SMKY..lot to like here... SUMMARY OF 3-27-2012

SMKY..lot to like here...

SUMMARY OF 3-27-2012 CHAT WITH SMKY CEO, EDDIE FEINTECH: 

• Financing: we have two structures in play: Preferred Stock and convertible debt. 
• Series A PS is $15 million, offering 2-year conversion @ 3x principal into market price at time of conversion, plus 5-year warrants @ $2. 
• Series B PS, offered after Series A is sold, is $10 million @ 5x conversion in three years, plus same 5-year warrants @ $2. 
• SMKY officers/directors and a few sales agents are working the PS offering and I'm expecting first proceeds in yet this week and continuing, we've issued $5 million is sub agreements to prospects. 
• I've sent out a number of subscription agreements to investors and we count about $5 million if ALL were to invest as anticipated ... one group is a fund of pro football players that could actually take out the whole offering as more begin to invest. 
• We have Hickory Group, a NY merchant bank working hedge funds for $15 to $20 million of convertible debt ... this process takes more time, but sales of the PS will speed the process substantially, and give us negotiation control. 
• Before signing on with Hickory Group, they gave me a spread of some 60 companies in the penny - microcap level that had received funding in the past two years ... wanted me to see what the market was paying. After researching every one of them, I was appalled at the types of deals funded and how horribly there were structured against equity. These deals had conversions based upon current stock prices, so there became millions of shares as overhang to these companies in the future, which kept their stock potential down ... our convertible debt will not be structured relative to our current price ... it will be a discount to market at time of conversion ... we need time to appreciate equity. 
• The time line is totally relative to receipt of money ... but, I feel totally confident we're going to fund ... we must hold our position to not be forced to take one of those toxic convertible deals. 
• With just the first $1 million from PS, we hire regional reps to grow the foodservice distribution model with SYSCO in all houses nationwide, at this point we're going to hold our brand distribution and not move to go private label for them, we'll get lost in their item book. 
• SYSCO-Iowa is moving product, but very slow since the reps don't push products ... they order-take ... they have far too many items and with our own reps, we have full time sales of SMKY products. 
• SYSCO-Iowa has purchased about 5 to 8 cases per week without much promotion by reps and this house is the smallest ... a house like Chicago or Minneapolis will sell many more times the product. Financing also increases our product line to SYSCO. 
• We have every SYSCO house in the country to work with, which is enough for foodservice ... we're only doing retail sales where we can place POS merchandisers, which include both traditional and non-traditional venues: truck stops and gyms and drug chains are all going to be tested with first round financing. 
• SYSCO offers great potential, but since we're setting up our own area market distribution centers in time to service the country, we will be actually become a competitor to SYSCO with cheaper foodservice prices for the SmokeChef line. From these AMC centers, we can make next-day ground delivery for foodservice and Internet sales, under-cutting every distributor and Internet retailer of food in the country. Our salmon goes to $29.95 DELIVERED (4 6 oz. fillets). 
• Most exciting thing happening at SMKY this year is our plan to acquire three companies in the next few months. 
• Our acquisition targets are our Iowa processor doing $30 mil and profitable, a meat processor in MA also doing $30 mil and profitable and gives us contact to the Eastern seaboard of distribution, and a Canadian fish company on Vancouver Island doing $25 million and profitable. 
• I realized back in November after a few months of working the PS offering back then, that financing SMKY as a stand-alone business, pre-revenue, was going to be a continual up-hill battle and especially so if we were going to try to dictate our terms to protect equity ... by acquiring these companies, we go instantly to nearly $90 million revenue and profitability, and with a financing structure that is favorable to our equity. 
• The acquisitions are absolutely required in order for SMKY to compete in the market. Experience is showing us that superior quality alone will not drive sales to the degree we're looking for. We must match the quality with a superior price, too. And then we own the smoked food market in both retail and foodservice. 
• This revenue from the acquisition gives us $4 mil EBITDA, and then we begin to add on SMKY brand distribution channels. 
• The cost for our processor is $7.5 mil cash, the cost for the MA processor is still being negotiated relative to the property but will likely be the same area and the Canadian fish company is about $2.5 mil cash plus stock. The PS offering is our working capital cash as we can use it as it comes in to launch operations. 
• All three acquisitions at this time look good; our processor is under LOI and the other two are looking good since management is being retained in each of those companies. We're not acquiring them to merge into our infrastructure ... they are viable businesses poised for explosive growth with the financing we can provide. 
• I'm sure hoping these acquisitions are done by summer and we're moving in all fronts, shouldn't take until Q4 to get this done ... especially if first money comes in as soon as I'm expecting. 
• The key to solid and viable acquisitions is the retention of management WITH INCENTIVES ... and we have that in place with each of these companies. 
