UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended:
Commission File Number:
(Exact name of registrant as specified in its charter)
| ||
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(
(Registrant’s telephone number, including area code)
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
N/A |
| N/A |
| N/A |
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.00001 par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months, and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ |
| Accelerated filer | ☐ |
☒ |
| Smaller reporting company | ||
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| Emerging growth company |
i
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of November 13, 2023 there were
ii
TABLE OF CONTENTS
iii
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BERGIO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2023 |
| December 31, 2022 | |||
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ASSETS: |
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Current assets: |
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Cash |
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Accounts receivable |
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Inventory |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Goodwill |
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Intangible assets, net |
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Operating lease right of use assets |
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Investment in unconsolidated affiliate |
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Total Assets |
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LIABILITIES AND STOCKHOLDERS’ EQUITY: |
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Current liabilities: |
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Accounts payable and accrued liabilities |
| $ |
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Bank overdraft |
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Accrued compensation - CEO |
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Notes payable - current portion, net of debt discount |
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Convertible notes payable, net of debt discount |
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Mandatorily redeemable Preferred Stock Series E - $ outstanding at September 30, 2023 |
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Loans and advances payable including accrued interest |
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Advances from CEO and accrued interest |
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Derivative liability - convertible debt |
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Derivative liability - acquisition |
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Operating lease liabilities - current |
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Total current liabilities |
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Long-term liabilities: |
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Notes payable - long-term |
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Operating lease liabilities - long-term |
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Total long term liabilities |
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Total Liabilities |
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Commitments and contingencies |
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The accompanying unaudited condensed notes are an integral part of these unaudited condensed consolidated financial statements.
1
BERGIO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
- CONTINUED -
| September 30, 2023 |
| December 31, 2022 | |||
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| (Unaudited) |
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Stockholders’ equity |
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Preferred stock Series A preferred stock - $ authorized, at September 30, 2023 and December 31, 2022, respectively |
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Convertible Series B preferred stock - $ authorized, at September 30, 2023 and December 31, 2022, respectively ($ |
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Convertible Series C preferred stock - $ authorized, at September 30, 2023 and December 31, 2022, respectively ($ |
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Convertible Series D preferred stock - $ authorized, at September 30, 2023 and December 31, 2022, respectively ($ |
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Common stock, $ as of September 30, 2023 and December 31, 2022, respectively |
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Common stock issuable ( |
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Additional paid-in capital |
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Accumulated deficit |
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Total Bergio International, Inc. stockholders’ equity |
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Non-controlling interest in subsidiaries |
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Total Stockholders’ equity |
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Total Liabilities and Stockholders’ Equity |
| $ |
| $ |
The accompanying unaudited condensed notes are an integral part of these unaudited condensed consolidated financial statements.
2
BERGIO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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| For the Three Months Ended September 30, |
| For the Nine Months Ended September 30, | ||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 | |||||
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Net revenues |
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Net revenues - related parties |
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Total net revenues |
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Cost of revenues |
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Gross profit |
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Operating expenses: |
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Selling and marketing expenses |
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Professional and consulting expenses |
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Compensation and related expenses |
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General and administrative expenses |
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Total operating expenses |
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Loss from operations |
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Other income (expenses) |
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Interest expense |
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Derivative expense |
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Amortization of debt discount and deferred financing cost |
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Loss from foreign currency transactions |
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Fraud loss caused by computer hackers |
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Change in fair value of derivative liabilities |
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Interest income |
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Other income |
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Gain from forgiveness of accounts payable |
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Gain from extinguishment of debt, net |
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Total other expenses, net |
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Loss before provision for income taxes |
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Provision for income taxes |
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Net loss |
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Losses attributable to non-controlling interest |
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Net loss attributable to Bergio International, Inc. |
| $ | ( |
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Deemed dividend |
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Net loss available to Bergio International, Inc. common stockholders |
| $ | ( |
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Net loss per common share: |
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Basic and diluted |
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Weighted average common shares outstanding: |
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Basic and diluted |
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The accompanying unaudited condensed notes are an integral part of these unaudited condensed consolidated financial statements.
3
BERGIO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
For the Nine Months Ended September 30, 2023 and 2022
(Unaudited)
Nine Months Ended September 30, 2023
| Series A Preferred Stock |
| Series B Preferred Stock |
| Series D Preferred Stock |
| Common Stock |
| Common Stock Issuable |
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Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Additional Paid In Capital |
| Accumulated Deficit |
| Non-controlling Interest |
| Total Stockholders’ Equity (Deficit) | ||||||||||
Balance, December 31, 2022 |
| $ |
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Series D preferred stock exchange for Series E preferred stock |
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Reclassification of Series E preferred stock to mezzanine debt |
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Fractional shares due to 1:500 reverse stock split |
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Dividends on preferred stock |
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Net loss |
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Balance, March 31, 2023 |
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Issuance of common stock for debt conversion including accrued interest and fees |
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Issuance of common stock for accrued compensation - CEO |
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Dividends on preferred stock |
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Net loss |
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Balance, June 30, 2023 |
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Issuance of common stock for debt conversion including accrued interest and fees |
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Return of common stock previously issued for accrued compensation - CEO |
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Issuance of common stock for conversion of Series D preferred stock accrued dividends |
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Stock warrants granted in connection with convertible notes |
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Dividends on preferred stock |
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Net loss |
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Balance, September 30, 2023 |
| $ |
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| $ |
| $ |
| $ | ( |
| $ | ( |
| $ |
The accompanying unaudited condensed notes are an integral part of these unaudited condensed consolidated financial statements.
