U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 16, 2001
Global Diversified Holdings, Inc.
(Exact name of registrant as specified in its charter)
Nevada
(State or jurisdiction of incorporation or organization)
333-83231
(Commission File Number)
95-4741485
(I.R.S. Employer Identification Number)
P.O. Box 3070 2724 Nathan Avenue Modesto, CA 95353
(Address of principal executive offices (Zip Code)
Registrant's telephone number: (209) 521-3303
520 North Kings Road Suite 214 Los Angeles, CA 90048
(Former name or former address, if changed since last report)
EXPLANATORY NOTE: This Current Report on Form 8K/A1 amends Item 7(b) of the
Registrant's Current Report on Form 8-K, filed on November 16, 2001, to
provide the Registrant's Unaudited Pro Forma Financial Statements. The
remaining items have not been amended herein.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FINANCIAL STATEMENTS AND SCHEDULES
DECEMBER 31, 2000 AND 1999
FORMING A PART OF ANNUAL REPORT
PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934
THE MAJESTIC COMPANIES, LTD.
Index to Financial Statements
Page
Report of Independent Certified Public Accountants F-3
Consolidated Balance Sheet at December 31, 2000 and 1999 F-4
Consolidated Statements of Losses for the two years
ended December 31, 2000 and 1999 F-6
Consolidated Statements of Deficiency in Stockholders' Equity for
the two years ended December 31, 2000 and 1999 F-7
Consolidated Statements of Cash Flows for the two years
ended December 31, 2000 and 1999 F-8
Notes to Consolidated Financial Statements F-9 to F-24
INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheet as of September 30, 2001 F-25
Consolidated Statement of Losses for the nine
months ended September 30, 2001 and 2000 F-26
Consolidated Statement of Cash Flows for the
nine months ended September 30, 2001 and 2000 F-27
Condensed Notes to Financial Statements at September 30, 2001 F-28-F-31
Stefanou & Company, LLP
CERTIFIED PUBLIC ACCOUNTANTS
1360 Beverly Road
Suite 305
McLean, VA 22101-3621
703-448-9200
703-448-3515 (fax)
Philadelphia, PA
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
The Majestic Companies, Ltd.
San Diego, California
We have audited the accompanying consolidated balance sheets of
The Majestic Companies, Ltd. and subsidiaries as of December 31, 2000
and 1999 and the related consolidated statements of losses,
deficiency in stockholders' equity, and cash flows for the two years
then ended. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on
these financial statements based upon our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
The Majestic Companies, Ltd. and subsidiaries as of December 31, 2000
and 1999, and the results of its operations and its cash flows for
the two years ended, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As
discussed in Note M, the Company is experiencing difficulty in
generating sufficient cash flow to meet it obligations and sustain
its operations, which raises substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these
matters are also described in Note M. The financial statements do
not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Stefanou & Company
Stefanou & Company, LLP
Certified Public Accountants
McLean, Virginia
March 20, 2001
F-3
THE MAJESTIC COMPANIES, LTD.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2000 AND 1999
2000 1999
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 36,688 $ 4,970
Accounts receivable, net of allowance for
doubtful accounts 52,832 69,182
Inventory, at lower of cost or market 732,036 499,575
Deposits 54,792 53,263
Prepaid expenses 111,843 1,386
Total current assets 988,191 628,376
PROPERTY AND EQUIPMENT-AT COST:
Buildings under operating leases (Note C) - 236,084
Furniture, equipment and leasehold improvements 311,135 491,644
311,135 727,728
Less accumulated depreciation 88,216 82,791
222,919 644,937
OTHER ASSETS:
Intangible assets, net of amortization (Note D) 47,915 73,926
$1,259,025 $1,347,239
See accompanying notes to consolidated financial statements
F-4
THE MAJESTIC COMPANIES, LTD.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2000 AND 1999
2000 1999
LIABILITIES
CURRENT LIABILITIES:
Current maturities of long-term debt (Note B) $ 376,358 $ 600,720
Accounts payable and accrued expenses 1,308,831 1,199,054
Customer deposits 752,525 286,175
Total current liabilities 2,437,714 2,085,949
LONG-TERM DEBT, less current maturities (Note B) 842,893 495,865
COMMITMENTS AND CONTINGENCIES (Note I)
STOCKHOLDERS' EQUITY (NOTES E AND H)
Convertible Preferred Stock Par Value $ .01 per share
2,000,000 shares authorized, none issued at
December 31 ,2000 and December 31, 1999 - -
Common Stock, Par Value $ .001 per share;
200,000,000 shares authorized, 75,415,004 shares
issued at December 31, 2000 and 26,834,070 issued at
December 31, 1999 75,415 26,834
Additional paid-in-capital 10,604,471 5,573,165
Stock subscription receivable (51,000) -
Accumulated deficit (12,650,467)(6,834,574)
(2,021,581)(1,234,575)
$1,259,025 $1,347,239
See accompanying notes to consolidated financial statements
F-4
THE MAJESTIC COMPANIES, LTD.
CONSOLIDATED STATEMENTS OF LOSSES
YEARS ENDED DECEMBER 31, 2000 and 1999
2000 1999
Revenues:
Modular buildings $ 2,389,095 $2,265,609
Rental income 100,150 23,529
$2,489,245 $2,289,138
Cost and expenses:
Modular Buildings 2,790,380 2,234,812
Selling, general and administrative 5,207,706 3,726,650
Research and development 114,535 190,430
Interest 106,441 177,959
Depreciation and amortization 88,279 83,403
8,307,341 6,413,254
Operating loss (5,818,096) (4,124,116)
Interest income 2,203 482
Income (taxes) benefit - -
Net loss (5,815,893) (4,123,634)
Loss per common share (basic and assuming dilution) (0.14) (0.17)
Weighted average common shares outstanding (Note J) 42,085,442 24,942,985
See accompanying notes to consolidated financial statements
F-6
THE MAJESTIC COMPANIES, LTD.
CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2000 AND 1999
<CAPTIION>
Additional Stock
Common Stock Paid-In Subscription Accumulated
Shares Amount Capaital Available Deficit Total
Balance at December 31 1998 21,111,863 $21,112 $ 3,073,945 $ (24,000) $(2,710,940) $ 360,117
Sale of stock issued
pursuant to private
placement 2,115,498 2,115 976,159 - - 978,274
Sale of stock issued
pursuant to private
placement 725,000 725 349,275 - - 350,000
Shares issued to
consultants and employees
in exchange for services 2,321,709 2,322 888,262 - - 890,584
Shares issued in exchange
for debt 560,000 560 285,524 - - 286,084
Receipt of stock
subscription note
receivable - - - 24,000 - 24,000
Net loss - - - - (4,123,634) (4,123,634)
Balance at December 31 1999 26,834,070 26,834 5,573,165 - (6,834,574) (1,234,575)
Shares issued in exchange
for debt 6,235,000 6,235 1,325,345 - - 1,331,580
Shares issued to
consultants and employees
in exchange for services 19,622,000 19,622 2,809,499 - - 2,829,121
Shares issued pursuant to
Offering 7,550,000 7,550 288,950 - - 296,500
Shares issued upon
conversion of
Convertible Debentures 15,173,934 15,174 607,512 - - 622,686
Stock Subscription
Receivable - - - (51,000) - (51,000)
Net Loss - - - (5,815,893) (5,815,893)
Balance at December 31 2000 75,415,004 75,415 10,604,471 (51,000) (12,650,467) (2,021,581)
See accompanying notes to consolidated financial statements
F-7
THE MAJESTIC COMPANIES, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000 and 1999
2000 1999
Increase (decrease) in cash and equivalents
Cash flows from operating activities
Net loss for the year $(5,815,893) $(4,123,634)
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Common stock issued in exchange for
services rendered 2,829,121 890,584
Common stock issued in exchange
for debt 1,331,580 286,084
Provision for doubtful accounts
Receivable 143,976 -
Depreciation and amortization 88,279 83,403
(Increase) decrease in:
Accounts receivable 16,350 78,057
Prepaid expenses and other (112,166) (63,678)
Inventory (232,461) 714,451
Increase (decrease) in:
Accounts payable and accrued expenses, net 109,777 454,652
Customer deposits 466,350 (647,271)
Net cash (used) provided by operating activities (1,175,087) (2,327,352)
Cash flows provided by (used in) in investing
activities:
Capital expenditures, net of disposals - (413,633)
Net cash used in investing activities - (413,633)
Cash flows used in financing activities:
Proceeds from sale of common stock, net 245,500 1,352,275
Proceeds from loans 1,095,500 1,256,121
Repayments of loans, net (134,195) (168,080)
Net cash, provided (used) in financing activities 1,206,805 2,440,316
Net (decrease) increase in cash and equivalents 31,718 (300,669)
Cash and equivalents at beginning of year 4,970 305,639
Cash and equivalents at end of year 36,688 4,970
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for interest 106,441 177,959
Cash paid during the year for taxes - -
Non-cash financing activities
Common stock issued for services 2,829,121 890,584
Issuance of common stock in exchanged for
debt (Note M) 1,331,580 286,084
Debentures exchanged for common stock 622,686 -
Common stock subscriptions receivable 51,000 -
See accompanying notes to consolidated financial statements
F-8
THE MAJESTIC COMPANIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000 and 1999
NOTE A-SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the
preparation of the accompanying consolidated financial statements
follows.
