Youngevity International's (YGYI) Q2 2014 Results - Earnings Call Transcript

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Youngevity International, Inc. (NASDAQ:YGYI) Q2 2014 Earnings Conference Call August 12, 2014 4:15 PM ET


Dave Briskie – Chief Financial Officer, President of Commercial Development, Director

Steve Wallach, CEO and Chairman of the Board

William Andreoli – President

Ernesto Aguila – President of Coffee Roasters


Unidentified Company Representative

Good afternoon everyone and thank you for joining the Second Quarter 2014 Earnings Conference Call for Youngevity International. Before we get started, I’d like to take this opportunity to read the Safe Harbor statement. The following information presented on this call includes forward-looking statements on current expectations and projections about future events. In some cases, forward-looking statements can be identified by terminology such as "may," "should," "potential," "continue," "expects," "anticipates," "intends," "plans," "believes," and similar expressions. These statements are based upon current beliefs, expectations and assumptions and are subject to a number of risks and uncertainties, many of which are difficult to predict. The information in the shareholder call is provided only as of the date of this release, and we undertake no obligation to update any forward-looking statements contained in this call based on new information, future events, or otherwise, except as required by law.

Now, I’d like to turn the call over to our Chief Financial Officer, Dave Briskie.

Dave Briskie

Hello everyone. I want to welcome you to Youngevity International shareholders call. As John said, my name is Dave Briskie, I’m the CFO of Youngevity and I’m sitting here with our corporate officers with our CEO, Steve Wallach, Steve is recovering from dental surgery and is unable to speak with you all today, but I assure you that he appreciates you’ll listening to our Q2 shareholder update call and he sent his best out to all of you.

Our speakers on the call today will be myself, our President Bill Andreoli, and the President of Coffee Roasting Operations, Ernesto Aguila. We’ll cover the following topics, first we will highlight our Q2 performance, we’re going to provide a review of our marketing initiatives and customer and distributor acquisition activity. We’ll take a deeper dive into the numbers and will provide a comprehensive update on our coffee operations and then we’re going to provide an update on our international progress, plans and objectives related to that and then we’re going to outline the initiatives that we’re going to undertake to bring awareness to the YGYI stock.

We’re very, very pleased in Q2 to deliver accelerated growth of our business and continued profitability. Q2 represents our eighth straight quarter of profitability. For the three months ending June 30, 2014 Youngevity reported net income of $32.7 million compared to $20.8 million for the same period in 2013. This represents an increase of 56.6% in top line revenue. The increase in revenue is attributed primarily to the increase in our product offerings and the number of distributors and customers that are currently selling our product.

We also realized $3.8 million in additional revenues during the quarter that was derived from acquisitions, the rest of the growth came from organic growth initiatives, these include on the acquisition side the purchase of Beyond Organic Inc. which we acquired May 1, 2014, Heritage Makers which was acquired August 14 of 2013, Good Herbs which was acquired in April 28, 2014, GOFoods which was acquired October 1 of 2013 and Biometics International which was acquired November 19 of 2013.

The increase in revenues in the commercial coffee sector is primarily due to the successful launch of our new green coffee distribution and we’ll have a lot more on that later in the call.

Gross profit for the second quarter ended June 30 increased to $18.9 million compared to $12.6 million for the same period last year, this represents a 49.2% increase. Operating income came in at $1.2 million which was an increase of 14.8% over the prior year. Net income for the three months ended June 30 decreased to $544,000 and compared to net income of $662,000 for the same period last year. EBITDA or earnings before interest taxes, depreciation and amortization as adjusted to remove stock based compensation which you all know, we define as adjusted EBITDA came in at $1.9 million for the three months period ending June 30. This compares to $1.6 million in the same period for the prior year.

Our balance sheet is also growing stronger. Our cash position has held up remarkably well. We’ve only experienced a modest 5% decrease in our cash position or approximately a $180,000 since we ended the year 2013 just six months ago. When you take into account that we acquired a plantation in Nicaragua and the processing plant in the region utilizing $2.1 million in cash, in that respect approximately $500,000 in physical plant improvement so far this year and that we increased our inventory position to help our growth by $2.5 million, it’s pretty apparent that our business model is working well and throwing off significant cash.

