NOTES
TO THE (UNAUDITED) CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature
of Business
Global
Diversified Marketing Group Inc. (the “Company”), formerly known as Dense Forest Acquisition Corporation, was incorporated
in Delaware
on December
1, 2017, and changed its name on June 13, 2018,
as part of a change in control. As part of the change in control, its then officers and directors resigned and contributed back to the
Company 19,500,000
shares of the 20,000,000
outstanding shares of its common stock,
$0.0001 par value per share (the “Common Stock”), and appointed new officers and directors. On June 14, 2018,
the new management of the Company issued 12,500,000
shares of its Common Stock to Paul
Adler, the then president of the Company.
On
November 26, 2018, the Company effected the acquisition of Global Diversified Holdings, Inc. (“GDHI”), a private New York
company owned by the Company’s president, with the issuance of 200
shares of the Company’s Common Stock
in exchange for all of the outstanding shares of GDHI. GDHI became a wholly-owned subsidiary of the Company, and its activity for
the three months ended March 31, 2022 and 2021 is reflected in these financial statements along with the expenses of the Company.
Prior
to the acquisition of GDHI, the Company had no business and no operations. Pursuant to the acquisition, the Company acquired the operations
and business plan of GDHI, which imports and sells snack food products. For accounting purposes, GDHI is considered to be the acquirer,
and the equity is presented as if the business combination had occurred on January 1, 2017.
Basis
of Presentation
The
financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States
of America and are presented in US dollars. Certain prior year amounts have been reclassified to conform to the presentation in the current
year. The Company has adopted a December 31 year-end.
Management’s
Representation of Interim Financial Statements
The
accompanying unaudited condensed consolidated financial statements have been prepared by the Company without audit pursuant to the rules
and regulations of the Securities and Exchange Commission (“SEC”). The Company uses the same accounting policies in preparing
quarterly and annual financial statements. Certain information and footnote disclosures normally included in financial statements prepared
in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted
as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented
not misleading. These condensed consolidated financial statements include all of the adjustments, which in the opinion of management
are necessary to a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring
nature. Interim results are not necessarily indicative of results for a full year.
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All intercompany
accounts and transactions have been eliminated in consolidation.
Fair
Value of Financial Instruments
The
Company’s financial instruments consist of cash, accounts receivable from customers, accounts payable, and loans payable. The carrying
amounts of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing
market rates unless otherwise disclosed in these financial statements.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheet.
Actual results could differ from those estimates.
Stock-Based
Compensation
The
Company accounts for stock-based compensation using the fair value method following the guidance outlined in Section 718-10 of the FASB
Accounting Standards Codification for disclosure about Stock-Based Compensation. This Section requires a public entity to measure the
cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with
limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange
for the award- the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for
which employees do not render the requisite service. During the three months ended March 31, 2022 and March 31, 2021 stock-based compensation
was $4,515 and $485,538 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 March
31, 2022, and December 31, 2021, the Company had $78,583 and $312,574, respectively of cash.
Factoring
The
Company accounts for the transfer of our accounts receivable to a third party under a factoring agreement in accordance with ASC 860-10-40-5
“Transfers and Servicing”. ASC 860-10 requires that several conditions be met in order to present the transfer of
accounts receivable as a sale. Even though we have isolated the transferred (sold) assets and we have the legal right to transfer our
assets (accounts receivable) we do not meet the third test of effective control since our accounts receivable sales agreement with the
factor requires us to be liable in the event of default by one of our customers. Because we do not meet all three conditions, we do not
qualify for sale treatment and our debt incurred with respect to the sale of our accounts receivable is presented as a loan payable in
on our consolidated balance sheet. As of March 31, 2022 and December 31, 2021, the amounts due to factors in both periods was $-0-.
Accounts
Receivable
Accounts
receivable are generated from sales of snack food products to retail outlets throughout the United States. The Company performs ongoing
credit evaluations of its customers and adjusts credit limits based on customer payment and current creditworthiness, as determined by
review of their current credit information. The Company continuously monitors credit limits for its customers and maintains a provision
for estimated credit losses based on its historical experience and any specific customer issues that have been identified. An allowance
for doubtful; accounts are provided against accounts receivable for amounts management believes may be uncollectible. The Company historically
has not had issues collecting on its accounts receivable from its customers. The Company factors certain of its receivables to improve
its cash flow.
Bad
debt expense for the three months ended March 31, 2022, and 2021 was $-0- and $-0-, respectively; the allowance for doubtful accounts
on March 31, 2022, and 2021 was $-0- and $-0-, respectively.
Inventory
Inventory
consists of snack food products and packaging supplies, and are stated at the lower of cost or market.
Property
and Equipment
Property
and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the
estimated useful life of the assets. Maintenance, repairs, and renewals that do not materially add to the value of the equipment nor
appreciably prolong its useful life are charged to expense as incurred.
Revenue
Recognition
Beginning
January 1, 2018, the Company implemented ASC 606, Revenue from Contracts with Customers. Although the new revenue standard is expected
to have an immaterial impact, if any, on our ongoing net income, we did implement changes to our processes related to revenue recognition
and the control activities within them. These included the development of new policies based on the five-step model provided in the new
revenue standard, ongoing contract review requirements, and gathering of information provided for disclosures.
The
Company recognizes revenue from product sales or services rendered when control of the promised goods are transferred to our clients
in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods and services. To achieve this
core principle we apply the following five steps: identify the contract with the client, identify the performance obligations in the
contract, determine the transaction price, allocate the transaction price to performance obligations in the contract and recognize revenues
when or as the Company satisfies a performance obligation.
