Verus International Inc (VRUS)

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Verus International, Inc (VRUS) CEO Anshu Bhatnagar on Q3 2019 Results - Earnings Call Transcript
Sept. 11, 2019 1:01 AM ETVerus International, Inc. (VRUS)
Verus International, Inc (OTCPK:VRUS) Q3 2019 Earnings Conference Call September 10, 2019 4:30 PM ET
Company Participants
Anshu Bhatnagar - Chief Executive Officer-
Chris Cutchens - Chief Financial Officer
Mark Forney - MKR Group
Conference Call Participants
Shane O'Brien - Optimal Growth Capital
Brian Steve - Speakeasy

Operator
Good day and welcome to the Verus International, Third Quarter Fiscal 2019 Financial Results Conference Call. Today’s conference is being recorded. And 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’s Third Quarter Fiscal 2019 Conference Call.
Earlier today, we issued our third 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 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 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.
I’ll now turn the call over to Verus CEO, Anshu Bhatnagar. Please go ahead.

Anshu Bhatnagar
Thank you, Mark. I can see that once again we have a very large number of shareholders joining us for today’s call. So I would like to thank everyone for your continued support and interest. I don’t think there are many stocks at any market cap with a more dedicated and passionate group of followers. Our CFO, Chris Cutchens will be joining me in a few minutes to provide a deeper look into our financials.
But to kick things off, I first want to highlight a few important aspects to the quarter, then can give investors a better sense of the future, because our GCC business is typically based on a set number of containers per month for each product category, we have excellent visibility.
So this quarter, which was primarily GCC revenue followed closely to our plan with a solid 154% revenue increase, while the focus in recent months has been centered on our Major League Baseball business, Q3 2019 is a reminder that our traditional markets also have excellent growth prospects.
The GCC will continue to represent a majority of the business for a quarter or two longer, but the mix is going to change. We now have two revenue drivers; our traditional business in the Middle East and the Major League Baseball in the U.S., which have an extended channel filling phase.
Our ultimate goal is to have multiple dependable revenue streams covering different geographies, so we are off to a good start in working towards that goal, probably the most important aspect of our growth right now is that it’s primarily organic growth, leaving room for some real acceleration from any acquisitions.
During Q3, we signed note that the bulk of our new working capital was not used to create Q3’s triple-digit growth. A good portion of the new funding went towards start-up cost for the MLB ice cream and candy production, which contributed only modestly to Q3 representing less than 2% to revenue and our new international line of credit with Columbia Bank came after the quarter end.

So the contribution from our recent financing activity won’t be felt until Q4 2019 and later. We are just a few days away from the midpoint of Q4. So we are glad to put some of our recent funding to work in the early part of this quarter and you will see the effect of that in the next quarterly update. Achieving triple-digit growth before our funding kicked in gives us great start on tracking our models over the next couple of quarters.
I am not going to get into specific product line items for the quarter, though Chris will break down our geographic footprint in a few minutes. The decision is partly for competitive reasons, but also practical. Most of our newest food categories are in start-up mode and will take a few quarters to come into play. Branded products require packaging and a bit of the learning curve. So there is always a lead time to deal with before revenues become significant.
Because we do not own any factories, we have to slot into manufacturing schedules at producers between design, packaging, testing, customer acceptance and other essential start-up tasks. It can take 45 to 90 days to begin shipping depending upon the product category. We have a terrific line-up for fiscal 2020 that we will begin to talk about in upcoming quarters.
I will discuss M&A later in this call, but to help explain our multi-line strategy, I would like to provide some background on the rationale behind our recent French Fry acquisition. This was a strategic opportunity that came out of one of my recent trips to Dubai. The seller is making some changes in their own operations and wanted to exit out of the entire frozen food business.
The only part of the business that made sense to me was the French Fry business. We know the selling company well and their overlap with our target customers was excellent. So we essentially purchased their line including their customer relationships, vendor relationships, some of their brands, but not their facilities or personnel.
This gives us a foothold that will allow us to grow this category from an established base using our own infrastructure rather than a cold start. We are still deciding on branding but in the mean time, we will get a bump in revenue that could become meaningful by the second half of fiscal 2020. We think we can ramp this up to 35 containers of French Fries a month into the Middle East in fiscal 2020 making this an important frozen food category for Verus.
I spent the first part of this call concentrating on the GCC business, partly because that region represented the main source of revenue for the quarter, but also as a reminder that Verus is a diversified food company with multiple sources of growth.

Over time, our goal is to create a mix of dependable, profitable, and uncorrelated revenue streams. This plan will be measured in years, not quarters, but Q3 marks another step forward in realizing that goal.
At this point, I will turn the call over to our CFO, Chris Cutchens, who will provide some greater details on the quarter.

Chris Cutchens
Thank you, Anshu. The last time I spoke with everyone, I was getting to relocate from Florida. So I am happy to report that I am here in Maryland with Anshu and Jim Wheeler at the corporate office. As Anshu mentioned, our third fiscal quarter showed great growth characteristics, but it is not yet representative of what the company will look like in the future. So we will try to pull a bit of that feature into today’s call to give everyone a sense of how we think the company will evolve.
My focus of today’s call will be on the current reported quarter and provide some commentary on the steps we are taking to accelerate our growth in future quarters. Our third fiscal quarter marked our fourth consecutive quarter of triple-digit growth with a record revenue of $3.48 million, along with a record 154% quarterly increase.
Although we have entered a new phase where our branded products take a little longer to begin the revenue upturn, we believe that we can continue to generate triple-digit growth over the next six quarters without counting any potential acquisitions. Our third fiscal quarter is the first quarter where we had revenue contribution from outside our core Middle Eastern markets.
We managed to get some – ice cream and candy shipped before quarter end, so the U.S. made the lift representing just under 2% of total revenue. We expect that percentage to grow significantly in each successive quarter.
Geographically, 64% of our third fiscal quarter revenue came from the UAE, 15% from Saudi Arabia, 10% from Bahrain, 9% from Oman, and 2% from the United States. We will be adding additional European countries in future quarters and have some targets in the South American markets as well. It may take a few quarters, but our geographic mix will begin to change particularly in the second half of fiscal 2020.
