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 September 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 November 14, 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

 

 

 

 

 

 

 

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

 

 

ASSETS			September 30, 2011				December 31, 2010
Current Assets			(Unaudited)
Cash		$	175,094			$	267,069
Accounts Receivable, net			2,544				13,676
Inventory			256				—
Prepaid expenses			2,752				5,500
Total Current Assets			180,646				286,245
Fixed Assets, net			3,449				5,275
TOTAL ASSETS		$	184,095			$	291,520
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable – Related Party		$	2,660			$	1,223
Accounts Payable – Trade			633				24,528
Total Current Liabilities			3,293				25,751
TOTAL LIABILITIES			3,293				25,751
Stockholders’ Equity
Preferred stock, $0.001 par value, 20,000,000 authorized,
-0-  issued and outstanding at September 30, 2011 and December 31, 2010			—				—
Common stock, $0.001 par value, 50,000,000 authorized,
7,431,736 issued and outstanding at September 30, 2011 and December 31, 2010			7,432				7,432
Additional paid-in-capital			316,470				316,470
Accumulated Deficit			(143,100	)			(58,133	)
Total Stockholders’ Equity			180,802				265,769
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	184,095			$	291,520
See accompanying summary of accounting policies and notes to consolidated financial statements

 

  

 

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

 

		Three Months Ended								Nine months Ended
		September 30, 2011				September 30, 2010				September 30, 2011				September 30, 2010
Revenue		$	33,639			$	24,551			$	88,480			$	68,502
Cost of Revenues			22,224				14,631				66,659				50,012
Gross Profit			11,415				9,920				21,821				18,490
Operating Expenses:
General and Administrative			17,590				6,804				67,172				29,959
Selling and Advertising Expenses			14,131				5,477				38,136				9,252
Depreciation and Amortization			609				608				1,826				1,420
Total Operating Expenses			32,330				12,889				107,134				40,631
Operating Loss			(20,915	)			(2,969	)			(85,313	)			(22,141	)
Other Income
Interest Income			95				—				346				265
Total Other Income			95				—				346				265
Net Loss		$	(20,820	)		$	(2,969	)		$	(84,967	)		$	(21,876	)
Basic and Diluted Loss per share		$	(0.00	)		$	(0.00	)		$	(0.01	)		$	(0.00	)
Weighted Average Shares Outstanding:
Basic and Diluted			7,431,736				7,059,889				7,431,736				7,020,182

 

 

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

  

 

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

 

 

			September 30, 2011				September 30, 2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss		$	(84,967	)		$	(21,876	)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation Expense			1,826				1,420
Changes in assets and liabilities:
Accounts Receivable			11,132				(234	)
Other Current Assets			2,748				(2,782	)
Inventory			(256	)			(15,165	)
Accounts Payable – Related Party			1,437				456
Accounts Payable – Trade			(23,895	)			20,136
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES			(91,975	)			(18,045	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Fixed Assets			—				(7,304	)
NET CASH USED IN INVESTING ACTIVITIES			—				(7,304	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Sale of Stock			—				198,650
Shareholder Advances			—				9,000
NET CASH PROVIDED FROM FINANCING ACTIVITIES			—				207,650
NET CHANGE IN CASH AND CASH EQUIVALENTS			(91,975	)			182,301
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			267,069				1,298
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	175,094			$	183,599
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

September 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

September 30, 2011

(Unaudited)

 

 

NOTE 2 – INVENTORY

 

Inventory is comprised of products for resale, specifically, mustard and salsa.  As of September 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 September 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 September 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 September 30, 2011 and 2010 the amounts charged were $1,006 and $1,228, respectively, and for the nine months ended September 30, 2011 and 2010 the amounts charged were $2,654 and $3,425, respectively.

 

The Company currently purchases all of their product from Herlocher Foods, Inc.  In the three months ended September 30, 2011 and 2010 the amounts purchased were $16,509 and $25,664, respectively.  In the nine months ended September 30, 2011 and 2010 the amounts purchased were $57,030 and $62,298, 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 September 30, 2011 and 2010 were $0 and $1,500, respectively, and for the nine months ended September 30, 2011 were $0 and $4,500.

