Pickle Quarterly Numbers In: No Big Surprises
November 14, 2008 @ 11:19 am
Spicy Pickle filed its 10Q quarterly financial filing yesterday, and there were no big surprises. Just as I suspected, top line numbers were up quite dramatically on a percentage basis, and the company continued to lose money.
Cash levels at the company are higher than they should be so action needs to be taken to either increase gross profits, lower costs, or raise money. In fact, what is likely to happen is some moderate combination of the three.
Here’s the story. SPKL delivered $1.4 million in revenues for the quarter. That’s up from $261k in the same quarter one year ago, or an increase of 424%. That’s a huge increase. It’s also about $200k higher than the previous quarter.
Losses came in at $1.3 million for the quarter, but as usual a bunch of the loss is paper loss- not cash flow loss. Of greater concern- at the end of the quarter, the company had about $800k left in cash. They really burned through about $1.1 million in the quarter.
In short, they have to slow their burn rate, or they simply won’t be around. Revenues will continue to rise, but expenses have to come down.
They are back on the expansion track now. Two new lease signings recently occurred, and there are a number of others just around the corner. I expect a number of new locations open by end of Q1 ‘09. Their Canadian subsidiary is starting to get traction as well. The September/October economic shock is wearing off, and things are getting back on track.
In the case of Spicy Pickle, the company came into 2008 geared up to open a new location about 3 to 4 times per month. The expansion just wasn’t there, then the recession hit. Now, adjustments need to be made.
Here’s an excerpt from the 10Q I find revealing about their direction:
“Our need to raise additional equity or debt financing and our ability to generate cash flow from operations will depend on our future performance and our ability to successfully implement our stated business and growth strategies. Our results of operations will also be affected by prevailing economic conditions. Many of these factors are beyond our control. If our working capital is insufficient to fund the implementation of our business plan (due to a change in our plans or a material inaccuracy in our assumptions, or as a result of unanticipated expenses, or other unanticipated problems), we will be required to seek additional financing sooner than currently anticipated in order to proceed with such implementation. In the event that we need additional capital and are unable to obtain it, we could be left without sufficient liquidity. We have the ability to reduce our overhead to meet the revenue flow from existing franchised restaurants. We are currently assessing the cuts that may be needed in future periods.”
It’s really a shame they got hit with this recession just as they were gearing up for major expansion. They had sold the franchises, they just needed a little more time.
I suspect the current recession is going to cost the company about a 12 to 18 months to get back on the 2007 growth track. The first half of 2008 they overspent relative to growth. In the second half of 2008 they will downsize considerably. In the first half of ‘09 they will deliver moderate growth, much lower expenses, and perhaps raise some capital. In the second half of 2009 they will get back on track, and become the company I was looking for in 2007.
So- here’s the short version. It’s going to be impossible to predict how the stock will trade for the rest of this year and into 2009. From the second half of 2009 on, it’s going to be a great stock to own. If they really ratchet down expenses, it could go up on that news. Once they accomplish reducing expenses, they will become more of a value play, then go on to become a growth story once again.
That’s how I see it. Of course, it is possible they could close their doors. In my view, not likely as they have recurring revenues, and who would walk away from that?
Comments and questions are welcome.
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I am finally done with this sold everything will not be part of any pick from you again hope all your china fail and your ass bleeds
Editor’s response: Ok. Bye.
Comment by Anonymous — 9/3/2009 @ 11:30 am
I am always amazed again reading stupid comments about losses of microcaps. Losses are program of microcaps in the first years - otherwise they would not be able to grow! When I statred my ‘microcap’ I had to ask my bank 6-7 years to lend money to my company. I also still have to laugh if I think on the negative comments of several friends….while my company to bigger and bigger! I really believe little employees should invest in fonds and not in high-risk microcaps as they do not understand the nature of this kind of companies.
I am pleased to see SPKL does not only survive but also is able to reduce losses while the terrible economy. If people are not able to see this they are simply dump! I appreciate critical comments -but I guess we could do without useless platter.
Editor: I’m guessing there will likely be a recapitalization here, and the company will really start moving in 2010. 2009 is a bit of a survival, throw away year. It’s just the way the cycles are working. They are doing a good job managing what they have to work with, but are expanding nicely in Western Canada- this will be a surprise in 2010 for investors.
