Attached files
| file | filename |
|---|---|
| EX-31.2 - CERTIFICATION - GLOBAL CONDIMENTS, INC. | ex31two.htm |
| EX-32.1 - CERTIFICATION - GLOBAL CONDIMENTS, INC. | ex32one.htm |
| EX-31.1 - CERTIFICATION - GLOBAL CONDIMENTS, INC. | ex31one.htm |
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2011
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF 1934
From the transition period from ___________ to ____________.
Commission File Number 333-138111
GLOBAL CONDIMENTS, INC.
(Exact name of small business issuer as specified in its charter)
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Nevada
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27-1458154
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|
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(State or other jurisdiction of incorporation or organization)
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(IRS Employer Identification No.)
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415 East Calder Way, State College, Pennsylvania 16801
(Address of principal executive offices)
(814) 237-0134
(Issuer's telephone number)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [ X ] 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” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
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Large Accelerated Filer [ ]
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Accelerated Filer [ ]
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Non-Accelerated Filer [ ]
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Smaller Reporting Company [X]
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Indicate by a check mark whether the company is a shell company (as defined by Rule 12b-2 of the Exchange Act: Yes [ ] No [ X ].
As of May 9, 2011, there were 7,431,736 shares of Common Stock of the issuer outstanding.
TABLE OF CONTENTS
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PART I FINANCIAL STATEMENTS
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||
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Item 1
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Consolidated Financial Statements
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3
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Item 2
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Management’s Discussion and Analysis or Plan of Operation
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8
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PART II OTHER INFORMATION
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||
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Item 1
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Legal Proceedings
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11
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Item 2
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Changes in Securities
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11
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Item 3
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Default upon Senior Securities
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11
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Item 4
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Submission of Matters to a Vote of Security Holders
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11
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Item 5
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Other Information
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11
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Item 6
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Exhibits
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11
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2
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GLOBAL CONDIMENTS, INC.
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||||||||
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CONSOLIDATED BALANCE SHEETS
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||||||||
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MARCH 31, 2011 AND DECEMBER 31, 2010
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ASSETS
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March 31, 2011
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December 31, 2010
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||||||
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Current Assets
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(Unaudited)
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|||||||
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Cash
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$
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196,616
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$
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267,069
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||||
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Accounts Receivable, net
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2,429
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13,676
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Inventory
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2,847
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-
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||||||
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Other Current Assets
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9,255
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5,500
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||||||
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Total Current Assets
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211,147
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286,245
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Fixed Assets, net
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4,667
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5,275
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TOTAL ASSETS
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$
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215,814
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$
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291,520
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LIABILITIES AND STOCKHOLDERS' EQUITY
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||||||||
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Current Liabilities
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||||||||
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Accounts Payable – Related Party
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$
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961
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$
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1,223
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||||
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Accounts Payable – Trade
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-
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24,528
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||||||
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Total Current Liabilities
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961
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25,751
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TOTAL LIABILITIES
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961
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25,751
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Stockholders’ Equity
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Preferred stock, $0.001 par value, 20,000,000 authorized,
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-0- issued and outstanding at March 31, 2011 and December 31, 2010
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-
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-
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Common stock, $0.001 par value, 50,000,000 authorized,
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7,431,736 issued and outstanding at March 31, 2011 and December 31, 2010
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7,432
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7,432
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Additional paid-in-capital
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316,470
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316,470
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Accumulated Deficit
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(109,049
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)
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(58,133)
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Total Stockholders’ Equity
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214,853
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265,769
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
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$
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215,814
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$
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291,520
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See accompanying summary of accounting policies and notes to consolidated financial statements.
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3
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GLOBAL CONDIMENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010
(Unaudited)
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Three Months Ended
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March 31,
2011
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March 31,
2010
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Revenue
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$
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30,036
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$
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24,741
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Cost of Revenues
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23,312
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21,632
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Gross Profit
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6,724
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3,109
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Operating Expenses:
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Depreciation and Amortization
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608
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203
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Selling and Advertising Expenses
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17,166
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1,600
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Other General and Administrative
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39,996
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11,517
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Total Operating Expenses
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57,770
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13,320
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Operating Loss
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(51,046
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)
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(10,211)
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Other Income (Expense)
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||||||||
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Interest Income
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130
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265
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Total Other Income (Expense)
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130
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265
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Net Loss
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$
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(50,916
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)
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$
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(9,946)
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Basic and Diluted Loss per share
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$
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(0.01
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)
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$
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(0.00)
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Weighted Average Shares Outstanding:
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Basic and Diluted
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7,431,736
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7,000,000
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||||||
See accompanying summary of accounting policies and notes to consolidated financial statements.
