Todor Pichurov

HDS International, Inc. (OTCMKTS:HDSI) Attempts to Leave Triple Zeroes

by Todor Pichurov April 2, 2015

We last covered HDS International, Inc. (OTCMKTS:HDSI, HDSI message board) just as the stock was crashing down, after getting a brief taste of double zeroes. Now HDSI is making another attempt to push itself away from the bottom. The stock closed 166% up yesterday, shifting considerable volume of over 316 million shares.

There seems to be very little to cheer about with HDSI. Yesterday, shortly after the opening bell, the company announced that it has 'reached terms' with an unnamed institutional investor who is to provide up to $4.6 million in cash through a combination of debt and equity.

Additionally, a paragraph gives a vague description of the reassignment of 'certain convertible notes'. Investors can only wonder what the PR really means to say when it states that further conversions under those notes will be made in 'a manner that will be compatible' with their interests. Too bad that the financing deal and re-assignment of convertibles are not detailed properly in an 8-K filing.

Maybe HDSI means that noteholders will no longer be able to get hundreds of millions of HDSI shares against less than $10,000 – like they did only a few days ago. In an extension of what looks like an effort to set some sort of new dilution record, on March 24 and March 30 the company issued another 172,000,000 shares to clear $8,700 worth of debt.

This is not the first time the company issued shares priced at $0.00005 (yes, this is four zeroes). On March 23 another 83 million shares were pumped out at the same per-share price. With the March 30 issuance, the company's outstanding share count reached 1.92 BILLION. The company's authorized shares peak at 2 billion.

HDSI has diluted its common stock by nearly 400% within the space of four and a half months. The company's annual report was due on March 31 but, somewhat predictably, HDSI filed for an extension.

The last time HDSI rushed up, the deflating drop was just as quick as the climb. The latest 8-K concerning the 172 million shares issued once again states that the company anticipates its share price to suffer because the noteholders are “selling shares received upon conversion into the open market”. The combination of hundreds of millions of shares obtained at quadruple zeroes and a spike in volume in which those shares can be offloaded are a dangerous combination that traders should consider.

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