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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Global Diversified Marketing Group Inc (PK) | USOTC:GDMK | OTCMarkets | Common Stock |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.22 | 0.22 | 0.274 | 0.00 | 01:00:00 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2021
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commissions file number 000-55889
GLOBAL DIVERSIFIED MARKETING GROUP INC.
(Exact name of registrant as specified in its charter)
| Delaware | 82-3707673 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
4042 Austin Boulevard, Suite B Island Park, New York 11558
(Address of principal executive offices) (zip code)
Registrant’s telephone number, including area code 800-500-5996
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) |
Name of each exchange on which registered | ||
| None | N/A | N/A |
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, $.0001 par value per share
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act
☐ Yes ☒ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
☐ Yes ☒ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
☒ Yes ☐ No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, “non-accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated filer ☐ | Accelerated filer ☐ | |
| Non-accelerated filer ☐ | Smaller reporting company ☒ | |
| Emerging growth company ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes ☒ No
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter was $1,736,591 on June 30, 2021
As of March 11, 2022, there were shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2021
TABLE OF CONTENTS
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FORWARD-LOOKING STATEMENTS
This Annual Report contains forward-looking statements. Such forward-looking statements include, among others, those statements including the words “believes”, “anticipates”, “expects”, “intends”, “estimates”, “plans” and words of similar import. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.
Forward-looking statements are based on our current expectations and assumptions regarding our business, potential target businesses, the economy, and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore that you should not rely on any of these forward-looking statements as statements of historical fact or as guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include without limitation, risks related to general economic and business conditions; our ability to continue as a going concern; our ability to obtain financing necessary to operate our business; our limited operating history; our ability to recruit and retain qualified personnel; our ability to manage any future growth; our ability to research and successfully develop our planned products; our ability to successfully complete potential acquisitions and collaborative arrangements; and changes in the political and regulatory environment and in business and fiscal conditions in the United States and overseas. These risks and others described under the section “Risk Factors” below are not exhaustive.
All forward-looking statements speak only as of the date of this Annual Report. Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, or other information contained herein, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise. We caution you therefore that you should not rely on any of these forward-looking statements as statements of historical fact or as guarantees or assurances of future performance.
All references in this Annual Report to the “Company”, “we”, “us”, or “our”, are to Global Diversified Marketing Group Inc., a Delaware corporation, its wholly-owned subsidiary, Global Diversified Holdings, Inc., described below.
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PART I
| Item 1. | Business |
Overview
Global Diversified Marketing Group Inc. (the “Company”) was incorporated on December 1, 2017 as a Delaware corporation under the name “Dense Forest Acquisition Corporation,” and became subject to the Exchange Act reporting requirements by filing a Form 10 Registration Statement with the SEC on January 19, 2018. On June 13, 2018, the Company effected a change in control with (i) the resignation of the then-officers and directors, (ii) the contribution back to the Company of 19,500,000 shares of the 20,000,000 outstanding shares of its Common Stock by these former directors and officers, and (iii) the appointment of Paul Adler as the new director and officer of the Company. In connection thereof, on June 13, 2018, the Company filed a Certificate of Amendment to its Certificate of Incorporation with the Delaware Secretary of State, changing the name of the Company to “Global Diversified Marketing Group Inc.” On June 14, 2018, the Company issued 12,500,000 shares of its Common Stock to its new director and officer, Paul Adler.
On November 26, 2018, the Company effected the acquisition of Global Diversified Holdings, Inc., a private New York corporation in the snack and gourmet food business (“GDHI”), pursuant to the terms of an acquisition agreement (the “Acquisition”). Upon the consummation of the Acquisition, the Company issued 200 shares of the Company’s Common Stock to Paul Adler, the sole stockholder of GDHI, in exchange for all of the outstanding shares of GDHI, and GDHI became a wholly owned operating subsidiary of the Company. The transaction was accounted for as a combination of entities under common control since the date of the Acquisition. Prior to the Acquisition, the Company had no business and no operations. Pursuant to the Acquisition, the Company acquired the operations and business plan of GDHI.
Business
We are an early-stage global multi-line consumer packaged goods (“CPG”) company with branded product lines, and are a food and snack manufacturer, marketer and distributor in the United States, Canada, and Europe. The Company is focused on developing and marketing products that appeal to consumers’ growing preference for healthy snack food and operates through snacks segments offering Italian Wafers, French Madeleines, Italian Croissants, Macaron Cookies, Wafer Pralines, and other wholesome snacks. Our sole officer often attends global food trade shows to seek out unique products and snacks. Once the Company identifies products that fit within its distribution channels, it will seek to enter into non-exclusive manufacturing and licensing agreements with such distributors to distribute products under the Company’s own trademarked brands for sale in the United States and/or global markets. Currently, the Company maintains six trademarks for its brands registered with the US Patent and Trademark Office; each trademark covers numerous product lines with a variety of unique identifiers (known as SKUs) offered under the applicable brand name. The Company has non-contractual on-going relationships with many Fortune 500 companies, including club and retail chain stores to whom the Company directly sells its products.
The Company sells its products directly in the United States and global markets through various distribution channels comprising specialty, grocery retailers, food-service distributors and direct store delivery (“DSD”), as well as the vending, pantry, and the micro-market segment. Our buyers typically represent recognized large retail chain stores. The products are then distributed by the chains to their local outlets. The Company seeks out and develops snacks and gourmet foods to brand under its trademarks based on market trends and input from the buyers as to consumer demand. The Company works closely with buyers to evaluate products with the intent to identify products that have likely customer demand. We recently re-branded and launched all new snack marketplace and will seek to gain market share in the ecommerce segment. Our re-branded website will serve as snack marketplace which will carry its own branded products and other gourmet snacks and products
We intend to develop additional gourmet foods and snack products under its trademarked brands and to expand the Company’s offering portfolio by identifying, producing and marketing new products. Management believes that the strategy of acquiring small brands regional brands and adding these to the Company’s national distribution can prove beneficial for the Company.
Vending Operations
In addition to placing its products with large retail specialty chains, the Company supplies products to vending channels throughout the United States through food service distributors. These vending machines are located in malls, service stations, and schools. The Company works with vending companies that have, in the aggregate, more than 100,000 machines nationwide. The Company supplies vending companies with products. The Company works directly with some vending companies and with others through its food service distributors. The broker pre-sells the products and the distributor services the accounts. When the distributor services the accounts, the distributor buys the product directly. Vending machine sales represent approximately one percent our revenues.
Products and Trademarked Brands
The Company currently owns six trademark brands. Each brand encompasses numerous SKUs that are brought to the market from time to time. The Company produces its products primarily on an “on request” basis from its retail chain buyers for sale through such chains. The Company’s trademarks are listed below as follows:
| Country | Mark | Status | Class | Serial Number | Registration Number | Registration Date | Owner Name | Expiration Date | ||||||||
| USA | BISCOTTELLI | Live | 030 | 86579810 | 4994327 | 3/28/2015 | Paul Adler | 3/27/25 | ||||||||
| USA | DOLCIBONO | Live | 030 | 88639475 | 6078602 | 10/2/2019 | Global Diversified Holdings, Inc. | 10/1/29 | ||||||||
| USA | BONBONS DE PARIS | Live | 030 | 87296805 | 544000 | 1/11/2017 | Paul Adler | 1/10/27 | ||||||||
| USA | FRUTTATA | Live | 029 | 88519630 | 6171561 | 7/19/2019 | Global Diversified Holdings, Inc. | 7/18/29 | ||||||||
| USA | COCO BLISS | Live | 030 | 87256922 | 5351910 | 12/5/2016 | Paul Adler | 12/4/26 | ||||||||
| USA | EZLYV | Live | 97001930 | Pending | 8/30/2021 | Global Diversified Holdings, Inc. | 8/29/31 |
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Retail Chain Buyers
The primary distribution of our products has been through specialty retail chains. We work with the buying office that determines placement for our products. The retail chain will then distribute the products to its retail outlets.
Our Strategy and Strengths
We believe a variety of favorable consumer trends, including a greater focus on health and wellness, increased consumption of smaller, more frequent meals throughout the day and a preference for convenient gourmet foods and snacks will continue to drive overall snacking growth within the overall market. Our Management believes that the Company’s products appeal to a wide range of consumers, including most age brackets. The young snackers, classified as those being between the ages of 18-34, tend to consume more snacks than average adults but the gourmet foods reach the broader adult market. The senior market tends to reduce snacks and gourmet foods. We expect to explore the development and acquisition of small regional brands and adding them to the Company’s national distribution within the United States and globally.
We anticipate that our marketing strategy will use the internet and social media including Facebook, Instagram, and Twitter. Our distribution channels consist of retailers, distributors, online e-commerce, and vending companies. The Company’s marketing strategy is primarily targeted at the vendors and retail chain stores.
The Company anticipates utilizing the following opportunities to further their marketing program, to obtain information to adjust and modify, as needed, the marketing program, and to create direct interest in its products:
Networking. Networking could be a low-cost but often effective means for us to generate partnerships and growth while bolstering personal commitments to the Company. Management will join wholesalers’ associations to network with other food manufacturers and distributors.