4
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GLOBAL CONDIMENTS, INC.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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FOR THE THREE MONTHS ENDED MARCH 31, 2011 and 2010
(Unaudited)
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March 31, 2011
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March 31, 2010
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CASH FLOWS FROM OPERATING ACTIVITIES
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Net Loss
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$
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(50,916
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)
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$
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(9,946
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)
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Adjustments to reconcile net loss to net cash
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used by operating activities:
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Depreciation Expense
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608
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203
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Changes in assets and liabilities:
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Accounts Receivable, net
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11,247
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1,545
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Other Current Assets
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(3,755
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)
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(32
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)
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Inventory
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(2,847
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)
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(2,847
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)
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Accounts Payable – Related Party
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(262
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)
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2,873
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Accounts Payable – Trade
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(24,528
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)
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14,925
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|||||
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NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
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(70,453
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)
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6,721
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CASH FLOWS FROM INVESTING ACTIVITIES
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||||||||
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Purchase of Fixed Assets
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-
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(7,304
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)
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NET CASH (USED IN) INVESTING ACTIVITIES
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-
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(7,304
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)
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NET CHANGE IN CASH AND CASH EQUIVALENTS
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(70,453
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)
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(583
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)
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CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
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267,069
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1,298
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CASH AND CASH EQUIVALENTS AT END OF PERIOD
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$
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196,616
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$
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715
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SUPPLEMENTAL DISCLOSURES
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Cash Paid During the Period for Interest Expense
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$
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-
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$
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-
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Cash Paid During the Period for Taxes
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$
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-
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$
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-
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See accompanying summary of accounting policies and notes to consolidated financial statements.
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5
GLOBAL CONDIMENTS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
(Unaudited)
NOTE 1 – NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Activities, History and Organization:
Global Condiments, Inc. (The “Company” or "GLOBAL") operates as an internet wholesaler and retailer of mustard, salsa and other food products. The Company is located in State College, Pennsylvania and was incorporated on September 17, 2009 under the laws of the State of Nevada.
Global Condiments, Inc., is the parent company of Herlocher Foods Online, L.L.C., (“HFO”), a company incorporated under the laws of the State of Pennsylvania. HFO was established on March 2, 2007 and for the past two and a half years has been operating from their offices in State College, PA.
GLOBAL was formed in order to acquire 100% of the outstanding membership interests of HFO. On September 17, 2009, GLOBAL issued 7,000,000 shares of common stock in exchange for a 100% equity interest in HFO. As a result of the share exchange, HFO became the wholly owned subsidiary of GLOBAL, and the former members of HFO owned a majority of the voting stock of GLOBAL. The transaction was regarded as a reverse merger whereby HFO was considered to be the accounting acquirer as its members retained control of GLOBAL after the exchange, although GLOBAL is the legal parent company. The share exchange was treated as a recapitalization of GLOBAL. As such, HFO (and its historical financial statements) is the continuing entity for financial reporting purposes. The financial statements have been prepared as if HFO had always been the reporting company and, on the share exchange date, changed its name and reorganized its capital stock.
Basis of Presentation and Consolidation:
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and applicable Securities and Exchange Commission (“SEC”) regulations for interim financial information. These consolidated financial statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring accruals) necessary to make the consolidated financial statements not misleading, and to present fairly the balance sheets, statements of operations and statements of cash flows for the periods presented in accordance with accounting principles generally accepted in the United States. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to SEC rules and regulations. It is presumed that users of this interim consolidated financial information have read or have access to the audited consolidated financial statements and footnote disclosure for the preceding fiscal year. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2011. Notes to the consolidated financial statements which would substantially duplicate the disclosure contained in the audited consolidated financial statements for the most recent fiscal year ended December 31, 2010 as reported in form 10-K have been omitted.
Recently Issued 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.
6
GLOBAL CONDIMENTS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
(Unaudited)
NOTE 2 – INVENTORY
Inventory is comprised of products for resale, specifically, mustard and salsa. As of March 31, 2011, there were 150 jars of mustard, with a value of $2,847 in inventory.
NOTE 3 – EQUITY
The Company is authorized to issue 20,000,000 preferred shares at a par value of $0.001 per share. These shares have full voting rights. At March 31, 2011 and December 31, 2010, there were zero shares issued and outstanding.