• Depending upon flow of proceeds, we'll be using funds first to grow immediate sales channels and begin the addition to the Iowa plant to make sure capacity is increased, with the addition money going to the purchase price. Next money buys us the Canadian fish company, which gives us distribution into Canada. Big things going on in Canada with a JV affiliation with Patteson Group. 
• Our Canada president has been working for six months to develop Canadian market and the Patteson Group loves our product; they own a 500-store supermarket chain, convenience store chain and fish distribution. In addition, we have Gordon Foodservice in Canada ready to take our line and a small chain of retail stores for POS merchandiser meal centers. 
• First PS proceeds launches Canada operations via export from Iowa, and when we're producing there, we'll have access to international distribution. Our kosher line is ready for export to Israel when we begin. 
• We'll need the additions built before more ovens can be ordered, other than for Canada processing. 
• Timing: for the past several months we've been developing distribution channels so that when first money hits, we're instantly rolling. 
• We'll go after full utilization of our existing oven with first money in from PS, going after SYSCO growth. With $2.5 mil of financing from PS, we launch our POS merchandisers into truck stops and other venues of retailing including some stores. 
• Full capacity of our existing oven will be able to be achieved with financing ... same money we've been looking for since launching WW. 
• We have capacity from the existing oven to launch into selected regions while expansion capacity is being created; remember, the close of the just the first acquisition makes SMKY a $30 mil company and profitable, it's a wonderful base of self-capitalization to work from. 
• We'll be offering both wild and farmed salmon. Scotland is still the best farmed salmon we've found and I haven't been thrilled with the quality of the wild salmon smoked ... it's nowhere near the fat/oil content of farmed - big difference. 
• Financing opens our line of products to include gourmet items, etc. 
• BarBQ Diner will be developed later in the year as the acquisitions get done and we have the cash to partner for development. No partners yet ... we need to be well financed before approaching big players. 
• SMKY symbol always stays, even with acquisitions. 
• Our plan is definitely to list on NASDAQ as soon as we qualify, which the acquisitions will do for us, plus a $3 price ... and I'm NOT getting there by REVERSE SPLIT!! 
• The growth potential for the acquisition targets and our SMKY brand potential is enormous, then we throw on BarBQ Diner ... my vision for two-year conversion after having received this financing and achieved the revenue potential is $3 to $5 range to be solidly feasible, year three conversion could be substantially higher, but anything above $1.50 in two years is a big win for equity. 
• If we raise the PS money as expected, giving us our launch to revenue and solid capital base to negotiate with, then I see us raising from $25 million to maybe even $40 million, as it just gets easier and SMKY at that time becomes a $100 million business and just beginning with its own brands. 
• Financing gets us major brand penetration with all three of our brands and possibly a fourth with SmokeChef, which becomes the expanded foodservice line produced by our Iowa processor; SMKY revenue can reach $200+ million easily in three years with the financing coming into place. 
• For news, I am literally looking for the wire of first money everyday, which will trigger a PR to confirm the acquisitions to the public. 
• I have very good reason to expect minimum $1.5 million to as much as $5 million to flow in during next two weeks or so, and hopefully yet this week for some of it. That money launches us big time and gets us control of hedge fund negotiations. 
• We're all set up for a public web cast to announce financing and detail plans of aggression! 
• Each week, I get no less than 10 e-mails on IR firms wanting to promote SMKY ... I can assure you, with hedge fund money in our game and under our terms of conversion discount to market, we will have aggressive support ... but also, we will be selecting certain firms to work with us. And, don't forget the Yummy Feasts ... they're still in our plan, just waiting for the right time to begin. 
• IHub board has been a real blessing to SMKY, greatly respect its value. 
• You all have invested in a company that is nearly 48% owned by management and affiliates - that's a huge root base for success and especially the security of your value as equity holders. I haven't come this far to give it away in the stretch. 
• Our price doesn't bother me a bit since our financing is not tied to it ... for the market, we're still a start-up and our value is fair, but the potential which is real makes it under-valued at this price. There are now 21 million shares free-trading, but still only 14.5 million in the market float, of which still about 7 to 8 million are very long. 
• As to where Eddie is spending his time: Currently, I'm in CA to enjoy some family time while holding these conference calls each day and using IT to bridge the area between investors. Since there has been no financing received since we raised money from the oven lease many months ago, there has not been production this quarter as the WW inventory has been used to supply SYSCO. That's actually been nice to have so much time to devote to the financing effort. 
• I look forward to the PR announcing the web cast, which is the first release about major financing and the launch. 
• I've really enjoyed this and will look forward to setting a chat date with you on a certain day each month from now on ... Thanks for all your great support!