4
BERGIO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
For the Nine Months Ended September 30, 2023 and 2022
(Unaudited)
Nine Months Ended September 30, 2022
| Series A Preferred Stock |
| Series B Preferred Stock |
| Series C Preferred Stock |
| Series D Preferred Stock |
| Common Stock |
| Common Stock Issuable |
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Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Additional Paid In Capital |
| Treasury Stock |
| Accumulated Deficit |
| Non-controlling Interest |
| Total Stockholders’ Equity (Deficit) | ||||||||||||
Balance, December 31, 2021 |
| $ |
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Series D preferred stock issued for cash, net of offering cost |
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Deemed dividend upon issuance of Series D preferred stock |
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Issuance of common stock for debt conversion including accrued interest and fees |
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Accretion of stock-based compensation for services |
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Dividends on preferred stock |
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Cancellation of treasury stock |
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Net loss |
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Balance, March 31, 2022 |
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Series D preferred stock issued for cash, net of offering cost |
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Deemed dividend upon issuance of Series D preferred stock |
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Issuance of common stock for conversion of Series C preferred stock |
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| ( |
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Reclassification of derivative liability to equity upon conversion of Series C preferred stock |
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Issuance of common stock for debt conversion including accrued interest and fees |
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Issuance of common stock for common stock issuable |
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Cashless exercise of stock warrants |
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Accretion of stock-based compensation for services |
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Accrued dividends on preferred stock |
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Net loss |
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Balance, June 30, 2022 |
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Reclassification of derivative liability to equity upon conversion of Series C preferred stock |
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Issuance of common stock for conversion of Series D preferred stock accrued dividends |
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| ( |
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| ( |
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Common stock issuable for services to CEO |
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Common stock issuable for services |
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Accretion of stock-based compensation for services |
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Accrued dividends on preferred stock |
|
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| ( |
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| ( | |||||||||||||||
Net loss |
|
|
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| ( |
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| ( |
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| ( | ||||||||||||||
Balance, September 30, 2022 |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| $ |
| $ |
| $ | ( |
| $ | ( |
| $ |
The accompanying unaudited condensed notes are an integral part of these unaudited condensed consolidated financial statements.
5
BERGIO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
| For the Nine Months Ended September 30, | ||||
| 2023 |
| 2022 | |||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
| ||
Net loss attributable to Bergio International, Inc. |
| $ | (1,544,003) |
| $ | (2,146,779) |
Adjustments to reconcile net loss to net cash used in operating activities |
|
|
|
|
|
|
Non-controlling interest in subsidiaries |
|
| (462,023) |
|
| (972,067) |
Amortization expense |
|
| 181,467 |
|
| 181,467 |
Depreciation expense |
|
| 28,485 |
|
| 30,448 |
Stock-based compensation |
|
| - |
|
| 213,674 |
Amortization of debt discount and deferred financing costs |
|
| 242,324 |
|
| 475,567 |
Derivative expense |
|
| 525,902 |
|
| 24,303 |
Change in fair value of derivative liabilities |
|
| (119,086) |
|
| (569,108) |
Gain from forgiveness of accounts payable |
|
| (231,806) |
|
| - |
Gain from extinguishment of debt |
|
| (115,232) |
|
| (349,314) |
Non-cash interest upon conversion of debt |
|
| - |
|
| 1,025,660 |
Amortization of right of use assets |
|
| 9,993 |
|
| (72,373) |
Change in operating assets and liabilities: |
|
|
|
|
|
|
Accounts receivable |
|
| (11,544) |
|
| (26,998) |
Inventory |
|
| 30,755 |
|
| 226,252 |
Prepaid expenses and other current assets |
|
| (12,845) |
|
| (34,457) |
Accounts payable and accrued liabilities |
|
| 460,849 |
|
| (227,296) |
Bank overdraft |
|
| (7,637) |
|
| - |
Accrued compensation - CEO |
|
| 148,239 |
|
| 319,765 |
Operating lease obligations |
|
| (9,994) |
|
| 72,372 |
Deferred compensation - CEO |
|
| - |
|
| (346,163) |
NET CASH USED IN OPERATING ACTIVITIES |
|
| (886,156) |
|
| (2,175,047) |
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
Purchase of property and equipment |
|
| (4,900) |
|
| - |
NET CASH USED IN INVESTING ACTIVITIES |
|
| (4,900) |
|
| - |
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
Proceeds from sale of preferred stock, net of offering cost |
|
| - |
|
| 1,555,000 |
Proceeds from note payable |
|
| 65,000 |
|
| 110,000 |
Proceeds from loans and advances payable |
|
| 560,616 |
|
| 1,003,140 |
Proceeds from convertible notes, net of debt issuance cost |
|
| 75,000 |
|
| 126,250 |
Repayment on note payable |
|
| - |
|
| (218,634) |
Repayment on loans and advances payable |
|
| (419,408) |
|
| (776,804) |
Repayment on secured notes payable |
|
| - |
|
| (400,000) |
Advance from (payments to) Chief Executive Officer, net |
|
| 192,783 |
|
| (129,858) |
NET CASH PROVIDED BY FINANCING ACTIVITIES |
|
| 473,991 |
|
| 1,269,094 |
|
|
|
|
|
|
|
NET CHANGE IN CASH AND CASH EQUIVALENTS: |
|
| (417,065) |
|
| (905,953) |
CASH AND CASH EQUIVALENTS – beginning of period |
|
| 464,248 |
|
| 1,093,195 |
CASH AND CASH EQUIVALENTS – end of period |
| $ | 47,183 |
| $ | 187,242 |
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
Interest |
| $ | - |
| $ | 14,610 |
Income taxes |
| $ | - |
| $ | - |
|
|
|
|
|
|
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
Issuance of common stock issued for convertible debt, loans payable, and accrued interest |
| $ | 59,488 |
| $ | 1,456,296 |
Issuance of common stock issued for accrued dividends |
| $ | 1,275 |
| $ | - |
Debt discount in connection with the issuance of stock warrants |
| $ | 5,512 |
| $ | - |
Deemed dividend upon issuance of Series D preferred stock |
| $ | - |
| $ | 1,555,878 |
Deemed dividend upon conversion of Series D preferred stock and accrued dividends |
| $ | 7,623 |
| $ |
|
Initial amount of ROU asset and related liability |
| $ | 81,213 |
| $ | - |
Initial derivative liability recorded in connection with convertible notes payable |
| $ | 252,488 |
| $ | 126,250 |
Reclassification of derivative liability to equity upon conversion of Series C preferred stock |
| $ | - |
| $ | 67,284 |
The accompanying unaudited condensed notes are an integral part of these unaudited condensed consolidated financial statements.
