UNITED STATES

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 period ended September 30, 2020

 

[  ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                     

 

Commission 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		(I.R.S. Employer
incorporation or organization)		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: 800-550-5996

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered

 

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. [X] 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). [X] 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	[X]
			Emerging growth company	[X]

 

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 [X] No

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date.

 

Class		Outstanding on November 3, 2020
Common Stock, par value $0.0001		13,127,200

 

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL INFORMATION

 

GLOBAL DIVERSIFIED MARKETING GROUP INC.

 

FINANCIAL STATEMENTS

 

SEPTEMBER 30, 2020

 

 

GLOBAL DIVERSIFIED MARKETING GROUP INC.

 

TABLE OF CONTENTS

 

SEPTEMBER 30, 2020

 

Consolidated Balance Sheets as of September 30, 2020, and December 31, 2019	F-1
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020, and 2019	F-2
Consolidated Statement of Stockholders’ Deficit for the Three and Nine Months Ended September 30, 2020 and 2019	F-3
Consolidated Statements of Cash Flows for the Three and Nine Months ended September 30, 2020, and 2019	F-4
Notes to the Consolidated Financial Statements	F-5 - F-9

 

 

Global Diversified Marketing Group, Inc.

(Unaudited) Consolidated Balance Sheets

 

		September 30,				December 31,
		2020				2019
ASSETS
Current assets:
Cash and cash equivalents		$	23,500			$	22,291
Accounts receivable			255,728				52,284
Prepaid expenses			13,156				34,176
Inventory			114,137				224,375
Other assets			999				4,384
Total current assets			407,520				337,509
Property and equipment, net			1,528				1,945
Operating lease right of use assets			18,312				30,477
Other assets-security deposit			1,600				1,600
Total assets		$	428,960			$	371,531
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expense		$	267,759			$	332,059
Current portion of operating lease payable			20,517				20,517
Loans payable			30,865				98,471
Total current liabilities			319,141				451,047
Government loans payable-long term			149,900
Long term liability- operating lease			900				15,732
Total liabilities			469,941				466,779
Commitments and contingencies
Stockholders’ Equity:
Preferred stock, Series A $.0001 par value, 1,000,000 shares authorized, 1,000 issued and outstanding			-				-
Common stock, $0.001 par value, 100,000,000 shares authorized; 13,127,200 and 13,010,200 issued and outstanding as of September 30, 2020 and December 31, 2019, respectively			1,418				1,301
Additional paid-in capital			26,264,807				78,169
Retained earnings deficit			(26,307,206	)			(174,718	)
Total stockholders’ equity			(40,981	)			(95,248	)
Total liabilities and equity		$	428,960			$	371,531

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

Global Diversified Marketing Group, Inc.

(Unaudited) Consolidated Statements of Operations

 

		Three Months				Three Months				Nine Months				Nine Months
		Ended				Ended				Ended				Ended
		September 30,				September 30,				September 30,				September 30,
		2020				2019				2020				2019
Sales, net		$	667,237			$	366,354			$	1,260,539			$	1,040,644
Cost of goods sold			420,698				222,357				785,473				695,820
Gross margin			246,539				143,997				475,066				344,824
Operating expenses:
Stock based compensation -related party			-								26,020,400				-
Payroll and taxes			55,006				63,206				173,514				190,480
Legal and professional fees			57,773				7,536				226,120				22,617
Rent			4,203				4,055				12,610				12,165
General and administrative			91,839				48,219				180,379				136,103
Total operating expenses			208,821				123,016				26,613,023				361,365
Income (loss) from operations			37,718				20,981				(26,137,957	)			(16,541	)
Other (expense)
Interest expense			(7,215	)			(6,855	)			(23,173	)			(22,722	)
Miscellaneous income			28,642				-				28,642				-
Total other (expense)			21,427				(6,855	)			5,469				(22,722	)
Income (loss) before income taxes			59,144				14,126				(26,132,488	)			(39,263	)
Provision for income taxes (benefit)			-				-				-				-
Net loss			59,144				14,126				(26,132,488	)			(39,263	)
Basic and diluted earnings (loss) per common share		$	0.00			$	0.00			$	(2.00	)		$	(0.00	)
Weighted-average number of common shares outstanding:
Basic and diluted			13,100,461				13,004,765				13,060,434				12,921,808

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

Global Diversified Marketing Group, Inc.