Our gross profit during the third fiscal quarter was approximately 14%. Excluding the Major League Baseball business, gross margin was 16.4%, which is consistent with the expected range for the more traditional Gulf Corporation Counsel or GCC product categories. As previously mentioned, this quarter had some heavy start-up cost without the benefit of ensuing revenue from those costs.

Our general and administrative expenses increased 63% to $387,000. We also had selling and promotions expense of $64,000 which is a new category for us connected to our MLB products launch. In addition to these startup costs, salaries and benefits increased 162% to $145,000. However, as a percentage of revenue it was just 4% exactly the same as third quarter last year.
We are going to be very prudent in expanding our infrastructure at the right pace keeping this as a lean operation that it can enhance our path to profitability. Additionally, we had a non-cash charge of $900,000 for stock-based compensation and a $222,000 increase in legal expenses compared to the third quarter of last year due to acquisition-related contract work and financing activities during the quarter.
I cannot provide any additional details on our potential acquisitions, as none have closed, but suffice it to say that late-stage acquisition activity generates legal fee. We ended the quarter with $408,000 in cash on hand, a 199% improvement over third quarter of 2018. With our new $500,000 international revolving line of credit signed in the last day of our third quarter, we have quite a bit of financial firepower ready to put to work.
Two line items show where our working capital went during the quarter. First, our accounts receivable increased 48% to $2.7 million and inventory was a record $567,000 representing a 124% increase. In our GCC business, inventory turns over quickly, but ice cream is a batch production process with multiple flavors, so inventory will be a larger line item at times as we grow that business.
We have the infrastructure in place to surpass $50 million in sales with only minimal additions to our personnel. We recently added a logistics team member to Big League Foods, but our infrastructure additions will be modest for the foreseeable future. As a result, we expect all of our operating metrics to improve significantly as we scale up our operations.
There is an obvious learning curve in tweaking during any new product line launch, but we were happy to face only a few small hurdles in that regard. Our ice cream had a short delay while the manufacturers sourced the right marshmallow size for the Grand Slam Sunday flavor and we ran into a bit of a gummy supply shortage here in the U.S., but these were surmountable challenges that had a minor impact on the eventual shipment schedule.
We are learning a great deal and getting some important feedback from the store level, which will translate into improvement and innovations concerning in-store display, the products themselves and production. The Major League Baseball lines under the oversight of Jim Wheeler are off to a great start.

We plan to complete themed makeover of our candy line and are in the planning stages with the manufactured to changed look of the candy. We will provide additional details as we unveil these products, but the initial reaction from customers has been highly favorable.
Branded products need to be differentiated in a high quality to encourage repeat buyers which is one of the reasons we use our own recipes and contract with top suppliers. But we also have some unique product design in work that will add to the appeal. As with any new products, the first customer is the retailer, the distributor or chain store supplier – sorry, same-store buyer.
So the feedback stage has been very encouraging as potential customers get their first look and taste of these new products. With the upfront expense of launching candy and ice cream along with acquisition-related and other non-cash charges, our third quarter 2019 results can be characterized as typical for an early growth company.
As we scale up the profit potential of our new Major League Baseball business is going to become apparent with higher margins finally making their way into the mix. A key event for us during the quarter was the $13.5 million in credit insurance that we signed with Euler Hermes, which we signed at the beginning of August.
For those of you wondering how we might use this insurance consider this to be another tool at our disposal. We can apply this to qualify transactions in scenarios where we want to extend some credit to captured business to cover short-term carrying periods where the inventory or sale of risk remains with Verus in events that stretch for larger orders where the supplier wants to derisk a transaction.
There are a great many scenarios. We also believe that signing this contract with a world leader in risk assessment contributed to ending the recent e-trade restrictions. We get many questions concerning working capital and our efforts to qualify for more commercial sources of credit. Our line of credit with Columbia Bank is at a starter level, so we expect that to grow over the course of the next few quarters.
We need capital to reach revenue thresholds where we can more easily qualify for higher quality interest rates such as LIBOR plus rates. To that end, we are trying to stay our step our way to that goal via some smaller financing while we continue discussions with much larger sources of funds.
We know the commercial credit will eventually come and we think that we finally have the track record to qualify. We have a major effort underway in this area and are currently in open discussions with a number of viable funding sources.

Overall, this was a solid launch quarter for the MLB products, thought the cost of the launch fell into the quarter without the benefit of much revenue. Based on results as we near the half way point of our fourth quarter 2019, we are confident in forecasting another triple-digit revenue quarter in fourth quarter 2019 and through 2020.
It might sound strange after reporting a 154% growth quarter to say that we are just getting started, but that is definitely the case when I look out across our sales forecast particularly during 2020 for the Major League Baseball part of the business.
At this time, I would like to turn the call back to Anshu for his closing comments.
Anshu Bhatnagar
Thanks, Chris. In the back half of this call, I will answer a number of questions that we have collected from investor. We are frequently asked about our plans to uplist to a major exchange and since our last update, nothing has changed in regard to that plan. We have already started the preliminary work to lay the ground work for an uplisting, but contrary to some speculation, this event is tied to multiple factors, not just a price point or market cap threshold.
We will uplist when our growth rate and business trajectory can support transition to an institutional holders and traditional investment banks. So this is the goal without a specific at this time. As the recent French Fry acquisition shows, we continue to look for strategic acquisitions that can quickly add revenue and growth at a triple-digit rate.
At any given time, we typically have several candidates under due diligence with some rotation among the candidates. The number of potential deals put in front of us is considerable, but we are being highly selective at this point in our growth cycle. We fully expect to do additional M&A as part of our growth strategy, but are being patient and opportunistic.
We are few days away from mid-Q4. So what does the near future look like? We got a late start in the baseball season. So our MLB line this year is more of a test run with limited markets. Believe it or not, even with the World Series still weeks away, retailers are already planning for the start of next baseball season.
Spring training starts February 21, a little over five months away with lead times for packaging and actual production, retailers will begin ordering as early as October in order to have baseball themed products in the shelves for the start of the next season. We will participate in some food shows in the coming months to feature MLB products for the first time at industry events.
We worked very hard to get this line out on the field even on a limited basis giving us a chance to showcase our product with the largest retailers in the industry. In our prior call, we mentioned that we had introduced our MLB products to buyers at some of the largest CPG food chains in the country.
