CV Sciences Inc (OTCMKTS:CANV) Making All The Right Moves

One of the most powerful moves a stock can make is a short covering rally. In trading penny stocks, one of the easiest ways to make money is to look for companies diluting their shareholders and just jump on the bandwagon and go short. However, what happens when a company that has diluted in the past stops diluting and instead starts paying off their convertible debt? We get the makings of a massive short covering rally. This looks to be the case with CV Sciences Inc (OTCMKTS:CANV).We profiled CANV last month and said that the company was looking to rebound. Shares were trading at just around 12 cents back then. We said:

"One of the biggest overhangs on the stock has been a history of dilution. However, those days look to be over. Earlier this month, CANV prepaid investors holding a series of its Convertible Promissory Notes in advance of conversion, thereby avoiding dilution to its stockholders. This is a huge positive for shareholders and one which will allow investors to finally make some money on CANV."

With shares trading at $.25, we were right on the money and just 2 cents off the lows. On February 3, CANV announced that it prepaid investors holding a series of its Convertible Promissory Notes in advance of conversion, thereby avoiding dilution to its stockholders. Under the terms of certain Convertible Promissory Notes issued by CV Sciences to its investors, the company could, on 10 days' advance notice, prepay the debt obligations together with a 30% premium. The company prepaid a total of $535,081 in principal and interest under the notes, and $160,524 in prepayment premium.By prepaying this debt, the company avoided issuing up to 9,000,000 shares of its common stock on conversion of the debt. After the prepayment of this debt, CV Sciences continues to have obligations to its investors on its fourth, and final tranche of Convertible Promissory Notes in the amount of $255,000, as of February 2, 2016. The company issued this debt on September 16, 2015. The company is engaged in efforts to secure further bridge financing to prepay the fourth, and final tranche of Convertible Promissory Notes.CANV did have an issue with one investor who was not happy getting prepaid. Obviously he was hoping to get shares as he would have made more money that way. However, the terms of the agreement were explicit and the company announced on March 3 that the investor accepted the prepayment, which retired 100% of the outstanding convertible promissory notes.Now investors can focus on CANV's business. What's interesting about CANV and why we like the company is that it’s one of the few pot stocks producing actual sales. It’s one of the leaders in the marijuana industry and will be one of the first names investors flock to when pot stocks get hot again. In the third quarter, CANV reported revenues of $4.2 million compared to just $1.9 million in the prior year. CANV currently has $1.1 million in cash, which is enough working capital to fund current operations.We think that investors are going to come back into pot stocks and that there will be another "Green Rush" starting this year. There is a lot of legislation that will be addressed concerning marijuana use this year. Many states have initiatives for November that focus on legalizing or regulating marijuana for adult use. These include Nevada, Massachusetts, Arizona, Maine and California. Some states are trying to pull together legislation for the November ballots. They include Florida, Arkansas and Missouri.In Congress, there are a number of pieces of legislation that will be voted on. These include bills that would allow states to legalize medical marijuana without federal interference and reschedule marijuana to a schedule II drug. It would eliminate barriers to research and allow banks to work with marijuana companies.CANV looks to have escaped the dark cloud of dilution and also its former name Cannavest. We think the worst is behind CANV and much better days are ahead for the company and its shareholders. Congrats to all subscribers that got in on CANV based on our last article! We will be updating Insider Financial as soon as we know more. For continuing coverage on CANV and our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!Disclosure: We have no position in CANV and have not been compensated for this article.