I would like to encourage all of our shareholders to review our financial numbers posted virtually on all financial websites this afternoon. Pay considerable attention to our balance sheet performance and please review our statements of cash flow.

I would like to on this particular call take a deeper dive into our revenues. Direct selling accounts for 87.6% of our business, while the coffee segment accounts for 12.4% of our revenue and that’s as of this quarter. Just a year ago direct selling represented 91% of our revenue while the coffee segment was 9%. So, we’re getting better balance out of the two segments.

In Q2 of 2014, we experienced on a consolidated basis a $11.8 million improvement Q over last year. This is 56% growth over last year, so let’s break it down. Of the $11.8 million $9.75 million of the growth came from the direct selling business and just over $2 million came from our coffee section. Both segments have grown significantly over the last year, in fact, direct selling grew by 51.6% while coffee grew by a 103.7% over last year.

Let’s break that down a little bit further. Coffee which compromises all organic growth most of it coming from our newly established ring coffee business as we said came in at $2 million while the direct selling segment grew organically at just under $6 million and acquisitions contributed just under $3.8 million including organic growth from those acquisitions.

And what do I mean by including organic growth from those acquisitions? Because when we do acquisitions, at least, up till now they haven’t been by audited companies, we’re not preview to sell against those numbers or base our revenues against those numbers. We can however, when we do an acquisition quantify what the sales look like to us on the very first month following the acquiring month. First, we also have our due diligence and merchant account activity so we know where our acquired companies revenues come in. but we’re not allowed to, for GAAP to use them as comparative basis because those numbers have never been audited before. So, when we report our numbers on our growth from acquisitions, we report the entire amount of revenue that comes from an acquisition from the beginning of the acquisition.

So let me draw an example for you to make it clear of what I’m talking about. Biometics as an example is a company that we acquired, when we acquired Biometics it was generating about a $100,000 in monthly sales at the time we acquired it last November. So, this quarterly revenue was coming in at about $300,000. In this second quarter Biometics revenue contributed just under $1 million in revenue for the quarter, this essentially tripled since our purchase, so that accounts for a big chunk of organic growth in the $3.8 million that we established coming from acquisitions.

Heritage Makers on the other hand is another great example of organic growth taking place within our acquisition model. Heritage Makers in this quarter contributed an incremental increase of revenue of a $1 million over the amount of revenue that it was contributing when we first acquired the business. So, Heritage Makers revenue stream essentially has doubled since we made the acquisition of that particular business. That would normally also account as organic growth. So, when we quantify the $3.8 million of revenue coming from acquisitions, we like to say including organic growth within those acquisitions.

So to summarize, our $11.8 million of growth that took place in Q2 50.8% of it came straight up from organic growth from our direct selling division, 17.5% of that number came from organic growth from our coffee division, while 32% of that growth came from acquisitions of which I would say conservatively half of that revenue is also organic growth.

So all in all, approximately 80% to 85% of our growth in this quarter came from organic activity that tells me that our business model and our acquisition model is really delivering the result that we hope it would.

One last thing that’s quite pertinent as we take a deeper dive in our financial performance. In Q2 which was also the same Q1 for those of you that was on the call, we experienced significant expenses that are affecting our bottom-line results. The NK collaborative, a Nicaragua acquisition in the integration expenses related to the Beyond Organic acquisition and the Good Herbs acquisition, the international setup expenses which includes growing our various teams in the various countries as well as the professional and legal structures and legal fees that we have to partaking and the product registration fees that we have to or partaking is all included in these expenses. Additionally as take on more business our amortization costs based on our acquisition structure also has increased.

So, for Q2 in just this quarter those figures amounted to about $550,000 of additional expenses, obviously we spent these dollars knowing that there will be future results on those expenditures. But, it’s important to note that it does create a drag on our financial performance in terms of bottom-line activity during that particular quarter.

We also had a one-time expense in this particular quarter related to our convention that’s our biggest advent of the year, this amounted to $175,000 after all offsets came in. So, when you combine the incremental expenses due to all of our growth initiatives along with the one-time expense this had a $725,000 effect on our expense structure and this obviously had an impact on our Q2 numbers.