Trade Shows. The Company plans to attend trade shows and exhibitions related to the food manufacturing industry, such as SIAL, PLMA Amsterdam, Thaifex, Fancy Food, CIBUS, ISM, and ANUGA among others. Through attendance at conventions and trade shows, management remains knowledgeable and informed about advancements, trends, and issues of concern in the market.
Direct Sales. The Company plans to employ a dedicated sales team to enact precise sales and promotional efforts in the near future.
Social Media and Food Blogging. The Company will manage its brands on social media sites, such as Facebook, Instagram, and Twitter. Twitter has proven an effective platform to conduct customer satisfaction surveys as well as solicit customer feedback on food products.
The rise in popularity of the food blogging community has given consumers a massive platform on which to share their opinion and make their voices heard. This has led to a rise in consumer concerns about food, with increasing emphasis being placed on healthy eating and organic produce. The Company will use food blogging websites to promote its products and highlight benefits that appeal to a new generation of socially-aware consumers.
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Websites. A well-optimized website has been constructed, with proper site structure, page layout, and clear and easy navigation, along with targeted keywords embedded throughout the site to ensure prominent search engine placement and saturation. The Company’s websites:
www.360worldsnacks.com, www.biscottelli.com, www.gdmginc.com, www.dolcibono.com, www.fruttatasnacks.com, and www.ezlyv.com are important marketing assets.
We anticipate that we will primarily target teens and adults up to age 65. The primary target market is “Young Snackers” that are 18-34 years old and tend to eat more snacks than other age groups. The trend of snacks between meals is especially strong with millennials and younger Americans. A quarter of American millennials, age 23 to 40, reported eating four or more times a day, compared to just 10% of Gen X and 9% of Baby Boomers. The Company believes that the senior age bracket (over 65) is not a strong snack market.
The Company use of co-packers for manufacturing and packaging of its products provides the most efficient and cost-effective means of operations for a small company like we are. It allows us to scale-up and meet growing demand, without having to invest in our own industrial setting and without the high overhead costs of hiring salespeople as employees of the Company. The Company intends to employ this model strategy in the future and also to attract and retain experienced sales team.
Competition
The snack food industry in the United States is very competitive, particularly in the savory and salty snack segment. In the United States, a study conducted and published by the Packaging Strategies magazine reported that snacks account for 51% of all food sales, and 92% of adults in the US have snacked within the last 24 hours.
The Company has observed an increased demand for “healthy” snacks. In the United States, companies are finding success in the “snackable” fruit and vegetable category, such as grapes or baby carrots.
A challenge facing entrants in the snack and gourmet food market is the dominance of leading snack food producers, particularly the industry leader PepsiCo. Large producers may experience a high degree of brand and consumer loyalty and typically possess sufficient capital to invest in extensive advertising and promotions to obtain a greater market share. Furthermore, companies such as PepsiCo often benefit from higher profit margins when compared with small- to medium-sized operators, enabling them to lower their product prices and to engage in price-based competition with competitors. Multinational producers may also experience lower per-unit costs due to economies of scale and scope
Employees
The Company currently has two employees, including one executive officer, and a director of operations, and a staff employee.
Subsidiaries
The wholly-owned subsidiary, Global Diversified Holdings, Inc., is the Company’s only subsidiary.
| Item 1A | Risk Factors |
Investing in our common stock involves a high degree of risk. Before investing in our common stock, you should carefully consider the risks described below, as well as the other information in this Annual Report, including our consolidated financial statements and the related notes. In addition, we may face additional risks and uncertainties not currently known to us, or which as of the date of this registration statement we might not consider significant, which may adversely affect our business. If any of the following risks occur, our business, financial condition and results of operations could be materially adversely affected. In such case the trading price of our common stock could decline due to any of these risks or uncertainties, and you may lose part or all of your investment.
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Risks Related to our Business and Industry.
The Company depends on its President and Chief Financial Officer, to manage its business effectively and loss of the President and Chief Financial Officer could significantly impair the Company’s results.
The Company, through its subsidiary, has a developed track record of bringing successful new products to the retail chain buyers for the placement and sale of the Company’s products. This track record has been developed by the President and Chief Financial Officer of the Company, Paul Adler, and his ability to locate and produce unique and quality snack and gourmet foods attractive to the buyer’s market. The loss of Mr. Adler as the Company’s President and Chief Financial Officer, or in active management of the Company, could have a significant negative impact of the operations of the Company. Such a loss could impact the production of current product, the relationship with the retail chain stores and development of future products.
Our independent auditors have expressed their concern as to our ability to continue as a going concern.
On a consolidated basis, the Company has incurred significant operating losses since inception and has a working capital deficit and accrued liabilities. As of December 31, 2021, the Company had cash on hand of $312,574, and an accumulated deficit of $27,543,659.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. The Company’s existing operational cash flow may not be sufficient to fund presently anticipated operations, and the Company will need to raise additional funds through alternative sources of financing. There is no assurance that we will be able to obtain additional funding when it is needed, or that such funding, if available, will be obtainable on terms acceptable to us. If we cannot obtain needed funds, we may be forced to reduce or cease our activities with consequent loss to investors. In addition, should we incur significant presently unforeseen expenses or delays, we may not be able to accomplish our goals. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. If the Company is unable to obtain sufficient funding, our business, prospects, financial condition and results of operations will be materially and adversely affected, and we may be unable to continue as a going concern.
The gourmet and snack food markets are dominated by several large strong food producers.
A challenge facing potential new or expanding entrants in the market is the dominance of leading snack food producers, particularly industry leader PepsiCo. Large producers experience a high degree of brand and consumer loyalty and possess sufficient capital to invest in extensive advertising and promotions to obtain a greater market share. Furthermore, companies such as PepsiCo benefit from higher profit margins when compared with small- to medium-sized operators, enabling them to lower their product prices to engage in price-based competition with competitors. Multinational producers also experience lower per-unit costs due to economies of scale and scope. Although these factors do not prevent a prospect from entering the industry, they may hamper the success of new entrants.
In addition, many industry players have established relationships with downstream retailers, which may be difficult for new entrants to secure. Typically, supermarkets give companies with established brands the most optimal shelf space. Moreover, larger producers have established relationships with upstream suppliers, an advantage that new entrants may find difficult to replicate.
During the last two fiscal years the Company has had four to five major customers that accounted for between 91- 99 % of its sales.
Historically, the Company has relied on a small number of customers to generate a large portion of its revenue. In 2021, five customers accounted for approximately 99% of the Company revenues. In 2020, customers accounted for approximately __% of the Company’s revenues. Loss of any one of these four customers would have a material adverse impact on our profitability and liquidity. Although we believe that we could locate replacement customers, the initial loss of such revenues could hamper on going production and distribution of the Company.
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No assurance of commercial success of any additional products.
The Company intends to seek and produce new products to add to its trademarked brands and to offer its buyers. The Company may spend a large portion of its revenues in locating and producing such products and the possible inability to market such products to the retail chain buyers, or the failure of such products to sell successfully once marketed could significantly impact the operations of the Company and impact its future ability to market other new products.
Failure to manage our growth effectively could cause our business to suffer and have an adverse effect on our financial condition and operating results.
Failure to manage our growth effectively could cause our business to suffer and have an adverse effect on our financial condition and operating results. To manage our growth effectively, we must continually evaluate and evolve our business and manage our employees, operations, finances, technology and development, and capital investments efficiently. Our efficiency, productivity and the quality of our business may be adversely impacted if we fail to appropriately coordinate across our business operations. Additionally, rapid growth may place a strain on our resources, infrastructure, and ability to maintain the quality of our production. If and when our structure becomes more complex as we add additional staff, we will need to improve our operational, financial and management controls as well as our reporting systems and procedures. Our failure to manage our growth could disrupt our operations and ultimately prevent us from generating revenues.
As a food production company, all of our products must be compliant with regulations by the Food and Drug Administration, or FDA. Any non-compliance with the FDA could harm our business.
We must comply with various FDA rules and regulations, including those regarding product manufacturing, food safety, required testing and appropriate labeling of our products. While our products are compliance with current regulations by the FDA, it is possible that regulations by the FDA and its interpretation thereof may change over time. As such, there is a risk that our products could become non-compliant with the FDA’s regulations and any such non-compliance could harm our business.
Our intellectual property rights are critical to our success, and the loss of such rights could materially adversely affect our business.
We regard our trademarks and other intellectual property rights as critical to our success and attempt to protect such intellectual property with registered and common law trademarks, restrictions on disclosure and other actions to prevent infringement. However, there can be no assurance that other third parties will not infringe or misappropriate our trademarks and similar proprietary rights. If we lose some or all of our intellectual property rights, our business may be materially adversely affected.
We may be subject to claims alleging the intellectual property subject to our licensing agreements is violating the intellectual property rights of others.
We may face significant expense and liability as a result of litigation or other proceedings relating to intellectual property rights of others. We could be required to participate in interference proceedings involving issued patents and pending applications of another entity. The cost to us of any such proceeding could be substantial. An adverse outcome in an interference proceeding could require us to cease using the technology, substantially modify it or to license rights from prevailing third parties. There is no guarantee that any prevailing owner of intellectual property would offer us a license so that we could continue to engage in our activities, or that such a license is made available to us, could be acquired on commercially acceptable terms. In addition, third parties may, in the future, assert other intellectual property infringement claims against us with respect to our services, technologies or other matters.
