Global Digital Soltn (OTCMKTS:GDSI) Remains A Volatile Choice
For the past several sessions the stock of Global Digital Solutions, Inc. (OTCMKTS:GDSI) has been extremely volatile. Any positive day has been followed by a comparable drop. Yesterday the ticker crashed by more than 17% and closed at $0.0038 per share.
GDSI captured the attention of the market last week when it announced the acquisition of Grupo Rontan Electro Metalurgica, S.A, a Brazilian company “engaged in the manufacture and distribution of specialty vehicles and acoustic/visual signaling equipment”. According to the PR published by GDSI for 2014 Rontan generated revenues of approximately $128 million. A staggering amount when you take into consideration Global Digital Solutions’ own financial results. For the quarter ended June 30 they reported:
• $147 thousand cash
• $769 thousand total current assets
• $1.6 million total current liabilities
• $379 thousand revenues
• $672 thousand net income
It should be noted that the net income was a result of changes in the fair value of derivatives. For the first half of 2015 GDSI have accumulated a net loss of over 2 million. Having in mind the limited resources of the company some might start to wonder how are GDSI going to pay for the announced acquisition. Especially when you consider that under the terms of the agreement they will have to pay $26 million in cash spread over 48 equal monthly installments, $26 million paid in stock valued at $1 per share, and an earn-out amount. In addition, although the PR makes it sound like the acquisition has been already completed the 8-K form for the deal states that the closing should occur within ten days of the publishing of Rontan’s financial statement.
Meanwhile the long term shareholders of GDSI have been simply drowned in dilution. The outstanding common shares of the company have increased from 112 million as of August 4 to nearly 287 million shares as of October 7. At the end of June GDSI had nearly $500 thousand in outstanding convertible notes that could be turned into shares at a 40% discount to the market price.
The red flags around the company are significant but if the Rontan’s acquisition is completed the stock could surge even higher up the chart. Don’t forget however that in our previous articles we warned you about GDSI‘s past failed attempts. The devastating effects of the rampant dilution shouldn’t be underestimated either. Plan your trades carefully and commit to anything only after doing extensive research.
In early trading today the ticker is still looking for a direction and after surging over 13% in the green is currently sitting 5.26% in the red at $0.0036.
