Verus International, Inc (VRUS) CEO Anshu Bhatnaga
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Verus International, Inc (VRUS) CEO Anshu Bhatnagar on Q2 2019 Results - Earnings Call Transcript
Jun. 24, 2019 7:34 PM ET | About: Verus International, Inc. (VRUS)
Verus International, Inc (OTCPK:VRUS) Q2 2019 Earnings Conference Call June 19, 2019 8:00 AM ET
Company Representatives
Anshu Bhatnagar - Chief Executive Officer-
Chris Cutchens - Chief Financial Officer
Mark Forney - MKR Group
Conference Call Participants
Shane O'Brien - OTC Investment
Randy Kenny - XF Holdings
Operator
Good day and welcome to the Verus International, Second Quarter, Fiscal 2019 Financial Results Conference Call. Today’s conference is being recorded. At this time I would like to turn the conference over to Mark Forney with MKR Group. Please go ahead.
Mark Forney
Thank you, operator. Good afternoon everyone and welcome to Verus International, Second Quarter Fiscal 2019 Conference Call.
Yesterday we issued our second quarter fiscal 2019 financial results. A copy of the Press Release is available on the Investor Relations section of our website and the financials are posted on EDGAR. We report our financials in U.S. dollars, so in today’s discussion we’ll use that currency unless otherwise noted.
Before beginning our formal remarks, I’d like to remind listeners that today’s discussion may contain forward-looking statements that reflect management’s current views with respect to future results or future events. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in these forward-looking statements. Verus does not undertake to update any forward-looking statements except as required.
You might also note that in today’s call our executive team are both traveling, and so we’re hopeful that the quality of the call will remain consistent, but we appreciate everyone’s patience in that regard.
I’d now like to turn the call over to Verus CEO, Anshu Bhatnagar. Please go ahead.
Anshu Bhatnagar
Thank you, Mark. First of all, I’d like to welcome our new shareholders who might be hearing my voice for the first time and welcome back all our long time shareholders. It’s been a while since we held one of these calls.
Those of you who have been with us the longest know how historic this call is today, because it signals not just a renewal of Verus as a company, but also marks the start of what we think is going to be a terrific growth phase that will change our company dramatically over the next few quarters.
In today’s call, I’ll make some comment on the just released 10-Q, answer a number of investor questions that we have collected during the last few months, then provide a look into our plans, into the remainder of 2019 and even into 2020.
As you know, we have an October year end, so these Q2 results correspond with the financial period that ended April 30, 2019. We are moving pretty fast right now whereas Verus just a few months ago seems like a different company and I think that the feeling is going to stay with us throughout the rest of the year.
First some comments about Q2, 2019. This was a watershed quarter in the sense that we achieved success in three areas of supreme importance: our capital structure, our order book, and our M&A plan, with the product line in geographical expansion as the end result.
The key event in Q2 was obviously the recapitalization announced on February 11, 2019 which eliminated our variable rate convertible debt and gave us a new starting point to grow the company. We are particularly grateful to our lead investors Andrew Garnock, Rick Berdon, Don Monaco and Monaco Group for making that possible.
We subsequently added $14 million in new backlog via the honey and rice fields in February and March. These basic product categories represent the kind of steady stable business that over time will create a base of dependable cash flow. So when the margins are right, we will continue to seek out these type of business to complement our specialty branded product offering.
We book ended this quarter with another major event, the acquisition of Big League Foods, which we announced in the last week of April. That acquisition gave us more than just a turnkey subsidiary and opened the largest market for us, the United States, and also gave us an industry veteran in Jim Wheeler.
In addition to holding executive positions at seven companies during his career, Jim is also an inventor who altered a number of patents, including a key patent for the pump mechanism that revolutionized the nacho [ph] industry. The acquisition of Big League Foods was very important on multiple levels, which will have ramifications across our entire business.
Even with a turnkey of operations there is a startup checklist. So we spent the first week setting up accounts, ordering packaging and completing the typical pre-launch tasks that a company in New Line and new vendor relationships. I’m excited to say that everything is moving along well and on schedule. The MLB teams we will feature in the ice cream lines will be the Chicago Cubs, Boston Red Sox, New York Yankees and Philadelphia Phillies. So everyone in those markets will get their first taste.
We’ll start with pint sized packaging and four flavors. We have additional flavors read to go and can add to the line later as needed. This part of the line will feature premium ice cream with a goal to create high quality products that will generate repeat purchases based on the quality and taste, along with fan loyalty. Our first production run will account for our eight to nine, after which will begin shipping via our distributors to locations in roughly 2,500 store footprint within the metro market for each team.
We will get some revenue contributions from this business next quarter which ends July 31, but the subsidy will really start to contribute in successive quarters. The initial candy shipments will follow a similar pattern with the store mix wearing someone. Candy has a much larger potential for plant because it can be placed in locations that do not have freezer cases.
These days that means just about every store including non-food retailer and office supplies, sporting goods and home good change, all which carry candy and other snack products.
If you step back and look at the potential of Big League Foods subsidiary, you will understand our confidence in predicting sustainable growth stretching out over many quarters. We intend to roll-up that group of teams tied originally to third party manufacturing facilities, so the same potential plan will be replaced across the country. Eventually the four teams will grow to eight, then 12, then onward until we reach all 30 metro team markets.
The product line will also expand with the addition of a full range of frozen desserts, including Drumstick, Ice Cream Sandwiches, cups and bars. We have a solid game plan to stair step this growth regionally, laid out in an orderly fashion until we have the full team coverage and a full product mix.
To put the scale of this opportunity in perspective, according to industry sources there are more than 750,000 retail locations that could carry either our ice cream, candy or both, for the first 2,500 stores is just a tiny sliver of our potential coverage. We obviously won’t be in every store in the full U.S. retail map, but based on our initial conversations with distributors and some selected chains, we believe that we can eventually carve out a double digit percentage of that store base.
We will provide some projections on that after we see our initial sell through in some of these key markets. The reaction to the packaging and product lines have been excellent during the prelaunch phase, so we have a high degree of confidence in reaching and exceeding our year one goals for the subsidiary.
Big League Foods has the potential to be a growth driver for Verus that will have to be measured not in months or even a quarter, but in yeas. There’s a secondary benefit that many investors may not realize and that is the important of having a 100% North American business unit where the sourcing, sales, invoicing and payments are U.S. based. That fundamentally changes Verus in the eyes of lenders, giving us the ability to access a much larger pool of sources of capital, particularly those banks that prefer or are limited to finding U.S. operations.
We have been working on multiple types of non-dilutive financing for quite a while and the missing elements have been two-fold: One, a track record of sales growth; and two, U.S. centric business. This quarter we met those requirements. We are on our third straight quarter of growth and the acquisitions of MLB license business, so new doors are finally opening for us.
There’s no question that Big League Foods has changed Verus in the eyes of financing sources, particularly with merchants and commercial banks. That’s coming loud and clear to our conversation with our contacts at these lending sources. We think this quarter we just reported were marked a tipping point in regard to some of our financing initiatives. So we look forward to updating investors on those topics in the future.
The best way to describe our company today is to use the word “conditional,” because we are quickly transforming from a wholesale focused business, into a full consumer products company. Our dramatic progress in just three months and so we [inaudible] we should offer ample proof that the growth embedded in Verus has always been there, it just needed to be untethered from the legacy issues that held us back for two years.
This is our third straight quarter of triple digit growth and that growth is entirely organic. Regarding our new Honey business, we are finishing our prelaunch win. We have received multiple orders from many markets around the world. We will provide an update on that business as it commences.
I would also like to point out that our recent working capital infusion of a little over $1 million only occurred last month, so these funds did not contribute to our strong Q2 2019 performance. The effect of that working capital will begin in the next quarter, but will really show up in later quarters. So there is a great trend developing here to carry us well into 2020.
We stopped publishing our backlog figures a while ago, chiefly because the numbers were so large they could rightly be considered almost theoretical due to the company’s lack of working capital. Ironically this potential backlog is even larger today, so we do not intend to change that policy.
Next up, I’ll turn the call over to CFO Chris Cutchens to cover some key financial metrics from this quarter.
Chris Cutchens
Thanks Anshu. As most of you know, I joined Verus as full time CFO as of June 1, but I’m not a stranger to the company, as this is my fourth set of financials for Verus. I’m currently relocating to Maryland to join Anshu at Corporate headquarters and have already begun to expand my role in the operations of the company.
I joined Anshu for a due diligence trip to an acquisition candidate during the first week of June, so I was glad to get a first-hand look at one of the great opportunities that we have in front of us. We have set some lofty goals for ourselves, and I look forward to being part of the team that turns those goals into reality.
So on to the financials. First I will take in a bit to the numbers from second quarter 2019 and then provide some commentary on our financial strategy through the end of the year. The key figure from this quarter is the revenue line, which came in at $2.9 million during the second quarter of 2019, representing an increase of 153% over the $1.2 million generated during second quarter of 2018.
As Anshu noted, this is largely organic growth in the GCC product lines and does not yet reflect our new sources of funding or the startup of recently announced product categories in that region for the U.S. Triple digit growth from programs that predate the February recap shows the power of the Verus model and how much leverage is embedded in the company’s strategy.
Currently all the company’s revenue comes from 4 GCC countries: the UAE, Saudi Arabia, Bahrain and Oman. But second quarter 2019 will be the last quarter with that geographic concentration. The upcoming quarter will feature additional geographies for the first time and we expect each subsequent quarter to widen our footprint into new markets, countries and continents. The international part of our corporate name is going to become even more appropriate.
The GCC lines today represent steady, predictable business, so it is no surprise that our gross margins barely moved from last quarter coming in at a very healthy 15.4%. Wholesale and commodity type lines carry lower margins than branded products, but they also tend to have faster turns in the GCC. So the trade off in margin can be overcome by the high frequency of shipments. This is an import reliant region with growing demand. In these core GCC lines $1 in funding can turn into $9 or more in revenue over the course of the year.
Overall Verus generated an operating loss of $244,000 during the quarter, compared to an operating loss of $307,000 during the second quarter of 2018. However, the second quarter 2019 operating loss included $291,000 of non-cash stock based compensation expense, which on a pro-forma basis Verus generated an operating profit of $47,000, which is an increase of $354,000 compared to the second quarter of 2018.
At this early stage, non-cash charges and provisions can swing a company to either side of the net profit line, but this is one case we are being profitable at such a low revenue level is a major positive and bodes well for the future. The pro-forma figure represents 115% year-over-year improvement and as a clear indication of the leverage in a business model.