Business and Basis of Presentation
The Majestic Companies, Ltd. (the "Company"), is incorporated under
the laws of the state of Nevada and develops, manufactures and
markets relocatable modular classrooms, office buildings, telephone
equipment bunkers and modular structures. This activity is conducted
primarily in the western part of the United States. The Company is
also engaged in the origination and servicing of new modular building
leases. This activity is conducted primarily in the state of
California. All of the leases which the Company enters into are
accounted for as operating leases. The Company is also in the
business of developing and marketing a proprietary passenger
restraint system for the school bus industry.
The consolidated financial statements include the accounts of the
Company, and its wholly-owned subsidiaries, Majestic Modular
Buildings, Ltd., Majestic Financial, Ltd., and Majestic
Transportation, Ltd. Significant intercompany transactions have been
eliminated in consolidation.
Inventories
Inventories are stated at the lower of cost or market determined by
the first-in, first-out (FIFO) method. Inventories consist of
modular buildings available for sale to contract clients and the
public, along with materials and work-in progress.
Components of inventories as of December 31, 2000 and 1999 are as
follows:
2000 1999
Raw Materials $ 166,106 $ 178,700
Finished Goods and Work In Progress 565,930 320,875
$ 732,036 $ 499,575
Revenue Recognition
The Company follows a policy of recognizing modular building sales at
the time of shipment. The Company follows a policy of recognizing
revenue from leasing modular buildings as operating leases. At the
inception of the lease, no lease revenue is recognized and the leased
building appears on the balance sheet as "buildings under operating
leases". The capitalized cost of each modular building is
depreciated over the lease term on a straight-line basis down to the
Company's original estimate of the projected value of the building at
the end of the scheduled lease term (the "Residual"). Monthly lease
payments are recognized as rental income.
F-9
Advertising
The Company follows the policy of charging the costs of advertising
to expenses incurred. For the years ended December 31, 2000 and 1999,
advertising costs were $ 46,796 and $47,125, respectively.
Property and Equipment
For financial statement purposes, property and equipment are
depreciated using the straight-line method over their estimated
useful lives (five years for furniture, fixtures and equipment and 15
years for building and improvements). The straight-line method of
depreciation is also used for tax purposes.
Intangible Assets
Intangible assets consist of patents, trademarks, and licensing
agreements to build transportation equipment and organization costs,
which are amortized using the straight line method over the estimated
useful lives of the assets which range from five to seven years. In
1999 the Company capitalized the costs to develop state certified
building plans used in the manufacture of modular buildings. The
plans are amortized over the course of their useful lives of three
years. Organization costs incurred after December 31, 1999 were
expensed as incurred in accordance with AICPA Statement of Position 98-5.
Income Taxes
Income taxes are provided based on the liability method for financial
reporting purposes in accordance with the provisions of Statements of
Financial Standards No. 109, "Accounting for Income Taxes".
Under this method deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be removed or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in the
consolidated statements of operations in the period that includes the
enactment date.
F-10
Cash Equivalents
For purposes of the Statements of Cash Flows, the Company considers
all highly liquid debt instruments purchased with a maturity date of
three months or less to be cash equivalents.
Impairment of Long-Lived Assets
The Company has adopted Statement of Financial Accounting Standards
No. 121 (SFAS 121). The Statement requires that long-lived assets
and certain identifiable intangibles held and used by the Company be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
SFAS No.121 also requires assets to be disposed of be reported at the
lower of the carrying amount or the fair value less costs to sell.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly actual results could differ from those estimates.
Research and Development
Company-sponsored research and development costs related to both
present and future products are expended in the year incurred. Total
expenditures on research and product development for 2000 and 1999
were $ 80,710 and $190,430, respectively.
Concentrations of Credit Risk
Financial instruments and related items which potentially subject the
Company to concentrations of credit risk consist primarily of cash,
cash equivalents and trade receivables. The Company places its cash
and temporary cash investments with credit quality institutions. At
times, such investments may be in excess of the FDIC insurance limit.
The Company's customers are concentrated primarily in the state of
California and it periodically reviews its trade receivables in
determining its allowance for doubtful accounts. The allowance for
doubtful accounts were $143,796 and $ 0 at December 31, 2000 and
1999, respectively.
F-11
Stock Based Compensation
The Company accounts for stock transactions in accordance with APB
Opinion 25, "Accounting for Stock Issued to Employees." In
accordance with statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation," the Company has adopted
the proforma disclosure requirements.
Liquidity
As shown in the accompanying financial statements, the Company
incurred a net loss of $ 5,815,893, during the year ended December
31, 2000 and $4,123,634 during the year ended December 31, 1999. The
Company's current liabilities exceeded its current assets by $ 1,449,524
as of December 31, 2000. At December 31, 2000 a substantial portion of all of
the Company's assets are illiquid.
Comprehensive Income
The Company does not have any items of comprehensive income in any of
the periods presented.
Segment Information
The Company adopted Statement of Financial Accounting Standards No.
131, Disclosures about Segments of an Enterprise and Related
Information ("SFAS 131") in the year ended December 31, 1998. SAFAS
establishes standards for reporting information regarding operating
segments in annual financial statements and requires selected
information for those segments to be presented in interim financial
reports issued to stockholders. SFAS 131 also establishes standards
for related disclosures about products and services and geographic
areas. Operating segments are identified as components of an
enterprise about which separate discrete financial information is
available for evaluation by the chief operating decision maker, or
decision making group, in making decisions how to allocate resources
and assess performance. The information disclosed herein, materially
represents all of the financial information related to the Company's
principal operating segments.
New Accounting Pronouncements
The Company adopted Statement of Financial Accounting Standards No.
132, Employers' Disclosures about Pension and Other -Post Employment
Benefits ("SFAS 132") in the year ended December 31, 1999. SFAS No.
132 establishes disclosure requirements regarding pension and post
employment obligations. SFAS No. 132 does not effect the Company
as of December 31, 1999.
F-12
In March 1998, Statement of Position No. 98-1 was issued, which
specifies the appropriate accounting for costs incurred to develop
or obtain computer software for internal use. The new pronouncement
provides guidance on which costs should be capitalized, and over
what period such costs should be amortized and what disclosures
should be made regarding such costs. This pronouncement is effective
for fiscal years beginning after December 15, 1998, but earlier
application is acceptable. Previously capitalized costs will not be
adjusted. The Company believes that it is already in substantial
compliance with the accounting requirements as set forth in this new
pronouncement, and therefore believes that adoption will not have a
material effect on financial condition or operating results.