6
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
Note 1 - Nature of Operations and Basis of Presentation
Organization and Nature of Operations
Bergio International, Inc. (the “Company”) was incorporated in the State of Delaware on July 24, 2007 under the name Alba Mineral Exploration, Inc. On October 21, 2009, as a result of a Share Exchange Agreement, the corporation’s name was changed to Bergio International, Inc. On February 19, 2020, the Company changed its state of incorporation to Wyoming. The Company is engaged in the product design, manufacturing, distribution of fine jewelry primarily in the United States and is headquartered in Fairfield, New Jersey. The Company’s intent is to take advantage of the Bergio brand and establish a chain of retail stores worldwide. The Company’s branded product lines are products and/or collections designed by the Company’s designer and CEO, Berge Abajian, and will be the centerpiece of the Company’s retail stores.
On February 10, 2021, the Company entered into an Acquisition Agreement (“Acquisition Agreement”) with Digital Age Business, Inc., a Florida corporation, (“Digital Age Business”), pursuant to which the shareholders of Digital Age Business agreed to sell all of the assets and liabilities of its Aphrodite’s business to a subsidiary of the Company known as Aphrodite’s Marketing, Inc. (“Aphrodite’s Marketing”), a Wyoming corporation in exchange for Series B Preferred Stock of the Company. The Company owns
On July 1, 2021 (“Closing”), the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with GearBubble, Inc., a Nevada corporation, (“GearBubble”), pursuant to which the shareholders of GearBubble (the “Equity Recipients”) agreed to sell
On March 24, 2021, the Company filed, with the Wyoming Secretary of State, a Certificate of Amendment, to amend its Articles of Incorporation. The amendment reflected the increase in the authorized shares of common stock from 1,000,000,000 shares to
On September 26, 2022, the Company filed, with the Wyoming Secretary of State, a Certificate of Amendment, to amend its Articles of Incorporation and reflected the increase in the authorized shares of common stock from 9,000,000,000 shares to
7
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information, which includes consolidated interim financial statements and present the consolidated interim financial statements of the Company and its wholly-owned and majority-owned subsidiaries as of September 30, 2023. All intercompany transactions and balances have been eliminated. In the opinion of management, all adjustments necessary to present fairly our financial position, results of operations, and cash flows have been made. Those adjustments consist of normal and recurring adjustments. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2022, and footnotes thereto included in the Company’s Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 30, 2023 (the “Annual Report”). The results of operations for the nine months ended September 30, 2023, are not necessarily indicative of the results to be expected for the full year.
Impact of the COVID-19 Coronavirus
The Company’s operations have been affected by the recent and ongoing outbreak of the coronavirus disease 2019 (COVID-19) which in March 2020, was declared a pandemic by the World Health Organization. The ultimate disruption which may be caused by the outbreak is uncertain; however, it has resulted in a material adverse impact on the Company’s financial position, operations and cash flows. Areas affected include, but are not limited to, disruption to the Company’s customers and revenue, including a significant disruption in consumer demand and accessories, labor workforce, inability of customers to pay outstanding accounts receivable due and owing to the Company as they limit or shut down their businesses, customers seeking relief or extended payment plans relating to accounts receivable due and owing to the Company, unavailability of products and supplies used in operations, and the decline in value of assets held by the Company, including property and equipment. As such, the comparability of the Company’s operating results has been affected by significant adverse impacts related to the COVID-19 pandemic.
The Company has increased its online presence to minimize the impact of having to close its retail stores as well as directing efforts towards its wholesale operations. The Company increased its online presence through its majority-owned subsidiaries, Aphrodite’s Marketing and GearBubble Tech.
Non-controlling Interest in Consolidated Financial Statements
In December 2007, the Financial Accounting Standard Board (“FASB”) issued ASC 810-10-65, “Non-controlling Interests in consolidated financial statements, an amendment of Accounting Research Bulletin No. 51” (“SFAS No. 160”). This ASC clarifies that a non-controlling (minority) interest in a subsidiary is an ownership interest in the entity that should be reported as equity in the unaudited condensed consolidated financial statements. It also requires consolidated net income to include the amounts attributable to both the parent and non-controlling interest, with disclosure on the face of the consolidated income statement of the amounts attributed to the parent and to the non-controlling interest. In accordance with ASC 810-10- 45-21, those losses attributable to the parent and the non-controlling interest in subsidiaries may exceed their interests in the subsidiary’s equity. The excess and any further losses attributable to the parent and the non-controlling interest shall be attributed to those interests even if that attribution results in a deficit non-controlling interest balance.