As expected, legal and professional fees declined, coming in at $77,000, a 45% improvement compared to the $139,000 during second quarter of 2018 and a 31% improvement over the $112,000 spent a quarter ago during the first quarter 2019.
General and administrative or G&A is always a bit of a catch all category for early stage companies, so it is sometimes better to look at that line item as a percentage of revenue. In that regard, G&A was about 8% of revenue during the second quarter of 2019 compared to 11% during the second quarter of 2018, representing a 288 basis point reduction on a year-over-year basis.
We expect all of our operating metrics to improve as the company gains traction and revenue kicks in from our multiple new product categories, but it may take a few quarters to see that improvement. During each star up period the company will absorb extra costs on the front end of new product launches, so at this small revenue base, those upfront costs can still have an impact.
A thing to remember is that every contract Verus signs is designed to be profitable, so upfront costs will be quickly absorbed as each one ramps. That will hold particularly true for multi-quarter growth strategies such as Big League Foods, which is already eclipsing any prior business launch in company history. In a way this is the equivalent of launching 30 different brands, but without the expense of traditional brand awareness programs. So the allocations today should yield considerable revenue very quickly, because the majority of the dollars spent are going to working capital for production.
The net income line, showed a profit of $2.2 million, largely due to the reversal of certain charges booked in the prior quarter related to the settlement of certain convertible notes payable and a gain realized on the extinguishment of certain other convertible notes payable during the quarter, both of which are beneficial to the company’s current capitalization strategy. This is another case where the income statement of a transitional companies such as Verus takes some new ones to interpret.
The period exiting a recap often contains provisions, reversals and other necessary accounting measures. The deal is much with theoretical outcomes as they do with actual financials. The good news is that we expect future quarters to become more understandable and hopefully simpler as all of the recapped legal and related noise dissipates from the story.
Verus just posted a 153% revenue increase, but if our shipment schedules stay true to form, we expect to improve our growth rate considerably in the final two quarters of fiscal 2019. We believe we are just weeks away from a revenue tipping point with initial shipments of ice cream and candy.
Next up, I would like to talk about our efforts to increase our financial strength. Cash at the end of the periods showed a significant increase as the company ended second quarter of 2019, to $493,000 in cash compared to only $118,000 at the same period last year.
With an additional capital infusion of $500,000 that we gathered after quarter end, our cash position is growing even stronger during the third quarter of 2019, so this is an area with some very welcome improvement. The majority of our cash goes directly to working capital, so the influence on future revenue was almost immediate.
We are working on new sources of financing that can unlock additional backlog. So we expect to have some clearly on that subject in the coming weeks. Completion of this quarterly filing was part of that process, so we are hopeful that these solid results take us one step closer to those additional sources of funds.
At this time I would like to turn the call back over to Anshu for his closing comments.
Anshu Bhatnagar
[Inaudible] about our M&A efforts, particularly the pace of signing new companies, but investors should understand that our approach to M&A can best be described as thorough. For example, we started our due diligence on some of our candidates as far back as early 2018, Big League Foods actually leapt over in few of our earlier prospects, because the timing was so important and the potential was so large.
As a company with limited resources, we need to be prudent in the M&A arena, so we’re taking our time to really get to know our candidates well before moving ahead. We have a pretty specific wish list, preferring turnkey or turnaround stories where companies has fundamental need that when filled can create a very rapid triple digit growth and winning environment for both Verus and the acquired company.
We currently have many candidates in review. We have three under serious due diligence and two in great late stage negotiations. There are no guarantees in closing M&A, so some of these candidates may not actually be part of Verus, but each has a particular attribute that under the right scenario would contribute significantly to our growth.
We think Big League Foods is going to serve as a great example of the advantages of joining forces with our team. So success in that subsidiary will go a long way in enhancing our status with M&A candidates in the future.
Other than a long tour for MLB branded products and planning other international lines, our number one focus is getting trade financing, particularly covering our non-U.S. business. Our organic growth is excellent, but we can turn that into hyper growth with a bit more funding.
We get two questions almost daily; do we plan to publish this year, and possibly [inaudible]. We have a goal to out license [ph] as soon as it makes sense for the company. There needs to be some [inaudible] for such an event. This may be such as raising institutional capital or an M&A transaction we being on a major exponent helps facilitate the transaction.
As for the dredged reverse world, we are probably one of the only micro-cap companies that is unafraid to discuss the concept of the reverse split and have been very open about that since early 2017. We have been consistent in saying the same thing; we will only implement a reverse when there is a good reason for such an action. This could be that we are ready to take the stock to the next level on a major exchange or we have an institutional investor wanting to invest, but is prohibited in investing in penny stocks. Otherwise we plan on letting our stock grow organically.
This should now be something to fear, because when investors see that day, it would be a signal that things are really clicking. We are still a small company with tasks to complete before we can take our place among the better known CPG companies, and we have the team, relationship and energy to maintain sustained growth.
When you stack up the experience of our executive than advisors you will see a group of industry veterans who can navigate, the move through multiple markets caps. Every early growth phase company is like a puzzle missing a few pieces before you see the full pictures. We are gradually filling in those pieces. We hope that investors see Verus the same way we do; as an open ended growth story that can generate consistent profitable results and become a respected leader in the CPG space.
We appreciate everyone joining us today for this call. At this time I would like to open up the call for questions.
Question-and-Answer Session
Operator
[Operator Instructions]. We’ll take our first question from Shane O'Brien with OTC Investment.
Shane O'Brien
Yeah hi, my name is Shane O'Brien. I was just wondering what is going on with the Disney deals overseas.
Anshu Bhatnagar
Thank you, Shane. So yeah, we still have the Disney contract. That’s coming to end. It’s not as lucrative as some of the other opportunities we’ve been working on and it’s not so much that the margins or anything are not great on that, it’s just more that commitment that’s there, it’s far more than what we are able to sell. So it’s so an ongoing contract, but we are going to have to relook at – I think it’s coming up for renewal and we will have to kind of figure out if this is something we want pursue again in the same markets.
I mean I think Disney makes senses in other markets, but in this particular market I’m not sure if this is something we can meet the commitment requirements that Disney wants from us.
Operator I’m ready for the next question.
Operator
We'll take our next question from a Private Investor, Karthick Srinivasan.
Unidentified Analyst
Thank you. I had a couple questions for starters. You obviously had a number of new product announcements since the last time you did an earnings call, and I just wanted to kind of get a better sense of what stages those are at in terms of the ramps on prior call. Obviously you touched on Disney so we can ignore that for now.
But in particular I'm curious where beverages are at? You made a number of announcements, I believe in December of 2018 about a new beverage product line that you were looking to launch, where does that stand? And then more broadly speaking if we are looking at most recent quarter. Could you give us some insight as to how the revenues broke down by product line versus geography, just so we can – how to think about your gross margins going forward and how that calibrates with the type of product mix you have?
Anshu Bhatnagar
Alright, thanks Karthick for that. So with respect to our beverages, so we did launch quite a few beverages and I think it's more – we're still tweaking our recipes and the different mix that we have and they are going alright. So we've launched the two brands in the Middle East, as well as some other products and it’s not at full capacity right now, only because turns are much larger, much slower when it comes to branded products from the time we actually are able to ship and actually get our return back on that.
So we haven't really gone all out in terms of a large scale distribution, but we have started distributing that those products on the beverage side. Our big focus right now is really on the MLB branded products and on that we have already commenced production on just a huge quantity of both ice creams and candies, and all the packaging have already been printed and I believe the candies have already been produced.
As far as the ice creams are concern, they would be produced I believe July 8. It would be July 8, July 9 we’ll start production on the ice creams and they'll start distributing as from that point. So those are the big – the big product launch that we're doing is on the MLB branded products, with respect to the breakdown of actual numbers by category. We haven't disclosed that at this point. I think that is something we will do in a subsequent quarter and we can actually break that down a moving forward.
But as of right now we are just primarily just breaking down region, not by actual category of a product. Because people understand and a lot of it has to do with competitive reasons as well, but more importantly, we just didn’t have a, you know I think maybe subsequent quarters we’ll start back.
Operator, I'm ready for the next question.
Operator
Our next question comes from Private Investor, William Luke. Mr. Luke your line is open and we cannot hear you. Please check your mute function.
Due to no response, our next question comes from Bud Ramsey a Private Investor.
Unidentified Analyst
Hello?
Anshu Bhatnagar
Hello?
Unidentified Analyst
Yes, I’m interested whether you are or do you have any intentions on launching a CBD vitamin line or CBD oil or whatever?
Anshu Bhatnagar
Yeah, so that’s another question we get a lot. We don’t have any intentions right now of launching such a product. We do get a lot of request for our re products and you know we're not taking anything off the table. That is something we might consider at some future date, but as of right now we have nothing in the works or developments to launch a CBD related product.
Operator, I’m ready for the next question.
Operator
We'll take our next question from Randy Ramnath a Private Investors.
Unidentified Analyst
Hello Anshu, how are you?
Anshu Bhatnagar
Doing well.
Unidentified Analyst
Thanks for having this call. Okay, so I'm going to touch base on a few things. I hope you can stay with me for just a little bit more than one question. The thing that a lot of people have been talking about it is e-trade and their restriction that they put for online buying on Verus Foods. So I'm just wondering what the status on that is or if we were just waiting for QB to fix that?
Anshu Bhatnagar
And actually on that I don’t even know if QB will fix that. That is something we are working with them with hopes that that gets resolved, but I have no control or idea on how or what e-trade does. Sorry Randy, did I lose you?
Unidentified Analyst
No, so additionally on this $30 million funded backlog, rice and honey obviously come up to $12 million. The balance of that, are we to expect that that is beef and is poultry also going to come into the mix here?
Anshu Bhatnagar
So yes, poultry is like a very easy category for us. I mean that's where we have more orders, but that’s not part of this at all. The only reason we haven't started on the poultry is simply because its – most of the poultry either comes from U.S. or Brazil and the shipping time is so long. By the time we actually – and we have to pay advance for all poultry products and so by the time we pay for the products and it actually ships and actually reaches the port and we get paid, it just takes a very long time, sometimes as long as 90 days. So we have avoided at this point, until we have stronger trade finance that we are not going to start the poultry business.
