The market was recently seduced by HempAmericana Inc (HMPQ) as revenues are expected for the first time in Q4 2018. In December, the share price increased from $0.008 to $0.02 delivering impressive stock returns. It seems the right time to assess the company’s technology and its financial statements.
Founded in 2014 and incorporated in Delaware, HempAmericana explores the hemp industry to offer investors new products. The company counts with an extremely supercritical extractor capable of processing over 15 kg of Hemp flower per minute. The manufacturer, Vitalis Extraction technology, notes that the company’s extractor is the largest and most efficient machine in the market.
The financial statements are not that appealing. In the last quarterly report, the company released an asset/liability ratio below one, which is a bit worrying. Additionally, with only $38,766 in cash and facing current liabilities of $3.345 million, HempAmericana will have liquidity issues in 2019. The market should have concerns about the future operations of the company. Sale of equity seems what the market should be expecting on this name.
Regarding the income statement, the company did not report revenues in the past, but expects to deliver revenues of $1 million after it processes its inventory consisting of 4,000 lbs of Hemp Flower. The market seems to be pushing the share price up after these expectations were delivered in November 2018. The following words were the most relevant in that communication:
“Total yield from this initial harvest is estimated at 4,000 lbs of hemp flower biomass produced from 3,831 harvested plants. If the Company is able to process this biomass at its state-of-the-art extraction and processing facility in Augusta, HempAmericana management expects the sales yield from this harvest in CBD distillate output to exceed $1 million.” Source: Press Release
On the bottom line, the company is losing more than $0.5 million per quarter. With this in mind and taking into account the cash in hand, it seems clear that HempAmericana could soon face a liquidity issue.
There are market analysts believing that share price could increase even more, reaching to $0.03. Market analyst SeaThruEquity believes that the company should report revenues of $3.6 million and $9.9 million in 2018. The lines below provide further details on the rationale of this analysis:
“We see HMPQ as a speculative emerging growth company positioning itself to capitalize on the burgeoning legal cannabis and hemp market, targeting the fastest growing sub segment (hemp-derived CBD). HMPQ has made considerable progress toward establishing a top-tier CBD oil extraction and production facility, with processing of its initial resource of 4,000 pounds of premium grade hemp having already begun. Moreover, we see several potential near-term catalysts ahead as management has stated that it will have a fully-automated extraction, production, refinement, distillation, bottling, and white-labeling system at its 17,000 sq. ft facility in Augusta, Maine by the end of calendar 4Q18. The target of $0.03 represents a valuation of 19.7x 2019E revenues of $3.6mn and 7.2x 2020E revenues of $9.9mn.” Source: markets.financialcontent.com
Disclosure: We hold no position in HempAmericana either long or short and we have not been compensated for this article.