THIS SECTION OF THE ANNUAL REPORT INCLUDES A NUMBER OF FORWARD-LOOKING STATEMENTS THAT REFLECT OUR CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE. FORWARD-LOOKING STATEMENTS ARE OFTEN IDENTIFIED BY WORDS LIKE: "BELIEVE," "EXPECT," "ESTIMATE," "ANTICIPATE," "INTEND," "PROJECT" AND SIMILAR EXPRESSIONS, OR WORDS THAT, BY THEIR NATURE, REFER TO FUTURE EVENTS. YOU SHOULD NOT PLACE UNDUE CERTAINTY ON THESE FORWARD-LOOKING STATEMENTS, WHICH APPLY ONLY AS OF THE DATE OF THIS REPORT. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM HISTORICAL RESULTS OR OUR PREDICTIONS.

OUR CONSOLIDATED FINANCIAL STATEMENTS ARE STATED IN UNITED STATES DOLLARS (USD OR US$) AND ARE PREPARED IN ACCORDANCE WITH UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. ALL REFERENCES TO "COMMON STOCK" REFER TO THE COMMON SHARES IN OUR CAPITAL STOCK.





Overview

The Company was incorporated on December 1, 2017 as a Delaware corporation under the name "Dense Forest Acquisition Corporation," Prior to the acquisition of GDHI as a subsidiary, the Company had no operations other than the administrative operations involved with the change in control. The information discussed herein below reflects the results of the Company's subsidiary, GDHI, an operating company in the snack and gourmet food production, marketing, and distribution industry.





Recent Developments

On August 31, 2022, the Company entered into an Asset Purchase Agreement with InPlay Capital Inc., a Delaware corporation ("InPlay"), pursuant to which the Company purchased from InPlay all of the assets relating to the online home fitness store known as "The Hula Fit," including the Shopify Store and the TikTok, Facebook and Google ad accounts, for a purchase price of $50,000. Paul Adler, the sole executive officer and a director of the Company, and the Company's majority stockholder, is also the sole officer, director, and 100% stockholder of InPlay. [The Company intends to make additional acquisitions of ecommerce businesses and assets in an attempt to increase its digital business.]

On November 2, 2022, the term of a purchase agreement (the "Purchase Agreement") the Company had entered into with Williamsburg Venture Holdings, LLC ("Williamsburg") expired. Pursuant to the Purchase Agreement, under certain circumstances, the Company had the right to direct Williamsburg to purchase up to $5,000,000 of its Common Stock (the "Put Shares") over a 12-month period. The Company did not sell any Put Shares to Williamsburg under the Purchase Agreement, and, on November 7, 2022, the Company withdrew a registration statement on Form S-1 it had filed to register the Put Shares.

On November 14, 2022, the Company entered into an engagement agreement (the "Engagement Agreement") with Spencer Clarke, LLC ("Spencer Clarke"), pursuant to which the Company engaged Spencer Clarke to serve as its exclusive investment banking firm to provide certain investment banking-related services to the Company in connection with financings and other transactions (the "Services"). The initial term of the Engagement Agreement is six (6) months, which will automatically extend for additional three-month periods, unless Spencer Clarke is given written notice of termination by the Company at least seven days prior to any extension period. In consideration for the Services, upon execution of the Engagement Agreement, the Company issued Spencer Clarke warrants to purchase 310,715 shares of the Company's Common Stock. Pursuant to the terms of the Engagement Agreement, upon the closing of a financing of over $1,000,000 in value (a "Qualified Financing"), the Company will issue to Spencer Clarke additional warrants to purchase shares of its Common Stock representing 3% of the Company's total issued and outstanding shares of Common Stock as of the closing date of the Qualified Financing. The Company also agreed to pay Spencer Clarke additional fees of at least $100,000 upon any closing of certain acquisitions, financings, and other transactions.





  16

In connection with the Company's planned expansion of its digital business, the Company intends to change its name from "Global Diversified Marketing Group Inc." to "NetBrands Corp." by filing a Certificate of Amendment to its Certificate of Incorporation with the Secretary of State of the State of Delaware. In anticipation of this name change, the Company submitted to the Financial Industry Regulatory Authority ("FINRA") a voluntary request for the change of its name and trading symbol in the market. The Company will announce its new trading symbol once it is approved by FINRA.