I am happy to say that we have already gone from an introduction phase to the supply discussion phase exploring our ability to match supply requirements on a multi-regional or even national scale with some of these major retailers. There is no guarantee that this interest will lead to near-term orders but we are pleased to be catching the attention of some of the leading retailers at this early stage.
Our current plan calls for a distributor-based rollout of an additional 16 or so teams in the next phase with the rollout geared towards the beginning of the baseball season. We will continue to prioritize based on team and market size, though we will eventually cover all 30 teams.
As Chris mentioned, we are redesigning parts of the candy line, something that we had planned to do for the 2020 season to make the product more baseball-centric. So we have some new shapes to end the works and we will have the most completed and ready to go for our next team expansion.
Under our current model, we think the MLB business could be very large in 2020, but we really have two different scenarios depending on the penetration of large retailers. Under even the slowest rollout projections, we expect hyper growth to kick in early in fiscal 2020. But we will give more formal guidance on the MLB expectations in an upcoming quarter.
We talk about Dominos and Wild Card in describing major potential events. But they are two different things. The Dominos are largely things we have planned such as an addition of new teams to our product mix, but Wild Cards are things like big box orders, banking and M&A. We don’t control the timing of Wild Cards, but each one would have a substantial impact on the company.
So for investors looking out into the future, we are forecasting more top-tier, triple-digit growth through fiscal 2020, coupled with potential to see some highly impactful wild cards that could hit at any time.
On behalf of the entire Verus team, I appreciate everyone for joining us today. At this time, I would like to open up the call for questions.


Question-and-Answer Session
Operator
[Operator Instructions] And we will take our first question from Chris Zimmerman, a private investor. Please go ahead.
Unidentified Analyst
Good afternoon. Great job on getting everything right where it needs to be. Outstanding report as usual. Just a couple quick questions if you don’t mind. Number one, I am seeing that the shares might be reduced by 200 million, it seems like the numbers have changed as I glance through the report real quick from 2290 which is $2,290,000,000 down to $2, 000,088,000. Can you comment on that at all?
Anshu Bhatnagar
Chris, you want to take that?
Chris Cutchens
Yes, yes. Good afternoon. Yes, we have to take a deeper look into that, because, I am only aware of the kind of two point – just under 2.3 billion shares that have been outstanding for some time. So, I don’t have that in top of my head. My apologies.
Unidentified Analyst
Okay. It’s just weighted average shares outstanding 2,088,996,855, like I said, I haven’t really had the opportunity…
Chris Cutchens
No, no, sorry I appreciate you sharing that. So, that’s just the kind of the mechanics behind the calculation that the scene you are referencing was in the income statement. So that’s just the weighted average calculation of how it’s computed based on when certain shares are outstanding versus not.
Unidentified Analyst
Okay, perfect. And one other point here, I am pretty adamant about given my feedback when it comes to kind of two birds one stone, I know you guys do a tremendous job, but sometimes, well not sometimes just very few instances, you might not see something from a investors’ perspective, one in particular would be the releasing of the news that you do like today. I feel if you would have released the quarter during business hours the news that I come would be up for people to now know that we had a hot results for today and more investors would just bound and this would ultimately helped the PPS in my opinion, I would like to state and then you could have, this is just my opinion, keep in mind, released an update tomorrow a press release. This way you get two days of it, boom, all day today and boom all day tomorrow. Now, when we go into tomorrow, we are not going have any news icon and kind of like, they say strike when the fire is hot kind of come tomorrow, I don’t think we are going to have as much interest as we may have had today. Now this is just from standpoint, you guys are running the business. You guys are the ones that are the CEOs and way smarter than me. But I just wanted to pass that on from a investor standpoint that I thought it could have been a little bit better strategy about the releasing of this report. Thank you.
Chris Cutchens
Thank you.
Operator
And we will take our next question from Dreyfus, another private investor.
Unidentified Analyst
Hey guys.
Chris Cutchens
Hi, how are you?
Unidentified Analyst
Hey, we congratulate you all for a great quarter, as well as getting the financials out early. I think that was really, serves all on top of investment world. A couple of questions, I’ll start with the hot topic, the French Fry acquisition, can you give us any more details on as far as, in terms of revenue targets that got the same risk and like the best way for us sort of value is how you did deploy the capital as far as in the last conference call you talked about a – knowing the one with investment dollar for return, but that’s how things are occurring.
Chris Cutchens
Yes, so, I guess, with respect to the French Fry acquisition, really the idea behind that is, it’s a market, I mean this is an easy – it was an easy target for us because it’s a market that we are already in. It’s an existing market and existing category for us. But it’s a category we’ve been trying to grow for some time. This particular company is someone we know quite well and we’ve done business with them over the years, over many years and when this opportunity came out it just seems like a pretty easy deal to takeover and we weren’t really looking at the whole company, because lot of those categories in the frozen food is areas we already are fairly strong in and we don’t want to pay for that. And so, we kind of were able to work out a deal just so far in that French Fry business. I am not sure how much we sort of kind of put out, but I think from a revenue standpoint, just, sorry one second. So, from a revenue standpoint, based on what the company has been doing historically, they were doing about between $5 million to $6 million in annual sales and just on the French fry business alone. So, we feel fairly confident that we can continue at least that runrate and then look to expand it over time. But, so that’s kind of just to give you some perspective as to where we feel that business can lead to.
Unidentified Analyst
Fantastic. Fantastic. Thank you for that. One more quick question, do we have any – have we made any progress on our legacy product lines or restarting those?
Anshu Bhatnagar
Lot of those are stuff that we are continuing to do. The bulk of our current revenue is based on legacy product lines. So that’s something that’s been going and then will continue and will continue to expand on that.
Unidentified Analyst
All right. Great job. Thanks guys. Appreciate you all.
Anshu Bhatnagar
Okay. Thank you.
Chris Cutchens
Thank you.
Operator
Our next question will come from Ross Flyer, another private investor. Please go ahead.
Unidentified Analyst
Good day guys. Thank you very much for the report today and congratulations on a terrific quarter. Appreciate the performance and the transparency. You are changing lives with what you are doing and it’s much appreciated. Basically, I am on curiosity and that’s to do with Singapore, what is the role of that office? And what might we expect in the future from that part of the world?