The Company adopted Statement of Financial Standards No. 133,
Accounting for Derivative Instruments and for Hedging Activities
("SFAS No. 133") in the year ended December 31, 1999. SFAS No. 133
requires that certain derivative instruments be recognized in
balance sheets at fair value and for changes in fair value to be
recognized in operations. Additional guidance is also provided to
determine when hedge accounting treatment is appropriate whereby
hedging gains and losses are offset by losses and gains related
directly to the hedged item. SFAS No. 133's impact on the
Company's consolidated financial statements is not expected to be
material as the Company has not historically used derivative and
hedge instruments.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (" SAB 101"), Revenue Recognition in
Financial Statements, which will become effective December 31, 2000.
The Company does not expect the standard to have a material effect on
its financial condition or operating results.
In March 2000, the Financial Accounting Standards Board issued
interpretation No. 44 ("FIN 44"), "Accounting for Certain
Transactions Involving Stock Compensation, an Interpretation of APB
Opinion No. 25". FIN 44 clarifies the application of APB No. 25 for
(a) the definition of employee for purposes of applying APB No. 25,
(b) the criteria for determining whether a plan qualifies as a
noncompensatory plan, (c) the accounting consequences of various
modifications to previously fixed stock option or award, and (d) the
accounting for an exchange of stock compensation awards in a business
combination. FIN 44 is effective July 2, 2000 but certain conclusions
cover specific events that occur after either December 15, 1998 or
January 12, 2000. The adoption of FIN 44 did not have an affect on
the Company's financial statements but may impact the accounting for
grants or awards in future periods
F-13
Earnings Per Share
The Company has adopted Statement of Financial Accounting Standard
No. 128, "Earnings Per Share," specifying the computation,
presentation and disclosure requirements of earnings per share
information. Basic earnings per share has been calculated based upon
the weighted average number of common shares outstanding. Stock
options and warrant's have been excluded as common stock equivalents
in the diluted earnings per share because they are either
antidilutive, or their effect is not material. There is no effect on
earnings per share information for the years ended December 31, 1999
and 1998 relating to the adoption of this standard.
Reclassifications
Certain reclassifications have been made in prior years' financial
statements to conform to classifications used in the current year.
NOTE B-LONG-TERM DEBT
Long-term debt at December 31, 2000 and 1999 consists of the
following:
2000 1999
Note payable in monthly installments of $5,000,
Including interest at 12% per annum, unsecured;
payable to related party and secured third party
collateral (See Note K) $ 173,433 $ 211,308
Note payable in monthly installments of $1,187
including interest at 9.75% per annum; secured by
office equipment 10,673 20,828
Note payable in monthly installments of
interest only at 10% per annum, secured by
accounts receivable, inventory and equipment;
the Company is in default under the terms of
the note. 25,000 25,000
Note payable in monthly installments of
interest only at 10% per annum, secured by
accounts receivable , inventory and equipment ;
the Company is in default under the terms of
the note. 50,000 50,000
F-14
Note payable in monthly installments of interest
only at 10% per annum, secured by accounts
receivable , inventory and equipment; the
Company is in default under the terms of the
note. 50,000 -
Note payable in monthly installments of interest
only at 10% per annum, secured by accounts
receivable , inventory and equipment ; the
Company is in default under the terms of the
note. 100,000 100,000
Note payable in monthly installments of
principal and interest at 19.57% per annum,
secured by equipment - 21,917
Note payable in monthly installments of
$1,276, interest only at 10% per annum,
secured by accounts receivable, inventory and
equipment 64,000 100,000
Note payable in monthly installments of
interest only at variable rates ranging from
12% to 40% per annum, secured by specified
accounts receivable 10,095 252,517
Note payable to related party at 0 % interest
per annum; unsecured (See Note K) - 70,300
Note payable at 10% interest per annum;
interest payable monthly unsecured 75,500
Note payable in monthly installments of $ 682 ,
including principal and interest at 12% per
annum, secured by equipment - 14,209
Note payable in monthly installments of $
820, including principal and interest at 21%
per annum, secured by equipment 40,706 40,706
Note payable to related party at 0% per annum;
unsecured (See Note K) 7,000 57,039
Note payable to officer at 12% per annum;
unsecured (See Note K) 200,160 132,761
Line of Credit -exchangeable for 4% debentures
that are then convertible into the Company's
common stock at an exchange rate equal to 80%
of the average closing bid price (as reported
by Bloomberg) of the Company's common stock
for any four (4) of the five (5) trading days
immediately preceding the date of conversion.
(see Note H) 134,360 -
Convertible Debentures, interest at 4 % per
annum and convertible into common stock of the
Company at either:120% of the closing bid price
on the closing date, or 80% of the average
closing bid price (as reported by Bloomberg)for
any four (4) days of the previous five (5) days
immediately preceding the date of conversion.
See Note H) 278,325 -
1,219,252 1,096,585
Less: current portion 376,358 600,720
842,894 495,865
F-15
Aggregate maturities of long-term debt as of December 31, 2000 are
as follows:
Year Amount
2001 $ 376,358
2002 140,000
2003 110,000
2004 190,000
2005 and after 452,894
$ 1,269,252
NOTE C-BUILDINGS UNDER OPERATING LEASES
Buildings under operating leases consist of the following:
2000 1999
Buildings $ - $ 236,084
Less: accumulated depreciation - 14,816
$ - $ 221,268
The buildings are depreciated to their estimated residual value of
$28,000 over the life of the lease contracts.
F-16
NOTE D-INTANGIBLE ASSETS
The costs and accumulated amortization of intangible assets at
December 31 are summarized as follows:
2000 1999
Trademarks $ 14,328 $ 12,884
Organization costs - -
Plans 78,800 78,800
93,128 91,684
Less: accumulated amortization 45,213 17,758
Intangible assets, net 47,915 73,926
Amortization expense included as a charge to income amounted to
$45,213 and $17,758 for the year ended December 31, 2000 and 1999,
respectively.
NOTE E-STOCK OPTIONS AND WARRANTS
The following table summarizes the changes in options outstanding and
the related prices for the shares of the Company's common stock
issued to a key employee of the Company (See Note I).
Number Weighted Average Number of
of shares Exercise Price Shares Exercisable
Outstanding at December 31 1997 250,000 $ .25 250,000
Granted 500,000 .45 500,000
Exercised - - -
Cancelled - - -
Outstanding at December 31 1998 750,000 - 750,000
Granted
Exercised (500,000) .45 (500,000)
Cancelled - - -
Outstanding at December 31 1999 250,000 $ .25 250,000
Granted 2,700,000 .20 2,700,000
Exercised (800,000) .20 (800,000)
Cancelled - - -
Outstanding at December 31 2000 2,150,000$ .25 2,150,000
F-17
For disclosure purposes the fair value of each stock option grant is
estimated on the date of the grant using the Black-Scholes option
pricing model with the following weighted-average assumptions used
for stock options granted during the years ended December 31, 2000
and 1999, respectively: annual dividends of $0.00 for both years,
expected volatility of 50%, risk free interest rate of 6.0% an
expected life of two years for all grants. The weighted-average fair
values of the stock options granted during the years ended December
31, 2000 and 1999 were $ .20 and $.19, respectively.
If the Company recognized compensation cost for the employee stock
option plan in accordance with SFAS No. 123, the Company's pro forma
net loss and net loss per share would have been $ (6,353,393) and $
(.14) in 2000 and $(4,171,134) and $(.17) in 1999, respectively.
NOTE F-INCOME TAXES
The Company has adopted Financial Accounting Standard number 109
which requires the recognition of deferred tax liabilities and assets
for the expected future tax consequences of events that have been
included in the financial statement or tax returns. Under this
method, deferred tax liabilities and assets are determined based on
the difference between financial statements and tax bases of assets
and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse. Temporary differences
between taxable income reported for financial reporting purposes and
income tax purposes are insignificant.
For income tax reporting purposes, the Company's aggregate unused net
operating losses approximate $12,600,000, which expire through 2020. The
future utilization of the operating loss carryforwards or the time period in
which the carryforwards could be utilized could be limited if certain
historical stockholders of Majestic sell their shares within two
years of the purchase of Skytex. The deferred tax asset related to
the carryforward is approximately $ 4,257,188. The Company has
provided a valuation reserve against the full amount of the net
operating loss benefit, since in the opinion of management based upon
the earning history of the Company, it is more likely than not that
the benefits will be realized.
