Youngevity International, Inc.
Q4 2012 Earnings Call Transcript

Published: 2 Apr 2013

[Operator:]

The broadcast is now starting. All attendees are in listen-only mode.

[John Zervas:]

Good afternoon. This is John Zervas, the Investor Relations Manager for AL International. And I would like to welcome everyone to AL International’s Fourth Quarter and Fiscal Year 2012 Earnings Conference Call. 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," "estimates," “encouraged” 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 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 CEO, Steve Wallach.

[Stephan Wallach:]

Thank you, John. Hello everyone. I want to welcome all of you to the AL International shareholders call. We have a lot of important information to share. So let’s get right to it. Over the next hour or so we will focus on a number of key areas within our business. Speakers on the call today are myself, and our President Bill Andreoli and our CFO Dave Briskie. We will cover the following topics. We will highlight our Q4 performance. We will provide an update on our Form 10 filing. We will provide a marketing and sales update. We will provide an update on our product strategy and third-party validation initiatives. We will provide an update on strategic initiatives. We will provide an update on our coffee operations. We will provide an update on our profitability improvement strategy and we will provide an update regarding investor relations. We are pleased to deliver our shareholders much improved performance in Q4, 2012. Both our direct selling business and our coffee operations continued to show improvement Q-to-Q. I’m going to turn the call over to our CFO, Dave Briskie to discuss our fourth quarter numbers. Dave?

[David Stephen Briskie:]

Thank you, Steve. First thing I want to do is let everyone know that we’re pretty pleased will the progress we’ve made on improving our bottom line, in particular. The following results that I’m going to share with you are going to provide on a pre-tax basis. Before I get into Q4, because that’s the piece we’re looking at. Obviously, we also are filing our year-end results as well and I’m proud to announce that we’ve eclipsed the $75 million mark and achieved record revenue performance for both the direct selling division and the coffee operations. So we’re pretty happy with our 2012 year-end results in terms of revenue. Let’s get into the Q4 results specifically and I’m not going to get too deeply involved in the numbers, because the press release has just been issued and its out there for everyone to read. But I do want to cover some of it and you will see the year-end results out there in the news, in the PR as well as Q4 performance. So let’s talk about Q4 a little bit. The Company reported a 39% increase in total revenues for the fourth quarter of fiscal 2012, recording net sales of $19.2 million for the quarter compared to $13.8 million in the previous quarter of 2011. Gross profit for the fourth quarter of fiscal 2012 increased approximately 45% to $11.3 million compared to $7.8 million for the same period 2011. AL International reported net income of $155,000 in the fourth quarter of fiscal 2012 versus a net loss of $548,000 for the same quarter of 2011. We are pretty encouraged with our continued improvement in profitability and EBITDA quarter-over-quarter. EBITDA for Q4, 2012, excluding unusual adjustments amounted to $1.4 million compared to a $1 million in just the previous quarter that being the third quarter of 2012. While pre-tax profits excluding unusual adjustments more than doubled from Q3 to Q4 to $674,000. You heard me mention two unusual adjustments in the fourth quarter, which I want you to consider and will be discussed further in this call and its necessary to properly evaluate the performance of our business from Q3 to Q4 and also from 2011 to 2012. First of all, there was a $1,130,000, that’s $1.130 million and non-cash expenses related to the increase in contingent acquisition liabilities. We will talk about contingent acquisition liabilities later in the call as its one of the shareholder question that was submitted. So we’re going to dig into that a little bit more. And second there was a $690,000 other income item that appeared in Q4 and we felt that it would be unfair to include that extra $690,000 of other income when evaluating our business Q-to-Q because its really a one-time event. So, we back those two items out to be able to get a proper comparison, so we could provide an update on our profitability improvement. And so when you back those item up out Q3 to Q4 actually doubled in the bottom line performance. I also want to talk a little bit about – just a summary really quick for those of you that are keeping up and its been difficult to keep up and now that we’re fully reporting, expect everyone to be able to monitor how the Company is doing from quarter-to-quarter. So just in summary, Q1 of 2012 the very beginning of last year, we recorded an $851,000 loss actually for that quarter with negative EBITDA. The following quarter in Q2, we improved to just about a breakeven with a $62,000 loss, but we recorded $700,000 in EBITDA. And that in Q3, we reported profits of $262,000 with a $1 million EBITDA and then we just went over Q4 less the one-time charges coming in at $674,000 of profit and $1.4 million in EBITDA. So I wanted to kind of summarize that because we get a number of enquiries as to how our profitability improvement plan is going and I think that’s a pretty good indication of how we’ve been doing Q-to-Q-to-Q into the fourth quarter and now we will head on into 2013. Given the significant improvement in our profits and EBITDA, combined with better inventory management systems, our balance sheet obviously are strengthening, our cash flow has improved greatly. I encourage everyone when they look at our recent filing that just will be coming up on Edgar, you will see a cash flow statement. I encourage you all to look there, because it explains more fully how the Company is performing, it shows both positive and negative adjustments there and it shows how the Company has improved in terms of just cash position from the beginning of the year through now. So that kind of shapes out all the areas where people might have difficultly understanding how GAAP accounting works, because it’s a fairly complicated set of rules that we must follow. I also encourage everyone after they’ve had a chance to go review the filings whether it be on pinksheets.com or on sec.gov, you’ve had a chance to look at them and if you have questions to write into our investor relations department, [e-mail] and we will be happy to answer your questions there. Let’s talk a little bit before we get into some of the fund stuff, about the process of becoming fully reporting. As you all know we created a filing of Form 10 back on February ’12. We have heard from the SEC regarding that particular filing and there were approximately 18 comments, which we were actually pretty enthused to see. In the latest filing that we just now submitted, we basically amended our Form 10 filing and also provided a letter answering the 18 SEC comments or questions if you will. So, that is also public information, which is why we can share that happening. You will see that coming up on sec.gov; you can see the amended Form 10 filing, which now is inclusive of the year-end numbers. So the Form 10 filing that is out there now will have the numbers straight through year-end and of course you will – you’re able to view our comments in our responses, so you can kind of follow along as to how we’re doing. We don’t know how long this process will take. That certainly is now back in the hands of the SEC to do their filing work and obviously if they have further comments we will expeditiously answer those. You should be happy to know that there isn’t a concern right now about numbers going stale. We had a number of people question that, given the timing of the first Form 10 or the initial Form 10 filing, but when we replied, we updated all of the numbers, so the first – the due date for the filing is April 1 and as of today that Form 10 has been amended. Obviously, we will keep everybody up to-date on progress as it relates to the filing and as we get any news, we will share it with you in a press release. I want to now hand off the call to our President, Bill Andreoli. Bill and his team are doing a very, very fine job and obviously an integral part of the exciting growth that we experienced last year and what we’re going to try to do is provide some information about how we’re doing in terms of plans and where we’re heading so that you can get a flavor for some of the things that are going on within the sales and marketing areas of the Company. Bill are you ready to take it away?

