Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Jun. 14, 2019 | Jun. 30, 2018 | |
Document And Entity Information | |||
Entity Registrant Name | GLOBAL DIGITAL SOLUTIONS INC | ||
Entity Central Index Key | 0001011662 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2018 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | No | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Public Float | $ 895,040 | ||
Entity Common Stock, Shares Outstanding | 579,525,814 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2018 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Current Assets | ||
Cash | $ 8,100 | $ 93,000 |
Prepaid expenses | 0 | 20,000 |
Total current assets | 8,100 | 113,000 |
Total assets | 8,100 | 113,000 |
Current Liabilities | ||
Accounts payable | 672,284 | 656,758 |
Accrued expenses | 917,633 | 528,651 |
Due to factor | 0 | 77,265 |
Due to officer | 0 | 71,920 |
Financed insurance policy | 11,187 | 11,187 |
Notes payable, net of discount of $74,324 and $-0-, respectively | 1,999,676 | 1,288,000 |
Convertible notes payable, net of discount of $96,750 and $-0-, respectively | 140,624 | 108,991 |
Derivative liability | 562,175 | 382,948 |
Total current liabilities | 4,303,579 | 3,125,720 |
Stockholders' Deficit | ||
Preferred stock, $0.001 par value, 35,000,000 shares authorized, 1,000,000 issued and outstanding at December 31, 2018 and 2017, respectively | 1,000 | 1,000 |
Common stock, $0.001 par value, 650,000,000 shares authorized, 579,900,814 and 530,806,571 shares issued and outstanding at December 31, 2018 and 2017, respectively | 579,901 | 530,807 |
Additional paid-in capital | 30,785,442 | 30,282,937 |
Accumulated deficit | (35,661,822) | (33,827,464) |
Total stockholders' deficit | (4,295,479) | (3,012,720) |
Total liabilities and stockholders' deficit | $ 8,100 | $ 113,000 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Notes payable discount | $ 74,324 | $ 0 |
Convertible notes payable discount | $ 96,750 | $ 0 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 35,000,000 | 35,000,000 |
Preferred stock, shares issued | 1,000,000 | 1,000,000 |
Preferred stock, shares outstanding | 1,000,000 | 1,000,000 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 650,000,000 | 650,000,000 |
Common stock, shares issued | 579,900,814 | 530,806,571 |
Common stock, shares outstanding | 579,900,814 | 530,806,571 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Statement [Abstract] | ||
Revenue | $ 0 | $ 0 |
Cost of revenue | 0 | 0 |
Gross profit | 0 | 0 |
Operating expenses | ||
Selling, general and administrative expenses | 1,277,524 | 1,363,752 |
Total operating expenses | 1,277,524 | 1,363,752 |
Loss from operations | (1,277,524) | (1,363,752) |
Other (income) expense | ||
Change in fair value of derivative liability | 46,411 | (289,776) |
Financing costs | 68,000 | 0 |
Interest expense | 415,924 | 42,320 |
Settlement expense | 43,764 | 0 |
Gain on conversion of liabilities | (17,265) | 0 |
Total other (income) expense | 556,834 | (247,456) |
Net loss | $ (1,834,358) | $ (1,116,296) |
Net loss per common share, basic | $ 0 | $ 0 |
Weighted average common shares outstanding, basic | 566,130,000 | 530,806,571 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT - USD ($) | Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning balance, shares at Dec. 31, 2016 | 1,000,000 | 530,806,571 | |||
Beginning balance, amount at Dec. 31, 2016 | $ 1,000 | $ 530,807 | $ 30,282,937 | $ (32,711,168) | $ (1,896,424) |
Shares issued for financing fees, amount | 0 | ||||
Net loss | (1,116,296) | (1,116,296) | |||
Ending balance, shares at Dec. 31, 2017 | 1,000,000 | 530,806,571 | |||
Ending balance, amount at Dec. 31, 2017 | $ 1,000 | $ 530,807 | 30,282,937 | (33,827,464) | (3,012,720) |
Shares sold, shares | 6,831,818 | ||||
Shares sold, amount | $ 6,832 | 18,914 | 25,746 | ||
Shares issued for conversion of debt, shares | 9,034,091 | ||||
Shares issued for conversion of debt, amount | $ 9,034 | 5,966 | 15,000 | ||
Shares issued for financing fees, shares | 7,500,000 | ||||
Shares issued for financing fees, amount | $ 7,500 | 49,500 | 57,000 | ||
Shares issued for services, shares | 25,728,334 | ||||
Shares issued for services, amount | $ 25,728 | 274,397 | 300,125 | ||
Reduction in derivative liability | 98,787 | 98,787 | |||
Debt discounts related to warrants | 54,941 | 54,941 | |||
Net loss | (1,834,358) | (1,834,358) | |||
Ending balance, shares at Dec. 31, 2018 | 1,000,000 | 579,900,571 | |||
Ending balance, amount at Dec. 31, 2018 | $ 1,000 | $ 579,901 | $ 30,785,442 | $ (35,661,822) | $ (4,295,479) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Cash flows from operating activities: | ||
Net loss | $ (1,834,358) | $ (1,116,296) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Bad debt | 0 | 4,261 |
Amortization of debt discount | 162,554 | 0 |
Change in fair value of derivative liability | 46,411 | (289,776) |
Stock- based compensation | 300,125 | 0 |
Shares issued for financing costs | 57,000 | 0 |
Financing costs | 9,000 | 0 |
Interest expense from derivative liability | 121,166 | 0 |
Operating expenses settled through debt proceeds | 77,750 | 0 |
Gain on settlement of liabilities | (17,265) | 0 |
Changes in operating assets and liabilities: | ||
Prepaid expenses | 20,000 | 2,597 |
Deposits | 0 | 2,415 |
Accounts payable | 15,526 | 106,652 |
Accrued expenses | 623,615 | 1,084,152 |
Due to officer | (21,920) | 30,995 |
Net cash used in operating activities | (440,396) | (175,000) |
Cash flows from investing activities: | ||
Net cash provided by investing activities | 0 | 0 |
Cash flows from financing activities: | ||
Proceeds on notes payable | 350,000 | 300,000 |
Payments on notes payable | (30,000) | (2,000) |
Proceeds from convertible notes payable | 101,250 | 0 |
Repayments of convertible notes payable | (31,500) | 0 |
Payments to Factor | (60,000) | (30,000) |
Proceeds from sale of common shares | 25,746 | 0 |
Net cash provided by financing activities | 355,496 | 268,000 |
Net increase (decrease) in cash | (84,900) | 93,000 |
Cash at beginning of year | 93,000 | 0 |
Cash at end of year | 8,100 | 93,000 |
Supplementary disclosure of non-cash investing and financing activities: | ||
Payments to officer from proceeds from notes payable | 50,000 | 0 |
Discount on notes payable | 167,000 | 0 |
Discount from warrants issued with notes payable | 50,378 | 0 |
Accrued expenses settled through convertible notes payable | 43,633 | 0 |
Discount on convertible notes payable | 1,250 | 0 |
Discount from warrants issued with convertible notes payable | 4,563 | 0 |
Discount from derivative on convertible notes payable | 110,437 | 0 |
Convertible debt settled through issuance of common shares | 15,000 | 0 |
Reduction in derivative liability from payments on convertible notes | 98,787 | 0 |
Accrued expenses settled through notes payable | $ 200,000 | $ 0 |
DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS | 12 Months Ended |
Dec. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
DESCRIPTION OF BUSINESS | We were incorporated in New Jersey as Creative Beauty Supply, Inc. (“Creative”) in August 1995. In March 2004, Creative acquired Global Digital Solutions, Inc., a Delaware corporation ("Global”). The merger was treated as a recapitalization of Global, and Creative changed its name to Global Digital Solutions, Inc. (“the Company”, “we”), Global provided structured cabling design, installation and maintenance for leading information technology companies, federal, state and local government, major businesses, educational institutions, and telecommunication companies. On May 1, 2012, we made the decision to wind down our operations in the telecommunications area and to refocus our efforts in the area of cyber arms technology and complementary security and technology solutions. From August 2012 through November 2013 we were actively involved in managing Airtronic USA, Inc., and effective as of June 16, 2014 we acquired North American Custom Specialty Vehicles (“NACSV”). In July 2014, we announced the formation of GDSI International (f/k/a Global Digital Solutions, LLC) to spearhead our efforts overseas. The Company has been dormant since December 31, 2015. The Company had limited operations from the NACSV subsidiary from December 31, 2015 until May 13, 2016. During the interim, the Company was pursuing acquisition opportunities and responding to the litigation with the Securities and Exchange Commission. Subsequent to May 13, 2016, the Company has been seeking acquisitions and additional financing. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Going Concern The accompanying financial statements have been prepared assuming we will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. We have sustained losses and experienced negative cash flows from operations since inception, and for the year ended ,December 31, 2018, incurred a net loss of $1,834,358 and used net cash of $440,396 to fund operating activities. At December 31, 2018, we had cash of $8,100, an accumulated deficit of $35,661,822, a working capital deficit of $4,295,479, and stockholders’ deficit of $4,295,479. We have funded our activities to date almost exclusively from equity and debt financings. Our cash position is critically deficient, and payments essential to our ability to operate are not being made in the ordinary course. Failure to raise capital in the coming days to fund our operations and failure to generate positive cash flow to fund such operations in the future will have a material adverse effect on our financial condition. These factors raise substantial doubt about our ability to continue as a going concern. We need to raise additional funds immediately and continue to raise funds until we begin to generate sufficient cash from operations, and we may not be able to obtain the necessary financing on acceptable terms, or at all. We will continue to require substantial funds to continue development of our core business. Management’s plans in order to meet our operating cash flow requirements include financing activities such as private placements of common stock, and issuances of debt and convertible debt instruments, and the establishment of strategic relationships which we expect will lead to the generation of additional revenue or acquisition opportunities. While we believe that we will be successful in obtaining the necessary financing to fund our operations, there are no assurances that such additional funding will be achieved or that we will succeed in our future operations. Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern as a result of our history of net losses. Our ability to achieve and maintain profitability and positive cash flow is dependent upon our ability to successfully execute the plans to pursue acquisitions and raise the funds necessary to complete such acquisitions. The outcome of these matters cannot be predicted at this time. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries, NACSV, GDSI Florida, LLC and Global Digital Solutions, LLC, dba GDSI International. All intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity-based transactions and disclosure of contingent liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of the financial statements. Significant estimates include the derivative liability valuation, deferred tax asset and valuation allowance, and assumptions used in Black-Scholes-Merton, or BSM, or other valuation methods, such as expected volatility, risk-free interest rate, and expected dividend rate. 