F-18
Components of deferred tax assets as of December 31, 2000 are as
follows:
Non Current:
Net operating loss carryforward $ 4,257,188
Valuation allowance (4,257,188)
Net deferred tax asset $ -
NOTE G-MAJOR CUSTOMERS
Revenue from three (3) major customers approximated $2,383,021 or 98%
and $1,659,929 or 73% of sales for the year ended December 31, 2000
and 1999, respectively.
NOTE H - CAPITAL STOCK
The Company is authorized to issue 200,000,000 shares of common stock
with a par value of $ .001 per share. As of December 31, 2000 the
Company has issued and outstanding 75,415,000 shares of common stock.
The Company is also authorized to issue 2,000,000 shares of preferred
stock with a par value of $.01 per share. There are no preferred
shares outstanding at December 31, 2000.
In 1999, the Company issued a total of 2,840,498 shares of common
stock in a private placements and exempt offerings to sophisticated
investors, primarily in the United States in exchange for $1,325,434
net of costs and fees. The Company also issued 2,321,709 shares to
consultants and employees for $890,584 of services rendered during
1999. The shares issued to the consultants and employees were based
upon the value of the services rendered or the market price of the
Company's common stock during the period the services were rendered.
In addition, the Company issued 560,000 shares of common stock in
exchange for $286,084 of previously incurred debt in 1999.
In 2000, the Company issued a total of 7,550,000 shares of common
stock in exchange for $ 296,500 net of costs and fees. The Company
issued 19,622,000 shares of common stock to consultants and employees
for $ 2,829,121 of services rendered during 2000. The shares issued
to the consultants and employees were based upon the value of the
services rendered or the market price of the Company's common stock
during the period the services were rendered. In addition, the
Company issued 6,235,000 shares of common stock in exchange for $1,331,580
of previously incurred debt.
In 2000, holders of the Company's 4% Convertible Debentures (see
Note B) converted Debentures into 4,637,459 shares of the Company's
common stock at an average conversion rate of 19,207 shares per
$1,000 principal amount of Debentures (equivalent to a conversion
price of approximately $.05).
F-19
In 2000, holders of the Company's Line of Credit exchangeable into 4%
Convertible Debentures (see Note B) converted underlying Debentures
into 10,536,475 shares of the Company's common stock at an average
conversion rate of 27,654 shares per $1,000 principal amount of
debentures (equivalent to a conversion price of approximately $.036
per share).
Share amounts presented in the consolidated balance sheets and
consolidated statements of stockholders' equity reflect the actual
share amounts outstanding for each period presented.
NOTE I-COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases office and warehouse space on a year-to-year basis
in San Diego, California for its corporate offices. The Company also
leases warehouse and plant facilities in Modesto, California.
Commitments for minimum rentals under non-cancelable leases at the
end of 2000 are as follows:
2001 $ 186,475
2002 180,000
2003 60,000
$ 426,475
Employment and Consulting Agreements
The Company has an employment agreement with the Company's President
and Chief Executive Officer. In addition to salary and benefit
provisions, the agreement includes defined commitments should the
employee terminate the employment with or without cause. At December
31, 2000, the Company's President and Chief Executive Officer waived
any and all claims for unpaid compensation of $140,000 under the
employment agreement.
The Company has consulting agreements with outside contractors,
certain of whom are also Company stockholders. The Agreements are
generally for a term of 12 months from inception and renewable
automatically from year to year unless either the Company or
Consultant terminates such engagement by written notice.
F-20
License and Royalty Agreements
The Company has entered into a licensing and royalty agreement which
allow the Company to use certain patent rights in the passive
restraint products the Company is currently developing. The
licensing agreement requires royalty payments ranging from 2% to 4%
of specified product sales. Minimum royalty payments due under this
agreement for the period 2000 through 2004 total approximately $250,000.
For the years ended December 31, 2000 and 1999, royalty payments
charged to expense were $ 50,000 and $25,000, respectively.
Litigation
In 1998, a financial institution filed a complaint against Majestic
Modular Buildings, Ltd, a wholly-owned subsidiary of the Company in
the Stanislaus County Superior Court. The complaint alleges the
previous owners of the subsidiaries' assets improperly transferred
property to the Company in connection with the sale of certain
assets. The Company believes that it has meritorious defenses to the
plaintiff's claims and intends to vigorously defend itself against
the bank's claims.
In July 2000, the Clovis Unified School District filed a complaint
against the Company and Majestic Modular Buildings, Ltd. in
Stanislaus County Superior Court. The complaint alleges a breach of
contract. The Company believes that it has meritorious defenses to
the plaintiff's claims and intends to vigorously defend itself
against the Plaintiff's claims.
In January 2001, the Eastside Union School District filed complaint
against the Company and Majestic Modular Buildings, Ltd. in
Stanislaus County Superior Court. The complaint alleges a breach of
contract. The Company believes that it has meritorious defenses to
the plaintiff's claims and intends to vigorously defend itself
against the Plaintiff's claims.
The Company is also subject to other legal proceedings and claims
which arise in the ordinary course of its business. Although
occasional adverse decisions or settlements may occur, the Company
believes that the final disposition of such matters will not have
material adverse effect on its financial position, results of
operations or liquidity.
F-21
NOTE J-LOSSES PER COMMON SHARE
The following table presents the computation of basic and diluted
loss per share:
2000 1999
Net loss available for common shareholders $(5,815,893) $(4,123,634)
Basic and fully diluted loss per share (.14) (.17)
Weighted average common shares outstanding 42,085,442 24,942,985
NOTE K-RELATED PARTY TRANSACTIONS
In 1999, the Company's President and Chief Executive Officer and his
spouse advanced funds in the form of unsecured notes to the Company
for working capital purposes. As of December 31, 2000 and 1999, the
amounts due the Company's President and Chief Executive Officer and
his spouse were $ 373,593 and $ 344,069, respectively (see Note B).
In 1999, a company whose shareholders include officers of the
Company, advanced funds in the form of an unsecured note to the
Company for working capital purposes. As of December 31, 2000 and
1999, the amount due the company were $ 7,000 and $57,039,
respectively. No formal repayment terms or arrangements exist (see Note B).
NOTE L-SEGMENT INFORMATION
The Company's operations are classified into three reportable
segments: Majestic Modular, Majestic Financial and Majestic
Transportation. The Company's three reportable segments are managed
separately based on fundamental differences in their operations.
Majestic Modular develops, manufactures and markets re-locatable
modular classrooms, offices, office buildings, telephone equipment
bunkers and modular structures. Majestic Modular's customers are
primarily in the State of California.
Majestic Financial originates and services modular building leases.
Majestic Financial's customers are primarily in the State of California.
Majestic Transportation is developing and marketing a proprietary
passenger restraint system for the school bus industry. While
Majestic Transportation is in the developmental stage and has not
reported sales from its inception, the Company believes its products
will be sold to customers throughout North America.
F-22
Segment operating income is total segment revenue reduced by
operating expenses identifiable with that business segment.
Corporate includes general corporate administrative costs.
The Company evaluates performance and allocates resources based upon
operating income. The accounting policies of the reportable segments
are the same as those described in the summary of accounting
policies. There are no inter-segment sales.
2000 1999
Sales:
Majestic Modular $ 2,391,298 $ 2,265,609
Majestic Financial 100,150 23,529
Majestic Transportation - -
Total Sales 2,491,448 2,289,138
Operating (Loss):
Majestic Modular (1,607,381) (1,522,237)
Majestic Financial (122,082) ( 37,461)
Majestic Transportation (243,989) ( 362,128)
Corporate General and Administrative Expenses (3,842,440) (2,202,290)
Total Segment Operating Loss (5,815,893) (4,124,116)
Segments Assets:
Majestic Modular 1,067,879 1,041,325
Majestic Financial - 222,531
Majestic Transportation 46,784 56,217
Corporate 144,363 27,166
Total Segment Assets 1,259,026 1,347,239
Capital Expenditures:
Majestic Modular 207,169 168,402
Majestic Financial - 201,084
Majestic Transportation 45,328 44,147
Corporate 18,337 -
Total Capital Expenditures 270,834 413,633
Depreciation and Amortization:
Majestic Modular 62,769 57,349
Majestic Financial 9,181 14,621
Majestic Transportation 10,735 5,861
Corporate 5,594 5,572
Total Depreciation and Amortization 88,279 83,403
F-23
NOTE M-GOING CONCERN MATTERS
The accompanying statements have been prepared on a going concern
basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As
shown in the financial statements during the years ended December 31,
2000 and 1999, the Company incurred loses from operations of $
5,815,893 and $4,123,634 respectively. These factors among others
may indicate that the Company will be unable to continue as a going
concern for a reasonable period of time.