But our backlog includes just across all our products, including our newly launched MLB branded products and partly because we paid all, we already paid for all of that, so it’s all funded in the sense that all the packaging has paid cash, all the manufacturing is paid in advance, so everything is ready to go. So this is fully ready and we're ready to start shipping as early as next month.
Operator, I’m ready.
Operator
Our next question comes from Chris Ziverman a Private Investor.
Unidentified Analyst
Hello! Can you hear me?
Anshu Bhatnagar
Yes.
Unidentified Analyst
Hey, thanks for taking the call and taking the time. Asking you about when we might be expected, number 1 to up-list to the OTCQB. I didn't really hear that answered, I wasn't sure if you did. I apologist if you did, number one.
Anshu Bhatnagar
So, I think according to the OTC it’s a four to six week process for their due diligence. Even though we were on the QB earlier, they said it was their standard procedure that they do that again. So we’ll follow-up with them and see when that happens.
Unidentified Analyst
Yeah, and number two, just a suggestion. Most penny stock investors flock to InvestorHub, so find the information and invest at least penny stocks.
When you guys do a press release, I know it's a little bit more expensive, but if you fail to use the market wired services, which is in sync with InvestorsHub, then the news icon doesn't appear there for potential investors to see.
Now so far in the past we've been fortunate because we've been killing two birds with one stone as you have been coming out with new filings which gives us that news icon there, and then you come out with the PR which we then put on the message boards for all to see, but if you're just going to put out a PR and without any filing, then mostly nobody knows about it in the penny stock community if that makes sense, but just a suggestion going forward.
Anshu Bhatnagar
Yes absolutely, I think that’s a great suggestion, we’ll defiantly keep that in mind and try to make that change. Operator?
Operator
Our next question comes from Brian Smith a Private Investor.
Unidentified Analyst
Hey, good afternoon Anshu and Chris, thank you all for making this conference call on and taking the questions from us. Two questions, one you have any detail or anymore comment on any non-food consumer products, specifically with cosmetics and fragrances you mentioned yesterday morning in at the release at the financials? And the second question would be the cold storage units that we recently built in Dubai. Those are being used yet, utilized and if not what do you plan on [inaudible] at rate. Thank you.
Anshu Bhatnagar
So yeah, with respect to the non-food categories and particularly the cosmetics and fragrances, so yeah we've been working with a company in Dubai and ship all over the same markets that we do, but also in Asia and other markets as well. And you know there's an opportunity to do an M&A merger with them or an acquisition of that company, so that's how we start looking at that and the real catalyst for that was not so much that we wanted to enter into product category but more that they were already in the same distribution channel we were planning on getting into.
So it was almost like its strategic acquisition where I would say it would save a lot of cost for us, as well as you know shipping a product or we have a delivery truck going with fragrances, we can add our case of juices or any other product at the same time, and it just saves a lot of time and then we started looking at many other companies that had expressed interest.
So that is something we're constantly looking at. We haven’t moved forward on that at this time, but it is an opportunity that's definitely there and you know there is a lot of other non-food categories that we've been exploring pretty heavily, because keeping in the same sort for line of consumer products, anything that’s in the retail shelf we would consider looking into it and that's something we're definitely looking at pretty heavily at this point.
With respect to the cold storage question, we don't own our own cold storage. All our cold storage facilities are using third party logistics. So we are definitely using that on a regular basis. Operator?
Operator
Our next question comes from George Thompson, a Private Investor.
Unidentified Analyst
Yes sir, how are you doing today?
Anshu Bhatnagar
Doing well.
Unidentified Analyst
Yes sir, congratulations on a successful quarter. Our question is, I know you got a license with the Major League Baseball. Do you have any intentions of reaching out to the NFL or the NBA or the Hockey League?
Anshu Bhatnagar
So the answer is yes, we actually did reach out to other sports teams and NBA in particular expressed interest, but they wanted to kind of see how things would work out with MLB. With NFL they are more of a team specific license, so we cannot do a license with NFL as a whole, at least not right now that we know of and so we would have to approach each team individually and the cost of that is just way too expensive in terms of what they are looking for and we are looking at NHL as well.
So our first thought was let's get – let's prove what we can do with the with Major League Baseball and if that goes well, which it will, because we already have orders. I think it would be a great model to replicate so we can go to them and say “look, what we're doing with MLB and we can do the same with you as well”. Operator?
Operator
The next question comes from Ed Tompkins, a Private Investor.
Unidentified Analyst
Yes, my question is – I came in a little late, but my question is what is the progress on the late stage M&As and the progress with the funding accordingly.
Anshu Bhatnagar
So again, that’s a great question. So yeah we're constantly – we have a lot of M&A opportunities that we are currently looking at and we keep looking at right. But just one thing to be very clear or to clarify how we are going about our process of doing our M&A transactions, we're very, very methodical in that.
We do want to be perceived as a rollup strategy and we're just rolling up companies to increase market cap, that’s not at all what we want to do. We want to make sure that the acquisition is very strategic; it actually make sense in terms of what we're doing. So for instance with majorly baseball it was – we wanted to get into the U.S. market. It's something we've been trying to do for a very long time, but we didn't want to come in. It’s a whole new set up and so we wanted to come in with the right management, but also with the product that would open a lot of doors and that has – we have just a tremendous amount of distribution now with that because of this acquisition.
And the second thing we want to look at it is we want to make sure that it's really, really good for the company from a cost standpoint, as well as from shareholders. We don't want it to simply give away equity and you can look at Major League Baseball, this Big League Foods acquisition as a perfect example of that, the way that was structured, there was no equity given.
So it has no effect to shareholders and in fact any compensation made to the previous owner comes from the profit of the company. So nothing of it even comes in terms of cash, we have to spend. But it’s our company now so we're spending money, but there's no capital that we're giving out in terms of spending shareholder capital, right.
So I'm very, very mindful of how we move forward in terms of doing acquisitions moving forward and we have quite a few that meet those requirements. So we've structured deal that are, but we want to take our time, we want to make sure it makes sense and as they happen we will definitely, obviously announce those. But we are being very strategic on that, and it's easy to just kind of keep rolling up companies, but that’s not – that’s really not what we want to do. Operator?
Operator
Our next question comes from Randy Kenny with XF Holdings.
Randy Kenny
Hey, I was just curious if any of your potential mergers or acquisitions are going to be within the marijuana sector. I know one your major investors Andrew Garnock, he was an early investor in Cronos Group which has been quite a success in there, a major factor in the marijuana sector overall, so that's why I'm asking a question?
Anshu Bhatnagar
Yeah, we get that a lot, but at this time we're not really looking at that vector. We do get a lot of opportunities and we're not shying away from that by any means. So if the opportunity is right, we will definitely move in that direction, but as of right now we have no active plan on getting into that space and we are not also – just as a further clarification we are not really doing anything with Andrew in that regard. Mr. Garnock in that regard at all. So you know if the right opportunity comes we would definitely take advice from him since he knows the space very well, but at this time we're not we're not looking at that space nor there is nothing actively going on there. Operator?
Operator
Our next question comes from Ivan Duncan a Private Investor.
Unidentified Analyst
Yes, I wanted to know in regards to working with the commercial bank, established working capital line of credit, I wanted to know like if you guys can give any insight to how you’re your applying for, and what you anticipate the use of that credit line?
Anshu Bhatnagar
So yes, we're working pretty actively with our commercial bank right now and are pretty close in getting something set up. The idea really is – first off, the structure of that facility is really a crate finance structure. So in other words its structured finance for our ability to export and to sell either exporter or domestically. So it would be a structured finance that would be, you know just an interest bearing. So there's no equity, no warrants or obviously just a commercial bank, but that's kind of what we're working on.
And our idea is really, we can use a lot of capital there, but just to set up the relationship first and that's what our sort of banks have said, “look, you set up the relationship. We can always increase your line as you user facility. So let's just set up something and then we can always increase that line. So that’s what we are working on, so trying to get the right structure first and the right interest rate and other rates worked out and once that's in place, we can always kind of figure out our use of the line and actually increase it accordingly.
And just to add on that, and one more thing, the way that that line also works is you can always discount your letters of credit that we get. So even though we have a line it would be able to rotate many times over, because the minute we ship and we get our bills are waiting. We can just submit that to the bank and they’ll give us the cash in our line is fully available again.
We don't really have to wait for the customer to pay us to have our crate facility line of credit kind of re-toped up again. So we don't need the money to come in, they’ll actually advance money. Operator.
Operator
Our next question comes from Brian Swift with Sutter Securities.
Brian Swift
Thanks, and again congratulations Anshu on a great quarter and also on getting in line the baggage you’ve had to carry for the last couple years behind you. Thanks for the color on the Big League Foods. Could you give us a little color on maybe the part of your backlog that excite you the most about how you can use the additional capital that you received and along with what your you know, what you are still trying to get in terms of bank type financing. What area in this backlog that you have, would fit the best to that and that really gives you the comfort about how you're going to be able to you know grow rapidly over the next couple of quarters.
Anshu Bhatnagar
Thanks for that. So yeah, I'm definitely, I would say most excited about the Big League Foods and really from for purposes of entering in this market. I mean the U.S. market, you know it's a great market for two fronts. One, it’s the largest market in the world, but also it's what investors understand and shareholders too.
Have you actually gone to a retail shop, walk to your local Safeway and pick up in the grocery aisle, pick up an ice cream look on the back and it says Verus Foods on the back, right. It's a fantastic feeling for people to know that, hey, this is real and they can eat it, they can taste it. So that that really excites me, it makes investors more excited as well. So that’s something we've been, very, very excited about.
It also makes financing a lot easier, even from this facility or this bank financing, commercial bank financing we're working on, the reason it's taking so long is because it's international, right. So banks need to get comfortable with this, we need to get trade credit insurance on our buyers, it’s a big process right in terms of establishing credit facility for international exports, but when it comes to domestic it's a lot easier.
So what we are definitely, that really excites us and I think that looking forward to being in this market, its opened so many doors. We are going to be in so many retail locations and just to be able to take other products and push them through the same retail locations is very easy. So for us to actually grow very\, very rapidly is something we are looking forward to. Operator?
Operator
Our next question comes from Ralph Viber a Private Investor.
Unidentified Analyst
Hi, a couple of questions. I'm curious about the Major League Baseball deal. Do you have any retail grocery chains lined up for this, for this candy and ice cream deal? And the other question I have is, I’m curious as to Andrew Garnock interest in your company, do you see partnerships in the future?