Comment by michael williams — 8/9/2009 @ 1:54 am
Any updates on this stock? Do you still hold it?
Editor: Every single share. I’m waiting for Q2 numbers to form an opinion about where we are.
Comment by Airjoe — 7/14/2009 @ 1:18 pm
Editor: My initial comment for you is this stock is going to start to rebound in pretty short order. I noted revenues were up and losses were down. However, I will get some commentary out on the Editor: Which report are you referring to? Q1? Sure- revs up and losses down. However, still losing money. I don’t think they will stop losing money until the Fall. Then, things should improve. I don’t believe they are in any danger of folding up, but until they start making money, you can’t say for sure. Q2 will show a further decline in losses. your word you idiot
Editor: Highly intelligent comment. Another idiot who kept telling me this company would be dead by now. I’m the last to deny it is a struggle for them- heck- the largest Krispy Kreme franchisee in the US just filed bankruptcy. However, the reports of this company’s demise keep being greatly exaggerated. I predict it will survive this downturn, and eventually go on to prosper. I could be wrong. I have been wrong about lots of situations. If you just want to comment they are losing money, that’s genius. Of course they are. They will lose more throughout the course of this year, then get back on track. We’ll see how it all comes out.
Comment by Anonymous — 7/14/2009 @ 3:32 am
I now you do not cover SPKL anymore, but still waiting for your comment to the report. thanks.
Editor: Which report are you referring to? Q1? Sure- revs up and losses down. However, still losing money. I don’t think they will stop losing money until the Fall. Then, things should improve. I don’t believe they are in any danger of folding up, but until they start making money, you can’t say for sure. Q2 will show a further decline in losses.
Comment by michael williams — 6/8/2009 @ 4:15 pm
Just received an alert by SPKL regarding the latest financial report. Your comment is appreciated. Thanks!
Editor: My initial comment for you is this stock is going to start to rebound in pretty short order. I noted revenues were up and losses were down. However, I will get some commentary out on the report.
Comment by Michael Williams — 5/14/2009 @ 1:53 pm
old news the I found out about the Brooklyn store by going there. where was the news?
Editor: That was out two months ago. They are relocating it out to Long Island. Today’s news gives you a better idea where the company is now headed.
Comment by Anonymous — 4/22/2009 @ 11:47 am
Since my last post,they have had the Soiux Falls, Brooklyn, Colorado Springs, and Fishers, IN stores close. and not a word from you
Editor: You’ll get a word tomorrow, and I’m sure you’ll be very disappointed. You’re just rehashing old news. You’ll be disappointed to learn things are now headed the other way.
Comment by Anonymous — 4/21/2009 @ 8:01 am
What happen to the Brooklyn store? how many more are closing
Editor: No, it has not closed yet, but they are looking at moving out to Long Island. The rent they are paying is too high relative to the death of Wall Street, and they need to make an adjustment. As far as I know at this time, there are no more imminent closings. In fact, about 6 new Bread Gardens are going to open. I always thought the stock might trade at its current levels, which is a heart breaker. However, I believe there will be better times ahead. All the bad news is out.
Comment by Anonymous — 3/3/2009 @ 12:45 pm
I still accumulate at .15 and .17 ! Any chance I do no jump off my roof this year ? Thought .20 would be the bottom. But SPKL seems to go .12 - .13 slowly. Any thought? Thanks.
)
(Hope me ‘love’ for this stock does not kill me one day
Editor: I always thought $.15 would be about the bottom. Here’s what I can tell you. All the bad news on the company has been disclosed. I believe there is a lot of upside from these levels with the patience of a few months. The stock is priced as if the company is going out of business, and I don’t believe that is going to be the case. Relatively speaking, there’s a lot going on. Hang in there.
Comment by Michael Williams — 3/3/2009 @ 8:52 am
I have been selling off just like you. this stock is going nowhere and there are better place to be than here. the company has been very quite not a good sign
Editor: I’m not sure what you mean by selling off. I may have sold a few shares of late just to help with expenses- I’m not even sure. However, it would represent far less than 1% of my holdings. I would hardly consider that selling. However, I’m not saying you should stay in. It’s up to you, and the company has been great effected by the recession like so many others. I can tell you the company is getting close to not being so quiet, and things are pretty good at the company all things considered.