With that said, we’re extremely proud of the profitability we’re able to deliver to our business, we feel we’re being very good stewards able to maintain profitability while taking on some very, very large undertakings. Our growth has been nothing short of astounding really over the last quarter and a lot of that comes from a great job done in our fields and of course our coffee business.

Bill Andreoli leads our fields, he is our President and he is here to talk to you some of the sales and marketing initiatives that contributed to this stellar growth that we experienced in Q2. Bill, can you take it away from here.

William Andreoli

Very well, thank you so much Mr. Briskie and special thank you to our shareholders who have joined us today. Today’s call like Dave has already stated comes in a pretty exciting time as we spoke about last May on Q1 call through a lot of positive and exciting things developing and we’re happy to report that these trends have continued.

The results really speak for themselves. In addition to the gross sales for the year as Dave already discussed, we use new customer and distributor enrollment as a key indicator of current as well as future sales growth. Overall enrollments for the Q2 are on par with those in Q1 which is 37% higher overall from the calendar year 2013.

What’s more is that distributor enrollments are up a whapping 93% average over 2013, this is indeed exciting and speaks well for the potential continued growth throughout the rest of 2014 because customers usually bring multiple product sales, distributors usually bring multiple customers. This is unpunctuated by July 2014 which is currently the largest sales in growth month in the company’s 17 year history.

This progress has eroded in our increasing ability to simulate our broadening acquisition strategy with our narrow organic growth strategy through our non-equalized marketing message and business building system referred to as saying in the lane, this comprehensive system provides a core foundation for even non-nutrition based acquisition upon which to build business.

This system stocks of our core product velocity of 90 For Life then to our product consumer action plan to Healthy Body Challenge. Followed by our new distributor startup kit in business and box called the CEO Omega pack.

Al Next comprises our life changing compensation, appreciation and world class recognition systems and lastly the business building action as called the high by high marketing system. While continuing to broaden our reach while we tighten our focus, we’re tracking great people from across the globe, both fresh entrepreneurs and established industry icons alike.

Our current growth trend really began back in December of 2013, traditionally the slowest growth in field monthly when we launched a very aggressive promotion what we call the CEO Omega pack promo giving a heavy discount on most profitable products to enroll and distributors. As we reported on Q4 2013 call, this marketing loss leader not only lead to a record break in December, it brought attention to new growth and excitement to our distributors at a time when typically the distributors as well as customers have their minds on other minds, plus the holidays and winter vacations. We piloted focus on growth right through Q1 into Q2 and now into Q3.

Even though July, the first month of Q3, I’m happy to say that with the success of Omega pack in December we repeated that promotion in July which is typically the second sales in growth month for year and not only that we eclipsed the growth in sales of all previous July, it proved to be the largest sales in growth month in company’s history as I mentioned earlier.

This consistent level of growth, although not unprecedented is a key indicator of our core philosophies in product messaging is resonating strongly with that core feel leadership, is also an indicator of our overall reputation within the industry as a whole, as distributors and consumers alike are attracted to noticeable success. Needless to say we’re pleased with current growth and look forward to continued upward movement.

Though our annual convention was in Q2, we discussed it on our Q1 call so there is no need to go into great detail there as into reiterate that it was a smashing success with nearly 2,000 of our more than a 120,000 active distributors in attendance. Since that event we’ve also conducted a CEO school, our quarterly sales and leadership training event. In this quarter we are embarked on more Marilu and (inaudible) tenant.

In this CEO school we’ll provide the perfect bridge for our distributors to fill the gap between the annual convention in April and the upcoming leadership summit in September. The leadership summit which runs in September 25 through to 27 is in Las Vegas, Nevada and it will be another highly attended event as we expect to full capacity at this venue. This event will be an extended version of the annual convention with more training sessions, breakouts and workshops. Ongoing awards will be presented for rank advancements and other achievements.

However, our annual awards and awards rank that we regular solely for the annual convention. Events like our annual convention, leadership summit and CEO schools are critical to enroll and protest of our distributor force. A tangible assets like workshops, great speakers and award banquets are easy to describer that the intangible affect of thousands of likeminded people come in together with one team, one dream and one mission is often difficult to put into words. But ultimately is a most powerful and strongest motivator of growth that we can master.