The Company's existence is dependent upon management's ability to
develop profitable operations and resolve it's liquidity problems.
Management anticipates the Company will attain profitable status and
improve it liquidity through the continued developing, marketing and
selling of its products and additional equity investment in the
Company. The accompanying financial statements do not include any
adjustments that might result should the Company be unable to
continue as a going concern.
In order to improve the Company's liquidity, the Company is actively
pursing additional equity financing through discussions with
investment bankers and private investors. There can be no assurance
the Company will be successful in its effort to secure additional
equity financing.
If operations and cash flows continue to improve through these
efforts, management believes that the Company can continue to
operate. However, no assurance can be given that management's
actions will result in profitable operations or the resolution of its
liquidity problems.
F-24
September 30
2001
ASSETS
Current Assets:
Cash and Equivalents $ 248,404
Accounts Receivable-net of allowance 70,584
Deposits and Other Prepaid Expenses 60,944
Inventory, at Cost 530,162
Total Current Assets 910,095
Property and Equipment 301,656
Accumulated Depreciation (109,513)
Net Property and Equipment 192,143
Other Assets 151,881
Amortization (69,507)
Net Other Assets 82,374
Total Assets 1,184,611
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current Liabilities:
Current Maturities of Long Term Debt 312,529
Accounts Payable and Accrued Liabilities 1,099,754
Customer Deposits 892,868
Total Current Liabilities 2,305,151
Long Term Debt, Less Current Maturities 370,286
Deficiency in Stockholders' Equity
Convertible Preferred Stock, Par Value,
$.001 per share 2,000,000 shares
authorized; none issued at September
30, 2001 -
Common Stock, Par Value $.001 per
Share, 200,000,000 shares authorized;
101,290,047 issued at September 30, 2001 191,290
Additional Paid-In Capital 12,871,198
Accumulated Deficit (14,553,314)
Deficiency in Stockholders' Equity (1,490,826)
Total Liabilities and Equity 1,184,611
See Accompanying Notes to Unaudited Financial Statements
F-25
THE MAJESTIC COMPANIES, LTD.
CONSOLIDATED STATEMENT OF LOSSES (Unaudited)
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30
Three Months Ended Nine Months Ended
September 30 September 30
2001 2000 2001 2000
Net Sales $ 17,321 $ 70,077 $ 60,339 $ 90,201
Cost of Goods Sold - 212,087 - 212,087
Gross Profit 17,321 (142,010) 60,339 (121,886)
Research and Development 18,143 9,326 48,571 90,245
Sales and Marketing 182,016 38,395 274,721 90,152
General and Administrative 209,669 1,253,677 981,670 2,893,778
Depreciation & Amortization 5,570 5,800 13,424 22,211
415,398 1,307,198 1,318,386 3,096,386
Operating (Loss) (398,077) (1,449,208) (1,258,047) (3,218,272)
Interest Expense 9,034 9,637 92,869 47,229
Loss from Continuing
Operations Before Income
Tax and Discontinued Operations (407,111) (1,458,845) (1,350,916) (3,265,501)
Income Tax Benefit - - - -
Loss from Continuing Operations, Before
Discontinued Operations (407,111) (1,458,845) (1,350,916) (3,265,501)
Loss from Discontinued Operations (54,313) (308,399) (551,930) (806,436)
Net Loss (461,426) (1,767,247) (1,902,846) (4,071,937)
Loss Per Common Share
(Basic and Assuming Dilution) (0.00) (0.03) (0.01) (0.12)
Continuing Operations (0.00) (0.03) (0.01) (0.09)
Discontinuing Operations$ (0.00) (0.00) (0.00) (0.03)
Weighted Average Common 169,984,046 51,301,397 135,047,360 135,230,355
See Accompanying Notes to Unaudited Financial Statements
F-26
THE MAJESTIC COMPANIES, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30
2001 2000
Increase (Decrease) in Cash and Equivalents
Cash Flows from Operating Activities:
Net Loss for the Period from Continuing Operations $(1,350,916) $(3,265,501)
Adjustments to Reconcile Net (Loss) to Net Cash
Net Cash Provided (Used) by Operating Activities:
Net Loss for the period from discontinued
Operations (551,930) (806,436)
Common Stock issued in connection with
services rendered 433,818 3,189,705
Common stock issued in exchange for debt 191,195 -
Depreciation and Amortization 51,313 71,841
(Increase) Decrease In:
Accounts Receivable (17,752) (126,751)
Prepaid Expenses and Other 105,691 (822,961)
Inventory 201,874 (633,759)
Other Assets (58,753) -
Increase (Decrease) in:
Accounts Payable and Accrued Expenses, net (209,077) 4,113
Customer Deposits 140,343 508,781
Net Cash Used in Operating Activities (1,064,194) (1,880,968)
Cash Flows from Investing Activities:
Capital Expenditures, Net of Disposals (3,687) (8,044)
Net Cash Used in Investing Activities (3,687) (8,044)
Cash Flows from Financing Activities:
Proceeds from Sale of Common Stock, Net of Costs - -
Proceeds from Loans, Net 1,431,720 3,188,022
Repayment of Loans, Net (152,123) (1,288,404)
Net Cash, Provided by Financing Activities 1,279,597 1,899,618
Net Increase (Decrease) in Cash and Equivalents 211,716 10,606
Cash and Equivalents at Beginning of Period 36,688 4,970
Cash and Equivalents at End of Period 248,404 15,576
Supplemental Disclosures of Cash Flow Information:
Cash Paid during the period for interest 18,686 62,196
Cash Paid during the period for taxes - -
Common Stock issued for services 433,818 3,189,705
Non Cash Financing Activities:
Issuance of common stock in exchange for debt 191,195 -
Common stock subscription receivable - -
Debentures exchanged for common stock 1,804,949 -
See Accompanying Notes to Unaudited Financial Statements
F-27
THE MAJESTIC COMPANIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - SUMMARY OF ACCOUNTING POLICIES
General
The accompanying unaudited consolidated financial statements have
been prepared in accordance with the instructions to Form 10-QSB, and
therefore, do not include all the information necessary for a fair
presentation of financial position, results of operations and cash
flows in conformity with generally accepted accounting principles.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine month period ended
September 30, 2001 are not necessarily indicative of the results that
may be expected for the year ended December 31, 2001. The unaudited
condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and footnotes
thereto included in the Registrant's December 31, 2000 Annual Report
on Form 10-KSB.
Basis of Presentation
The consolidated financial statements include the accounts of the
Registrant, and its wholly-owned subsidiaries, Majestic Modular
Buildings, Ltd., Majestic Financial, Ltd., and Majestic Safe-T-
Products, Ltd. (formerly Majestic Transportation Products, Ltd.).
Significant intercompany transactions have been eliminated in consolidation.
Discontinued Operations
In October 2001, the Company signed a binding letter of intent to
sell its Majestic Modular segment to Global Diversified Holdings,
Inc for approximately $ 6,000,000, comprised as follows:
Assumption of Majestic Modular debt $ 1,000,000
Issuance of Note Payable to Company 1,300,000
Issuance of Global Diversified Holdings,
Inc common stock 3,700,000
$ 6,000,000
The Majestic Modular Buildings segment is accounted for as a
discontinued operation, and accordingly, amounts in the financial
statements, and related notes for all periods shown have been
restated to reflect discontinued operations accounting. Summarized
results of the discontinued business are shown separately as
discontinued operations in the accompanying consolidated financial
statements. The investment is discontinued operations is primarily
comprised of accounts receivable, inventory, fixed assets, net of liabilities.
