Hemp, Inc (OTCMKTS:HEMP) Fails To Move

Yesterday the stock of Hemp Inc (OTCMKTS:HEMP, HEMP message board) opened at $0.02345, below the closing price of the previous session, but surged up the chart and reached a high of the day of $0.026. Whatever support the stock enjoyed in the early trading quickly vanished however and the ticker dropped back down. It was still able to close in the green making a small jump of 2.08% right before the closing bell and finishing the session at $0.245.

The daily volume registered by the stock surpassed the 30-day average but the increased attention did not translate into a more significant move up the chart. The annual report for 2014 that was filed a couple of days ago failed to prevent the stock from sliding further down. At first glance this might be quite surprising considering that HEMP reported the following results:

• $243 thousand cash
• $3.5 million total current assets
• $1.4 million total current liabilities
• $7.95 million sales
• $904 thousand net loss

If a pennystock company reports nearly $8 million in annual revenues you would usually expect its stock to soar up the chart to new highs. In the case of HEMP though the numbers need some clarification.

Almost all of the reported revenues were generated during the first half of 2014 – around $5.5 million during the first quarter and $2.3 million during the second quarter. HEMP received the money under the form of securities held for sale from its various consulting clients. For the second half of 2014 HEMP actually generated less than $100 thousand.

At the same time the dilution of the common stock hasn’t been slowing down. At the end of 2013 HEMP had 1.8 billion outstanding shares while 12 months later that number had reached 2.7 billion. A significant amount of the shares issued last year came through the conversion of preferred and preferred K shares. At the start of 2015 there were 108 million preferred shares each of which can be turned into 2.5 common shares and nearly 155 million preferred K shares that can be converted into a total of 1.55 billion common shares. If the issuance of shares continues at the same rate HEMP will have to increase their 3 billion authorized shares in the near future.

In a recent PR the CEO of HEMP stated that they should begin processing kenaf for commercial use this fall. Keep in mind that the company won’t be able to process hemp until the plant gets legalized in North Carolina. For now HEMP's decortication equipment is still hasn't been reassembled and the company expects the engineers from Temafa to arrive by the end of April. By the time the machinery becomes operational the crushing dilution of the common stock may have depressed the share price to even lower ranges. That is why it is of vital importance to do your own due diligence before committing to any trades involving HEMP’s stock.