Georgi Kamburov


by Georgi Kamburov November 10, 2015

Last Friday Global Digital Solutions Inc (OTCMKTS:GDSI, GDSI message board) submitted their financial report for the quarter ended September 30. On that day the stock closed at $0.0067 for a gain of 8%. When the market opened yesterday the positive momentum behind the stock had gotten even stronger and the ticker soared upwards by nearly 21% and closed at $0.0081. Since mid-October GDSI has been moving up the chart but will the uptrend push their stock above $0.01?

Well, investors seem to be viewing the recently reported financial results in a favorable light and compared to the same period last year GDSI's balance sheet definitely shows signs of improvement. At the end of September the company had:

• $115 thousand cash
• $570 thousand total current assets
• $1.4 million total current liabilities
• $254 thousand revenues
• $935 thousand net loss

As you can see GDSI is still in a dire financial state. The reported revenues may have increased significantly year-over-year but the company still reported a gross loss of $24 thousand for the period. Far more serious though is the fact that at the start of 2015 GDSI had no outstanding convertible notes while a little over a month ago they had over $312 thousand in convertible notes and $76 thousand in accrued interest.

For the first nine months of the year GDSI have issued 175 million shares through conversions with the majority of the shares seeing the light of day in the last couple of months. The outstanding shares of the company ballooned from 112 million as of August 4 to 286 million at the end of September. The new quarterly report however shows that as of November 4 GDSI had 489 million outstanding shares. In short, the O/S of the company has increased by more than four times in just three months.

Through a factoring agreement the company was able to repay two of the convertible notes totaling approximately $60 thousand but that could still leave quite a lot of debt convertible into shares. Keep in mind that the majority of the notes can be turned into shares at a 40% discount to the market price and that GDSI are considering an increase of the authorized shares because the current amount of 650 million shares is not enough to accommodate all of the potential shares that have to be issued.

All of the current excitement around the stock and the main reason for its recovery is the October 21 announcement that GDSI will be acquiring the Brazilian company Grupo Rontan Eletro Metalurgica S.A. According to the PR Grupo Rontan generated $128 million in revenues just last year. As we said in our previous articles under the terms of the deal GDSI will pay over $52 million - $26 million in 48 equal monthly installments, $26 million paid in stock valued at $1 per share, and an earn-out amount. And you definitely read that right - GDSI's stock is going to be valued at $1 while at the moment despite the recent gains it is still trading at below a cent. In addition, although the October PR made it sound like closed by the end of the year.

The hype surrounding the announced acquisition could continue to boost the stock up the chart. The risks should not be taken lightly though. The potential for even more underpriced shares to find their way to the open market must be taken into account. Do your own due diligence and adjust your trades accordingly. 

Comments 1

1. Guest
April 16, 2016, 10:37AM

Quotes Type your message...GDSI.......Well looks like another huge deal has hit a roadblock. Rontan, to be acquired for $52 million has refused to close the deal and has refused to surrender shares of Rontan to GDSI management.

Obviously, this might have to do with the "phantom" institutional investment company General Capital American Partners, who were to provide "significant investment capital" to GDSI. Research has revealed that the "institutional investor" was organized as a Delaware Corp. in Sept. 2014 and has no business history, with regard to ever providing any investment capital to any businesses previously. ACP, once did have a website, but a of this date, that website no longer exists.

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