[William Andreoli:]

I’m Dave. Thank you very much, Mr. Briskie and thank you to our CEO and especially to our shareholders that have joined us here today. As you know its my primary focus here at AL Global and Youngevity to drive top line sales as well as the continued improving our gross profit margin. So that end, I’m pleased to announce that we’ve seen significant growth in both of these areas over the past quarter and even greater growth as we move into 2013. In late November 2012 we launched the Healthy Body Challenge, with a marketing initiative that works in concert with the 90 For Life Movement that we rolled out in the late 2011. As a 90 For Life Campaign did in 2012 and continue to do today, the Healthy Body Challenge campaign will continue to simplify our marketing methods and give our distributors and even more importantly our customers a clear track to run on. The Healthy Body Challenge take the power of the 90 For Life product lines and puts well the fine action plan in place by encouraging everyone to one, take the Healthy Body Challenge themselves for better health, for further Healthy Body Challenge to receive price for free, and three to promote the Healthy Body Challenge to participate in our industry leading compensation systems. For those that have tracked our seals over the past 12 to 18 months, you no doubt noticed the tremendous growth we saw over the second quarter of 2012, creating the greatest top line sales months and quarter in Company history. It’s no coincidence that this tremendous growth was proceeded by our annual convention. The annual convention is a time when all of our top distributors and rising stars all come together in one place for training, collaboration and most importantly recognition for jobs well done. It is the time where our corporate execs and management staff along with our top field leaders go the extra mile to show our appreciation for everyone’s contribution. This year celebration will be held May 2nd to May 4th, in Las Vegas, Nevada at the Red Rock Resort & Spa and I’m excited to announce that pre-registrations for this year’s event that’s still a month away have already exceeded last year’s total attendants meaning that convention 2013 will be the largest, loudest and most significant event in Company history, which also means that we will drive even more significant distributor in customer growth as well as larger increases in sales, moving through Q2 and into Q3 of 2013. This year’s convention will also be the host to our new celebrity brand ambassador Marilu Henner. In the past we’ve had many officers from various celebrities to get involved with our Company and product message, but none fit as well as Marilu. She has long been advocate for health and wellness and let be honest her recent and continued success in the Network Television Show Celebrity Apprentice certainly doesn’t hurt. Marilu will also be one of the featured stars of an up and coming issue of success from Home Magazine. In fact the entire issue will be dedicated to Youngevity, our product message, our leaders, and of course Dr. Joel Wallach, our founder and patriot. This magazine is nationally distributed and will appear on magazine racks across the country, including Barnes & Nobles and Books-A-Million and so many more. This not only helps to give our distributors third-party credibility, but it even further simplified our marketing message, bringing all aspect of our Company into one plate, even including a promotional DVD in each magazine copy. On other fronts we’re continuing our marketing and customer service efforts into new technologies. We’re noticing the rapid and continued movement away from traditional computers into the smartphone and tablet arena to support and encourage these interfaces we’re continuing to simplify our web presence. We’ve added online chat to enhance customer service and we’re currently developing mobile applications making it easier for people to promote business, develop distributors and service customers while on the go, plus we’ve expanded our social media presence through Facebook, Twitter, Pinterest and more. In today’s fast paced out society there are many different ways to connect to our distributors and customers and we’re making 1000s of new friends every single day. Lastly and certainly not least, we’re getting serious about the Spanish speaking members of our society. For the first time in Company history, we’re fully supporting this growing market segment from bilingual customer support, the printed materials to a new fully translated opportunity in product presentation in Spanish, we’re continuing to prepare for this untapped marketplace in Youngevity. So we’re definitely excited about where we’re, but we’re even more excited about where we’re going. Thank you Dave.

[David Stephen Briskie:]

Thank you very much, Mr. Andreoli. That was a great presentation. We appreciate the update and I’m sure our shareholders like hearing some of the color in between the numbers of what we do. Now we’re going to get Steve Wallach back on the call. I think it’s an important time to talk about the unique piece of our business model. We get a lot of questions about our industry and what our model is and how it works and our model is really unique and it’s a story we enjoyed telling and its bringing in additional shareholders when they truly understand the unique nature of our business model. Steve is also going to talk about third-party validation of our products, which is an ongoing initiative and then he is going to get into other strategic ongoing initiatives within the Company that are really important to be shared. So Steve, can you pick it up from here?

