IDS Industries Inc (OTCBB:IDST) – Another Turbulent Pot Stock
Up until September 2012, IDS Industries Inc (OTCBB:IDST)’s main business plan comprised of designing and building relaxation flotation tanks. Looking at the older SEC filings, we can see that they failed to get the ball rolling. Not surprisingly, they spun-off the subsidiary and started looking for new opportunities.
A name change was effected and the company underwent some restructuring. They entered the renewable energy business, which, as we all know, could be a massively lucrative industry. The reports for the first calendar quarters of 2013 show that they did manage to generate some revenues, but the proceeds came from the sale of lead acid products. Apparently, these were deemed unsuitable for a renewable energy company and at one point, IDST decided to focus on solar energy only.
We saw some interesting press releases in September and October suggesting that the development of the new products is progressing along nicely, but even now, four and a half months later, their Charge! portable and stationary power stations still don’t appear to be for sale.
Somewhat predictably, IDST wasn’t the most sought after stock until a couple of weeks ago. On February 10, however, they announced their plans to enter the marijuana industry and this changed the market sentiment dramatically. As you can see from the chart at the beginning of the article, the ticker jumped immediately and has been actively traded ever since. The stock performance leaves a lot to be desired. IDST showed some serious signs of hesitation after the initial surge and in a matter of just ten days, it plummeted back to the pre-marijuana price. It should be said, however, that it managed to recover nicely and after another 55% jump yesterday, it stands at $0.0623 per share – a level it hasn’t visited for over five months.
Not surprisingly, hype around message boards is quite strong and a lot of people think that the best is yet to come. But are things really so simple? We’re about to find out, but we should note that we can see a couple of potential issues.
On March 6, they announced that they are conducting some tests to see if they will be able to implement their power stations in the process of growing cannabis. Unfortunately, they are not ready to tell us when the results will be in and they don’t say how much the testing costs. Looking at the latest 10-Q, we’re quite sure that most of the shareholders hope that it’s cheap. Here’s an outlook of IDST‘s financial situation as of November 30, 2013:
- NO cash
- current assets: $130 thousand
- current liabilities: $1 million
- NO quarterly revenue
- quarterly net loss: $203 thousand
Of course, using the Charge! power stations in the process of growing marijuana won’t be the only source of revenues from the pot industry. IDST are also in charge of spreading the word around and collecting signatures for a petition aimed at legalizing weed in the state of California. Apparently, Propel Management Group, IDST‘s new subsidiary, should receive $2.75 per signature. Unfortunately, investors will need to wait for some time until they see the results of the campaign. And while they’re at it, they might want to consider one more thing.
Over the years, IDST have issued a number of notes that can be turned into common shares at a 49% discount. Considering the company’s financial situation, repaying the debt in cash could be a tall order and we read in the latest report that the conversion has already started. Subsequent to November 2013, for example, an entity called Asher Enterprises (who have something of a reputation among penny stock investors) turned a $12,500 note into more than 3 million shares (conversion rate hovers around $0.004 per share). There are plans to increase the authorized capital to 500 million shares which could suggest that much more discounted stock is about to see the light of day. And we all know what will happen if it hits the open market. Doing a lot of research and due diligence and carefully weighing the risks is, as always, absolutely crucial.
