In an attempt to stop its stock from registering another severe correction yesterday Hemp Inc (OTCMKTS:HEMPD) issued a new PR and put out online a new video update. Both of them were about the company’s kenaf crops and it is safe to say that investors weren’t particularly impressed – the stock crashed by 11.56%. Although the loss was lower than the 16% wiped on Wednesday it took place on a volume of 3.3 million traded shares which doubles the monthly average for the stock.
If you are not familiar with HEMP over a year ago the company bought a line of Temafa decortication equipment and as part of the deal it received around 14-15 million pounds of kenaf. The reassembly of the machinery in HEMP’s North Carolina facility began a couple of months ago and recently phase one of the process was completed. According to the company the wiring and the duct work would take another 60 days. Meanwhile out of the initial amount of kenaf only about 5 million pounds turned out to be actually usable.
Investors, however, have a lot more to worry about. The plethora of red flags surrounding HEMP turns their stock into an extremely dangerous choice. Let’s start with the financials of the company. According to the restated quarterly report for the period ending March 31 HEMP have:
• $632 thousand cash
• $2.3 million current assets
• $2.27 million current liabilities
• $6,223 revenue
• $1.08 million net loss
The next quarterly should be submitted any day now and if the numbers inside show even more signs of deterioration the stock could find it very hard to form any kind of recovery.
Due to the crushing dilution of the common stock, as of March 31 HEMP had 2.7 billion outstanding shares out of the 3 billion authorized, the company decided to increase its authorized amount to 5.5 BILLION shares. Apparently that wasn’t enough though and on July 31 without any prior warning HEMP performed a 1-for-10 reverse split. On that day the stock closed at 14 cents per share. That is right after yesterday’s trading the ticker is now trading a lower price.
The next quarterly report will also show if any preferred K shares have been issued recently. The company owed $2 million to its CEO and in the past any similar debt was reduced through the issuance of preferred K shares, each of which could be converted into 10 common shares.
It is paramount to do your own due diligence before committing to any trades involving HEMP’s stock. Take into account all of the various risks and never put unaffordable sums of money on the line.