Notes
To Unaudited Condensed Financial Statements For The Periods
Ended
March 31, 2023 And 2022
NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature
of Business
NetBrands
Corp., formerly known as Global Diversified Marketing Group Inc. ( “NetBrands” or the “Company”), was incorporated
as Dense Forest Acquisition Corporation, 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 years 2022 and 2021
is reflected in these condensed 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.
On
March 29, 2023, the Company filed an Amendment to its Certificate of Incorporation (the “Amendment”) effecting the change
of the Company’s name to “NetBrands Corp.”, a name that reflects the planned expansion of the Company’s digital
business. In connection with the name change, the Company submitted to the Financial Industry Regulatory Authority, Inc. (“FINRA”)
a voluntary request for the change of its OTC trading symbol. In the meantime, the Company’s common stock will remain listed for
quotation under the current symbol “GDMK.”
Basis
of Presentation
The
condensed 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 Condensed Financial Statements
The
accompanying unaudited consolidated condensed 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 condensed financial statements. Certain information and footnote disclosures normally included in condensed 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 condensed financial statements include all of the adjustments, which in the opinion of management are necessary for
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 condensed financial statements include the accounts of the Company and its wholly-owned subsidiary, Global Diversified
Holdings, Inc. 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 condensed financial statements.
Use
of Estimates
The
preparation of condensed 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 three months ended March 31, 2023 and March 31, 2022 stock-based compensation
was $-0- and $4,515, respectively.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. On March 31,
2023, and December 31, 2022, the Company had $8,221 and $54,185 of cash and cash equivalents, respectively.
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 three months ended March 31, 2023, and 2022 was $-0- and $-0-, respectively; the allowance for doubtful accounts
on the same dates were $-0-and $-0-, respectively.
Inventory
Inventory,
which is comprised of snack food products and packaging supplies is charged to inventory when purchased, is stated at the lower of cost
or net realizable value with cost determined under the first-in, first-out (“FIFO”) method. The Company does not carry any
raw materials.
The
Company evaluates inventory levels quarterly value based upon assumptions about future demand and market conditions. Any inventory that
has a cost basis in excess of its expected net realizable value, inventory that becomes obsolete, inventory in excess of expected sales
requirements, inventory that fails to meet commercial sale specifications or is otherwise impaired are written down with a corresponding
charge to the statement of operations in the period that the impairment is first identified. The Company performed its evaluation on
March 31, 2023 and December 30, 2022, and determined that no write-down was required.
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
The
Company recognizes revenue from product sales 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. Typically, the Company receives a detailed purchase order from large retailers that specify the goods
ordered, their price, payment terms and the required delivery date. Once the delivery of items on the purchase order is made to the client
and title passes, the Company has met its performance obligation and recognizes revenue.
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 $31,288 and $14,884 during the three months ended March 31, 2023, and 2022, respectively.
Impairment
of Long-Lived Assets
The
Company continually monitors events and changes in circumstances that could indicate the 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.
Intangible
Assets
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.
We
perform an annual impairment assessment for intangible 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.
Determining
the fair value of intangible assets is judgmental in nature and requires the use of significant estimates and assumptions.
On
September 30, 2022, we conducted an impairment analysis and determined that our purchase of Hula Fit was fully impaired. As a result, we
recorded an impairment loss of $50,000 for the year ended December 31, 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.
Leases
The
majority of our lease obligations are real estate operating leases from which we conduct our business. For any lease with an initial
term in excess of 12 months, the related lease assets and liabilities are recognized on the Consolidated Balance Sheets as either operating
or finance leases at the inception of an agreement where it is determined that a lease exists. Leases with an initial term of 12 months
or less are not recorded on our Consolidated Balance Sheets; we recognize lease expense for these leases on a straight-line basis over
the lease term.
Leases
with an initial term of 12 months or less, or that are on a month-to-month basis are not recorded on our Consolidated Balance Sheets;
we recognize lease expense for these leases on a straight-line basis over the lease term.
Operating
lease assets represent the right to use an underlying asset for the lease term, and operating lease liabilities represent the obligation
to make lease payments arising from the lease. These assets and liabilities are recognized based on the present value of future payments
over the lease term at commencement date. We use a collateralized incremental borrowing rate based on the information available at commencement
date, including lease term, in determining the present value of future payments. Our lease terms generally do not include options to
extend or terminate the lease unless it is reasonably certain that the option will be exercised. Fixed payments may contain predetermined
fixed rent escalations. We recognize the related rent expense on a straight-line basis from the commencement date to the end of the lease
term.
As
of March 31, 2023, we had $546,267 in right of use assets, $112,666 in short term operating lease payables and $436,674 in long term lease
liabilities with an average remaining life of approximately 3.75 years.
Comprehensive
Income
The
Company has established standards for reporting and displaying 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 periods ended March 31,
2023 and December 31, 2022, the Company had a balance of $1,895 in accumulated other comprehensive income on its balance sheet which
arose from an unrealized gain due to foreign currency fluctuations in prior years.
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.
As of March 31, 2023 the Company had no dilutive instruments that could increase the number of shares if exercised or converted.
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 March 31, 2023, the Company had cash and cash equivalents of $8,221,
negative working capital of $1,114,166 and had an accumulated deficit of $28,922,341.
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 authorized. The Company had 15,635,756
and 15,635,756
shares of common stock issued and outstanding as of March 31, 2023, and December 31, 2022, respectively. There were no stock
issuances in the first fiscal quarter of 2023.