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 actually 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 December 31, 2018 and 2017. The Company recognizes interest and penalties on unrecognized tax benefits as well as interest received from favorable tax settlements within income tax expense. On December 22, 2017, the President of the United States signed and enacted into law H.R. 1 (the “Tax Reform Law”). The Tax Reform Law, effective for tax years beginning on or after January 1, 2018, except for certain provisions, resulted in significant changes to existing United States tax law, including various provisions that are expected to impact the Company. The Tax Reform Law reduces the federal corporate tax rate from 34% to 21% effective January 1, 2018. The Company analyzed the provisions of the Tax Reform Law to assess the impact on the Company’s consolidated financial statements and determined it had no material impact. Cash and Cash Equivalents We consider all highly liquid investments with original maturities of three months or less to be cash equivalents. Prepaid expenses Prepaid expenses consist primarily of legal retainers, which are expensed when the services are incurred. Fair Value of Financial Instruments The carrying value of cash, accounts payable and accrued expenses approximate their fair values based on the short-term maturity of these instruments. The carrying amounts of debt were also estimated to approximate fair value. The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. ASC 820 establishes a fair value hierarchy that prioritizes the inputs 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 measurement) and the lowest priority to unobservable inputs (level 3 measurement). This fair value measurement framework applies at both initial and subsequent measurement. The three levels of the fair value hierarchy defined by ASC 820 are as follows: ● Level 1 – Quoted prices in active markets for identical assets or liabilities ● Level 2 –Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable, either directly or indirectly ● Level 3 – Significant unobservable inputs that cannot be corroborated by market data. Derivative Financial Instruments We account for conversion options embedded in convertible notes payable in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC’) 815, “Derivatives and Hedging” Embedded Derivatives Derivative Liabilities Derivatives and Hedging – Contracts in Entity’s own Equity Change in fair value of derivative liability Earnings (Loss) Per Share (“EPS”) Basic EPS is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding. Diluted EPS includes the effect from potential issuance of common stock, such as stock issuable pursuant to the exercise of stock options and warrants and the assumed conversion of convertible notes. The following table summarizes the securities that were excluded from the diluted per share calculation because the effect of including these potential shares was antidilutive: Year ended December 31, 2018 2017 Convertible notes 163,700,000 46,249,733 Preferred stock 214,560,000 196,398,431 Stock options 13,650,002 13,650,002 Warrants 10,500,000 1,500,000 Potentially dilutive securities 402,410,002 257,798,166 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 . 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. Professional 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 Convertible Securities with Beneficial Conversion Features,” as those professional standards pertain to “Certain Convertible Instruments.” Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Original issue discounts (“OID”) under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. 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. Convertible Securities Based upon ASC 815-15, we have adopted a sequencing approach regarding the application of ASC 815-40 to convertible securities. We will evaluate our contracts based upon the earliest issuance date. In the event partial reclassification of contracts subject to ASC 815-40-25 is necessary, due to our inability to demonstrate we have sufficient shares authorized and unissued, shares will be allocated on the basis of issuance date, with the earliest issuance date receiving first allocation of shares. If a reclassification of an instrument were required, it would result in the instrument issued latest being reclassified first. Recent Accounting Pronouncements In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers: Topic 606, In February 2016, the FASB issued ASU No. 2016-02, Leases: Topic |
ACCRUED EXPENSES
ACCRUED EXPENSES | 12 Months Ended |
Dec. 31, 2018 | |
Payables and Accruals [Abstract] | |
ACCRUED EXPENSES | Accrued expenses consist of the following amounts: Year ended December 31, 2018 2017 Accrued compensation to executive officers $ 572,437 $ 342,919 Accrued professional fees and settlements 196,663 125,771 Accrued Interest 148,533 59,961 Total accrued expenses $ 917,633 $ 528,651 |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 12 Months Ended |
Dec. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | We had no Level 1 or Level 2 assets and liabilities at December 31, 2018 and December 31, 2017. The Derivative liabilities are Level 3 fair value measurements. The following is a summary of activity of Level 3 liabilities during the years ended December 31, 2018 and 2017: 2018 2017 Balance at beginning of year $ 382,948 $ 672,724 Additions 231,603 - Settlements (98,787 ) - Change in fair value 46,411 (289,776 ) Balance at end of year $ 562,175 $ 382,948 Embedded Derivative Liabilities of Convertible Notes At December 31, 2018, the fair value of the bifurcated embedded derivative liabilities of convertible notes was estimated using the following weighted-average inputs: risk free interest rate –2.45%; term -.25 years; volatility – 193.28%; dividend rate – 0%. At December 31, 2017, the fair value of the bifurcated embedded derivative liabilities of convertible notes was estimated using the following weighted-average inputs: risk free interest rate- 1.39%%; term - .25 years; volatility – 246.62%; dividend rate – 0%. |
NOTES PAYABLE
NOTES PAYABLE | 12 Months Ended |
Dec. 31, 2018 | |
Notes Payable [Abstract] | |
NOTE PAYABLE | Convertible Note Payable During January 2015, the Company entered into a one-year $78,750 convertible note payable with LG Capital Funding (LG). The note bears interest at 8% per annum and is convertible at any time at the option of LG into shares of our common stock at a conversion price equal to a 40% discount of the lowest closing bid price for 20 prior trading days including the notice of conversion date. The embedded derivative liability associated with the conversion option of the note was bifurcated from the note and recorded at its fair value on the date of issuance and at each reporting date. The note requires the Company to reserve four times the potential number of shares of common stock issuable upon conversion, or 157,974,360 and 82,557,576 at December 31, 2018 and 2017, respectively. The Company defaulted on the note in January 2016. Additionally, as a result of declines in the fair value of the Company’s common stock, from time to time the Company did not have sufficient authorized shares to maintain this required four times share reserve. Accordingly, the note holder had the right to accelerate the repayment of the note and unpaid interest. In addition, LG has the right to require that additional shares and/or monies be paid in connection with the defaults. During December 2017, in settlement of default, the Company and LG entered into a Convertible Note Redemption Agreement under which the Company was to repay $68,110, $39,921 in unpaid principal outstanding at December 31, 2017 and $28,189 in accrued interest, in five payments through April 2018. Through April 2018, the Company repaid $6,500 of principal under the Convertible Note Redemption Agreement. The Company defaulted on the Convertible Note Redemption Agreement in April 2018 and the $28,189 in accrued interest was converted to principal. As of December 31, 2018, and through the date of this report, the principal balance totaling $61,610 is outstanding and remains in default. During January 2015, the Company entered into a two-year convertible note payable for up to $250,000 with JMJ Financial (JMJ), of which $110,000 was funded between January and April 2015. The note was issued with an original issue discount of 10% of amounts funded, had a one-time 12% interest charge as it was not repaid within 90 days of the funding date, and is convertible at any time at the option of JMJ into shares of our common stock at the lesser of $0.075 per share or 60% of the average of the trading price in the 25 trading days prior to conversion. The embedded derivative liability associated with the conversion option of the note was bifurcated from the note and recorded at its fair value on the date of issuance and at each reporting date. The note requires the Company to reserve 26,650,000 shares of common stock. JMJ had the option to finance additional amounts up to the balance of the $250,000 during the term of the note. The Company defaulted on the note during January 2017. During December 2017, in settlement of default, the Company and JMJ entered into a Repayment Agreement under which the Company was to repay $84,514, $69,070 in unpaid principal outstanding at December 31, 2017 and $15,444 in accrued interest, in four payments through May 2018. Through May 2018, the Company repaid $25,000 of principal under the Repayment Agreement. The Company defaulted on the Repayment Agreement in May 2018 and the $15,444 in accrued interest was converted to principal. As of December 31, 2018, and through the date of this report, the principal balance totaling $59,514 is outstanding and remains in default. During November 2018, the Company entered into a nine-month 12% convertible note payable with Actus Fund, LLC totaling $90,000. The note is convertible into common stock at a conversion price equal to 50% of the lowest trading/closing price for the 25 trading days prior to conversion. The embedded derivative liability associated with the conversion option of the note was bifurcated from the note and recorded at its fair value on the date of issuance and is revalued at each reporting date. In connection with the convertible note, the Company issued 2,500,000 warrants exercisable at $0.0069 over 5 years. At issuance, the derivative liability and warrants were valued at $192,600 and $17,500, resulting in a $90,000 discount on the convertible note at origination. The warrants were valued using the Black Scholes Merton model and the key valuation assumptions used consist, in part, of the price of the Company’s common stock of $0.007 at issuance date; a risk-free interest rate of 3.07% and estimated volatility of the Company’s common stock of 255%. The derivative liability was valued using the Black Scholes Merton model and the key valuation assumptions used consist, in part, of the price of the Company’s common stock of $0.007 at issuance date; a risk-free interest rate of 2.33% and estimated volatility of the Company’s common stock of 190%. The $90,000 note remains outstanding and in good standing as of December 31, 2018 and through the date of this report. During December 2018, the Company entered into a Securities Purchase Agreement with Adar Alef, LLC containing up to four one-year 8% convertible notes payable with Adar Alef, LLC totaling $105,000. The notes include an original issue discount of 5% of all amounts funded such that the purchase price for each note shall be $25,000. The notes are convertible into common stock at a conversion price equal to 60% of the lowest trading price for the 20 trading days prior to conversion. The first $26,500 note was funded