The Company is authorized to issue 50,000,000 common shares at a par value of $0.001 per share. These shares have full voting rights. At March 31, 2011 and December 31, 2010, there were 7,431,736 shares issued and outstanding.
On June 14, 2010 the Company filed an S-1/A; general form for registration of securities under the Securities Act of 1933, and it was approved on July 8, 2010. The Company, under this registration statement, is authorized to raise up to $500,000 by selling 666,667 shares of common stock at $.75 per share. The offering closed on October 12, 2010 and the Company raised $323,802 by selling 431,736 shares.
There is currently no market for our shares. We intend to work with a market maker who would then apply to have our securities quoted on the over-the-counter bulletin Board or on an exchange as soon as practicable after our offering. We closed our offering on October 12, 2010. Our stock began trading in March 2011 on the over-the-counter bulletin Board under the symbol, GCNT.
NOTE 4 – RELATED PARTY TRANSACTIONS
Under a contract with the Company beginning January 1, 2008, Herlocher Foods, Inc. provides general office space and administrative support at 2-6% of gross sales. For the three months ended March 31, 2011 and 2010 the amounts charged were $904 and $1,237, respectively.
The Company currently purchases all of their product from Herlocher Foods, Inc. In the three months ended March 31, 2011 and 2010 the amounts purchased were $26,159 and $20,909, respectively. The Company does not have a written supplier / distributor agreement with Herlocher Foods, Inc., nor is the Company an exclusive distributor.
On September 30, 2009 the Company signed a contract with Herlocher Foods, Inc. to provide management services at a cost of up to $5,000 per month, depending on activity, beginning October 1, 2009. This agreement can be cancelled by either party with a 30 day written notice. Total management services expenses for the three months ended March 31, 2011 and 2010 were $0 and $1,500, respectively.
NOTE 5 – MAJOR CUSTOMERS
The Company has over 400 customers and has one that is greater than 10% of the total revenue. For the three months ended March 31, 2011, the Company sold $9,891 to Giant Eagle Grocery Stores, or 33% of the Company’s revenues. For the three months ended March 31, 2010, the comparable sales to Giant Eagle were $2,997 or 12% of the Company’s revenues.
7
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS
General
Over the past few years sales via the internet have increased year-over-year and GLOBAL is no exception. The Company’s sales have increased year-over-year in 2011 by approximately 21% and in 2010 by 85%. With this increase has come reduced margins as we have taken on larger accounts with more purchasing power.
Employees
We currently employ one employee, the President, who is not compensated.
RESULTS FOR THE THREE ENDED March 31, 2011 and 2010
Our quarter ended on March 31, 2011. Any reference to the end of the fiscal quarter refers to the end of the first quarter for the period discussed herein.
REVENUE. Revenue for the three months ended March 31, 2011 was $30,036 compared to $24,741 for the three month period ended March 31, 2010.
The increase in revenue in the three month period ended March 31, 2011 of $5,295 is due to our marketing programs and personal sales calls by the president. The volume increase was 83% and the revenue increase was 21% as the first quarter was impacted by the several trade shows (regional and national) which generated lower AUP (average unit price) due to product mix. Mustard volume sales were up 80% and revenue 18% as AUP decreased by $11.58 to $22.25. Salsa volume sales were up 238% and revenue 197% as AUP decreased $3.27 to $23.51. Mustard accounted for 96% of the sales for the three months ended March 31, 2011.
GROSS PROFIT. Gross profit for the three months ended March 31, 2011 was $6,724 compared to $3,109 for the three months ended March 31, 2010. Margins improved in the three months ended March 31, 2011 versus 2010 from 12.6% to 22.4%. The improvement is attributable to favorable product mix.
OPERATING EXPENSES. Total operating expenses for the three months ended March 31, 2011 were $57,770 compared to $13,320 for the three months ended March 31, 2010. Depreciation expense included in the operating expense was $608 and $203 for the three months ended March 31, 2011 and 2010, respectively
The increase of $44,450 in the three months ended March 31, 2011 is attributed to professional fees of $18,500 (a one-time $10,000 fee for being DTC eligible, Professional Consulting fees of $5,000 and increased audit expenses of $3,500), increased advertising and marketing expenses ($10,000) in implementing our growth plan as laid out in our S-1 filings, $5,000 of auto and general repairs and $4,500 of general office expenses.
