cash and cash equivalents of $110,646 and a working capital deficit of $325,110 as of December 31, 2009.

To finance the expansion of our Internet retail operations and BarBQ Diner concept, we intend to seek additional financing in the second half of 2011. Given that we are not yet in a positive cash flow or earnings position, the options available to us are fewer than to a positive cash flow company and generally do not include bank financing. To raise additional capital, we expect to issue equity securities, including preferred stock, common stock, warrants and/or convertible securities. We do not have any commitments from any party to provide required capital and may, or may not, be able to obtain such capital on reasonable terms or at all.

AS per the NV SOS is 210M

Looks like they are ready to start diluting...

In a March 2010 transaction with 70 Limited LLC, we received $150,000 in cash for a promissory note in the amount of $150,000 together with a warrant to purchase up to 450,000 shares of our common stock. Under the terms of the promissory note, we were obligated to make payment on the full principal amount, plus interest accruing at 10% per year, by March 5, 2011, and we could prepay any amount of principal or interest at any time without penalty.

In August, 2010, the Company and 70 Limited LLC agreed to refinance the note. Pursuant to the agreement, both loans were combined, along with accrued interest, forming a new loan with a maturity date of August 18, 2020. The note will accrue interest at a 10% annual rate until repaid. Prior warrants were revised to allow for exercise at $.05 per warrant as opposed to the previous $.15. The term for exercising the warrants was adjusted to ten years as opposed to five years on the cancelled warrants. The new warrants were valued based on the Black-Scholes method using a risk-free rate of return of .15% and volatility of 347%.

During 2010, principal uses of cash were approximately $300,000 to finance operating losses and approximately $5,000 for equipment.

Expected minimum capital expenditures during the remainder of 2011 of $750,000 are required for the Company to launch its on-line sales operations and would include expenditures for advertising, inventories and general operating expenses.

Assuming the success of our initial Internet retail operations and our subsequent BarBQ Diner restaurant concept, which are expected to utilize a substantial portion of our existing production capacity, we anticipate the need to invest as much as $1,500,000 to create additional production capacity at Specialty Food’s production facility to support our expanded marketing operations. This will most likely require the construction of an additional building adjacent to Specialty Food’s existing production space for more ovens and packaging equipment. We have entered into agreements with Specialty Foods under which we were granted an option to construct an up to 80 thousand square foot building on its property to accommodate additional smoker ovens and equipment and an option to purchase the 15-acre campus on which Specialty Foods operates if needed to accommodate growth of the Company’s business (subject to an obligation to lease back to Specialty Foods its processing facility). We anticipate that the financing to pay for the proposed building addition will be generated from a combination of our sales and additional financing transactions involving debt or equity securities. If we are unable to obtain financing to construct the building addition as planned, we will be forced to significantly curtail our proposed expansion, and our ability to grow revenue will be halted until increased capacity can be created.


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In July 2011, in order to raise capital in order to complete our 2010 audit, complete this report and continue our operations, we entered into a Purchase and Lease Agreement (the “Sale/Lease Agreement”) with SMKY Asset Fund LLC (the “Lessor”) related to our smoker-oven system. Pursuant to the Sale/Lease Agreement, we sold the smoker-oven system to the Lessor for a purchase price equal of $170,000, subject to increase by the Lessor prior to January 25, 2012 subject to a maximum of $500,000. In addition, we are required to issue to Lessor a warrant to purchase a share of common stock for each $1.00 in purchase price paid. The warrant has an exercise price of $0.50 per share, a five-year term and includes net exercise provisions. We leased back the smoker-oven system for rent equal to the lesser of (a) $0.20 per pound of product produced using the smoker-oven, or (b) the amount necessary to generate a 30% return on the sum of the purchase price and $5,000. The Sale/Lease Agreement has a 10-year term, provided that we may repurchase the smoker-oven system at any time after July 25, 2014 that the market price for our common stock has exceeded $0.50 for thirty trading days. The repurchase price is a number of shares of common stock with a fair market value equal to 20 times the sum of (a) the purchase price, plus (b) $5,000.

[Brad S]

SMKY anyone?

It would appear that they're trying to do something legit. As always, the long term health of the company will depend on it's ability to hold up under the heavy weight of the financing. For trading purposes, .30 looks like a decent entry although I'd definitely keep some powder handy in case the low .20's are tested. This is all provided that no one does a promo on it, at which point I wouldn't buy it at any price. I myself have no intentions of buying it, as I prefer more established, profitable companies.