Anshu Bhatnagar
So on the – with respect to the first question, yeah so we're working with a lot of – just about all the major big retail shops. So including we get a question about Cosco or Wal-Mart, so Cosco is defiantly very interested, Wal-Mart’s also very interested in the product, both of those wanted to see products before they actually put it on the shelves.
So with the product now, coming within a couple of weeks we should be in a good place for that, but there's a lot of retail locations that you know we are going to be in just about all the sort of no names. So that's something we are working on and we’ll start announcing that once they are finalized, but you know just about everyone you could think of, we have already interest in. So there’s actually about 40,000 retail locations in the country that have already expressed interest in carrying our product.
And with respect to Andrew, I'm not – you know I mean he's actually expressed interest in our company almost two years ago, so it took us awhile to actually you know take money from him, but he was a shareholder a long, long time shareholder. So it’s – I don’t think he is interested in our company on a TBD play. It’s just he is – you know assuming he just liked the company and I can’t really say anything more than that about his intentions. Operator?
Operator
Our next question comes from Jim McAuliffe a Private Investor.
Unidentified Analyst
Yes, hi Anshu.
Anshu Bhatnagar
Hi, how are you?
Unidentified Analyst
Good, I have a follow up question to your Big Leagues brand that you're launching now. Are you going to add additional products to this line in such as peanuts, popcorn, whatever?
Anshu Bhatnagar
So our [inaudible] currently covers all Ice cream and candies and related products, so that's kind of what we're focusing on and there is just so many varieties of those products that we're currently exploring for next year and we're developing different molds and different types of products, so as of right now I think that's kind of our main focus.
We might sort of expand that to look at adding some stuff and like you know for party packs or something like that for kids theme parties, but beyond that we're not really looking at savories which our license does not cover right now. So anything that's salted, we are not covered in that. Operator?
Operator
Our next question comes from Brad Burt a Private Investor.
Unidentified Analyst
Thank you for taking my call. Hey, I missed your last segment when you talked about reverse split. I know that’s a horrible subject to talk about, but it’s a very, very – did you mention that you would give investors a heads up before that happens.
Anshu Bhatnagar
So, you know I think our intent, I think what I was talking about was that you know we don't – we have no intention on just reversing the stocks for the sake of reversing it or for doing anything else. Our ideas is to grow this company and keep growing this the best way we see possible and any sort of, any corporate action we ever take in the company needs to sort of benefit the company and shareholders, right and that’s kind of our overall theme, so a hint of saying that, hey look, this is a good time to reverse it or it's not something we're going to do.
So the only time that's ever going to happen, that we decide we are going to reverse our stock is if we are in the process of up listing or if we have any other event that’s taking place. So for instance, if there is you know an institutional investor that wants to invest, but they are not able to – they want to put in a lot of capital into the company, but they need the stock to above $1, we would consider it at that time, right or if we're doing saying an M&A deal where a large company, but they want to be, want the company to be listed on an exchange, and so because of that we're trying to do – so there has to be some reason to do such an event, otherwise our idea would be to grow the – to let the stock just grow organically until it makes sense. Operator?
Operator
Our next question comes from [inaudible] a Private Investor.
Unidentified Analyst
Yeah hi, I want to thank you guys, thank the company, thank you Mark for everything you've done for us as a shareholder group. And I also wanted to thank the strong longs that we have here. My question was actually about Andrew Garnock’s involvement or what peaked his interest actually. I know you talked about this prior to me asking the question, but if you could elaborate on what might have peaked his interest into the company, that would be great.
Also we seem to be having issues on e-trade with Morningstar and analysis opinions on the buy rating on the stock, it doesn’t seem to be there.
Anshu Bhatnagar
Thanks a lot. So again, I really can't speak to why Andrew’s interest in our company. I think this is something that's been there for a long time, so I don't really think it has anything to do with some strategic time with anything that he’s working on. I think it’s just he looked at the company as an opportunist investment and felt that this was a good invested from where we were, and I think that’s why he’s invested in the company.
And again with respect to e-trade, I’m really not sure why that’s happening. I mean the only thing we can do as a company is try to up-lift – to list on the QB and I’m hoping that that would resolve the matter. I’m not sure if they will. But I’m hopping that’s maybe that’s something that could at least make them comfortable. I’m not sure what happened and why we have issues with them or ever for that matter what we could do as a company about that. Operator?
Operator
Our next question comes from David McCloud, a Private Investor.
Unidentified Analyst
How are you doing Mark? And congratulations on a great quarter. You answered mostly my questions, I was on a conference call, but I’ll ask it anyway, just in case you have anything that you want to add.
But you guys said that by the end of this quarter and the beginning of the third quarter that you wanted to be in the U.S. market. How large of a footprint does Verus have in the U.S. market? Are you guys are trying to find a decent entry point, trying to find an entry point, something like basically take it from there and try to take it all aboard. You guys have deals in place that’s quantified sustainable economic income, payable income, as well as give you guys a footprint in the U.S. market; a decent piece of the market I should say.
I know you guys have, you said that you guys had deals with individual MLB team. What about you know the supermarkets, the grocery stores and the e-commerce sites that matched those deals with – that would put Verus to the forefront. Anything that you want to add?
Anshu Bhatnagar
Right. And so just to, yeah to – with the MOV we are going to be in the retail locations. So this is not just selling into a stadium [ph]. So we’re actually going to be just about every major retail location that you see, that’s really what the goal is and our national footprint.
So we started off with the four teams only because it costs a lot of money to produce a packaging and each brand and each SKU. So with the 30 we wanted to test the market, so we took the four biggest markets with the four teams and we have launch that, but we're going to be in just about every grocery store, every sea store, so from all the gas stations, from 7/11 as well as all the bookstore, the grocery stores from like the takeaways, 7/11 and the Wal-Mat’s, Cosco’s and the like, so that’s really what the goal is on a national level.
And with the candies we will be in every other box store, that's where our goal is from fixed sporting goods, to Target to TK Max. So that’s the kind of footprint that we were looking to get into and what candies you can be everywhere, even down from the hardware store, so that we have interest in selling in those in those markets as well.
So we do look at getting international footprint in just about all the retail locations. As I mentioned earlier, we're about 40,000 locations, we have interests in or that have interest in our product and then once we have that, we can access our cross selling other products as well. So once we have the distribution in there, we can add other products outside of MLB branded products. Operator?
Operator
Our next question comes from Matt Lusais, a Private Investor.
Unidentified Analyst
Hey Anshu, can you hear me?
Anshu Bhatnagar
Yes, I can.
Unidentified Analyst
Thank you so much for all the work you've done and I just speak for everybody that a private investor we're just really proud of the work you are doing. My question – my original question actually was about Andrew Garnock, but you've been beaten up about that and thank you for answering it. But my other question for you is just about in general where do you see Verus going kind of how do you grow it from here and what's your larger vision for the next year or so.
Anshu Bhatnagar
Yeah, thanks man. So you know we’re still like a, what we call early stage company and even though we’ve been growing steadily, I just feel like our backlog is so much right now. And just to kind of meet that demand, I think that's really where we want to be and just to continue to build out this market but also look at other markets as well and become an international consumer products company, that's kind of what we're striving to become. And you know I just think that right now we're so early that even if we don't do anything major we’ll continue to see triple digit growth for at least the foreseeable future. So there's a lot where you just need to do in terms of meeting our existing demand and to be able to fulfill that.
Unidentified Analyst
Awesome! Thank you so much.
Anshu Bhatnagar
Operator?
Operator
Our next question comes from George Thompson, Private Investor.
Unidentified Analyst
Yes sir, this is my second question to you. It’s my understanding that your MLB products was rolled out July 8 or July 9. What is your marketing or advertising campaign? Have you reached out to any particular baseball players to sponsor the product or the initiative that’s going to be rolled out in a couple of weeks?
Anshu Bhatnagar
So yeah, so initially what we're doing is we're starting up with distribution agreement, so we have quite a few distribution agreements we are working with. But once we sort of, we are looking at other marketing channels as well, as well as sponsorships, we've had major discussions on that, but as of right now we just kind of want to launch the product, understand the sort of feedback we get from the product.
That product is our own recipes, we've actually had them designed in labs and you know often what happens is when you make it in the lab and when you actually get it out there, there is some changes that happen. So we really want to just get the product out initially and see what sort of feedback is and if we need to make any changes to it and at some point, you know once we, you know with the goal by next year to hopefully be in all 30 teams. You know that’s what we are hoping and then we can look on how we want to future advertise and promote the product. Operator?
Operator
Our next question comes from Dave Donaldson with Professional Escort Services. Mr. Donaldson, your line is open and we cannot hear you. Please check your mute function.
We’ll move on to our next question due to no response. Our next question comes from Ivan Duncan, a Private Investor.
Unidentified Analyst
Yes, one question that I have, in regards to the organic market, are you guys going to hit any organic markets, as whole foods went out to distributors or the fresh market one of the distributors that you guys want to get into, but what's the, I guess forcible future for the organic market.
Anshu Bhatnagar
Yeah no, that's a great question. So that is something we're looking at right now, not necessarily organic but just whole foods in general like using even like on candies is trying to get more you know, cane sugar as opposed to and no artificial coloring and the like. So we are looking at actively entering into a more healthier food market and whole foods would be, and whole foods, Trader Joes and the likes would be a greater market for that. But that is something we’re looking at and trying to explore what product mix would make more sense, now that we're in this market. So that's something we're going to definitely continue to explore. Operator?
Operator
Our next question comes from Shane O'Brien with OTC Investments.
Shane O'Brien
Yeah, this is my second question and that may have already been asked and I may have missed it, but according to filings Garnock has or in his consulting firm has over 50% ownership of the company. How much involved are they on day-to-day operations and what exactly are they – what is their motives as far as ownership in the company?
Anshu Bhatnagar
So, they are not involved in any day-to-day. There's no day-to-day involvement in the company at all. So other than you know to the extent – you know yeah, they are zero. Let me rephrase that, and I’ll leave it at that, there is no involvement and just an investor, that’s really his interest. Operator?
Operator
And we have no further questions at this time. I'd like to turn the conference back to Mr. Bhatnagar for any additional or close remarks.
Anshu Bhatnagar
I just want to thank everyone for staying with the company and you know we look forward to another wonderful quarter and we'll keep you updated and that's all I have. So Mark will – I guess this ends the call, right.