As Longevity continues to grow both through organic growth and strategic acquisition, we’ve been fortunate enough to attract some of the industry greatest leaders, both inside of our corporate team and in the field for us. As you heard and sound previous year hold a calls, I’m proud to say that Longevity grows in product sales and diversity, we’ve also become more efficient quarterly, staying the stage even greater growth in the field without the need to the same degree of growth within our corporate staff.

As we continue to mention on these calls, our development of our industry unique mobile app, website and web presence , an improvement to our distributor back office systems are ongoing. We continue to forge ahead on the Spanish speaking marketplace with both web and printed supporting materials as well as look around the globe for market potential.

Longevity’s footprint is continuing to grow with diversified product offering with both inside and outside of the U.S. Today’s consumers as well as today’s independent distributors are attracted to variety in diversification. Like investing, people find strength and safety with the diversified portfolio. However, in business at the same time they rely on stability and focus, harmonizing the posing forces as one of the thing to separate us, not only from other direct fields and network but from the health and health and wellness industry as well.

In Longevity we’re fortunate enough not just to have diversified products, but diversified products on each stand on their own vision and marketplace and this is evident by the high number of real customers that have been purchasing our products year after year after year.

It’s ironic that the most things has changed and more things stay the same. With the continued influence of the internet, social networking and assumingly ever decreasing level of brand and personnel loyalty in the world, Longevity continues to shine. And this is because we’re embracing the changes while staying true to our roots and getting where we came from.

Establishing and motivating relationship is important to any business, believe in more so in direct sales. Trust and consistency are critical important to key customers and distributors long term. In a recent independent study that we commission Brytt, a brand research and strategy firm we discovered not only how we develop loyalty within our customers and distributors, start the 90 For Life messaging for half the strongest and most effective you have ever seen.

So, Life assured it has re-continued to grow in a diverse product offerings and acquisition come on board will never have been our core believe in people and in a message that cite us company over 17 years ago.

I want to thank you all again for joining us on the call today and with that I’ll hand the call over to you Dave.

Dave Briskie

Thank you Bill, that’s some great stuff there. I appreciate all the hard work of the marketing and sales team, it’s done a incredible up in this last quarter. Obviously if you folks have been taking note of the press releases that are out there, we’ve made a significant investment in the coffee segment of our business, we like the fact that we’ve a very diversified revenue and that we continue to diversify those revenue streams in various products, products categories, vertical integration place and so forth.

In the second quarter as we had announced, we acquired the Siles Plantation Family Group. The purchase price just to summarize, the processing plant and the first plantation totaled just over $3.3 million and we’ve an option on the second plantation that will cost approximately $1.3 million, until we execute that option we’ve acquired the rights to the harvest on that particular plantation, so we’re actually working that plantation as we speak and regardless of the closing date, we still will own the harvest that comes off of the property.

The reason why we made this move is always had been a goal to become to field to cop and by acquiring a plantation in the various processing plants we’re able to accomplish that goal. This particular plantation in the region, it’s in Nicaragua is in the middle of rain forest, it fair trade certified coffee, its organic certified coffee and its rain forest certified coffee. So, it’s a very, very special area in the coffee growing region.

In support of that particular business and the expansion going down at CLR Roasters we’ve also made a significant investment with our plant in Miami and our distribution center down there. And the best person to fill you in on what’s going on in our coffee business is Ernesto Aguila, Ernesto has been there from the beginning of CLR Roasters, he does incredible job for us, he has an amazing work ethic and I’m proud to have him as part of the team and I’m proud to bring him onto the call to have him to provide the update on our coffee business.

Ernesto, can you take it away please?

Ernesto Aguila

Absolutely. Thank you, Dave. And hello to our shareholders from sunny morning, Florida. I’m very proud to be on the call today and very excited to talk about something that I’m very passionate about CLR Roasters, our coffee company. Today CLR Roasters is the second largest roaster in the floor, only Maxwell House and Jacksonville is larger than us.

Our business model is made up into three parts. The first impotent is our branded business led by our expressive brand Café La Rica that is number four in the state and number 9 on a national level to-date. Distribution for this brand, Wal-Mart, Publix, Winn-Dixie, Sams, (Inaudible) just a name a few.

