Georgi Kamburov

Hemp, Inc (OTCMKTS:HEMP) Barely Keeps Its Gains

by Georgi Kamburov January 6, 2015

During the first session of the year the stock of Hemp, Inc. (OTCMKTS:HEMP, HEMP message board) simply exploded logging in gains of more than 44% and closing at $0.041. The jump took place on a traded volume of close to 41 million shares which surpassed the 30-day average for the company by more than 4 times. The fact that most of the pennystocks in the marijuana sector registered similarly impressive gains led many investors to believe that HEMP’s ascent was only just beginning.

Well, as yesterday’s trading proved that notion was nothing more than wishful thinking. Despite opening with a gap up the ticker failed to sustain its upwards movement and finished the session less than 2% in the green at $0.0418. Throughout the volatile session investors exchanged an even bigger amount of shares and the daily volume reached 44.6 million. Interest in the company is certainly high but should you consider yesterday’s results as a healthy consolidation or as a sign that the momentum is starting to dissipate?

In our previous articles about the company we have often warned you about its discouraging financials. The abysmal cash reserves, the underwhelming revenues and the massive net loss that reached $2.3 million at the end of the third quarter of 2014 are far from the only red flags around HEMP’s balance sheet. The company reports millions in equities held for sale but they actually consist of billions of shares of highly illiquid pennystocks. Not to mention that some of those companies got suspended by the SEC and are currently trading on the Grey Market.

In order to boost the confidence of their shareholders HEMP decided to move away from their consulting business and acquired a Temafa decortication line that can process raw hemp and Kenaf. Even on this front the company seems to have encountered a couple of setbacks. Initially they reported that along with the Temafa line a total of 15 million pounds of raw and processed Kenaf were purchased but the latest PR dated January 2 revealed that only 4-5 million pounds of it are actually usable.

The launch of the decortication line also got delayed significantly. In a PR from August 29 HEMP’s COO stated that he believed the machinery to be fully operational in the first quarter of 2015. According to the latest video posted by the company however it seems that now they expect to complete Phase 1 in the next 60 to 120 days.

Meanwhile the company is still issuing more and more shares. Just for the first 9 months of 2014 the number of outstanding shares rose from 1.8 billion to 2.6 billion. Currently HEMP has 3 billion authorized shares but if the issuance rate remains the same they will have to either increase the authorized shares or perform a reverse split.

The risks around the company demand the use of caution. Do extensive due diligence and make sure to set appropriate time horizons for your trades. 

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