Operator
Thank you, and that does conclude today's conference. We thank you for your participation. You may now disconnect.
source
https://seekingalpha.com/article/4271901-veru...ipt?page=1
Jun. 24, 2019 7:34 PM ET | About: Verus International, Inc. (VRUS)
Verus International, Inc (OTCPK:VRUS) Q2 2019 Earnings Conference Call June 19, 2019 8:00 AM ET
Company Representatives
Anshu Bhatnagar - Chief Executive Officer-
Chris Cutchens - Chief Financial Officer
Mark Forney - MKR Group
Conference Call Participants
Shane O'Brien - OTC Investment
Randy Kenny - XF Holdings
Operator
Good day and welcome to the Verus International, Second Quarter, Fiscal 2019 Financial Results Conference Call. Today’s conference is being recorded. At this time I would like to turn the conference over to Mark Forney with MKR Group. Please go ahead.
Mark Forney
Thank you, operator. Good afternoon everyone and welcome to Verus International, Second Quarter Fiscal 2019 Conference Call.
Yesterday we issued our second quarter fiscal 2019 financial results. A copy of the Press Release is available on the Investor Relations section of our website and the financials are posted on EDGAR. We report our financials in U.S. dollars, so in today’s discussion we’ll use that currency unless otherwise noted.
Before beginning our formal remarks, I’d like to remind listeners that today’s discussion may contain forward-looking statements that reflect management’s current views with respect to future results or future events. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in these forward-looking statements. Verus does not undertake to update any forward-looking statements except as required.
You might also note that in today’s call our executive team are both traveling, and so we’re hopeful that the quality of the call will remain consistent, but we appreciate everyone’s patience in that regard.
I’d now like to turn the call over to Verus CEO, Anshu Bhatnagar. Please go ahead.
Anshu Bhatnagar
Thank you, Mark. First of all, I’d like to welcome our new shareholders who might be hearing my voice for the first time and welcome back all our long time shareholders. It’s been a while since we held one of these calls.
Those of you who have been with us the longest know how historic this call is today, because it signals not just a renewal of Verus as a company, but also marks the start of what we think is going to be a terrific growth phase that will change our company dramatically over the next few quarters.
In today’s call, I’ll make some comment on the just released 10-Q, answer a number of investor questions that we have collected during the last few months, then provide a look into our plans, into the remainder of 2019 and even into 2020.
As you know, we have an October year end, so these Q2 results correspond with the financial period that ended April 30, 2019. We are moving pretty fast right now whereas Verus just a few months ago seems like a different company and I think that the feeling is going to stay with us throughout the rest of the year.
First some comments about Q2, 2019. This was a watershed quarter in the sense that we achieved success in three areas of supreme importance: our capital structure, our order book, and our M&A plan, with the product line in geographical expansion as the end result.
The key event in Q2 was obviously the recapitalization announced on February 11, 2019 which eliminated our variable rate convertible debt and gave us a new starting point to grow the company. We are particularly grateful to our lead investors Andrew Garnock, Rick Berdon, Don Monaco and Monaco Group for making that possible.
We subsequently added $14 million in new backlog via the honey and rice fields in February and March. These basic product categories represent the kind of steady stable business that over time will create a base of dependable cash flow. So when the margins are right, we will continue to seek out these type of business to complement our specialty branded product offering.
We book ended this quarter with another major event, the acquisition of Big League Foods, which we announced in the last week of April. That acquisition gave us more than just a turnkey subsidiary and opened the largest market for us, the United States, and also gave us an industry veteran in Jim Wheeler.
In addition to holding executive positions at seven companies during his career, Jim is also an inventor who altered a number of patents, including a key patent for the pump mechanism that revolutionized the nacho [ph] industry. The acquisition of Big League Foods was very important on multiple levels, which will have ramifications across our entire business.
Even with a turnkey of operations there is a startup checklist. So we spent the first week setting up accounts, ordering packaging and completing the typical pre-launch tasks that a company in New Line and new vendor relationships. I’m excited to say that everything is moving along well and on schedule. The MLB teams we will feature in the ice cream lines will be the Chicago Cubs, Boston Red Sox, New York Yankees and Philadelphia Phillies. So everyone in those markets will get their first taste.
We’ll start with pint sized packaging and four flavors. We have additional flavors read to go and can add to the line later as needed. This part of the line will feature premium ice cream with a goal to create high quality products that will generate repeat purchases based on the quality and taste, along with fan loyalty. Our first production run will account for our eight to nine, after which will begin shipping via our distributors to locations in roughly 2,500 store footprint within the metro market for each team.
We will get some revenue contributions from this business next quarter which ends July 31, but the subsidy will really start to contribute in successive quarters. The initial candy shipments will follow a similar pattern with the store mix wearing someone. Candy has a much larger potential for plant because it can be placed in locations that do not have freezer cases.
These days that means just about every store including non-food retailer and office supplies, sporting goods and home good change, all which carry candy and other snack products.
If you step back and look at the potential of Big League Foods subsidiary, you will understand our confidence in predicting sustainable growth stretching out over many quarters. We intend to roll-up that group of teams tied originally to third party manufacturing facilities, so the same potential plan will be replaced across the country. Eventually the four teams will grow to eight, then 12, then onward until we reach all 30 metro team markets.
The product line will also expand with the addition of a full range of frozen desserts, including Drumstick, Ice Cream Sandwiches, cups and bars. We have a solid game plan to stair step this growth regionally, laid out in an orderly fashion until we have the full team coverage and a full product mix.
To put the scale of this opportunity in perspective, according to industry sources there are more than 750,000 retail locations that could carry either our ice cream, candy or both, for the first 2,500 stores is just a tiny sliver of our potential coverage. We obviously won’t be in every store in the full U.S. retail map, but based on our initial conversations with distributors and some selected chains, we believe that we can eventually carve out a double digit percentage of that store base.
We will provide some projections on that after we see our initial sell through in some of these key markets. The reaction to the packaging and product lines have been excellent during the prelaunch phase, so we have a high degree of confidence in reaching and exceeding our year one goals for the subsidiary.
Big League Foods has the potential to be a growth driver for Verus that will have to be measured not in months or even a quarter, but in yeas. There’s a secondary benefit that many investors may not realize and that is the important of having a 100% North American business unit where the sourcing, sales, invoicing and payments are U.S. based. That fundamentally changes Verus in the eyes of lenders, giving us the ability to access a much larger pool of sources of capital, particularly those banks that prefer or are limited to finding U.S. operations.
We have been working on multiple types of non-dilutive financing for quite a while and the missing elements have been two-fold: One, a track record of sales growth; and two, U.S. centric business. This quarter we met those requirements. We are on our third straight quarter of growth and the acquisitions of MLB license business, so new doors are finally opening for us.
There’s no question that Big League Foods has changed Verus in the eyes of financing sources, particularly with merchants and commercial banks. That’s coming loud and clear to our conversation with our contacts at these lending sources. We think this quarter we just reported were marked a tipping point in regard to some of our financing initiatives. So we look forward to updating investors on those topics in the future.
The best way to describe our company today is to use the word “conditional,” because we are quickly transforming from a wholesale focused business, into a full consumer products company. Our dramatic progress in just three months and so we [inaudible] we should offer ample proof that the growth embedded in Verus has always been there, it just needed to be untethered from the legacy issues that held us back for two years.
This is our third straight quarter of triple digit growth and that growth is entirely organic. Regarding our new Honey business, we are finishing our prelaunch win. We have received multiple orders from many markets around the world. We will provide an update on that business as it commences.
I would also like to point out that our recent working capital infusion of a little over $1 million only occurred last month, so these funds did not contribute to our strong Q2 2019 performance. The effect of that working capital will begin in the next quarter, but will really show up in later quarters. So there is a great trend developing here to carry us well into 2020.
We stopped publishing our backlog figures a while ago, chiefly because the numbers were so large they could rightly be considered almost theoretical due to the company’s lack of working capital. Ironically this potential backlog is even larger today, so we do not intend to change that policy.
Next up, I’ll turn the call over to CFO Chris Cutchens to cover some key financial metrics from this quarter.
Chris Cutchens
Thanks Anshu. As most of you know, I joined Verus as full time CFO as of June 1, but I’m not a stranger to the company, as this is my fourth set of financials for Verus. I’m currently relocating to Maryland to join Anshu at Corporate headquarters and have already begun to expand my role in the operations of the company.
I joined Anshu for a due diligence trip to an acquisition candidate during the first week of June, so I was glad to get a first-hand look at one of the great opportunities that we have in front of us. We have set some lofty goals for ourselves, and I look forward to being part of the team that turns those goals into reality.
So on to the financials. First I will take in a bit to the numbers from second quarter 2019 and then provide some commentary on our financial strategy through the end of the year. The key figure from this quarter is the revenue line, which came in at $2.9 million during the second quarter of 2019, representing an increase of 153% over the $1.2 million generated during second quarter of 2018.
As Anshu noted, this is largely organic growth in the GCC product lines and does not yet reflect our new sources of funding or the startup of recently announced product categories in that region for the U.S. Triple digit growth from programs that predate the February recap shows the power of the Verus model and how much leverage is embedded in the company’s strategy.
Currently all the company’s revenue comes from 4 GCC countries: the UAE, Saudi Arabia, Bahrain and Oman. But second quarter 2019 will be the last quarter with that geographic concentration. The upcoming quarter will feature additional geographies for the first time and we expect each subsequent quarter to widen our footprint into new markets, countries and continents. The international part of our corporate name is going to become even more appropriate.
The GCC lines today represent steady, predictable business, so it is no surprise that our gross margins barely moved from last quarter coming in at a very healthy 15.4%. Wholesale and commodity type lines carry lower margins than branded products, but they also tend to have faster turns in the GCC. So the trade off in margin can be overcome by the high frequency of shipments. This is an import reliant region with growing demand. In these core GCC lines $1 in funding can turn into $9 or more in revenue over the course of the year.
Overall Verus generated an operating loss of $244,000 during the quarter, compared to an operating loss of $307,000 during the second quarter of 2018. However, the second quarter 2019 operating loss included $291,000 of non-cash stock based compensation expense, which on a pro-forma basis Verus generated an operating profit of $47,000, which is an increase of $354,000 compared to the second quarter of 2018.
At this early stage, non-cash charges and provisions can swing a company to either side of the net profit line, but this is one case we are being profitable at such a low revenue level is a major positive and bodes well for the future. The pro-forma figure represents 115% year-over-year improvement and as a clear indication of the leverage in a business model.
