The following unaudited interim financial
statements of Global Diversified Marketing Group Inc. (referred to herein as the “Company,” “we,”
“us” or “our”) are included in this Quarterly Report on Form 10-Q (the “Quarterly Report”).
The accompanying unaudited financial statements have
been prepared in accordance with accounting principles generally accepted in the United States and the rules of the SEC, and should be
read in conjunction with the audited financial statements and notes thereto contained in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2020 which we filed with the Securities and Exchange Commission (“SEC”) on February 18, 2021 (the
“Annual Report”), as updated in subsequent filings we have made with the SEC. In the opinion of management, all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for
the periods presented have been reflected herein. The results of operations for the periods presented are not necessarily indicative of
the results to be expected for the full year.
See accompanying notes to unaudited condensed consolidated
financial statements
See accompanying notes to unaudited condensed consolidated
financial statements
See accompanying notes to unaudited condensed consolidated
financial statements
See accompanying notes to unaudited condensed consolidated
financial statements
NOTES TO THE (UNAUDITED) CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE
30, 2021 AND 2020
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Nature of Business
Global Diversified Marketing Group Inc. (the “Company”),
formerly known as Dense Forest Acquisition Corporation, was incorporated in Delaware on December 1, 2017, and changed its name on June
13, 2018, as part of a change in control. As part of the change in control, its then officers and directors resigned and contributed back
to the Company 19,500,000 shares of the 20,000,000 outstanding shares of its common stock, and appointed new officers and directors. On
June 14, 2018, the new management of the Company issued 12.500,000 shares of its common stock to Paul Adler, the then president of the
Company.
On November 26, 2018, the Company effected the acquisition
of Global Diversified Holdings, Inc. (“GDHI”), a private New York company owned by the Company’s president, with the
issuance of 200 shares of the Company’s common stock in exchange for all of the outstanding shares of GDHI. GDHI became a wholly-owned
subsidiary of the Company, and its activity for the periods presented are reflected in these unaudited consolidated financial statements
along with the expenses of the Company.
Before the acquisition of GDHI, the Company had no
business and no operations. Pursuant to the acquisition, the Company acquired the operations and business plan of GDHI, which imports
and sells snack food products. For accounting purposes, GDHI is considered to be the acquirer, and the equity is presented as if the business
combination had occurred on January 1, 2017.
COVID-19
On March 11, 2020, the World Health Organization (“WHO”)
declared the COVID-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic is having a
negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most US states and
many countries have issued policies intended to stop or slow the further spread of the disease.
COVID-19 and the U.S’s response to the pandemic
are significantly affecting the economy. There are no comparable events that provide guidance as to the effect the COVID-19 pandemic
may have, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. During the three months ended
March 31, 2020 our business was adversely impacted by COVID-19. Although our business has grown significantly over historic levels since
March 31, 2020, we cannot determine if our business would have grown above current levels without the lingering impact of Covid-19. We
continue to monitor the ongoing impact of Covid-19 on our business which is currently indeterminable.
Basis of Presentation
The unaudited consolidated financial statements of
the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented
in US dollars. The Company has adopted a December 31 year-end.
Management’s Representation of Interim
Financial Statements
The accompanying unaudited condensed consolidated
financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange
Commission (“SEC”). The Company uses the same accounting policies in preparing quarterly and annual financial statements.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles
generally accepted in the United States (“GAAP”) have been condensed or omitted as allowed by such rules and regulations,
and management believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated
financial statements include all of the adjustments, which in the opinion of management are necessary to a fair presentation of financial
position and results of operations. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative
of results for a full year.
Principles of Consolidation
The accompanying unaudited consolidated financial
statements include the accounts of the Company and its wholly-owned subsidiary. All intercompany accounts and transactions have been eliminated
in consolidation.
Fair Value of Financial Instruments
The Company’s financial instruments consist
of cash, accounts receivable from customers, accounts payable, and loans payable. The carrying amounts of these financial instruments
approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed
in these financial statements.
Use of Estimates
The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the balance sheet. Actual results could differ from those estimates.
