On the first day of 2014 the entire marijuana and cannabis sector got a massive boost as investors once again flocked to the companies in a buying frenzy. Pennystocks operating in the industry that were largely forgotten by the market in the previous months suddenly found themselves once again among the top traded stocks for the day. Cannabis Science, Inc. (OTCMKTS:CBIS
, CBIS message board
) was certainly not an exception.
CBIS added more than a quarter to their value when they closed at $0.0515 just shy of the highest point for the day. Traded volume exploded and 28 million share changed hands throughout the session which is seven times more than the average for the company. This drastic change in investors sentiment came just days after CBISdropped to a new 52-week low of just $0.028 per share.
This time the industry hype was caused by the first legal sale of marijuana for recreational use in the state of Colorado. For now only a couple of dozen stores were operational but in the coming weeks that number will grow substantially. Regulators have granted 178 licenses for cultivation, 136 for retail stores, 31 for spin-off products and 3 for testing.
CBIS are not directly involved with the recreational use of marijuana and instead have put themselves to the task of developing cannabis formulation-based drugs. In November the company submitted a patent application in Europe that covers the development of drugs treating a variety of neurobehavioral disorders. That however doesn't change the dismal state of the company's financials.
According to the last quarterly report
they filed at the end of September CBIS had:
- $462 cash
- $288 thousand total current assets
- $3.5 million total liabilities
- $70 thousand revenues
- $1.1 million net loss
They have a negative working capital of more than $3 million, the accumulated deficit has passed $90 million and looking at their cash reserves investors should expect even more dilution of the common stock. Just for the time between September 30 and November 19 when the report was filed CBIS issued another 50 million shares bringing the outstanding amount to 760 million out of the 850 million authorized.
The current over-enthusiastic prices are not likely to hold for much longer as the company's fundamentals are clearly not capable of supporting them. In a few months another hype-wave might happen as the next state in line legalizes the sale of recreational marijuana but untill then, without any major developments, CBIS is bound to depress back to its previous price ranges.
The two leading companies in the sector - Medical Marijuana, Inc. (OTCMKTS:MJNA
) and Growlife, Inc. (OTCBB:PHOT
) also benefited from the increased buying with MJNA climbing up by 16% to $0.155 per share while PHOT had a more subdued gain of 6% to arrive at $0.151 per share.