As expected, legal and professional fees declined, coming in at $77,000, a 45% improvement compared to the $139,000 during second quarter of 2018 and a 31% improvement over the $112,000 spent a quarter ago during the first quarter 2019.
General and administrative or G&A is always a bit of a catch all category for early stage companies, so it is sometimes better to look at that line item as a percentage of revenue. In that regard, G&A was about 8% of revenue during the second quarter of 2019 compared to 11% during the second quarter of 2018, representing a 288 basis point reduction on a year-over-year basis.
We expect all of our operating metrics to improve as the company gains traction and revenue kicks in from our multiple new product categories, but it may take a few quarters to see that improvement. During each star up period the company will absorb extra costs on the front end of new product launches, so at this small revenue base, those upfront costs can still have an impact.
A thing to remember is that every contract Verus signs is designed to be profitable, so upfront costs will be quickly absorbed as each one ramps. That will hold particularly true for multi-quarter growth strategies such as Big League Foods, which is already eclipsing any prior business launch in company history. In a way this is the equivalent of launching 30 different brands, but without the expense of traditional brand awareness programs. So the allocations today should yield considerable revenue very quickly, because the majority of the dollars spent are going to working capital for production.
The net income line, showed a profit of $2.2 million, largely due to the reversal of certain charges booked in the prior quarter related to the settlement of certain convertible notes payable and a gain realized on the extinguishment of certain other convertible notes payable during the quarter, both of which are beneficial to the company’s current capitalization strategy. This is another case where the income statement of a transitional companies such as Verus takes some new ones to interpret.
The period exiting a recap often contains provisions, reversals and other necessary accounting measures. The deal is much with theoretical outcomes as they do with actual financials. The good news is that we expect future quarters to become more understandable and hopefully simpler as all of the recapped legal and related noise dissipates from the story.
Verus just posted a 153% revenue increase, but if our shipment schedules stay true to form, we expect to improve our growth rate considerably in the final two quarters of fiscal 2019. We believe we are just weeks away from a revenue tipping point with initial shipments of ice cream and candy.
Next up, I would like to talk about our efforts to increase our financial strength. Cash at the end of the periods showed a significant increase as the company ended second quarter of 2019, to $493,000 in cash compared to only $118,000 at the same period last year.
With an additional capital infusion of $500,000 that we gathered after quarter end, our cash position is growing even stronger during the third quarter of 2019, so this is an area with some very welcome improvement. The majority of our cash goes directly to working capital, so the influence on future revenue was almost immediate.
We are working on new sources of financing that can unlock additional backlog. So we expect to have some clearly on that subject in the coming weeks. Completion of this quarterly filing was part of that process, so we are hopeful that these solid results take us one step closer to those additional sources of funds.
At this time I would like to turn the call back over to Anshu for his closing comments.
Anshu Bhatnagar
[Inaudible] about our M&A efforts, particularly the pace of signing new companies, but investors should understand that our approach to M&A can best be described as thorough. For example, we started our due diligence on some of our candidates as far back as early 2018, Big League Foods actually leapt over in few of our earlier prospects, because the timing was so important and the potential was so large.
As a company with limited resources, we need to be prudent in the M&A arena, so we’re taking our time to really get to know our candidates well before moving ahead. We have a pretty specific wish list, preferring turnkey or turnaround stories where companies has fundamental need that when filled can create a very rapid triple digit growth and winning environment for both Verus and the acquired company.
We currently have many candidates in review. We have three under serious due diligence and two in great late stage negotiations. There are no guarantees in closing M&A, so some of these candidates may not actually be part of Verus, but each has a particular attribute that under the right scenario would contribute significantly to our growth.
We think Big League Foods is going to serve as a great example of the advantages of joining forces with our team. So success in that subsidiary will go a long way in enhancing our status with M&A candidates in the future.
Other than a long tour for MLB branded products and planning other international lines, our number one focus is getting trade financing, particularly covering our non-U.S. business. Our organic growth is excellent, but we can turn that into hyper growth with a bit more funding.
We get two questions almost daily; do we plan to publish this year, and possibly [inaudible]. We have a goal to out license [ph] as soon as it makes sense for the company. There needs to be some [inaudible] for such an event. This may be such as raising institutional capital or an M&A transaction we being on a major exponent helps facilitate the transaction.
As for the dredged reverse world, we are probably one of the only micro-cap companies that is unafraid to discuss the concept of the reverse split and have been very open about that since early 2017. We have been consistent in saying the same thing; we will only implement a reverse when there is a good reason for such an action. This could be that we are ready to take the stock to the next level on a major exchange or we have an institutional investor wanting to invest, but is prohibited in investing in penny stocks. Otherwise we plan on letting our stock grow organically.
This should now be something to fear, because when investors see that day, it would be a signal that things are really clicking. We are still a small company with tasks to complete before we can take our place among the better known CPG companies, and we have the team, relationship and energy to maintain sustained growth.
When you stack up the experience of our executive than advisors you will see a group of industry veterans who can navigate, the move through multiple markets caps. Every early growth phase company is like a puzzle missing a few pieces before you see the full pictures. We are gradually filling in those pieces. We hope that investors see Verus the same way we do; as an open ended growth story that can generate consistent profitable results and become a respected leader in the CPG space.
We appreciate everyone joining us today for this call. At this time I would like to open up the call for questions.
Question-and-Answer Session
Operator
[Operator Instructions]. We’ll take our first question from Shane O'Brien with OTC Investment.
Shane O'Brien
Yeah hi, my name is Shane O'Brien. I was just wondering what is going on with the Disney deals overseas.
Anshu Bhatnagar
Thank you, Shane. So yeah, we still have the Disney contract. That’s coming to end. It’s not as lucrative as some of the other opportunities we’ve been working on and it’s not so much that the margins or anything are not great on that, it’s just more that commitment that’s there, it’s far more than what we are able to sell. So it’s so an ongoing contract, but we are going to have to relook at – I think it’s coming up for renewal and we will have to kind of figure out if this is something we want pursue again in the same markets.
I mean I think Disney makes senses in other markets, but in this particular market I’m not sure if this is something we can meet the commitment requirements that Disney wants from us.
Operator I’m ready for the next question.
Operator
We'll take our next question from a Private Investor, Karthick Srinivasan.
Unidentified Analyst
Thank you. I had a couple questions for starters. You obviously had a number of new product announcements since the last time you did an earnings call, and I just wanted to kind of get a better sense of what stages those are at in terms of the ramps on prior call. Obviously you touched on Disney so we can ignore that for now.
But in particular I'm curious where beverages are at? You made a number of announcements, I believe in December of 2018 about a new beverage product line that you were looking to launch, where does that stand? And then more broadly speaking if we are looking at most recent quarter. Could you give us some insight as to how the revenues broke down by product line versus geography, just so we can – how to think about your gross margins going forward and how that calibrates with the type of product mix you have?
Anshu Bhatnagar
Alright, thanks Karthick for that. So with respect to our beverages, so we did launch quite a few beverages and I think it's more – we're still tweaking our recipes and the different mix that we have and they are going alright. So we've launched the two brands in the Middle East, as well as some other products and it’s not at full capacity right now, only because turns are much larger, much slower when it comes to branded products from the time we actually are able to ship and actually get our return back on that.
So we haven't really gone all out in terms of a large scale distribution, but we have started distributing that those products on the beverage side. Our big focus right now is really on the MLB branded products and on that we have already commenced production on just a huge quantity of both ice creams and candies, and all the packaging have already been printed and I believe the candies have already been produced.
As far as the ice creams are concern, they would be produced I believe July 8. It would be July 8, July 9 we’ll start production on the ice creams and they'll start distributing as from that point. So those are the big – the big product launch that we're doing is on the MLB branded products, with respect to the breakdown of actual numbers by category. We haven't disclosed that at this point. I think that is something we will do in a subsequent quarter and we can actually break that down a moving forward.
But as of right now we are just primarily just breaking down region, not by actual category of a product. Because people understand and a lot of it has to do with competitive reasons as well, but more importantly, we just didn’t have a, you know I think maybe subsequent quarters we’ll start back.
Operator, I'm ready for the next question.
Operator
Our next question comes from Private Investor, William Luke. Mr. Luke your line is open and we cannot hear you. Please check your mute function.
Due to no response, our next question comes from Bud Ramsey a Private Investor.
Unidentified Analyst
Hello?
Anshu Bhatnagar
Hello?
Unidentified Analyst
Yes, I’m interested whether you are or do you have any intentions on launching a CBD vitamin line or CBD oil or whatever?
Anshu Bhatnagar
Yeah, so that’s another question we get a lot. We don’t have any intentions right now of launching such a product. We do get a lot of request for our re products and you know we're not taking anything off the table. That is something we might consider at some future date, but as of right now we have nothing in the works or developments to launch a CBD related product.
Operator, I’m ready for the next question.
Operator
We'll take our next question from Randy Ramnath a Private Investors.
Unidentified Analyst
Hello Anshu, how are you?
Anshu Bhatnagar
Doing well.
Unidentified Analyst
Thanks for having this call. Okay, so I'm going to touch base on a few things. I hope you can stay with me for just a little bit more than one question. The thing that a lot of people have been talking about it is e-trade and their restriction that they put for online buying on Verus Foods. So I'm just wondering what the status on that is or if we were just waiting for QB to fix that?
Anshu Bhatnagar
And actually on that I don’t even know if QB will fix that. That is something we are working with them with hopes that that gets resolved, but I have no control or idea on how or what e-trade does. Sorry Randy, did I lose you?
Unidentified Analyst
No, so additionally on this $30 million funded backlog, rice and honey obviously come up to $12 million. The balance of that, are we to expect that that is beef and is poultry also going to come into the mix here?
Anshu Bhatnagar
So yes, poultry is like a very easy category for us. I mean that's where we have more orders, but that’s not part of this at all. The only reason we haven't started on the poultry is simply because its – most of the poultry either comes from U.S. or Brazil and the shipping time is so long. By the time we actually – and we have to pay advance for all poultry products and so by the time we pay for the products and it actually ships and actually reaches the port and we get paid, it just takes a very long time, sometimes as long as 90 days. So we have avoided at this point, until we have stronger trade finance that we are not going to start the poultry business.
But our backlog includes just across all our products, including our newly launched MLB branded products and partly because we paid all, we already paid for all of that, so it’s all funded in the sense that all the packaging has paid cash, all the manufacturing is paid in advance, so everything is ready to go. So this is fully ready and we're ready to start shipping as early as next month.
