New Decorticator Update Causes Hemp Inc (OTCMKTS:HEMP) To Bounce
At the end of May the German engineer from Temafa, initially it was supposed to be a group of engineers, finally arrived at Hemp Inc (OTCMKTS:HEMP)’s facility in North Carolina and the reassembly of their Temafa decortication line could begin. Despite the encouraging news June was a terrible month for the stock of the company as HEMP slid down from around $0.018 to a new 52-week low of $0.01.
Yesterday, however, after a month of silence about the progress of the reassembly HEMP released a new video update. The video had an immediate effect on investors and the stock registered its biggest gain in quite a while – HEMP closed yesterday’s session nearly 11% in the green at $0.0123. The daily volume of close to 21 million traded shares was nearly twice the 30-day average for the company. Will yesterday’s surge turn into a more prolonged recovery though?
Well, the reassembly of the Temafa machinery may still need a couple of months. In the video update HEMP stated that the electrical wiring will take approximately 60 days. And Investors should also keep in mind that under North Carolina law hemp is still not legalized and thus the Temafa line, when it becomes operational, will be used to process kenaf. More than a year ago when HEMP purchased the equipment they also received 15 million tons of kenaf but by now about 2/3 of that amount has become unusable leaving the company with around 5 million pounds of kenaf.
While HEMP have been focused on their North Carolina facility the financials of the company have continued to deteriorate – the company finished the first quarter of the year with just $6223 in revenues and a gross loss of $23 thousand. The restated quarterly also revealed that over $2 million were owed to the CEO of the company Mr. Bruce Perlowin.
If you have been following our articles you should know that HEMP has been rather regularly decreasing its debt to Mr. Perlowin by giving him preferred K shares that can be turned into common shares at a ratio of one preferred K share for 10 common shares. And exactly such conversions have been going on for quite some time.
As whole the dilution of HEMP’s common stock has been absolutely crushing with the company reporting 2.7 BILLION outstanding shares out of the 3 billion authorized as of March 31. The company, however, recently increased their authorized amount to 5.5 BILLION shares so there is plenty of room for the future issuance of shares.
For now HEMP have been able to avoid dropping down into the double-zero price ranges but the fact that the Temafa line still needs more time and the continued dilution of the common stock could still depress the ticker. At the moment the market cap of the company stands at $33 million which could be viewed as rather inflated. Any trades involving the stock should be attempted only after doing your own due diligence.
