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Wednesday, October 11, 2017 7:50:06 PM
He is not alone in this endeavor, Matt Grabau will be responsible for the sales and distribution of the product. Matt is an all-star on his own account and brings a wealth of experience. For the last 12 years, he’s headed up sales for some of the largest practitioner lines of supplements in the country. His team at Rocky Mountain Pro Nutrients focuses on personalized medicines and giving medical practitioners the toolkit they need to help their patients. Him and his direct reports have been selling $5 million annually while dealing with men’s and women’s health issues, immune health, sports nutrition, antioxidants, detoxification, cardiovascular, and blood sugar to name a few.
The convergence of these 2 industry veterans is no mistake because they can leverage their relationships to build a very large distribution force from scratch and effectively manage the growth. It is conceivable that Patrick will be focused on logistics, operations, and marketing while Matt leads the sales channels. They seem to be ramping up sales efforts quite nicely with over 10+ jobs posted on Zip Recruiterand Linked in looking for CBD sales reps. Getting sales seems to be both of these managers forte and that focus to drive sales is what creates the true value in this company.
Exponential Sales Growth Potential
Doing some napkin math it’s conceivable that with 10 sales reps they might be able to do about $1 million per sales representative annually. This metric comes from what an average outside sales pharmaceutical rep could produce to a pharmacy in a given year. This sales team could drive total sales close to $10 mil in the first year. With at least 50% Gross Margins on hemp oil it’s not unreasonable to see $5 mil in gross profit the first year.
Favorable Market Structure
The company is on OTC markets listed under Pink Current Information and fully reporting with the SEC. From the latest 10-Q they had 25,319,572 shares issued and outstanding. Their fraud analytics subsidiary is continuing to produce revenue but it’s uncertain if they are profitable. The salient point about the revenue is that GRCK is not a shell company. The company is active and has been making progress on the balance sheet and has cleaned up some of its convertible debt and went from $405,097 to $349,062 in the past 6 months according to the last quarterly filing. They have been fully reporting since 2015 so a natural progression to look for might be an uplisting, now that money and revenue seem to be in place.
Large Strategic Investor
There was a 13-G filing by Oakmore Opportunity Fund LLP on Sept 26, 2017 where they filed that they owned 4,657,247 shares of common stock or 9.9% of the stock which puts the new share count at 46,619,089. The timing of this filing suggests a couple of things. It appears that they likely bought out the remaining debt from the noteholder and might have put additional capital in the company to scale up operation. Oakmore doesn’t seem to be a very large fund with its only other holding in Wisdom Homes of America, Inc. (WOFA) but it seems they are very selective and that should bode well for GRCK shareholders. It’s not hard to connect that the activity in the past couple of days has been driven by fund interest in a great growth story.
Earnings Growth Acceleration
The details of the deal remain unknown but it’s not hard to conservatively speculate that management might hold has much as 25% percent of the company which could potentially drive the share count as high at 58 million. Assuming share count goes to 58 million, and it might not even be that dilutive because they might structure in some options based on performance investors could be looking at roughly $.16 in eps per share assuming this capital structure and sales momentum. Investor’s should keep in mind that this is a hypothetical scenario and should wait until early October to see what the terms of the deal are and react accordingly.
Investment Summary
GRCK with its acquisition of Eqova Life Sciences might have stuck paydirt. What you essentially have are two industry veterans, powerhouses in their own right, coming together to sell the hottest selling product in the nutraceutical space utilizing their industry acumen and contacts. The question yet to be answered is do they have the right plan to rapidly scale the business? Their industry experience seems to be perfectly aligned to target the commonly ignored practitioner market. A strategic investor with startup capital seems to be in place and the dilution has come to an end setting up the perfect storm for stock appreciation. With potential sales news on the horizon, and the build out of product labels and inventory this could be a fun story to watch unfold. With 46 mil shares outstanding and a market cap of $1.15 mil this seems undervalued given the potential of this team. It’s way too early in the story to set price targets but the earnings potential of this business is amazing compared to the last acquisition target they were looking at when the stock was trading at $.15/share.
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