Anshu Bhatnagar
Thanks for that question. So, really there was two-fold and the reason why we set up that presence there. Number one was, sort of looking to expand certain product lines in that market in the whole Asia Pacific region, right. So, that’s a big market. That has been historically a big market for what I’ve done in my previous company. So it’s a market we know we could actually expand into if you wanted to. So that was one reason to get into that market. The second was really banking, right. So, Singapore has great sort of banking and trade facilities for trading and also it has efficient for, they have a lot of promotions or kind of benefit for setting up a trading headquarters in Singapore. So that was a second reason we actually looked at getting into that market. However, with that said, we haven’t really, I mean, based on sort of the challenges we had faced historically, it wasn’t something we were able to really utilize and as of right now we are not – it’s not really a cost on us or nor is that really other than paying some a negligible filing fees, we haven’t really taken advantage of that market and lot of that h as to do with just being able to meet the demand to our existing – the existing demand that the company has. So, when we kind of decide, hey, do we want to enter Singapore as a market or Asia as a market or do we want to expand the U.S. as a market, we chose to first build out this U.S. We felt that would be sort of a better return on looking at the U.S. as the next market. So, we haven’t really taken advantage of that yet, but it’s something we might do at a future day.
Unidentified Analyst
Also, thank you very much. Appreciate your time.
Operator
Our next question will come from Karthik Srinivasan, a private investor. Please go ahead.
Unidentified Analyst
Thanks. I have three questions. My first question pertains to the funded backlog which in the press release you discussed it being $34 million for the next 12 months, but that’s actually down versus the number you quoted in the July corporate presentation. I am just curious why that maybe and what some of the factors that may have contributed to that and then I have a couple follow-up questions after that.
Anshu Bhatnagar
Thanks, Karthik. I think really on that is, what we’ve sort of looked at there is just existing backlog of the sort of contracts that we have on hand right now and it might have – I don’t have the exact calculation for the presentation versus what was put out here. But I can take a look at it more detail and get back to you, but that’s kind of approximately what we are looking at in terms of sort of contracts that we are looking to fulfill at the moment and that we have funded at this point. So that’s kind of how that number came about.
Unidentified Analyst
Right. My next question pertains to the Q4 revenue guidance. I am going to go back to the July corporate presentation where you suggested a number of $4.6 million or there about the revenue in the Q4 time period. Is that potentially gets to the early number given that BLF looks like it didn’t really affect Q3 to much degree and you will be wrapping that up more significantly in the next quarter.
Anshu Bhatnagar
Yes, it could be. So that’s kind of the total number we put out there and probably would – we can easily surpass that number and we feel pretty comfortable about that. But we wanted to just make sure that we – whatever guidance we do put out is something we feel fairly confident that we can achieve even if not everything goes as planned. So, I think that that’s fair to say that that’s an easy target for us to hit.
Unidentified Analyst
Great. Okay, my final question, again, I am going to go back to July presentation. You talked about gross margin, net margin goals of 20% and 12% respectively in Q4. Given what transpired in Q3 and some of the startup, let’s call it challenges, nothing not insurmountable but – John was wrapping up BLFs, are those still are realistic targets? Or do they kind of pushed out more into Q1 or Q2 in FY 2020?
Chris Cutchens
Yes, I think those are still realistic. And it just depends at the end of the day it’d be contributed that as going to be what our revenues ultimately are for the full fourth quarter for the Big League Food products. So, without getting into too much detail, kind of from a GAAP perspective, there is certain charges that we have to take once we – and we started taking this quarter once we started to generate revenue. And so, regardless of what that revenue is, because those charges are straight lined over certain periods of time. And specifically, certain of those charges go against cost of sales. So, drives down the gross profit margin. So, all that being said, as we continue to ramp the revenue, we will start to see that gross profit margin contribution to significantly increase. So, at this point, I do think that is still achievable for the quarter. Definitely, our expectation is to see fourth quarter, if not at that level, not too far off, which would still be significantly higher than where we end up for this quarter.
Unidentified Analyst
Sounds great. Thanks very much for your time.
Chris Cutchens
Yes. Thank you.
Operator
Next we’ll hear from Martin, a private investor. Please go ahead.
Unidentified Analyst
Yes, hi. I wanted to thank you guys very much for your continued progression and transparency and also two lungs, strong lungs, you have a really good base here. My question would be basically, how the two interviews went, the one that we weren’t ready to see it, that has anything to do with the French Fry deal and my other question was regarding the IFG. And if you guys are with that at all? Thank you.
Anshu Bhatnagar
Sorry, I don’t think I caught the second part of the IF…
Unidentified Analyst
Yes, they’ll need true delegation?
Anshu Bhatnagar
I am not aware of that. I am sorry. I don’t think I was involved with any, no issues. So, I guess, with respect to the two interviews. They are actually in conjunction with each other. So, they were two basically new channels that had come out and I think, unfortunately, I don’t see the whole news was not broadcasted here. We don’t at least, I don’t get those channels. But, yes, we need one well into that. I did ask for the tape on that again this morning. But I haven’t really seen the whole thing. But, yes, both went really, really well and I think what we kind of posted was kind of the raw footage of entire interview that was done in both and I think the one that was done in India, the NDTV was about two minutes and thirty seconds. So it was condensed and the other was five minutes and some seconds. So, but, I think, combined that was – I wish you got to hear, my side, I still waiting to hear that to the entire…
Unidentified Analyst
Thank you very much for your continued transparency. You guys are amazing.
Anshu Bhatnagar
You are welcome. Thank you.
Operator
And next we will hear from Matthew Carlyle, a private investor. Please go ahead.
Unidentified Analyst
Hi guys. How is it going? Congratulations on the good quarter. You guys are awesome. The one question I really have and I guess, I could really do the math on my own between the trade financing. What is the timeline on how often are you guys able to utilize that? And then, say, I know you guys that once they get the doc side is considered off your books, so how quickly are you guys able to flip that kind of capital? Is that something where you are able to use it on a monthly basis? Or is that something where is it maybe every month and a half or two months?