[Stephan Wallach:]

Sure Dave, and definitely thanks for that update President, Bill Andreoli. To kind of start off Dave with one of the topics you touched on and the uniqueness of our business model, I’m going to start-off by prefacing that within a lot of ways our business model is similar to businesses such as Amazon.com, people have heard us kind of make that correlation in the past. Amazon really is even I’ve talked about to then shareholders and other calls and things, Amazon started out as a book seller and that’s what they were famous for and they rapidly realize that providing their service and matching products to consumers, to customers was a great business model to expand upon, so today they offer 10s of 1000s of products to millions of potential customers. We are similar in a lot of ways to that business model. We actually match great products to people worldwide and we’ve a database of over 500,000 people that have purchased something from this Company within the last 15 or 16 years. And so when we bring products on, it’s a great opportunity for us to reintroduce the business, the business opportunity or business model, our public company to people that have already purchased something from this Company or have some relationship with this Company from the past whether they’re actively purchasing our existing products or have actively purchased something in the past in the longer are purchasing our existing products by introducing a new product to the entire database. It’s a great opportunity and a great business model. It also makes us unique in that we can expand our business for our product range dramatically. We are not [paint it into a corner] or pigeonholed into a very narrow product focus and so this Company has been about that cloud philosophy that we’ve talked about matching people with products around the world. So its really people, products and places and so it gives us that ability when we see a fantastic product or a new product trend that we can capitalize on that and so that is definitely something that makes our business opportunity very unique. With Amazon they obviously incentivize their affiliates to help drive their awareness and their campaigns to new potential customers. Obviously, we utilize and have a fantastic motivated group of highly skilled distributors to help us do that same thing. Something similar to Amazon, they deliver products directly to the end consumers home, we do the same thing and with fuel prices being among the all time higher, of course the all time highs and looking like they’re going higher more and more people are shopping online as president Andreoli was just talking about allowing people and providing the opportunity for people to actually purchase our products in many more ways on the go, mobile devices, shopping applications from their computers and so forth. It expands the business opportunity and our model and that it provides further opportunities for us to introduce our products and make them convenient at purchase among our database customers and distributors. So that definitely makes us a unique business model. More than 70% of our sales occur to the end consumer, whether that be a distributor purchasing products for themselves which many and most do, but also customers that simply just want to purchase our great products and so over 70% of the purchasing activity that occurs on the direct selling side is to the end consumer. Again, driving that engine are our committed distributors. We support this effort by marketing more and more products to our – direct to our database of customers and distributors. The acquisition part of our model is effective, low risk, non-dilutive as I was discussing just a little bit ago by creating the opportunity and really the expandability of the opportunity by bringing on new products, trendy in products, products in other places around the world, it creates a virtually endless business opportunity to introduce new products to new people, to new places. President Bill Andreoli was just talking about further supporting Spanish speaking, the Latino market here in the United States as well as internationally. That’s just one example of that and so every which way we can climb to expand the connectivity of our products to people and new people and more people we’re seeking those opportunities out and actively pursuing them. Dave, you’d also mentioned third-party validation. Bill had talked about third-party credibility as well and introducing Marilu Henner for example and Success Magazine just adds that third-party credibility – adds credibility to our products or business model to our business to the public company aspect of our business. So that again to more people in more ways and new ways and so we continue to do that, but the third-party validation of our products many of you’ve heard about the Clemson study that was done and we’re seeking ways to further that whole aspect of third-party validation among our product line, among our key products and we continue to seek that we’re in active discussions with numerous other institutions including additional universities. So, what we’re seeing is our distributors and customers responding to that third-party credibility and feeling great about the Company, about the products and that third-party credibility really adds to that. Obviously, its having a very positive effect. Bill had talked about, our increasing sales and things like that. This is one aspect of that. So much so, we’re expanding like I said to other research facilities and we will continue to do that. One of our products (indiscernible) has been researched by the University of Connecticut and we intend to put out further information about that very shortly and at the upcoming convention. Now one of the questions that we also get and talking about third-party credibility, kind of centers around the plant derived minerals, Dave many of you know, some of you don’t know, our plant derived minerals comes from a certified organic source. Its independent – the source is independently certified organic from an organization called OMRI, which stands for Organic Materials Review Institute. Somebody had asked and we get this question from time to time, how can you call your plant derived minerals are mined from Utah? Well, it’s a U.S. source obviously, but it certified ancient or pre-store plant material from the Bureau of Land Management, and so this ancient plant material is are great source of trades minerals and we only extract the water soluble minerals and that’s the base of many of our products. It – the plant derived minerals represent 60 of the 90 essential nutrients that you hear about even the 90 For Life Campaign, 60 of the 90 nutrients are essential minerals and so far we get that from a prestore plant deposit in Utah, just the water soluble minerals that I’ve talked about. So that third-party validation of OMRI even has a positive effect to our distributors and customers because at endpoint to the Organic Materials Review Institute is certifying the source organic. We are thrilled it’s a U.S. source. One of the things that we’ve talked about on these calls in the past is really just the popularity of many of the individual supplements or individual nutrients, calcium and magnesium are among the top 5 and 10 selling nutrients worldwide in the form of supplements. And so one of our products Osteo-fx, which also contains some of the plant derived minerals, but has added magnesium and calcium to it. One of our top 10 products being sold within our own product line is an important product. One of the things tying it back to the plant derived minerals the third-party credibility, one of the things as a Company we get asked often about is are the calcium and magnesium, the major minerals from a plant source? The answer is no. There really hasn’t been a plant source of calcium and magnesium available that we could accumulate that much calcium and magnesium when you think about it. The RDA for an adult person, men or women is about a 1,000 milligrams of calcium, about a gram of calcium per day, and that’s a lot. The plant driving minerals to-date have been of trace minerals. And so the calcium or magnesium have been from mine sources typically ancient seabeds and things like that. It’s USP grade or pharmaceutical grade calcium by the time its utilized in our products, third-party validated and QCed before its used obviously. But one of the things that as a Company we pursued and that’s tied back into the third-party credibility as we do more research and people ask what is the role of the Scientific Advisory Board, what do these people continue to help the Company due and that sort of thing. And one of the things that we actively saw for a long time is what if we could produce a calcium product from living plants? What if we can produce a magnesium source and product from living plants? And what we’ve been able to find and identify and we’re pursuing this opportunity further and I’m going to tell you a little bit about it right now is what if we could produce a calcium magnesium product with other beneficial trace minerals from a living plant source, something that we could validate as being certified organic renewable growing here in the United States, that would be – we believe a fantastic business opportunity for this Company. Well just recently we filed for a patent, a U.S. patent the application has been filed, its really the beginning point of identifying and pursuing the manufacturing opportunity of producing a calcium, magnesium finished supplement from living plant sources here in the United States. So, I’m pleased to announce that we’ve filed that patent application again, doesn’t mean that we’re going right into production tomorrow of a living plant source of calcium and magnesium, but it does mean that the Company has filed for a U.S. patent has identified the source and we’re actively pursuing that. So you will definitely hear more about that as we progress with that. I wanted to give you an international update as well. Obviously, we continue to realize its huge opportunity. We continue to ship to about 65 countries. Huge interest and continued interest from a global perspective. Bill had just mentioned that we continue to and are actively supporting the Spanish speaking market. That’s not just here in the United States, obviously that also leads to expansion throughout Mexico, Central America, Latin America and so forth. We have our offices as many of you’ve heard in Auckland, New Zealand that continues to support the Australasia marketplace. Its an area that has been growing for us. We continue to actively seek ways to expand that as well. One of the things that we’re – we’ve identified as part of our huge growth opportunity going forward really the strategy is about how to tackle the huge international opportunity and one of the key components of our long-term growth strategy, so the time is now for us to make that commitment as we have the financial resources and so we’re continuing to identify those markets that we want to expand into really with a business model or business plan and utilize those resources. One of the things that I had mentioned just a few minutes ago, obviously also the ability to acquire companies and integrate companies again isn’t just about people, isn’t just about products but also about the places that we can market our products to and within, and so the acquisition strategy ties into the international market as well, and so we’re pursuing those activities on a daily basis. Bill, Dave and I actively investigate and review opportunities like I said on a daily basis and we continue to, and you’ll hear more about that in the not too distant future I believe as well. One of the other activities and areas that we’ve identified for growth opportunities that we are actively implementing is cost marketing and cost campaign. Again it ties back into having a brand ambassador -- celebrity brand ambassador such as Marilu Henner. We intend to talk much more about this at the upcoming convention that Bill was just talking about – mentioning. And so we’ve identified this as another great way to really bring awareness to the company and do some great things with a company of this size with that many people associated and that many involved the cost marketing campaign we believe will really help drive company awareness and company sales. What I’d like to do right now is turn this back over to Dave, and get an update on CLR Roasters. Dave.

