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Any updates from Mark?
He seems to reply to you promptly.
Obviously didn't come close to this..
For reasons we've discussed ad nauseum, but keep this in mind when framing the first full UNENCUMBERED year of operations:
New Company Highlights and Guidance: Verus Foods (source: Press release dated 2/8/17)
Revenue is expected to total at least $50 million for the full year fiscal 2017 (ending October 31, 2017)
Revenue for the third quarter of fiscal 2017 (ended July 31, 2017) is expected to be approximately $20 million
Revenue for the fourth quarter of fiscal 2017 (ended October 31, 2017) is expected to be approximately $30 million
Anshu has said in the past on numerous occasions that the revenue capacity of the company on a quarterly basis is at least $15-$20mm. Keep in mind, this guidance was based mostly on the initial $78mm beef deal, though he may have been assuming other deals in the pipeline converted.
If he can reiterate this type of guidance, the stock should rerate a lot higher and we'll be off to the races. I've repeatedly reminded him of this guidance in the past. I know you read the board Mark..put out a press release like this again and show the path to financing this level of revenue. It's what long-term shareholders deserve!
Exactly
If you want to buy more, why not just buy on the open market? Yes, you might get a meaningful discount in a PP, but then you'd have liquidity restrictions. Moreover, they aren't going to do a PP until the valuation is a lot higher, so you'd miss out on a up move.
If you like the story, no reason to wait. This is a terrific valuation to acquire more and there's ample volume available at $0.20-$0.25.
Why wouldn't they consider selling shares in Canada?
Assuming they get listed in the next month, why wouldn't they sell shares to Canadian institutional investors instead of doing a PP? They could keep the shares locked up for a few months (typical for most deals that I've seen), but it wouldn't be anything close to a US PP in terms of duration. This would lower the liquidity discount. They might have to setup a Canadian subsidiary to receive the proceeds, but that shouldn't be difficult.
This is of course predicated on them boosting the valuation through business development. Selling shares at the current valuation would be prohibitively dilutive and I doubt any insider wants to do that.
Better have something lined up
Raising capital at this valuation is not feasible.
They obviously expected some positive announcements when they extended the warrants. Obviously those didn't materialize to this point. I hope that's just a timing issue. It seems like Alex wants to say more,but he's holding back.
M&A
Will be interesting to see how he structures a deal given VRUS' market cap is so low right now. I think it would behoove him to announce funding and give revenue guidance to get the stock up to a higher level and then execute a deal.
He might be able to structure a deal based on revenue contribution based on the backlog at VRUS. That would be ideal if the counterparty is willing to accept that. He also has the infrastructure in place, as you allude to, to penetrate markets in the UAE. That does have value if he can position it properly.
Anshu hasn't displayed great competence in the area of corporate finance. I know the excuses, but hopefully once the obstacles (either real or self-imposed) are removed, I'd like to see him demonstrate superior acumen to enable shareholder value creation.
Hope they're stockpiling positive developments
It's been underwhelming for the past year to say the least. At least Alex is active trying to get the message out, but they need more PRs. A strong stock price is vital for them to execute their strategy.
Have to bust through the overhang between $0.20-$0.25
Still a sizable seller sitting at $0.20.
You're right..news flow is the dominant factor
But even if the argument is based on numbers, his are so far off it's laughable. I wouldn't waste your time debating.
Someone needs to takeout the overhang
At $0.20. Would be preferable if it were an insider or Board member to show incremental confidence in the company's prospects.
At least the warrant overhang will be over after today.
The new quarter would be the January qtr
Not the October qtr or fiscal year end. Regardless, it's a timing issue that would hopefully get resolved by the Jan qtr 10-q.
One problem with your logic
They can't retroactively adjust the balance sheet and P&L for an event (the 14c) occurring this year. The 10-K was as of Oct 31, 2018. The balance sheet is for a point in time.
In my view, the delay pertains to disclosures relating to liquidity and going concern. If they can get a financing deal done, the liquidity and going concern sections look markedly different (and more favorable obviously). This also helps with incremental debt capital raises, should they be required, over the course of FY 2019.
How are you certain that we get an update tomorrow?
Did Mark mention that to someone?
Blame the company for this
Communication has been executed in a haphazard manner with no PRs since October, only tweets. The tweets, while helpful, haven't been followed up with substantive action. That's the problem here...blame Anshu and to a lesser extent, Mark.
Most of us believe the quiet period will be justified once news starts flowing, but it's been a poorly executed IR effort to this point. I'm not saying Mark isn't responsive, but random email responses don't constitute a proper IR strategy.
Hopefully once all the cards are laid on the table the company can execute a more normal IR effort to keep shareholders informed.
There's a liquidity section in the 10-K
That obviously depends on financing and he may have to wait to confirm various transactions before finalizing the 10-K. Happens a lot and is not a big deal at all.
The stock weathered the shock of the 14c and rebounded...I think a short delay in the 10-K won't be a big deal at all.
Totally disagree
The market cap is less than $4mm and the company is already on a run-rate to do over $5mm in revenue ignoring the $12mm contract. To say a good result is baked in is silly.
So did I
For some reason Anshu alluded to Jan 29th, but I think he made a mistake.
That's typically when the filings take place
If you look historically, this company typically releases filings after the trading day.
Keep in mind
The financials are most certainly done, but there may be disclosures related to M&A, financing etc. that they aren't ready to make. That can delay the filing versus the original timetable.
I hope it gets filed after the close, but if it doesn't, not a big deal. There's almost certainly a reasonable explanation.
anyone have a L2 snapshot to post?
Thanks in advance.
$2 warrants expire at the end of the month
Nice job Alain Bankier...