Stock-Based Compensation
Under the modified prospective method, the Company uses, stock compensation expense includes compensation
expense for all stock-based compensation awards granted, based on the grant-date estimated fair value.
Cash and Cash Equivalents
The Company considers all highly liquid investments
with the original maturities of nine months or less to be cash equivalents. On June 30, 2021, and December 31, 2020, the Company had $152,436
and $62,555 in cash, respectively.
Accounts Receivable
Accounts receivables are generated from sales of snack
food products to retail outlets throughout the United States. The Company performs ongoing credit evaluations of its customers and adjusts
credit limits based on customer payment and current creditworthiness, as determined by a review of their current credit information. The
Company continuously monitors credit limits for its customers and maintains a provision for estimated credit losses based on its historical
experience and any specific customer issues that have been identified. An allowance for doubtful; accounts is provided against accounts
receivable for amounts management believes may be uncollectible. The Company historically has not had issues collecting on its accounts
receivable from its customers. The Company factors certain of its receivables to improve its cash flow.
Bad debt expense for the six months ended June 30,
2021, and 2020 were $-0- and $-0-, respectively. The allowance for doubtful accounts on June 30, 2021, and December 31, 2020, was $-0-.
Inventory
Inventory consists of snack food products and packaging
supplies, stated at the lower of cost or market.
Property and Equipment
Property and equipment are stated at cost, net of
accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful life of the assets. Maintenance,
repairs, and renewals that do not materially add to the value of the equipment nor appreciably prolong its useful life are charged to
expense as incurred.
Revenue Recognition
Beginning January 1, 2018, the Company implemented
ASC 606, Revenue from Contracts with Customers. Although the new revenue standard is expected to have an immaterial impact, if any, on
our ongoing net income, we did implement changes to our processes related to revenue recognition and the control activities within them.
These included the development of new policies based on the five-step model provided in the new revenue standard, ongoing contract review
requirements, and gathering of information provided for disclosures.
The Company recognizes revenue from product sales
or services rendered when control of the promised goods are transferred to our clients in an amount that reflects the consideration to
which we expect to be entitled in exchange for those goods and services. To achieve this core principle we apply the following five steps:
identify the contract with the client, identify the performance obligations in the contract, determine the transaction price, allocate
the transaction price to performance obligations in the contract and recognize revenues when or as the Company satisfies a performance
obligation.
Advertising and Marketing Costs
The Company’s policy regarding advertising and
marketing is to record the expense when incurred. The Company incurred advertising and marketing expenses of $125,580 and $17,381 during
the six months ended June 30, 2021, and 2020, respectively.
Income Taxes
Income taxes are computed using the asset and liability
method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between
the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation
allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
The Company’s wholly-owned subsidiary, with
the consent of its stockholder, had elected to be taxed as an S Corporation under the provisions of the Internal Revenue Code. Instead
of paying federal corporate income taxes, the stockholder(s) of an S Corporation are taxed individually on their proportionate share of
the Company’s taxable income. Therefore, prior to the business combination discussed above, the Company had made no provision for
income taxes. Effective with the business combination, the wholly-owned subsidiary became a C-corporation, and the loss incurred in 2018
for the period as a C-corporation approximated $270,000. See Note 7. The Company’s income tax returns are open for examination for
up to the past six years under the statute of limitations. There are no tax returns currently under examination.
Comprehensive Income
The Company has established standards for reporting
and display of comprehensive income, its components, and accumulated balances. When applicable, the Company would disclose this information
on its Statement of Stockholders’ Equity. Comprehensive income comprises equity except those resulting from investments by owners
and distributions to owners.
Income (Loss) Per Share
Basic income (loss) per share has been calculated
based on the weighted average number of shares of common stock outstanding during the period.
