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 June 30, 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)

 

Nevada		27-1458154
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

 

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:

 

 

	Large Accelerated Filer [  ]	Accelerated Filer [  ]
	Non-Accelerated Filer [  ]	Smaller Reporting Company [X]

 

 

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 August 12, 2011, there were 7,431,736 shares of Common Stock of the issuer outstanding.

 

 

 

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TABLE OF CONTENTS

 

 

	PART I FINANCIAL STATEMENTS
Item 1	Consolidated Financial Statements	3
Item 2	Management’s Discussion and Analysis or Plan of Operation	8
	PART II OTHER INFORMATION
Item 1	Legal Proceedings	11
Item 2	Changes in Securities	11
Item 3	Default upon Senior Securities	11
Item 4	Removed and Reserved	11
Item 5	Other Information	11
Item 6	Exhibits	11

 

 

 

 

 

 

 

2

 

 

GLOBAL CONDIMENTS, INC. CONSOLIDATED BALANCE SHEETS JUNE 30, 2011 AND DECEMBER 31, 2010

 

 

ASSETS		June 30, 2011				December 31, 2010
Current Assets		(Unaudited)
Cash		$	198,012			$	267,069
Accounts Receivable, net			4,402				13,676
Inventory			256				-
Prepaid expenses			7,503				5,500
Total Current Assets			210,173				286,245
Fixed Assets, net			4,058				5,275
TOTAL ASSETS		$	214,231			$	291,520
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable – Related Party		$	8,841			$	1,223
Accounts Payable – Trade			3,768				24,528
Total Current Liabilities			12,609				25,751
TOTAL LIABILITIES			12,609				25,751
Stockholders’ Equity
Preferred stock, $0.001 par value, 20,000,000 authorized,
-0-  issued and outstanding at June 30, 2011 and December 31, 2010			-				-
Common stock, $0.001 par value, 50,000,000 authorized,
7,431,736 issued and outstanding at June 30, 2011 and December 31, 2010			7,432				7,432
Additional paid-in-capital			316,470				316,470
Accumulated Deficit			(122,280	)			(58,133)
Total Stockholders’ Equity			201,622				265,769
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	214,231			$	291,520
See accompanying summary of accounting policies and notes to consolidated financial statements.

 

 

 

 

 

 

3

 

GLOBAL CONDIMENTS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND 2010 (Unaudited)

 

		Three Months Ended								Six Months Ended
		June 30, 2011				June 30, 2010				June 30, 2011				June 30, 2010
Revenue		$	24,805			$	19,210			$	54,841			$	43,951
Cost of Revenues			21,123				13,749				44,435				35,381
Gross Profit			3,682				5,461				10,406				8,570
Operating Expenses:
General and Administrative			9,586				11,638				49,582				23,155
Selling and Advertising Expenses			6,839				2,175				24,005				3,775
Depreciation and Amortization			609				609				1,217				812
Total Operating Expenses			17,034				14,422				74,804				27,742
Operating Loss			(13,352	)			(8,961	)			(64,398	)			(19,172	)
Other Income
Interest Income			121				-				251				265
Total Other Income			121				-				251				265
Net Loss		$	(13,231	)		$	(8,961	)		$	(64,147	)		$	(18,907	)
Basic and Diluted Loss per share		$	(0.00	)		$	(0.00	)		$	(0.01	)		$	(0.00	)
Weighted Average Shares Outstanding:
Basic and Diluted			7,431,736				7,000,000				7,431,736				7,000,000

 

 

See accompanying summary of accounting policies and notes to consolidated financial statements.

  

 

4

 

GLOBAL CONDIMENTS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND 2010 (Unaudited)

 

 

		June 30, 2011				June 30, 2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss		$	(64,147	)		$	(18,907	)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation Expense			1,217				812
Changes in assets and liabilities:
Accounts Receivable			9,274				(3,216	)
Other Current Assets			(2,003	)			(6,532	)
Inventory			(256	)			(2,847	)
Accounts Payable – Related Party			7,618				5,074
Accounts Payable – Trade			(20,760	)			32,168
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES			(69,057	)			6,552
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Fixed Assets			-				(7,304	)
NET CASH USED IN INVESTING ACTIVITIES			-				(7,304	)
NET CHANGE IN CASH AND CASH EQUIVALENTS			(69,057	)			(752	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			267,069				1,298
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	198,012			$	546
SUPPLEMENTAL DISCLOSURES
Cash Paid During the Period for Interest Expense		$	-			$	-
Cash Paid During the Period for Taxes		$	-			$	-

 

 See accompanying summary of accounting policies and notes to consolidated financial statements.

 

 

 

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GLOBAL CONDIMENTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 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.  

 

 

 

 

 

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GLOBAL CONDIMENTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

(Unaudited)

 

 

NOTE 2 – INVENTORY

 

Inventory is comprised of products for resale, specifically, mustard and salsa.  As of June 30, 2011, there were 16 cases of salsa, with a value of $256 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 June 30, 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 June 30, 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.

 

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 June 30, 2011 and 2010 the amounts charged were $744 and $961, respectively, and for the six months ended June 30, 2011 and 2010 the amounts charged were $1,648 and $2,198, respectively.

 

The Company currently purchases all of their product from Herlocher Foods, Inc.  In the three months ended June 30, 2011 and 2010 the amounts purchased were $14,362 and $12,878, respectively.  In the six months ended June 30, 2011 and 2010 the amounts purchased were $40,521 and $36,634, 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 June 30, 2011 and 2010 were $0 and $1,500, respectively, and for the six months ended June 30, 2011 were $0 and $3,000.