Operator, I’m ready.
Operator
Our next question comes from Chris Ziverman a Private Investor.
Unidentified Analyst
Hello! Can you hear me?
Anshu Bhatnagar
Yes.
Unidentified Analyst
Hey, thanks for taking the call and taking the time. Asking you about when we might be expected, number 1 to up-list to the OTCQB. I didn't really hear that answered, I wasn't sure if you did. I apologist if you did, number one.
Anshu Bhatnagar
So, I think according to the OTC it’s a four to six week process for their due diligence. Even though we were on the QB earlier, they said it was their standard procedure that they do that again. So we’ll follow-up with them and see when that happens.
Unidentified Analyst
Yeah, and number two, just a suggestion. Most penny stock investors flock to InvestorHub, so find the information and invest at least penny stocks.
When you guys do a press release, I know it's a little bit more expensive, but if you fail to use the market wired services, which is in sync with InvestorsHub, then the news icon doesn't appear there for potential investors to see.
Now so far in the past we've been fortunate because we've been killing two birds with one stone as you have been coming out with new filings which gives us that news icon there, and then you come out with the PR which we then put on the message boards for all to see, but if you're just going to put out a PR and without any filing, then mostly nobody knows about it in the penny stock community if that makes sense, but just a suggestion going forward.
Anshu Bhatnagar
Yes absolutely, I think that’s a great suggestion, we’ll defiantly keep that in mind and try to make that change. Operator?
Operator
Our next question comes from Brian Smith a Private Investor.
Unidentified Analyst
Hey, good afternoon Anshu and Chris, thank you all for making this conference call on and taking the questions from us. Two questions, one you have any detail or anymore comment on any non-food consumer products, specifically with cosmetics and fragrances you mentioned yesterday morning in at the release at the financials? And the second question would be the cold storage units that we recently built in Dubai. Those are being used yet, utilized and if not what do you plan on [inaudible] at rate. Thank you.
Anshu Bhatnagar
So yeah, with respect to the non-food categories and particularly the cosmetics and fragrances, so yeah we've been working with a company in Dubai and ship all over the same markets that we do, but also in Asia and other markets as well. And you know there's an opportunity to do an M&A merger with them or an acquisition of that company, so that's how we start looking at that and the real catalyst for that was not so much that we wanted to enter into product category but more that they were already in the same distribution channel we were planning on getting into.
So it was almost like its strategic acquisition where I would say it would save a lot of cost for us, as well as you know shipping a product or we have a delivery truck going with fragrances, we can add our case of juices or any other product at the same time, and it just saves a lot of time and then we started looking at many other companies that had expressed interest.
So that is something we're constantly looking at. We haven’t moved forward on that at this time, but it is an opportunity that's definitely there and you know there is a lot of other non-food categories that we've been exploring pretty heavily, because keeping in the same sort for line of consumer products, anything that’s in the retail shelf we would consider looking into it and that's something we're definitely looking at pretty heavily at this point.
With respect to the cold storage question, we don't own our own cold storage. All our cold storage facilities are using third party logistics. So we are definitely using that on a regular basis. Operator?
Operator
Our next question comes from George Thompson, a Private Investor.
Unidentified Analyst
Yes sir, how are you doing today?
Anshu Bhatnagar
Doing well.
Unidentified Analyst
Yes sir, congratulations on a successful quarter. Our question is, I know you got a license with the Major League Baseball. Do you have any intentions of reaching out to the NFL or the NBA or the Hockey League?
Anshu Bhatnagar
So the answer is yes, we actually did reach out to other sports teams and NBA in particular expressed interest, but they wanted to kind of see how things would work out with MLB. With NFL they are more of a team specific license, so we cannot do a license with NFL as a whole, at least not right now that we know of and so we would have to approach each team individually and the cost of that is just way too expensive in terms of what they are looking for and we are looking at NHL as well.
So our first thought was let's get – let's prove what we can do with the with Major League Baseball and if that goes well, which it will, because we already have orders. I think it would be a great model to replicate so we can go to them and say “look, what we're doing with MLB and we can do the same with you as well”. Operator?
Operator
The next question comes from Ed Tompkins, a Private Investor.
Unidentified Analyst
Yes, my question is – I came in a little late, but my question is what is the progress on the late stage M&As and the progress with the funding accordingly.
Anshu Bhatnagar
So again, that’s a great question. So yeah we're constantly – we have a lot of M&A opportunities that we are currently looking at and we keep looking at right. But just one thing to be very clear or to clarify how we are going about our process of doing our M&A transactions, we're very, very methodical in that.
We do want to be perceived as a rollup strategy and we're just rolling up companies to increase market cap, that’s not at all what we want to do. We want to make sure that the acquisition is very strategic; it actually make sense in terms of what we're doing. So for instance with majorly baseball it was – we wanted to get into the U.S. market. It's something we've been trying to do for a very long time, but we didn't want to come in. It’s a whole new set up and so we wanted to come in with the right management, but also with the product that would open a lot of doors and that has – we have just a tremendous amount of distribution now with that because of this acquisition.
And the second thing we want to look at it is we want to make sure that it's really, really good for the company from a cost standpoint, as well as from shareholders. We don't want it to simply give away equity and you can look at Major League Baseball, this Big League Foods acquisition as a perfect example of that, the way that was structured, there was no equity given.
So it has no effect to shareholders and in fact any compensation made to the previous owner comes from the profit of the company. So nothing of it even comes in terms of cash, we have to spend. But it’s our company now so we're spending money, but there's no capital that we're giving out in terms of spending shareholder capital, right.
So I'm very, very mindful of how we move forward in terms of doing acquisitions moving forward and we have quite a few that meet those requirements. So we've structured deal that are, but we want to take our time, we want to make sure it makes sense and as they happen we will definitely, obviously announce those. But we are being very strategic on that, and it's easy to just kind of keep rolling up companies, but that’s not – that’s really not what we want to do. Operator?
Operator
Our next question comes from Randy Kenny with XF Holdings.
Randy Kenny
Hey, I was just curious if any of your potential mergers or acquisitions are going to be within the marijuana sector. I know one your major investors Andrew Garnock, he was an early investor in Cronos Group which has been quite a success in there, a major factor in the marijuana sector overall, so that's why I'm asking a question?
Anshu Bhatnagar
Yeah, we get that a lot, but at this time we're not really looking at that vector. We do get a lot of opportunities and we're not shying away from that by any means. So if the opportunity is right, we will definitely move in that direction, but as of right now we have no active plan on getting into that space and we are not also – just as a further clarification we are not really doing anything with Andrew in that regard. Mr. Garnock in that regard at all. So you know if the right opportunity comes we would definitely take advice from him since he knows the space very well, but at this time we're not we're not looking at that space nor there is nothing actively going on there. Operator?
Operator
Our next question comes from Ivan Duncan a Private Investor.
Unidentified Analyst
Yes, I wanted to know in regards to working with the commercial bank, established working capital line of credit, I wanted to know like if you guys can give any insight to how you’re your applying for, and what you anticipate the use of that credit line?
Anshu Bhatnagar
So yes, we're working pretty actively with our commercial bank right now and are pretty close in getting something set up. The idea really is – first off, the structure of that facility is really a crate finance structure. So in other words its structured finance for our ability to export and to sell either exporter or domestically. So it would be a structured finance that would be, you know just an interest bearing. So there's no equity, no warrants or obviously just a commercial bank, but that's kind of what we're working on.
And our idea is really, we can use a lot of capital there, but just to set up the relationship first and that's what our sort of banks have said, “look, you set up the relationship. We can always increase your line as you user facility. So let's just set up something and then we can always increase that line. So that’s what we are working on, so trying to get the right structure first and the right interest rate and other rates worked out and once that's in place, we can always kind of figure out our use of the line and actually increase it accordingly.
And just to add on that, and one more thing, the way that that line also works is you can always discount your letters of credit that we get. So even though we have a line it would be able to rotate many times over, because the minute we ship and we get our bills are waiting. We can just submit that to the bank and they’ll give us the cash in our line is fully available again.
We don't really have to wait for the customer to pay us to have our crate facility line of credit kind of re-toped up again. So we don't need the money to come in, they’ll actually advance money. Operator.
Operator
Our next question comes from Brian Swift with Sutter Securities.
Brian Swift
Thanks, and again congratulations Anshu on a great quarter and also on getting in line the baggage you’ve had to carry for the last couple years behind you. Thanks for the color on the Big League Foods. Could you give us a little color on maybe the part of your backlog that excite you the most about how you can use the additional capital that you received and along with what your you know, what you are still trying to get in terms of bank type financing. What area in this backlog that you have, would fit the best to that and that really gives you the comfort about how you're going to be able to you know grow rapidly over the next couple of quarters.
Anshu Bhatnagar
Thanks for that. So yeah, I'm definitely, I would say most excited about the Big League Foods and really from for purposes of entering in this market. I mean the U.S. market, you know it's a great market for two fronts. One, it’s the largest market in the world, but also it's what investors understand and shareholders too.
Have you actually gone to a retail shop, walk to your local Safeway and pick up in the grocery aisle, pick up an ice cream look on the back and it says Verus Foods on the back, right. It's a fantastic feeling for people to know that, hey, this is real and they can eat it, they can taste it. So that that really excites me, it makes investors more excited as well. So that’s something we've been, very, very excited about.
It also makes financing a lot easier, even from this facility or this bank financing, commercial bank financing we're working on, the reason it's taking so long is because it's international, right. So banks need to get comfortable with this, we need to get trade credit insurance on our buyers, it’s a big process right in terms of establishing credit facility for international exports, but when it comes to domestic it's a lot easier.
So what we are definitely, that really excites us and I think that looking forward to being in this market, its opened so many doors. We are going to be in so many retail locations and just to be able to take other products and push them through the same retail locations is very easy. So for us to actually grow very\, very rapidly is something we are looking forward to. Operator?
Operator
Our next question comes from Ralph Viber a Private Investor.
Unidentified Analyst
Hi, a couple of questions. I'm curious about the Major League Baseball deal. Do you have any retail grocery chains lined up for this, for this candy and ice cream deal? And the other question I have is, I’m curious as to Andrew Garnock interest in your company, do you see partnerships in the future?