We also have our Josie's Java House for American line of coffee and flavors. This price in retailers, some examples of hobbits, Wal-Marts associated grocer and drug mart. We also Java House for our urban brand for American coffee with enlarged flavor line of products, you can find this brand in the discount marts as PJ marts and home goods.

We’re also working on our club store on a package for first quarter of 2015 that brand will be Café Alma. The second part of our business is on private label business, we can produce all different types of coffee blends, packaging, weights, accounts. We simply started by hearing to our customers needs and expectations and we relate to them and this model has been very successful for us.

The third part of our business model is our newly launched green coffee division. This division was launched in late April and we have contracted 3.31 million pounds of coffee, sale value of $6,256,562 just since April alone. I’m going to ask everyone to please close your eyes as I walk you through our hosting facility. Let me take on board. When you first time come across facility you are going to find a quality control lab with the most modern equipment to run a QC lab in the industry. For example, we have three general brand sample roaster, a color track laser analyzer for the sample of coffee. This equipment is the most modern in the industry. We also have a green and roaster coffee immobilizer equipment, grinders and all type of grooving equipments of different coffee cup.

Next, green coffee cleaner, it was purchased just over a year ago, we have four stylos different types of coffees, these stylos feed our roaster, consistent weight and cleans our doing coffee. Now we are into our roasting part of the business. The rosters we have two German burns 23 hour roasters, these are German machines that can put 200 pounds of coffee over 15 minutes. Fully automated controls roasting (inaudible) and after burns, these roasters can produce 10 million pounds of coffee one shift.

Next, we are moving to our grinding stations where we have four Java grinders that can produce 15 million pounds of coffee per year one shift.

Next our packaging lines, we currently have 30 machines they can produce anything from 0.6 grams up to a 1,000 pound super sacks. These machines can produce single serves, fractional packs, rigs, retail bags, club store products free made bags with (inaudible) flavors and talk about flavors we are currently producing 50 different types of flavored coffees today. We are also producing 32 different types of coffee blends and we are also producing 150 branded coffee items in our facility. Our coffee is so fresh that we recently 24 months supply certified from a third party lab.

Today we are SQF Level 2 certified which we just completed our recertification a couple of months ago and we were given excellent score of 95. SQF is the highest standard of food safety certification in the industry. We are also organic certified and fair trade certified. We just signed a 10 year extension to our current location and we now have 50,000 square feet to accommodate our current business and future growth. Our parent company Youngevity International has made tremendous investment in our current and future growth of CLR and for that we thank them.

Let’s get into the numbers. 2014 was –

(Technical difficulty)

We’re testing more and more and more of our products and make sure that we’re always in compliance with the various rules and regulation that govern our industry. I would like to set way from there into our international business very quickly. International is a very, very big part of what’s going on Longevity International. As I’ve stated the amount of expense flow that we’re carrying in Q1 and then again in Q2 significant and we’re doing this with an eye towards massive growth that is our plan, our growth, initiatives are starting to hit straight, we consider ourselves as a growth company and we believe the best days of our growth are in the international markets and that’s why we’ve targeted them so specifically.

I wanted to notify you that we’ve already registered Youngevity as an independent company in Mexico and in Columbia, so we’re registered there, we have our own corporate entity setup there. They were incorporated as of June of 2014, tax ID numbers for both companies have been setup, the banking relationships in those countries are now established and we’re pretty excited about the potential for those two markets.

We’ve already started our product submissions in Mexico, we’ve made our application for import licenses and we expect that to come in this month, the month of August and if everything goes as we expect, we’ll be shipping to this market starting in September. Mexico operations, our folks are on the ground there literally as we speak, we have just hired a country manager for Mexico. Our distribution will be coming through Guadalajara that situation has already been established there in Guadalajara, product will be shift to Guadalajara and shift to the rest of Mexico from Guadalajara. Our office will also be in that same area and our whole invoicing system, our legal set up, our training and all of that is taking place as we speak, as we hoping to open up Mexico on a wider scale beginning in September.

Columbia, we are just now starting the process and looking for a country manager for Columbia. We expect that we will be operating in Columbia by December of this year or January. So our target date is December as a soft launch and then moving into January with full operations in Columbia by March 2015.

We are currently evaluation Guatemala, Dominican Republic, Costa Rica for next year 2015. Providing that Mexico and Columbia comes online as we anticipate based on the strong interest from those countries we would expect to open those three countries in 2015.