2022
Common Stock Issuances for Services
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 price 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 an aggregate of (a) 250,000
shares of common stock to the members of the Company’s board of directors, valued at $0.18
per share, and (b) 350,000
shares of common stock to the members of its board of directors in lieu of cash payments, valued at $0.21
per share. The Company also issued 20,000
shares of common stock to a service provider, valued at $0.106
per share.
During
the three months ended September 30, 2022, the Company issued an aggregate of 427,500
shares to consultants and to an investor relations firm valued at an average of approximately $0.20
per share.
During
the three months ended December 31, 2022, the Company issued 100,000
shares of common stock to a member of the Company’s board of directors valued at $0.151
per share.
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. The 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 Company’s affairs for the foreseeable future.
As
a result of the
issuance of the A Stock with super-voting rights giving him an aggregate of 100,000,000 votes, combined with the shares of common
stock he holds, Mr. Adler has effective voting control of approximately 97% of the Company.
NOTE
4 – RELATED PARTY TRANSACTIONS
On
August 31, 2022, the Company entered into an Asset Purchase Agreement with InPlay Capital Inc., a Delaware corporation (“InPlay”),
pursuant to which the Company purchased from InPlay all of the assets used in the operation 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. The assets were recorded as intangible assets
on the Company’s balance sheet then impaired for the full amount of $50,000.
NOTE
5 – COMMITMENTS AND CONTINGENCIES
The
Company has two primary leases. The Company leases approximately 1,500 square feet of office space at 4042 Austin Boulevard, Suite B,
Island Park, New York 11558. On October 1, 2021, the Company entered into a 60-month lease for $20,976 per year for the first two years,
with 3% annual escalation clauses for the last three years of the lease. The lease contains one five-year renewal option. Management
believes that its present office facilities are adequate for its corporate needs.
In
March 2022, the
Company transitioned from the use of a public warehouse and entered a lease for 8,500
square feet of warehouse space for 60
months at 78 Henry Street Secaucus, NJ 07094, at the rate of $132,896
per year, with annual 3% escalation clauses.
Future
minimum lease payments due under these operating leases, including renewal periods, are as follows:
SCHEDULE
OF FUTURE MINIMUM LEASE PAYMENTS OF OPERATING LEASE LIABILITY
| | |
| | |
| December 31, 2023 | |
| 157,014 | |
| December 31, 2024 | |
| 161,724 | |
| December 31, 2025 | |
| 166,576 | |
| December 31, 2026 | |
| 171,573 | |
| December 31, 2027 | |
| 37,392 | |
| Total | |
$ | 694,279 | |
NOTE
6 – LOANS PAYABLE
The
Company had various loans outstanding on March 31, 2023, and December 31, 2022. All of these loans were short-term in
nature, with varying rates of interest and fees, and no set minimum monthly payments, as follows:
SCHEDULE
OF DEBT
| | |
| | | |
| | |
| Fund box (c) | |
$ | 68,827 | | |
$ | 50,964 | |
| Can Capital (d) | |
| 155,902 | | |
| - | |
| Credit Line – Loan Builder(b) | |
| 112,395 | | |
| 144,746 | |
| Credit Line – Webster Bank(a) | |
| 96,000 | | |
| 75,656 | |
| Total loans payable | |
$ | 433,124 | | |
$ | 271,096 | |
| |
(a) |
The maximum
borrowing level under this unsecured facility is $100,000 at an interest rate of 2.5% over prime. This facility has no fixed maturity
date. |
| |
(b) |
The maximum borrowing level
on this facility is $150,000 with a fixed interest rate of 10%. this facility has no fixed maturity date. |
| |
(c) |
The interest rate on this
facility is 40% with a one-year maturity date of December 31, 2023. |
| |
(d) |
The principal loan
is for 150,000 with weekly loan payments due of $2,558 over a 78-month period. The effective interest rate on this loan amounts to
approximately 67%. |
Government
loans payable
As
of March 31, 2022 and December 31, 2022, the Company had $519,001 and $524,033, respectively, in government EIDL loans outstanding related
to Covid-19. These loans are repayable over a 30-year period with an interest rate of 3.75%.
NOTE
7 – CONCENTRATIONS
The
Company does substantially all of its business with five customers. These customers accounted for 99% and 99% of revenues for the three
months ended March 31, 2022, and 2022, respectively.
SCHEDULE
OF CONCENTRATION OF RISK
| | |
March 31, 2023 | | |
March 31, 2022 | |
| Customer A | |
| 34 | | |
| 39 | |
| Customer B | |
| 23 | | |
| 36 | |
| Customer C | |
| 15 | | |
| 24 | |
| Customer D | |
| 15 | | |
| - | |
| Customer E | |
| 12 | | |
| - | |
| Total | |
| 99 | % | |
| 99 | % |
NOTE
8 – SUBSEQUENT EVENTS
In
accordance with ASC 855-10, the Company has analyzed its operations subsequent to March 31, 2023, to the date these condensed financial statements
were issued, and has determined that it does not have any other material subsequent events to disclose in these condensed financial statements
except as follows:
On
April 10, 2023, the Company’s CEO, Paul Adler extended a short-term, unsecured loan to the Company in the principal amount of
$124,000, at an interest rate of 14.9% per annum. To evidence the loan, the Company issued Mr. Adler a promissory note, which has a
maturity date of July 9, 2023.