Read the previous post (#8591) before reading this one
Scott Mahoney
I think it's important to just maybe, make sure everyone kind of sees that we bought several businesses, at least in two instances, they were immediate low hanging fruit that we could come in and make very specific changes, run them for either clock way and get some meaningful incremental revenue improvement. Now the hard work begins with some of those markets where we've got to really, really push the marketing effort to take customers away from other people that are deeply entrenched.
Some of those people have significantly more financial resources and assets than we do to throw at that competition. So we had excellent results. Our strategy is working and we think it's repeatable. We just want to be careful not to manage the market to think that we can grow any one of these acquisitions 20%, 30%, 50% in the quarter for an extended period of time like anything, we're going to slow and see a diminishing rate of returns on our efforts.
But what we're really focused on is a balanced business model to where we're not 100% dependent upon the seasonality of anyone market. As we've commented in our press releases recently, some of the things about Trico are affected by crops, so they'll have a slower period because most of their agricultural clients are out either planting or harvesting periodically throughout the year, which takes them away from the maintenance of their equipment temporarily. That will affect sales for two, three weeks a month and you'll see it, and the sales of that'll be balanced up with the fact that Texas is having a seasonally strong period or Florida is.
So the modeling and forecasting of the business has grown more complicated. But we are pleased that basically, as of right now, regardless of sort of the flux of any one month, we're comfortable in that $900,000 to $1.1 million revenue run rate on any given month and over a reasonable period of time where at least $1 million a month an average. Growth will continue to accelerate thereafter. But when you’re talking about 10% or 15% growth rate or 20% growth rate, you're not talking about sales going from $1 million to $2 million organically overnight.
Amit Dayal
Great. That was really helpful. In terms of how you are looking to now balance, all of these acquisitions that have already been made and are being consolidated versus some new acquisitions that you maybe looking to undertake. How should we think about what those efforts look like right now if you have an active pipeline that you are considering? And what funding strategy you'll plan to sort of deploy to execute on this?
Ermanno Santilli
Scott, do you want to take that one.
Scott Mahoney
Sure. So with the acquisition strategy, what we're really looking at right now are two things in any one market. So this exact situation applies in all three markets in which we compete. We want to get two things out of each market. We want to get the maximum possible revenue for the minimum amount of operating expense. So what that implies is if you use the standard business model across the industry, you want to try to acquire incremental customers through acquisition while minimizing the required additional overhead you bring with the business.
So if you look at say Trico in Northern California, that would be a perfect candidate for us to go and look for smaller complimentary business models where you might look at a local competitor that has between $1 million and $3 million in revenue, acquire it, and you don't require any of their operating infrastructure, bolted on and you just dropped in that gross income to your bottom line. That's a strategy we're looking at very closely in that market.
Conversely, Green Arc is a smaller business that if it was bolted onto something bigger in East Texas, it would see massive improvement in its operating efficiencies. So we don't necessarily want to spread ourselves significantly out geographically for where we want to compete. We know we can significantly improve our operating performance through scale.
When you compare that with organic operations, organic operations are going to continue to go at a certain pace, regardless of what we're doing with acquisitions. There's not so much of a capital constraint on that side that we can't do both.
You asked a second, really important question. I'm glad you give. How are we going to pay for this? So we have a certain amount of capital left under our convertible preferred that would let us make at least a couple of reasonable sized acquisitions and the remainder of the year that can really improve our operating performance. We'd love to do that with the market support.
But alongside that, we also now have a much larger unleveraged balance sheet. At the beginning of the year, we had less than $11 million in total asset value, excluding fixed assets, working capital assets. Today that's just about doubled. So now you've got $20 million of unlevered assets to work with and we're getting closer and closer to being what I call bankable and that means inexpensive senior lenders that can provide you working capital to fund additional acquisitions.
So working diligently towards to support ourselves in a position where we don't have to sell at the every time we want to buy a business. And that's a goal that we'd really like to see happen over the next couple of quarters.
Amit Dayal
Got it, thanks Scott. And just one from me guys, and then I’ll hop back into the queue. Strategy around Europe has changed a few times, what is the realistic expectation of any type of contribution coming from there in the near-term? Is this 12 months away or even further out?
Scott Mahoney
Well, the European strategy has evolved as we've learned about it and one key change for us was getting with the right partners in a very capital our Ernst & Young have been fantastic and that really opened our eyes to some of the opportunities that are there. One of our trips, we actually went with the group from Ernst & Young to the European Investment Bank, which is one of the largest office buildings in the world and it actually is one of the greatest, if not the largest lender in Europe, effectively for innovation.
We would never have been able to get in without them. So when we realized that through Ernst & Young, we had access to these, all these opportunities that are in the United States are really almost non-existent. We pivoted towards more and more grants and loans through the Ernst & Young contacts and the European Investment Bank, along with our other regional opportunities, which we got in determining.
The other thing is that they also have context to the consortium. So every time you have a grant, you have to have a least three organization – just have organizations from three different countries in Europe. Many of these, the ideal consortium partners are clients or are in turn subcontracted consultants to Ernst & Young.
So for them it's just a phone call away. Now the – as we said, the application process is going to be completed in October. We're having regular calls every Thursday, short-term, meaning the next quarter, I think we may get some responses initially, but I think between now and the end of the year, we'll be going to know much more where we stand with these opportunities.
Ermanno Santilli
Yes, I think I would probably add just a couple of things. So we've previously announced a very healthy relationship with a company called innovative – with Infinite Fuels. Infinite Fuels is a startup with a deep relationship experience with MagneGas. They're ahead of their technology, has worked on various projects with MagneGas for over 10 years.
But they came to us as a startup almost two years ago after having navigated this existing process with Ernst & Young and with the various European financial organizations. And they were at the very infancy of trying to accomplish something very audacious. They've done that.
They essentially one, with our support, one of the largest grants in Germany, essentially it's about a $7 million grant. And I think that if we're successful because we're asking, asked me, which is the European Commission Division that gave the grant to reasoning very unique, we're asking them to let us guarantee the unfunded portion of the grant. If we're able to get that exception and get them to permit us to do so, we could potentially join unlocked that $7 million grant as soon as next month.
Scott Mahoney
If that happens, several things financially happen for MagneGas at that time. First, we will begin a collecting on the $750,000 grant, a consulting arrangement that has been put in place and it's been deferred until that grant began - began its funding mechanisms. And second, we will begin to deploy that grant on a biofuels project in Northern Germany that could have an enormous amount of benefits to MagneGas when it comes to the applications for our waste-to-energy efforts in Europe.
So from an operational perspective, that existing grant is most likely the first thing that we'll be able to unlock that will show up on our balance sheet and our P&L, hopefully in the end of Q3, most likely beginning of Q4 of this year. Beyond that, controlling that grant and partnering with them to manage that grant, from what we've been told by Ernst & Young would significantly improve our ability to get these additional grants that we're working towards.
So the infinite fuels relationship is a huge stepping stone towards bigger things in Europe. And then the other thing I think that that you'll see from us is you'll see healthy updates and getting those additional grants submitted and trying to cement certain commercial relationships around the port. That's what we're really trying to work on in 2018.