 

 

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 September 30, 2011, the Company sold $14,313 to Giant Eagle Grocery Stores, or 43% of the Company’s revenues. For the three months ended September 30, 2010, the comparable sales to Giant Eagle were $11,877 or 48% of the Company’s revenues. For the nine months ended September 30, 2011, the Company sold $40,689 to Giant Eagle Grocery Stores, or 46% of the Company’s revenues. For the nine months ended September 30, 2010, the comparable sales to Giant Eagle were $41,230 or 60% 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 NINE MONTHS ENDED September 30, 2011 and 2010

 

Our quarter ended on September 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 September 30, 2011 was $33,639 compared to $24,551 for the three month period ended September 30, 2010.  Revenue for the nine months ended September 30, 2011 was $88,480 compared to $68,502 for the nine month period ended September 30, 2010.

 

The increase in revenue in the three month period ended September 30, 2011 of $9,088 is due to our marketing programs and personal sales calls by the president.  The volume change was unfavorable 2% and the revenue increase was 37% as the third quarter continued to experience strong demand from our larger customers and sales leads from trade shows. AUP (average unit price) increased 40% due to the product mix.  Mustard volume sales were down 8% and revenue up 28% as AUP increased by $6.80 to $24.04.  Salsa volume sales were up 167% and revenue 119% as AUP increased $4.82 to $30.3.  Mustard accounted for 89% of the sales for the three months ended September 30, 2011.

 

The increase in revenue in the nine month period ended September 30, 2011 of $19,978 is also due to our marketing programs and personal sales calls by the president.  The volume increase was 24% and the revenue increase was 29% due to the strong demand from our larger customers and sales leads from trade shows. AUP (average unit price) increased 4% due to a mix shift toward mustard cases.  Mustard volume sales were up 22% and revenue 28% as AUP increased by $0.94 to $22.88.  Salsa volume sales were up 55% and revenue was up 60% as AUP increased $0.90 to $27.88.  Mustard accounted for 94% of the sales for the nine months ended September 30, 2011.

 

GROSS PROFIT.  Gross profit for the three months ended September 30, 2011 was $11,415 compared to $9,920 for the three months ended September 30, 2010.   Margins decreased in the three months ended September 30, 2011 versus 2010 from 40.4% to 33.9%.  The decrease is attributable to unfavorable product mix.

 

Gross profit for the nine months ended September 30, 2011 was $21,821 compared to $18,490 for the nine months ended September 30, 2010.   Margins decreased in the nine months ended September 30, 2011 versus 2010 from 27.0% to 24.7%.  The decrease is attributable to product mix.

 

OPERATING EXPENSES. Total operating expenses for the three months ended September 30, 2011 were $32,330 compared to $12,889 for the three months ended September 30, 2010. Depreciation expense included in the operating expense was $609 and $608 for the three months ended September 30, 2011 and 2010, respectively.

 

Total operating expenses for the nine months ended September 30, 2011 were $107,134 compared to $40,631 for the nine months ended September 30, 2010. Depreciation expense included in the operating expense was $1,826 and $1,420 for the nine months ended September 30, 2011 and 2010, respectively.

 

The increase in operating expenses of $19,441 in the three months ended September 30, 2011 is attributed to increased marketing and advertising expenses of about $8,700, supplies of $5,000, development of $4,000 and other expenses of $2,000.

 

The increase in operating expenses of $66,503 in the nine months ended September 30, 2011 is attributed to marketing and advertising of $28,900 (in implementing our growth plan as laid out in our S-1 filings), professional fees of $12,000 (including a one-time $10,000 fee for being DTC eligible), supplies $5,000, travel $4,000, development $4,000, auto expenses $3,000, payroll $3,000 and other $6,000.

 

NET LOSS. Net loss for the three months September 30, 2011 was $20,820 compared to a loss of $2,969 for the three month period ended September 30, 2010.   Net loss for the nine months September 30, 2011 was $84,967 compared to a loss of $21,876 for the nine month period ended September 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 2011 and 2012.

 

 

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 nine months ended September 30, 2011 decreased by $83,141 to $177,353, versus the year ended December 31, 2010.  This decrease is primarily due the loss from operations.

 

 

		Working Capital				Change from prior period
September 30, 2011		$	177,353			$	(83,141	)
December 31, 2010		$	260,494			$	270,472

 

 

STOCKHOLDER’S EQUITY: Stockholder’s Equity for the nine months ended September 30, 2011 decreased by $84,967 to $180,802 due to the net loss for the year.  Please see the section on ‘Results for the Quarter Ended September 30, 2011’ that discusses in more detail the reasons for the loss.

 

GOING CONCERN: The Company has limited operations and has working capital of $177,353 and an accumulated deficit of $143,100 as of  September 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 September 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 September 30, 2011, our Chief Executive and Chief Financial Officer as of September 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: November 14, 2011

 

 

 

 

 

 

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