Advertising
and Marketing Costs
The
Company’s policy regarding advertising and marketing is to record the expense when incurred. The Company incurred advertising and
marketing expenses of $14,884 and $59,782 during the three months ended March 31, 2022 and 2021, respectively.
Impairment
of Long-Lived Assets
The
Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be
recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by
determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total
of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess
of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or
the fair value less costs to sell.
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 three months ended March 31, 2022, Company had a balance
of $1,895 in accumulated other comprehensive income which arose from unrealized gain due to foreign currency fluctuations.
Basic
Income (Loss) Per Share
Basic
income (loss) per share has been calculated based on the weighted average number of shares of Common Stock outstanding during
the period.
Recent
Accounting Pronouncements
The
Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s
results of operations, financial position, or cash flow.
NOTE
2 GOING CONCERN
As
of March 31, 2022, the Company had cash and cash equivalents of $78,583, a working capital deficit of $131,107 and had an accumulated
deficit of $27,747,453. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The
consolidated financials have been prepared assuming that the Company will continue as a going concern and, accordingly, do not include
any adjustments that might result from the outcome of this uncertainty. If the Company is, in fact, unable to continue as a going concern,
the shareholders may lose some or all of their investment in the Company.
NOTE
3 – CAPITAL STOCK
The
Company has 100,000,000 shares
of $0.0001 par
value common stock (the “Common Stock”) authorized. The Company had 14,488,256
and 14,473,256
shares of Common Stock issued and outstanding
as of March 31, 2022, and December 31, 2021, respectively.
During
the three months ended March 31, 2022 the Company issued 15,000
shares of its Common Stock
for services which were valued at $4,515.
All issuances made by the Company are valued based upon the closing trading of the Company’s Common Stock on the date when
the Board of Directors authorizes and approves the issuance of such shares.
2021
Common stock Issuances
During
the year ended December 31, 2021, the Company issued a total of 1,340,738 shares of Common Stock as follows:
Services
800,110
shares were issued for services to consultants and one employee. These shares were valued at $871,341
125,000
shares were awarded to four independent directors and were valued at $250,250.
These
charges amounting to $1,121,591 were recorded as $932,591 in “professional fees” and $189,000 in payroll on the Company’s
Consolidated Statements of Operations during the year ended December 31, 2021.
Preferred
Stock
The
Company has 20,000,000
shares of $0.0001
par value preferred stock authorized. On February
24, 2020, the Company filed a Certificate of Designation for a class of preferred stock designated Class A Super Voting Preferred Stock
(“A Stock”). There are 1,000,000
shares of A Stock designated. Each
share of such stock shall vote with the Common Stock and have 100,000 votes.
A Stock has no conversion, dividend, or liquidation rights. Accordingly, the holders of A Stock will, by reason of their voting power,
be able to control the affairs of the Company. The Company has issued 1,000
shares of A Stock to Paul Adler, the company’s
Chief Executive Officer, and majority shareholder giving him effective voting control over the Registrant’s affairs for the foreseeable
future.
NOTE
4 – RELATED PARTY TRANSACTIONS
During
the three months ended March 31, 2022, and 2021, the Company incurred salary expense of $96,500 and $73,750 respectively, related to
services provided to it by its CEO.
NOTE
5 – COMMITMENTS AND CONTINGENCIES
The
Company renewed a 60-month
lease agreement on October 1, 2021, to rent approximately 1,000
square feet of office space in Island
Park, New York. The lease requires monthly payments of $1,748 for the first 24 months and after that increases by approximately 3%
each year, and contains one five year renewal option. Rental expenses under this lease for the three months ended March 31, 2022 were
$5,245.
Future minimum lease payments due under this operating lease, including renewal periods, are as follows:
SCHEDULE
OF FUTURE MINIMUM LEASE PAYMENTS OF OPERATING LEASE LIABILITY
| |
| | |
December 31, 2022 | |
$ | 20,980 | |
December 31, 2023 | |
| 21,137 | |
December 31, 2024 | |
| 21,771 | |
December 31, 2025 | |
| 22,425 | |
December 31, 2026 | |
| 17,194 | |
Total | |
$ | 103,509 | |
Under
the guidelines of ASC 842, renewal of the lease at the end of its term was not considered probable. The Company record right of use assets
and lease liabilities of $83,415 related to this lease.
NOTE
6 – LOANS PAYABLE
As
of March 31, 2022 and December 31, 2021 the Company had an unsecured credit line for up to $100,000 with lender at an interest rate of
6%
SCHEDULE
OF LOANS OUTSTANDING
| |
March 31, 2022 | | |
December 31,2021 | |
Credit Line - Sterling | |
$ | 34,741 | | |
$ | 37,807 | |
Total loans payable | |
$ | 34,741 | | |
$ | 37,807 | |
NOTE
7 – CONCENTRATIONS
The
Company does substantially all of its business with 4 customers. These customers accounted for % and 91% of revenues for the three months
ended March 31, 2022, and 2021, respectively.
SCHEDULE
OF CONCENTRATION OF RISK
| |
March 31, 2022 | | |
March 31, 2021 | |
Customer A | |
| 39 | | |
| 31 | |
Customer B | |
| 36 | | |
| 23 | |
Customer C | |
| 24 | | |
| 19 | |
Customer D | |
| - | | |
| 15 | |
Customer E | |
| - | | |
| 10 | |
Total | |
| 99 | % | |
| 98 | % |
NOTE 8 – SUBSEQUENT EVENTS
On April 4, 2022, the Company
issued 250,000
shares of Common Stock to its director of operations as
a bonus on his one year anniversary of employment. These shares were valued at $45,000.
On April 25, 2022, the Company granted an aggregate of 350,000
shares of Common Stock to four directors of the Company. These shares were valued at $61,565.