Intelligent Highway Solutions Inc (OTCMKTS:IHSI) Bounces On Unprecedented Volume

Yesterday Intelligent Highway Solutions Inc (OTCMKTS:IHSI) published a new PR announcing a a Private Equity Line Financing for up to $5 million. Such a tremendous boost to the company’s balance sheet was bound to capture the attention of the market and, indeed, investors began rushing towards the stock. In a state of real buying frenzy IHSI registered a never-before-seen daily volume of over 126 million shares. The buying pressure was so strong that it pushed the stock to a close nearly 31% in the green at $0.0017.

Yesterday’s trading may have been extremely positive but unfortunately IHSI still has a long way to go – their stock has been crashing down the chart for more than a year and a half. And the multitude of red flags around the company could continue to influence the chart performance negatively.

Let’s start with the latest financial report. According to it at the end of March IHSI had:

• $37,832 cash
• $303,340 current assets
• $2,228,602 current liabilities
• $183,274 revenues
• $438,598 net loss

Although the company is generating revenues the balance sheet as a whole fails to inspire much confidence. Not to mention that the entire generated amount came through a purchase order from Honeywell International Inc. (NYSE:HON), that, as the July 23 PR tells us, has now been completed leaving the company in search for new clients.

The $5 million financing is more than likely going to be enough to keep IHSI going for quite a while but so far the details of the deal have not been disclosed. At least we know that the financing has no downward convertible mechanism. That, however, doesn’t mean IHSI‘s stock is safe from dilution. On the contrary – as of March 31 there were around $289 thousand worth of principal and interest on some notes that could be converted into common shares at discounts ranging from 35% to 52%.

The potential dilution should not be underestimated in the slightest. As of May 20 IHSI had approximately 51.5 million outstanding shares while, as we said earlier, yesterday’s volume surpassed 126 million. This could mean that in less than 3 months the O/S count of the company more than doubled.

The excitement created by the $5 million financing may be enough to push IHSI up the chart in the coming days but you should still approach the stock with caution. Take into account the various risks and adjust your trades accordingly.