Comment by Anonymous — 2/4/2009 @ 11:27 am
On 1/20 you wrote: “I know circumstances are improving at the company.”
Have you heard anything about how the present economic conditions have affected future store openings, i.e. have they been cancelled, postponed, delayed?
Editor: yes- I have heard quite a bit, and when the company starts getting active again, investors are going to be in for a surprise. Are things great at the company? No. Are they continuing to expand and have they reduced their operating expenses dramatically? Yes- to close to a break even in Q1. They are going to be around for a while, and it’s just a question of time for the stock to wake up.
Comment by IrvT — 1/27/2009 @ 4:27 pm
Would you agree that .18 - .20 might be the bottom?
Editor: It certainly appears that way. I know circumstances are improving at the company. They have pared down the overhead to just about zero loss in Q1.
Comment by michael williams — 1/20/2009 @ 6:46 am
why are the directors dumping shares? and why are you so quiet
Editor: I’m not aware of anyone dumping much. There isn’t enough liquidity to dump any to speak of. The directors have recently pledged $750k to the company out of their own pockets, so I’m not clear what you are referring to. I haven’t had much to say because I’m waiting for some progress. I believe 2009 will be tough, but that’s already priced into the stock. In 2010 the company will get back on track.
Comment by Anonymous — 1/11/2009 @ 4:58 pm
will this company follow Platina Energy? spkl has limited cash and sell shares for services
Editor: It’s not a good comparison. SPKL doesn’t sell a commodity that is down to 1/3 from its high. Also, it has not borrowed any money. There is a preferred stock that converts into common stock at $.85. SPKL hasn’t issued any shares since last December. They are simply going to lower their overhead to the point where their cash flow covers expenses. It will be very lean, but necessary to make it through the recession.
Comment by Anonymous — 12/3/2008 @ 1:48 pm
I worry we will see .10 here. Have been talking to another CEO today - gold stock, great and honest finds, has gone from 1.20 to .05 currently. He told me that this market is worse than 1929. Thus I believe .10 or a marketcap of 5 mill might be an poor option here. Try to get through it with one eye crying. Good luck to all !
Editor: Could be the case. 2009 is going to be a difficult year for any company that sells anything to US consumers. However, we will get through it, and some companies will come out the other end in good shape.
Comment by michael williams — 11/21/2008 @ 1:29 pm
I’m thinking of selling my shares any buying cgyv. Hopeing to make up some losses cgyv may be on the way up and I don’t see to much hope for spkl in the near further any thoughts
Editor: I personally own a lot more SPKL than CGYV, but for the next six months I wish it were the other way. I believe SPKL is going to have to be very prudent in the 2009 with how it manages the company and whatever growth they can put together. CGYV is much better financed, making money, and growing far more rapidly. Futhermore, I believe the emerging markets will come back before the US market- therefore, I’d personally rather have more money in China. That having been said, I own way too much SPKL to make any appreciable sales in this illiquid environment. I believe I will make a lot of money in the stock in one to two years. I own too much of both to make much of a change, so I’ll just stick with what I’ve got. That’s kind of a long answer to a really short question. In answer to your question- I do believe CGYV will appreciate more than SPKL in the next six months and is less risky. After that, it’s too hard to call.
Comment by Rob — 11/18/2008 @ 6:37 am
Given the track record of the guys running this company, I think there is more reason to keep the faith that they will turn it around than there is concerning a lot of other companies. The big issue is how long will it take given the economic environment.
Editor: I think the company has going to have to be managed very prudently for all of 2009- at least they need to plan it that way. The stock is another story- I believe it could get legs again in the second half of 2009. Today, I believe there are better stocks to put your money in. However, this one will have its day again.
Comment by Irvt — 11/17/2008 @ 4:50 pm
Where do you think the cost of an average dinner at SPKL compared with McDonald and with Kentucky Fried Chicken?
Editor: I don’t know about KFC, but I would say about $2 to $3 higher for lunch than McDonalds. You shouldn’t really look at it as a dinner place. Some of the stores get some dinner traffic, but it’s mostly lunch.
Comment by Anonymous — 11/16/2008 @ 6:56 am