Pulse Beverage Corp (OTCMKTS:PLSB) Is A Top Growth Play

Pulse Beverage Corp (OTCMKTS:PLSB), the beverage company, saw a big increase in trading volume in July. For some days, more than 40 million shares changed hands. For what reasons? The company recently put out an agreement with KeHE Distributors to provide national distribution coverage for its Natural Cabana® Coconut Water, Lemonades and Limeades. Given the size of the partner, which we will note later in detail, the potential revenues derived from the contract could be very significant. That is, in our opinion, the most relevant reason to explain the astonishing volume. Have a look at the recent share price action.SourceBusinessPulse Beverage Corp. is a Northglenn, Colorado based beverage company formed in 2011. The following brands are owned by the company:

• Natural Cabana® Lemonade/Limeade
• Natural Cabana® Coconut Water
• PULSE® Heart & Body Health functional beverages

PLSB works with approximately 70 distributors and 20 wholesalers. The following are the national grocery and convenience chain stores distributing the products:

"Albertsons/Safeway/Tom Thumb Markets, Walmart, Kroger/King Soopers/City Markets, Stater Bros, Food Max, Houchens/IGA/IGA Express/IGA Cross Roads, Kmart, 7-Eleven, United C-stores, Weis Markets, King Kullen, Dierbergs Markets, Hy-Vee Supermarket, WinCo Foods, Price Less Markets, Gristede’s Foods, Toot n Totem, Travel America, Walgreens, Smashburger, Bolla Markets, Shop-Rite Grocery, Natural Foods, Flash Foods and Associated Foods." Source

In the following video, the company shows some of its brands. Also, there are interesting conversations with the management in the video:https://youtu.be/bW4Ijgd_xWISourceRecent DevelopmentsOn July 25, 2017, PLSB announced an agreement with KeHE Distributors. The company started in July 2017 providing national distribution coverage for its Natural Cabana® Coconut Water, Lemonades and Limeades. This is a great news, as KeHE Distributors seems like a big distributor that will be able to help PLSB increase the revenue line. In the press release, we could find some information regarding KeHE's size:

"KeHE has 17 distribution facilities in the North America and utilizes over 470 trucks with daily routes that service half of the top 100 retailers from coast to coast. They currently provide brands and service to over 30,000 retailers across North America." Source

Robert Yates, CEO of Pulse, explained further:

“We are very pleased to partner with this prestigious grocery distributor, KeHE Distributors who has a stellar reputation for bringing quality natural brands to their customers throughout North America. KeHE will soon be stocking our beverages in all of their distribution facilities. We started in Dallas and will move forward in California shortly thereafter. We would expect KeHE to be distributing our products in all 17 North American geographies within 6 months.” Source

On June 12, 2017, another agreement with another distributor was put out. Affiliated Foods Inc. of Amarillo, Texas, has been working with the company since June 2017. It will be in charge of distribution of Natural Cabana® Coconut Waters in Texas and the surrounding states of Arizona, Colorado, Kansas, New Mexico, Oklahoma, and Wyoming. This new distributor is also very large. This information is also from the press release:

"AFI utilizes over 1.2 million square feet of warehouse facilities with more than 1,200 employees to deliver over $1.5 billion USD worth of products annually to their clients." Source

In our opinion, the most interesting words said by the CEO were the following ones, in which the size of the beverage product market is noted:

"We saw an opportunity to be part of a worldwide coconut beverage product market that is expected to yield $2 billion worth of sales by the year 2020 from a $1.6 billion product sales category in 2016. We are excited to be achieving the growth that Pulse deserves in this product category and have new potential channel partners knocking on our door every week looking to distribute our products.” Source

Financial SituationReaders need to have a look at the financial situation of PLSB. The following are the assets. Please note the large amount of inventory and net receivables owned by PLSB, and the fact that these two accounts diminished in the last two years. This is a good news. It means that the company is being paid more rapidly and does not need to hold a lot of inventory. Conversely, note that some intangible assets were written off in the last year:Period Ending12/31/201612/31/201512/31/2014Current AssetsCash And Cash Equivalents159.66431.2770.664Short Term Investments---Net Receivables146.324386.462544.749Inventory781.469988.911,146.12Other Current Assets21.58515.461283.324Total Current Assets1,109.0381,822.1032,044.857Long Term Investments--177.232Property Plant and Equipment151.235247.235266.553Goodwill---Intangible Assets86.641,131.7931,156.115Accumulated Amortization---Other Assets---Deferred Long Term Asset Charges---Total Assets1,346.9133,201.1313,644.757SourceThe following table shows the liabilities of the company. Note that the company has no long term debt, but has short term debt:Accounts Payable816.974790.616883.587Short/Current Long Term Debt1,959.202755.771-Other Current Liabilities21.05722.06621.147Total Current Liabilities2,797.2331,568.453904.734Long Term Debt---Other Liabilities---Deferred Long Term Liability Charges---Minority Interest---Negative Goodwill---Total Liabilities2,797.2331,568.453904.734

Source

Management holds a big stake in the companyAccording to the document put out on May 17, 2017, management owns 59.60% of the company, which we appreciate. Is this good for the company and the other stakeholders? Yes, it is. This is what the Harvard Law School Forum says about stakes owned by management and equity compensations:

"Economic theory suggests that the key to aligning managerial compensation with shareholder interest is to increase the sensitivity of executive compensation to firm performance (Core et al., 2005; Jensen and Meckling, 1976)"

To sum up, management will truly work to push up the share price, as it will get benefit from it.ConclusionPulse Beverage Corp. is interesting for its beverage line and the distribution network that it has created. We could see in this piece that the company is signing every month new agreements with big distributors, like Affiliated Foods Inc. and KeHE Distributors. This is exciting the market and explains the recent increase in volume that we saw in July. This increase in the demand for the stock may increase the price in the near future. Hence, be alert on this name. It may pop soon.Be sure to check out our coverage on PLSB.We will be updating our subscribers as soon as we know more. For the latest updates on PLSB, sign up below!Image courtesy of Paul Medina via FlickrDisclosure: We have no position in PLSB and have not been compensated for this article.