Georgi Kamburov

Global Digital Solutions Inc (OTCMKTS:GDSI) Gets Demolished

by Georgi Kamburov April 12, 2016

To say that yesterday's trading was a complete disaster for the stock of Global Digital Solutions Inc (OTCMKTS:GDSI, GDSI message board) would be an understatement. The ticker opened the session with a massive gap down and failing to recover closed the day with a loss of more than 62%. That is right - yesterday GDSI saw nearly 2/3 of their value simply disappear. During the session nearly 49 million of the company's shares got dumped on the market. For comparison the monthly average stands at less than 3.43 million traded shares.

In order to explain the reason for the sudden plummet down the chart we will have to first talk about the securities purchase and sale agreement that was announced by GDSI back in October 2015. According to the terms of the agreement the company was going to acquire Grupo Rontan Electro Metalurgica, S.A., a Brazilian limited liability company. The PR for the deal described Rontan as "the largest specialty vehicles and acoustic and visual signaling equipment company in Latin America" with revenues for 2014 of approximately $128 million. The closing of the deal was subject to specific conditions to closing.

Last Friday GDSI filed a new 8-K form stating that it believes to have "satisfied or otherwise waived" the conditions to closing and that on April 1 it demanded the Rontan securities to be delivered. The sellers, however, had other plans - apparently they intend to terminate the entire agreement. According to the 8-K filing GDSI have hired U.S. and Brazilian lawyers and will try to enforce their rights. The Rontan agreement was the main driving force behind the stock's chart ascend and without it there will be nothing to offset the myriad of red flags that surrounding the company.

Let's start with the horrific dilution that took place last year. At the end of 2014 GDSI had a little over 108 million outstanding shares. By the end of September 2015, however, that number had ballooned to more than 286 million shares. Out the newly issued shares 175 million came through the conversion of debt at an average price of $0.002. This means that even after yesterday's crash there could still be people owning shares that they got at a price nearly three times below the current market price. Unfortunately, the issuance of shares didn't stop at the end of the third quarter. In fact, the rate at which new shares were being printed got even faster. Although the subsequent section of the report covering the quarter didn't mention the specific details by November 4 GDSI had managed to issue another 200 million shares bringing the O/S to over 489 million shares.

Investors should have been able to see a more up-to-date picture of both the financial state of the company and its share structure at the end of last month when the annual report for 2015 was supposed to be filed. Instead GDSI submitted a notification of late filing, which gave them a 15-day extension. The annual report is now anticipated to be submitted by April 14. If the balance sheet found in the report shows little improvement in the financials while at the same time more shares have been issued at discounted prices GDSI might be in for even more red sessions. 

Comments 6

1. Guest
May 02, 2016, 12:52AM

Quotes 4/29/16 Rontan is negotiating the sale of its production units with new investors. This is what the President of SINDMETAL Union Ronaldo José da Mota said. According to him, the Rontan owners talked about the new sale after they gave up the closing of the deal with GDSI. They had a meeting with the company Tuesday, April 26, and they said they are negotiating with the new investors. However, Mota would not speculate who would be the future buyers. He explained they are closely follow the negotiations since the Tatui unit had been affected by the national financial crisis and it has 600 employees (represented by the Union). Their most recent actions generated a three-day strike. The strike started Wednesday, April 27, and ended Friday, 29. Rontan entered into new negotiations after giving up complete the process with U.S. investors. Every time we were negotiating, they were haggling until it reached the point Rontan wanted no more and ended the contract said the trade unionist.

2. Guest
April 16, 2016, 12:24PM

Quotes ...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.

3. Guest
April 16, 2016, 11:38AM

Quotes The truth comes out on GDSI. Having worked as a consultant on such deals, I can point to the dishonest, putrid and bumbling efforts of Dick Sullivan and his crony criminals as the real reason Rontan got spooked.
They operate as if they live in a third world cesspool like Vietnam.
Take a look at how Richard Sullivan is destroying his reputation on line.
Thank you.

4. Guest
April 14, 2016, 11:57AM

Quotes Chance zero

5. Guest
April 14, 2016, 09:58AM

Quotes How a company GDSI want to buy a company and do not want to pay e neither want to have give any a garantee???
And announced that bought a company, with no autorization and really not buy the campany, they do not want to pay.

6. Guest
April 14, 2016, 08:57AM

Quotes quais são as chances reais da GDSI assumir a empresa brasileira Rontan

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