Dow Jones 11972.25 +21.16 2:22 pm PDT, March 17, 2008 NASDAQ 2177.01 -35.48 For info, visit access.smallcapnetwork.com S & P 500 1276.60 -11.54 Change your subscription status here Russell 2000 650.48 -12.42 VOLUME 08 : ISSUE 26 Spicy Pickle: An Enticing 'Then & Now' Snapshot I don't think I could have asked for a better backdrop than the one Bear Stearns and J.P. Morgan provided for us today. Do I see a near-insolvency-bailout as good thing? Of course not - I'm an investor too. However, I see the fiasco as an ideal reason to point out how there are plenty of investment-worthy companies doing quite well despite the mess. There are several stocks I could bring up, but I'll just mention one for today. It's a name you're already familiar with. Spicy Pickle is still going full throttle, unnerved by the market's recent volatility (and probably rightfully so). I joked a few editions ago how 'more of the same good news' was fine by me. Now though, the persistent growth is no laughing matter ...these numbers are getting serious.   The 'Then & Now' Remember the story of the tortoise and the hare? I think Spicy Pickle (OTCBB: SPKL) is a great example of tortoise-like consistency ....albeit one quick tortoise. The news comes first - Spicy Pickle just signed a seven unit development deal for San Antonio, Texas. There were already three in Austin - two in operation, and one more under construction. It was the fifth multi-unit deal made within the last three months (many of which, as we've said before, were signed before the first units were even built in the area). I know we've been keeping tabs on all the tallies here: franchises signed, stores opened, stores with signed leases, etc. Now I'm wondering if the long string of good news has obscured just how far the company has come since we began watching in September. To alleviate the issue, today I wanted to make a 'then & now' comparison. It may be a real eye-opener. The nearby table tells the story pretty succinctly. Or, if data tables don't speak to you as loud as words do, then here's my one word synopsis ...growth. From 40 'signed' stores two years ago to 128 now? How much evidence do you need? I'm not going to repeat my deluge of 'growth no matter what the environment' comments again; you get it by now. I think at this point it's time to start thinking about something we really haven't touched on since September - the hunt for profitability.  Like any company, Spicy Pickle has fixed costs, and variable costs. For the most part, the variable costs are proportional to the number of stores in operation. As long as each unit is yielding more than it costs to maintain, operating profits are generated. Fixed costs don't change (mostly) regardless of how many units are in operation.  I know, I know...you don't have to be a CPA to understand this, so what's my point? Back in September I suggested the company could start covering their fixed overhead of roughly $200K per month when they had about 45 stores opened. See, each franchise contributes an average of a little more than $4100 per month (a high margin $4100, by the way) to the corporation's top line. It's basic math...$4100 multiplied by 45 stores equals about $190K per month.  Since then, things have changed slightly for the better. The same idea above still applies, but five company-owned stores means expenses are greater. Of course, the top line gets bigger as well. Just for the sake of simplicity though, I'll stick with 45 units as the near-term milestone. So, my point is just that a beneficial economy of scale is starting to come into view - 36 stores are open, and another 92 are in the works...far beyond my personal line in the sand of 45 or so. I think at this point an operating profit is a question of 'when' more than 'if', but it's not just me noticing the strength in numbers... For the first time that I can remember however, CEO Marc Geman also acknowledged in the press release how multi-unit cities are starting to help ease the overall variable costs.  Moreover, each and every unit - whether the lone store in a market or one of a dozen stores in the area - is helping to offset the fixed monthly overhead.  After all the recent openings, a $6 million financing, and the creation of four more company-owned stores, it's kind of tough to make a meaningful before-and-after comparison. As it stands right now though, the company should be doing about $1 million in revenue per quarter. That number could go up greatly all throughout 2008, which leads me to my final thought....   Half Empty, or Half Full? The market has been throwing some pretty nasty, bearish curve balls lately, and SPKL hasn't been immune. That's just how things are sometimes. However, when it comes to SPKL shares, any dip for the stock doesn't make me cringe the way it would for...say a Bear Stearns or comparable clone. Quite the contrary actually. While I wouldn't be a blind buyer at current levels, I also wouldn't throw the SPKL baby out with the overall market's bath water. We're back to September's trading levels as of today, which I feel makes the stock a bargain for longer-term thinkers. Why? The subprime mess - and ensuing recession-like effect - has completely shut down a lot of other companies an addition to Bear Stearns. Yet, it hasn't even dented Spicy Pickle's ability to grow.  Some of the best purchases I've ever made were beaten-up stocks of companies consistently taking the right steps, even when 'times were tough'. I think Spicy Pickle is one of those companies. This is when patience really becomes a virtue. Will patience be rewarded tomorrow, or next month, or next year? I don't know exactly when. I just know the consistent and focused tortoise won the race in the end.    I'm Bullish, By The Way  What do I think about the Bear Stearns fallout and the massive market dip? Actually, I'm bullish after today ...though only for the very near-term.  As I mentioned in this weekend's edition, the Fed is getting desperate. I didn't know Bernanke was going to get so nervous he'd interrupt his weekend to do something about it. The fact that he did, though, tells me he's going to pull out some more stops in tomorrow's FOMC meeting. The market could really like it; the fact that we're so oversold makes the bears even more vulnerable.  Well, now we can add a couple of more reasons to the list.  First, take a look at today's partial intra-day reversals; we closed well above the lows, so it's not like the market was truly freaking out over the news.  