Triton Distribution Systems Inc (PINK:TTDZ) stock woke up from the dead-like condition after the CEO said he will retire 99.7% of his own shares, with no cost for the company. This action showed the management’s commitment to the earlier announced plans to reduce the issued and outstanding stock by 99% through a buyback program.
Since the company doesn’t have any cash for such a deed, they will offer a minimum possible price of $0.0001 per share, and issue convertible debentures which promise the payment in 5 years, and bear 10% interest.
While this looks good for the shareholders, the question is whether the entity will still be around after a 5 year period. The company has been using their stock to cover the operating costs and pay for acquisitions, latest of which happened in September 2009. If they wouldn’t use equity sales to raise funds, the company would not exist by now.[BANNER]
The business activities of Triton are limited. Their second quarter report, for period ending June, 2010, shows no cash and a huge leverage – $1.6 million in assets versus $12.7million in liabilities. No revenues, recurring losses and constant issuing of new shares are also alerting. Even if they buy back most of the outstanding stock, it still remains questionable whether the company can survive in such a bad financial position.
The nature of the ongoing stock trades is not clear. Acquiring the stock right now looks meaningless, as investors would just be freezing their funds for 5 years. Price appreciation is not happening as well, only some volatile bursts were recorded, which also provides little profit opportunities for day traders.
