Rocky Mountain High Brands, Inc. (OTCQB: RMHB), is a fully reporting consumer goods company specializing in hemp-infused food and beverage products and naturally high alkaline water. The company was incorporated in 2000 and is based in Dallas, Texas.
On March 2nd 2017, RMHB announced that it entered into a contract for over $800,000 with LyonPride Music, LLC to provide promotion, sponsorship and advertising services. The company has been very aggressive with its marketing campaign in the recent past & have taken multiple steps towards it, including implementation of a powerful new GPS based geofencing software advertising system for marketing its products in the Los Angeles market.
During March 2017, RMHB also announced Change of Control & ownership of the company. Jerry Grisaffi, Founder and Chairman of the Board of Directors, sold his controlling interest to LSW Holdings, LLC through a private transaction that closed on February 28, 2017.
RMHB is expected to derive strength from this new parentage (viz, LSW Holdings) translating in substantial financial flexibility, infusion of need based fund for new product development, inventory production, innovative advertising and marketing campaigns and help RMHB in increasing its distribution base both in the U.S and internationally.
LSW plan to merge Rocky Mountain High China with RMHB. Rocky Mountain High China is currently a non-affiliated company and is the exclusive distributor for RMHB Brands in China. This move will allow RMHB to consolidate the revenue that RMHB China is presently reporting on a stand-alone basis.
RMHB operates in an industry that has rapidly & recently turned into a multi-billion dollar massive growth market across US and Canada with many new states legalizing it. According to a recent estimates, cannabis market crossed $6.7 billion from the U.S. alone in 2016, and that sale of cannabis are set to rise to $22.8 billion in the U.S. by 2020. For businesses like RMHB, specializing in brand development of health conscious, hemp-infused food and beverage products, this trend of acceptance of cannabis by American society is creating an excellent opportunity in an industry that is already on a rapid growth path.
The company’s stock has unsurprisingly found enormous strength in the recent past. RMHB reported increase in the stock price backed by these announcements laying foundation for revenue visibility and business growth.
Description & about the Company:
Rocky Mountain High Brands Inc (OTCMKTS: RMHB) is a consumer goods company specializing in brand development of health conscious, hemp-infused food and beverage products. It currently markets a lineup of four naturally flavored hemp-infused beverages (Citrus Energy, Black Tea, Mango Energy and Lemonade) and a low calorie Coconut Lime Energy drink. It also offers hemp-infused 2oz. Mango Energy Shots and Mixed Berry Energy Shots. The Company recently launched naturally high alkaline spring water, Eagle Spirit Spring Water.
Major product pipeline:
RMHB currently market two brands: Rocky Mountain High and Eagle Spirit Spring Water. It markets its hemp-infused products under the Rocky Mountain High brand name. This includes energy drinks (citrus energy, mango energy, and low-calorie coconut lime energy), lemonade, black tea, two energy shots (mango energy and mixed berry energy), and relaxation brownie.
Whereas, it market its naturally high 7.5pH alkaline spring water from the Ancestral Rocky Mountains under the Eagle Spirit Spring Water brand
Major Brands of the company:
Recent developments:
RMHB recently announced that it has entered into a contract for over $800,000 with LyonPride Music, LLC to provide promotion, sponsorship and advertising services to the Company over the next year.
LyonPride Music is an advertising and promotion company that will tour across the United States this summer traveling to dozens of cities in their custom party bus fleet promoting Rocky Mountain High beverages and Eagle Spirit Spring Water.
The company also announced that Jerry Grisaffi, Founder and Chairman of the Board of Directors, sold his controlling interest in the Company to LSW Holdings, LLC through a private transaction that closed on February 28, 2017.
LSW Holdings, LLC, is cheerfully optimistic about the synergies from this deal & believe that RMHB will become a worldwide brand very soon. They plan to merge Rocky Mountain High China into the Company as a wholly owned subsidiary in the near future. Rocky Mountain High China is currently a non-affiliated company and is the exclusive distributor for Rocky Mountain High Brands in China. The proposed merger would allow RMHB to consolidate the revenue that they generates in China.
The new promoters also plan to introduce a new hemp-infused ginseng plum drink into the Asian market. Plum is a huge seller in the Asian markets. With the expertise and resources of Rocky Mountain High Brands, they believe that they will be able to create this new drink and many others to bring to market very quickly.
On the flip side, management of RMHB is also positive after change in control & ownership of the company. They believe that new parentage would lend substantial operational and financial comfort to the company including, funding of new product development, inventory production, innovative advertising and marketing campaigns and help RMHB increase its distribution base both in the U.S and internationally.
Key Stock Influences:
Some key influences that might govern future stock price performance include:
(1) RMHB is still at an early stage and has not yet generated meaningful revenue and will likely operate at a loss as it grows its market position and seeks ways to monetize it. Therefore, any time or cost overrun in its ongoing marketing activities and its impact on business & financial profile will remain a key business sensitivity factor.
(2) RMHB is having a constrained financial position. Therefore, its ability to maintain liquidity and financial flexibility to fund its incremental capital requirements will remain an extremely critical challenge for the company.
(3) RMHB ability to revamp its sales strategy and to align with mainstream markets would hold the key over the near to medium term.
(4) RMHB’s management believes that the company will receive strong support from its parent over the medium term. However, any sort of diminution in the support that RMHB is expecting from its parent would adversely affect the operational & financial efficiency of the company.
Earnings Review:
For three months ended December 31, 2016 sales were $24,751 compared to $313,116 for December 31, 2015, a decrease of $288,365 or 92%. The sales decrease was driven by management’s focus on closing the LSW Holdings deal, lack of inventory of its more popular flavors to sell, and a restructuring of brokerage agreements with outside brokers. In three months ended December 31, 2016 sales consisted of approximately 71% online sales and 29% distributor sales compared to 97% distributor sales and 3% online sales for the three months ended December 31, 2015.
Profitability:
The Company’s net loss for the three months ended December 31, 2016 was $2,410,416 compared to net income of $2,336,289 for the three months ended December 31, 2015.
Cash Flow & Balance Sheet:
RMHB experienced recurring losses from operations and to date, have not been able to produce sufficient sales to become cash flow positive and profitable on a consistent basis. Therefore, success of its business plans during the next 12 months and beyond will be contingent upon generating sufficient revenue to cover costs of operations and/or upon obtaining additional financing. In fact, for these reasons, auditor has raised substantial doubt about RMHB’s ability to continue as a going concern.
Net cash used in operating activities during the six months ended December 31, 2016 was $789,802 compared to $512,002 during the six months ended December 31, 2015. The change was principally driven by the net loss during 2016.
The anticipated operational shortfall for the next twelve months is $1,200,000. For the next two years, management anticipates cash needs to be between $2,000,000 and $5,000,000. They expect raising required capital through a blank check preferred stock, as authorized by the Company’s Articles of Incorporation. Also, RMHB has plans to establish a new class of preferred stock and raise up to $5,000,000 under a Rule 506 subscription agreement.
Stock Performance
On Friday, March 3rd, 2017, RMHB shares declined by 14.49% to $0.110 on an average volume of 10.99 million shares exchanging hands. Market capitalization is $96.44 million. The current RSI is 47.72.
In the past 52 weeks, shares of RMHB have traded as low as $0.03 and as high as $0.16.
At $0.110, shares of RMHB are trading above their 50-day moving average (MA) at $0.09 and above their 200-day MA at $0.05.
The present support and resistance levels for the stock are at $0.102 & $0.123 respectively.
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