Investors Can’t Get Excited About Hemp Inc (OTCMKTS:HEMP)
After several delays the German engineer from Temafa – initially the PRs talked about a whole team of engineers but now it’s down to only one- finally arrived at Hemp Inc (OTCMKTS:HEMP)‘s North Carolina facility. This meant that the reassembly of the Temafa decortication line that HEMP bought over a year ago could finally begin. Such an event was quite significant so what do you think the reaction from the market was?
On the day of the announcement the stock closed 2.65% in the red at $0.0184. The following sessions were equally as uninspired especially yesterday’s when the ticker closed flat at $0.0181 on below average volume of 8.4 million shares. The stock is currently sitting rather close to its 52-week low of $0.0166 posted back in April.
There are numerous reasons that could explain the lack of enthusiasm displayed by investors. Let’s start with the financial report that covers the first quarter of 2015. The numbers you can find inside paint a rather bleak picture:
• $630 thousand cash
• $2.4 million total current assets
• $1.3 million total current liabilities
• $6223 revenues
• $979 thousand net loss
You are not mistaken, HEMP indeed managed to generate exactly $6223 in revenues during the first three months of the year. But the situation gets even grimmer when you notice that HEMP incurred cost of goods sold of $28 thousand which is FOUR times bigger than the sales. This left the company with a gross loss of $21,784 at the end of the period.
Although the issuance of new shares was kept under control as of March 31 HEMP still had more than 2.7 billion outstanding shares out of the 3 billion authorized. With 108 million preferred shares and 153 million preferred K shares that could be converted into approximately 1.8 billion common shares the potential dilution is enormous.
Even after the recent depreciation of its share price HEMP still commands an overly-inflated market cap of $49.5 million. In addition, as we warned you in our previous articles, even when the Temafa line finally becomes operational it will be used solely for the processing of kenaf because in hemp has not been legalized.