(Unaduited) Consolidated Statements of Changes in Stockholders’ Equity

 

																		Additional				Retained				Total
		Preferred Stock								Common Stock								Paid-in				Earnings				Stockholders’
		Shares				Value				Shares				Value				Capital				(Deficit)				Equity
Balance, December 31, 2018			-			$	-				13,340,200			$	1,334			$	77,966			$	(23,734	)		$	55,566
Private placement of common shares											40,000				4				36								40
Net income (loss)																							(33,043	)			(33,043	)
Balance March 31, 2019			-			$	-				13,380,200			$	1,338			$	78,002			$	(56,777	)		$	22,563
Net income (loss)
																							(20,346	)			(20,346	)
Private placement of common shares											90,000				9				81								90
Common shares returned by founders											(500,000	)			(50	)			50								-
Balance, June 30, 2019			-			$	-				12,970,200			$	1,297			$	78,133			$	(77,123	)		$	2,307
Net income (loss)																							14,126				14,126
Private placement of common shares											40,000				4				36								40
Balance, September 30, 2019			-			$	-				13,010,200			$	1,301			$	78,169			$	(62,997	)		$	16,473
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
Net income (loss)																							(26,001,782	)			(26,001,782	)
Balance, March 31, 2020			1,000			$	-				13,010,200			$	1,301			$	26,098,569			$	(26,176,500	)		$	(76,630	)
Net income(loss)																							(189,850	)			(189,850	)
Common stock issued for services											60,000				60				119,940								120,000
Balance, June 30, 2020			1,000			$	-				13,070,200			$	1,361			$	26,218,509			$	(26,366,350	)		$	(146,480	)
Net income(loss)																							59,144				59,144
Common stock issued for services											57,000				57				46,298								46,355
Balance, September 30, 2020			1,000			$	-				13,127,200			$	1,418			$	26,264,807			$	(26,307,206	)		$	(40,981	)

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

Global Diversified Marketing Group, Inc.

(Unaudited) Consolidated Statements of Cash Flows

 

		Nine Months				Nine Months
		Ended				Ended
		September 30,				September 30,
		2020				2019
Cash flows from operating activities of continuing operations:
Net income (loss)		$	(26,132,488	)		$	(39,263	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation			417				417
Stock-based compensation -related party			26,020,400				-
Common stock issued for services			166,355				-
Changes in operating assets and liabilities:
Accounts receivable			(203,444	)			(127,153	)
Prepaid expenses			21,020				(20,090	)
Right of use assets			12,165				(32,437	)
Inventory			110,238				327,400
Other assets			3,385				-
Operating lease payable			(14,832	)			26,570
Accounts payable and accrued expenses			(64,300	)			(127,977	)
Net cash provided by (used in) operating activities			(81,085	)			7,467
Cash flows from investing activities:
Purchase of fixed assets			-				-
Net cash provided by (used in) financing activities			-				-
Cash flows from financing activities:
Increase (decrease) in loans payable, net			(67,606	)			(28,157	)
Government loans-net			149,900				170
Net cash provided by (used in) financing activities			82,294				(27,987	)
Net increase (decrease) in cash and cash equivalents			1,209				(20,520	)
Cash and cash equivalents at beginning of period			22,291				21,515
Cash and cash equivalents at end of period		$	23,500			$	995
Supplemental disclosure of cash flow information:
Cash paid for interest		$	23,173			$	22,722
Cash paid for income taxes		$	-			$	-

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

GLOBAL DIVERSIFIED MARKETING GROUP INC.

NOTES TO THE (UNAUDITED) CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS SEPTEMBER 30, 2020 and 2019

 

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, 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 periods presented are reflected in these unaudited consolidated financial statements along with the expenses of the Company.

 

Before 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.

 

COVID-19

 

On March 11, 2020, the World Health Organization (“WHO”) declared the COVID-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic is having a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most US states and many countries have issued policies intended to stop or slow the further spread of the disease.

