For the last three sessions before the weekend the stock of Cannabis Science, Inc. (OTCMKTS:CBIS, CBIS message board) was making a tentative recovery but now with the start of the new week it simply exploded. During yesterday’s trading more than 37 million shares changed hands, volume that is more than 5 times higher than the previous session. As a result the stock surged up the chart by close to 37% running from an opening price of $0.096 to a close of $0.126.
Early in the morning CBIS issued a press release but it highly unlikely that it was the reason that sparked such a buying frenzy. In fact the PR revealed a rather negative news – Dr. Robert Melamede, co-founder and President of the company, had stepped down from all of his positions in CBIS due to serious health issues.
The bad news continued though because as a part of his resignation Dr. Melamede sold the 500 thousand preferred series A shares he owned to the Bogat Family Trust, controlled by Raymond C. Dabney, for just $500. After the transaction the Bogat Trust now has 57% voting control of the company. If you run even a quick check on Mr. Dabney’s past you will find that he has been accused by the SEC for stock manipulation on two separate occasions. The most recent one is from 2008 and concerns the stock of Alliance Transcription Services, Inc.
No, the reason for the sudden enthusiasm shown by investor is the issuance of yet another round of email pumps for the company. Damn Good Penny Picks, Penny Stock Newsletters and Penny Picks started touting CBIS on June 1 and continued to do so yesterday. The pumpers disclosed a compensation of $25 thousand by an unaffiliated third party. The artificial hype may have boosted the stock but investors should be extremely cautious when dealing with the company. The SEC has been cracking down of both pumped and marijuana pennystocks and even issued an investor alert about the dangers around those stocks.
Even without the paid promotion CBIS is riddled with red flags. Their OTCMarkets profile still bears the Pink Limited Information mark due to the company’s inability to file its financial report for the first quarter of the year. On May 15 CBIS submitted a notification of late filing which gave them a 5-day extension but now 15 days later there is still no sign of the report. This forces investors to rely on information that is more than 5 months old. Not only that but the financial results of the company at the start of the year showed a rather grim picture:
• $943 cash
• $302 thousand total current assets
• $4 million total liabilities
• $82 thousand revenues
• $5.9 million net loss
The accumulated deficit back then had already surpassed $92 million but more importantly the number of outstanding shares
had reached 834 million out of the 850 million authorized. With no signs that the dilution is going to stop it is safe to assume that the authorized amount will be increased.
Yesterday the stock of Terra Tech Corp. (OTCMKTS:TRTC) continued to climb up the chart adding more than 18% to its value and returning to $0.65 per share. Vapor Hub International Inc. (OTCMKTS:VHUB) on the other hand plummeted further towards the bottom by wiping 18.2% and closing at $0.458.
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