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We may be subject to significant liability should the consumption of any of our products cause or be claimed to cause illness or physical harm.
We sell products for human consumption, which involves risks such as product contamination or spoilage, product tampering, other adulteration, mislabeling and misbranding. Under certain circumstances, we may be required to, or may voluntarily, recall or withdraw products. Such withdrawal may negatively and significantly impact our sales and profitability for a period of time and could result in significant losses depending on the costs of the recall, the destruction of product inventory, product availability, competitive reaction and customer and consumer reaction. We may also be subject to claims or lawsuits resulting in liability for actual or claimed injuries, illness or death. Any of these events may result in a material adverse effect on our business. Even if a product liability claim or lawsuit is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion that our products caused illness or physical harm could adversely affect our reputation with existing and potential customers and consumers and our corporate and brand image. Moreover, certain claims or liabilities of this sort might not be covered by our insurance or by any rights of indemnity or contribution that we may have against others. We maintain product liability insurance in an amount that is required by our customers/retailers. However, we cannot be sure that we will not incur claims or liabilities for which we are not insured or that exceed the amount of our insurance coverage. A product liability judgment against us or a product recall could have a material adverse effect on our business, consolidated financial condition, results of operations or liquidity.
Limitations on director and officer liability and indemnification of our officers and directors by us may discourage stockholders from bringing suit against a director.
Our Certificate of Incorporation and Bylaws provide, with certain exceptions as permitted by governing state law, that a director or officer shall not be personally liable to us or our stockholders for breach of fiduciary duty as a director, except for acts or omissions. During 2021, the Company obtained $5.0 million of Directors and Officers insurance.
Risks Related to COVID-19
The uncertainty and extent of the COVID-19 pandemic may continue to have an adverse effect on our operations and on the global capital markets.
The current outbreak of COVID-19 could continue to have a material and adverse effect on the Company’s business operations. We sell our products throughout the United States and global markets to buyers which typically represent recognized large retail chain stores. Any disruptions or restrictions on the Company’s ability to travel or to distribute its products in the United States and in global markets, as well as temporary closures of production facilities would likely impact our sales and operating results. In addition, Covid-19 has resulted in a widespread health crisis that could adversely affect the economies and financial markets of many other countries, resulting in an economic downturn that could affect demand for our products and significantly impact our operating results.
The extent to which our results continue to be affected by COVID-19 will largely depend on future developments which cannot be accurately predicted, including the duration and scope of the pandemic, governmental and business responses to the pandemic and the impact on the global economy, demand for our products, and our ability to provide our products, particularly as result of our employees working remotely and/or the closure of certain offices and production facilities. While these factors are uncertain, the COVID-19 pandemic or the perception of its effects could continue to have a material adverse effect on our business, financial condition, results of operations, or cash flows.
Risks Related to Our Common Stock
The Company’s sole officer beneficially owns and will continue to own a majority of the Company’s common stock and, as a result, can exercise control over shareholder and corporate actions.
Paul Adler, the founder and President of the Company, is currently the beneficial owner of approximately ___% of the Company’s outstanding Common Stock, and assuming that Williamsburg purchases the maximum number of the Shares pursuant to the Purchase Agreement, will own approximately 68.7% of the Company’s then outstanding Common Stock. In addition, Mr. Adler owns 1,000 shares of Series A Super Voting Preferred Stock as such, he will have approximately 95.2% of the voting power in the Company and thus be able to control all matters requiring approval by shareholders, including the election of directors and approval of significant corporate transactions.
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The Company has authorized the issuance of preferred stock with certain preferences.
The Company is authorized to issue up to 20,000,000 shares of $0.0001 par value preferred stock. The board of directors of the Company (the “Board”) has the power to establish the dividend rates, liquidation preferences, and voting rights of any series of preferred stock, and these rights may be superior to the rights of holders of the Shares. The Board may also establish redemption and conversion terms and privileges with respect to any shares of preferred stock. Any such preferences may operate to the detriment of the rights of the holders of the Shares, and further, could be used by the Board as a device to prevent a change in control of the Company. To the Company has designated 1,000,000 shares of Series A Super Voting Preferred Stock, each of which votes with the Common Stock and has 100,000 votes. Mr. Adler, our sole officer and a member of the Board, owns all the issued 1,000 shares of this class of preferred stock which gives him an additional 100,000,000 voting rights in any shareholder meeting.
Future capital raises may dilute our existing shareholders’ ownership, the value of their equity securities and/or have other adverse effects on our operations.
If we raise additional capital by issuing equity securities in connection with equity financings, our existing shareholder’ percentage ownership may decrease, and these shareholders may experience substantial dilution. If we raise additional funds by issuing debt instruments, these debt instruments could impose significant restrictions on our operations, including liens on our assets. If we raise additional funds through collaborations and licensing arrangements, we may be required to relinquish some rights to our technologies or products, or to grant licenses on terms that are not favorable to us or could diminish the rights of our shareholders. Furthermore, if we offer to sell our shares of Common Stock in subsequent offerings for the purchase price that is less than the purchase price of shares of Common Stock offered pursuant to this Report, this may impact the value of equity securities of the shareholders that are purchasing our shares of Common Stock in the offering pursuant to this Report. In addition, the issuance of such additional shares may impact the ability of any investor to sell their shares once such shares are eligible for sale.
The sale of shares of our Common Stock to Williamsburg may cause dilution, and the subsequent resale of the shares of our Common Stock acquired by Williamsburg, or the perception that such resales may occur, could cause the price of our Common Stock to fall.
Under the Purchase Agreement, we may require Williamsburg to purchase up to $5.0 million of our Common Stock, except that, pursuant to the terms of the Purchase Agreement, we would be unable to sell shares to Williamsburg if such purchase would result in its beneficial ownership of more than 4.99% of our outstanding Common Stock. After Williamsburg has acquired our shares, it may sell all, some, or none of those shares. Therefore, sales to Williamsburg by us could result in substantial dilution to the interests of other holders of our Common Stock. Additionally, the sale of a substantial number of shares of our Common Stock to Williamsburg, or the anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish. Under the Purchase Agreement, Williamsburg’s per-share purchase price for our shares will be equal to 90% of the VWAP average of the Common Stock during five consecutive days immediately following the clearing date associated with the applicable put notice during which the purchase price is valued. Depending on market liquidity at the time, resales of these shares may cause the trading price of our Common Stock to fall.
Williamsburg will pay less than the then-prevailing market price for our Common Stock.
We will sell shares of our Common Stock to Williamsburg pursuant to the Purchase Agreement at 90% of the VWAP average of the Common Stock during five consecutive days immediately following the clearing date associated with the applicable put notice during which the purchase price is valued. Williamsburg has a financial incentive to sell our Common Stock immediately upon receiving the shares to realize the profit equal to the difference between the discounted price and the market price. If Williamsburg sells the shares, the market price of our Common Stock could decrease.
The Company’s election not to opt out of JOBS Act extended accounting transition period may not make its financial statements easily comparable to other companies.
Pursuant to the JOBS Act, as an emerging growth company, the Company can elect to opt out of the extended transition period for any new or revised accounting standards that may be issued by the PCAOB or the SEC. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the standard for the private company. This may make comparison of the Company’s financial statements with any other public company which is not either an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible as possible different or revised standards may be used.
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“Penny Stock” rules may make buying or selling our Common Stock difficult. Limitations upon Broker-Dealers Effecting Transactions in “Penny Stocks”
Trading in our Common Stock is subject to material limitations as a consequence of regulations which limit the activities of broker-dealers effecting transactions in “penny stocks.” Pursuant to Rule 3a51-1 under the Exchange Act, our Common Stock is a “penny stock” because it (i) is not listed on any national securities exchange (ii) has a market price of less than $5.00 per share, and (iii) its issuer (the Company) has net tangible assets less than $2,000,000 (if the issuer has been in business for at least three (3) years) or $5,000,000 (if the issuer has been in business for less than three (3) years).
Rule 15g-9 promulgated under the Exchange Act imposes limitations upon trading activities on “penny stocks”, which makes selling our Common Stock more difficult compared to selling securities which are not “penny stocks.” Rule 15a-9 restricts the solicitation of sales of “penny stocks” by broker-dealers unless the broker first (i) obtains from the purchaser information concerning his financial situation, investment experience and investment objectives, (ii) reasonably determines that the purchaser has sufficient knowledge and experience in financial matters that the person is capable of evaluating the risks of investing in “penny stocks”, and (iii) delivers and receives back from the purchaser a manually signed written statement acknowledging the purchaser’s investment experience and financial sophistication.
Rules 15g-2 through 15g-6 promulgated under the Exchange Act require broker-dealers who engage in transactions in “penny stocks” first to provide their customers with a series of disclosures and documents, including (i) a standardized risk disclosure document identifying the risks inherent in investing in “penny stocks”, (ii) all compensation received by the broker-dealer in connection with the transaction, (iii) current quotation prices and other relevant market data, and (iv) monthly account statements reflecting the fair market value of the securities.
