NOTES
TO THE (UNAUDITED) CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
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, $0.0001 par value per share (the “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 nine months ended September
30, 2022 and 2021 is reflected in these financial statements along with the expenses of the Company.
Prior
to 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.
On
August 31, 2022, the Company entered into an Asset Purchase Agreement with InPlay Capital Inc., a Delaware corporation (“InPlay”),
pursuant to which, on the same date, the Company purchased from InPlay all of the assets used in the operation and conduct of its business
relating to the online home fitness store known as “The Hula Fit”, including the Shopify Store and the TikTok, Facebook and
Google ad accounts, for a purchase price of $50,000. Paul Adler, the sole executive officer and a director of the Company, and the Company’s
majority stockholder, is also the sole officer, director, and 100% stockholder of InPlay.
Basis
of Presentation
The
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. Certain prior year amounts have been reclassified to conform to the presentation in the current
year. 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 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
The
Company accounts for stock-based compensation using the fair value method following the guidance outlined in Section 718-10 of the FASB
Accounting Standards Codification for disclosure about Stock-Based Compensation. This Section requires a public entity to measure the
cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with
limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange
for the award- the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for
which employees do not render the requisite service. During the nine months ended September 30, 2022 and September 30, 2021 stock-based
compensation was $212,260 and $784,259 respectively.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents. On September
30, 2022, and December 31, 2021, the Company had $177,679 and $312,574, respectively of cash.
Factoring
The
Company accounts for the transfer of our accounts receivable to a third party under a factoring agreement in accordance with ASC 860-10-40-5
“Transfers and Servicing”. ASC 860-10 requires that several conditions be met in order to present the transfer of
accounts receivable as a sale. Even though we have isolated the transferred (sold) assets and we have the legal right to transfer our
assets (accounts receivable) we do not meet the third test of effective control since our accounts receivable sales agreement with the
factor requires us to be liable in the event of default by one of our customers. Because we do not meet all three conditions, we do not
qualify for sale treatment and our debt incurred with respect to the sale of our accounts receivable is presented as a loan payable in
on our consolidated balance sheet. As of September 30, 2022 and December 31, 2021, the amounts due to factors in both periods was $-0-.
Accounts
Receivable
Accounts
receivable 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
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 are 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 nine months ended September 30, 2022, and 2021 was $-0- and $-0-, respectively; the allowance for doubtful accounts
on September 30, 2022, and 2021 was $-0- and $-0-, respectively.
Inventory
Inventory
consists of snack food products and packaging supplies, and are 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 $34,430 and $160,893 during the nine months ended September 30, 2022 and 2021, respectively.
Impairment
of Long-Lived Assets
The
Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be
recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by
determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total
of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess
of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or
the fair value less costs to sell.
Goodwill
and Intangible Assets
Goodwill
represents the future economic benefit arising from other assets acquired that could not be individually identified and separately recognized.
The goodwill arising from our acquisitions is attributable to the value of the potential expanded market opportunity with new customers.
Intangible assets have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized
on a straight-line basis over their economic or legal life, whichever is shorter.
Goodwill
and indefinite-lived assets are not amortized but are subject to annual impairment testing unless circumstances dictate more frequent
assessments. We perform an annual impairment assessment for goodwill and indefinite-lived assets during the fourth quarter of each year
and more frequently whenever events or changes in circumstances indicate that the fair value of the asset may be less than the carrying
amount. Goodwill impairment testing is a two-step process performed at the reporting unit level. Step one compares the fair value of
the reporting unit to its carrying amount. The fair value of the reporting unit is determined by considering both the income approach
and market approaches. The fair values calculated under the income approach and market approaches are weighted based on circumstances
surrounding the reporting unit. Under the income approach, we determine fair value based on estimated future cash flows of the reporting
unit, which are discounted to the present value using discount factors that consider the timing and risk of cash flows. For the discount
rate, we rely on the capital asset pricing model approach, which includes an assessment of the risk-free interest rate, the rate of return
from publicly traded stocks, our risk relative to the overall market, our size and industry and other Company-specific risks. Other significant
assumptions used in the income approach include the terminal value, growth rates, future capital expenditures and changes in future working
capital requirements. The market approaches use key multiples from guideline businesses that are comparable and are traded on a public
market. If the fair value of the reporting unit is greater than its carrying amount, there is no impairment. If the reporting unit’s
carrying amount exceeds its fair value, then the second step must be completed to measure the amount of impairment, if any. Step two
calculates the implied fair value of goodwill by deducting the fair value of all tangible and intangible net assets of the reporting
unit from the fair value of the reporting unit as calculated in step one. In this step, the fair value of the reporting unit is allocated
to all of the reporting unit’s assets and liabilities in a hypothetical purchase price allocation as if the reporting unit had
been acquired on that date. If the carrying amount of goodwill exceeds the implied fair value of goodwill, an impairment loss is recognized
in an amount equal to the excess.
Indefinite-lived
intangible assets are evaluated for impairment at the individual asset level by assessing whether it is more likely than not that the
asset is impaired (for example, that the fair value of the asset is below its carrying amount). If it is more likely than not that the
asset is impaired, its carrying amount is written down to its fair value.