Anshu Bhatnagar
So on the – with respect to the first question, yeah so we're working with a lot of – just about all the major big retail shops. So including we get a question about Cosco or Wal-Mart, so Cosco is defiantly very interested, Wal-Mart’s also very interested in the product, both of those wanted to see products before they actually put it on the shelves.
So with the product now, coming within a couple of weeks we should be in a good place for that, but there's a lot of retail locations that you know we are going to be in just about all the sort of no names. So that's something we are working on and we’ll start announcing that once they are finalized, but you know just about everyone you could think of, we have already interest in. So there’s actually about 40,000 retail locations in the country that have already expressed interest in carrying our product.
And with respect to Andrew, I'm not – you know I mean he's actually expressed interest in our company almost two years ago, so it took us awhile to actually you know take money from him, but he was a shareholder a long, long time shareholder. So it’s – I don’t think he is interested in our company on a TBD play. It’s just he is – you know assuming he just liked the company and I can’t really say anything more than that about his intentions. Operator?
Operator
Our next question comes from Jim McAuliffe a Private Investor.
Unidentified Analyst
Yes, hi Anshu.
Anshu Bhatnagar
Hi, how are you?
Unidentified Analyst
Good, I have a follow up question to your Big Leagues brand that you're launching now. Are you going to add additional products to this line in such as peanuts, popcorn, whatever?
Anshu Bhatnagar
So our [inaudible] currently covers all Ice cream and candies and related products, so that's kind of what we're focusing on and there is just so many varieties of those products that we're currently exploring for next year and we're developing different molds and different types of products, so as of right now I think that's kind of our main focus.
We might sort of expand that to look at adding some stuff and like you know for party packs or something like that for kids theme parties, but beyond that we're not really looking at savories which our license does not cover right now. So anything that's salted, we are not covered in that. Operator?
Operator
Our next question comes from Brad Burt a Private Investor.
Unidentified Analyst
Thank you for taking my call. Hey, I missed your last segment when you talked about reverse split. I know that’s a horrible subject to talk about, but it’s a very, very – did you mention that you would give investors a heads up before that happens.
Anshu Bhatnagar
So, you know I think our intent, I think what I was talking about was that you know we don't – we have no intention on just reversing the stocks for the sake of reversing it or for doing anything else. Our ideas is to grow this company and keep growing this the best way we see possible and any sort of, any corporate action we ever take in the company needs to sort of benefit the company and shareholders, right and that’s kind of our overall theme, so a hint of saying that, hey look, this is a good time to reverse it or it's not something we're going to do.
So the only time that's ever going to happen, that we decide we are going to reverse our stock is if we are in the process of up listing or if we have any other event that’s taking place. So for instance, if there is you know an institutional investor that wants to invest, but they are not able to – they want to put in a lot of capital into the company, but they need the stock to above $1, we would consider it at that time, right or if we're doing saying an M&A deal where a large company, but they want to be, want the company to be listed on an exchange, and so because of that we're trying to do – so there has to be some reason to do such an event, otherwise our idea would be to grow the – to let the stock just grow organically until it makes sense. Operator?
Operator
Our next question comes from [inaudible] a Private Investor.
Unidentified Analyst
Yeah hi, I want to thank you guys, thank the company, thank you Mark for everything you've done for us as a shareholder group. And I also wanted to thank the strong longs that we have here. My question was actually about Andrew Garnock’s involvement or what peaked his interest actually. I know you talked about this prior to me asking the question, but if you could elaborate on what might have peaked his interest into the company, that would be great.
Also we seem to be having issues on e-trade with Morningstar and analysis opinions on the buy rating on the stock, it doesn’t seem to be there.
Anshu Bhatnagar
Thanks a lot. So again, I really can't speak to why Andrew’s interest in our company. I think this is something that's been there for a long time, so I don't really think it has anything to do with some strategic time with anything that he’s working on. I think it’s just he looked at the company as an opportunist investment and felt that this was a good invested from where we were, and I think that’s why he’s invested in the company.
And again with respect to e-trade, I’m really not sure why that’s happening. I mean the only thing we can do as a company is try to up-lift – to list on the QB and I’m hoping that that would resolve the matter. I’m not sure if they will. But I’m hopping that’s maybe that’s something that could at least make them comfortable. I’m not sure what happened and why we have issues with them or ever for that matter what we could do as a company about that. Operator?
Operator
Our next question comes from David McCloud, a Private Investor.
Unidentified Analyst
How are you doing Mark? And congratulations on a great quarter. You answered mostly my questions, I was on a conference call, but I’ll ask it anyway, just in case you have anything that you want to add.
But you guys said that by the end of this quarter and the beginning of the third quarter that you wanted to be in the U.S. market. How large of a footprint does Verus have in the U.S. market? Are you guys are trying to find a decent entry point, trying to find an entry point, something like basically take it from there and try to take it all aboard. You guys have deals in place that’s quantified sustainable economic income, payable income, as well as give you guys a footprint in the U.S. market; a decent piece of the market I should say.
I know you guys have, you said that you guys had deals with individual MLB team. What about you know the supermarkets, the grocery stores and the e-commerce sites that matched those deals with – that would put Verus to the forefront. Anything that you want to add?
Anshu Bhatnagar
Right. And so just to, yeah to – with the MOV we are going to be in the retail locations. So this is not just selling into a stadium [ph]. So we’re actually going to be just about every major retail location that you see, that’s really what the goal is and our national footprint.
So we started off with the four teams only because it costs a lot of money to produce a packaging and each brand and each SKU. So with the 30 we wanted to test the market, so we took the four biggest markets with the four teams and we have launch that, but we're going to be in just about every grocery store, every sea store, so from all the gas stations, from 7/11 as well as all the bookstore, the grocery stores from like the takeaways, 7/11 and the Wal-Mat’s, Cosco’s and the like, so that’s really what the goal is on a national level.
And with the candies we will be in every other box store, that's where our goal is from fixed sporting goods, to Target to TK Max. So that’s the kind of footprint that we were looking to get into and what candies you can be everywhere, even down from the hardware store, so that we have interest in selling in those in those markets as well.
So we do look at getting international footprint in just about all the retail locations. As I mentioned earlier, we're about 40,000 locations, we have interests in or that have interest in our product and then once we have that, we can access our cross selling other products as well. So once we have the distribution in there, we can add other products outside of MLB branded products. Operator?
Operator
Our next question comes from Matt Lusais, a Private Investor.
Unidentified Analyst
Hey Anshu, can you hear me?
Anshu Bhatnagar
Yes, I can.
Unidentified Analyst
Thank you so much for all the work you've done and I just speak for everybody that a private investor we're just really proud of the work you are doing. My question – my original question actually was about Andrew Garnock, but you've been beaten up about that and thank you for answering it. But my other question for you is just about in general where do you see Verus going kind of how do you grow it from here and what's your larger vision for the next year or so.
Anshu Bhatnagar
Yeah, thanks man. So you know we’re still like a, what we call early stage company and even though we’ve been growing steadily, I just feel like our backlog is so much right now. And just to kind of meet that demand, I think that's really where we want to be and just to continue to build out this market but also look at other markets as well and become an international consumer products company, that's kind of what we're striving to become. And you know I just think that right now we're so early that even if we don't do anything major we’ll continue to see triple digit growth for at least the foreseeable future. So there's a lot where you just need to do in terms of meeting our existing demand and to be able to fulfill that.
Unidentified Analyst
Awesome! Thank you so much.
Anshu Bhatnagar
Operator?
Operator
Our next question comes from George Thompson, Private Investor.
Unidentified Analyst
Yes sir, this is my second question to you. It’s my understanding that your MLB products was rolled out July 8 or July 9. What is your marketing or advertising campaign? Have you reached out to any particular baseball players to sponsor the product or the initiative that’s going to be rolled out in a couple of weeks?
Anshu Bhatnagar
So yeah, so initially what we're doing is we're starting up with distribution agreement, so we have quite a few distribution agreements we are working with. But once we sort of, we are looking at other marketing channels as well, as well as sponsorships, we've had major discussions on that, but as of right now we just kind of want to launch the product, understand the sort of feedback we get from the product.
That product is our own recipes, we've actually had them designed in labs and you know often what happens is when you make it in the lab and when you actually get it out there, there is some changes that happen. So we really want to just get the product out initially and see what sort of feedback is and if we need to make any changes to it and at some point, you know once we, you know with the goal by next year to hopefully be in all 30 teams. You know that’s what we are hoping and then we can look on how we want to future advertise and promote the product. Operator?
Operator
Our next question comes from Dave Donaldson with Professional Escort Services. Mr. Donaldson, your line is open and we cannot hear you. Please check your mute function.
We’ll move on to our next question due to no response. Our next question comes from Ivan Duncan, a Private Investor.
Unidentified Analyst
Yes, one question that I have, in regards to the organic market, are you guys going to hit any organic markets, as whole foods went out to distributors or the fresh market one of the distributors that you guys want to get into, but what's the, I guess forcible future for the organic market.
Anshu Bhatnagar
Yeah no, that's a great question. So that is something we're looking at right now, not necessarily organic but just whole foods in general like using even like on candies is trying to get more you know, cane sugar as opposed to and no artificial coloring and the like. So we are looking at actively entering into a more healthier food market and whole foods would be, and whole foods, Trader Joes and the likes would be a greater market for that. But that is something we’re looking at and trying to explore what product mix would make more sense, now that we're in this market. So that's something we're going to definitely continue to explore. Operator?
Operator
Our next question comes from Shane O'Brien with OTC Investments.
Shane O'Brien
Yeah, this is my second question and that may have already been asked and I may have missed it, but according to filings Garnock has or in his consulting firm has over 50% ownership of the company. How much involved are they on day-to-day operations and what exactly are they – what is their motives as far as ownership in the company?
Anshu Bhatnagar
So, they are not involved in any day-to-day. There's no day-to-day involvement in the company at all. So other than you know to the extent – you know yeah, they are zero. Let me rephrase that, and I’ll leave it at that, there is no involvement and just an investor, that’s really his interest. Operator?
Operator
And we have no further questions at this time. I'd like to turn the conference back to Mr. Bhatnagar for any additional or close remarks.
Anshu Bhatnagar
I just want to thank everyone for staying with the company and you know we look forward to another wonderful quarter and we'll keep you updated and that's all I have. So Mark will – I guess this ends the call, right.
Operator
Thank you, and that does conclude today's conference. We thank you for your participation. You may now disconnect.
source
https://seekingalpha.com/article/4271901-veru...ipt?page=1
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