Second, look at the volume today. Even for the part of the day where stocks were sinking, it wasn't a large number of sellers. If things were as bad as the media would have you believe, it should have been a selling melee.  Finally, look at the VIX (one of my other favorite reversal tools). It peaked at 35.60 today, which was basically the high water mark before January's bounce and last August's bounce.  Nothing is ever set in stone, but I personally plan on betting on stocks tomorrow - before the Bernanke chat - rather than against them. I don't plan on being long for more than a few days though.    Spicy Pickle(tm) Announces 7 Restaurant Franchise Agreement in San Antonio, Texas Texas To Challenge Colorado For Lead in Restaurant Numbers  DENVER, CO--(MARKET WIRE)-March 17, 2008 -- Spicy Pickle(tm) fast casual restaurants (OTC BB: SPKL.OB) announced today it has recently sold the rights to develop seven Spicy Pickle(tm) restaurants in San Antonio, Texas.  The sale of the seven restaurant development package brings the total of franchise and corporate restaurants to128. There are currently 36 restaurants open and many more in construction, lease negotiation, and site selection.  Marc Geman, CEO of Spicy Pickle Franchising, Inc. commented: "Our Austin, Texas restaurants have done very well, and their success fostered interest in Houston and San Antonio. Our third restaurant in Austin is close to opening, and we have begun the site selection process in Houston". "With the addition of the San Antonio development package we now have commitments for 25 Spicy Pickle(tm) restaurants in Texas. Colorado currently has a total of 23. Texas has accepted our concept, with the Dallas/Ft. Worth area, the largest population center in the state, still open for expansion."  Furthermore, Mr. Geman stated: "In the last three months we have entered into multi unit franchise agreements in Chicago, Los Angeles, Houston, San Antonio, and Michigan. We are proving out our evolution to the multi unit ownership model. It provides efficient use of personnel, communication, distribution, and marketing. The more restaurants we build in larger areas, the easier and more cost efficient the construction, distribution, branding, marketing, and training becomes. Texas is our first state outside of Colorado where these efficiencies will start working."  "I feel that we are beginning the second phase in our growth strategy. We are starting to see activity in and around our early single markets. More interest brings more restaurants, and more restaurants bring conditions that can improve unit economics. It all works together to create momentum. We are very excited to see our hard work starting to pay off in Texas and expect other states and regions to follow. If we continue on our current path, our growth should accelerate over the coming months and years."  About Spicy Pickle(tm):  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 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. As a leading "fast-casual" concept, Spicy Pickle(tm) offers menu items that are far beyond traditional fast food -- but without the price point of casual dining. The hallmark of a Spicy Pickle(tm) restaurant is quality, service and an enjoyable atmosphere. The company is headquartered in Denver, Colorado, with restaurants open or under construction across 16 states and many more in development nationwide. For more about Spicy Pickle(tm), including franchise information and inquiries, visit http://www.spicypickle.com.  Forward-Looking Statements:  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.  COMPANY CONTACT:  Marc Geman, CEO  Spicy Pickle Franchising, Inc.  303-951-2530  ir@spicypickle.com  Source: Spicy Pickle Franchising, Inc.    We Value Your Feedback   Got comments, questions or suggestions? 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For web based email addresses, the Small Cap Network recommends @yahoo.com or @aol.com for timely and reliable email newsletter delivery. D I S C L A I M E R: The Small Cap Network, its website and email newsletter (hereafter, cumulatively referred to as "SCN") , is an independent electronic publication committed to providing its readers with factual information on select publicly traded companies. SCN is owned and operated by TGR Group, LLC ("TGR"). All companies are chosen on the basis of certain financial analysis and other pertinent criteria with a view toward maximizing the upside potential for investors while minimizing the downside risk, whenever possible. Moreover, as detailed below, TGR accepts compensation from third party consultants and/or companies, which it features in the publication and circulation of SCN. To the degrees enumerated herein, SCN should not be regarded as an independent publication.  Click Here or go to http://access.smallcapnetwork.com/compensation_disclosure/ to view our compensation on every company we have ever covered, or visit the following web address: http://access.smallcapnetwork.com/profile_disclosure/ for our full profiles and http://access.smallcapnetwork.com/alert_disclosure/ for Trading Alerts.  Larry Isen, the editor and publisher of the OTC Journal, through various entities he controls, has purchased 1,200,441 shares of Spicy Pickle at an average cost of $.2125 per share. These purchases were made in Spicy Pickle private offerings. The aforementioned purchases were made between August of 2005 and August of 2006. On 12/15/07, on entity controlled by Larry Isen participated in an additional financing wherein 12 shares of convertible preferred, converting at $.85 into 120,000 shares and 90,000 warrants with an exercise price of $1.60 were purchased. In addition, Larry Isen has received 785,000 shares of Spicy Pickle common stock for consulting services. In addition, MarketByte LLC, an entity controlled by Larry Isen, has received a fee of $30,000 cash, and 300,000 newly issued restricted shares for coverage of Spicy Pickle. TGR Group LLC, the publisher of the Small Cap Network, has received $30,000 and 300,000 newly issued restricted shares for coverage of Spicy Pickle. Mr. Isen is an affiliate of TGR Group. In addition, two other individuals affiliated with TGR Group have purchased a total of 300,000 shares at $.25 per share and received an additional 70,000 for consulting services. Current positions of the aforementioned can be found at www.otcjournal.com and access.smallcapnetwork.com in the Spicy Pickle information section.  From time to time TGR sells shares received as compensation for coverage of client companies. Shares received are sold in the open market. 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