 

COVID-19 and the U.S’s response to the pandemic are significantly affecting the economy. There are no comparable events that provide guidance as to the effect the COVID-19 pandemic may have, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. We do not yet know the full extent of the effects on the economy, the markets we serve, our business, or our operations.

 

Basis of Presentation

 

The unaudited consolidated 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. The Company has adopted a December 31 year-end.

 

Principles of Consolidation

 

The accompanying unaudited 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

 

As of September 30, 2020, the Company has not issued any share-based payments to its employees. Under the modified prospective method, the Company uses, stock compensation expense includes compensation expense for all stock-based compensation awards granted, based on the grant-date estimated fair value.

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with the original maturities of nine months or less to be cash equivalents. On September 30, 2020, and December 31, 2019, the Company had $23,500 and $22,291 in cash, 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 a 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 is 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 nine months ended September 30, 2020, and 2019 were $3,039 and $-0-, respectively. The allowance for doubtful accounts on September 30, 2020, and December 31, 2019, was $-0-.

 

Inventory

 

Inventory consists of snack food products and packaging supplies, 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 $67,985 and $7,376 during the nine months ended September 30, 2020, and 2019, respectively. Included in advertising and marketing expenses are

 

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 wholly-owned subsidiary, with the consent of its stockholder, had elected to be taxed as an S Corporation under the provisions of the Internal Revenue Code. Instead of paying federal corporate income taxes, the stockholder(s) of an S Corporation are taxed individually on their proportionate share of the Company’s taxable income. Therefore, prior to the business combination discussed above, the Company had made no provision for income taxes. Effective with the business combination, the wholly-owned subsidiary became a C-corporation, and the loss incurred in 2018 for the period as a C-corporation approximated $270,000. See Note 7. The Company’s income tax returns are open for examination for up to the past six 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. The Company has not had any significant transactions that are required to be reported in other comprehensive income.

 

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

 

Adoption of ASC 842 - On January 1, 2019, we adopted FASB Accounting Standards Codification, or ASC, Topic 842, Leases, or ASC 842, which requires the recognition of the right-of-use assets and related operating and finance lease liabilities on the balance sheet. As permitted by ASC 842, we elected the adoption date of January 1, 2019, which is the date of initial application. As a result, the consolidated balance sheet prior to January 1, 2019, was not restated, continues to be reported under ASC Topic 840, Leases, or ASC 840, which did not require the recognition of operating lease liabilities on the balance sheet, and is not comparative. Under ASC 842, all leases are required to be recorded on the balance sheet and are classified as either operating leases or finance leases. The lease classification affects the expense recognition in the income statement. Operating lease charges are recorded entirely in operating expenses. Finance lease charges are split, where amortization of the right-of-use asset is recorded in operating expenses and an implied interest component is recorded in interest expense. The expense recognition for operating leases and finance leases under ASC 842 is substantially consistent with ASC 840. As a result, there is no significant difference in our results of operations presented in our consolidated income statement for each period presented.

 

We adopted ASC 842 using a modified retrospective approach for all leases existing on January 1, 2019. The adoption of ASC 842 had a substantial impact on our balance sheet. The most significant impact was the recognition of the operating lease right-of-use asset and the liability for operating leases. Accordingly, upon adoption, leases that were classified as operating leases under ASC 840 were classified as operating leases under ASC 842, and we recorded an adjustment of $44,602 to operating lease right-of-use assets and the related lease liability. The lease liability is based on the present value of the remaining minimum lease payments, determined under ASC 840, discounted using our secured incremental borrowing rate at the effective date of January 1, 2019, using the original lease term as the tenor. As permitted under ASC 842, we elected several practical expedients that permit us to not reassess (1) whether a contract is or contains a lease, (2) the classification of existing leases, and (3) whether previously capitalized costs continue to qualify as initial indirect costs. The application of the practical expedients did not have a significant impact on the measurement of the operating lease liability.

 

NOTE 2 – GOING CONCERN

 

As of September 30, 2020, the Company had cash and cash equivalents of $23,500 and an accumulated deficit of $(26,307,206). These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

 

On April 17, 2020, the Company received a forgivable loan in the amount $28,642 under the Federal Payroll Protection Program (“PPP”). While the rules under the PPP are complex and continue to evolve and be clarified, generally the PPP loan will be forgiven if, during a certain measuring period that begins with the receipt of the loan, at least 75% of the loan is applied to employee payroll expense with the balance applied to rent and utilities and the recipient employer has employees equal to 90% of the number of employees it had prior to receipt of the loan.