NET LOSS. Net loss for the three months March 31, 2011 was $50,916 compared to a loss of $9,946 for the three month period ended March 31, 2010. The increased sales volume and improved margins was more than off-set by the increased expenses as discussed above.
8
LIQUIDITY AND CAPITAL RESOURCES. Global Condiments filed on Form S-1/A, a registration statement with the U.S. Securities & Exchange Commission in order to raise funds to develop their business. The registration statement became effective in July 2010, the offering closed on October 12, 2010 and the Company raised $323,802 by selling 431,736 shares.
Trends, events or uncertainties impact on liquidity:
The Company expects revenue trends to improve toward the holiday and sports seasons Off-peak periods will be financed, if needed, through shareholder advances.
In addition to the preceding, the Company plans for liquidity needs on a short term and long term basis as follows:
Short Term Liquidity:
We believe our cash balance affords us adequate short term liquidity. We anticipate we will need additional capital to continue our business operations. We have historically financed our operations through equity financing. We do not have any commitments for equity funding at this time. As such there is no assurance that we can raise additional capital from external sources, the failure of which could cause us to curtail operations.
Long Term Liquidity:
The long term liquidity needs of the Company are projected to be met primarily through the cash flow provided by operations. Cash flow from Operating Activities is expected to improve as sales increase in 2010 and 2011.
Capital Resources
At the time of this filing the Company has no capital commitments. Computers were purchased in the three months ending March 31, 2010 for $7,304. The computers were capitalized as of March 31, 2010.
Trends, events or uncertainties
The Company has not been in existence long enough and has limited sales data to determine whether sales fluctuations are truly a result of trends. The Company believes that sales will trend with promotions that typically follow the holiday and sports seasons and this will be monitored over the next few quarters. There are no other known events or uncertainties.
Material Changes in Financial Condition
WORKING CAPITAL: Working Capital for the three months ended March 31, 2011 decreased by $50,308 to $210,186, versus the year ended December 31, 2010. This decrease is primarily due the reduction of cash of $70,453 and the reduction in accounts payable of $24,790.
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Working Capital
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Change from prior period
|
|||||||
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March 31, 2011
|
$
|
210,186
|
$
|
(50,308
|
)
|
|||
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December 31, 2010
|
$
|
260,494
|
$
|
270,472
|
||||
|
December 31, 2009
|
$
|
(9,978
|
)
|
$
|
(12,086
|
)
|
||
STOCKHOLDER’S EQUITY: Stockholder’s Equity for the three months ended March 31, 2011 decreased by $50,916 to $214,853 due to the net loss for the quarter. Please see the section on ‘Results for the Quarter Ended March 31, 2011’ that discusses in more detail the reasons for the loss.
GOING CONCERN: The Company has limited operations and has working capital of $210,186 and an accumulated deficit of $109,049 as of March 31, 2011. Because of this accumulated deficit and limited operations, the Company may require additional working capital to survive. The Company intends to raise additional working capital either through private placements or bank loans or loans from management if there is need for liquidity to alleviate the substantial doubt to continuing as a going concern. There are no assurances that the Company will be able to do any of these. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company. If adequate working capital cannot be generated, the Company may not be able to continue its operations.
9
Item 3: Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of March 31, 2011. This evaluation was accomplished under the supervision and with the participation of our chief executive officer / principal executive officer, and chief financial officer / principal financial officer who concluded that our disclosure controls and procedures are not effective.
Based upon an evaluation conducted for the period ended March 31, 2011, our Chief Executive and Chief Financial Officer as of March 31, 2011 and as of the date of this Report, has concluded that as of the end of the periods covered by this report, we have identified the following material weakness of our internal controls:
|
·
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Reliance upon third party financial reporting consultants for review of critical accounting areas and disclosures and material non-standard transaction.
|
|
·
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Lack of sufficient accounting staff which results in a lack of segregation of duties necessary for a good system of internal control.
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In order to remedy our existing internal control deficiencies, as our finances allow, we will hire additional accounting staff.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during the period covered by this report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
10
PART II
Items No. 1, 2, 3, 4, 5 - Not Applicable.
Item No. 6 - Exhibits
(a) None
(b) Exhibits
|
Exhibit Number
|
Name of Exhibit
|
|
|
31.1
|
Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
31.2
|
Certification of Chief Financial Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.1
|
Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
SIGNATURES
In accordance with the requirements 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 Condiments, Inc.
By /s/ Charles C. Herlocher
Charles C. Herlocher, Chief Executive Officer
and Chief Financial Officer
Date: May 13, 2011
11