On February 9, 2021, the Company entered into an Acquisition Agreement which resulted to the acquisition of
8
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
attributable to non-controlling interest of $
Note 2 - Going Concern
These unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying unaudited condensed consolidated financial statements, the Company had a net loss attributable to Bergio International, Inc. and cash used in operations of $
The Company increased its online presence and provided for the expansion of the Company’s branded product lines. The acquired majority owned subsidiaries, Aphrodite Marketing and GearBubble Tech of which the Company owns 51%, will enhance the Company’s online presence and provide the opportunity for future growth. However, there can be no assurance that this venture will be successful or that the Company can raise the required capital to fund this operation.
These unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Note 3 - Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States which includes the Company, its wholly-owned and majority owned subsidiaries as of September 30, 2023. All significant inter-company accounts and transactions have been eliminated.
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future events. Accordingly, the actual results could differ significantly from estimates. Significant estimates during the nine months ended September 30, 2023 and 2022 include the estimates of useful lives of property and equipment and intangible assets, valuation of the operating lease liability and related right-of-use asset, valuation of derivatives, allowance for uncollectable receivables, valuation of equity based instruments issued for other than cash, the fair value of warrants issued with debt, the valuation allowance on deferred tax assets, and stock-based compensation.
9
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
Revenue Recognition
The Company applies ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures. ASC 606 requires us to identify distinct performance obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. When distinct performance obligations exist, the Company allocates the contract transaction price to each distinct performance obligation. The standalone selling price, or our best estimate of standalone selling price, is used to allocate the transaction price to the separate performance obligations. The Company recognizes revenue when, or as, the performance obligation is satisfied.
Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Also, significant judgment may be required to determine the allocation of transaction price to each distinct performance obligation.
Generally, revenues are recognized at the time of shipment to the customer with the price being fixed and determinable and collectability assured, provided title and risk of loss is transferred to the customer. Provisions, when appropriate, are made where the right to return exists. Shipping and handling costs charged to customers are classified as sales, and the shipping and handling costs incurred are included in cost of sales.
The Company’s subsidiary, GearBubble Tech, recognizes revenue from three sources: (1) e-commerce revenue (2) platform subscription fees and (3) partner and services revenue.
•Revenues are recognized when the merchandise is shipped to the customer and title is transferred and are recorded net of any returns, and discounts or allowances. Shipping cost paid by customers are primarily for ecommerce sales and are included in revenue. Merchandise sales are fulfilled with inventory sourced through our suppliers. Therefore, the Company’s contracts have a single performance obligation (shipment of product).
The Company evaluates the criteria outlined in ASC 606-10-55, Principal versus Agent Considerations, in determining whether it is appropriate to record the gross amount of merchandise sales and related costs or the net amount earned as commissions. The Company evaluates whether it is appropriate to recognize revenue on a gross or net basis based upon its evaluation of whether the Company obtains control of the specified goods by considering if it is primarily responsible for fulfillment of the promise, has inventory risk, and has the latitude in establishing pricing and selecting suppliers, among other factors. The ecommerce sellers have no further obligation to the customer after the promised goods are transferred to the customer. Based on its evaluation of these factors, we have determined we are the principal in these arrangements. Through our suppliers, we have the ability to control the promised goods and as a result, the Company records ecommerce sales on a gross basis.
The Company refunds the full cost of the merchandise returned and all original shipping charges if the returned item is defective or we or our partners have made an error, such as shipping the wrong product. If the return is not a result of a product defect or a fulfillment error and the customer initiate a return of an unopened item within 30 days of delivery, for most products we refund the full cost of the merchandise minus the original shipping charge and actual return shipping fees. If our customer returns an item that has been opened or shows signs of wear, the Company issues a partial refund minus the original shipping charge and actual return shipping fees.
10
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
•The Company generally recognizes platform subscription fees in the month they are earned. Annual subscription payments received that are related to future periods are recorded as deferred revenue to be recognized as revenues over the contract term or period.
•Partner and services revenue is derived from: (1) partner marketing and promotion, and (2) non-recurring professional services. Revenue from partner marketing and promotion and non-recurring professional services is recognized as the service is performed.
Cost of revenues
Cost of revenue consists primarily of the cost of the merchandise, shipping fees, credit card processing services, fulfillment cost, ecommerce sellers’ pay-out; costs associated with operation and maintenance of the Company’s platform.
Marketing
The Company applies ASC 720 “Other Expenses” to account for marketing costs. Pursuant to ASC 720-35-25-1, the Company expenses marketing costs as incurred. Marketing costs include advertising and related expenses for third party personnel engaged in marketing and selling activities, including sales commissions, and third-party e-commerce platform fees and selling fees. The Company directs its customers to the Company’s ecommerce platform through social media, digital marketing, and promotional campaigns. Marketing costs were $
Shipping and Handling Costs
The Company accounts for shipping and handling fees in accordance with ASC 606. While amounts charged to customers for shipping products are included in revenues, the related costs of shipping products to customers are classified in selling and marketing expenses as incurred.
Fair Value of Financial Instruments
FASB ASC 820 - Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC 820 requires disclosures about the fair value of all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about the fair value of financial instruments are based on pertinent information available to the Company on September 30, 2023. Accordingly, the estimates presented in these financial statements are not necessarily indicative of the amounts that could be realized on disposition of the financial instruments. FASB ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).
The three levels of the fair value hierarchy are as follows:
Level 1:Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
11
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
Level 2:Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
Level 3:Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.
The carrying amounts reported in the unaudited condensed consolidated balance sheets for cash, prepaid expenses and other current assets, accounts payable and accrued liabilities, and accrued compensation approximate their fair market value based on the short-term maturity of these instruments.
In August 2018, the FASB issued ASU 2018-13,” Changes to Disclosure Requirements for Fair Value Measurements”, which will improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements, and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Upon adoption, this guidance did not have a material impact on its unaudited condensed consolidated financial statements.