in December 2018 and principal and interest are due at maturity in December 2019. The embedded derivative liability associated with the conversion option of the note was bifurcated from the note and recorded at its fair value of on the date of issuance and is revalued at each reporting date. At issuance, the derivative liability was valued at $39,000, resulting in a $25,000 discount on the convertible note at origination. The derivative liability was valued using the Black Scholes Merton model and the key valuation assumptions used consist, in part, of the price of the Company’s common stock of $0.006 at issuance date; a risk-free interest rate of 2.62% and estimated volatility of the Company’s common stock of 188%. The $26,250 note remains outstanding and in good standing as of December 31, 2018 and through the date of this report. Notes Payable During August 2017, Dragon Acquisitions, a related entity owned by William Delgado, and an individual lender entered into a Promissory Note agreement for $20,000 as well as $2,000 in interest to accrue through maturity on August 31, 2018 for a total of $22,000 due on August 31, 2018. Dragon Acquisition assumed payment of a payable of the Company and the Company took on the note. The Company defaulted on the note at maturity in August 2018. The $20,000 note remained outstanding December 31, 2018 and through the date of this report. On December 22, 2017, the Company entered into a financing agreement with Parabellum, an accredited investor, for $1.2 million. Under the terms of the agreement, the Company is to receive milestone payments based on the progress of the Company’s lawsuit (Note 6) for damages against Grupo Rontan Metalurgica, S.A (the “Lawsuit”). Such milestone payments consist of (i) an initial purchase price payment of $300,000, which the Company received on December 22, 2017, (ii) $150,000 within 30 days of the Lawsuit surviving a motion to dismiss on the primary claims, (iii) $100,000 within 30 days of the close of all discovery in the Lawsuit and (iv) $650,000 within 30 days of the Lawsuit surviving a motion for summary judgment and challenges on the primary claims. As part of the agreement, the Company shall pay the investor an investment return of 100% of the litigation proceeds to recoup all money invested, plus 27.5% of the total litigation proceeds received by the Company. $300,000 was received by the Company in December 2017. The $300,000 note remains outstanding and in good standing as of December 31, 2018 and 2017, and through the date of this report. On December 23, 2017 (the “effective date”), the Company entered into a $485,000, 7% interest rate, demand promissory note with Vox Business Trust, LLC (Vox). The note was in settlement of the amounts accrued under a consulting agreement (Note 6), consisting of $200,000 owed for retainer payments through December 2017, as well as $285,000 owed to Vox when the Resolution Progress Funding was met on December 22, 2017. As part of the agreement, Vox may not demand payment prior to the date of the Resolution Funding Date. The Company also agreed to grant 5,000,000 shares within 90 days of the Resolution Progress Funding Date and 10,000,000 shares within 90 days of the Resolution Funding Date. The 5,000,000 shares were issued on March 13, 2018. The Company shall make mandatory prepayment in the following amounts and at the following times – ● $1,000 on the effective date. ● $50,000 on the date on which the judge presiding over the lawsuit issues a ruling or decision in which the lawsuit survives a motion to dismiss. ● $50,000 on the date on which discovery closes with respect to the lawsuit. ● $100,000 on the date on which the judge presiding over the lawsuit issues a ruling or decision in which the lawsuit survives a motion for summary judgement on the claims. Under the terms of the Vox note consulting agreement (Note 6), any unpaid consulting fees subsequent to December 2017 causes a default on the note with unpaid consulting fees to be added to the principal of the note. During the year ended December 31, 2018, consulting fees totaling $100,000 were added to the note principal and are included in the note balance at December 31, 2018. The notes had a balance of $584,000 and $484,000 as of December 31, 2018 and 2017, respectively. Through the date of this report, monthly consulting fees have not been repaid and continue to be added to the principal balance of the note. The note remains in default however Vox has voluntarily refrained from making demand prior to the Resolution Funding Date. On December 26, 2017 (the “effective date”), the Company entered into a $485,000, 7% interest rate, demand promissory note with RLT Consulting, Inc. (RLT), a related party. The note was in settlement of the amounts accrued under a consulting agreement (Note 6), consisting of $200,000 owed for retainer payments through December 2017, as well as $285,000 owed to RLT when the Resolution Progress Funding was met on December 22, 2017. As part of the agreement, RLT may not demand payment prior to the date of the Resolution Funding Date. The Company also agreed to grant 5,000,000 shares within 90 days of the Resolution Progress Funding Date and 10,000,000 shares within 90 days of the Resolution Funding Date. The 5,000,000 shares were issued on March 13, 2018. The Company shall make mandatory prepayment in the following amounts and at the following times – ● $1,000 on the effective date. ● $50,000 on the date on which the judge presiding over the lawsuit issues a ruling or decision in which the lawsuit survives a motion to dismiss. ● $50,000 on the date on which discovery closes with respect to the lawsuit. ● $100,000 on the date on which the judge presiding over the lawsuit issues a ruling or decision in which the lawsuit survives a motion for summary judgement on the claims. Under the terms of the RLT note consulting agreement (Note 6), any unpaid consulting fees subsequent to December 2017 causes a default on the note with unpaid consulting fees to be added to the principal of the note. During the year ended December 31, 2018, consulting fees totaling $100,000 were added to the note principal and are included in the note balance at December 31, 2018. The notes had a balance of $584,000 and $484,000 as of December 31, 2018 and 2017, respectively. Through the date of this report, monthly consulting fees have not been repaid and continue to be added to the principal balance of the note. The note remains in default however RLT has voluntarily refrained from making demand prior to the Resolution Funding Date. RLT was granted a first priority security interest in the Litigation Proceeds and is pari passu to Parabellum and Vox. To that end, they share in the litigation in a priority position to proceed to repay the note. During April 2018, the Company entered into an Investment Return Purchase Agreement with an accredited investor (the “Purchaser”) for proceeds of $50,000 (the “Investment Agreement”). The $50,000 proceeds were paid directly to Bill Delgado to reimburse expenses incurred on behalf of the Company. Under the terms of the Investment Agreement, the Company agreed to pay the Purchaser the $50,000 proceeds plus a 50% return, or $25,000 (the “Investment Return”) within seven (7) months from the date of the Investment Agreement. In addition, the Company agreed to issue to the Purchaser 1,000,000 warrants to purchase common stock of the Company at an exercise price of $0.01 per share, exercisable for a period of five (5) years. The warrants were valued using the Black Scholes Merton model, resulting in a fair value of $9,000 which were recorded as a discount on the note. The key valuation assumptions used consist, in part, of the price of the Company’s common stock of $0.009 at issuance date; a risk-free interest rate of 2.60% and estimated volatility of the Company’s common stock of 235%. During November 2018, the Company defaulted on the Investment Agreement. As of December 31, 2018, the $50,000 principal and $25,000 Investment Return remained outstanding. During May 2019, the Company and the Purchaser amended the Investment Agreement, as detailed in Note 10. During April 2018, the Company entered into a one-month $30,000 note payable with $18,000 in proceeds paid directly to a third-party vendor for expenses. The note did not bear interest and included a $12,000 original issue discount. As of December 31, 2018, the note has been repaid. During April 2018, the Company entered into a two-month $36,000 note payable with $31,000 in proceeds paid directly to a third-party vendor for expenses. The note did not bear interest and included a $5,000 original issue discount. During June 2018, the Company defaulted on the note. As of December 31, 2018, and through the date of this report, the $36,000 note remains outstanding. During May 2018, the Company entered into an Investment Return Purchase Agreement with an accredited investor (the “Purchaser”) for proceeds of $200,000 (the “Investment Agreement”). Under the terms of the Investment Agreement, the Company agreed to pay the Purchaser the $200,000 proceeds plus a 10% return, or $20,000 (the “Investment Return”) within three (3) months from the date of the Investment Agreement. Such Investment Return shall be paid earlier if the Company secures funding totaling $500,000 within 90 days from the date of the Investment Agreement. In addition, the Company agreed to issue to the Purchaser 2,000,000 warrants to purchase common stock of the Company at an exercise price of $0.01 per share, exercisable for a period of three (3) years. The warrants were valued using the Black Scholes Merton model, resulting in a fair value of $13,000 which were recorded as a discount on the note. The key valuation assumptions used consist, in part, of the price of the Company’s common stock of $0.007 at issuance date; a risk-free interest rate of 2.75% and estimated volatility of the Company’s common stock of 220%. During August 2018, the Company defaulted on the Investment Agreement. As of December 31, 2018, and through the date of this report, the $200,000 principal and $20,000 Investment Return remained outstanding. During June 2018, the Company entered in to a one-year $300,000 non-convertible note with an accredited investor with $150,000 original issue discount (“OID”) for net proceeds of $150,000. As part of the note agreement, the Company also agreed to issue the investor 5,000,000 warrants at an exercise price of $0.01, exercisable for a period of three (3) years. The warrants were valued using the Black Scholes Merton model, resulting in a fair value of $35,000 of which $28,378 was recorded as a discount on the note. The key valuation assumptions used consist, in part, of the price of the Company’s common stock of $0.008 at issuance date; a risk-free interest rate of 2.62% and estimated volatility of the Company’s common stock of 218%. At December 31, 2018, the $300,000 note remained outstanding. The Company defaulted on the note at maturity in June 2019 and the note remained outstanding through the date of this report. The note contains a default interest rate of 10% plus a 5% penalty of the outstanding balance of the note. The note holder has voluntarily refrained from making demand for repayment under the default provisions of the note, which would require the Company to pay the holder 130% of the outstanding principal and interest accrued at the default rate. The June 2018 note bears a personal guarantee by William Delgado, the Chief Executive Officer of the Company. As further security for the note, Mr. Delgado has also pledged the 1,000,000 Convertible Preferred Shares of the Company that he owns, as well as 5,000,000 common shares of SHMP, another public company in which Mr. Delgado is a director and Chief Financial Officer. Revenue Based Factoring Agreements During 2015, the Company entered into two revenue based factoring agreements with Power Up Lending Group, Ltd. (Power Up) totaling $145,700. During 2016, the Company defaulted on the $117,265 balance due under agreements. During September 2017, the Company and Power Up settled the default with payments totaling $90,000 to be made through May 2018. At December 31, 2017, the balance under the agreements totaled $77,265. During May 2018, the Company made the final payment under the settlement and recognized a $17,265 gain on settlement. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | Legal Proceedings We may be involved in legal proceedings in the ordinary course of our business, and our management cannot predict the ultimate outcome of these legal proceedings with certainty. The Company is plaintiff or defendant in the following actions: Dekle, et. al. v. Global Digital Solutions, Inc. et. al. Brian A. Dekle and John Ramsay filed suit against the Company and its wholly owned subsidiary, North American Custom Specialty Vehicles, Inc. (“NACSV”), in the Circuit Court of Baldwin Alabama, on January 14, 2015, case no. 05-CV-2015-9000050.00, relating to our acquisition of NACSV (the ''Dekle Action"). Prior to instituting the Dekle Action, in June 2014, the Company had entered into an equity purchase agreement with Dekle and Ramsay to purchase their membership interest in North American Custom Specialty Vehicles, LLC. The Dekle Action originally sought payment for $300,000 in post-closing consideration Dekle and Ramsay allege they are owed pursuant to the equity purchase agreement. On February 9, 2015, t In response to the Company’s and NACSV's motion to dismiss, Dekle and Ramsay filed an amended complaint on March 2, 2015 seeking specific performance and alleging breach of contract, violations of Security and Exchange Commission (“SEC”) Rule 10b-5, and violations of the Alabama Securities Act. The amended complaint also names the Company’s Chairman, President, and CEO, Richard J. Sullivan (“Sullivan”), as a defendant. On March 17, 2015, the Company, NACSV and Sullivan filed a motion to dismiss the amended complaint seeking dismissal for failure to state valid causes of action, for lack of personal jurisdiction, or alternatively to transfer the case to the United States District Court in and for the Middle District of Florida. Dekle and Ramsay responded on March 31, 2015, and the Company filed its response thereto on April 7, 2015. On June 2, 2015, Dekle passed away. On June 5, 2015, the Court denied the Company’s motion to transfer the case to Florida. On June 10, 2015, the Company filed a motion to reconsider the Court’s denial of its motion to transfer the case to Florida. On September 30, 2105, the Court granted the Company’s Renewed Motion to Transfer Venue. The case was transferred to the Middle District of Florida, where it is currently pending. On June 15, 2015, Ramsay filed a second amended complaint. On June 25, 2015, the Company filed a motion to dismiss the second amended complaint. The Company’s Motion to Dismiss was denied. On July 27, 2017, the Company and Dekle and Ramsay came to a Settlement Agreement. The Company and the plaintiff came to the following agreements: i. Judgment is due to be entered against the Company in the amount of $300,000 if the sum of $20,000 as noted in iv is not paid. ii. The Company grants the plaintiffs vehicles and trailers in connection to this proceeding. iii. The Company will assist the plaintiffs in obtaining possession of the said vehicles. iv. The Company will pay the plaintiffs the sum of $20,000. The $20,000 settlement was paid in August 2017. PowerUp Lending Group, LTD., v. North American Custom Specialty Vehicle, Inc. et.al On September 13, 2017 Power Up received a default judgment against the Company in the amount of $109,302.00. The Company negotiated a settlement agreement on December 21, 2017 with Power Up to pay $90,000 in three installments of $30,000. As of May 15, 2018, the company has paid the entire amount (Note 5). Global Digital Solutions, Inc. et. al. v. Communications Laboratories, Inc., et. al. On January 19, 2015 the Company and NACSV filed suit against Communications Laboratories, Inc., ComLabs Global, LLC, Roland Lussier, Brian Dekle, John Ramsay and Wallace Bailey for conversion and breach of contract in a dispute over the payment of a $300,000 account receivable that ComLabs owed to NACSV but sent payment directly to Brian Dekle. The case was filed in the Eighteenth Judicial Circuit in and for Brevard County Florida, case no. 05-2015-CA-012250. On February 18, 2015 (i) defendants Communications Laboratories, Inc., ComLabs Global, LLC and Roland Lussier and (ii) defendant Wallace Bailey filed their respective motions to dismiss seeking, among other things, dismissal for failure to state valid causes of action, lumping and failure to post a non-resident bond. On February 26, 2015, defendants Dekle and Ramsay filed their motion to dismiss, or stay action, based on already existing litigation between the parties. NACSV filed its required bond on March 2, 2015. Jeff Hull, Individually and on Behalf of All Others Similarly Situated v. Global Digital Solutions, Inc., Richard J. Sullivan, David A. Loppert, William J. Delgado, Arthur F. Noterman and Stephanie C. Sullivan United States District Court, District of New Jersey (Trenton), Case No. 3:16-cv-05153-FLW-TJB On August 24, 2016, Jeff Hull, Individually and on Behalf of All Others Similarly Situated (“Hull”) filed suit in the United States District Court for the District of New Jersey Securities and Exchange Commission v. Global Digital Solutions, Inc., Richard J. Sullivan and David A. Loppert United States District Court for the Southern District of Florida, Case No. 9:16-cv-81413-RLR On August 11, 2016, the Securities and Exchange Commission (“SEC”) filed suit in the United States District Court for the Southern District of Florida On October 12, 2016, Defendant GDSI filed its First Answer to the Complaint. On November 9, 2016, Defendant Sullivan filed a Letter with the Court denying all allegations regarding the case. On December 15, 2016, the SEC filed a Motion for Judgment and Notice of Filing of Consent of Defendant Loppert to entry of Final Judgment by the SEC. On December 19, 2016, the Court entered an order granting the SEC’s Motion for Judgment as to Defendant Loppert. On December 21, 2016, the SEC filed a Notice of Settlement as entered into by it and Defendants GDSI and Sullivan. On December 23, 2016, the Court entered an Order staying the case and directing the Clerk of the Court to close the case for statistical purposes per the December 21, 2016 Notice of Settlement. On March 7, 2017, the SEC moved for a Judgment of Permanent Injunction and Other Relief and Notice of Filing Consent of Defendant GDSI to Entry of Judgment by the SEC. On March 13, 2017, the Judge signed the Judgment as to Defendant GDSI and it was entered on the Court’s docket. On April 6, 2017, the SEC moved for a final Judgment of Permanent Injunction and Other Relief and Notice of Filing Consent of Defendant Sullivan. On April 10, 2017, the Judge signed the final Judgment as to Defendant Sullivan and it was entered on the Court’s docket. On December 21, 2017, the SEC moved for a final Judgment and Notice of Filing Consent of Defendant GDSI to Entry of Final Judgment. On January 2, 2018, the Judge signed the Final Judgment as to Defendant GDSI and it was entered on the Court’s docket. The amount of the judgement is One Hundred Thousand Dollars ($100,000.00) plus interest, which is included in accrued expenses in the accompanying consolidated balance sheet. Adrian Lopez, Derivatively and on behalf of Global Digital Solutions, Inc. v. William J. Delgado, Richard J. Sullivan, David A. Loppert, Jerome J. Gomolski, Stephanie C. Sullivan, Arthur F. Noterman, and Stephen L. Norris United States District Court for the District of New Jersey, Case No. 3:17-cv-03468-PGS-LHG On September 19, 2016, Adrian Lopez, derivatively, and on behalf of Global Digital Solutions, Inc., filed an action in New Jersey Superior Court sitting Mercer County, General Equity Division. That action was administratively dismissed for failure to prosecute. Plaintiff Lopez, through his counsel, filed a motion to reinstate the matter on the general equity calendar on or about February 10, 2017. The Court granted the motion unopposed on or about April 16, 2017. On May 15, 2017, Defendant William Delgado (“Delgado”) filed a Notice of Removal of Case No. C-70-16 from the Mercer County Superior Court of New Jersey United States District Court for the District of New Jersey Mercer County Superior Court of New Jersey Adrian Lopez v. Global Digital Solutions, Inc. and William J. Delgado Superior Court of New Jersey, Chancery Division, Mercer County, Equity Part, Docket No. MER-L-002126-17 On September 28, 2017, Plaintiff Adrian Lopez (“Lopez”) brought an action against Global Digital Solutions, Inc. (“GDSI”) and William J. Delgado (“Delgado”) to compel a meeting of the stockholders of Global Digital Solutions, Inc. pursuant to Section 2.02 of GDSI’s Bylaws and New Jersey Revised Statute § 14A:5-2. On October 27, 2017, Defendants GDSI and Delgado filed a Motion to Stay the Proceeding. On November 24, 2017, Plaintiff filed an Objection to Defendants’ Motion to Stay the Proceeding. In the Matter of GLOBAL DIGITAL SOLUTIONS, INC., ADMINISTRATIVE PROCEEDING File No. 3-18325. Administrative Proceeding Before the Securities and Exchange Commission. On December 26, 2017, the Securities and Exchange Commission instituted public administrative proceedings pursuant to Section 12(j) of the Securities Exchange Act of 1934 (“Exchange Act”) against the Respondent Global Digital Solutions, Inc. On January 8, 2018, Respondent Global Digital Solutions, Inc. (“GDSI”) filed its answer to the allegations contained in the Order Instituting Administrative Proceedings and Notice of Hearing Pursuant to Section 12U) of the Exchange Act. A briefing schedule was entered into and on February 15, 2018, the Securities and Exchange Commission filed a motion for an order of summary disposition against Respondent GDSI on the grounds that there is no genuine issue with regard to any material fact, the Division was entitled as a matter of law to an order revoking each class of GDSI's securities registered pursuant to Section 12 of the Exchange Act. Respondent GDSI opposed the Securities and Exchange Commission’s motion on the grounds that there were material issues of fact. The Securities and Exchange Commission replied and a hearing was held on April 9, 2018. The Administrative Law Judge ordered supplemental evidence and briefing on the issues of material fact. The Company believes the likelihood of an unfavorable outcome of the dispute is reasonably possible but is not able to reasonably estimate a range of potential loss, should the outcome be unfavorable. PMB HELIN DONOVAN, LLP vs. GLOBAL DIGITAL SOLUTIONS, INC. IN THE CIRCUIT COURT FOR THE 15TH JUDICIAL CIRCUIT IN AND FOR PALM BEACH COUNTY, FLORIDA, Docket No.: 50-2017-CA-011937-XXXX-MB On October 31, 2017, PMB Helin Donovan, LLP filed an action for account stated in Palm Beach County. Global Digital Solutions, Inc. (“GDSI”) settled the matter for Forty Thousand Dollars ($40,000.00) of which the first payment of Ten Thousand Dollars ($10,000.00) has been paid on May 16, 2018. The $40,000 is included in accounts payable as of December 31, 2017 and $30,000 at December 