We have also entered into international banking relationship with Wells Fargo, we have selected them after an exact research as our worldwide banking and we are moving our banking from a more localized banking system to Wells Fargo on a worldwide platform using their worldwide banking system. We’ve also engaged the surfaces of Grant Thornton as our international accounting firm to make sure we are doing everything by working in these various countries as you could imagine there is number of rules and regulations to follow. So we will be executing with Grant Thornton and all the countries that will be opening and they will also be overseeing our operations on our coffee division in Nicaragua.

I wanted to touch a little bit leaving Latin America for a second and Israel where already registered Youngevity as an independent company in Israel, all of these independent companies are wholly owned by Youngevity International. The company in Israel was incorporated on June 2014, tax ID number is set up, the banking relationships have been established. Obviously, very important to that marketplace is Kosher Certification and we obtained Kosher Certification for all of our products that will ultimately go into Israel, obviously with the situation in Israel right now we are holding off our launch day in Israel until things settle down there. Our people that are on the ground in Israel have nourished now obviously unfortunately there is no stranger to these types of situations that happened in the country but their experience says is when things settle down it is the best time to enter that country as there is a boom and plenty of demand there. So we are hopeful to open in Israel in December that’s our target date depending on the situation over in that particular area. We have already started the preregistration of leaders in Israel and we have some major leaders onboard ready to go as soon as we open that country.

Russia is still a very, very important market for us, it’s actually one of the more exciting markets in terms of growth and opportunity in the direct selling industry in the worldwide platform. We are fully registered now in Russia and we have already started the product registration process. I have received the number of enquiries from our shareholder base regarding that marketplace and the concerns about the relations with Russia and America. We have many people on the ground there, we have our consultants there, we have our staffing there and what we essentially have learned is that the effects on American commerce has really been focused on the larger industry that being agriculture and oil and all that really to balance of operations or different types of American enterprises operating in Russia have really been unaffected other than in those two areas. So we continue to forge forward in that particular region. We’ve already shipped and submitted our first 12 food supplement products first 11 cosmetics or import license in the Russia and we expect to have those all the license by the end of October.

One of the things I would like to bring up as we enter all of these countries as we are doing at the right way, we are leading with our core products better here in America, that’s Russia, that’s Latina America, that’s Israel that any country we enter we’re leading with our core 90 For Life products in the main products that were successful here in America. The reason why we do this is, allow us for an easy or system implication as we enter the countries, we simply translate our marking materials to make sure they are culturally fitting that the language is working properly and that our marketing initiatives are all in synch with what we are doing in the U.S. that also allows us to recruit heavily in the U.S. and leverage relationships in the U.S. into these foreign markets as the systems all remain the same.

For Russia, we expect to soft lunch in October with full scale operations beginning in November of 2014. We are currently in the process of running our offices there, we are working on all the technical issues of our operations including office equipment, legal invoicing systems training and recruiting has already taken place in this region.

After Russia, we will immediately launch into Kazakhstan and Belarus because these two countries basically work on the same platform of Russian Certifications, so in importation we’ve already been accomplished in these two regions once we are set up in Russia.

The preregistration has already began, key leaders in Russia has already happened in fact we already have 200 leaders in the sales side signed up for Russia as we speak and we expect to have 400 leaders by the soft lunch day in place they are already in the Youngevity system and are ready to go to work, they are just waiting for the product registration. The first five regions that will focus on will be five regions including Saint Petersburg. So we will really have a nice footprint in Russia as we enter that market here in November.

I had a number of questions about future and where we are going as you all know we brought David Ori onto our team, he comes from some Isagenix, he has got a huge amount of experience in the pack rim, he has been besides doing a lot oversight on various things that are going on with our whole international strategy, he has been spending a fair amount of time of valuating Hong Kong, China, Taiwan, Singapore in that region and we are looking at Hong Kong and Taiwan possibly in Q2 of next year as new areas. Of course, we will not take those on until all of these other regions that we just discussed our up and running and producing the revenue that we expect them to produce.