Assets or liabilities measured at fair value or a recurring basis included embedded conversion options in convertible debt and convertible preferred stock and were as follows at:
|
| September 30, 2023 |
| December 31, 2022 | ||||||||||||||||||
Description |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| Level 1 |
|
| Level 2 |
|
| Level 3 | ||||||
Total derivative liabilities |
| $ | - |
|
| $ | - |
|
| $ |
| $ | - |
|
| $ | - |
|
| $ |
ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding equity instruments.
Cash and Cash Equivalents
Cash equivalents are comprised of certain highly liquid instruments with a maturity of three months or less when purchased. The Company did not have any cash equivalents on hand at September 30, 2023 and December 31, 2022. The Company places its cash with high credit quality financial institutions. The Company’s accounts at these institutions are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $
Accounts Receivable
The Company performs ongoing credit evaluations of its customers and adjusts credit limits based on customer payment and current credit worthiness, as determined by review of their current credit information. The Company continuously monitors credit limits for and payments from its customers and maintains provision for estimated credit losses based on its historical experience and any specific customer issues that have been identified. While such credit losses have historically been within the Company’s expectation and the provision established, the Company cannot guarantee that this will continue.
12
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
An allowance for doubtful accounts is provided against accounts receivable for amounts management believes may be uncollectible. The Company determines the adequacy of this allowance by regularly reviewing the composition of its accounts receivable aging and evaluating individual customer receivables, considering the customer’s financial condition, credit history and current economic circumstance. While credit losses have historically been within the Company’s expectation and the provision established, the Company cannot guarantee that this will continue. As of September 30, 2023 and December 31, 2022, the allowance for doubtful accounts was $0 for both periods.
Inventory
Inventories consist primarily of finished goods and are stated at the lower of cost or market. Cost is determined using the weighted average method, and average cost is recomputed after each inventory purchase or sale. Inventories are written down if the estimated net realizable value is less than the recorded value, if appropriate.
Long-Lived Assets
The Company assesses the recoverability of the carrying value of its long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future, undiscounted cash flows expected to be generated by an asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. No impairment losses were recognized for the nine months ended September 30, 2023 and 2022.
Property and equipment
Property is carried at cost. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. Depreciation is calculated on a straight-line basis over the estimated useful life of the assets, generally three to five years.
Stock-based compensation
Stock-based compensation is accounted for based on the requirements of ASC 718 - “Compensation-Stock Compensation”, which requires recognition in the financial statements of the cost of employee, non-employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.
Derivative Liabilities
The Company has certain financial instruments that are embedded derivatives associated with capital raises and acquisition. The Company evaluates all its financial instruments to determine if those contracts or any potential embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815-10 - Derivative and Hedging - Contract in Entity’s Own Equity. This accounting treatment requires that the carrying amount of any derivatives be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the fair value is recorded as a liability, as is the case with the Company, the change in the fair value during the period is recorded as either other income or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at the conversion, repayment, or exercise date and then the related fair value amount is reclassified to other income or expense as part of gain or loss on debt extinguishment.
13
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
In July 2017, FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features. These amendments simplify the accounting for certain financial instruments with down-round features. The amendments require companies to disregard the down-round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. For public business entities, the amendments in Part I of the ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.
Concentration Risk
Concentration of Revenues
For the nine months ended September 30, 2023 and 2022, no customer accounted for over 10% of total revenues.
Concentration of Purchases
The Company purchased approximately
Concentration of Accounts Receivable
As of September 30, 2023, accounts receivable amounted to $
Recent Accounting Pronouncements
Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.
Note 4 - Property and Equipment
Property and equipment consist of the following:
| September 30, 2023 |
| December 31, 2022 | |||
|
|
|
|
| ||
Leasehold improvements |
| $ |
| $ | ||
Office and computer equipment |
|
|
|
| ||
Selling equipment |
|
|
|
| ||
Furniture and fixtures |
|
|
|
| ||
|
|
|
|
|
|
|
Total at cost |
|
|
|
| ||
Less: Accumulated depreciation |
|
| ( |
|
| ( |
|
|
|
|
|
|
|
|
| $ |
| $ |
Depreciation expense for the nine months ended September 30, 2023 and 2022 was $
14
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
Note 5 - Net Loss per Share
Pursuant to ASC 260-10-45, basic loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the periods presented. Diluted loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. Potentially dilutive common shares consist of common stock issuable for stock options and stock warrants (using the treasury stock method), convertible notes and common stock issuable. These common stock equivalents may be dilutive in the future.