31, 2018. JENNIFER CARROLL, vs. GLOBAL DIGITAL SOLUTIONS, INC., NORTH AMERICAN CUSTOM SPECIALTY VEHICLES, INC., IN THE CIRCUIT COURT FOR THE 15TH JUDICIAL CIRCUIT in AND FOR PALM BEACH COUNTY, FLORIDA, CASE NO.: 50-2015-CC-012942-XXXX-MB On October 27, 2017, Plaintiff Jennifer Carroll, the former President of NACSV, moved the court for a default judgment against Defendant Global Digital Solutions, Inc. (“GDSI”) and its subsidiary North American Custom Specialty Vehicles Inc. The amount of the judgement is Fifteen Thousand Dollars ($15,000.00) plus fees of Thirteen Thousand Three Hundred Fifty Three Dollars Forty Four Cents ($13,353.44) and costs of six hundred twenty four dollars thirty cents ($624.30). Consulting agreements The Company entered into two consulting agreements (See Note 5) in May 2016, for services to be provided in connection towards the resolution of the Rontan lawsuit (below). The consulting agreements includes a monthly retainer payment of$10,000 to each consultant. The agreement also includes consideration of 5,000,000 shares of restricted common stock of the Company, plus a 5% cash consideration of the Resolution Progress Funding, (defined as upon the retention of legal counsel and receipt of funding for the litigation), as of the Resolution Progress Funding date and 10,000,000 shares of restricted common stock of the Company and a 5% cash consideration of the Resolution Funding amount (defined as a settlement or judgement in favor of the Company by Rotan),at the Resolution Funding date. The Resolution Progress funding was met on December 22, 2017. Share Purchase and Sale Agreement for Acquisition of Grupo Rontan Electro Metalurgica, S.A. Effective October 13, 2015, the Company (as “Purchaser”) entered into the SPSA dated October 8, 2015 with Joao Alberto Bolzan and Jose Carlos Bolzan, both Brazilian residents (collectively, the “Sellers”) and Grupo Rontan Electro Metalurgica, S.A., a limited liability company duly organized and existing under the laws of Federative Republic of Brazil (“Rontan”) (collectively, the “Parties”), pursuant to which the Sellers agreed to sell 100% of the issued and outstanding shares of Rontan to the Purchaser on the closing date. The purchase price shall consist of a cash amount, a stock amount and an earn-out amount as follows: (i) Brazilian Real (“R”) $100 million (approximately US$26 million) to be paid by the Purchaser in equal monthly installments over a period of forty eight (48) months following the closing date; (ii) an aggregate of R$100 million (approximately US$26 million) in shares of the Purchaser’s common stock, valued at US$1.00 per share; and (iii) an earn-out payable within ten business days following receipt by the Purchaser of Rontan’s audited financial statements for the 12-months ended December 31, 2017, 2018 and 2019. The earn-out shall be equal to the product of (i) Rontan’s earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the last 12 months, and (ii) twenty percent and is contingent upon Rontan’s EBITDA results for any earn-out period being at least 125% of Rontan’s EBITDA for the 12-months ended December 31, 2015. It is the intention of the parties that the stock amount will be used by Rontan to repay institutional debt outstanding as of the closing date. Under the terms of a Finders Fees Agreement dated April 14, 2014, we have agreed to pay RLT Consulting Inc., a related party, a fee of 2% (two percent) of the Transaction Value, as defined in the agreement, of Rontan upon closing. The fee is payable one-half in cash and one-half in shares of our common stock. Specific conditions to closing consist of: a) Purchaser’s receipt of written limited assurance of an unqualified opinion with respect to Rontan’s audited financial statements for the years ended December 31, 2013 and 2014 (the “Opinion”); b) The commitment of sufficient investment by General American Capital Partners LLC (the “Institutional Investor”), in the Purchaser following receipt of the Opinion; c) The accuracy of each Parties’ representations and warranties contained in the SPSA; d) The continued operation of Rontan’s business in the ordinary course; e) The maintenance of all of Rontan’s bank credit lines in the maximum amount of R$200 million (approximately US$52 million) under the same terms and conditions originally agreed with any such financial institutions, and the maintenance of all other types of funding arrangements. As of the date of the SPSA, Rontan’s financial institution debt consists of not more than R$200 million (approximately US$52 million), trade debt of not more than R$50 million (approximately US$13 million) and other fiscal contingencies of not more that R$95 million (approximately US$24.7 million); f) Rontan shall enter into employment or consulting service agreements with key employees and advisors identified by the Purchaser, including Rontan’s Chief Executive Officer; and g) The Sellers continued guarantee of Rontan’s bank debt for a period of 90 days following issuance of the Opinion, among other items. The Institutional Investor has committed to invest sufficient capital to facilitate the transaction, subject to receipt of the Opinion, as well as the ability to acquire 100% of the outstanding stock of Rontan at a price of $200 million BR, and the Company can acquire 100% of all real estate held by Rontan. Subject to satisfaction or waiver of the conditions precedent provided for in the SPSA, the closing date of the transaction shall take place within 10 business days from the date of issuance of the Opinion. Rontan is engaged in the manufacture and distribution of specialty vehicles and acoustic/visual signaling equipment for the industrial and automotive markets. Subsequent to December 31, 2015, on April 1, 2016, we believed that we had satisfied or otherwise waived the conditions to closing (as disclosed under the SPSA, the closing was subject to specific conditions to closing, which were waivable by us,) and advised the Sellers of our intention to close the SPSA and demanded delivery of the Rontan Securities. The Sellers, however, notified us that they intend to terminate the SPSA. We believe that the Sellers had no right to terminate the SPSA and that notice of termination by the Sellers was not permitted under the terms of the SPSA. On January 31, 2018, we announced that we initiated a lawsuit for damages against Grupo Rontan Metalurgica, S. A, (“Rontan”) and that company’s controlling shareholders, Joao Alberto Bolzan and Jose Carlos Bolzan. The action has been filed in the United States District Court for the Southern District of Florida. The complaint alleges that Rontan is wholly-owned by Joao Bolzan and Jose Bolzan. In the complaint, we further allege that Rontan and its shareholders improperly terminated a Share Purchase and Sale Agreement (the “SPA”) by which we were to acquire whole ownership of Rontan. On February 5, 2018, United States District Court Southern District of Florida filed a Pretrial Scheduling Order and Order Referring Case to Mediation dated February 5, 2018 for the Company’s lawsuit against Grupo Rontan Electro Metalurgica, S.A., et al. The Case No. is 18-80106-Civ-Middlebrooks/Brannon. The court has issued a schedule outlining various documents and responses that are to be delivered by the parties as part of the discovery plan. On April 25, 2018, the Note of Filing Proposed Summons was completed by the Company. On April 26, 2018, a summons was issued to Grupo Rontan Electro Metalurgica, S.A. Also, on May 15, 2018, the Company filed a motion for Issuance of Letters Rogatory. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2018 | |
Stockholders' Deficit | |
STOCKHOLDERS' EQUITY | Preferred Stock We are authorized to issue 35,000,000 shares of noncumulative, non-voting, nonconvertible preferred stock, $0.001 par value per share. At December 31, 2018 and 2017, 1,000,000 shares of preferred stock were outstanding. On August 15, 2016, William J. Delgado, our current Chief Executive Officer, agreed to convert $231,565 of indebtedness owed to him by the Company into 1,000,000 shares of convertible preferred stock (the “Preferred Stock”). The Preferred Stock has voting rights as to one (1) preferred share to four hundred (400) shares of the common stock of the Company. The Preferred Stock is convertible into common stock at any time after issuance into 37% of the outstanding common stock of the Company at the time of the conversion. The conversion to common can only take place when there are an adequate number of shares that are available and is subject to normal stock adjustments (i.e. stock splits etc.) that are executed by the Company in its normal course of business. Common Stock We are authorized to issue 650,000,000 shares of common stock, $0.001 par value per share. At December 31, 2018 and 2017, 579,900,814 and 530,806,571 shares were issued, outstanding, or vested but unissued under stock compensation plans, respectively. Common Stock Warrant We have issued warrants, which are fully vested and available for exercise, as follows: Class of Warrant Issued in connection with or for Number outstanding Exercise Price Date of Issue Date Vest Date of Expiration A-5 Financing 1,000,000 $ 0.01 April 3, 2018 April 3, 2018 April 3, 2023 A-6 Financing 2,000,000 $ 0.01 May 15, 2018 May 15, 2018 May 15, 2021 A-7 Financing 5,000,000 $ 0.01 June 1, 2018 June 1, 2018 June 1, 2021 A-8 Financing 2,500,000 $ 0.0069 Nov. 2, 2018 Nov. 2, 2019 Nov. 2, 2023 10,500,000 All warrants are exercisable at any time through the date of expiration. All agreements provide for the number of shares to be adjusted in the event of a stock split, a reverse stock split, a share exchange or other conversion or exchange event in which case the number of warrants and the exercise price of the warrants shall be adjusted on a proportional basis. The warrants expired unexercised on the dates of expiration, as shown above. The following is a summary of outstanding and exercisable warrants at December 31, 2018: Outstanding Exercisable Weighted Average Outstanding Weighted Weighted Range of Number Remaining Average Number Average Exercise Outstanding Contractual Exercise Exercisable Exercise Prices at 12/31/18 Life (in yrs.) Price at 12/31/18 Price $ 0.01 1,000,000 4.26 $ 0.01 1,000,000 $ 0.01 $ 0.01 2,000,000 2.37 $ 0.01 2,000,000 $ 0.01 $ 0.01 5,000,000 2.40 $ 0.01 5,000,000 $ 0.01 $ 0.0069 2,500,000 4.85 $ 0.0069 2,500,000 $ 0.0069 0.0069 to 0.01 10,500,000 3.17 $ 0.0093 10,500,000 $ 0.0093 The following is a summary of outstanding and exercisable warrants at December 31, 2017 Outstanding Exercisable Weighted Average Outstanding Weighted Weighted Range of Number Remaining Average Number Average Exercise Outstanding Contractual Exercise Exercisable Exercise Prices at 12/31/17 Life (in yrs.) Price at 12/31/17 Price 0.15 1,000,000 0.33 0.15 1,000,000 0.15 0.50 500,000 0.42 0.50 500,000 0.50 0.15 to 0.50 1,500,000 0.75 0.37 1,500,000 0.56 The intrinsic value of warrants outstanding at December 31, 2018 and 2017 was $0. Aggregate intrinsic value represents the value of the Company’s closing stock price on the last trading day of the fiscal period in excess of the exercise price of the warrant multiplied by the number of warrants outstanding or exercisable. Stock Incentive Plans 2014 Global Digital Solutions Equity Incentive Plan On May 9, 2014 our shareholders approved the 2014 Global Digital Solutions Equity Incentive Plan (“Plan”) and reserved 20,000,000 shares of our common stock for issuance pursuant to awards thereunder, including options, stock appreciation right, restricted stock, restricted stock units, performance awards, dividend equivalents, or