[David Stephen Briskie:]

Thanks, Steve. Really, really great stuff to talk about, I agree. I think our unique business model is unbelievably exciting when people start to understand that we’ve got a group of committed distributors to driving traffic into our consumer products company basically and using the internet, the power of the internet and the power of our customer base to grow our business is a very, very unique model, tying that in with one of our vertical integration pieces being the coffee roasting operation is exciting, and then hearing you talk about this patent pending which plays right into our integration strategy or vertical integration strategy because obviously that could open up an opportunity to further vertically integrate another manufacturing source product, so it's great stuff. And I want to just kind of put an exclamation point on our international strategy. We have been growing internationally. Our products continue to expand, but the takeaway there is that we are prepared to put the financial resources together to finally take advantage of what is the biggest opportunity for our business, and that is of course international growth. And we talked about it many times on this call, but the large players in this business about 70% plus of their sales are usually outside of this country. So, the excitement of putting an plan together, putting a team together and putting the financial resources behind finally tackling that as a focus project market-by-market is something that is certainly near and dear to my heart and something I’ve been involved in before in a prior life, and I am very, very excited about those opportunity in expanding on the relationships that we have abroad. So, thank you for that great update. In terms of CLR Roasters, let’s talk a little bit about that. There’s been quite a bit of press on what's going on at CLR and it's pretty exciting. The company has been expanding fairly rapidly. Just from last year we are operating about, I don’t know about maybe a third of the size. So the business has increased by 66%. The facility is now around 40,000 square feet of production and distribution space. Beginning of last year, I believe we had about five or six packaging machines we’re north of 13 or 14 different packaging machines right now. We’re very excited about a custom made packaging machine that we are having built for us out of the country at Italy that is going to be a really exciting production piece to put in production that’s going to support the growth of our Café La Rica espresso brand. So we have a lot of great things going on in that area of the business. The business is tracking up significantly. It grew significantly last year, and I think going into this year we’re going to see more of the same. The top four accounts for us remain Carnival, is still number one. Aldi is a big account. A new account that you read about is, Norwegian Cruise Lines which is in concert with a company called Sysco Foods and we’re doing business with them as we speak now, and then a large convenient store distributor. And all of those businesses that being Carnival and Aldi, are all up over prior-year when I look at Q1 of this year; so they’re off to a fast start and those customer relationships continue to grow Q to Q so it's nice to see our largest customers having significant growth. Probably the most exciting growth is with Aldi that is tracking up 40% already, so that’s very, very exciting. We’re really focused a big way since we’re so -- our concern I guess, if you were to read the entire Form 10 file and you find different areas of concern and for me one of the things I’m concerned about as much as I’m thrilled to have customers the size that I just went over, it also comes with some risks because obviously there’s a fairly significant dependence on customers that are that big. So one of the things we’ve been taking on is taking matters into our own hand and building our own branded business, building the power of our own brands and we believe that’ll build shareholder value and it takes some of the risk out of our business model. So the brands that we’ve been focusing on lately have been the Café La Rica brand and the Josie's Java House brand. And we’ve released some news recently about the success going on with those brands. I think we specifically have announced what we’ve been doing at Walmart. And we’re happy to announce that Walmart has expanded the rollback program with us. It's now going to go through Q2 of this year and that’s because we have seen in both Café La Rica and Josie's Java House we’ve got a 50% sales lift within Walmart, week to week to week to week it's growing. So, we’re up 50% over last year and that is for both of those brands. So, we’re starting to expand that footprint which is now in 14 states when you take the two brands and combine them within Walmart stores. We’re also continuing to see strong growth in Florida with our DSD business which is directly shipping our Café La Rica brands and our Josie's Java House brand. We have a prominent position now in public stores and in Dixie stores, Sedano’s and many of the larger independents here in the State of Florida and that continues to grow and we’re seeing sales growth. I think something that we’re most enthusiastic about is the growth and sales success of the Josie's Java House brand. Obviously Café La Rica has been around a while and Josie’s is just relatively new. It appeals to a wider consumer base where Café La Rica is espresso and has a nice niche, Josie’s has a wide appeal and we’re getting a lot of good feedback from our consumer that really are enjoying this product and it's showing up in sales lift that’s pretty exciting. So we’re excited to see this particular product grow the way it is and it doesn’t pigeonhole us into markets that are more espresso focused. Josie’s can be on any shelf, anywhere, any state. And seeing it having a sales lift is very, very exciting to our coffee division particular since it's a company owned brand. We’ve seen recent expansion at the 72 locations into Ohio with the Discount Drug Mart; they took in both Josie’s and Café La Rica. We just recently earned a test for Café La Rica with Price Chopper up in the north east which we consider a very, very exciting partner to be doing business with and we’re excited to get our product up into the north east now. Recently we packaged Café La Rica in a four pack based on the success Café La Rica has been having in the Walmart chain. We had Sam’s club, stores approach us and we created a package for them that has now been approved by Sam’s Club so we’ll be heavily marketing our product into those larger club