 

 

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 June 30, 2011, the Company sold $16,485 to Giant Eagle Grocery Stores, or 66% of the Company’s revenues. For the three months ended June 30, 2010, the comparable sales to Giant Eagle were $10,234 or 53% of the Company’s revenues. For the six months ended June 30, 2011, the Company sold $26,376 to Giant Eagle Grocery Stores, or 48% of the Company’s revenues. For the six months ended June 30, 2010, the comparable sales to Giant Eagle were $29,353 or 67% of the Company’s revenues.

 

 

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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 and 2011 is no exception with an increase of approximately 25% which follows a total year increase in 2010 of 34%.  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 AND SIX MONTHS ENDED June 30, 2011 and 2010

 

Our quarter ended on June 30, 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 June 30, 2011 was $24,805 compared to $19,210 for the three month period ended June 30, 2010.  Revenue for the six months ended June 30, 2011 was $54,841 compared to $43,951 for the six month period ended June 30, 2010.

 

The increase in revenue in the three month period ended June 30, 2011 of $5,595 is due to our marketing programs and personal sales calls by the president.  The volume increase was 16% and the revenue increase was 29% as the second quarter continued to experience strong demand from our larger customers and sales leads from trade shows. AUP (average unit price) increased 14% due to the product mix.  Mustard volume sales were up 22% and revenue 40% as AUP increased by $2.79 to $22.31.  Salsa volume sales were down 87% and revenue 91% as AUP decreased $9.10 to $19.17.  Mustard accounted for 99% of the sales for the three months ended June 30, 2011.

 

The increase in revenue in the six month period ended June 30, 2011 of $10,890 is also due to our marketing programs and personal sales calls by the president.  The volume increase was 45% and the revenue increase was 25% due to the strong demand from our larger customers and sales leads from trade shows. AUP (average unit price) increased 11% due to a mix shift toward mustard cases.  Mustard volume sales were up 48% and revenue 27% as AUP decreased by 3.59 to $22.28.  Salsa volume sales were down 16% and revenue was down 31% as AUP decreased $4.98 to $22.97.  Mustard accounted for 97% of the sales for the six months ended June 30, 2011.

 

GROSS PROFIT.  Gross profit for the three months ended June 30, 2011 was $3,682 compared to $5,461 for the three months ended June 30, 2010.   Margins decreased in the three months ended June 30, 2011 versus 2010 from 28.4% to 14.8%.  The decrease is attributable to unfavorable product mix.

 

Gross profit for the six months ended June 30, 2011 was $10,406 compared to $8,570 for the six months ended June 30, 2010.   Margins decreased in the six months ended June 30, 2011 versus 2010 from 19.5% to 19.0%.  The decrese is attributable to product mix.

 

OPERATING EXPENSES. Total operating expenses for the three months ended June 30, 2011 were $17,034 compared to $14,422 for the three months ended June 30, 2010. Depreciation expense included in the operating expense was $609 for the three months ended June 30, 2011 and 2010.

 

Total operating expenses for the six months ended June 30, 2011 were $74,804 compared to $27,742 for the six months ended June 30, 2010. Depreciation expense included in the operating expense was $1,217 and $812 for the six months ended June 30, 2011 and 2010, respectively.

 

The increase of $2,612 in the three months ended June 30, 2011 is attributed to increased marketing and advertising expenses of about $3,000.

 

The increase of $47,062 in the six months ended June 30, 2011 is attributed to professional fees of $11,400 (a one-time $10,000 fee for being DTC eligible, Professional Consulting fees of $5,000 offset by reduced audit expenses of $3,500), increased advertising and marketing expenses ($10,700) in implementing our growth plan as laid out in our S-1 filings, trade show expense of $9,800, facilities of $2,400, and $4,200 of auto and general repairs.

 

NET LOSS. Net loss for the three months June 30, 2011 was $13,231 compared to a loss of $8,961 for the three month period ended June 30, 2010.   Net loss for the six months June 30, 2011 was $64,147 compared to a loss of $18,907 for the six month period ended June 30, 2010. The increased sales volume and improved margins was more than off-set by the increased expenses as discussed above.

 

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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 six months ended June 30, 2011 decreased by $62,930 to $197,564, versus the year ended December 31, 2010.  This decrease is primarily due the reduction of cash of $69,057.

 

 

		Working Capital				Change from prior period
June 30, 2011		$	197,564			$	(62,930	)
December 31, 2010		$	260,494			$	270,472

 

 

STOCKHOLDER’S EQUITY: Stockholder’s Equity for the six months ended June 30, 2011 decreased by $64,147 to $201,622 due to the net loss for the quarter.  Please see the section on ‘Results for the Quarter Ended June 30, 2011’ that discusses in more detail the reasons for the loss.

 

GOING CONCERN: The Company has limited operations and has working capital of $197,564 and an accumulated deficit of $122,280 as of  June 30, 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.

 

 

 

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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 June 30, 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 June 30, 2011, our Chief Executive and Chief Financial Officer as of June 30, 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:

 

·

Reliance upon third party financial reporting consultants for review of critical accounting areas and disclosures and material non-standard transaction.

 

·

Lack of sufficient accounting staff which results in a lack of segregation of duties necessary for a good system of internal control.

 

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.

 

 

 

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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: August 15, 2011

 

 

 

 

 

 

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