There can be no assurance that any broker-dealer which initiates quotations for the Common Stock will continue to do so, and the loss of any such broker-dealer likely would have a material adverse effect on the market price of our Common Stock.
FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.
In addition to the “penny stock” rules described below, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our Common Stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
Because our Common Stock is deemed a low-priced “penny stock,” it will be cumbersome for brokers and dealers to trade in our Common Stock, making the market for our Common Stock less liquid and negatively affect the price of our stock.
We will be subject to certain provisions of the Exchange Act, commonly referred to as the “penny stock” rules as defined in Rule 3a51-1. A penny stock is generally defined to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Since our stock is deemed to be a penny stock, trading is subject to additional sales practice requirements of broker-dealers. These require a broker-dealer to:
| ● | Deliver to the customer, and obtain a written receipt for, a disclosure document; | |
| ● | Disclose certain price information about the stock; |
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| ● | Disclose the amount of compensation received by the broker-dealer or any associated person of the broker-dealer; | |
| ● | Send monthly statements to customers with market and price information about the penny stock; and | |
| ● | In some circumstances, approve the purchaser’s account under certain standards and deliver written statements to the customer with information specified in the rules. |
Consequently, penny stock rules and FINRA rules may restrict the ability or willingness of broker-dealers to trade and/or maintain a market in our Common Stock. Also, prospective investors may not want to get involved with the additional administrative requirements, which may have a material adverse effect on the trading of our shares.
We are an “emerging growth company” under the JOBS Act of 2012 and a “smaller reporting company” and, as a result of the reduced disclosure and governance requirements applicable to emerging growth companies and smaller reporting companies, our Common Stock may be less attractive to investors.
We are an “emerging growth company”, as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our Common Stock less attractive because we may rely on these exemptions. If some investors find our Common Stock less attractive as a result, there may be a less active trading market for our Common Stock and our stock price may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to take advantage of the extended transition period for complying with new or revised accounting standards.
We will remain an “emerging growth company” until the earlier of (i) the last day of the year following the fifth anniversary of the date of the completion of our initial public offering, (ii) the last day of the year in which we have total annual gross revenue of at least $1.07 billion, (iii) the last day of the year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our Common Stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year, or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period..
Even after we no longer qualify as an “emerging growth company,” we may still qualify as a “smaller reporting company,” which would allow us to continue to take advantage of many of the same exemptions from disclosure requirements, including, among other things, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, presenting only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and reduced disclosure obligations regarding executive compensation in this Report and our periodic reports and proxy statements.
Our status as an “emerging growth company” under the JOBS Act may make it more difficult to raise capital as and when we need it.
Because of the exemptions from various reporting requirements provided to us as an “emerging growth company” and because we will have an extended transition period for complying with new or revised financial accounting standards, we may be less attractive to investors and it may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in our industry. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected.
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Since we are traded on the OTC Pink Market, an active, liquid trading market for our Common Stock may not develop or be sustained. If and when an active market develops the price of our common stock may be volatile.
Presently, our Common Stock is traded on the OTC Pink Market. There is a very limited trading in our stock and there is no assurance that an active market will develop. In the absence of an active trading market, investors may have difficulty buying and selling or obtaining market quotations, market visibility for shares of our Common Stock may be limited, and a lack of visibility for shares of our Common Stock may have a depressive effect on the market price for shares of our Common Stock. The lack of an active market impairs your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value of your shares. An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares.
Trading in stocks quoted on the OTC Pink Market is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. The securities market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of shares of our Common stock. Moreover, the OTC Pink Market is not a stock exchange and is not an established market, and trading of Securities is often more sporadic than the trading of securities listed on a national stock exchange like the NYSE. Accordingly, you may have difficulty reselling any shares of Common Stock.
| Item 1B. | Unresolved Staff Comments |
None
| Item 2. | Properties |
The Company does not own real properties. 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 into a 60-month lease $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 facilities are adequate for its needs.
The Company’s website is www.360worldsnacks.com.
| Item 3. | Legal Proceedings |
There are no pending, threatened or actual legal proceedings in which the Company is a party.
| Item 4. | Mine Safety Disclosures. |
Not applicable.
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PART II
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Our Common Stock is currently quoted on the OTC Pink marketplace of OTC Markets Group, Inc., an inter-dealer quotation system, under the symbol “GDMK.” However, there is currently only a limited trading market for our Common Stock and there is no assurance that a regular trading market will ever develop.
On March 8, 2022, the last reported closing price of our Common Stock was $0.18 per share.
Holders
As of March 11, 2022, there were 33 shareholders of record of our Common Stock.
Dividends
We have never declared or paid any cash dividends on our common stock. We intend to retain future earnings, if any, to finance the expansion of our business. As a result, the Company does not anticipate paying any cash dividends in the foreseeable future.
Recent Sales of Unregistered Securities
Except as set forth below, there were no sales of equity securities during the period covered by this Annual Report that were not registered under the Securities Act and were not previously reported in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K filed by the Company.
Securities Authorized for Issuance Under Equity Compensation Plans
We do not presently maintain any equity compensation plans and have not maintained any such plans since our inception.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
| Item 6. | Selected Financial Data |
As a smaller reporting company, we are not required to provide this information
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| ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
THIS SECTION OF THE ANNUAL REPORT INCLUDES A NUMBER OF FORWARD-LOOKING STATEMENTS THAT REFLECT OUR CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE. FORWARD-LOOKING STATEMENTS ARE OFTEN IDENTIFIED BY WORDS LIKE: “BELIEVE,” “EXPECT,” “ESTIMATE,” “ANTICIPATE,” “INTEND,” “PROJECT” AND SIMILAR EXPRESSIONS, OR WORDS THAT, BY THEIR NATURE, REFER TO FUTURE EVENTS. YOU SHOULD NOT PLACE UNDUE CERTAINTY ON THESE FORWARD-LOOKING STATEMENTS, WHICH APPLY ONLY AS OF THE DATE OF THIS REPORT. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM HISTORICAL RESULTS OR OUR PREDICTIONS.
OUR CONSOLIDATED FINANCIAL STATEMENTS ARE STATED IN UNITED STATES DOLLARS (USD OR US$) AND ARE PREPARED IN ACCORDANCE WITH UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. ALL REFERENCES TO “COMMON STOCK” REFER TO THE COMMON SHARES IN OUR CAPITAL STOCK.
Overview
The Company was incorporated on December 1, 2017 as a Delaware corporation under the name “Dense Forest Acquisition Corporation,” Prior to the acquisition of GDHI as a subsidiary, the Company had no operations other than the administrative operations involved with the change in control. The information discussed herein below reflects the results of the Company’s subsidiary, GDHI, an operating company in the snack and gourmet food production, marketing, and distribution industry.
Recent Developments
Equity Purchase Agreement and Registration Rights Agreement with Williamsburg
On November 2, 2021, the Company entered into the Purchase Agreement (the “Purchase Agreement”) with Williamsburg Venture Holdings, LLC (“Williamsburg”), pursuant to which the Company shall have the right, but not the obligation, to direct Williamsburg, an unrelated third party, to purchase up to $5,000,000 of its Common Stock . The Purchase Agreement provides that the Company can sell the shares of Common Stock (the “Put Shares”) to Williamsburg from time-to-time over the 12-month period commencing on the date commencing on November 2, 2021, and ending on the earlier of (i) the date on which Williamsburg shall have purchased up to $5,000,000 of shares, (ii) November 2, 2022, or (iii) written notice of termination by the Company to Williamsburg, which shall not occur at any time that Williamsburg holds any of the shares it purchased in connection with the applicable Put Notice. Each notice to Williamsburg shall state the number of shares of the Common Stock Williamsburg is required to purchase, not to exceed a value of the lower of 200% of the average daily trading volume and $500,000. The price per share of Common Stock shall be 90% of the average of the volume weighted average price of the Company’s Common Stock for five trading days following the date of the delivery of the shares.
As consideration for its commitment to purchase shares pursuant to the Purchase Agreement, the Company issued to Williamsburg 50,000 shares of Common Stock.
There is no guarantee that we will be able to meet the conditions under the Purchase Agreement or that we will be able to draw down any portion of the amounts available under the Purchase Agreement (the “Commitment Shares”).
We also entered into the Registration Rights Agreement with Williamsburg, pursuant to which, we have filed a registration statement with the SEC relating to Williamsburg’s resale of any shares of Common Stock it purchases, including the Commitment Shares. The effectiveness of this Registration Statement, which is currently being reviewed by the SEC, is a condition precedent to our ability to sell shares of our Common Stock to Williamsburg under the Purchase Agreement.
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Discussion of the Years Ended 2021 and 2020
Revenues and Cost of Sales
Sales for the year ended December 31, 2021 were $2,665,017 compared to sales for the year ended December 31, 2020 of $1,660,726, an increase of $1,004,291or approximately 60.5%. Our sales increases in the 2021 period are attributable to the addition of a new customer, new products as well as increased sales to existing customers; offset by the impact of Covid-19.
Historically, the Company has relied on a small number of customers to generate a large portion of its revenue. In 2021, five customers accounted for approximately 99% of the Company revenues. In 2020, four customers accounted for 91% of the Company’s revenues. Loss of any one of these five customers would have a material adverse impact on the Company’s profitability and liquidity.