F-28
Recent Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("FAS")No. 141, "Business
Combinations" ("FAS 141") and FAS 142, "Goodwill and Other Intangible
Assets" ("FAS 142"). FAS 141 addresses the initial recognition and
measurement of goodwill and other intangible assets acquired in a
business combination. FAS 142 addressed the initial recognition and
measurement of intangible assets acquired outside of a business
combination, whether acquired individually or with a group of other
assets, and the accounting and reporting for goodwill and other
intangibles subsequent to their acquisition. These standards require
all future business combinations to be accounted for using the
purchase method of accounting. Goodwill will no longer be amortized
but instead will be subject to impairment tests at least annually.
The Company is required to adopt FAS 141 and FAS 142 on a prospective
basis as of January 1, 2002; however, certain provisions of these new
standards may also apply to any acquisitions concluded subsequent to
June 30, 2001. As a result of implementing these new standards, the
Company will discontinue the amortization of goodwill as of December
31, 2001. The Company does not believe that the adoption of FAS 141
and FAS 142 will have a material impact on its consolidated financial
statements.
In October 2001, the Financial Accounting Standards Board issued FAS
144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
("FAS 144"). FAS 144 addresses financial accounting and reporting
for the impairment or disposal of long-lived assets. This statement
supersedes FAS 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of" (FAS 121) and
related literature and establishes a single accounting model, based n
the framework established in FAS 121, for long-lived assets to be
disposed of by sale. The Company is required to adopt FAS 144 no
later than January 1, 2002. The Company does not believe that the
adoption of FAS 144 will have a material impact on its consolidated
financial statements.
Segment Information
During 2001 and 2000, the Registrant operated in three reportable
segments: Majestic Modular, Majestic Financial and Majestic Safe-T-
Products. The Registrant's three reportable segments are managed
separately based on fundamental differences in their operations.
Majestic Modular develops, manufactures and markets re-locatable
modular classrooms, offices, office buildings, telephone equipment
bunkers and modular structures. Majestic Modular's customers are
primarily in the State of California. The Company entered into a
binding letter of intent to sell Majestic Modular and the segment had
been accounted for as a discontinued operation in the accompanying
consolidated financial statements.
Majestic Financial originates and services modular building leases.
Majestic Financial's customers are primarily in the State of
California. Operations for this subsidiary were substantially reduced
in the year 2000.
F-29
Majestic Safe-T-Products, Ltd., is developing and marketing a
proprietary passenger restraint system and an undercarriage guard
device for the school bus industry. While Majestic Safe-T-Products
is in the developmental stage and has not reported sales from its
inception, the Registrant believes its products will be sold to
customers throughout North America.
Segment operating income is total segment revenue reduced by
operating expenses identifiable with that business segment.
Corporate includes general corporate administrative costs.
The Registrant evaluates performance and allocates resources based
upon operating income. The accounting policies of the reportable
segments are the same as those described in the summary of accounting
policies. There are no inter-segment sales.
THE MAJESTIC COMPANIES, LTD.
INDUSTRY SEGMENTS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30 September 30
2001 2000 2001 2000
Net Sales to External
Customers
Leases $ 10,037 $ 70,038 $ 30,113 $ 90,113
Transportation 1,194 - 1,194 -
All Other, net 6,090 39 29,032 88
Total Sales to External
Customers 17,321 70,077 60,339 90,201
Segment Operating Income
(Loss)
Leases 10,038 (143,372) 29,983 (132,119)
Transportation (59,133) (101,594) (146,540) (189,097)
All Other (348,982) (1,204,242) (1,141,490) (2,897,056)
Total Segment Operating
(Loss) (398,077) (1,449,208) (1,258,047) (3,218,272)
F-30
THE MAJESTIC COMPANIES, LTD.
INDUSTRY SEGMENTS
(UNAUDITED)
September 30
2001
Assets:
Modular Buildings $ 802,710
Leases -
Transportation 337,179
Corporate Assets not Assigned
to Units 44,722
$ 1,184,611
Nine Months ended
September 30
2001 2000
Capital Expenditures:
Modular Buildings $ - $ -
Leases - -
Transportation - -
Corporate 3,687 8,044
3,687 8,044
Depreciation and amortization
Modular Buildings - -
Leases - 9,181
Transportation 10,457 8,942
Corporate 40,856 53,718
51,313 71,841
F-31
(b) Pro Forma Financial Information.
Unaudited Pro Forma Condensed Balance Sheet as of
October 31, 2001
Unaudited Pro Forma Condensed Statement of Losses for
the Six Months ended October 31, 2001
Unaudited Pro Forma Condensed Statement of Losses for
the Year ended April 30, 2001
Notes to Unaudited Pro Forma Condensed Financial
Information
Unaudited Pro Forma Condensed Financial Information
On December 7, 2001, Global Diversified Holdings, Inc.,
formerly Global Foods Online, Inc. (the "Registrant", "Global")
formally acquired purchased Majestic Modular Buildings, Ltd.("Modular"), a
wholly owned subsidiary of the Majestic Companies, Ltd. ("Majestic") , through
an Agreement and Plan of Exchange ("Agreement"). Pursuant to this
Agreement, Modular became a wholly-owned subsidiary of the Registrant.
Modular is engaged in the business of designing, manufacturing
and marketing re-locatable modular structures such as classrooms and
office buildings to end users as well as to third party leasing
agents for use primarily within the state of California. Modular
maintains administrative and manufacturing facilities at 320 9th
Street, Modesto, California.
In connection with the acquisition of Modular, the Registrant
issued to the parent of Modular, Majestic, a total of Twenty-
Eight Million, Five Hundred Thousand (28,500,000) shares of
restricted common stock of the Registrant. The Registrant also issued
a note payable to Majestic in the amount of Nine Hundred Thousand
Dollars ($900,000.00), payable over a sixteen (16) month period.
Subsequent to the date of the Agreement, the Registrant and
Majestic amended the terms of the Agreement whereby the Majestic and
the Registrant agreed to cancel the $900,000 note in exchange for the
issuance of an additional 5,000,000 shares of the Registrant's
restricted common stock to Majestic. The shares are to be held in
escrow and the Registrant has the option to redeem the shares in
full, or in part, within one year of issuance in exchange for $150,000.
Under a separate Agreement, an entity controlled by the
Registrant's President and Chief Executive Officer contributed an
aggregate of $1,500,000 of assets and raw materials (fair market
value estimated at $3,116,000) in exchange for Fifty-Nine Million
(59,000,000) shares of the Registrant's restricted common stock and
the issuance of a non- interest bearing note payable in the amount
of Seven Hundred Thousand Dollars ($700,000.00). The note is
payable over a sixteen (16) month period, beginning on June 8, 2002,
and continuing on the eighth day of each successive month for nine
more months at the rate of $70,000 per month in the form of the
Registrants' restricted common stock . The shares of common stock to
be issued will be based upon the closing bid price of the Registrant
common stock on the eighth day of each month on which payment is due,
and if there is not a closing bid price on that day, then the amount
to be calculated will be calculated according to the next available
closing bid price. The transaction will be accounted for using the
purchase method of accounting. The Registrant recorded the carryover
historical basis of net tangible assets contributed, which did not
differ materially from their historical cost. The results of
operations subsequent to the date of acquisition will be included in
the Registrant's consolidated statement of operations.
The contribution of the assets should result in an
immediate increase in core business book value and bring
about revenue and income growth. The core component of the
asset base is its integrated, state-of-the-art, automated
manufacturing equipment and process, raw material and marketing
collateral that are specifically designed for the high capacity
construction of modular structures. In addition to tangible assets,
the new Company's new management team brings a proven track
record of being able to quickly ramp up modular building sales and
manufacturing capacity in an extremely compressed time frame, as well
as many years of modular industry experience.