stores. Because of the success we’ve had with Café La Rica and Josie’s Java House we saw an opportunity to develop a third brand which we created and is now trademarked and company owned called Café Alma. And Café Alma is going to be targeting the bulk coffee business which is a very, very big business, and we expect to gain traction with Café Alma in the club stores. So we’re going directly at that club store market. They’re large consumers of coffee and we’re going to be placing Café Alma are targeting those particular types of stores that are Café Alma brand. So we’ll be focusing on three brands now moving into 2013. I want to change gears a little bit and talk about our IRPR strategy. We’ve been working pretty hard at this and we’ve made a paradigm shift if you will away from doing it on outside companies and we’ve moved it internally most of our significant shareholders and many of you have reached out to our IR manager John Zervas. He’s really starting to get his arms around his job every day, and he’s communicating with shareholders continually. And it's exciting to hear him on the phone and know that we’ve got somebody full time operating from beginning of the day to the end of the day talking to shareholders, talking to potential new investors, talking to potential institutional investors and answering tons of different questions. He’s also reaching out to all of our newly minted option earners within our distributor force that are quickly becoming shareholders in this company. I think that’s probably one of our larger shareholder growth basis is within our distributor organization. That’s very, very exciting to see this, that going on. We’ve recently printed a noble list because you can’t really see what happens to your shares once it leaves your (indiscernible). So recently, when I say recently I’m talking in the last couple of weeks. We pulled the noble list to see how our shareholder growth is going at various institutions and so forth. And our shareholder list is now approaching about 4000 shareholders. So, it's exciting to see the reach there in terms of having that many interested shareholders that we can reach out to and market to. And that is another step we’re going to do. We’re going to start marketing various products and communicating with these shareholders now that we’ve identified them and reach out to them and let them know more about our company. Most of you I hope have seen the Micro-Cap Review article that came out. We were profiled there. Micro-Cap Review has literally millions of subscribers and that article has lead to people reaching out to us and wanting to learn more about our company. We’re going to continue to do those types of opportunities and market to those that are interested in the Micro-Cap space where we operate. This year we’ll do an educational piece at our convention. I’ll actually be speaking at the convention about the opportunity in terms of what our company is like as a public company and even have a breakout session to educate our distributors more on our company and what the options mean to them and what opportunities there are if they’re interested in buying additional shares on the open market. So, that is something that’s well in focus now. We also instituted a share repurchase program. We instituted that program early on when the stock was in the teens. We really felt, myself, Steve and Bill got together and although we were looking at lots of opportunities with lots of other companies to acquire. At those price points we just felt like we needed to invest in ourselves. We know what we have going on here, so that’s why we instituted that program, and we’ll continue to evaluate that particular share repurchase program and have a keen eye towards doing what's best for the company with those dollars. So, we’ll keep you updated on our progress there and it will be a requirement and be always found in our filings Q to Q as we move in the fully reported status so you can see what we’ve actually purchased and so forth. The other big thing I think that Steve and Bill, both mentioned is the SUCCESS Magazine article although that’s exciting for distributors, it's also exciting to have our company profiled in such a prestigious magazine that brings more eyes on our company and the fact that we’re public and we’ll bring a view to other potential shareholders. So, we’re pretty excited about that and we will continue to extend the effort in our IR program, continue to put out press releases. I believe we put out nine releases this year already and obviously we can’t invent press, but we will put out releases when appropriate and under the rules that we have to follow as we follow the guide of being a fully reported company. I want to switch gears now a little bit and get into a -- kind of a Q&A area, what we -- we did this a little bit different this particular call. What we did is we requested that our shareholders send us questions so that we could see what was on their mind. So we ended up with quite a number of questions that had come in. So, we documented all these questions. And I thought we would take them one by one if you will. There was a lot that overlapped, so the ones that overlapped we went ahead and we kind of compiled those together so that we could start communicating to you folks on what's on your mind. A lot of people or a few people asked why we weren’t doing a Q&A. And the reason actually was a fiscal reason, it was a financial reason. Believe it or not, to do a monitored Q&A it runs about $3800 to $4000 a call. We did that for two calls and we received a total of four questions I believe in total for both calls combined. So to spend $8000 to field four questions it seems like a bad business decision. So in putting it out there to everyone to send to the IR not only did we drive the traffic to our IR end of our site, but we got a lot more questions. Generally people maybe a little bit uncomfortable jumping on a call, but giving the opportunity to put stuff in writing, we feel like we got a lot more questions and we were able to learn what was on our shareholders minds and we thought that, but now we know that’s a pretty effective way to doing it. So I’m not going to say the last names of people although it was submitted that way. The first question I’m going to field is from John. And John wanted to know, he said in the past and so did other shareholders. In the past the company has indicated that there will not be another reverse split of the stock. Is that decision still valid? Will there be another reverse split for the foreseeable future? And I’m going to let Steve pickup that question first and then I’ll add to it if necessary. Steve.

