On October 5th, 2017, Grasshopper Staffing, Inc. (OTC:TCKF) filed a Form 10-Q Quarterly Report with the SEC for the period that ended on April 30th, 2017. As a Pueblo, Colorado based staffing firm serving the cannabis industry, Grasshopper Staffing seeks to connect job applicants with opportunities within the rapidly blossoming industry. Faced with headwinds from competing start-ups like Vangsters, a specialized cannabis job board site, we figured this company's recent filing was worth a second look.
From initial glances we see that the company had an increase in revenues when compared to the same quarter in 2016. Upon some further digging, we see that the company is experiencing a downturn in gross profits among other things, giving us inspiration to dig into the company's valuation of nearly $20 million.
Based on data from the recent 10-Q, there were 26,287,500 TCKF shares outstanding, which based on a last traded price of $0.7349 per share gives the company a market cap. of $19,318,683.75. We believe this to be overvalued regardless of which valuation metric one were to use.
As seen in the income statement above, the company had $72,859 in revenues for the quarter which represents an increase of $10,015 or 19.75% when compared to the same quarter in 2016. However, a comparison of the 9 months ending April 30th, 2017 versus the 9 months ending April 30th, 2016 shows that revenues dropped from $305,902 to $249,342. While seasonality of the staffing business may be at play, we believe this to be a bearish signal of what's to come for the company.
Looking at gross profits, we see that TCKF had a gross profit of $16,986 in the three months that ended April 30, 2017, which is a decrease of $2,469 from a gross profit of $19,455 in the three months that ended April 30, 2016.
As seen in the table above, the quarter ended in net losses of $327,643. The company has consistently lost money quarter after quarter, and is close to running out of working capital.
With only $4,730 in current assets and over $600,000 in current liabilities, we believe Grasshopper Staffing to be at a high risk of being unable to continue operations. As stated in the company's 10-Q, Grasshopper has "a history of losses, an accumulated deficit, a negative working capital and have not generated cash from operations to support meaningful ongoing operations. Our Independent Registered Public Accounting Firm has included a “Going Concern Qualification” in their report for the years ended July 31, 2016 and 2015. The foregoing raises substantial doubt about the Company’s ability to continue as a going concern. We intend on financing our future development activities and working capital needs largely from the sale of public equity securities with some additional funding from other traditional financing sources, including term notes until such time that funds provided by operations are sufficient to fund working capital requirements. There is no guarantee that additional capital or debt financing will be available when and to the extent required, or that if available, it will be on terms acceptable to us."
Based on a high level of competition from web-based staffing services in the cannabis space, as well as mounting debt and limited working capital, we believe Grasshopper Staffing to be overvalued. Be sure to do your own digging and due diligence before making an investment decision, and always consult with a financial advisor to determine the suitability of any given investment. We have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. We'll be sure to keep readers updated with any further developments.
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