The Registrant's acquisition of certain Modular assets and
contribution of assets by the Company's President and Chief
Executive Officer are critical steps in the deployment of its new
business, what will be the Registrant's core business- the business
of designing, manufacturing and marketing re-locatable modular
structures such as classrooms and office buildings to end users as
well as to third party leasing agents for use within the state of
California, as well as other Western States
Subsequent to its acquisition of Modular, the Registrant
determined it was in the best interests of the Company to dispose of
Modular's certain non performing assets. On January 24, 2002, the
Registrant sold Modular to Mr. Gerard Lehman, a former employee and
officer of Modular for $1,000 and other good and valuable consideration.
GLOBAL DIVERSIFIED HOLDINGS, INC
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
OCTOBER 31, 2001
The Majestic Global Foods
Companies, Ltd. Online, Inc.
(Historical Majestic (Historical Proforma
Financial Proforma Modular Financial Proforma Balance
Statements) Adjustments Buildings Ltd. Statements) Adjustments Sheet
ASSETS
Current Assets:
Cash and Equivalents $ 248,404 $ (248,229)(1) $ 175 $ 421 $ 825(10)$ 1,421
Accounts
Receivable-net 70,584 (20,000)(1) 50,584 - (50,584)(10) -
Notes Receivable - - 10,250 10,250
Deposits and Other 60,944 (8,436)(1) 52,508 500 (52,508)(10) 500
204,552 (5)
Inventory, at Cost 530,162 530,162 - (255,162)(10) 479,552
Total Current Assets 910,094 633,429 11,171 491,723
1,295,448(5)
Property and Equipment,
net of depreciation 192,143 (40,374)(1) 151,769 3,123 (151,769)(10) 1,298,571
Other Assets
1,572,162(4)
85,000(5)
Goodwill, net of
amortization - - - (1,572,162)(10) 85,000
Trademarks, net of
Amortization 82,374 (64,862)(1) 17,512 - (17,512)(10) -
Net Other Assets 82,374 17,512 - 85,000
1,184,611 802,710 14,294 1,875,294
See accompanying notes to pro forma unaudited condensed financial information
GLOBAL DIVERSIFIED HOLDINGS, INC
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
OCTOBER 31, 2001
The Majestic Global Foods
Companies, Ltd. Online, Inc.
(Historical Majestic (Historical Proforma
Financial Proforma Modular Financial Proforma Balance
Statements) Adjustments Buildings Ltd. Statements) Adjustments Sheet
LIABILITIES AND
(DEFICIENCY)
STOCKHOLDERS' EQUITY
Liabilities
Current Liabilities:
Current Maturities of
Long Term Debt $ 79,934 (79,934)(1) $ - $ - $ -
Accounts Payable and
Accrued Liabilities 1,099,755 (202,845)(1) 896,909 174,920 (896,909)(10) 174,920
Notes Payable - - 3,000 700,000 (5) 703,000
Other Liabilities 232,595 (225,000)(1) 7,595 (7,595)(10) -
Customer Deposits 892,868 892,868 - (617,868)(10) 275,000
Total Current
Liabilities 2,305,152 1,797,372 177,920 1,152,920
Long Term Debt, Less
Current Maturities 95,888 (95,888)(1) - - -
Due Related Party 274,397 (274,397)(1) - - -
Total Long Term
Liabilities 370,285 - - -
(Deficiency)
Stockholders' Equity 59,000(5)
Common Stock 191,290 (191,290)(1) - 10,607 33,500(4) 103,107
826,000(5)
Additional Paid-In
Capital 12,871,198 (12,871,198)(1) - 1,477,921 544,000(4) 2,847,921
Common Stock
Subscriptions - - 16,600 16,600
(576,500)(10)
Accumulated Deficit (14,553,314) 13,558,652(1) (994,662) (1,668,754) 994,662(4) (2,245,254)
Stockholders' Equity
(deficiency) (1,490,826) (994,662) (163,626) 722,374
Total Liabilities and
Equity 1,184,611 802,710 14,294 1,875,294
See accompanying notes to pro forma unaudited condensed financial information.
GLOBAL DIVERSIFIED HOLDINGS, INC
UNAUDITED PRO FORMA CONDENSED STATEMENT OF LOSSES
FOR THE SIX MONTHS ENDED OCTOBER 31, 2001
The Majestic Global
Companies, Ltd. Diversified
(Historical Majestic Holdings, Inc. Proforma
Financial Proforma Modular Historical Proforma Balance
Statements) Adjustments Buildings Ltd. Financial Adjustments Sheet
Statements)
Revenues
Operating Income $ 755,516 $ (21,269)(2) $ 734,247 $ - $ (734,247)(11) $ -
Cost of Goods Sold
Materials 405,272 405,272 - (405,272)(11) -
Labor 167,975 167,975 - (167,975)(11) -
Other 38 38 - (38)(11) -
573,285 573,285 - -
Gross Profit 182,231 160,962 - -
Other Income 23,500 (23,500)(2) - - -
205,731 160,962 - -
Operating Expenses
General and
Administrative 1,392,910 (833,382)(2) 559,528 162,051 (559,528)(11) 162,051
Interest Expense 65,326 (53,477)(2) 11,849 150 (11,849)(11) 150
(24,750)(11)
259,090(8)
Depreciation and
Amortization 34,247 (9,497)(2) 24,750 1,562 331,432(6) 592,084
Total Expenses 1,492,483 596,127 163,763 754,285
(Loss) Before Income
Taxes and Disposal of
Segment (1,286,752) (435,165) (163,763) (754,285)
Income Taxes - - - -
Loss on Disposal of
Segment - - - (576,500)(10) (576,500)
Net Loss (1,286,752) (435,165) (163,763) (1,330,785)
Loss per common share
(basic and assuming
dilution) (0.02) (0.13)
Continuing operations (0.07)
Discontinued operations (0.06)
Weighted average shares
Outstanding 10,042,205 10,042,205
See accompanying notes to pro forma unaudited condensed financial information.
GLOBAL DIVERSIFIED HOLDINGS, INC
UNAUDITED PRO FORMA CONDENSED STATEMENT OF LOSSES
FOR THE PERIOD ENDED APRIL 30, 2001
The Majestic Global
Companies, Ltd. Diversified
(Historical Majestic Holdings, Inc. Proforma
Financial Proforma Modular Historical Proforma Balance
Statements) Adjustments Buildings Ltd. Financial Adjustments Sheet
Statements)
Revenues
Operating Income $ 2,473,570 $ (40,150)(3) $ 2,433,420 $ - $ (2,433,420)(12)$ -
Cost of Goods Sold
Materials 1,962,811 (212,087)(3) 1,750,724 - (1,750,724)(12) -
Labor 841,853 841,853 - (841,853)(12) -
Other (1,485) (1,485) - 1,485(12) -
2,803,179 2,591,092 - -
Gross Profit (329,609) (157,672) - -
Other Income 68,277 (68,277)(3) - - -
(261,332) (157,672) - -
Operating Expenses
General and
Administrative 4,763,591 (3,687,745)(3) 1,075,846 1,055,605 (1,075,846)(12) 1,055,605
Interest Expense 130,995 (81,588)(3) 49,407 8,400 (49,407)(12) 8,400
(69,348)(12)
129,545(9)
Depreciation and
Amortization 90,414 (21,066)(3) 69,348 - 165,716(7) 295,261
Total Expenses 4,985,000 1,194,601 1,064,005 1,359,266
(Loss) Before Income
Taxes and Disposal of
Segment (5,246,332) (1,352,273) (1,064,005) (1,359,266)
Income Taxes - - - - -
Loss on Disposal of
Segment - - - (576,500)(10) (576,500)
Net Loss (5,246,332) (1,352,273) (1,064,005) (1,935,766)
Loss per common share
(basic and assuming
dilution) (0.13) (0.24)
Continuing operations (0.17)
Discontinued operations (0.07)
Weighted average shares
Outstanding 8,021,249 8,021,249
See accompanying note to pro forma unaudited condensed financial information.
