GLOBAL DIGITAL SOLUTIONS, INC. Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes a number of forward-looking
statements that reflect management's current views with respect to future events
and financial performance. Forward-looking statements are projections in respect
of future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential" or "continue" or the negative of these terms or other comparable
terminology. These statements include statements regarding the intent, belief or
current expectations of us and members of our management team, as well as the
assumptions on which such statements are based. Prospective investors are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risk and uncertainties, and that actual results may
differ materially from those contemplated by such forward-looking statements.
These statements are only predictions and involve known and unknown risks,
uncertainties and other factors, including the risks set forth in the section
entitled "Risk Factors" in our Annual Report on Form 10-K for the year ended
? our ability to successfully commercialize and our products and services on
a large enough scale to generate profitable operation;
? our ability to maintain and develop relationships with customers and
suppliers;
? our ability to successfully integrate acquired businesses or new brands;
? the impact of competitive products and pricing;
? supply constraints or difficulties;
? the retention and availability of key personnel;
? general economic and business conditions;
? substantial doubt about our ability to continue as a going concern;
? our need to raise additional funds in the future;
? our ability to successfully recruit and retain qualified personnel in
order to continue our operations;
? intellectual property claims brought by third parties; and
? business interruptions resulting from geo-political actions, including
war, and terrorism or disease outbreaks (such as COVID-19).
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, or performance. Except as required by applicable law, including the
securities laws of
Readers are urged to carefully review and consider the various disclosures made
by us in this report and in our other reports filed with the
As used in this Quarterly Report on Form 10-Q and, unless otherwise indicated,
the terms "GDSI," "Company," "we," "us," and "our" refer to
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Corporate History
We were incorporated in
Business Overview
We are engaged in the development of proprietary aviation technology. We are
also looking to develop an automotive technology company currently in
Results of Operations
Comparison of the Nine Months Ended
Revenues
There was no revenue for the nine months ending
Our operating expenses for the nine months ended
For The
Nine Months Ended
September 30,
2022 2021
Salaries and related expenses $ 247,787 $ 1,033,000
Rent 4,650 -
Professional fees 89,499 108,486
Consulting services 297,160 612,110Other general and administrative 74,080 55,510 Total Operating Expenses
$ 713,176 $ 1,809,106
Operating expenses for the nine months ended
Liquidity, Financial Condition and Capital Resources
As of
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Working Capital Deficiency
Our working capital deficiency as of September 30, 2022 , in comparison to our
working capital deficiency as of December 31, 2021 , can be summarized as
follows:
September 30, December 31,
2022 2021
Current assets $ 5,837 $ 98,800
Current liabilities 13,063,268 11,257,572
Working capital deficiency
Cash Flows
During the nine months ended September30, 2022 and 2021 our sources and uses of
cash were as follows:
Nine Months Ended
September30,
2022 2021
Net cash used in operating activities
- (66,971 )
Net cash provided by financing activities 354,772 1,959,096
Increase (decrease) in cash $ (92,963 ) $ 1,739
Operating Activities
Net cash used in operating activities was approximately
Net cash used in operating activities was approximately for the nine months
ended
Investing Activities
During the nine months ended
Financing Activities
Net cash provided by financing activities for the nine months ended
Net cash provided by financing activities for the nine months ended
Recent Financing Arrangements and Developments During the Period
On
On
On
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On
Going Concern
The accompanying financial statements have been prepared in conformity with
GAAP, assuming the Company will continue as a going concern, which contemplates
the realization of assets and satisfaction of liabilities in the normal course
of business. The Company has sustained losses and experienced negative cash
flows from operations since inception, and for the nine months ended
Future Financing
We will require additional funds to implement our growth strategy for our
business. In addition, while we have received capital from various private
placements that have enabled us to fund our operations, these funds have been
largely used to develop our processes, although additional funds are needed for
other corporate operational and working capital purposes. Subsequent to period
end we have received funding of
Effects of Inflation
We do not believe that inflation has had a material impact on our business, revenues or operating results during the periods presented.
Significant Accounting Policies and Estimates
Our significant accounting policies are more fully described in the notes to our
unaudited condensed consolidated financial statements included herein for the
quarter ended
Fair Value Measurement
The fair value measurement guidance clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in the valuation of an asset or liability. It establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under the fair value measurement guidance are described below:
Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.
Level 2 - Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; or
Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
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Use of Estimates
The preparation of unaudited condensed consolidated financial statements in
conformity with
Derivative Financial Instruments
We account for conversion options embedded in convertible notes payable in
accordance with the
Convertible Instruments
The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with accounting standards for "Accounting for Derivative Instruments and Hedging Activities."
Accounting standards generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. accounting standards also provide an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards as "The Meaning of Conventional Convertible Debt Instrument."
The Company accounts for convertible instruments (when it has determined that
the embedded conversion options should not be bifurcated from their host
instruments) in accordance with professional standards when "Accounting for
ASC 815-40 provides that, among other things, generally, if an event is not within the entity's control could or require net cash settlement, then the contract shall be classified as an asset or a liability.
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Income Taxes
Income taxes are accounted for based upon an asset and liability approach. Accordingly, deferred tax assets and liabilities arise from the difference between the tax basis of an asset or liability and its reported amount in the financial statements. Deferred tax amounts are determined using the tax rates expected to be in effect when the taxes will be paid or refunds received, as provided under currently enacted tax law. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense or benefit is the tax payable or refundable, respectively, for the period plus or minus the change in deferred tax assets and liabilities during the period.
Accounting guidance requires the recognition of a financial statement benefit of
a tax position only after determining that the relevant tax authority would more
likely than not sustain the position following an audit. For tax positions
meeting the more-likely-than-not threshold, the amount recognized in the
financial statements is the largest benefit that has a greater than fifty
percent likelihood of being realized upon ultimate settlement with the relevant
tax authority. The Company believes its income tax filing positions and
deductions will be sustained upon examination and accordingly, no reserves, or
related accruals for interest and penalties have been recorded at
Stock-based Compensation
In accordance with ASC 718, "Compensation - Stock Compensation" the Company measures the cost of employee services received in exchange for share-based compensation measured at the grant date fair value of the award.
The Company's accounting policy for equity instruments issued to advisors, consultants and vendors in exchange for goods and services follows the provisions of FASB ASC 505-50. The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the advisor, consultant or vendor is reached or (ii) the date at which the advisor, consultant or vendor's performance is complete. In the case of equity instruments issued to advisors and consultants, the fair value of the equity instrument is recognized over the term of the advisor or consulting agreement. Stock-based compensation related to non-employees is accounted for based on the fair value of the related stock or options or the fair value of the services, whichever is more readily determinable.
New and Recently Adopted Accounting Pronouncements
Any new and recently adopted accounting pronouncements are more fully described in Note 2 to our unaudited condensed consolidated financial statements herein for the quarter ended September30,2022.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
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