The potentially dilutive common stock equivalents as of September 30, 2023 and December 31, 2022 were excluded from the dilutive loss per share calculation as they would be antidilutive due to the net loss as follow:
| September 30, 2023 |
| December 31, 2022 | |||
|
| (Unaudited) |
|
| ||
Common Stock Equivalents: |
|
|
|
|
|
|
Stock Warrants |
|
|
|
| ||
Convertible Preferred Stock |
|
|
|
| ||
Convertible Notes |
|
|
|
| ||
Total |
|
|
|
|
Note 6 - Convertible Notes Payable
As of September 30, 2023 and December 31, 2022, convertible notes payable consisted of the following:
| September 30, 2023 |
| December 31, 2022 | |||
|
| (Unaudited) |
|
| ||
Principal amount |
| $ |
| $ | ||
Less: unamortized debt discount |
|
| ( |
|
| ( |
Convertible notes payable, net |
| $ |
| $ |
Boot Capital, LLC
On October 3, 2022, the Company entered into an
Trillium Partners LP
On June 16, 2022, the Company received proceeds related to a loan with Trillium Partners LP in the amount of $
15
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
the nine months ended September 30, 2023, the Company reclassed this from a loan to a convertible note payable upon the receipt of a secured promissory note. Accordingly, the Company entered into Secured Promissory Note (the “Secured Note”) in amount of $
The Secured Note was issued in connection with the Advance Agreement dated October 27, 2021. On April 21, 2023, the Company, together with its majority owned subsidiaries, Aphrodite Marketing and GearBubble Tech (collectively the “Borrower”), entered into an Amendment Agreement (the “First Amendment”) with Trillium Partners L.P. to amend the Advance Agreement dated October 27, 2021 (the “Agreement”). Both parties agreed to amend the Agreement in section 10 of the Agreement including among others, a default interest rate of 22% per annum, conversion right to convert all or any part of the outstanding and unpaid amounts of the promissory notes, a provision that in no event shall the lender be entitled to convert into common stock that would result to beneficial ownership by lender and its affiliates of more than 4.99% of the outstanding shares of common stock (the “Beneficial Ownership Limitation”), and variable conversion price of 50% of the lowest trading price during the 30-trading day period prior to conversion date.
In the event that the Company fails to deliver the shares of common stock issuable upon conversion of principal or interest under of the promissory note within three business days of a notice of conversion, the Company shall incur a penalty of $2,000 per day; provided, however, that such fee shall not be due if the failure to deliver the shares is a result of a third party, such as the transfer agent.
On May 31, 2023, the Company, together with its majority owned subsidiaries, and Trillium Partners L.P. entered into a Second Amendment to the Advance Agreement whereby both parties agreed to amend under section 10(b) to increase the Beneficial Ownership Limitation from 4.99% into 9.99%.
Principal and interest shall be paid with 16 weekly payments of $7,375 shall be paid to the lender on each Friday starting in the month of July 2022; Upon the occurrence of an event of default, the principal or interest on this note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum. The Company did not pay the required payments and accordingly, has been accruing interest at
August 10, 2023 Securities Purchase Agreement
On August 10, 2023, the Company entered into a securities purchase agreement with Trillium Partners LP (“Trillium”), which closed on August 15, 2023, pursuant to which Trillium purchased a convertible promissory note (the “August 10, 2023 Trillium Note”) from the Company in the aggregate principal amount of $
In connection with such note, the Company issued
16
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
J.P. Carey Limited Partners LP
August 10, 2023 Securities Purchase Agreement
On August 10, 2023, the Company entered into a securities purchase agreement with J.P. Carey Limited Partners LP (“JP Carey”), which closed on August 15, 2023, pursuant to which J.P. Carey purchased a convertible promissory note (the “August 10, 2023 JP Carey Note”) from the Company in the aggregate principal amount of $
In connection with such note, the Company issued
The following terms shall apply to the above August 10, 2023 Trillium Note and August 10, 2023 JP Carey Note (the “August 10, 2023 Notes”):
The August 10, 2023 Notes bear interest at a rate of 12% per annum, which interest may be paid by the Company to the lenders in shares of the Company’s common stock; but shall not be payable until the August 10, 2023 Notes become payable, whether at the maturity date or upon acceleration or by prepayment.
During the first 180 days following the date of the August 10, 2023 Notes, the Company has the right to prepay the principal and accrued but unpaid interest due under the above notes, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium of 150% as defined in the note agreement. After this initial 180-day period, after the expiration of the prepayment periods set forth above, the Company may submit an optional prepayment notice to the lenders.
The conversion price for the above notes shall be equal to a 50% discount of the market price which means the lowest 10 trading prices of the Common Stock immediately prior to the delivery of a Notice of Conversion. Notwithstanding the foregoing, the lenders shall be restricted from effecting a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned by lenders and its affiliates, exceeds 9.99% of the outstanding shares of the Company’s common stock. Notwithstanding the foregoing, such conversion price and lookback periods are subject to adjustment in favor of the Investor in the event the Company issues securities to another party with more favorable conversion terms (“Most Favored Nation”). During the period where any monies are owed to the lender pursuant to the August 10, 2023 Notes, if the Company engages in any future financing transactions with a third party investor, the Company will provide the lender with written notice (the “MFN Notice”) thereof promptly but in no event less than 10 days prior to closing any financing transactions except for exempt issuance as defined in related the note agreements.
The above notes contain certain events of default, upon which principal and accrued interest will become immediately due and payable. In addition, upon an event of default, interest on the outstanding principal shall accrue at a default interest rate of 22% per annum, or if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
Upon certain events of default, the above the August 10, 2023 Notes will become immediately due and payable and the Company must pay the lenders 200% of the then-outstanding principal amount of the above August 10, 2023 Notes, plus any interest accrued upon such event of default or prior events of default (the “Default Amount”). Further,
17
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
upon any event of default relating to the failure to issue shares of common stock upon the conversion of such notes, such notes become immediately due and payable in an amount equal to twice the Default Amount.
The total principal amount outstanding under the above Trillium financing agreement was $
1800 Diagonal Lending LLC
On April 24, 2023, the Company entered into an 8% convertible note in the amount of $
During the first 90 to 180 days following the date of these notes, the Company had the right to prepay the principal and accrued but unpaid interest due under the above note together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 115% to 120% as defined in the note agreement. After this initial 180-day period, the Company does not have a right to prepay such notes.