For the year ended December 31, 2021, gross profit was $1,035,901 or 38.9 % of revenue compared to gross profit of $660,815 or 39.1% of revenue. The slight decrease in gross profit in 2021 as a percentage of sales (“gross margin”) compared to 2020, is attributable to increased shipping and container costs during the fourth quarter of 2021.
Operating expenses
Operating expenses for the year ended December 31, 2021, were $2,237,178 compared to $26,821,661 for the same period ended December 31, 2020. Operating expenses consisted of payroll and taxes, legal and professional fees, rent and selling, general and administrative expenses. The 2020 period includes a non-cash charge of $26,020,400 in stock-based compensation related to the issuance of the Series A Preferred Stock with super-voting rights to the Company’s chief executive officer. Excluding the one -time charge of $26,020,400, operating expenses were $2,237,178 in 2021 compared to $801,261. The increase in operating expenses in 2021 compared to 2020 are attributable to the payroll associated with the hiring of an operations manager, an increase of $953,063 in stock based compensation for consultants and services providers, and an increase of advertising expense of approximately $80,000.
Other income and (expense)
Other income and expense is comprised of other income items and interest expense. Other expense was $12,601 for the year ended December 31, 2021, compared to $5,785 in other income during the same period ended December 31, 2020. The decrease in other income and expense is attributable to a reduction of $21,698 in interest expense in the 2021 period more than offset by income from the forgiveness of 40,084 in PPP loans in 2020 period.
Liquidity and Capital Resources
As of December 31, 2021, and 2020, the Company had $312,574 and $62,555 in cash on hand, respectively. Net cash used in operating activities was $438,415 compared to $41,597 for the same period ended December 31, 2020. The increase in net cash used in operating activities is primarily attributable to an increase in net loss in the 2021 period (net of non-cash charges) and a significant increase in inventory levels necessitated by world-wide supply chain issues which has slowed down the timing of inventory imported by the Company from overseas.
Cash flows from financing activities increased to $696,432 for the period ended December 31, 2021, compared to $71,969 during the same period ended December 31, 2020. The increase in net cash provided from financing activities is attributable to the receipt of $379,165 in government PPP loans in 2021 compared to $149,900 in 2020, as well as $300,000 in proceeds for private placements of common stock in 2021 compared to zero in the 2020 period .
A large portion of the Company’s liquidity in both 2021 and 2020 was provided by the SBA COVID-19 loans and EIDL loans thus allowing the Company to reduce its reliance on factoring. There can be no assurances that other forms of financing on reasonable terms, or continued higher levels of factoring will be available to the Company in the future. Nor can there be any assurance that the Company will achieve positive cash flow from operations.
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Seasonality
The Company’s business is not subject to seasonality.
Off-Balance Sheet Arrangements.
The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires making estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Going Concern
There is substantial doubt about the Company continuing as a going concern based on the Company’s accumulated deficit and accrued liabilities. For the period ended December 31, 2021, the Company had a net loss of $1,213,879 and had a stockholder’s deficit of $27,543,659.
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.
| Item 7A | Quantitative and Qualitative Disclosures About Market Risks |
As a smaller reporting company, we are not required to provide this information
| Item 8. | Financial Statements and Supplementary Data |
The financial statements for the year ended December 31, 2021, and 2020 are attached included in this report beginning on page F-1.
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
There were no disagreements with the Company’s accountants on accounting or financial disclosure for the period covered by this report.
| Item 9A. | Controls and Procedures |
Pursuant to Rules adopted by the Securities and Exchange Commission, the Company evaluated the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Exchange Act Rules. This evaluation was done as of the end of the fiscal year under the supervision and with the participation of the Company’s principal executive officer (who is also the principal financial officer). There have been no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of the evaluation. Based upon that evaluation, the principal officer believes that the Company’s disclosure controls and procedures are effective in gathering, analyzing, and disclosing information needed to ensure that the information required to be disclosed by the Company in its periodic reports is recorded, summarized, and processed timely. The principal executive officer is directly involved in the day-to-day operations of the Company. Management has determined that disclosure controls and procedures were effective as of December 31, 2021.
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Management’s Report of Internal Control over Financial Reporting
The Company is responsible for establishing and maintaining adequate internal control over financial reporting in accordance with Rule 13a-15 of the Securities Exchange Act of 1934. The Company’s sole officer, its president, conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013). Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2021, based on those criteria. A control system can provide only reasonable, not absolute, assurance that the objectives of the control system are met and no evaluation of controls can provide absolute assurance that all control issues have been detected.
BF Borgers CPA PC., Lakewood, Colorado, the independent registered public accounting firm of the Company, has not issued an attestation report on the effectiveness of the Company’s internal control over financial reporting as no such report is required for a smaller reporting company.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during our fourth quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| Item 9B. | Other Information |
Not applicable.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
PART III
| Item 10. | Directors, Executive Officers, and Corporate Governance |
Officers and Directors
The Directors and Officers of the Company are as follows:
| Name | Age | Position | Director/Executive Officer Since | |||
Paul Adler
|
45 | President, Chief Financial Officer, Secretary, Treasurer, Director |
June 13, 2018 | |||
James Curtis Donegan |
64 | Director |
February 24, 2021 | |||
Michael Cascione |
62 | Director |
February 24, 2021 | |||
Sandra G. Williams |
76 | Director |
February 24, 2021 | |||
| David Natan | 68 | Director | February 24, 2021 |
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Officers and Directors of Global Diversified Holdings, Inc. (“GDHI”)
The Company’s operating subsidiary, GDHI, has a separate board of directors from the Company which consists of:
| Name | Position | |
| Paul Adler | President, Secretary, CFO, Director |
The Company is authorized to have at least one director but no more than five. Each of the Company’s directors serves for a term of one year or until a successor is elected and qualified. Set forth below is a brief description of the background and business experience of our executive officers and directors.
Paul Adler
President, Secretary, Chief Financial Officer and a director of the Company.
Paul Adler has over a decade of experience in food manufacturing and marketing industries having served as a board member in two food manufacturing companies. In 2012, Mr. Adler established Fruttata Brand, a line of freeze-dried healthy fruit snacks, under the corporate umbrella of Global Diversified Holdings, Inc., the subsidiary of the Company. Since 2012, Mr. Adler has worked with Global Diversified Holdings Inc., our subsidiary, in which he currently serves as a director, President, Chief Financial Officer and Secretary, to continue its development as a manufacturer, marketer and supplier of unique products. Mr. Adler has extensive knowledge of day-to-day business operations ranging from Wall Street companies to running a private company and has been successful at establishing long-lasting business relationships throughout his career. Mr. Adler’s extensive experience in the industry led to the decision to appoint him to the board of directors.
James Curtis Donegan has 30 years sales and marketing experience in the food industry. Mr. Donegan’s has been the principal of Crestview Consultants since 2006 serving various food industry clients. Prior thereto he worked for many food industry companies including P&G from 1979 to 1981, Pepsi from 1981 to 1983, Ragu Foods – Unilever from 1983 to 1989, McCain Elio’s Foods from 1989 to 1992 and others. Mr. Donegan’s experience in the food industry led to the decision to appoint him to the board of directors.
Michael Cascione is the founder and president of Group C, whose various companies provide Pantry, Micro Markets, Coffee and Vending services. Mr. Cascione’s original startup, CC Vending (CCV), began in 1989 was with a single beverage machine. CCV has subsequently grown into one of the largest vending companies on the East Coast, servicing over 15,000 machines, while managing the operations of several other companies throughout four states. Mr. Cascione, credits his early embrace and investment in technology as one of the keys to his and the company’s success. CCV currently develops new technology for Micro-Markets and creates healthy products for the K-12 market, where it services the nation’s largest public school system, the New York City Department of Education. In addition, Group C’s Metropolitan Coffee House roasts and packages its own coffee for OCS accounts throughout the tri-state area. Mr. Cascione continues to guide Group C’s expansion in both technology and geography; committing resources to research and development, as well as corporate acquisition. Mr. Cascione’s extensive experience in the industry led to the decision to appoint him to the board of directors.
Sandra G. Williams has been a consultant to a New York City sportswear and dress manufacturer since May 2018. Prior thereto was at TJX Corporation in various capacities from 2000 to 2018. Mrs. William’s experience led to the decision to appoint her to the board of directors.
David Natan has served as President and Chief Executive Officer of Natan & Associates, LLC, Parkland, Florida, a privately held consulting firm offering chief financial officer services to public and private companies in a variety of industries. In addition, since April 2020 Mr. Natan has served as Executive Vice President and Chief Financial Officer for Airborne Motorworks, Inc., Spokane, WA, a privately-held aerospace transportation company, Since February 2021, Mr. Natan is a director and Chairperson of the Company’s Audit Committee. In February 2022 Mr. Natan became a director and chair of the Audit committee for Sunshine Biopharma, a Nasdaq listed biotechnology company. From February 2010 to May 2020, Mr. Natan served as Chief Executive Officer of ForceField Energy, Inc. a company focused on the solar industry and LED lighting products. He was also Chairman of the Board of this company from April 2015 to May 2020. Additionally, Mr. Natan served in various roles of increasing responsibility with Deloitte & Touche LLP, a global consulting firm, as well as a member of the Board of Directors of various companies. Mr. Natan holds a B.A. in Economics from Boston University.