Anshu Bhatnagar
Yes, so, just to be clear on – it’s not like, there is no restriction on how we use it from that standpoint. We can use those funds sort of as needed, because all our customers, I think the requirement on that – our existing trade facility is, one the customer has to adhere pay by letter of credit or we need to have credit insurance which we do. So, either way, all are receivables that we have or all the customers, we are going to ship to, we can go ahead and use the facility as we’ve see – as we see if fit. Where we can actually, I guess, the point and you are trying to make it, with respect to getting a letter of credit, right, so when lot of our customers will pay by letter of credit, once we get letter of credit, the bank will go ahead and submit the documents to the buyers’ bank. Once the buyers’ bank accepts those documents, the whole process might take two months and the shipment to go and all that. Our bank will go ahead and credit that cash to our account and we would immediately get paid on that account as though our customer had paid and that could be within a week to ten days. So, that allows us to keep rotating our trade facility as we keep moving forward and just to further add to that, the reason we’ve actually set a limit of 500,000, we actually wanted a lot more, but what we did was we – in speaking to the bank, we wanted to get something done as quickly as possible and what the banker has said, look, once it’s set up we can easily increase the line. It’s getting it approved, getting it set up is what takes the longest and anything less than half million that can improve sort of internally. And so that was kind of why we set that arbitrary $500,000 number, but with the idea that once we start using this line, it’s going to be able to increase fairly rapidly.
Unidentified Analyst
All right. And then I have one last follow-up question. Regarding the credit insurance, I have seen that and reading it, you had mentioned a major secondary benefit. Is that credit insurance, was that motivated by your current business? Or is that something that you got for future business that you guys are thinking making partnerships with larger corporations that they are going to require that or it was that just obtained just for your current business and going forward?
Anshu Bhatnagar
Yes, so, it’s a great question. So, yes, even though, it really was the sort of motivation was not only for existing business, but there is a lot of new business we can get by having credit insurance in place and it actually – there is a lot of other benefits in terms of opening up – and just a lot of other channels that can come out of this and some of this will announce into the future, right. We are not in a position to announce those yet, but yes, there is going to be a lot of additional benefits other than the existing business and - but as of right now, the existing business we have a lot of benefit. By using this, we are also looking at getting a similar facility because of the set up for sort of bifurcating our international business with our domestic business. So we might actually set up an entirely separate line of credit with the same bank for our domestic business which is our Big League Food business. But, yes, there is a lot of other benefits that will come out of it and we’ll be announcing those as they happens.
Unidentified Analyst
All right. Fantastic. Thank you guys very much and I look forward to another conference call.
Anshu Bhatnagar
Thank you.
Operator
And next we’ll hear from Bruce [Indiscernible] a private investor. Please go ahead.
Unidentified Analyst
Gentlemen, good afternoon. What a great quarter? Looking at the results, I’ve got a couple of questions. I don’t see anything or wanted to know if you can comment on the Disney beverage agreement if that’s finally put to rest or slide or if it’s going to work? And then on the fry business, seeing that naturally there is a lot of things you can expand off of that, would you be supplementing or can you add on things like cooking oils with that? So you are selling two facility to both oils and potato products, if that’s possible? And then of course, as I’ve spoken once before, both bringing importing products into the U.S. Is that on the short-term agenda? Is that more of a long-term deal? If you could answer those, I’d appreciate it. Thank you.
Chris Cutchens
All right. Thank you. So, yes, with respect to Disney, that is something we might kind of relook at now that we are having like, really great traction with – and this is something we continue – we would actually renegotiate the terms of that Disney deal and it’s something we can probably still expand. It just didn’t make sense at that time based on where we were to really spend a lot of money under the terms of the existing deal that we had. I guess, with respect to supplying cooking oil, that’s another market that – it’s a tough market to do. I mean, we’ve supplied cooking oil or I have, in my previous company in the past. So it is a tough market and the margins are really, really thin. So, it’s not probably something that I would bring to the forefront at this time and supplying it to manufacturers, really it’s a commodity business at that point. So they will buy it in container loads and it’s probably not something we would explore in the near future although it’s something I have done in the past. So I am very familiar with it. But as of right now, we are probably would not get into that. I hope that answers your question.
Unidentified Analyst
Yes, it does. Thanks, gentlemen.
Chris Cutchens
Thank you.
Operator
And next we will hear from Shane O'Brien with Optimal Growth Capital. Please go ahead.
Shane O'Brien
Yes, hi. Thanks for taking my call. I was just curious about any future expansion or any other major league sports licensing. I know, NFL just started and NBA is coming up, NHL right around the corner. So I was just curious if you guys had reached out on trends you get any of those licenses and if you guys were trying to expand international with any of the MLB products?
Anshu Bhatnagar
Yes, so, great question. So with respect to National Basketball Association, the NBA, we’ve actually had reached out to them and they are actually quite interested. What they want to do is, since we already have the MLB deal, they wanted to kind of see how that works out. And the fact that we’ve had just tremendous with what we’ve been doing with the MLB, we feel pretty good about kind of replicating this model with the NBA. With respect to NFL, the way they structured their deal is little bit different. They don’t have it on a league basis. So we wouldn’t be able to sign a deal with NFL directly. We would have to go per team and the cost per team on ice creams alone was – it’s extreme. It’s very, very high and it doesn’t really make sense for us. We actually have reached out to them or understand what that model is and we are just not there right now. I think it makes more sense for other types of companies and with respect to overseas, we have looked at Major League Baseball. Our current license includes Canada, but we’ve actually looked at other markets that would make sense like Japan and South Korea and maybe South America. So that is some markets, but lot of other markets that we are currently in, MLB doesn’t have the same following is as it does here. So, it probably does not make sense. However, with that said, we are looking at soccer and cricket and rugby and some other sports teams to kind of see if that’s something we can expand, because those are huge in some of the Asian and Middle East and European markets.
Shane O'Brien
Thanks for answering that. One more quick question, as far as the national resellers, has there been any further talks with – I know you guys have mentioned Wal-Mart and Cosco, is there any other talks in moving forward with that?
