Borislav Tonev

HDS International Corp (OTCMKTS:HDSI) Exits Triple-Zero Land

by Borislav Tonev March 18, 2015

A few days ago, HDS International Corp (OTCMKTS:HDSI, HDSI message board) was pretty much anchored to the bottom of the chart. The stock's 52-week low sits at $0.0001 and it was last seen at these levels on March 12. It may not seem that important at the moment, but we would like to urge you to bear this piece of information in mind while we talk you through some of the recent news around the company.

Six days ago, HDSI came up with its first press release in a while. The PR didn't appear on the usual news websites, but it was accompanied by an 8-K. Apparently, HDSI has signed a strategic expansion agreement with an entity called SirenGPS Inc – a developer of a mobile application which acts as a sort of a panic button on your phone. Basically, it lets you dial 911 in a hurry and it gives the first response people your precise location.

Along with the business plan, the management team has also been changed and the previous idea of providing renewable energy solutions has been ditched.

By the looks of things, investors are now much more interested in the company. We saw some increased activity on the market over the last few days and thanks to two strong sessions on Monday and Tuesday, HDSI managed to claw its way above the $0.001 per share mark for the first time since September 2014.

So, a lot of people are pouring money in the company and are hoping to see it grow in the future.

As always, the all-important question is: 'Aren't they overlooking something?'

Well, neither the press release, nor the 8-K told us if the new expansion agreement can somehow solidify HDSI's financial positions. And that's rather important because the balance sheet in the latest 10-Q isn't really impressive. In fact, it's absolutely atrocious. Here's a summary of the figures recorded on September 30, 2014:

  • cash: $163
  • total assets: $2,594
  • current liabilities: $1,361,244
  • no revenue since inception
  • quarterly net loss: $120,251

The expansion agreement states that HDSI's use of the SirenGPS technology will be dependent on monthly payments of $7,500 per month. That might not sound like much, but with a little over $160 in the bank, it could prove to be a challenge. Believe it or not, however, the pitiful amount of cash on hand and the lack of revenues aren't the biggest problem. The biggest problem lies with the toxic debt.

Over the years, HDSI has issued plenty of convertible debentures and the 10-Q tells us that most of them can be turned into common stock at a 50% discount to the lowest closing price from the last thirty trading days.

This is where the first paragraph of our article comes into play. As we mentioned already, the stock spent the last few months dragging itself along the bottom of the chart and the lowest closing price from the last thirty days is still sitting at $0.0001. But let's see what effects this has had on the share structure.

Thanks to a few 8-K forms published recently, we found out that between November 21, 2014 and March 17, 2015, HDSI converted $27,500 worth of debt into exactly 479,750,000 shares of common stock. The average conversion rate is $0.000057 (that's right, four zeros) per share.

The latest conversion was reported earlier today and the 8-K told us that currently, there are more than 1.6 billion shares issued and outstanding.

The management team also stated that 'as long as we obtain loans from convertible debenture agreements, including the outstanding notes, our stock prices are anticipated to depress.'

We couldn't have said it better ourselves.

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