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
On December 11, 2001, Global Diversified Industries, Inc.,
formerly, Global Foods Online, Inc. (" the Registrant" or "Company")
formally acquired Majestic Modular Buildings, Ltd ("Modular"), a wholly owned
subsidiary of Majestic Companies. Inc. ("Majestic") through an
Agreement and Plan of Exchange ("Agreement"). The transaction is
accounted for using the purchase method of accounting.
In connection with the acquisition of Modular, the Registrant
issued to the parent of Modular, Majestic, a total of Twenty-
Eight Million, Five Hundred Thousand (28,500,000) shares of
restricted common stock of the Registrant. The Registrant also
issued a note payable to Majestic in the amount of Nine Hundred
Thousand Dollars ($900,000.00), payable over a sixteen (16) month
period. The stock that was issued in this transaction was valued
at approximately 50% percent of the average of the stock's closing
price five days prior to November 16, 2001.
Subsequent to the date of the Agreement, the Registrant and
Majestic amended the terms of the Agreement whereby the Majestic and
the Registrant agreed to cancel the $900,000 note in exchange for the
issuance of an additional 5,000,000 shares of the Registrant's
restricted common stock to Majestic. The shares are to be held in
escrow and the Registrant has the option to redeem the shares in
full, or in part, within one year of issuance in exchange for $150,000.
Under a separate Agreement, dated November 2001 an entity
controlled by the Registrant's President and Chief Executive Officer
contributed an aggregate of $1,500,000 of assets and raw materials
(fair market value estimated at $3,116,000) in exchange for Fifty-
Nine Million (59,000,000) shares of the Registrant's restricted
common stock and the issuance of a non- interest bearing note
payable in the amount of Seven Hundred Thousand Dollars
($700,000.00). The note is payable over a sixteen (16) month period,
beginning on June 8, 2002, and continuing on the eighth day of each
successive month for nine more months at the rate of $70,000 per
month in the form of the Registrants' restricted common stock . The
shares of common stock to be issued will be based upon the closing
bid price of the Registrant common stock on the eighth day of each
month on which payment is due, and if there is not a closing bid
price on that day, then the amount to be calculated will be
calculated according to the next available closing bid price. The
transaction will be accounted for using the purchase method of
accounting. The Registrant recorded the carryover historical basis
of net tangible assets contributed, which did not differ materially
from their historical cost. The results of operations subsequent to
the date of acquisition will be included in the Registrant's
consolidated statement of operations.
Subsequent to its acquisition of Modular, the Registrant
determined it was in the best interests of the Company to dispose of
its certain non performing assets. On January 24, 2002, the
Registrant sold Modular to Mr. Gerard Lehman, a former employee and
officer of Modular for $1,000, and other good and valuable consideration.
The Pro Forma Unaudited Financial Statements have been prepared in
order to present the condensed financial position and results of
operations of the Company and Modular as if:
Modular's acquisition and subsequent disposition occurred as of
October 31, 2001 for the unaudited pro forma condensed balance
sheet, as if the transactions had taken place at May 1, 2000 for
the unaudited condensed statements of losses for the year ended
April 30, 2001 and for the six month period ended October 31, 2001.
the contribution of assets by an entity controlled by the
Company's principal shareholder the Company had occurred as of
October 31, 2001 for the unaudited pro forma condensed balance
sheet, as if the transaction had taken place at May 1, 2000 for
the unaudited condensed statements of losses for the year ended
April 30, 2001 and for the six month period ended October 31, 2001.
The unaudited pro forma condensed financial data has been prepared
by the Company's management based on the financial statements
included elsewhere herein. The pro forma adjustments include certain
assumptions and preliminary estimates as discussed in the
accompanying notes and are subject to change. This pro forma data
may not be indicative of the results that actually would have
occurred if the transactions had been in effect on the dates
indicated or which may be obtained in the future. The pro forma
condensed financial information should be read in conjunction with
the historical consolidated financial statements of Majestic and
Registrant included in this Form and the historical consolidated
December 31, 2000 financial statements of Majestic (including notes
thereto) and the historical consolidated April 30, 2001 financial
statements of Registrant included in the Registrant's SEC Form
10KSB and the October 31, 2001 financial information included in
Registrant's SEC Form 10QSB.
(1) Reflects the removal of specific assets and liabilities of
Majestic operating segments that were not acquired as part of
Global's acquisition of Modular
Dr (Cr)
Cash $ ( 248,229)
Accounts receivable (20,000)
Deposits (8,436)
Property and equipment, net (40,374)
Trademarks, net (64,862)
Current potion- long term debt 79,935
Accounts payable and accrued expenses 202,845
Other liabilities 225,000
Long term debt 95,888
Due to related party 274,397
Common stock 191,290
Additional paid in capital 12,871,198
Accumulated deficit (13,558,652)
$ 0
(2) Reflects the removal of specific business segments from
Majestic that were not acquired as a part of the acquisition of
Modular by Global for the six months ended October 31, 2001
Dr Cr.
Revenues 21,269
Other income 23,500
Selling general and administrative 833,382
Interest 53,477
Depreciation and amortization 9,497
(3) Reflects the removal of specific business segments from Majestic
that were not acquired as a part of the acquisition of Modular by
Global for the year ended April, 2001
Dr Cr.
Revenues 40,150
Other income 68,277
Cost of sales 212,087
Selling general and administrative 3,687,745
Interest 81,588
Depreciation and amortization 21,066
(4) To record the acquisition of Modular for 28,500,000 shares of
the Company's restricted common stock valued at $.015 per share,
5,000,000 shares of the Company's restricted common stock held in
escrow, valued at $.03 per share, and the assumption of the excess of
$994,662 of Modular liabilities assumed over the Modular assets. The
28,500,000 shares of stock issued in this transaction was valued at
approximately 50% the average of the Company's common stock closing
price five days prior to November 16, 2001.The 5,000,000 shares
issued were valued based upon the Company's price to redeem the
shares within one year of issuance.
The significant components of this transaction are:
Common shares issued $ 33,500
Additional paid in capital 544,000
Excess of liabilities assumed
over assets acquired 994,662
Total consideration paid $ 1,572,162
(5) To record the purchase of assets from entity controlled by
Company's President and Chief Executive Officer
Dr. Cr.
Inventory 204,552
Property and Equipment 1,295,448
Goodwill 85,000
Note payable 700,000
Issuance of 59,000,000 shares of
the Company's restricted common stock 59,000
Additional paid in capital 826,000
(6) To record one year's amortization of intangibles arising from
the acquisition of Modular and other assets. The intangible
assets acquired are being amortized over a five-year period.
(7) To record six month's amortization of intangibles arising from
the acquisition of Modular and other assets. The intangible
assets acquired are being amortized over a five-year period.
(8) To record one year's depreciation of equipment arising from the
acquisition of assets. The equipment acquired will be depreciated
over a five-year period.
(9) To record six month's depreciation of property and equipment
arising from the acquisition of assets. The assets will be
depreciated over a five-year period.
(10) Reflects the removal of specific assets and liabilities of
Modular that were disposed of in exchange for $1,000, and
other good and valuable consideration.
Dr(Cr)
Cash and equivalents, net $ 825
Accounts receivable- net of allowance (50,584)
Notes receivable (52,508)
Inventory, at cost (255,162)
Property and Equipment, net of depreciation (151,769)
Trademarks, net of amortization (17,512)
Goodwill (1,572,162)
Accounts Payable and Accrued Liabilities 896,909
Other Liabilities 7,595
Customer Deposits 617,868
Loss on Disposal of Segment 576,500
$ -
(11) Reflects the removal of Modular revenues and expenses for the
six months ended October 31, 2001
Dr Cr.
Revenues 734,247
Cost of sales 573,285
Selling general and administrative 559,528
Interest 11,849
Depreciation and amortization 24,750
(13) Reflects the removal of Modular revenues and expenses for the
year ended April 30, 2001
Dr Cr.
Revenues 2,433,420
Cost of sales 2,591,092
Selling general and administrative 1,075,846
Interest 49,407
Depreciation and amortization 69,348
SIGNATURE
Pursuant to the requirements of Section 13 or 15(b) 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 Holdings, Inc
By: /s/ Philip Hamilton
Dated: February 15, 2001 Philip Hamilton, President