Anshu Bhatnagar
Yes, we are in touch with them and it’s been very positive. I think really what we are doing on a larger scale, I mean, it might be a little difficult for this season, but for next season, I think we are kind of getting everything prepared. We have already reached out to not only in Cosco and Wal-Mart, but lots of other retailers as well that have expressed interest. So, yes, we are doing what we can as fast as we can because lot of the purchasing happens in October. So, for next season. So we’ve been very busy with a lot of positive response and that was kind of one of the drivers of why we can of course product to market as quickly as we did. Because a lot of these buyers want to actually see the product in hand and take it. Hope that answers your question.
Shane O'Brien
Yes, thanks.
Operator
And we’ll move on to our next question from Randy Romnos, a private investor. Please go ahead.
Unidentified Analyst
Yes, good afternoon gentlemen. Thank you for having this conference call. Great work today and congratulations again on a great quarter. What I wanted to ask – two questions actually have been answered. So, I just wanted to get maybe a status on the rice and honey and where we are with that? And secondly, I noticed maybe on the last two acquisitions that have jumped the line that they did not involve shares. Is this the new strategy that you are putting out there as to your new acquisitions and maybe that’s playing a part in what you do going forward with the eight M&As that we were talking about before? Thank you.
Anshu Bhatnagar
Yes. Thanks for those questions. So, with respect to the rice and honey deal, that is – we haven’t, it’s pretty much ready to go. One of the things we wanted to do was wait to get our line of credit in place which we do have in place right now and it’s something we can actually start sort of any time we want to. There are couple other opportunities where it’s just trying to final line to decide which way we want to go first. So, we will be probably putting something out on that shortly, because I think that will come to fruition in the next – if not this week, next week. So we will kind of put something out once that happens. With respect to our M&A strategy and the shares, you are absolutely correct on that. When it comes to issuing shares, we are very, very picky. One of the things we try to avoid is doing any M&A deal where we just use our stock as our currency, because it doesn’t help shareholders and that’s something that I am definitely very mindful of and so is Chris and so we try to avoid that at all costs. And that’s probably one of the reasons why we are taking as long as we are to close deals because we want to make sure that the structure makes sense. We’ve avoided issuing any shares and then all the deals that we currently have in our pipeline none of them, as of right now involves giving equity and it’s not to say that we will never do that but it would have to create a tremendous amount of value for shareholders by doing that. And so, we try to avoid that.
Unidentified Analyst
Okay. Thank you. I appreciate that and I hope everyone appreciates what that second answer was. Have a great run guys. Keep up the good work.
Anshu Bhatnagar
Thank you.
Chris Cutchens
Thank you.
Operator
And our next question will come from Jim Nicola, a private investor. Please go ahead.
Unidentified Analyst
Yes. How are you guys doing today?
Anshu Bhatnagar
Very good. Thank you.
Unidentified Analyst
I got a quick question. I was trying to forecast information regard to your Major League Baseball rollout that you were doing with the ice cream, during some of my research, some of your biggest fan bases are in California where you have the most loyal fans in Major League Baseball. You have, let’s see here, you got LA, you have San Francisco Giants, et cetera, the Ace, Padres, Giants, what’s the chase as you guys get now to Cali and start selling ice cream out there?
Anshu Bhatnagar
Yes, so, I think that is in our pipeline for next season. So we already have LA Duggers. We have San Francisco Giants. So, they are already in sort of – and probably some others, I don’t have the complete list in front of me right now, but that is the plan for next season. I think this – the goal for this season was really just getting product to market. So, retailers can see this, right, because lot of the big box stores and big retailers need to see product in market and so we kind of took the markets we felt would be easiest to go after and that’s kind of why we went with the ones we did. But for next year, California is definitely part of the list.
Unidentified Analyst
Well, the reason why I would say this is, you have in terms of the fan base and the loyal fans that are out there, the most of the teams that you have that are loyal fan base are in California. And it’s been probably over the top 10 and you are really dealing with just the Angels and Dodgers, the Padres and the Giants. Just, I mean, basically, you are doing the same thing but you are just having another product to roll out. I also had one more question, which was in regards to the next other shares that were distributed a long time ago and I notice that they are – went to site under construction. Is there anything that’s going on with that at all?
Anshu Bhatnagar
They are totally unrelated company at this point. So I have no visibility on what they are doing or even any conversation with them on that. So, I have unfortunately no idea. We probably need to reach out to them on that. I am sorry.
Unidentified Analyst
All right. Well, thank you very much for your time and great quarter and keep up the good work.
Anshu Bhatnagar
Thank you.
Operator
Your next question will come from Jim Ralph, a private investor. Please go ahead.
Unidentified Analyst
Hey, Anshu, how are you?
Anshu Bhatnagar
Hey, Jim Very good.
Unidentified Analyst
Just had two quick questions for you. Congratulations again on a stellar quarter. I know your style, Anshu is to not over hype things, almost sometimes to a flaw. I just want to get a better understanding if we could fast forward out maybe a year or two from today, and have this Major League Baseball situation at full capacity, what type of revenues in your opinion would that contract generate? I know, we’ve been kind of guessing so to speak since the contract was announced and again it’s not up to the company in your style to throw a lot of flocks of numbers out there. But if you can just fast forward for me mentally, and say you know what, we are two years down the road, we are in all of the existing markets, what type of revenue do you think that contract is going to be generating at that point?
Anshu Bhatnagar
Jim, thanks for that. Yes, so, of course, there is a lot of factors that go into this and sometimes it kind of providing guidance it becomes a little bit tricky because you are sort of as a public company especially you are not going to held to it and you suddenly if you miss your targets and people kind of don’t take what you say seriously anymore. So that has the negative effect as well. So, we’ve been kind of reluctant on putting some guidance out on this until we really get a better feel for what the retailers come back with. But just to give you some like a general sense, I mean, even if we were based on some kind of conservative targets, Chris, but what would you say was sort of a conservative number that we might be able to do in the MLB I don’t know?
Chris Cutchens
Yes, I mean, on a really conservative basis, and again as Anshu mentioned, there is a lot of factors that go into it because we’ve run I can’t tell you how many different models that were the variables being the number of SKUs, number of teams. So, from a – what I call, convinced number of teams to if we rolled out all 30 teams, that those models range anywhere from 50 plus million to 100 plus million. And again, just depending upon all the factors that are involved in that, unfortunately, it yielded a pretty wide range. But, just Anshu mentioned, try to give you some level of reference and scale.