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Directors Donegan, Cascione, Williams and Natan were appointed to the Board on February 24, 2021. On March 1, 2021, the Company granted 25,000 shares of Common Stock to each of these directors. In addition, the Company granted Mr. Natan another 25,000 shares of Common Stock in connection with his appointment as the member of the Audit Committee.
Director Independence
With the exception of Paul Adler, our Board has determined that all of our directors are independent, as that term is defined by NASDAQ Marketplace Rule 5605(a)(2). In assessing the independence of the directors, the Board considers any transactions, relationships and arrangements between our Company and our independent directors or their affiliated companies. This review is based primarily on responses of the directors to questions in a director and officer questionnaire regarding employment, business, familial, compensation and other relationships with our Company or our management.
Term of Office
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our Board and hold office until removed by the Board.
Committees of the Board
Audit Committee
The Company established its Audit Committee on April 5, 2021. The Audit Committee will (a) assist the Board in fulfilling its oversight of: (i) the quality and integrity of the Company’s financial statements; (ii) the Company’s compliance with legal and regulatory requirements relating to the Company’s financial statements and related disclosures; (iii) the qualifications and independence of the Company’s independent auditors; and (iv) the performance of the Company’s independent auditors; and (b) prepares any reports that the rules of the SEC require be included in the Company’s annual proxy statement. We appointed our new director, David Natan, as the member of the Audit Committee. Our Board may designate from among its members to appoint additional members to the Audit Committee in the future. We have not adopted a written audit committee charter at this time.
Other than the audit committee, the Company currently does not have any other committees, nor does the Company have a written nominating, compensation or audit committee charter. The Board believes that it is not necessary to have such committees, at this time, because they can adequately perform the functions of such committees. However, the Board may establish such committees in the near future upon the Board’s determination.
The Company does not currently have any defined policy or procedural requirements for shareholders to submit recommendations or nominations for directors. The Board believe that, given the stage of the Company’s development, a specific nominating policy would be premature and of little assistance until our business operations develop to a more advanced level. The Company does not currently have any specific or minimum criteria for the election of nominees to the Board and does not have any specific process or procedure for evaluating such nominees. The Board will assess all candidates, whether submitted by management or shareholders, and make recommendations for election or appointment. A shareholder who wishes to communicate with the Board may do so by directing a written request addressed to our President and Director, at the address appearing on the first page of this filing.
Family Relationships
There are no family relationships between any of our directors or executive officers, other than one of our advisors, Anthony Cascione, who is the son of Michael Cascione, a director.
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Certain Legal Proceedings
There are no legal proceedings that have occurred within the past ten years concerning our directors, or control persons which involved a criminal conviction, a criminal proceeding, an administrative or civil proceeding limiting one’s participation in the securities or banking industries, or a finding of securities or commodities law violations.
Oversight
Effective risk oversight is an important priority of the Company. Because risks are considered in virtually every business decision, the Directors’ approach to risk oversight includes understanding the critical risks in the Company’s business and strategy, evaluating the Company’s risk management processes, allocating responsibilities for risk oversight among the full Board of Directors, and fostering an appropriate culture of integrity and compliance with legal responsibilities.
Corporate Governance
The Company promotes accountability for adherence to honest and ethical conduct; endeavors to provide full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with the SEC and in other public communications made by the Company; and strives to be compliant with applicable governmental laws, rules and regulations. The Company has not formally adopted a written code of business conduct and ethics that governs the Company’s employees, officers and Directors as the Company is not required to do so. Prior to the establishment of an audit committee, our Board was responsible for reviewing and making recommendations concerning the selection of outside auditors, reviewing the scope, results and effectiveness of the annual audit of the Company’s financial statements and other services provided by the Company’s independent public accountants. With the establishment of the audit committee, the audit committee will perform this and other functions, assisting the Board in fulfilling its oversight responsibilities.
Code of Ethics
The Company has not adopted a code of ethics.
Director of Operations.
Sergey Kats. Sergey Kats has started his employment with the Company as the director of operations on April 5, 2021. Prior to joining the Company as the director of operations, Mr. Kats has worked in major business banking institutions. From March 2019 to March 2021, Mr. Kats served as Vice President Senior Bank Business Banker at Capital One Bank. From March 2012 to March 2019, he was employed with JP Morgan Chase Bank, starting as a Business Banker and becoming a Vice President Business Relationship Manager. Mr. Kats received his Associate Degree in Business Administration at Nassau Community College in May 2007. We do not have a written employment agreement with Mr. Kats, but the Company made an oral arrangement to pay Sergey Kats an annual salary in the amount of $160,000. In addition, the Company issued 100,000 shares of its Common Stock to Mr. Kats upon his employment as a bonus.
Advisors
In addition to the management team, the Company has developed an advisory team that supports the Company and provides guidance and credibility and contacts as needed. The advisors do not receive compensation for their assistance to the Company. The advisors include:
Anthony Cascione. Anthony Cascione is a lifetime member of the vending industry and a partner in Group C. As the director of operations of Route Drive and Manager and a specialist in operations and logistics, Mr. Cascione’s deployment of cloud-based management and telemetry systems have helped CC Vending become one of the East Coast’s largest independent operators, with over 15,000 machines in a four-state area. He has similarly expanded Group C’s Micro Market facilities, which now operate throughout the region. Of particular note, is the 10-year extension of the New York City Department of Education contract, which was credited to Mr. Cascione’s management of the account and his stewardship throughout the renewal process. At the present time, there are over 3,000 machines operating in 1,400 schools. Mr. Cascione is committed to the continued growth of Group C and its various companies. His knowledge of the industry and passion for innovation, along with his leadership, has provided the structure and strategy to continue its expansion in both operations and geography. Anthony Cascione is the son of Michael Cascione.
| 21 |
Oleg Kaplun. In 2010, Mr. Kaplun started a food distribution company in New York to service specialty and ethnic markets. He has continued to grow his company by expanding the customer base and introducing products from all over the world. He has increased truck fleet by 6-fold and continues to seek new opportunities by branching out in other markets. Currently, the assortment of the products that his company offers is up to 2500 SKU’s. Before founding his distribution company, Mr. Kaplun ran a national distribution company in Israel and was instrumental in building a multinational distribution network.
| Item 11. | Executive Compensation |
Summary Compensation
| Name and principal position | Year | Compensation ($) | Bonus ($) | Stock awards ($) | Option awards ($) | Nonequity incentive plan compensation ($) | Nonqualified deferred compensation earnings ($) | Total ($) | All other compensation ($) | Total ($) | ||||||||||||||||||||||||||||||
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | |||||||||||||||||||||||||||||||
| Paul Adler | 2021 | 295,000 | 295,000 | |||||||||||||||||||||||||||||||||||||
| CEO, | 2020 | 210,000 | 210,000 | 210,000 | ||||||||||||||||||||||||||||||||||||
| President | ||||||||||||||||||||||||||||||||||||||||
| (1) | This compensation was paid to Paul Adler from the Company’s wholly-owned subsidiary, GDHI. The Company anticipates that it will continue paying such compensation to Mr. Adler with annual increases as approved by the Board. The Company may choose to pay an additional salary or stock to its executive management in the future. |
No retirement, pension, profit sharing, insurance programs, long-term incentive plans or other similar programs have been adopted by us for the benefit of our employees. We had no outstanding equity awards as of the date of this Report.
There were no outstanding equity awards made to any officers or directors as of December 31, 2020.
Employment Agreements, Termination of Employment, Change-in-Control Arrangements
The Company has not entered into any employment agreements with any officers or key personnel. In connection with Mr. Kats’ employment, the Company orally agreed to provide to Sergey Kats an annual cash salary of $160,000. As of the date of this Report, the Company has two employees, including Paul Adler, a director and the sole officer and the director of operations. There are no compensation plans or arrangements, including payments to be made by us, with respect to Paul Adler that would result from the resignation, retirement or any other termination.
The Company does not have any change-in-control agreements with any of its executive officers.
| 22 |
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters (1) |
The following table lists, as of March 9, 2022, the number of shares of Common Stock beneficially owned by (i) each person, entity or group (as that term is used in Section 13(d)(3) of the Exchange Act) known to the Company to be the beneficial owner of more than 5% of the outstanding Common Stock; (ii) each of our directors (iii) each of our Named Executive Officers and (iv) all executive officers and directors as a group. Information relating to beneficial ownership of Common Stock by our principal stockholders and management is based upon information furnished by each person using “beneficial ownership” concepts under the rules of the SEC. Under these rules, a person is deemed to be a beneficial owner of a security if that person directly or indirectly has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to dispose or direct the disposition of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the SEC rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary interest. The Company does not have any compensation plans. Except as noted below, each person has sole voting and investment power with respect to the shares beneficially owned and each shareholder’s address is c/o Global Diversified Marketing Group Inc, 4042 Austin Boulevard, Suite B, Island Park, New York 11558.
