HEMP, Inc. (OTCMKTS:HEMP) Tries To Bounce On Quarterly Report
Yesterday the stock of HEMP, Inc (OTCMKTS:HEMP) managed to take a breath of fresh air after it closed the session 11% in the green at $0.058. The positive movement was accompanied by a corresponding increase in the traded volume which reached more than 53 million shares, or nearly 7 times higher than the previous session.
This was only the fourth session that ended with gains for the stock since the start of the month as the negative trend is still going strong. Even after yesterday’s recovery HEMP is still more than 80% down from its February highs when the hype around the marijuana industry managed to boost them above 30 cents per share.
Now with the hype mostly gone HEMP has been trying to keep investors interested by issuing quite a few PR messages about the numerous consulting deals of their subsidiary IHMMCC. Thanks to this side of their business HEMP were able to announce that revenues for the first quarter of 2014 had reached more than $5.4 million far surpassing the revenues for the whole of 2013. This Tuesday they filed the financial report for the period and now we can see the whole picture. At the end of March HEMP had:
- $220 thousand cash
- $5.8 million total current assets
- $258 thousand total current liabilities
- $5.4 million sales
- $2.6 million net income
At first glance the numbers represent a drastic improvement over the state of the company at the start of the year. Well, when you dig deeper though things are not what they seem.
In our previous articles we warned investors that the consulting deals were signed with various pennystocks that are not exactly in the best financial health. That is why we were not surprised to find that HEMP was actually paid with 2.9 billion common shares from eight consulting clients. These shares were valued at $5.3 million and represent the majority of both the current assets and the revenues. Most of these companies are either extremely thinly traded or are sitting deep into the triple-zero price ranges so HEMP might find it difficult cashing in the shares.
Another huge point of concern should be the continued dilution of HEMP‘s common stock. Just for the three months covered by the report another 300 million shares saw the light of day bringing the outstanding shares to 2.1 billion out of the 3 billion authorized. Around 170 million of the newly issued shares came into existence after conversion of preferred K shares which are held by the CEO of the company Mr. Bruce Perlowin. He currently has another 100 million preferred K shares and each of them can be turned into 10 common shares.
With yesterday’s gains the market cap of HEMP has once again risen above $100 million, a number that is grossly disconnected from their fundamentals. Doing your own due diligence is mandatory before attempting any trades involving pennystocks. Yesterday marijuana pennystock – TerraTech Corp. (OTCMKTS:TRTC) continued to lose positions and after wiping 10% of its value found itself at $0.36 per share. The recent slide was caused by the massive net loss reported for the first quarter of 2014 which coupled with the other red flags around them prompted us to create a video coverage on the company.