Anshu Bhatnagar
Yes, and then, we feel pretty confident that within a couple of years the domestic business would be larger than our international business, it’s not as early as next year. So that’s something that’s going to lets what we are doing internationally.
Chris Cutchens
Okay, and want to give some idea.
Unidentified Analyst
Yes, now that was fantastic. I had one other follow-up on that, again, I don’t know you will be in a position to answer it or not, But knowing your style, once again when it comes in relation to the stock price at this point in time I know as an investor there is a lot of other companies out there that don’t seem to have nearly anywhere near shape or form what you guys got going on at this point, not just where we stand today as a company, but all of the unknowns that this company has and then I got to – I scratch my head and I say, how the heck is thing is still trading at two or three pennies per share. It’s kind of mindboggling, where did you think would be a fair value based on where we stand today, Anshu? I mean, are you, sometimes banging your head at night times saying, what you can’t believe also that we are at the levels that we are currently at knowing what you know at this point?
Anshu Bhatnagar
Absolutely, I think sometimes, I definitely think if you look at the company as a growth stock and kind of what we’ve kind of already guided and mentioned and how we’ve gotten historically I think the stock is undervalued. That’s just my opinion and I think, as our sort of investor base, so we get attracting more institutional buyers. I think what would happen is we would get more of a larger base which would help this – the stock actually start increasing value and that’s something we are actually already seeing. We are getting a lot of interest from institutional buyers and that’s something we are going to continue to focus on moving forward. And especially as we look at couple of things to a listed exchange and that’s really one of the drivers where that as well. If we were on a listed exchange we would have qualified for the Russell, we would qualify for lots of other stuff that would sort of provide an additional level of buying and hopefully the – what we are not kind of subjective to today grading or some of that happens that kind of gets the stock to be sort of – sometimes I don’t understand why a stock moves the way it does.
Unidentified Analyst
Got you. Okay, Anshu, listen again, great quarter and I will look forward to speaking to you shortly.
Anshu Bhatnagar
Thank you.
Operator
And next we will hear from George Thompson. A private investor. Go ahead.
Unidentified Analyst
Yes guys, how are you doing today?
Anshu Bhatnagar
Very good. Thank you.
Unidentified Analyst
Yes, thank you for taking my call. I have two questions. The first question is, is my understanding that you are rolling out, you are ramping up to a rollout 16 additional teams. I like could you guys think in the future to create some typos start changing where you can within a city or a zip code to see where the product is located? And my second question is, in the future do you think that you might pan out the evidence to the shareholders?
Anshu Bhatnagar
So, I guess, with respect to the first question, so it really depends, I mean, unfortunately the way our model works we have certain distribution channels where we are actually paying to get in retail shelves and in different retail locations and in which point we get actually a list of every location that we are in with photographs and so on and so forth. So we can actually see everything and we have great visibility on that. We also sell through distributors and those distributors will not provide us a list of where they sell their product. So, we might know that we are in a lot of retail locations in Europe, but trying to get those lists from them is very difficult. We have to actually reach out there. The managers then say we don’t pull these reports for people. So, we don’t have complete visibility but I think that is something as we kind of build it, we might want to – we will look at kind of providing some more visibility for everyone who wants to buy the product. That’s something we will definitely try to do. And actually, one of our goals also is to be able to sell the product online and so that’s something we are working on as well.
And with respect to the second question, yes, the dividend…
Chris Cutchens
Yes, so great question, but the way we currently think about that and we do keep it in mind. But based on where the company currently is, within its lifecycle and growth cycle, we are currently not even close to that point. So we are taking every penny of profit and reinvesting it back into the business. Just so we can continue to grow as we have been and continue to release as much of the backlog as we can. So, currently that’s our structure and that’s our focus.
Unidentified Analyst
Okay. Thank you sir for taking question?
Chris Cutchens
You are welcome.
Operator
And next we will hear from Brett Hameed, a private investor. Please go ahead. Brett, you may be on mute. And we will move on to our next question a follow-up from Dreyfus. Please go ahead.
Unidentified Analyst
Hey guys. Great answer to a couple callers before about the life of securities. We always want to figure that on that – [Inaudible]
Anshu Bhatnagar
Sorry, we weren’t able to make out what you were saying. I think the connection is not kind of great.
Unidentified Analyst
I am sorry. Is it better?
Anshu Bhatnagar
Yes.
Unidentified Analyst
Sorry. The question was real quick, where you looking at possibly expanding the Board of Directors and if so would that be to qualify for institutional investors?
Anshu Bhatnagar
Yes, that is something we are looking and we are actually kind of going through that as we speak and not only in terms of expanding our Board, but also in terms of our corporate governance which we have a lot of those committees and charters in place already. But that’s something we are going to try to make sure we have the appropriate Board members just get on those committees. So that is something we are working on right now.
Unidentified Analyst
Awesome, awesome. And as investors, I think we’d all like to give a salute - Mark for you - your investor relations guy, he does a really great job answering emails. I’ve never had an email, it’s a digital answer even this in the acknowledgement. So, we appreciate Mark. Just want to give you [Indiscernible] And then also one quick comment that the scavenger hunt, where are you? There is a lot of firms I think generating a whole lot of interest and let’s say some of that that is going out there.
Anshu Bhatnagar
Absolutely. We will definitely do that.
Unidentified Analyst
All right. Okay.
Operator
And we have another follow-up from Shane O'Brien with Optimal Group Capital. Please go ahead.
Shane O'Brien
Yes, hi. This is just another follow-up to my last question. I know you guys obviously are in India, is there any chances of doing any cricket deals out there? And then, also you just mentioned trying to do some retail online sales. So if you guys resell to Amazon at all?
Anshu Bhatnagar
So, yes, with respect to cricket, that is something we are looking at. I can’t say we have any major progress made at this point. But it is something we are definitely looking at, not only in India, but also in UK and Europe. And with respect to the online presence, we have reached out to Amazon. One of the sort of restrictions with Major League Baseball is they don’t want their products sold on Amazon for kind of few reasons and we are trying to work with them to kind of let them know that it’s kind of difficult to counterfeit our packaging. It’s a lot of money. It’s not like some of the stuff like T-shirts that you can counterfeit. So, we are kind of working with MLB to see if there is a way we can get an exception to that and be able to sell on Amazon as well. So, that is something that we might be able to do. If that happens that will be great. That will be a huge win for us. That is something we are working on that and we are aware of.
