Investors Return to Hemp Inc (OTCMKTS:HEMP)
For most of 2015 the stock of Hemp Inc (OTCMKTS:HEMP) has been going straight for the bottom of the chart wiping a huge amount of its value and hitting a new 52-week low of $0.01 on June 24. For the past two sessions though the ticker has made a significant resurgence. Last Friday HEMP surged upwards by 23% while yesterday the gains were even bigger – 36% and a close at $0.0204. The daily volume hit the record for the past 8 months number of 77.6 million shares. So what caused the sudden change in investors’ sentiment?
The last official PR published by HEMP came on July 20 and it announced that North Carolina, where HEMP’s decortication plant is located, passed a new bill that legalizes CBD/Hemp Oil. This means that now neurologists can recommend a hemp oil treatment to patients that suffer from intractable epilepsy. Keep in mind that they can only recommend CBD/Hemp Oil and cannot prescribe it. The news is definitely encouraging but does it change anything around Hemp Inc?
Unfortunately the red flags around the company remain as serious as ever and all those who jumped into the stock recently must be extremely careful when the excitement begins to fade. HEMP’s decortication line is still being reassembled and according to the latest video update as of July 7 around 60% of the process was completed. It will still take some time though before the machine becomes fully operational.
In the meantime the financials of the company have continued to deteriorate. On May 21 the company submitted its quarterly report for the first three months of the year and although the numbers it presented were already quite discouraging when on June 16 a restated report was filed it showed an even grimmer picture. For the first quarter of 2015 HEMP generated just $6223 in revenues while incurring costs of sales of $29,312. This means that at the end of the period HEMP had a gross loss of over $23 thousand. The net loss stood at $1.08 million.
The restated quarterly also showed that the company owed more than $2 million to its CEO Mr. Bruce Perlowin. In the past the sums due to the CEO have been reduced through the issuance of preferred K shares that can be turned into 10 common shares each. At the end of March there were nearly 155 million preferred K shares outstanding. HEMP’s long-term shareholders have already been put true a massive amount of dilution – the outstanding shares of the company surpassed 2.7 billion at the end of March. With the recently increased authorized amount of 5.5 million shares and the millions of preferred shares the printing presses may not be stopping any time soon.
The general industry hype has boosted the stock of the company in the past on several occasions but the positive effects have been rather short-lived. Will this time be any different? It is up to you to decide.
