Spicy Pickle fails to cure default by deadline; investors sell assets

Lenders owed $4.76 million to cure default caused by bad debt charge

By Devika Patel

Knoxville, Tenn., Feb. 8 - Spicy Pickle Franchising, Inc. did not pay off the default on $5.27 million of promissory notes by the Feb. 3 deadline, according to an 8-K filed Wednesday with the Securities and Exchange Commission. As a result, investors Presley and Patricia Stacey Reed and Raymond and Joan BonAnno notified the company on Feb. 8 that they would sell the registrant's assets to the highest qualified bidder in a public sale on Feb. 21 in Denver.

As previously reported, on Feb. 2, the company was notified by the investors that it had defaulted on several notes. It had until Feb. 3 to pay the default balance of $4.76 million, which includes $3.79 million of principal and accrued interest owed as of Feb. 1 to the Reeds and $969,844 of principal and accrued interest owed as of Feb. 1 to the BonAnnos.

The default stemmed from a $335,000 bad debt charge taken against operations when one of the company's debtors told Spicy Pickle that it would not be able to pay the receivable it owed the company. This resulted in a loss for the quarter ended Dec. 31, which led to the default, the company said in the 8-K.

Affected are the company's $509,595 convertible promissory note, its $307,657 convertible promissory note, its $2 million convertible promissory note, two $500,000 convertible promissory notes, a $1.16 million senior secured promissory note and a $290,000 senior secured promissory note.

Spicy Pickle Franchising is a Denver-based restaurant operator.

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