[Stephan Wallach:]

All right Dave, sure. There is not a reverse split planned, and for the foreseeable future we don’t see one. It isn’t -- we aren’t planning on one for the foreseeable future is the simple answer. The longer answer is obviously Dave and I and Bill and the entire team, the executive team and the set of directors evaluate what's best for the business on a daily basis. But in terms of a reverse split we’re much more interested in building shareholder value by growing the company on a daily basis by actively looking at potential acquisitions. The share repurchase plan was put out not too long ago. Again we’re showing, improving that our intent is to build shareholder value through increasing and improving shareholder value within growing the company, building the company on a daily basis. So that is much more our focus.

[David Stephen Briskie:]

Right. And to add to that, and here’s the hard part; you never can say never. The real – the in between the line on a question like that is most people that have been involved in a reverse split has been hurt by the reverse split. And certainly the history of this company had the same experience. So, the real answer there is, can you do a reverse split and have it help shareholders and the answer to that also is yes, if done properly. And let me explain so that people understand a good reverse split versus a bad reverse split. Many, many, many, many times and this is the example of a bad reverse split. We see companies on the NASDAQ, the New York Stock Exchange something where when their share trading price falls below the requirement the see the stock falling and the company is obviously struggling if the stock is moving in that direction. And what management makes the faulty decision of doing is to not lose their listing. They go ahead and they do this reverse split. And of course they reverse split and then it gets it back over the share price, but then the share price continues to fall and fall and fall. And generally the reason why it was falling was because it was going to fall anyways. So the reverse split was a move that only split the stock that tried to get the stock price back up, but management never fixed the issue with the company, so it continued to fall. So that would be an example of how not to do a reverse split. Other ways we see it in large companies that have tons and tons of shares and they just split it for the heck of it to get their share numbers down, but they haven’t ever fixed their business model going forward. A right way to do a reverse split and I’ve seen it work effectively is really, I call it like the symphony orchestra. It's when a company sits there and takes their stock. They look at their shares. They have a huge or significant capital raise behind them. They have a move to a major exchange as part of it. They have a couple of acquisitions that go along with it and they do all of that simultaneously so the post split company if they go through a reverse it looks completely different than it did pre split. And in those cases if done right, we see the stock potentially move the other way because all of the components and all of the positives are there so that the company is a different company. We do not have any plans for a reverse split. But if we did it would be under that type of scenario of a perfect storm. And right now we’re going to continue with our business model and I think Steve made it clear, but I did want to educate our shareholders on when a reverse split might be effective or how. The next question came from John M, and John asked a couple of questions. The first one he wanted to know was; why is Dave Briskie not under contract, and why is he at will employee? Apparently John has been reading the Form 10 file. I’ll probably take that one and let Steve, comment on it as well. John, when it comes to people being under contract particularly employment contract, if somebody is not happy or motivated or passionate within a company and he’s under contract, I’m not sure that’s somebody I’d really want under contract. And I have -- I’ve always been very, very passionate about what I do. It's not important for me to have a contract, because I love what I do. And as long as I love what I do I’m going to keep doing it. I have a tremendous amount of respect for Steve Wallach and Bill Andreoli and the entire team that we’re building, and I expect to be with this company for a long, long time. My last run with a company was 18 years and I wasn’t under contract with that particular company either. It was important if Steve felt it was important for me to be under contract I would gladly sign one. But it's not important to me for those reasons. I have seen enough contracts go bad and people wave their contracts in the air and I’ve seen what can transpire from that. So, what I’ve learned is the best is to communicate well, to have good vision and good plans with people you’d like to be in business with. And there’s no better contract than a handshake if that’s the situation you have. Steve, anything to add to that?

[Stephan Wallach:]

I am just thrilled that John is concerned for you Dave. We all love Dave. I think Dave is a tremendous addition to the team. Obviously there’s been a lot of changes with this company over the last two and three years going from a private company where contracts, employment contracts in particular were few and far between if any, and so you’re seeing the professionalism of the company grow through this whole process. And so I think Dave answered the question really well. But I absolutely anticipate -- hope and my desire is that Dave and this whole team stick together for decades to come, because I think we’re accomplishing some fantastic things and I think we’re just really getting started truly.

[David Stephen Briskie:]

The next question also came from the same gentlemen John M, and it was post from some other people. Since Mr. Wallach and I think he meant you Steve owns over 280 million shares of JCOF; isn’t this too much control in the hands of one man for any serious investor to get involved with the company? Obviously I lead the IR effort and that the questions double edge. It depends on the man and in this case no, it's not really an issue. Steve’s got a very, very long-term view. He doesn’t have his shares even in a position to be able to sell. I know for a fact this is, his view is extremely long-term and to build a large and legacy type company. And I also know that some of those shares will likely be used for acquisition or structure or whatever when the time is right. So, most folks -- most serious investors that have met Steve and get to know him and get to know the company actually feel pretty good that there’s that many shares not in the flow or not going to be in the flow. So in the case of the question depending on who’s got their finger at the switch it's a loaded question. But in the case of our company it really hasn’t really created any obstacles for us accomplishing anything we’ve needed to accomplish. Steve, anything to add to that or you think [multiple speakers].

[Stephan Wallach:]

Just again, I appreciate the question, and thank you for the kind words Dave and you’re right, exactly right. The shares are not in a position to be liquidated or sold and I view and view have a long, long-term view of growing this company and building shareholder value through growth and the things we talked about on this call. And so on the other hand the alternative of having fewer shares locked up I guess, and my control, our control would be that those shares would be on the open market or in somebody else’s hands that may not have as longer term view as we do. And so from that perspective we’re in a position of, as a company buying shares on the open market through the share repurchase program. We’re not -- we have no interest in diluting shareholders. We have not interest of liquidating stock on to the market. We’re not raising capital and those sorts of things liquidating stock on to the market. We definitely from a public company standpoint believe that there is adequate share’s available and on the market and to the point that we’re actually seeing opportunity to buy stock and retire it through the share repurchase program.