 

The proceeds from the PPP loan were applied to certain expenses as required to qualify for forgiveness under the PPP Program. As a result, for the period ended September 30, 2020, the Company recorded $28,642 in “Other Income” on its Consolidated Statements of Operations.

 

On May 21, 2020, the Registrant received a loan from the Small Business Administration in the amount of $150,000 (the “SBA Loan”). The SBA Loan bears interest at 3.75% per annum and is payable over 30 years with all payments of principal and interest deferred for the first 12 months.

 

Both of these loans significantly improved the Company’s liquidity and working capital.

 

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 – EQUITY

 

The Company has 100,000,000 shares of $.0001 par value common stock authorized. The Company has 13,127,200 and 13,010,000 shares of common stock issued and outstanding as of September 30, 2020, and December 31, 2019, respectively. During the nine months ended September 30, 2020, the Company issued the following shares:

 

On February 26, 2020, the Company issued 60,000 restricted common shares to a consultant and recorded a charge of $120,000.

 

On July 30, 2020, the Company issued 12,000 restricted common shares to an investment banking firm and recorded a charge of $12,600.

 

On August 14, 2020, the Company issued 30,000 shares to an investment banking firm and recorded a charge of $22,503.

 

On August 19, 2020, the Company issued 15,000 restricted common shares to a consultant and recorded a charge of $11,252.

 

All of these charges were recorded as “professional fees” on the Company’s Consolidated Statements of Operations during the nine months ended September 30, 2020.

 

The Company has 20,000,000 shares of $.0001 par value preferred stock authorized. On February 24, 2020, the Company filed a Certificate of Designation for a class of preferred stock designated Class A Super Voting Preferred Stock (“A Stock”). There are 1,000,000 shares of A Stock designated. Each share of such stock shall vote with the common stock and have 100,000 votes. 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.

 

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 1,000 preferred shares, the Company recorded stock compensation expense, related party of $26,020,400 for the nine months ended September 30, 2020.

 

NOTE 4 – RELATED PARTY TRANSACTIONS

 

During the nine months ended September 30, 2020, and 2019, the Company incurred wages of $165,938 and $150,000 respectively, related to services provided to it by its executive officer. Additionally, during the nine months ended September 30, 2020, the Company’s CEO was awarded super-voting A Stock-see Note 3. Capital Stock.

 

 

NOTE 5 – COMMITMENTS AND CONTINGENCIES

 

The Company entered into a 60-month lease agreement on October 1, 2016, to rent office space. The lease requires monthly payments of $1,600 for the first 24 months and after that increases by 3% each year, and contains one five year renewal option. Rental expenses under this lease for the nine months ended September 30, 2020, and 2019 were $4,203 and $4,055 respectively. The lease also required an advance payment of $1,600 for the last month of rent as well as a $1,600 security deposit. Future minimum lease payments due under this operating lease, including renewal periods, are as follows:

 

Year ended December 31, 2020		$	20,517
Year ended December 31, 2021			900
Total minimum lease payments		$	21,417

 

NOTE 6 – LOANS PAYABLE

 

The Company had loans outstanding on September 30, 2020, and December 31, 2019, as follows:

 

Short Term

 

		September 30, 2020				Dec. 31, 2019
Loan Builder (a)		$	33,453			$	86,184
Credit Line - Blue Vine (a)			(2,588	)			12,287
Total loans payable		$	30,865			$	98,471

 

(a)

Represents notes payable from factoring with varying rates of interest and fees, and no set minimum monthly payments

 

Long Term

 

As of September 30, 2020, the Company had $149,900 in long term loans outstanding compared to $-0- as of December 31, 2019. On May 21, 2020, the Company received a loan from the Small Business Administration of $150,000 (the “SBA Loan”). The SBA Loan bears interest at 3.75% per annum and is payable over 30 years with all payments of principal and interest deferred for the first 12 months.

