Organic To Go (OTCBB:OTGOE) today reported financial results for the third quarter and nine-month period ended September 30, 2008.

Jason R. Brown, Founder, chairman and CEO, said, “While we are pleased with the third quarter sales increase of 70% over last year, operating results were below our expectations. However, year to date, we have made a number of substantial improvements to our business. Our revenue is up more than 56% over last year, while gross margin has improved to 58.3% from 51.8% last year. During this year of rapid growth, we have simultaneously improved the quality/presentation of our food along with our operations at every level, and followed through with our commitment to prove that Organic To Go is a bi-coastal brand.”

“In September and continuing into the fourth quarter, we recognized the significant challenges in our economy and began making meaningful cuts to our operations to become a more efficient and streamlined organization, while also being poised for future expansion when the timing is right. These are extraordinary times in our country’s economic history and the reality that as the workforce surrounding us is being reduced, it has a direct effect on our business. To drive our operational and labor costs down in the fourth quarter, we have taken aggressive steps to insure that we focus on driving to profitability by cutting our overall expenses wherever and whenever possible, including our labor force by 30%. We have also curtailed capital investments in our future growth, excluding the three additional locations we plan to open in Washington, DC by early next year.”

Third Quarter Results

Revenue for the third quarter increased 70.0% to $6.3 million, as compared with revenues of $3.7 million in the same quarter last year. Gross profit increased 71% to $3.4 million, as compared with $2.0 million in the year-ago period. Gross profit margin improved to 53.3% for the third quarter, as compared with 52.9% in last year’s third quarter, although was negatively affected by our launch in Washington, DC. Gross margin in existing operations was approximately 56% compared to almost 53% last year in the third quarter. The operating EBITDA loss for the third quarter was approximately $(3.2) million as compared with an operating EBITDA loss of $(2.5) million for the same period last year. This takes into consideration the $707,000 nonrecurring costs associated with launching on the east coast in Washington, DC. Net loss for the third quarter was approximately $(7.1) million, or $(0.19) per share, as compared with $(3.8) million, or $(0.15) per share, for the same quarter last year.

For the three-month period, retail sales, which include café, delivery, and catering sales, were approximately $5.5 million, an increase of 74% over the same period last year. Wholesale sales were approximately $800,000, an increase of 45% over the same period last year.

“While our third quarter sales have historically been our slowest period due to summer holidays for people at work and universities in summer session, our current performance underscores our rapid expansion and the acceptance of our business model over the past year in both core and newer markets. This also comes at a time when, like many other food service providers, we also experienced a material softening due to the current economic downturn, as consumers continue to limit their food consumption away from home. With regards to our operations, we experienced nonrecurring expenses associated with opening a new region in Washington, DC, in addition to operational inefficiencies that yielded lower gross margins and higher expenses than we had experienced in several quarters due to our initial launch into this market.”

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