[David Stephen Briskie:]

Thank you. The next was from [Sean Shi] and Sean wanted to know what is the growth in percent profit margin by product brand and what is the plan to divest unprofitable brands and or product? Well we don’t really put out the growth by every particular product because we have some 400 of them. But I will tell you Sean that we monitor all of them very, very carefully. And we continuously evaluate what you termed unprofitable brands or products. We don’t really have any that aren’t profitable. But what we do have is products that maybe don’t produce at the level of volume that we would like, okay and that’s another question in itself, but it's really where we focus. And on those particular types of product you have to understand our business model. It's not just like a retail business that we’re operating here where we say, oh jeez we’re not selling a whole lot of them, let’s get rid of it. In the case of this company we’ve grown the business through a number of acquisitions and a number of integrated acquisitions. And sometimes some of those product that don’t sell that much volume, happens to be a product that a key distributor or key partner really, really likes. So in that case we have to take that into consideration when we evaluate products. But for the most part we’re in pretty good shape in evaluating those products and that particular inventory. And one of the things we’ve done as a business is we’ve really become very, very efficient within our shipping and distribution areas. We are not in a situation where you have to worry about not bringing in fast turning product if you will at the expense of slower turning products. That’s when we really have to sharpen our pencil and say jeez, lets move these unprofitable lower turn products out of the company because it's precluding us from bringing in these higher turn more profitable products. We’re not in that situation yet, and we’ll get a little bit more serious about watching these particular products and moving them out if it's preventing us from growing other brands or growing more profitable brands. We’re very, very efficient and within our current situation and our current distribution facilities, we can grow our business another 50%. So it's not like these products are holding us back right now, by good question we monitor it continuously and we will continue to do so. The next question came from a [Donald P]. Well, anyways it was [Donald P] I’m not sure how to say the last name. Several people asked this question. They wanted to know what the guidance for Q1, 2013 is and I’m going to -- we as a company we don’t really believe that it's in our best interest to provide guidance for a number of reasons. The biggest reason being is our company grew so quickly and the GAAP accounting and the purchase accounting that we have to go through makes it very difficult to provide guidance and what to guide on, okay? But I will tell you this, in terms of short-term guidance it is April 1, and our Q1 is behind us. And I am willing to say that Q1 was probably a pretty nice question for the business certainly from the top-line perspective obviously we haven’t finished the numbers and that’s both ends of the business. Pretty exciting numbers, and leading into the show if you paid attention to the things that Bill said, you would know that going forward and going into this major event that we're gaining momentum. And if you paid attention to the numbers that we put out Q1, Q2, Q3, Q4, that particular pattern. And I believe I said I expect more of the same. We’re willing to guide at least to that point. I think it's a little bit dangerous to provide guidance. I believe it's not really in our best interest to do that. But we have shared because of this guidance question, a lot of information on this call that talked about things we’re doing going forward. One of the things that I wanted Steve to jump on and Bill or either one of you would like to take it is the decision that companies made to invest in technology? Do you want to -- one of you guys want to talk about that?

[Stephan Wallach:]

Sure. Bill, do you want to take that one?

[William Andreoli:]

Sure, I mean like we stated earlier on the call with the technology we’re seeing that people today, it's not all just traditional buying, it's weird how people going on to a website is now become traditional. Today everything that people are trying to do on a website on their PC lets say at home, they want to be able to do it through their mobile phone also, and through mobile phone applications and web applications and shopping cart. What we’re really putting a lot of effort into right now and people are going to be able to see those efforts come true real soon is the shopping cart, the user experience. And you can all the greatest products. You can have all this great stuff but the user experience has to be there for people. We have to have that same simplicity for everyone across the board. And as the user experience gets simpler whether if you’re looking for presentations or products or information where to actually go shopping and that user experience becomes more simple obviously that duplication takes place and we’re excited Dave. We were at right now with that platform and again we’ll be having some announcements at our convention in Las Vegas.

[David Stephen Briskie:]

Yeah, that’s great and it's important to know the amount of capital that we’ve allocated to put into this type of technology and it's a pretty significant project for the company to take advantage of this huge and growing database we have and I’m sure our distributors will be excited to know that we’re supporting this and taking this on the company’s back to provide a better shopping experience for all our customers and distributors. So it's very, very exciting and it's very forward thinking. And I believe it does guide us into the future as we kind of touch on why our model is so different and unique. Same person I believe asked this question, Steve I’ll throw this on up to you. Do you anticipate any acquisitions in 2013?

[Stephan Wallach:]

Okay. As I mentioned a little while ago on this call, the team, all of us evaluate potential opportunities really on a daily basis. And on a prior shareholder call I believe we had talked about being a public company and learning what we’ve learned through the audit process, purchase accounting, GAAP accounting all these great things. It really has allowed us to look at acquisitions through a very, very clear lens. And we’ve become very particular about what fits the model by today’s standards as a public company. And so what means is, we look at more and we’re more particular about those opportunities. We’re looking for great opportunities, great products, great people, as I was mentioning earlier. But from an acquisition standpoint in 2011 we did seven transactions that was really unique prior to that we had averaged about two per year, last year we did two. This year it's still early in the year, but we definitely had been looking at a lot of potential opportunities and we’ll continue to do so. So what I anticipate any, I would say, yes. Are we about ready to announce any today or tomorrow? No, not on this call, but that is always subject to change based on the ongoing conversations that we have on a daily basis.

[David Stephen Briskie:]

Thanks, Steve. That was a great answer and that’s a tough one as you know to predict these things. I mean, some of the acquisitions you work on it, you work on it and you work on it and you’re going to -- you almost could predict that yeah it's going to happen, and for whatever reason in the final hour it doesn’t work, it's just not right. And then others can move quickly, but I think based on our model and based on the success of two situations last year, I think we would be disappointed if we weren’t able to make an acquisition happen, but we’re not going to do an acquisition for acquisition sake, that’s for sure. I’m going to skip through some because we – that we try to limit the call to an hour and we’re trying to go over that. We did have a question from (indiscernible) I know you’re a long time shareholder out there and we appreciate your involvement. He had a great question and I think either one of you can deal this, but its how will Marilu Henner’s partnership with AL International help us? What will she do? What was her role be as an ambassador? And if you want to pick that one up, let’s provide an answer, because that’s been a very common question.