The percentages below are calculated based on 14,488,256 shares of Common Stock issued and outstanding as of March 9, 2021.
| Name and Position | Shares Owned | Percent of Class | ||||||
| Paul Adler President, CFO, Director | 12,375,200 | (1) | 85.4 | %(1) | ||||
| James Curtis Donegan, Director | 35,000 | * | ||||||
| Michael Cascione, Director | 25,000 | * | ||||||
| Sandra G. Williams, Director | 25,000 | * | ||||||
| David Natan, Director | 50,000 | * | ||||||
| All Officers and Directors as a Group (5 person) | 12,510,200 | 86.3 | % | |||||
* Less than 1%
| (1) | Includes 650,000 shares held by Mr. Adler’s spouse. |
The following table sets forth as of the date of this Annual Report, each person known by the Company to be an officer or director of the Company or a beneficial owner of five percent or more of the Company’s Series A Super Voting Preferred Stock.
| Name and Position | Shares Owned | Percent of Class | ||||||
| Paul Adler, President, CEO and Director | 1,000 | 100 | % | |||||
Each share of Series A Preferred votes with the Common Stock and has 100,000 votes. Accordingly, Mr. Adler has an additional 100,000,000 votes in addition to his 12,375,200 shares of Common Stock and together has an aggregate of 112,375,200 voting share equivalents equaling more than 98.1% of the voting power of our stock.
| Item 13. | Certain Relationships and Related Transactions and Director Independence |
The following is a description of transactions since January 1, 2020 to which we have been a party, in which the amount involved exceeded or will exceed $120,000, and in which any of our directors, executive officers or holders of more than 5% of our capital stock, or an affiliate or immediate family member thereof, had or will have a direct or indirect material interest.
During the years ended December 31, 2021 and 2020, the Company paid an annual salary to Paul Adler, the Company’s Chief Financial Officer and President, in the amount of $_295,000___ and $210,000, respectively, for the services provided to the Company by Mr. Adler.
On April 5, 2021, the Company hired Sergey Kats as the director of operations, and agreed to pay an annual salary in the amount of $160,000 to Mr. Kats for his services as the director of operations to be provided to the Company. In connection with his employment, the Company also issued to Mr. Kats an aggregate of 100,000 restricted shares of Common Stock, valued at $0.0001 per share or $10.00.
Directors Donegan, Cascione, Williams and Natan were appointed to the Board on February 24, 2021. On March 1, 2021, the Company granted 25,000 shares of Common Stock to each of these directors. In addition, the Company granted Mr. Natan another 25,000 shares of Common Stock in connection with his appointment as the member of the Audit Committee.
| Item 14. | Principal Accounting Fees and Services. Audit Fees |
The aggregate fees incurred for each of the last two years for professional services rendered by the independent registered public accounting firm for the audits of the Company’s annual financial statements and review of financial statements included in the Company’s Form 10-K and Form 10-Q reports and services normally provided in connection with statutory and regulatory filings or engagements were as follows:
| December 31, 2021 | December 31, 2020 | |||||||
| Audit-Related Fees | $ | 38,340 | 30,500 | |||||
The Company does not currently have an audit committee serving and as a result, its board of directors performs the duties of an audit committee. The board of directors will evaluate and approve in advance, the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services. The Company does not rely on pre-approval policies and procedures.
| 23 |
PART IV
| Item 15. | Exhibits, Financial Statement, Schedules |
EXHIBITS:
| 101.INS* | Inline XBRL Instance Document |
| 101.SCH* | Inline XBRL Schema Document |
| 101.CAL* | Inline XBRL Calculation Linkbase Document |
| 101.LAB* | Inline XBRL Label Linkbase Document |
| 101.PRE* | Inline XBRL Presentation Linkbase Document |
| 101.DEF* | Inline XBRL Definition Linkbase Document |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith
ITEM 16. FORM 10–K SUMMARY
None.
| 24 |
GLOBAL DIVERSIFIED MARKETING GROUP INC.
FINANCIAL STATEMENTS
DECEMBER 31, 2021
GLOBAL DIVERSIFIED MARKETING GROUP INC.
TABLE OF CONTENTS
DECEMBER 31, 2021
| F-1 |
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of Global Diversified Marketing Group, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Global Diversified Marketing Group, Inc. (the “Company”) as of December 31, 2021 and 2020, the related statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ BF Borgers CPA PC
BF Borgers CPA PC
We have served as the Company’s auditor since 2017.
Lakewood, CO
March 11, 2022
| F-2 |
Global Diversified Marketing Group, Inc.
Consolidated Balance Sheets
| December 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 312,574 | $ | 62,555 | ||||
| Accounts receivable | 174,579 | 134,570 | ||||||
| Prepaid expenses | 51,984 | 31,444 | ||||||
| Inventory | 664,337 | 350,615 | ||||||
| Other assets | 999 | 10,890 | ||||||
| Total current assets | 1,204,472 | 590,074 | ||||||
| Property and equipment, net | 833 | 1,389 | ||||||
| Operating lease right of use assets | 80,271 | 14,257 | ||||||
| Other assets-security deposit | 1,600 | 1,600 | ||||||
| Total assets | $ | 1,287,175 | $ | 607,320 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expense | 491,684 | $ | 472,514 | |||||
| Current portion of operating lease payable | 13,508 | 15,732 | ||||||
| Government loans payable | 529,065 | 149,900 | ||||||
| Loans payable | 37,807 | 20,540 | ||||||
| Lease liabilities | 66,763 | - | ||||||
| Total current liabilities | 1,072,063 | 658,686 | ||||||
| Total liabilities | 1,138,826 | 658,686 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ Equity(Deficit): | ||||||||
| Preferred stock, Series A $ par value, shares authorized, issued and outstanding | - | - | ||||||
| Common stock, $ par value, shares authorized; and issued and outstanding as of December 31, 2021 and December 31, 2020, respectively | 1,447 | 1,313 | ||||||
| Additional paid-in capital | 27,688,665 | 26,267,208 | ||||||
| Accumulated deficit | (27,543,659 | ) | (26,329,779 | ) | ||||
| Accumulated other comprehensive income | 1,895 | 9,892 | ||||||
| Total stockholders’ equity(deficit) | 148,349 | (51,366 | ) | |||||
| Total liabilities and equity | $ | 1,287,175 | $ | 607,320 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
| F-3 |
Global Diversified Marketing Group, Inc.
Consolidated Statements of Operations
| Year | Year | |||||||
| Ended | Ended | |||||||
| December 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Sales, net | $ | 2,665,017 | $ | 1,660,726 | ||||
| Cost of goods sold | 1,629,116 | 999,911 | ||||||
| Gross margin | 1,035,901 | 660,815 | ||||||
| Operating expenses: | ||||||||
| General and administrative expense -related party | - | 26,020,400 | ||||||
| Payroll and taxes | 657,760 | 241,018 | ||||||
| Legal and professional fees | 1,041,542 | 242,892 | ||||||
| Rent | 21,254 | 16,225 | ||||||
| Selling, general and administrative and expenses | 516,623 | 301,126 | ||||||
| Total operating expenses | 2,237,178 | 26,821,661 | ||||||
| Income (loss) from operations | (1,201,278 | ) | (26,160,846 | ) | ||||
| Other (expense) | ||||||||
| Interest expense | (12,601 | ) | (34,299 | ) | ||||
| Miscellaneous income | - | 40,084 | ||||||
| Total other (expense) | (12,601 | ) | 5,785 | |||||
| Income (loss) before income taxes | (1,213,879 | ) | (26,155,061 | ) | ||||
| Provision for income taxes (benefit) | - | - | ||||||
| Net loss | $ | (1,213,879 | ) | $ | (26,155,061 | ) | ||
| Basic and diluted earnings (loss) per common share | $ | (0.09 | ) | $ | (2.00 | ) | ||
| Weighted-average number of common shares outstanding: | ||||||||
| Basic and diluted | 14,011,246 | 13,076,590 | ||||||
| Comprehensive income (loss): | ||||||||
| Net income(loss) | $ | (1,213,879 | ) | (26,155,061 | ) | |||
| Unrealized gain on foreign exchange | 7,997 | 9,892 | ||||||
| Comprehensive income (loss) | $ | (1,205,882 | ) | $ | (26,145,169 | ) | ||
The accompanying notes are an integral part of the consolidated financial statements.
| F-4 |
Global Diversified Marketing Group, Inc.