other stock-based awards. The Plan is intended as an incentive, to retain in the employ of the Company, our directors, officers, employees, consultants and advisors, and to attract new officers, employees, directors, consultants and advisors whose services are considered valuable, to encourage the sense of proprietorship and to stimulate the active interest of such persons in the development and financial success of the Company and its subsidiaries. In accordance with the ACS 718, Compensation – Stock Compensation There was not any stock based compensation in the year ended December 31, 2017. Stock-based compensation expense for the years ended December 31, 2018 is comprised as follows: 2018 Stock based compensation expense $ 300,125 Shares issued for financing costs 57,000 Total $ 357,125 Awards Issued Under Stock Incentive Plans Stock Option Activity At December 31, 2018 and 2017 we have outstanding 13,650,002 stock options - all of which are fully-vested stock options that were granted to directors, officers and consultants. The outstanding stock options are exercisable at prices ranging from $0.006 to $0.64 and expire between February 2024 and December 2025, for an average exercise price per share of $0.60 and an average remaining term of 7.5 years as of December 31, 2018. During the years ended December 31, 2018 we did not recognize any stock-based compensation cost related to the outstanding stock options. The intrinsic value of options outstanding at December 31, 2018 and 2017 was $0. Aggregate intrinsic value represents the value of the Company’s closing stock price on the last trading day of the fiscal period in excess of the exercise price of the option multiplied by the number of options outstanding. Restricted Stock Units On October 10, 2014 we granted an employee 1 million RSU’s convertible into 1 million shares of the Company’s common stock, with a grant date fair market value of $100,000. The grant was made under our 2014 Equity Incentive Plan. 333,333 RSU’s will vest in respect of each calendar year (commencing January 1 and ending December 31) of the Company from 2015 through 2017 if the Company has achieved at least 90% of the total revenue and EBITDA midpoint targets set forth in the agreement. If less than 90% of the target is achieved in respect of any such fiscal year, then the number of RSU’s vesting for that fiscal year shall be 333,333 times the applicable percentage set forth in the agreement; provided that, Awards Not Issued Under Stock Incentive Plans Restricted Stock Grants Awarded to Advisors In order to align our senior advisors with the interest of the stakeholders of the Company, the Board of Directors of the Company has granted the advisors restricted stock awards valued at $0.17 to $0.364 per share which vest over a period of 12 – 24 months, subject to remaining an advisor for a minimum of twelve months, and which are forfeited if the advisor is terminated or is no longer an advisor on the anniversary of the advisory award, as follows: December 31, 2018 Name Date of Grant Number of Shares Vest from Vest To Vested Unvested Forfeited Mathew Kelley 4/17/13 1,250,000 4/30/13 3/31/14 1,250,000 - - 4/17/13 1,250,000 2/28/14 1/31/15 1,250,000 - - Richard J. Feldman 4/30/14 500,000 4/30/14 3/30/15 500,000 - - 500,000 4/30/15 3/30/16 375,000 - 125,000 Gary Gray 3/7/15 1,000,000 3/7/15 5/30/15 1,000,000 Ross Trevino 3/7/15 500,000 3/7/15 5/30/15 500,000 5,000,000 4,875,000 - 125,000 The aggregate intrinsic value of the restricted stock grant was $0 at December 31, 2018 and 2017. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | Reconciliations between the statutory rate and the effective tax rate for the year ended December 31, 2018 consist as follows: 2018 (rounded to nearest thousand) Amounts Rate Income tax (expense) benefit at statutory federal rate of 21% $ 385,000 -21 % Permanent differences (10,000 ) 1 % Increase (decrease) in valuation allowance (375,000 ) 20 % Income tax expense (benefit) at Company’s effective tax rate $ - 0 % TOTAL 12/31/2018 2018 Activity TOTAL 12/31/2017 Net Operating Loss Carryforward $ 12,151,033 $ 1,787,947 $ 10,363,086 NOL tax benefit $ 3,007,000 $ 375,000 $ 2,632,000 Stock based compensation 2,908,000 - 2,908,000 Accrued expenses 26,000 26,000 Amortization and depreciation 19,000 - 19,000 Impairment of intangible assets 243,000 243,000 Total Deferred Tax Assets 6,203,000 375,000 5,828,000 Valuation allowance (6,203,000 ) (375,000 ) (5,828,000 ) $ - $ - $ - As of December 31, 2018, the Company had $12,151,033 of federal net operating loss carry forwards. These carry forwards, if not used, will begin to expire in 2028. Current or future ownership changes, including issuances of common stock under the terms of the Company’s convertible notes payable that were entered into during 2015 and the closing of the Rontan Transaction may severely limit the future realization of these net operating losses. The Company provides for a valuation allowance when it is more likely than not that they will not realize a portion of the deferred tax assets. The Company has established a valuation allowance against their net deferred tax asset due to the uncertainty that enough taxable income will be generated in those taxing jurisdictions to utilize the assets. Therefore, they have not reflected any benefit of such deferred tax assets in the accompanying financial statements. The Company’s net deferred tax asset and valuation allowance increased by $375,000 the year ended December 31, 2018, related to the current year activity. The Company has reviewed all income tax positions taken or that are expected to be taken for all open years and determined that their income tax positions are appropriately stated and supported for all open years. The Company is subject to U.S. federal income tax examinations by tax authorities for years after 2011 due to unexpired net operating loss carryforwards originating in and subsequent to that year. The Company may be subject to income tax examinations for the various taxing authorities which vary by jurisdiction. The Company’s policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes in the consolidated statements of operations. As of December 31, 2018, there were no unrecognized tax benefits, or any tax related interest or penalties. The Company files income tax returns in the U.S. federal jurisdiction and the various states in which they operate. The former members of NACSV are required to file separate federal and state tax returns for NACSV for the periods prior to our acquisition of NACSV. The Company files consolidated tax returns for subsequent periods. The Company has not filed their U.S. federal and certain state tax returns since 2014 and currently do not have any examinations ongoing. Tax returns for the years 2012 onwards are subject to federal, state or local examinations. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2018 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | Due to officer During the year ended December 31, 2018, approximately $170,000 of expenses incurred by the Company were paid by Dragon Acquisitions and Bronco Communications, entities controlled by William J. Delgado. The Company reimbursed approximately $242,000 to these entities for 2018 expenses and $72,000 in unreimbursed expenses as of December 31, 2017. RLT Consulting At December 31, 2018 the company had a note payable to RLT consulting and a consulting agreement see (Note 5). Additionally, in 2018, the company issued nine million Common Stock shares for $108,000 for consulting services of RLT Consulting. Dragon Acquisitions During 2017 the Company assumed a note payable from Dragon Acquisitions (see Note 5). Accounts Payable 2018 2017 RLT Consulting $ 33,841 $ 33,841 Jerome Gomolski 25,000 25,000 Charter 804CS 20,099 20,099 Gary Gray 12,000 12,000 Total $ 90,940 $ 90,940 Accrued Compensation At December 31, 2018 and December 31, 2017, we had $482,431 and $310,000 payable to William J. Delgado and $65,839 and $20,835 to Jerome Gomolski, respectively. Bill Jerome Total Delgado Gomolski Balance 12/31/2017 $ 330,835 $ 310,000 $ 20,835 2018 Salary $ 290,000 $ 240,000 $ 50,000 Payments $ (50,000 ) $ (47,569 ) $ (5,000 ) Balance 12/31/2018 $ 570,835 $ 482,431 $ 65,835 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | On January 21, 2019 the Company entered into a Convertible Promissory Note with Crown Bridge Partners, LLC., in the principal amount of $75,000. The note carries original issue discount of $7,500 The Principal amount with interest at 12% will be due in twelve months from the advance. The Principal amount will be advanced in Tranches of $25,000 each. The note is convertible into shares of The Company’s common stock. The conversion price shall equal the lessor of (i) Current Market price or (ii) Variable Market price as defined as Market Price less a 45% discount price. In addition, the Company agreed to issue to Crown Bridge Partners 3,750,000 warrants to purchase common stock of the Company at an exercise price of $0.01 per share, exercisable for a period of five (5) years. As of the issuance date of these financial statements, $25,000 has been received and remains outstanding. On January 31, 2019, the Company increased its authorized common shares to 2,000,000,000. On February 11, 2019, the Company entered into an agreement for the purchase of common stock with Mared Management LLC. Under the terms of the agreement the purchaser purchased 25,000,000 shares of common stock for $250,000. The purchaser also received warrants to purchase 6,250,000 shares of GDSI common stock at $.01/share. Warrants will have a three-year term to exercise. On February 26, 2019, the Company entered into a 10% Convertible Promissory Note with Tangiers Global LLC. in the principal amount of $55,000 due on February 26, 220. The note is convertible into shares of the Company’s common stock. The conversion price shall equal 55% of the lowest trading price of the Company’s common stock during the 20 consecutive trading days prior to the date on which the holder elects to convert part of all of the note. As of the issuance date of these financial statements, the note remains outstanding. On March 7, 2019, the Company and Power Up Lending Group entered into a security purchase agreement for a 10% Convertible Note in the aggregate principal of $58,000 due on March 7, 2020. The note is convertible into shares of common stock of the Company. The conversion price is equal to the Variable Conversion price which is defined as 61% of the Market Price for the lowest two trading dates during a fifteen-day trading period ending on the latest complete trading date prior to the Conversion date. As of the issuance date of these financial statements, the note remains outstanding. On May 10, 2019, the Company and GHS Investments LLC entered into a security agreement for a 10% Convertible Note in the aggregate principal of $335,000 due on February 10, 2020. The note carries original issue discount or $35,000. The note is convertible into shares of common stock of the Company. The “Conversion Price” shall mean 60% multiplied by the Market Price (as defined herein), representing a discount rate of 40%. “Market Price” means the lowest Traded Price for the Common Stock during the twenty (20) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. The Company is required to maintain a common share reserve of not less that three times the number of shares that is actually issuable upon full conversion of the note. The purchaser will also receive warrants to purchase 5,000,000 shares of GDSI common stock at $.01/share. Warrants will have a three-year term to exercise. The