Determining
the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue
growth rates, strategic plans, and future market conditions, among others. There can be no assurance that our estimates and assumptions
made for purposes of the goodwill impairment testing will prove to be accurate predictions of the future. Changes in assumptions and
estimates could cause us to perform an impairment test prior to scheduled annual impairment tests.
On
September 30, 2022 we conducted an impairment analysis and determined that our purchase of Hula fit was fully impaired. As a result we
record an impairment loss of $50,000 for the period ended September 30, 2022
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 income tax returns are open for examination for up to the past three 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. During the nine months ended September 30, 2022, Company had
a balance of $1,895 in accumulated other comprehensive income which arose from unrealized gain due to foreign currency fluctuations.
Basic
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
The
Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s
results of operations, financial position, or cash flow.
NOTE
2 GOING CONCERN
As
of September 30, 2022, the Company had cash and cash equivalents of $177,679 a working capital deficit of $520,016 and had an accumulated
deficit of $28,403,818. 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 – CAPITAL STOCK
The
Company has 100,000,000 shares of $0.0001 par value common stock (the “Common Stock”) authorized. The Company had 15,535,756
and 14,473,256 shares of Common Stock issued and outstanding as of September 30, 2022, and December 31, 2021, respectively.
2022
Common Stock Issuances
During
the three months ended March 31, 2022 the Company issued 15,000 shares of its common stock for services which were valued at $4,515.
All issuances made by the Company are valued based upon the closing trading of the Company’s Common Stock on the date when the
Board of Directors authorizes and approves the issuance of such shares.
During
the three months ended June 30, 2022 the Company issued 250,000 shares to the Company’s board of directors valued at $0.18 per
share, 350,000 shares to its Board of Directors in lieu of cash payments. These shares were value valued at $0.21 per shares. The Company
also issued 20,000 shares to a service provider valued at $0.106 per share.
During
the three months ended September 30, 2022 the Company issued 427,500 shares to consultants and to an investor relations firm valued at
an average of approximately $0.20 per share.
2021
Common Stock Issuances
During
the year ended December 31, 2021, the Company issued a total of 1,340,738 shares of Common Stock as follows:
800,110
shares were issued for services to consultants and one employee. These shares were valued at $871,341
125,000
shares were awarded to four independent directors and were valued at $250,250.
These
charges amounting to $1,121,591 were recorded as $932,591 in “professional fees” and $189,000 in payroll on the Company’s
Consolidated Statements of Operations during the year ended December 31, 2021.
Preferred
Stock
The
Company has 20,000,000 shares of $0.0001 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.
NOTE
4 – RELATED PARTY TRANSACTIONS
During
the nine months ended September 30, 2022, and September 30, 2021, the Company incurred salary expense of $295,500 and $221,250 respectively,
related to services provided to it by its CEO.
NOTE
5 – COMMITMENTS AND CONTINGENCIES
The
Company renewed a 60-month lease agreement on October 1, 2021, to rent approximately 1,000 square feet of office space in Island Park,
New York. The lease requires monthly payments of $1,748 for the first 24 months and after that increases by approximately 3% each year,
and contains one five year renewal option. 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
| |
| | |
December 31, 2022 | |
$ | 20,980 | |
December 31, 2023 | |
| 21,137 | |
December 31, 2024 | |
| 21,771 | |
December 31, 2025 | |
| 22,425 | |
December 31, 2026 | |
| 17,194 | |
Total | |
$ | 103,509 | |
Under
the guidelines of ASC 842, renewal of the lease at the end of its term was not considered probable. The Company record right of use assets
and lease liabilities of $83,415 related to this lease.
NOTE
6 – LOANS PAYABLE
As
of September 30, 2022 and December 31, 2021 the Company had the following loans payable
SCHEDULE OF DEBT
| |
September 30, 2022 | | |
December 31,2021 | |
Credit Line – Sterling (a) | |
$ | 82,334 | | |
$ | 37,807 | |
Credit Line-Loan Builder (b) | |
| 68,384 | | |
| - | |
Total loans payable | |
$ | 150,718 | | |
$ | 37,807 | |
|
(a) |
The
maximum borrowing level under this unsecured facility is $100,000 at an interest rate of 2.5% over prime |
|
(b) |
The
maximum borrowing level on this facility is $125,000 with a fixed interest rate of 10% |
NOTE
7 – CONCENTRATIONS
The
Company does substantially all of its business with 4 to 5 customers. These customers accounted for 91 % and 99% of revenues for the
nine months ended September 30, 2022, and 2021, respectively.
SCHEDULE OF CONCENTRATION OF RISK
| |
September 30, 2022 | | |
September 30, 2021 | |
Customer A | |
| 36 | % | |
| 25 | % |
Customer B | |
| 28 | % | |
| 25 | % |
Customer C | |
| 13 | % | |
| 18 | % |
Customer D | |
| 9 | % | |
| 18 | % |
Customer E | |
| 5 | % | |
| 13 | % |
Total | |
| 91 | % | |
| 99 | % |