IDS Industries Inc (OTCBB:IDST) as Volatile as Ever

Our previous article on IDS Industries Inc (OTCBB:IDST) came out a couple of hours before last Tuesday’s opening bell. As you can see from it, we commented on the company’s new marijuana business and how it’s affecting the stock performance. Investors were rather excited by the entrance into the cannabis industry and, a few hours after our article went online, IDST‘s management team tried to get them even more fired up.

At 9AM on March 11, they announced that they have entered into an agreement to acquire a private entity called MiCannLabs.com. MiCannLabs is, apparently, based in Michigan and it has been in the business of providing a range of services to pot-related companies for about three years. The acquisition should be completed within sixty days and, in the words of Scott Plantinga, IDST‘s CEO, it “is a small yet strategic step to enter a market space with hyper growth“.

The market’s initial reaction, however, wasn’t all that positive. March 11’s session finished with around $400 thousand in dollar volume and a 5% correction. On Wednesday, investors seemed a bit more enthusiastic and IDST‘s value increased by more than 38%. It remained pretty much stationary during Thursday’s session, but on Friday, it slipped and fell hard.

More than 12 million shares changed hands in just six and a half hours bringing the dollar volume up to around $730 thousand. IDST opened the session at $0.08 per share (3% below Thursday’s close) and started sliding towards the bottom immediately. It hit an intraday low of $0.0542 and closed the week at $0.06 which represents 27% in daily losses. Today’s session isn’t off to the best of starts either. About an hour and forty-five minutes after the opening bell, IDST is sitting at $0.0524 which is another 12% down.

Hardly the perfect performance everyone was expecting, but, having gone through the discussion boards, we can see that there are plenty of investors who don’t seem that bothered. Some of them claim that the drop is nothing more than a healthy pullback while others think that it was caused by profit-taking from day traders. A third group reckons that inexperienced investors got scared by the developments around Petrotech Oil & Gas Inc (OTCMKTS:PTOG) and hit the panic button.

There are certainly quite a lot of hypotheses around the reasons for the current performance, but it’s safe to say that there’s no shortage of people who think that the best is yet to come for IDST. Are they right though?

You need to decide for yourself. As we mentioned in our previous article, however, there are some things you need to keep in mind while contemplating the risks.

The hype around the cannabis business is, apparently, enough to keep the price quite high at the moment. In the longer run, however, it will be the company’s operations that will ultimately decide the ticker’s faith. That’s where things don’t look quite so rosy.

IDST have so far failed to generate any significant revenues from the renewable energy business and according to the latest 10-Q, they had absolutely no cash as of November 30. The report also shows that they had to deal with around $1 million in current liabilities, a third of which consisted of convertible notes.

That brings us on to the problem of dilution. As we mentioned last week, the subsequent events section of the 10-Q shows that an entity called Asher Enterprises has converted $12,500 into more than 3 million common IDST shares.

There are several things to suggest that some more stock saw the light of day after the publishing of the report. According to the filing, the O/S count as of January 9 was hovering around 39 million. The OTC Markets’ profile, however, informs us that on February 25, there were nearly 60 million shares issued and outstanding. IDST recently announced their intentions to increase the authorized capital from 100 million to 500 million shares and although there’s been no official confirmation, Nevada’s Secretary of State’s website suggests that the new A/S count is already in effect.

All in all, despite the optimism flying around, there are still plenty of risks involved with a potential investment in IDST. Carefully considering all of them is, as always, absolutely essential.