Convertible Note is personally guaranteed by William Delgado, CEO. As of the issuance date of these financial statements, the note remains outstanding. On March 1, 2019, the Company entered into a purchase agreement with HarmAlarm, a company specializing in patented Aviation Technology. The Company will leave 5,200,000 shares of its common stock in exchange for the assets of HarmAlarm. Additionally, the Company will pay 49.1% of any profits generated subsequently by the assets to the former owner of HarmAlarm. As of the issuance date of these financial statements, the shares have not been issued and no assets have been received by the Company. On March 1, 2019, the Company entered into a consulting agreement with the former owner of HarmAlarm. The agreement commenced on March 1, 2019 and shall continue for a period of thirty-six (36) months. The agreement may only be terminated by either incapacitation or death of consultant or for cause with ten (10) days written notice. During the term of the agreement consultant will be paid at a rate of $5,000 per month. In May 2019 the Company sold 3,513,888 of common stock shares for $35,138 to three individual investors. On May 28, 2019, the Company amended the March 28, 2018 $50,000 note payable. The Company agreed to increase the holder's return by $25,000 to $50,000 and repaid the original $50,000 principal in May 2019. Additionally, the holder is to receive 1,000,000 additional common stock warrants under the same terms as the original March 2018 warrants and the holder will receive $15,000 in common stock at a 20% discount to the closing price on the date the $50,000 holder's return is paid. As of the issuance date of these financial statements, the warrants and common stock have not been issued and the $50,000 holder's return remains outstanding. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Going Concern | The accompanying financial statements have been prepared assuming we will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. We have sustained losses and experienced negative cash flows from operations since inception, and for the year ended ,December 31, 2018, incurred a net loss of $1,834,358 and used net cash of $440,396 to fund operating activities. At December 31, 2018, we had cash of $8,100, an accumulated deficit of $35,661,822, a working capital deficit of $4,295,479, and stockholders’ deficit of $4,295,479. We have funded our activities to date almost exclusively from equity and debt financings. Our cash position is critically deficient, and payments essential to our ability to operate are not being made in the ordinary course. Failure to raise capital in the coming days to fund our operations and failure to generate positive cash flow to fund such operations in the future will have a material adverse effect on our financial condition. These factors raise substantial doubt about our ability to continue as a going concern. We need to raise additional funds immediately and continue to raise funds until we begin to generate sufficient cash from operations, and we may not be able to obtain the necessary financing on acceptable terms, or at all. We will continue to require substantial funds to continue development of our core business. Management’s plans in order to meet our operating cash flow requirements include financing activities such as private placements of common stock, and issuances of debt and convertible debt instruments, and the establishment of strategic relationships which we expect will lead to the generation of additional revenue or acquisition opportunities. While we believe that we will be successful in obtaining the necessary financing to fund our operations, there are no assurances that such additional funding will be achieved or that we will succeed in our future operations. Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern as a result of our history of net losses. Our ability to achieve and maintain profitability and positive cash flow is dependent upon our ability to successfully execute the plans to pursue acquisitions and raise the funds necessary to complete such acquisitions. The outcome of these matters cannot be predicted at this time. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern. |
Principles of Consolidation | The accompanying consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries, NACSV, GDSI Florida, LLC and Global Digital Solutions, LLC, dba GDSI International. All intercompany accounts and transactions have been eliminated in consolidation. |
Use of Estimates | The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity-based transactions and disclosure of contingent liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of the financial statements. Significant estimates include the derivative liability valuation, deferred tax asset and valuation allowance, and assumptions used in Black-Scholes-Merton, or BSM, or other valuation methods, such as expected volatility, risk-free interest rate, and expected dividend rate. |
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 actually 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 December 31, 2018 and 2017. The Company recognizes interest and penalties on unrecognized tax benefits as well as interest received from favorable tax settlements within income tax expense. On December 22, 2017, the President of the United States signed and enacted into law H.R. 1 (the “Tax Reform Law”). The Tax Reform Law, effective for tax years beginning on or after January 1, 2018, except for certain provisions, resulted in significant changes to existing United States tax law, including various provisions that are expected to impact the Company. The Tax Reform Law reduces the federal corporate tax rate from 34% to 21% effective January 1, 2018. The Company analyzed the provisions of the Tax Reform Law to assess the impact on the Company’s consolidated financial statements and determined it had no material impact. |
Cash and Cash Equivalents | We consider all highly liquid investments with original maturities of three months or less to be cash equivalents. |
Prepaid Expenses | Prepaid expenses consist primarily of legal retainers, which are expensed when the services are incurred. |
Fair Value of Financial Instruments | The carrying value of cash, accounts payable and accrued expenses approximate their fair values based on the short-term maturity of these instruments. The carrying amounts of debt were also estimated to approximate fair value. The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. ASC 820 establishes a fair value hierarchy that prioritizes the inputs 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 measurement) and the lowest priority to unobservable inputs (level 3 measurement). This fair value measurement framework applies at both initial and subsequent measurement. The three levels of the fair value hierarchy defined by ASC 820 are as follows: ● Level 1 – Quoted prices in active markets for identical assets or liabilities ● Level 2 –Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable, either directly or indirectly ● Level 3 – Significant unobservable inputs that cannot be corroborated by market data. |
Derivative Financial Instruments | We account for conversion options embedded in convertible notes payable in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC’) 815, “Derivatives and Hedging” Embedded Derivatives Derivative Liabilities Derivatives and Hedging – Contracts in Entity’s own Equity Change in fair value of derivative liability |
Earnings (Loss) Per Share ("EPS") | Basic EPS is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding. Diluted EPS includes the effect from potential issuance of common stock, such as stock issuable pursuant to the exercise of stock options and warrants and the assumed conversion of convertible notes. The following table summarizes the securities that were excluded from the diluted per share calculation because the effect of including these potential shares was antidilutive: Year ended December 31, 2018 2017 Convertible notes 163,700,000 46,249,733 Preferred stock 214,560,000 196,398,431 Stock options 13,650,002 13,650,002 Warrants 10,500,000 1,500,000 Potentially dilutive securities 402,410,002 257,798,166 |
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 . |
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. Professional 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 Convertible Securities with Beneficial Conversion Features,” as those professional standards pertain to “Certain Convertible Instruments.” Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Original issue discounts (“OID”) under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. 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. |
Convertible Securities | Based upon ASC 815-15, we have adopted a sequencing approach regarding the application of ASC 815-40 to convertible securities. We will evaluate our contracts based upon the earliest issuance date. In the event partial reclassification of contracts subject to ASC 815-40-25 is necessary, due to our inability to demonstrate we have sufficient shares authorized and unissued, shares will be allocated on the basis of issuance date, with the earliest issuance date receiving first allocation of shares. If a reclassification of an instrument were required, it would result in the instrument issued latest being reclassified first. |
Recent Accounting Pronouncements | In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers: Topic 606, In February 2016, the FASB issued ASU No. 2016-02, Leases: Topic |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Securities excluded from the diluted per share calculation | Year ended December 31, 2018 2017 Convertible notes 163,700,000 46,249,733 Preferred stock 214,560,000 196,398,431 Stock options 13,650,002 13,650,002 Warrants 10,500,000 1,500,000 Potentially dilutive securities 402,410,002 257,798,166 |
ACCRUED EXPENSES (Tables)
ACCRUED EXPENSES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Payables and Accruals [Abstract] | |
Accrued expenses | Year ended December 31, 2018 2017 Accrued compensation to executive officers $ 572,437 $ 342,919 Accrued professional fees and settlements 196,663 125,771 Accrued Interest 148,533 59,961 Total accrued expenses $ 917,633 $ 528,651 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
Activity of Level 3 liabilities | 2018 2017 Balance at beginning of year $ 382,948 $ 672,724 Additions 231,603 - Settlements (98,787 ) - Change in fair value 46,411 (289,776 ) Balance at end of year $ 562,175 $ 382,948 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Stockholders' Deficit | |
Issuance of warrants | Class of Warrant Issued in connection with or for Number outstanding Exercise Price Date of Issue Date Vest Date of Expiration A-5 Financing 1,000,000 $ 0.01 April 3, 2018 April 3, 2018 April 3, 2023 A-6 Financing 2,000,000 $ 0.01 May 15, 2018 May 15, 2018 May 15, 2021 A-7 Financing 5,000,000 $ 0.01 June 1, 2018 June 1, 2018 June 1, 2021 A-8 Financing 2,500,000 $ 0.0069 Nov. 2, 2018 Nov. 2, 2019 Nov. 2, 2023 10,500,000 |
Outstanding and exercisable warrants | The following is a summary of outstanding and exercisable warrants at December 31, 2018: Outstanding Exercisable Weighted Average Outstanding Weighted Weighted Range of Number Remaining Average Number Average Exercise Outstanding Contractual Exercise Exercisable Exercise Prices at 12/31/18 Life (in yrs.) Price at 12/31/18 Price $ 0.01 1,000,000 4.26 $ 0.01 1,000,000 $ 0.01 $ 0.01 2,000,000 2.37 $ 0.01 2,000,000 $ 0.01 $ 0.01 5,000,000 2.40 $ 0.01 5,000,000 $ 0.01 $ 0.0069 2,500,000 4.85 $ 0.0069 2,500,000 $ 0.0069 0.0069 to 0.01 10,500,000 3.17 $ 0.0093 10,500,000 $ 0.0093 The following is a summary of outstanding and exercisable warrants at December 31, 2017 Outstanding Exercisable Weighted Average Outstanding Weighted Weighted Range of Number Remaining Average Number Average Exercise Outstanding Contractual Exercise Exercisable Exercise Prices at 12/31/17 Life (in yrs.) Price at 12/31/17 Price 0.15 1,000,000 0.33 0.15 1,000,000 0.15 0.50 500,000 0.42 0.50 500,000 0.50 0.15 to 0.50 1,500,000 0.75 0.37 1,500,000 0.56 |