Comparison of the Year Ended December 31, 2022 to the Year Ended December 31, 2021





Revenues and Cost of Sales

Sales for the year ended December 31, 2022 were $1,643,138 compared to sales of $2,665,017 for the year ended December 31, 2021 a decrease of $1,021,879, or a decrease of 38.3%. The decrease was primarily due to a one-time order from a major club store chain in the first quarter of 2021 without a comparable order in 2022, shipping and logistic issues, transitioning from a public warehouse to our own warehousing facility, and the significant loss of revenue on a product with eight SKUs that was produced in Russia that is no longer available to us.

Historically, the Company has relied on a small number of customers to generate a large portion of its revenue. In 2022, five customers accounted for approximately 92.3% of the Company's revenues. In 2021, five customers accounted for approximately 99.0% of the Company's revenues. Loss of any one of these customers would have a material adverse impact on the Company's profitability and liquidity.

For the year ended December 31, 2022, gross profit was $407,610, or 24.8 % of revenue, compared to gross profit of $1,035,901 or 38.9% of revenue for the year ended December 31, 2021. The decrease in gross profit was attributable to lower sales volumes. The decrease in gross profit margin was primarily due to significantly increased shipping and inventory costs.





Operating expenses

Operating expenses for the year ended December 31, 2022, were $1,474,405 compared to $2,237,178 for the year ended December 31, 2021. Operating expenses consisted of payroll and taxes, legal and professional fees, rent and selling, general and administrative expenses. Operating expenses included $227,361 and 1,121,592 in non-cash stock- based compensation for years ended December 31, 2022 and 2021, respectively. Excluding this stock based compensation in both periods, operating expenses were $1,247,044 and 1,115,587, for periods ended December 31, 2022 and 2021, respectively Excluding stock-based compensation in both periods the increase in operating expenses in 2022 compared to 2021 is attributable to $50,000 in impairment of intangible assets in 2022 compared to zero in 2021, an increase in rent expense in 2022 due to the Company's new warehouse facility, an increase in 2022 payroll partially offset by a decrease in selling general and administrative expenses in 2022.





Other (expense)

Other expense is comprised of interest expense. Other expense was $19,687 for the year ended December 31, 2022, compared to $12,601 in other expense during the year ended December 31, 2021. The increase in other expense is attributable to higher levels of borrowing due to decreased profitability.

Liquidity and Capital Resources

As of December 31, 2022 and 2021, the Company had $54,185 and $312,574 in cash on hand, respectively. Net cash used in operating activities for the year ended December 31, 2022 was $436,645, compared to $438,415 for the year ended December 31, 2021. The slight decrease in net cash used in operating activities is primarily attributable to a reduction of inventory levels offset by increased operating losses excluding non-cash stock based compensation.

Cash flows from financing activities was $228,257 for the year ended December 31, 2022, compared to $696,432 during the year ended December 31, 2021. The decrease in net cash used in operating activities is primarily attributable to proceeds from government loans of $379,165 and proceeds from private placements of $300,000 in 2021 compared to $-0- for both categories in 2022, partially offset by increases of notes payable in 2022 of $216,022 over 2021 levels.





  17

A large portion of the Company's liquidity in 2021 was provided by the SBA COVID-19 loans and EIDL loans thus allowing the Company to reduce its reliance on factoring. Due to operating losses in 2022 the Company relied on new lines of credit to fund its operations. There can be no assurances that additional lines or credit on reasonable terms, will be available to the Company in the future. Nor can there be any assurance that the Company will achieve positive cash flow from operations.





Seasonality

The Company's business is not subject to seasonality.

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.





Critical Accounting Policies

The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires making estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.





Going Concern

There is substantial doubt about the Company continuing as a going concern based on the Company's accumulated deficit and accrued liabilities. For the period ended December 31, 2022, the Company had a net loss of $1,086,662 and had a stockholder's deficit of $710,953.

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.

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