SOURCE: Smoky Market Foods, Inc.

May 05, 2008 16:10 ET

Smoky Market Foods, Inc. Releases Special Letter to Shareholders

Founder, Chairman, President & CEO Edward C. Feintech Discusses Stock's Recent Price Drop and Announces Focused Marketing and Operating Plans That Capitalize Upon Restaurant Industry's New Troubles From Economic Issues

APTOS, CA--(Marketwire - May 5, 2008) - Smoky Market Foods, Inc. (OTCBB: SMKY); A Letter From Edward C. Feintech, Chairman and CEO:

As the largest single shareholder in SMKY (through my cash-invested ownership in Smoky Systems), I have been deeply and directly affected by the recent, steady drop in SMKY's stock price these past weeks amidst a large amount of selling. I am sure that for other SMKY shareholders, seeing the value of your equity position in SMKY drop so dramatically has been of deep concern as well. The purpose of this letter is to provide an explanation as to what I believe is happening with our stock and to announce a change in our marketing and operating strategy, which I believe creates a positive opportunity for SMKY and its potential business partners out of the recent decline in the performance of the restaurant industry.

Relative to SMKY stock, I believe that the price of our stock has declined during the past weeks, and especially this past week, primarily because of our efforts to secure financing to pursue our business plan. Our need to raise capital has been referenced in our recent filings and is well known in the investment community. It is normal for the market price of a company's common stock to decline when it is seeking capital, in part because of anticipated dilution. In addition, with an early stage company seeking a substantial amount of capital, it is common for prospective investors, or those otherwise aware of possible transactions, to begin taking steps -- primarily short selling -- in order to push down the price of the company's common stock. Since any financing will be based upon the market price of the company's common stock, if a prospective institutional investor or group of investors can take steps to put downward pressure on the stock price, this will reduce the price they will pay in any financing or create other opportunities for profit if the stock price bounces back.

With a company, such as SMKY, that is pre-revenue and has low trading volume, an institution or group working together can severely harm the company's stock price by continuing to sell tens of thousands of shares, even if they don't own the stock they are selling. Such efforts dramatically affect the price of a company's stock, without any reference to the future potential of the company. I am optimistic that this recent downturn in our stock price will be temporary and that the future of our company, and our stock price, remains bright.

Relative to our marketing and operating plan, I am announcing a revised marketing and operating strategy focused less on building a number of independent restaurant-stores in the short term and more on installing stations and kiosks in existing locations in order to create immediate-term revenue for us and our business partners.

In just the time since SMKY became public, due to severe economic turns with rising fuel costs, rising food costs, lower consumer spending, and rising employee costs for wages and workman's comp, the restaurant industry has entered a well-publicized downturn. Indeed, most regional and national chains are reporting drops in customer counts, revenue, and profits and for the near and longer term forecast, the trend is not expected to end. This turn of events creates a problem for our plan to open a large number of restaurants in the near term.

However, I believe the restaurant industry's dilemma represents an opportunity for SMKY in that it makes our foodservice menu system concepts and our 35s/f and 70s/f stations, and 150s/f self-contained kiosks, potentially attractive to existing restaurants and other venues in need of more income. We are seeking to enter into agreements to install the foodservice stations and kiosks inside chain venues (restaurants, delis, juice stores, convenience stores, retail venues, etc.) and operate them as lease departments, by which we pay the host venue a fixed amount of space rent against a percentage of sales in exchange for the space in which to set up our station or kiosk. This represents an opportunity for the host venue to obtain incremental revenue without additional cost. SMKY will benefit by being able to get its products and brand in front of customers on a large scale basis, without significant per-venue up front costs.

As we are able to obtain financing, our marketing and operating plan is to position SMKY to grow revenue aggressively, but with much less debt and fixed operating expense exposure. We will intensify our focus on generating revenue through a multi-channel distribution which includes stations and kiosks, and our packaged retail and Internet operations. We will continue to open some Smoky Market restaurant-stores, but in reduced numbers and in strategic locations throughout the country for the purpose of menu product testing and system training for Franship™ operators of the stations and kiosks. Our retail merchandising and Internet operations for sales of packaged foods continues to be a significant distribution channel for us to develop, as consumers travel less to restaurants and purchase more quality prepared foods for in-home consumption.

About Smoky Market Foods

Smoky Market Foods, Inc. is a development stage company that produces a complete line of fully-cooked Smoke-Baked foods through a unique wood-burning oven system. Because of its proprietary wood-burning oven technology, the company's Smoke-Baked products are believed to be truly healthful as they are prepared the old-fashioned way, without the use of any additives or chemical preservatives. Smoky Market Foods, Inc. intends to build a national chain of Smoky Market® restaurant-stores and self-contained kiosks that do not cook raw food on site, as well develop nationwide retail distribution for its packaged line through Internet sales and display merchandising venues.

Forward-Looking Statements

This release may contain forward-looking statements as well as historical information. Forward-looking statements may involve risks, uncertainties and other factors that may cause the Smoky Market Foods' actual results and performance in future periods to be materially different from any future results or performance suggested by the forward-looking statements in this release. These risks and uncertainties include, without limitation, the following risks: that the company will be unable to obtain significant financing on reasonable terms, or at all, and will not be able to implement its business plan; that any financing transaction will substantially dilute existing shareholders; that the market price of the company's stock will continue to be subject to manipulation and will continue to fall despite positive financial or business developments; that the company will be unable to enter into agreements on reasonable terms or at all with potential venues for its stations and kiosks; and that revenues generated from the roll out of the company's business plan will not exceed associated costs. In addition, other risks are identified in the company's most recent Annual Report on Form 10-KSB and other filings with the SEC. Any forward-looking statements speak only as of the date of this release. The company expressly disclaims any obligation to update or revise any forward-looking statements found herein to reflect any changes in company expectations or results or any change in events.

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