CannaVEST Corp (OTCMKTS:CANV) Is Slowly Sinking
For the past three sessions the stock of CannaVEST Corp (OTCMKTS:CANV) has been dropping down the chart. The corrections have been not that alarming but they have been growing. Yesterday the ticker finished the trading day with a loss of over 5% at $0.425. During the session, however, the stock dropped as low as 36 cents per share. Will CANV be able to reverse its current downwards course?
On May 16 the company submitted its latest quarterly report so let’s see what it had in terms of financials at the end of the first quarter of the year:
• $536 thousand cash
• $16.3 million total current assets
• $1.6 million total current liabilities
• $2.42 million sales
• $1.5 million net loss
With over half a million in cash reserves, positive working capital and $2.4 million in revenues CANV is obviously far from the typical pennystock company. Compared to the same period in 2015 the net loss has also been reduced significantly. The company has stated that it has sufficient inventory levels to support its sales for the year, which will further reduce the cash outflow. If everything is going so well why is then the stock chart not reflecting it?
Well, there are several rather serious red flags that must be taken into account. Despite the impressive revenues reported for the quarter investors were definitely far from thrilled to learn that on a year-over-year basis the revenues are actually down by close to $300 thousand. Even the fact that back in February and March CANV managed to retire 100% of its outstanding convertible notes seems far less impressive when you take a closer look.
In order to raise the funds required for the repayment of some of the notes before they could be converted entirely CANV had to sell a $850 thousand promissory note. Even with those funds, however, millions of shares still saw the light of day at extremely cheap prices – 3 million shares were issued as a conversion at $0.083 while 2.5 million shares were priced even lower at just $0.0612 per share.
The latest 8-K filing showed it took less than two months for CANV to no longer be free of convertible debt. On May 25 the company entered into a securities purchase agreement raising $2 million through a new convertible note. While at the moment it is highly unlikely that any amount will be turned into shares due to the note having a conversion price of $0.50, which is higher than the current market price, this may not be the case six months from now. After that period the owner of the note will have the option to convert $275 thousand per month at the lower of $0.50 or a 30% discount.
No matter how strongly you may believe in CANV‘s potential putting any money into the stock should still be preceded by doing thorough due diligence. Use caution and set appropriate time horizons for your trades.
