Grey Wolf Animal Health Corp. (WOLF.V)



Website
Yahoo Finance
Filing

Feb. 10, 2023
Sept. 2022 Data
Price: $0.78. Shares: 31m,  Cap: $24.2m. 

1. Business
(1) History 
The company was founded by Dr. Ian Sandler in 2015. Dr. Ian Sandler has been a Veterinarian since 1994. On Dec. 31, 2018, the company acquired Veterinary Healthcare Solutions Inc. for around $1.2m in cash. 

In July 2021, WOLF acquired Phillios Drugs Limited (Phillios) for $2.3m. Phillios holds a pre-1954 Charter license which allows a corporation operates a pharmacy.  

In Sept. 2021, the company acquired Trutina Pharmacy Inc. and TruBalance Healthcare Inc. for $20.6m cash + 1.1m shares at $1.5/share.  In 2020, it generated 8.8m in revenue and $1.5m in profit. In 2021, the acquired business generated around $10.5m in revenue and $1.8m in profit.

In Nov. 2022, the company IPOed through a reverse merger.  It raised $4.3m from the shell company and converted around $12.5m of its convertible debt and preferred shares into common shares. 


(2) Product & Business 
1. Animal Health OTC Products:
GI Upset-related products: Four in total. These might be its main products.

VetriScience  Composure Pro: This is a product that can calm down a very active pet. WOLF is the distributor in Canada. 

VetriScience VetriFlex: This is another product that helps dogs with their bones & joints etc.

Hide & Treat: This is a product to help feed medicine to pets. 

Consumables: Med pet shirts, Wound care, Needles/syringes, Catheters, etc.  

2. Rx products:
Analgesics: Ataject & Sedaject, anesthetic/analgesia during wound care and surgical procedures. 

Compounding pharmacy: Compounding is a procedure that generates a specific mix of Rx products by prescription. The company provides compounding mostly as a service. 


(3) Industry

(4) Employees
Currently, the company has 40 employees. Half work for animal health and half for Trutina. Revenue/employee > 500k/year. 

2. Management
(1) Management
CEO:  Angela Cechetto, She joined WOLF in May 2017 as VP of Business and Corporate Development. In Jan 2022, she became the CEO of WOLF. 

Dr. Ian Sandler: Founder and CEO. He is a veterinarian since 1994 and is still practicing. He is working at Rosedale Animal Hospital since 2000. 

(2) Ownership and Compensation
Shares:  31m shares.
Ian Sandler: 3.1m shares. 10.1%
Bloom Burton: 3.6m shares. 11.6%
Magen(Shell): 60m/16.6=3.6m. Original cash $5m. current $4.3m.  Cost/share: $1.2

All insiders hold shares: around 30%

3. Financial data

Notes: Debt and cash
Before IPO: Total debt: 24m. Total cash: 3m.
After IPO: Total debt: 10.5m. Total cash: 6.8m. The debt's interest is around 4%. 

Before IPO, the interest expense of the convertible debt is non-cash based which is around $500k/quarter. The other cash interest expense is around $150k. After the IPO, the company should have only the cash-interest expense.

Notes: Share data
Shares: there are 31m shares outstanding at the time of IPO.
Options: 2.4m. 650k at $0.83-$0.88. rest > $1.00
Warrants: 3m. at > $1.50.


4. Valuation and comments
(1) Currently the company is traded under 1 time of its annualized revenue which is lower than its IPO price. However, it is losing money mainly because of the high-interest expense and acquisition and IPO-related transaction expenses. On a cash basis, it is just made cash even on the first 3Q of 2022.  

(2) The company logged around $1.6m in transaction costs in the first 3Q of 2022. If the transaction cost is indeed not recurring in the future, the company could generate $2m in cash per year. Based on this, the current market cap is quite cheap. 


5. Risk
(1) The company is a new IPO. It is hard to tell how profitable it will be after the newly public company cost. 

(2) The transaction cost might continue to be high after the IPO. 


6. Conclusion
Overall, the company is managed well and it has a good potential to do very well in the future. The current market cap is just around 1 time of its revenue. The price is quite acceptable. However, currently, it is hard to tell how profitable it will be after the IPO. Should watch it closely. 

7. Links