Of course I know it's a scalable business.
In a past life, I used to do market research and competitive analysis for a large semiconductor company, so looking at a market and the capital equipment required to serve it is something I occasionally did.
HEMP bought some older decortication equipment and after telling someone on this board (in August) that it would be running in the first week of November, now informs the world that they yet to have permit approval on the layout of the equipment. He also informs us that the budget has nearly doubled, to $2.3M, and IMO, will probably go higher.
Since growing industrial hemp is legal in Canada, I've looked at that as a model for HEMP's potential business. By HEMP's own words, we know that at full capacity, the plant can only process the hemp grown on about 3,000 acres, per year. From that Canadian study, we also learn that the, the net profit before taxes will be less than $2M. HEMP's past reports show that its corporate expenses will eat that up in short order.
But unless growing industrial hemp is legalized within the next three or four months, and it won't be, there will be no hemp to process in 2015, and the market for kenaf is dead.
If and when growing the hemp becomes legal, then HEMP will lose money during the ramp-up, while other, more well funded competitors begin to order their decortication equipment.
In order to expand capacity, HEMP would have to build another (by Bruce's estimate) $15M plant, and the company doesn't have that kind of money.
By the time HEMP is financially ready -- if ever -- to order more equipment, it will have to get in line at Temafa, because others will be ahead of it.
Even if they grow hemp on the five or six acres around the plant, at ten tons per acre, that's only 50 - 60 tons of stalks, or about four days of production.
Oh, I've thought this through, and looked at most of the angles.
HEMP will lose a lot of money in 4Q/15, more in 1Q/15. If hemp is not legalized for a 2015 crop season, then it will be unprofitable in all of 2015.
And by that time, we'll either have seen a reverse split or an increase in the Authorized Shares to 5B - 7B.
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