Consolidated Statements of Changes in Stockholders’ Equity
| Accumulated | ||||||||||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | Comprehensive | Stockholders’ | |||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Capital | Deficit | Income(Loss) | Equity | |||||||||||||||||||||||||
| Balance, December 31, 2019 | - | $ | 13,010,200 | $ | 1,301 | $ | 78,169 | $ | (174,718 | ) | $ | $ | (95,248 | ) | ||||||||||||||||||
| Issuance of super-voting preferred stock | 1,000 | 26,020,400 | 26,020,400 | |||||||||||||||||||||||||||||
| Common stock issued for services | 122,318 | 12 | 168,639 | 168,651 | ||||||||||||||||||||||||||||
| Change in foreign currency trnaslation | 9,892 | 9,892 | ||||||||||||||||||||||||||||||
| Net income (loss) | (26,155,061 | ) | (26,155,061 | ) | ||||||||||||||||||||||||||||
| Balance, December 31, 2020 | 1,000 | $ | 13,132,518 | $ | 1,313 | 26,267,208 | (26,329,779 | ) | $ | 9,892 | $ | (51,366 | ) | |||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | Comprehensive | Stockholders’ | |||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Capital | Deficit | Income(Loss) | Equity | |||||||||||||||||||||||||
| Balance, December 31, 2020 | 1,000 | $ | 13,132,518 | $ | 1,313 | $ | 26,267,208 | $ | (26,329,779 | ) | $ | 9,892 | $ | (51,366 | ) | |||||||||||||||||
| Common stock issued for services | 925,110 | 93 | 1,121,499 | 1,121,591 | ||||||||||||||||||||||||||||
| Common stock issued in private placements | 415,628 | 42 | 299,958 | 300,000 | ||||||||||||||||||||||||||||
| Net income(loss) | (1,213,879 | ) | (1,213,879 | ) | ||||||||||||||||||||||||||||
| Change in foreign currency translation | (7,997 | ) | (7,997 | ) | ||||||||||||||||||||||||||||
| Balance, December 31, 2021 | 1,000 | $ | 14,473,256 | $ | 1,447 | $ | 27,688,665 | $ | (27,543,659 | ) | $ | 1,895 | $ | 148,349 | ||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
| F-5 |
Global Diversified Marketing Group, Inc.
Consolidated Statements of Cash Flows
| Year | Year | |||||||
| Ended | Ended | |||||||
| December 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities | ||||||||
| Net income (loss) | $ | (1,213,879 | ) | $ | (26,155,061 | ) | ||
| Adjustments to reconcile net loss to cash used in operating activities: | ||||||||
| Depreciation | 556 | 556 | ||||||
| Stock-based compensation | 26,020,400 | |||||||
| Common stock issued for services | 1,121,592 | 168,529 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (40,009 | ) | (82,286 | ) | ||||
| Prepaid expenses | (20,539 | ) | 2,732 | |||||
| Right of use assets | (66,014) | 16,220 | ||||||
| Inventory | (313,722 | ) | (126,240 | ) | ||||
| Other assets | 9,892 | (6,507 | ) | |||||
| Operating lease payable | 64,539 | (20,517 | ) | |||||
| Accounts payable and accrued expenses | 19,170 | 140,577 | ||||||
| Net cash provided by (used in) operating activities | (438,415 | ) | (41,597 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Increase (decrease) in loans payable, net | 17,267 | (77,931 | ) | |||||
| Proceeds from private placements | 300,000 | |||||||
| Government loans | 379,165 | 149,900 | ||||||
| Net cash provided by (used in) financing activities | 696,432 | 71,969 | ||||||
| Effect of exchange rates on cash and cash and cash equivalents | (7,997 | ) | 9,892 | |||||
| Net increase (decrease) in cash and cash equivalents | 258,017 | 30,372 | ||||||
| Cash and cash equivalents at beginning of period | 62,555 | 22,291 | ||||||
| Cash and cash equivalents at end of period | $ | 312,574 | $ | 62,555 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | 12,601 | $ | 34,299 | ||||
| Cash paid for income taxes | $ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
| F-6 |
GLOBAL DIVERSIFIED MARKETING GROUP INC. NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 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 shares of the outstanding shares of its common stock, and appointed new officers and directors. On June 14, 2018, the new management of the Company issued 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 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 2021 and 2020 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.
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.
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.
| F-7 |
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 years ended December 31, 2021 and December 31, 2020 stock-based compensation was $ and $ 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 December 31, 2021, and 2020, the Company had $312,574 and $62,555 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 December 31, 2021 and 2020, the amounts due to factors were $-0- and $20,540 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 years ended December 31, 2021, and 2020 was $0 and $0, respectively; the allowance for doubtful accounts on December 31, 2021, and 2020 was $0.
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.
| F-8 |
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 $173,741 and $93,805 during the years ended December 31, 2021, and 2020, 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.
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 year ended December 31, 2021 the 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 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.
| F-9 |
NOTE 2 GOING CONCERN
As of December 31, 2021, the Company had cash and cash equivalents of $312,574 and had an accumulated deficit of $27,543,659. 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 shares of $ par value common stock authorized. The Company had and shares of common stock issued and outstanding as of December 31, 2021, and December 31, 2020, respectively.
2020 Common Stock Issuances
During the year ended December 31, 2020, the Company issued the following shares:
On February 26, 2020, the Company issued restricted common shares to a consultant and recorded a charge of $120,000.
On July 30, 2020, the Company issued restricted common shares to an investment banking firm and recorded a charge of $12,600.
On August 14, 2020, the Company issued shares to an investment banking firm and recorded a charge of $22,503.
On August 19, 2020, the Company issued restricted common shares to a consultant and recorded a charge of $11,252.
On December 28, 2020 the Company issued shares to a consultant and recorded a charge of $2,296.
All of these charges were recorded as “professional fees” on the Company’s Consolidated Statements of Operations during the year months ended December 31, 2020.
2021 Common stock Issuances
During the year ended December 31, 2021, the Company issued a total of shares as follows:
Services
shares were issued for services to consultants and one employee. These shares were valued at $871,341
shares were awarded to four independent directors and were valued at $250,250.
These charges amounting to $ were recorded as $ in “professional fees” and $ in payroll on the Company’s Consolidated Statements of Operations during the year ended December 31, 2021.
Preferred Stock
The Company has shares of $ 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 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 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 preferred shares, the Company recorded stock compensation expense, related party of $ during the year ended December 31, 2020.
NOTE 4 – RELATED PARTY TRANSACTIONS
During the years ended December 31, 2021, and 2020, the Company incurred salary expense of $298,000 and $210,000 respectively, related to services provided to it by its CEO.
| F-10 |
NOTE 5 – COMMITMENTS AND CONTINGENCIES
The Company renewed a 60-month lease agreement on October 1, 2021, to rent approximately 1500 square feet of office space in Austin Park, New york. The lease requires monthly payments of $1,748.36 for the first 24 months and after that increases by approximately 3% each year, and contains one five year renewal option. Rental expenses under this lease for the year ended December 31, 2021, and 2020 was $21,254 and $16,255, respectively. Future minimum lease payments due under this operating lease, including renewal periods, are as follows:
| 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
The Company had various loans outstanding on December 31, 2021, and 2020 – all were short-term in nature, with varying rates of interest and fees, and no set minimum monthly payments, as follows:
| 2021 | 2020 | |||||||
| Credit Line - BlueVine | - | 14,072 | ||||||
| Credit Line – Loan Builder | - | 6,468 | ||||||
| Credit Line - Sterling | 37,807 | - | ||||||
| Total loans payable | $ | 37,807 | $ | 20,540 | ||||
The credit lines to BlueVine and LoanBuilders were for factoring of receivables. The credit line to Sterling is an unsecured line of credit.
NOTE 7 – INCOME TAXES
For the period ended December 31, 2020, 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. The net operating loss carry forward is approximately 409,000 on December 31, 2020.
The provision for Federal income tax consists of the following on December 31, 2021, and 2020:
| 2021 | 2020 | |||||||
| Federal income tax benefit attributable to: | ||||||||
| Current Operations | $ | 48,000 | $ | 33,900 | ||||
| Less: NOL carryforward in 2021, and valuation allowance in 2020 | (48,000 | ) | (33,900 | ) | ||||
| Net provision for Federal income taxes | $ | $ | ||||||
NOTE 8 – CONCENTRATIONS
The Company does substantially all of its business with 4 customers. These customers accounted for % and 91% of revenues for the years ended December 31, 2021, and 2020, respectively.
| 2021 | 2020 | |||||||
| Customer A | 27 | 34 | ||||||
| Customer B | 24 | 24 | ||||||
| Customer C | 21 | 22 | ||||||
| Customer D | 17 | 11 | ||||||
| Customer E | 10 | |||||||
| Total | % | 91 | % | |||||
NOTE 9 – SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to December 31, 2020, to the date these financial statements were issued, and has determined that it does not have any other material subsequent events to disclose in these financial statements.
| F-11 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| GLOBAL DIVERSIFIED MARKETING GROUP INC. | |||
| Dated: | March 14, 2022 | By: | /s/ Paul Adler |
| Paul Adler | |||
| President (principal executive officer) | |||
| Dated: | March 14, 2022 | By: | /s/ Paul Adler |
Paul Adler Chief Financial Officer (principal financial and accounting officer) | |||
Pursuant to the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Capacity | Date | ||
| /s/ Paul Adler | President, Chief Financial Officer, Treasurer, Secretary and Director (Principal Executive Officer and Principal Financial and Accounting Officer) | March 14, 2022 | ||
| Paul Adler | ||||
| /s/ James Curtis Donegan | Director | March 14, 2022 | ||
| James Curtis Donegan | ||||
| /s/ Michael Cascione | Director | March 14, 2022 | ||
| Michael Cascione | ||||
| /s/ Sandra G. Williams | Director | March 14, 2022 | ||
| Sandra G. Williams | ||||
| /s/ David Natan | Director | March 14, 2022 | ||
| David Natan |
| 25 |
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