I'd like to know as well
Throwing out numbers without assumptions is silly.
Must have consulted with bunnyslopes.
They had a RS approved in late 2016 too
And they never used it. Could have reverse split the stock when it was trading at $0.02-0.04 and chose not to.
Really bad trading in this stock
But the shares are ending up in better hands I believe.
Not going to get any buying pressure
Unless management shows some progress...on ANYTHING!
Should clear out the retail panic sellers today
Too bad they didn't do any work to understand the rationale behind the moves.
Short sellers for a $4mm market cap company?
Come on woodleigh...I expect better from you.
Surprised you're discussing par value
Thought your we're more informed than to raise a meaningless point.
It's quite simple
If you believe what Anshu said, the stock is a screaming buy. If you don't,sell and move on.
AS increase
In the short run, as I previously explained, it was done to remove the default liability from the balance sheet. That goes a long way towards getting book value to positive territory.
In the medium term, it's for M&A. If he uses the shares judiciously, shareholders should benefit.
Now we need to see the results of all of the activity behind the scenes.
Sello getting back in?
Did he hear what he wanted?
I think the most interesting part of the tweet storm was the statement that they've completed negotiations with new funding sources. Look forward to hearing about that.
Should be an interesting month.
One other thing to keep in mind
Assuming the company was close to breakeven on a pre-tax basis in Q4, getting the converts off the books would bring book equity into positive territory. That would be a big milestone for uplisting.
If Anshu wants to uplist to NYSE, the most likely scenario, he'll have to satisfy the pre-tax income test. He can get there conceivably in FY 19 if he can unlock a substantial portion of the backlog. That obviously requires incremental capital or a merger partner that can give him scale.
Unfortunately, this is all deductive reasoning and conjecture. Anshu needs to explain.
AS/OS ratios for growth companies
One other thing to keep in mind is that for most growth companies, the ratio of AS/OS is at least 4:1. Tesla's is almost 12:1 and it's a capital intensive business. So VRUS' current ratio falls within norms.
As far as the R/S is concerned, they had one approved in late 2016 and never executed it. They're just keeping their options open IMO.
I don't believe this is like other serial dilution stories as the management team isn't paying themselves big salaries. Anshu, in particular, really only makes serious money through the stock. Furthermore, the company is close to breakeven on an operating basis, so it's not a cash consumptive operation excluding acquisitions. It's quite likely, ignoring charges, that the company had positive operating income in Q4 if the performance in Q3 continued.
The company should have a conference call ASAP to explain their thinking. IMO, that's the big problem here. Mark expects investors to be patient, but they need to communicate a lot better. Tweets and PRs aren't enough.
My take
The magnitude of the increase does look alarming, but a few points to consider.
1. Can't run a business with A/S maxed out. I was hoping they would buyback some stock to address the issue, but they clearly need more money for something, most likely one or more deals. I was thinking they'd increase it to 3-4bn, but I'm in the dark as to the rest of the plan that Mark alludes to.
2. Had to address the convert and default provision that they put on the balance sheet on the last 10-Q. That provision was due to having insufficient shares. Remember the following from the last 10-Q:
Additionally, at July 31, 2018, the Company was in default with respect to certain convertible notes as a result of not having sufficient shares of common stock available for issuance upon the conversion of such notes and certain cross-default provisions. The default provisions include 1) default interest rates ranging from 18% to 24% per annum, 2) daily fixed dollar penalties, and 3) an increase in the total amount due calculated by multiplying the aggregate of the then outstanding principal amount of the note, together with accrued and unpaid interest thereon, plus default interest and fixed dollar penalties by 200%. As of July 31, 2018, the principal amount of the notes together with interest accrued thereon and penalties totaled $855,398, consisting of $793,327 of default principal and $62,071 of default interest.
They also have the Monaco note coming due at the end of this month. So, to address all of that and reverse the provision of ~$800k they booked in the last 10-Q, they had to increase authorized shares so auditors would sign off.
3. M&A. Clearly, equity is their vehicle to do deals. Need shares for that. A central question will be how much of the backlog they can unlock now with some flexibility on the equity front. In addition, how much additional revenue can they book now? Anshu has made it clear in PRs that he wants to maximize growth. Unfortunately, that's entailed dilution at awful prices, and it curbs the upside, but there's still a lot of upside potential.
4. They need to PR the reasons for the increase much like Mark indicated in his emails. That needs to be broadly disseminated by Anshu to boost confidence.
I'm not arguing that the stock won't be down on Monday, particularly at the open and in the absence of an explanatory PR. Don't ping me with obvious statements in that regard. I'm trying to make sense of what transpired in that filing.
That's my hypothesis
And it removes the liability for shares they didn't have to cover the converts.
That said, they need a PR to explain.
That's true
Questions:
1. Did he do this to clean up the balance sheet liability that he had to record due to insufficient shares?
2. Did he increase the A/S in anticipation of deals (ie. reverse merger to acquire additional assets)?
The R/S is largely irrelevant at this point since even a 400-1 split doesn't accomplish much. Moreover, they already had a RS approved.
Company needs to follow up with a PR to explain why these actions were taken. Everyone should ping Mark demanding some answers.
CSE is a Canadian entity
Why would the shutdown impact the listing?
I doubt it
He only got ~250k shares pro forma for the reverse split. I bet he was gone a long time ago.
I'd disagree
It's up to Anshu to step up now. Many of us have held and accumulated all the way down while not a single insider, Anshu included, has bought on the open market. We've stood by the company and expect them to reward us.
Can anyone explain, other than JF, where huge blocks would be coming from?
I would imagine it has to be a PP holder. Sad that they have so little confidence that they're willing to sell at such a paltry valuation.