 

NOTE 7 – INCOME TAXES

 

For the period ended September 30, 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 provision for Federal income tax consists of the following on September 30, 2020, and December 31, 2019:

 

		2020				2019
Federal income tax benefit attributable to:
Current Operations		$	-			$	8,200
Less: valuation allowance			-				(8,200	)
Net provision for Federal income taxes		$	-			$	0

 

NOTE 8 – CONCENTRATIONS

 

The Company does a significant amount of its total business with 4 customers, as follows for the nine months ended September 30, 2020, and 2019 (percentage of total sales of $1,260,539 and $1,040,644 respectively):

 

		2020				2019
Customer A			28	%			30	%
Customer B			23	%			26	%
Customer C			21	%			19	%
Customer D			13	%			18	%

 

NOTE 9 – SUBSEQUENT EVENTS

 

In accordance with FASB ASC 855-10, Subsequent Events, the Company has analyzed its operations subsequent to September 30, 2020, to the date these consolidated financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these consolidated financial statements.

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The Company has one wholly-owned subsidiary, Global Diversified Holdings Inc., through which it conducts all its operations.

 

Recent Developments

 

On April 17, 2020, the Company received a forgivable loan in the amount $28,642 of under the Federal Payroll Protection Program (“PPP”).

 

The proceeds from the PPP loan were applied to certain expenses as required to qualify for forgiveness under the PPP Program. As a result for the period ended September 30, 2020, the Company recorded $28,642 in “Other Income” on its Consolidated Statements of Operations.

 

On May 21, 2020, the Registrant received a loan from the Small Business Administration of $150,000 (the “SBA Loan”). The SBA Loan bears interest at 3.75% per annum and is payable over 30 years with all payments of principal and interest deferred for the first 12 months.

 

These loans helped improve the Company’s liquidity and reliance on factoring during the current period.

 

Discussion of the Three and Nine Month Periods Ended September 30, 2020, and the Period Ended September 30, 2019

 

Revenues and Cost of Sales

 

Sales for the three months ended September 30, 2020, were $667,237 compared to $366,354 for the same three month period ended September 30, 2019, an increase of $300,883. Sales for the nine months ended September 30, 2020, were $1,260,539 compared to $1,040,644 for the same nine-month period ended September 30, 2019, an increase of $219,895. Our sales increase in both the three and nine months is attributable to the addition of new customers, new products as well as increased sales to existing customers; offset by the impact of Covid-19.

 

For the nine months ended September 30, 2020, we had four customers that represented 85% of our business, compared to 94% for the same four customers during the nine months ended September 30, 2019. The loss of any of these customers could have a material adverse impact on our business.

 

Our gross operating margin which is calculated by subtracting the cost of sales from revenue was $246,539 for the three months ended September 30, 2020, compared to $143,997 for the same three-month period ended September 30, 2019, an increase of $102,542. This increase is attributable to higher sales levels in 2020. Our gross margin as a percentage of sales was 36.9% in the three months ended September 30, 2020, compared to 39.3% in the same 2019 period.

 

Our gross operating margin was $475,066 for the nine months ended September 30, 2020, compared to $344,824 for the same three-month period ended September 30, 2019, an increase of 130,242. This increase in operating gross margin is attributable to increased sales in 2020. Our gross margin as a percentage of sales was 37.7% in the nine months ended September 30, 2020, compared to 33.1%% in the same 2019 period. Our gross margin percentage will vary due to the mix of our product sales. We expect our gross margin percentages to be in the range of 35-40%, going forward, although there can be no assurances.

 

 

Operating Expenses

 

Operating expenses for the nine months ended were $26,613,023 for the nine months ended September 30, 2020, compared to $361,365 during the nine months ended September 30, 2019. 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, and $166,635 in non-cash charges to professional expenses due to the issuance of restricted common shares to consultants and investment bankers, see Note 3. Capital Stock. Excluding the charges of $26,020,400 and $166,635, operating expenses were $425,988 during the nine months ended September 30, 2020, compared to $361,365, an increase of $64,623. This increase in 2020 is primarily attributable to increased advertising expenses of approximately $60,000 in the 2020 period to help support sales levels.