I wanted to talk a little bit about a press release that came about Youngevity selling $4.35 million worth of five year notes bearing an interest at 8%, as you all know at the pace we are growing we want to make sure that we are profitably capitalized, we paid cash for all of the operations as it related to the coffee business, the K-Cup machine, the plantations and the processing plant and the $750,000 of improvements we have invested thus far in Nicaragua CapEx improvements to improve that area. So we wanted to make sure that we replenish some of that cash.

My hats off to Steve Wallach, our CEO. Steve really stepped up and he has been telling all of you for the right opportunity that he would utilize his shares where he felt appropriate. Steve stepped in guarantee personally these notes which allowed us to get a very attractive 8% rate. I had a number of firms already approached me about the rate congratulating us on the 8% yield that around these notes typically companies and pace like this pay much higher interest rates, so very, very happy we are able to achieve these rates, these notes are already in place and we will close off this offering if you will raise on September 01. Steve personally guarantee the notes which allowed us to get this rate and there is a conversion which was outlined in the press release that $0.35 we have got a premium conversion to market, many felt that our share price was undervalued, so that’s how we’re able to negotiate at higher conversion price and Steve Wallach has fledged that he will use his personal shares for any of these notes that convert to equity, so that there is not any collusion on the conversion of the shares, so my hats off to Steve for doing that and really it as if Steve used his own shares really to acquire the Nicaraguan operations which tells me that he is obviously very committed to the coffee business along with our direct selling business. So that’s very, very exciting news and you will hear more on that in the near future.

I wanted to close really talking about Youngevity and one of the biggest questions I mean almost the only question we got from our shareholder base other than how the MK Collaborative was doing and let me just bring, let touch on that then I will get to Youngevity. The MK Collaborative soft launch in July it’s doing as we expected it to do, it’s soft launch because it’s a web based platform in e-commerce boutiques. We haven’t even broad after recruiting and the capabilities of the MK Collaborative as one of the nature we worked out all of the kings, were shipping products everyday and is at the pace we want, we expected to launch the MK Collaborative in Q4 and we moved that up to a soft launch in Q2 and expect to continue to growth that into just before the Christmas season by Q4. So the recruiting end of that site should be up next week and we will get those step on the gas a little bit harder on the MK Collaborative initiative here in the coming weeks but it’s going as per plan, the product looks great, our distributors are wearing a lot of the product enjoy and we expect that to be in major growth sector as we move later into the year.

So, the second real question that every had is what’s going on with Youngevity stock. And we understand that is a frustration source for many of you, particularly because our business is performing so well, but it is our feeling that we won't be held back long. We are delivering on very high growth company, we are doing everything right on the financial metrics of our business would be good stewards of our cash, we are delivering profitability while we’re achieving very measurable growth and this is a story that needs to be told. You sometimes wait for a trigger point that really step on the gas and telling a story and we feel like we hit that trigger point now, obviously we are well north of a $100 million mark in terms of our revenue. We’ve got 8 quarters of profitability, our business segments are hitting on all cylinders, our coffee business growth is accelerating, as mentioned over a 100% this year over last year. So it’s a great time to start getting out there and we have to do a better job telling the Youngevity story to YGYI story to the various investments group out there.

So we are very, very committed to doing that. In fact, we have a number of major distributors and customers in our space that have access to radio, reporting at a comprehensive radio program to go out and start telling the Youngevity International Corporate story to the world. We believe it’s time to do that not only here but on a worldwide platform, we expect to do that in radio and in print. We are also got to start doing that in September with a very significant road show in the middle of the month where we are going to see various funs and various retail players just let them hear more about the YGYI story. We are going to continue to attend investment conferences and this is a major priority for the business as it is the one area of the business that we’re disappointed in and we understand our shareholders are Steve Wallach, myself, Bill Andreoli, Ernesto we all have significant stakes in this company and we believe the time is now to get out there until the Youngevity corporate story.

We have done a fantastic job growing customers and distributors but we haven’t done a very good job telling our story to the investment community and I wanted everyone to know that we are hugely committed to doing that and that starts in September and it will be an ongoing platform in an ongoing initiative with significant capital going towards getting out there and letting people know about our company.

So with that said, I appreciate you all jumping on the call and we all look forward to talking to you when we announce our Q3 results later in the year, have a great day.

Question-and-Answer Session

[No formal Q&A for this event]

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