CannaVEST Corp (OTCMKTS:CANV) Back Above $3
After climbing the charts for three consecutive sessions, yesterday CannaVEST Corp (OTCMKTS:CANV) dipped. By the time of the closing bell CANV was down 2.21% on a volume of 196.4 thousand shares, and closed at $3.10.
Potential investors should keep in mind that CANV‘s market performance is not particularly impressive once you look at the big picture. CANV was one of the most insanely overpriced stocks when the marijuana frenzy kicked in at the start of 2014. In February it hit a 52-week high of $201. After that its downfall began, and now it can barely even sustain a price above $3. So, with that in mind, can you really call $3.10 impressive?
CANV‘s latest news comes from a PR issued on Oct 02. It disclosed that the company will be attending the SupplySide West Trade Show from Oct 06 to Oct 10, where it will be introducing its “wide range of formulation-ready CBD products”. There are no other recent updates, as the other releases are from September.
The company’s next quarterly is set to be filed sometime in November. Until then, let’s look at the latest available one. It was filed on Aug 14 and it covers the three months ended June 30. For their Q2 CANV reported:
- cash: $9.2 million
- current assets: $18 million
- current liabilities: $976 thousand
- revenues: $3 million
- quarterly net income: $8 million
The numbers seem impressive. There is working capital, cash in the bank and net income. However, when you look at the report more thoroughly, you began to see discrepancies. Take the substantial net income amount, for instance. CANV listed $8 million as quarterly net income, but $7.89 million of it came from “gain on sale of equity investment”. That represents 98.2% of the net income, so we investigated further.
As it turns out, on June 02 CANV decided to sell its 24.97% equity investment in KannaLife to an entity called PhytoSPHERE. In exchange for the 24.97%, PhytoSPHERE granted the company with 500 thousand CANV shares of common stock, which it was already in possession with. Confused? These 500 thousand CANV shares, which PhytoSPHERE held, were valued at the then-current market price of CANV. On June 02, the company closed at $16.60, and so the estimated price of the 500 thousand shares amounted to $7,899,306.
As for the revenue amount, it should be noted that the company has reported it comes from an agreement with HempMeds PX, LLC, a subsidiary of Medical Marijuana Inc (OTCMKTS:MJNA). That is important because the 10-Q also disclosed that this agreement was terminated, and this action “may have an impact on future revenues”.
Aside from an impressive net income, CANV also lists an impressive cash supply. However, when you dig deeper you learn that it’s also not as impressive as it seems. In fact, $8,247,500 out of the $9,270,452 listed as cash, come from “common stock issued for cash”. That represents 88.9% of the reported cash, so we decided to track CANV‘s issuances.
When you go through the company’s reports, you notice that between December 31, 2013 and June 30, 2014, the O/S amount has almost doubled. In April CANV‘s price was ranging between $19 and $38, but that didn’t stop the company from issuing 781 thousand shares priced at $1.50 each. With CANV currently sitting at $3.10, the potential profits will be substantial.
Apart from the share issuances at great discounts, the 10-Q also discloses that CANV was a defendant in a case for ‘damages resulting from fraud arising out of a land transaction’, or more precisely CANV‘s President and CEO – Michael J. Mona Jr, and several other company representatives. Mr. Mona and the others listed as defendants, lost the case and now owe $17.7 million to the plaintiff, Far West Industries.
Potential investors should consider all the pros and cons, and do their own due diligence before deciding whether or not to commit to the stock.