 

Other Income (Expense)

 

Other income and expense is comprised of other income items and interest expense. Other income was $5,469 for the nine months ended September 30, 2020, compared to $22,722 in other expense during the same period ended September 30, 2019. The improvement in other income and expense of $28,181 is attributable to the recording of income for the forgiveness of $28,642 in PPP loans as described throughout this report

 

Net income (loss)

 

Net loss for the nine months ended September 30, 2020, was $26,132,488 compared to a net loss of $39,263 for the nine months ended September 30, 2019. The loss for the 2020 period includes a charge of $26,020,400 related to the issuance of super-voting preferred stock -see Footnote 3. Equity, a non-cash charge of $166,635 relating to the issuance of shares of common stock to service providers and other income of $28,642 in other income from the forgiveness of the PPP loan. Excluding these items, the profit for the 2020 period is $25,905 compared to a net loss of $39,263 for the nine months ended September 30, 2019. The increase in profit in the 2020 period compared to the same period in 2019 is attributable to an increased gross margin of $130,242 from higher sales levels in the nine months ended September 30, 2020, offset by an increase of $64,623 in operating expense.

 

Liquidity and Capital Resources

 

Net cash used in operating activities was $81,085 during the nine months ended September 30, 2020, compared to net cash provided of $7,467 for the nine months ended September 30, 2019, a decrease of $88,552. The increase in net cash used in operating activities is attributable to net changes in operating assets and liabilities.

 

Net cash provided by financing activities during the nine months ended September 30, 2020, was $82,294 compared to $27,987 used in financing activities during the same period nine-month period ended September 30, 2019. The increase is primarily attributable to the receipt of $178,642 in SBA financing due to COVID-19.

 

A large portion of the Company’s liquidity in 2020 was provided by the SBA COVID-19 loans thus allowing the Company to reduce its reliance on factoring. Additionally, the Company became profitable from operations during the three months ended September 30, 2020. In the event the Company cannot maintain its profitability going forward, it will have to rely on additional factoring or other sources of financing such as debt or equity. 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.

 

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.

 

Equipment Financing

 

The Company has no existing equipment financing arrangements.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Information is not required to be filed by smaller reporting companies.

 

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Disclosures 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 period covered by this report.

 

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, evaluated the effectiveness of the Company’s internal control over financial reporting as of the end of the period covered by this report under the supervision and with the participation of the Company’s principal executive officer (who is also the principal financial officer) 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 the date of review, 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.

 

Management is also responsible to maintain records accurately and fairly to reflect transactions and transactions are recorded, as necessary. The controls should provide reasonable assurance regarding the prevention of unauthorized acquisition or use of assets.

 

In the present case of the Company, management maintained sole control of all financial transactions and all assets. Since the president of the Company is in sole control of the financial transactions and assets management believes that its control reasonably and adequately addresses the risk of a misstatement in the financial reporting. 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.

 

This Quarterly Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Quarterly Report.

 

Changes in Internal Control Over Financial Reporting

 

There was no change in the Company’s internal control over financial reporting that was identified in connection with such evaluation that occurred during the period covered by this report that has materially affected or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

PART II–OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

There are no legal proceedings against the GLOBAL DIVERSIFIED MARKETING GROUP INC. (the “Company”) and the Company is unaware of any such proceedings contemplated against it.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

On February 26, 2020, the Company issued 60,000 restricted common shares to a consultant and recorded a charge of $120,000.

 

On July 30, 2020, the Company issued 12,000 restricted common shares to an investment banking firm and recorded a charge of $12,600.

 

On August 14, 2020, the Company issued 30,000 shares to an investment banking firm and recorded a charge of $22,503.

 

On August 19, 2020, the Company issued 15,000 restricted common shares to a consultant and recorded a charge of $11,252.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

Not applicable.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

(a) Not applicable.

 

(b) Item 407(c)(3) of Regulation S-K:

 

During the quarter covered by this Report, there have not been any material changes to the procedures by which security holders may recommend nominees to the Board of Directors.

 

ITEM 6. EXHIBITS

 

	31	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

SIGNATURES

 

Pursuant to 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 DIVERSIFIED MARKETING GROUP INC.
	By:	/s/ Paul Adler
		President
Dated: November 4, 2020
	By:	/s/ Paul Adler
		Chief Financial Officer
Dated: November 4, 2020