[Stephan Wallach:]

Sure, absolutely. Bill had talked about it earlier on this call as well. Again, Marilu Henner was introduced in person at our CEO Distributor Training event here in San Diego earlier this year. She told a little bit about her story, people are aware of her story, which she is a best selling author in terms of health and wellness. She is known for that as well, but on top of that she is just a really genuinely nice person and so people really felt a connection to her from our distributor perspective and our distributors just loves her and so we anticipate seeing that relationship grow through social media, through online marketing, through the websites, through in-person appearances and events, obviously many of you’re aware that she has got a pretty high level of exposure on national television programs. I can tell you when she was recently here having to do with the Success Magazine, her hair and make up was all done with Youngevity product. She is raving by the – with the Youngevity products while she was here and in conversation I had with her ongoing. But she is going to be a featured speaker at our upcoming convention in just about a month and so we’re thrilled with that. She will be in front of a large group of people that really want to hear more from her as well. But as Bill had also mentioned, she continues to be on Celebrity Apprentice, all stars on a weekly basis. Just the access to her role in next of people that she is in contact with and pick up the phone and call her, send a text to or an email to, you just think about who she interacts with on the Celebrity Apprentice on a weekly basis and while it was filming it was a daily basis and so that’s just a little example of some of the people she knows on a personal level and so we’re excited about what those potential relationships might garner as well for the Company in awareness just from that perspective. But also something that hasn’t been officially announced yet, but she is slated to start a daily radio program later this month and so we’re excited about what that brings and that is going to be the producer of that show is the same producer GCN, the same producer of the Alex Jones Show which is the largest online radio program I believe throughout the U.S. possibly the world, huge audience. And so we’re excited about what that means for Youngevity as well. So having our celebrity brand ambassador on a daily radio program backed by GCN similar to their involvement with the Alex Jones Show and that with Marilu’s just potential guests, she could bring to the – to that program or program of that type, pretty incredible potential around that. So we’re excited about all of this [and plus] she is committed to making several additional appearances for the Company at distributor events and things like that throughout the year as well. So, lot of great stuff.

[David Stephen Briskie:]

Awesome. Thank you. Last question we’re going to field is from [Doug R]. And Doug said how long is the agreement for payment of these past acquisitions, it is my understanding that these are payments affect profit numbers and I think he is talking about the way we do acquisitions? Let me explain, take this one and then I think we can wrap up the call because its really important it goes all the way back to the beginning when I talked about unusual charges. We have an incredible acquisition model. I mean, it really does everything we want it to do. Its low risk, it doesn’t take a lot of cash, it creates zero dilution to shareholders. But it’s challenging from an accounting standpoint and let me explain. We pay a percentage usually of product sales, just how these work and you can read about them in the Form 10 filing and most of Doug’s questions are in the Form 10. You can see how long they’re or what they’re with. The challenge we have and its one of the funniest challenge ever is, we had a take a – we had to take our contingent acquisition debt on two acquisitions we did, Livinity and True to Life. They were two of last year’s acquisitions. And they happen to be doing extremely well. In fact, they’re growing at a quicker pace than we anticipated. Now generally that would sound like a very good thing and it is in every category, except one. When the companies like that, the ones we acquired do well, the way GAAP accounting works is they go ahead and say okay, what is your contingent acquisition debt? And what that basically mean is what is if you did a five-year arrangement and you’re going to pay some company 10% of their sales for five years, what is that number? And we go ahead and provide a forecast. It’s required under GAAP. But if the company that we acquired does three times the forecast, you would think that Steve and myself and Bill would be throwing a parade in a parties and wow it’s three times better than we thought. And it really is in all circumstance, except for one. Under GAAP we would have to take three times the amount of the future payments at 5% or 10% and then we would have to record it on to our balance sheet and right when we do that recording, we had to do that in Q4 of last year because Livinity and True to Life is doing so well when we did that its for the entire length and agreement. So these agreements are let’s say they’re five years. And lets say that’s going to potentially be an extra million dollars and payments over the five years. We then have to take a million dollar hit against our net income. A non-cash experience doesn’t cost the company a dime, its literally just a contingent acquisition that adjust. However, when you have to do it, it makes the Company looks like its not doing well. So, eventually it all goes away after the period of time. It was a five-year agreement. After five years you don’t have to do that type of accounting. Because of that situation we have been working with our accountants about how we can structure future acquisitions so that we can soften these types of things that we believe give our shareholders a faulty view of the actual performance of the Company. Yes, it’s according to GAAP, but it doesn’t necessarily tell the whole picture of how we’re performing, which is why we get a lot of questions saying I don’t understand how your company is bottom lined, it isn’t doing that great in our opinion, but when we look at your cash flow statement it seems like you’re putting a lot of money into the bank. And it really [falls squarely on] the whole definition of contingent acquisition debt and how it works. So, that is the answer on that and there is more to be read about that, Doug or other shareholders if you want to go read the Form 10. I did jump on during the call pinksheets.com. If you click on filings, our filings are sitting right there now. You can also get there by sec.gov and you can put in AL International and you can find the filing there. So, our year-end filings are up and eventually you also see the response, I’ve not seen the response to the letter yet. I understand that the 18 point letter response usually takes a day or two longer than the Form 10 filing to show up, but it should show up under filings as well. Steve do you want to close out the call?

[Stephan Wallach:]

Just that I think we’ve covered a lot. There is definitely a lot of information out there for our shareholders now. So I know they’ve been asking these questions, I know they appreciate that information and definitely its our goal and we strive to achieve it to be fully transparent. You’re seeing that with the Form 10 filing, with the SEC comments and responses with the year-end numbers been posted. And so, we continue to strive every data to get that information to you guys. And I certainly appreciate the hour plus that you’ve spend with us today to learn more about the Company. So thank you.

[John Zervas:]

Well that concludes the call. Thanks everybody.

[Operator:]

The organizer has ended the session. And this call will be disconnected. Good bye. [No formal Q&A for this event]