Newstrike Brands Ltd NWKRF

a quick analysis of HIP

[kijiji]

Over the past year, HIP has ramped up its debt from CA$0.2M to CA$1.3M , which is made up of current and long term debt. With this growth in debt, the current cash and short-term investment levels stands at CA$0.1M for investing into the business. Moving onto cash from operations, its small level of operating cash flow means calculating cash-to-debt wouldn’t be too useful, though these low levels of cash means that operational efficiency is worth a look. 
At the current liabilities level of CA$0.5M liabilities, the company has not maintained a sufficient level of current assets to meet its obligations, with the current ratio last standing at 0.34x, which is below the prudent industry ratio of 3x.
Since total debt levels have outpaced equities, HIP is a highly leveraged company. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible. Though, since HIP is presently unprofitable, there’s a question of sustainability of its current operations. Maintaining a high level of debt, while revenues are still below costs, can be dangerous as liquidity tends to dry up in unexpected downturns.
With a high level of debt on its balance sheet, HIP could still be in a financially strong position if its cash flow also stacked up. However, this isn’t the case, and there’s room for HIP to increase its operational efficiency. In addition to this, the company may not be able to pay all of its upcoming liabilities from its current short-term assets.