Shane O'Brien
Okay. One more quick question. Have you guys thought about or looked into doing any e-sports deals or fortnight or anything like that?
Anshu Bhatnagar
Nothing active. I mean, it is a big market. So I am well aware of that. But, at this point, we have not really moved on that.
Shane O'Brien
Okay. Thank you.
Anshu Bhatnagar
Thank you.
Operator
And next we will hear a follow-up from Matthew Carlyle. Please go ahead.
Unidentified Analyst
Hello again. My last question really is regarding the authorized shares. I know currently they stand at 7.5 billion and just based on the reaction to the stock, I don’t think that anyone thinks the rules are going to be issued. What my real question lies in, are you guys looking to reduce the authorized shares down in anytime in the near future? I was looking into it and looking at it, I know you guys, said it you were doing it for a deal structure. Is that something where you are reducing I would say to 5 billion or even 4 billion authorized shares? Is that’s something that is possible in your future or is that you are just believing it as it is then you guys will update that as it comes?
Anshu Bhatnagar
So, yes, I mean, that’s not initially the reason for it was part of that whole restructuring that we had done in the past and you are absolutely correct and we don’t need that number of authorized shares at this point. But we’d probably do it in – the next time we do any kind of a change in our structure and we’d probably just do it at that time instead of doing it specifically for this at this point. Especially, depending on what we are looking at doing in the next quarter or so, if this will parse any kind of change to our articles will kind of do it at the same time.
Unidentified Analyst
All right. I thank you very much and have a good night guys.
Anshu Bhatnagar
Thank you.
Chris Cutchens
Thank you.
Operator
And next we will hear from Brad Burk, a private investor. Please go ahead.
Unidentified Analyst
Anshu, Chris, Jim, Mark, thank you so much for your hard work and dedication. I don’t have so much of a question as I have a comment. Thank you so much for your – the importance that you put on looking for your investors upfront. That means the world to us and I just wanted you to know that we are incredibly grateful.
Chris Cutchens
Thank you. Appreciate that.
Anshu Bhatnagar
Thank you.
Operator
And next we will hear from Laura Thane, a private investor. Please go ahead.
Unidentified Analyst
Yes, hi. Just had a question regarding social media marketing. I don’t really expect any of this to occur anything, but I was curious if you are aware of the YouTube Channel T Series, where there is any of oversee advertising that you guys are working on or that actually takes place over a million for India? Thank you again.
Anshu Bhatnagar
No, I am not aware of that channel. But it is, as far as digital marketing, that is something we are actually working to expand, especially now that we have our own – we have a local product that I think makes sense and so it’s something we are working on and we are working on quite a few interesting things on that front. So, definitely expect to see some update on that really.
Unidentified Analyst
Great. Thanks. I appreciate it.
Operator
And there are no further questions at this time. We may did have a question just come through from Chris Brown with First [Indiscernible] International. Please go ahead.
Unidentified Analyst
I know you guys talk about acquiring different companies and stuff, but, when if, would you allow another company to acquire your company?
Anshu Bhatnagar
I mean, if there was an opportunity that came up and it made sense, I mean, look, we are not opposed to anything. But I don’t think that’s right now in the cards. So that’s not something we are actively looking at or even pursuing. But, hey, if the opportunity came out and it makes sense for shareholders, it is something we would be open to.
Unidentified Analyst
Okay. Thank you.
Anshu Bhatnagar
Thanks.
Operator
And next we will hear from Daniel Martin, a private investor. Go ahead.
Unidentified Analyst
Hey Anshu and Chris, how is it going guys?
Anshu Bhatnagar
Very good.
Unidentified Analyst
I saw that BLF website was directed to the Verus Food website, what’s going on with that?
Anshu Bhatnagar
So, yes, we are in the process of actually updating that website. So, hopefully we will have something up there shortly.
Unidentified Analyst
Okay. And I’ve been having a lot of people ask about, is there any conferences you guys going to this year to kind of some, see and check you out?
Anshu Bhatnagar
Absolutely. So, yes, there is a couple conferences we are looking at, not from yet, but there is a – hopefully, we will be at NEVA in New York in November and LD Micro in December. So that should be good. But once that confirmed that we will definitely let you guys know.
Unidentified Analyst
Okay. And one more last one, have you guys thought about college football as far as anytime from candies or ice creams on that stuff?
Anshu Bhatnagar
Yes, it’s something we can definitely look at, I think getting this rolled out and it’s kind of our first quarter business. So, you know, we will see how it goes next year and then that’s a good progression in getting into college football and other sports.
Unidentified Analyst
Excellent, excellent. Well, Man! I really appreciate everything you guys been doing and my daughter wanted to give a shout as she loves your candy and you guys, you all count on it.
Anshu Bhatnagar
All right. Thank you.
Chris Cutchens
Awesome, thanks and take care.
Operator
And we will take our final question from Brian Steve with Speakeasy. Please go ahead.
Brian Steve
Hey guys. Great job and a great quarter. Just a quick question regarding the new BLF Foods website. Will customers be able to buy food online? Or is it just for stores? Thank you.
Chris Cutchens
Yes, so, it is our intent to be able to order product online itself. So that is something we are working on and I think the bigger challenge is not so much the website, it’s really the fulfillment center. So we are actually working with them as well and our goal is not to be able to order just the candies which is easy, but also to be able to order ice creams as well, which is a little bit more challenging, but if that something we can do I think that will be fantastic. So that’s what we are working on right now. So once we get that in place, basically, anyone would be able to buy the product nationally.
Brian Steve
Okay. Thanks again for all your hard work. We all appreciate it.
Chris Cutchens
Thank you.
Operator
And I now like to turn the call back to Anshu Bhatnagar for any additional or closing remarks.
Anshu Bhatnagar
Thank you. I just want to thank everyone for taking the time and joining us in this call. There is a lot of exciting things that we have planned in the future. So stay tuned. We look forward to reaching out to you both in press releases, but more importantly, I love taking this opportunity to speak to you in person. So, hopefully to speak to you guys again in the next call. Thank you so much.
Operator
And this concludes today's conference. Thank you for your participation and you may now disconnect.


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