On April 24, 2023, the Company entered into a 13% promissory note in the amount of $
Amortization of debt discounts and financing cost
For the nine months ended September 30, 2023 and 2022, amortization of debt discounts and financing cost related to all the convertible notes above amounted to $
Note 7 - Derivative Liability
The Company applies the provisions of ASC 815-40, Derivatives and Hedging - Contracts in an Entity’s Own Stock, under which convertible instruments that contain terms and provisions which cause the embedded conversion options to be accounted for as derivative liabilities. As a result, embedded conversion options in certain convertible notes and convertible preferred stock are recorded as a liability and are revalued at fair value at each reporting date. As of September 30, 2023 and December 31, 2022, total derivative liabilities amounted $
18
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
The following is a roll forward for the nine months ended September 30, 2023 and for the year ended December 31, 2022 of the fair value liability of price adjustable derivative instruments:
|
| Fair Value of Liability for Derivative Instruments | |
|
|
|
|
Balance at December 31, 2021 |
| $ | |
Initial valuation of derivative liabilities included in debt discount |
|
| |
Initial valuation of derivative liabilities related to issuance of Series B and C Preferred Stock |
|
| |
Initial valuation of derivative liabilities included in derivative expense |
|
| ( |
Reclassification of derivative liabilities to gain from extinguishment of debt |
|
| ( |
Change in fair value of derivative liabilities |
|
| ( |
Balance at December 31, 2022 |
| $ | |
|
|
|
|
Initial valuation of derivative liabilities included in debt discount |
|
| |
Initial valuation of derivative liabilities included in derivative expense |
|
| |
Reclassification of derivative liabilities to gain from extinguishment of debt |
|
| ( |
Change in fair value of derivative liabilities |
|
| ( |
Balance at September 30, 2023 |
| $ |
The Company calculates the estimated fair values of the liabilities for derivative instruments using the Black-Scholes pricing model. The closing price of the Company’s common stock at September 30, 2023 and December 31, 2022 was $0.0006 and $0.005, respectively. The volatility, expected remaining term, and risk-free interest rates used to estimate the fair value of derivative liabilities at September 30, 2023 are indicated in the table that follows.
The expected term is equal to the remaining term of the convertible instruments and the risk-free rate is based upon rates for treasury securities with the same term.
|
| Initial Valuations (on new derivative instruments entered into during the three months ended September 30, 2023) |
| September 30, 2023 | ||
Volatility |
|
| 692% to 697% |
|
| 697% |
Expected Remaining Term (in years) |
|
| 0.82 to 1.00 |
|
| 0.01 to 0.86 |
Risk Free Interest Rate |
|
| 5.33 to 5.37% |
|
| 5.46% |
Expected dividend yield |
|
| None |
|
| None |
Note 8 - Loans and Advances Payable
Loans and advances payable consisted of the following:
| September 30, 2023 |
| December 31, 2022 | |||
|
| (Unaudited) |
|
| ||
Principal amount of loans and advances |
| $ |
| $ | ||
Accrued interest |
|
|
|
| ||
Loans and advances payable |
| $ |
| $ |
19
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
Trillium Partners LP
On June 16, 2022, the Company received proceeds related to a loan with Trillium Partners LP in the amount of $
Jonathan Foltz
The Company’s majority owned subsidiary, Aphrodite’s Marketing, has a loan with Jonathan Foltz, the President and CEO of Digital Age Business. On February 10, 2021, upon the acquisition of Aphrodite’s Marketing, the Company assumed an outstanding balance of $
Nationwide Transport Service, LLC (“Nationwide”)
Through the Company’s majority owned subsidiary, Aphrodite’s Marketing, has loan agreements with Nationwide dated in October 2020 and November 2020. Nationwide is owned by the father of Jonathan Foltz. On February 10, 2021, upon the acquisition of Aphrodite’s Marketing, the Company assumed an outstanding balance of $
Amazon Capital Services, Inc.
In July 2022, the Company’s majority owned subsidiary, Aphrodite’s Marketing, entered into a loan agreement with Amazon Capital Services, Inc. (“Amazon”) for a loan amount of $
Bluevine Capital, Inc.
In August 2022, the Company’s majority owned subsidiary, Aphrodite’s Marketing, entered into a line of credit agreement with Bluevine Capital, Inc. (“Bluevine”) for up to a loan amount of $
Square Advance
In September 2022, the Company’s majority owned subsidiary, Aphrodite’s Marketing, executed a merchant cash advance agreement (the “First Advance”) with Square Advance. Under the agreement, the Company sold an aggregate
20
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
of $
In January 2023, the Company’s majority owned subsidiary, Aphrodite’s Marketing, executed a merchant cash advance agreement with Square Advance. Under the agreement, the Company sold an aggregate of $
During the nine months ended September 30, 2023, interest expense incurred related to these advances amounted to $
EAdvance Services
In November 2022, the Company’s majority owned subsidiary, Aphrodite’s Marketing, executed a purchase and sale of future receipt agreement with EAdvance Services. Under the agreement, the Company sold an aggregate of $
During the nine months ended September 30, 2023, repaid back $
Parkside Funding Group LLC
In February 2023, the Company’s majority owned subsidiary, Aphrodite’s Marketing, executed a purchase and sale of future receipt agreement with Parkside Funding Group LLC. Under the agreement, the Company sold an aggregate of $
Marcus by Goldman Sachs
In February 2023, the Company’s majority owned subsidiary, Aphrodite’s Marketing, entered into a line of credit agreement with Marcus by Goldman Sachs (“Marcus”) for up to a loan amount of $
21
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
and repaid back $
Shopify
The Company’s majority owned subsidiary, Aphrodite’s Marketing, has a merchant loan agreement with Shopify, an e-commerce platform provider with a daily remittance rate of 17% for a loan amount of $
Note 9 - Notes Payable
Notes payable is summarized below:
| September 30, 2023 |
| December 31, 2022 | |||
|
| (Unaudited) |
|
| ||
Principal amount |
| $ |
| $ | ||
Less: current portion |
|
| ( |
|
| ( |
Notes payable - long term portion |