Recent Accounting Pronouncements
Adoption of ASC 842 - On January 1, 2019, we
adopted FASB Accounting Standards Codification, or ASC, Topic 842, Leases, or ASC 842, which requires the recognition of the right-of-use
assets and related operating and finance lease liabilities on the balance sheet. As permitted by ASC 842, we elected the adoption date
of January 1, 2019, which is the date of initial application. As a result, the consolidated balance sheet prior to January 1, 2019, was
not restated, continues to be reported under ASC Topic 840, Leases, or ASC 840, which did not require the recognition of operating
lease liabilities on the balance sheet, and is not comparative. Under ASC 842, all leases are required to be recorded on the balance sheet
and are classified as either operating leases or finance leases. The lease classification affects the expense recognition in the income
statement. Operating lease charges are recorded entirely in operating expenses. Finance lease charges are split, where amortization of
the right-of-use asset is recorded in operating expenses and an implied interest component is recorded in interest expense. The expense
recognition for operating leases and finance leases under ASC 842 is substantially consistent with ASC 840. As a result, there is no significant
difference in our results of operations presented in our consolidated income statement for each period presented.
We adopted ASC 842 using a modified retrospective
approach for all leases existing on January 1, 2019. The adoption of ASC 842 had a substantial impact on our balance sheet. The most significant
impact was the recognition of the operating lease right-of-use asset and the liability for operating leases. Accordingly, upon adoption,
leases that were classified as operating leases under ASC 840 were classified as operating leases under ASC 842, and we recorded an adjustment
of $44,602 to operating lease right-of-use assets and the related lease liability. The lease liability is based on the present value of
the remaining minimum lease payments, determined under ASC 840, discounted using our secured incremental borrowing rate at the effective
date of January 1, 2019, using the original lease term as the tenor. As permitted under ASC 842, we elected several practical expedients
that permit us to not reassess (1) whether a contract is or contains a lease, (2) the classification of existing leases, and (3) whether
previously capitalized costs continue to qualify as initial indirect costs. The application of the practical expedients did not have a
significant impact on the measurement of the operating lease liability.
NOTE 2 – GOING CONCERN
As of June 30, 2021, the Company had cash and cash
equivalents of $152,436
and an accumulated deficit of $(27,112,458).
The accumulated deficit includes a non-cash charge of $26,020,400 related to the issuance of super voting stock in 2020. These
conditions raise substantial doubt about the Company’s ability to continue as a going concern.
The consolidated financials have been prepared assuming
that the Company will continue as a going concern and, accordingly, do not include any adjustments that might result from the outcome
of this uncertainty. If the Company is in fact unable to continue as a going concern, the shareholders may lose some or all of their investment
in the Company.
NOTE 3 – EQUITY
Common stock
The Company has 100,000,000
shares of $0.0001 par value
common stock authorized. The Company had 14,047,006
and 13,132,518 shares of common
stock issued and outstanding as of June 30 2021, and December 31, 2020, respectively. During the six months ended June 30, 2021, the
Company issued a total of 914,488
shares as follows:
Services
373,860
shares were issued to consultants and one employee providing professional services to the Company. These shares were
valued at $509,809.
125,000 shares were awarded to four independent directors
and were valued at $250,250.
All of these charges amounting to $485,503 were recorded
as “professional fees” on the Company’s Consolidated Statements of Operations during the six months ended June 30, 2021.
Sale of Common Stock to Accredited Investors
During the six months ended June 30, 2021, the Company
raised $300,000 from the sale of 415,628 shares to five accredited investors.
Preferred Stock
The Company has 20,000,000 shares of $.0001 par value
preferred stock authorized. On February 24, 2020, the Company filed a Certificate of Designation for a class of preferred stock designated
Class A Super Voting Preferred Stock (“A Stock”). There are 1,000,000 shares of A Stock designated. Each share of such stock
shall vote with the common stock and have 100,000 votes. A Stock has no conversion, dividend, or liquidation rights. Accordingly, the
holders of A Stock will, by reason of their voting power, be able to control the affairs of the Company. The Company has issued 1,000
shares of A Stock to Paul Adler, the company’s Chief Executive Officer, and majority shareholder giving him effective voting control
over the Registrant’s affairs for the foreseeable future.