Stock-based compensation expense | 2018 Stock based compensation expense $ 300,125 Shares issued for financing costs 57,000 Total $ 357,125 |
Restricted stock grants awarded to advisors | December 31, 2018 Name Date of Grant Number of Shares Vest from Vest To Vested Unvested Forfeited Mathew Kelley 4/17/13 1,250,000 4/30/13 3/31/14 1,250,000 - - 4/17/13 1,250,000 2/28/14 1/31/15 1,250,000 - - Richard J. Feldman 4/30/14 500,000 4/30/14 3/30/15 500,000 - - 500,000 4/30/15 3/30/16 375,000 - 125,000 Gary Gray 3/7/15 1,000,000 3/7/15 5/30/15 1,000,000 Ross Trevino 3/7/15 500,000 3/7/15 5/30/15 500,000 5,000,000 4,875,000 - 125,000 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Effective tax rate reconciliation | 2018 (rounded to nearest thousand) Amounts Rate Income tax (expense) benefit at statutory federal rate of 21% $ 385,000 -21 % Permanent differences (10,000 ) 1 % Increase (decrease) in valuation allowance (375,000 ) 20 % Income tax expense (benefit) at Company’s effective tax rate $ - 0 % |
Deferred tax assets | TOTAL 12/31/2018 2018 Activity TOTAL 12/31/2017 Net Operating Loss Carryforward $ 12,151,033 $ 1,787,947 $ 10,363,086 NOL tax benefit $ 3,007,000 $ 375,000 $ 2,632,000 Stock based compensation 2,908,000 - 2,908,000 Accrued expenses 26,000 26,000 Amortization and depreciation 19,000 - 19,000 Impairment of intangible assets 243,000 243,000 Total Deferred Tax Assets 6,203,000 375,000 5,828,000 Valuation allowance (6,203,000 ) (375,000 ) (5,828,000 ) $ - $ - $ - |
RELATED PARTY TRANSACTIONS (Tab
RELATED PARTY TRANSACTIONS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Related Party Transactions [Abstract] | |
Accounts payable and accrued compensation | Accounts Payable 2018 2017 RLT Consulting $ 33,841 $ 33,841 Jerome Gomolski 25,000 25,000 Charter 804CS 20,099 20,099 Gary Gray 12,000 12,000 Total $ 90,940 $ 90,940 Accrued Compensation Bill Jerome Total Delgado Gomolski Balance 12/31/2017 $ 330,835 $ 310,000 $ 20,835 2018 Salary $ 290,000 $ 240,000 $ 50,000 Payments $ (50,000 ) $ (67,569 ) $ (5,000 ) Balance 12/31/2018 $ 570,835 $ 482,431 $ 65,835 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - shares | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Potentially dilutive securities | 402,410,002 | 257,798,166 |
Convertible Notes | ||
Potentially dilutive securities | 163,700,000 | 46,249,733 |
Preferred Stock | ||
Potentially dilutive securities | 214,560,000 | 196,398,431 |
Stock Options | ||
Potentially dilutive securities | 13,650,002 | 13,650,002 |
Warrants | ||
Potentially dilutive securities | 10,500,000 | 1,500,000 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Accounting Policies [Abstract] | |||
Net loss | $ (1,834,358) | $ (1,116,296) | |
Net cash used in operating activities | (440,396) | (175,000) | |
Cash and cash equivalents | 8,100 | 93,000 | $ 0 |
Accumulated deficit | (35,661,822) | $ (33,827,464) | |
Working capital deficit | $ (4,295,479) |
ACCRUED EXPENSES (Details)
ACCRUED EXPENSES (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Payables and Accruals [Abstract] | ||
Accrued compensation to executive officers | $ 572,437 | $ 342,919 |
Accrued professional fees and settlements | 196,663 | 125,771 |
Accrued interest | 148,533 | 59,961 |
Total accrued expenses | $ 917,533 | $ 528,651 |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) - Level 3 - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Beginning balance | $ 382,948 | $ 672,724 |
Additions | 231,603 | 0 |
Settlements | (98,787) | 0 |
Change in fair value | 46,411 | (289,776) |
Ending balance | $ 562,175 | $ 382,948 |
STOCKHOLDERS' EQUITY (Details)
STOCKHOLDERS' EQUITY (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Number outstanding | 10,500,000 | 1,500,000 |
Exercise price | $ .0093 | $ .37 |
A-5 | ||
Issued in connection with or for | Financing | |
Number outstanding | 1,000,000 | |
Exercise price | $ 0.01 | |
Date of issue | April 3, 2018 | |
Date vest | April 3, 2018 | |
Date of expiration | April 3, 2023 | |
A-6 | ||
Issued in connection with or for | Financing | |
Number outstanding | 2,000,000 | |
Exercise price | $ 0.01 | |
Date of issue | May 15, 2018 | |
Date vest | May 15, 2018 | |
Date of expiration | May 15, 2021 | |
A-7 | ||
Issued in connection with or for | Financing | |
Number outstanding | 5,000,000 | |
Exercise price | $ 0.01 | |
Date of issue | June 1, 2018 | |
Date vest | June 1, 2018 | |
Date of expiration | June 1, 2021 | |
A-8 | ||
Issued in connection with or for | Financing | |
Number outstanding | 2,500,000 | |
Exercise price | $ 0.0069 | |
Date of issue | November 2, 2018 | |
Date vest | November 2, 2018 | |
Date of expiration | November 2, 2023 |
STOCKHOLDERS' EQUITY (Details 1
STOCKHOLDERS' EQUITY (Details 1) - $ / shares | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Weighted average number outstanding | 10,500,000 | 1,500,000 |
Weighted average outstanding remaining contractual life | 3 years 2 months 1 day | 9 months |
Weighted average exercise price | $ .0093 | $ .37 |
Number exercisable | 10,500,000 | 1,500,000 |
Weighted average exercise price | $ .0093 | $ .56 |
$0.01 | ||
Weighted average number outstanding | 1,000,000 | |
Weighted average outstanding remaining contractual life | 4 years 3 months 4 days | |
Weighted average exercise price | $ .01 | |
Number exercisable | 1,000,000 | |
Weighted average exercise price | $ .01 | |
$0.01 | ||
Weighted average number outstanding | 2,000,000 | |
Weighted average outstanding remaining contractual life | 2 years 4 months 13 days | |
Weighted average exercise price | $ .01 | |
Number exercisable | 2,000,000 | |
Weighted average exercise price | $ .01 | |
$0.01 | ||
Weighted average number outstanding | 5,000,000 | |
Weighted average outstanding remaining contractual life | 2 years 4 months 24 days | |
Weighted average exercise price | $ .01 | |
Number exercisable | 5,000,000 | |
Weighted average exercise price | $ .01 | |
$0.0069 | ||
Weighted average number outstanding | 2,500,000 | |
Weighted average outstanding remaining contractual life | 4 years 10 months 6 days | |
Weighted average exercise price | $ .0069 | |
Number exercisable | 2,500,000 | |
Weighted average exercise price | $ .0069 | |
$0.15 | ||
Weighted average number outstanding | 1,000,000 | |
Weighted average outstanding remaining contractual life | 3 months 29 days | |
Weighted average exercise price | $ .15 | |
Number exercisable | 1,000,000 | |
Weighted average exercise price | $ .15 | |
$0.50 | ||
Weighted average number outstanding | 500,000 | |
Weighted average outstanding remaining contractual life | 5 months 1 day | |
Weighted average exercise price | $ .50 | |
Number exercisable | 500,000 | |
Weighted average exercise price | $ .50 |
STOCKHOLDERS' EQUITY (Details 2
STOCKHOLDERS' EQUITY (Details 2) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Stockholders' Deficit | ||
Stock based compensation expense | $ 300,125 | |
Shares issued for financing costs | 57,000 | $ 0 |
Total | $ 357,125 |
STOCKHOLDERS' EQUITY (Details 3
STOCKHOLDERS' EQUITY (Details 3) | 12 Months Ended |
Dec. 31, 2018shares | |
Number of shares | 5,000,000 |
Vested | 4,875,000 |
Unvested | 0 |
Forfeited | 125,000 |
Mathew Kelley | Grant 1 | |
Date of grant | Apr. 17, 2013 |
Number of shares | 1,250,000 |
Vest from | Apr. 30, 2013 |
Vest to | Mar. 31, 2014 |
Vested | 1,250,000 |
Unvested | 0 |
Forfeited | 0 |
Mathew Kelley | Grant 2 | |
Date of grant | Apr. 17, 2013 |
Number of shares | 1,250,000 |
Vest from | Feb. 28, 2014 |
Vest to | Jan. 31, 2015 |
Vested | 1,250,000 |
Unvested | 0 |
Forfeited | 0 |
Richard J. Feldman | Grant 1 | |
Date of grant | Apr. 30, 2014 |
Number of shares | 500,000 |
Vest from | Apr. 30, 2014 |
Vest to | Mar. 30, 2015 |
Vested | 500,000 |
Unvested | 0 |
Forfeited | 0 |
Richard J. Feldman | Grant 2 | |
Number of shares | 500,000 |
Vest from | Apr. 30, 2015 |
Vest to | Mar. 30, 2016 |
Vested | 375,000 |
Unvested | 0 |
Forfeited | 125,000 |
Gary Gray | Grant 1 | |
Date of grant | Mar. 7, 2015 |
Number of shares | 1,000,000 |
Vest from | Mar. 7, 2015 |
Vest to | May 30, 2015 |
Vested | 1,000,000 |
Unvested | 0 |
Forfeited | 0 |
Ross Trevino | Grant 1 | |
Date of grant | Mar. 7, 2015 |
Number of shares | 500,000 |
Vest from | Mar. 7, 2015 |
Vest to | May 30, 2015 |
Vested | 500,000 |
Unvested | 0 |
Forfeited | 0 |
STOCKHOLDERS' EQUITY (Details N
STOCKHOLDERS' EQUITY (Details Narrative) - $ / shares | Dec. 31, 2018 | Dec. 31, 2017 |
Stockholders' Deficit | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 35,000,000 | 35,000,000 |
Preferred stock, shares issued | 1,000,000 | 1,000,000 |
Preferred stock, shares outstanding | 1,000,000 | 1,000,000 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 650,000,000 | 650,000,000 |
Common stock, shares issued | 579,900,814 | 530,806,571 |
Common stock, shares outstanding | 579,900,814 | 530,806,571 |
INCOME TAXES (Details)
INCOME TAXES (Details) | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Income Tax Disclosure [Abstract] | |
Income tax (expense) benefit at statutory federal rate of 21% | $ 385,000 |
Permanent differences | (10,000) |
Increase (decrease) in valuation allowance | (375,000) |
Income tax expense (benefit) at Company's effective tax rate | $ 0 |
Income tax (expense) benefit at statutory federal rate of 21%, percent | (21.00%) |
Permanent differences, percent | 1.00% |
Increase (decrease) in valuation allowance, percent | 20.00% |
Income tax expense (benefit) at Company's effective tax rate, percent | 0.00% |
INCOME TAXES (Details 1)
INCOME TAXES (Details 1) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Income Tax Disclosure [Abstract] | ||
Net operating loss carryforwards | $ 12,151,033 | $ 10,363,086 |
NOL tax benefit | 3,007,000 | 2,632,000 |
Stock based compensation | 2,908,000 | 2,908,000 |
Accrued expenses | 26,000 | 26,000 |
Amortization and depreciation | 19,000 | 19,000 |
Impairment of intangible assets | 243,000 | 243,000 |
Total deferred tax asset | 6,203,000 | 5,828,000 |
Valuation allowance | (6,203,000) | (5,828,000) |
Deferred tax assets | $ 0 | $ 0 |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) | Dec. 31, 2018USD ($) |
Income Tax Disclosure [Abstract] | |
Federal net operating loss carry forwards | $ 12,151,033 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Compensation owed to our senior management | $ 90,940 | $ 90,940 |
RLT Consulting | ||
Compensation owed to our senior management | 33,841 | 33,841 |
Jerry Gomolski | ||
Compensation owed to our senior management | 25,000 | 25,000 |
Charter 804CS | ||
Compensation owed to our senior management | 20,099 | 20,099 |
Gary Gray | ||
Compensation owed to our senior management | $ 12,000 | $ 12,000 |
RELATED PARTY TRANSACTIONS (D_2
RELATED PARTY TRANSACTIONS (Details 1) | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Beginning balance | $ 330,835 |
2018 Salary | 290,000 |
Payments | (50,000) |
Ending balance | 570,835 |
Bill Delgado | |
Beginning balance | 310,000 |
2018 Salary | 240,000 |
Payments | (67,569) |
Ending balance | 482,431 |
Jerome Gomolski | |
Beginning balance | 20,835 |
2018 Salary | 50,000 |
Payments | (5,000) |
Ending balance | $ 65,835 |