General Cannabis Corp (OTCMKTS:CANN) Drops Below $1

At the end of March General Cannabis Corp (OTCMKTS:CANN) announced record breaking revenues for the fourth quarter of 2015 and the year as a whole. Indeed, on year-over-year basis the quarterly revenues were up by 1205% while the annual revenues showed an increase of 634%. Seeing this investors showed massive support for the stock and in just a few weeks the ticker found itself reaching a high of $1.95 per share.

After hitting such price levels, though, CANN lost its momentum and started retracing its steps back down the chart. Yesterday the company crashed by over 17% and as a result fell below the $1 dollar mark for a close at $0.96. What could explain the drastic change in sentiment towards the stock?

CANN may have achieved significant revenue growth but unfortunately that is simply not enough to offset the rest of the numbers found on their balance sheet. Opening the annual report reveals the whole picture – as of December 31, 2015, CANN had:

• $59 thousand cash
• $246 thousand total current assets
• $3.7 million total current liabilities
• $1.76 million total revenues
• $8.78 million net loss

Although the financials raise enough red flags even on their own investors should also keep in mind that quite a few shares could have seen the light of day at extremely cheap prices. Back in December the company issued 619 options with an exercise price of $0.60 as well as warrants for the purchase of 50 thousand shares again at $0.60 per share. In March, as part of the amendment of the option agreement with Infinity Capital West, LLC., a warrant for the purchase of 100 thousand shares at $0.67 was issued by CANN. In the same 8-K form you can also see that at the start of April options for the purchase of 216,650 shares with an exercise price of $0.61 were issued under the company’s 2014 Equity Incentive Plan.

Last month CANN were able to negotiate an extension of substantially all of their indebtedness to dates beyond January 2017 so at least for now they won’t have to worry about that.

Trading pennystocks is inherently extremely risky and CANN is not an exception. Even if you believe in the potential of the company you should still use caution when putting any of your hard-earned money on the line.