As a result of the issuance of super-voting rights
enabling him to vote 100,000,000 shares, Mr. Adler has effective voting control of approximately 99% of the Company. In conjunction with
the issuance of these 1,000 preferred shares, the Company recorded stock compensation expense, related party of $26,020,400 during 2020.
NOTE 4 – RELATED PARTY TRANSACTIONS
During the six months ended June 30, 2021 and 2020
the Company incurred wages of $147,500 and $111,911 respectively, related to services provided to it by its executive officer. Additionally,
during 2020, the Company’s CEO was awarded super-voting A Stock-see Note 3. Capital Stock.
NOTE 5 – COMMITMENTS AND CONTINGENCIES
The Company entered into a 60-month lease agreement
on October 1, 2016, to rent office space. The lease requires monthly payments of $1,600 for the first 24 months and after that increases
by 3% each year, and contains one five year renewal option. Rental expenses under this lease for the three months ended June 30, 2021,
and 2020 were $4,356 and $4,302 respectively. The lease also required an advance payment of $1,600 for the last month of rent as well
as a $1,600 security deposit. Future minimum lease payments due under this operating lease, including renewal periods, are as follows:
SCHEDULE
OF FUTURE MINIMUM LEASE PAYMENTS OF OPERATING LEASE LIABILITY
|
|
|
|
|
|
|
Year ended December 31, 2021
|
|
|
15,732
|
|
|
Total minimum lease payments
|
|
$
|
15,372
|
|
NOTE 6 – LOANS PAYABLE
The Company had loans outstanding on June 30, 2021
and December 31, 2020, as follows:
SCHEDULE
OF LOANS OUTSTANDING
Short Term
|
|
|
June 30,2021
|
|
|
Dec. 31, 2020
|
|
|
Loan Builder (a)
|
|
$
|
65,649
|
|
|
$
|
14,072
|
|
|
Credit Line - Blue Vine (a)
|
|
|
-
|
|
|
|
6,468
|
|
|
Total loans payable
|
|
$
|
65,649
|
|
|
$
|
20,540
|
|
|
|
(a)
|
Represents notes payable from factoring with varying rates of interest and fees, and no set minimum monthly payments
|
Long Term
As of June 30, 2021, the Company had $179,065
in long term loans outstanding compared to $149,900
as of December 31, 2020. On May 21, 2020, the Company received a loan from the Small Business Administration of $150,000
(the “SBA Loan”). The SBA Loan bears interest at 3.75%
per annum and is payable
over 30 years with all payments of principal and interest deferred for the first 12 months. During the three months ended March
31, 2021 the Company received an additional forgivable PPP loan amounting to $29,165.
NOTE 7 – INCOME TAXES
For the period ended June 30, 2021, the Company has
incurred net losses and, therefore, has no tax liability. The net deferred tax asset generated by the loss carry-forward has been fully
reserved.
NOTE 8 – CONCENTRATIONS
The Company does substantially all of its total business
with five customers. The concentration
of customer revenue for the six months ended June 30, 2021 and 2020 as percentage of total sales of $1,379,979
and $ 593,302, respectively is as follows:
SCHEDULE
OF CONCENTRATION OF RISK
|
|
|
2021
|
|
|
2020
|
|
|
Customer A
|
|
|
25
|
%
|
|
|
35
|
%
|
|
Customer B
|
|
|
21
|
%
|
|
|
24
|
%
|
|
Customer C
|
|
|
20
|
%
|
|
|
17
|
%
|
|
Customer D
|
|
|
19
|
%
|
|
|
10
|
%
|
|
Customer E
|
|
|
14
|
%
|
|
|
-
|
|
NOTE 9 – SUBSEQUENT EVENTS
In accordance with FASB ASC 855-10, Subsequent
Events, the Company has analyzed its operations subsequent to June 30 ,2021, to the date these consolidated financial statements were
issued, and has determined that it does not have any material subsequent events to disclose in these consolidated financial statements
except as follows:
On July 20, 2021 the SBA modified its loan previously
extended to the Company and increased the loan from $150,000 to $500,000 by sending the Company an additional $350,000.