| $ |
| $ |
Minimum principal payments under notes payable are as follows:
Year ended December 31, 2023 - remainder |
| $ | |
Year ended December 31, 2024 |
|
| |
Year ended December 31, 2025 |
|
| |
Year ended December 31, 2026 |
|
| |
Year ended December 31, 2027 |
|
| |
Year ended December 31, 2028 and thereafter |
|
| |
Total principal payments |
| $ |
On July 6, 2020, entered into a Loan Authorization and Agreement (“SBA Loan Agreement”) with the Small Business Association (“SBA”) in the amount of $
Through the Company’s majority owned subsidiary, Aphrodite’s Marketing, entered into a Loan Authorization and Agreement with the SBA, under the SBA’s Economic Injury Disaster Loan assistance program in light of the impact of the COVID-19 pandemic. On February 10, 2021, upon the acquisition of Aphrodite’s Marketing, the Company assumed an outstanding balance of $
22
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
the Company, which also contains customary events of default. The SBA Note bears an interest rate of
On July 1, 2021, the Company issued a promissory note in the amount of $
On April 24, 2023, the Company entered into a
For the nine months ended September 30, 2023, amortization of debt discounts related to this promissory note amounted to $
Note 10 - Related Party Transactions
Advances from Chief Executive Officer and Accrued Interest
The Company receives periodic advances from the Company’s Chief Executive Officer (“CEO”) based upon the Company’s cash flow needs. At September 30, 2023 and December 31, 2022, $
23
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
Effective February 28, 2010, the Company entered into an employment agreement with the CEO. The agreement, which is for a five-year term, provides for an initial base salary of $
In April 2022, the Company accrued bonus compensation of $
On July 1, 2021, the Company entered into an Amended and Restated Executive Employment Agreement (“Amended Employment Agreement”) with the CEO of the Company, Berge Abajian (the “Executive”). The term of the Amended Employment Agreement shall be for 5 years and shall be automatically extended for successive periods of 1 year unless terminated by the Company or the Executive. The Executive shall receive a base salary of $
Loans Payable
The Company’s majority owned subsidiary, Aphrodite’s Marketing, has a loan with Jonathan Foltz, the President and CEO of Digital Age Business. Jonathan Foltz is one of the majority owners of the 49% in Acquisition Sub, Aphrodite’s Marketing (see Note 8). As of September 30, 2023 and December 31, 2022, the outstanding balance is $
Through the Company’s majority owned subsidiary, Aphrodite’s Marketing, has loan agreements with Nationwide dated in October 2020 and November 2020. Nationwide is owned by the father of Jonathan Foltz (see Note 8). As of December 31, 2022, the outstanding balance is $
Note 11 - Commitments and Contingencies
Litigation
The Company is currently not involved in any litigation that we believe could have a material adverse effect on the Company’s financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation
24
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of the Company or any of the Company’s subsidiaries, threatened against or affecting the Company, the Company’s common stock, any of the Company’s subsidiaries or of the Company’s officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
Operating Lease Agreements
The Company leases retail space at two different locations. The term of the first lease is for a ten-year period from July 2014 to April 2024 starting with a monthly base rent of $
Through the Company’s majority owned subsidiary, Aphrodite’s Marketing, entered into an approximate three-year lease agreement on October 1, 2019, for its office facilities starting with a monthly base rent of $
In March 2023, the Company leases retail space at their 3rd location. The term of the first lease is for a five-year period from March 2023 to February 2028 starting with a monthly base rent of $
The following table reconciles the undiscounted future minimum lease payments (displayed by year in aggregate) under non-cancelable operating leases with terms more than one year to the total operating lease liabilities on the unaudited consolidated balance sheet as of September 30, 2023:
Year 2023 - remainder | $ | |
Year 2024 |
| |
Year 2025 |
| |
Year 2026 |
| |
Year 2027 |
| |
Year 2028 |
| |
Total minimum lease payments |
| |
Less amounts representing interest |
| ( |
Present value of net minimum lease payments |
| |
Less current portion |
| ( |
Long-term capital lease obligation | $ |
Amended Employment Agreement
25
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
On July 1, 2021, the Company entered into an Amended and Restated Executive Employment Agreement with the CEO of the Company, Berge Abajian. The term of the Amended Employment Agreement shall be for 5 years and shall be automatically extended for successive periods of 1 year unless terminated by the Company or the Executive. The Executive shall receive a base salary of $250,000 per year and such base salary shall automatically increase in a rate of 3% per annum for each consecutive year after 2021 or at such rates as may be approved by the board of directors of the Company. Upon written request of the Executive, the Company shall pay all or a portion of the base salary owed to Executive in the form of i) a convertible promissory note, or ii) the Company’s common stock or if available, S-8 common stock. Additionally, the Executive is eligible to receive a quarterly bonus at the discretion of the board of directors of the Company. Additionally, the Executive shall be eligible to participate in the Company’s 2021 Stock Incentive Plan. In July 2021, under the terms of the ESOP, the Board of Directors of the Company approved the future issuance of 1,000,000 post-split shares (500,000,000 pre-split shares) to the Company’s CEO subject to the Company increasing its authorized shares to 6,000,000,000 shares and subject to the effectiveness of an S-8 Registration Statement covering these shares which was filed with the SEC on September 21, 2022 (see Note 12).
Note 12 - Stockholder’s Equity (Deficit)
Employee Stock Ownership Plan
On July 9, 2021, the Board of Directors of the Company adopted the Bergio International, Inc. 2021 Stock Incentive Plan (the “ESOP”), under which the Company may award shares of the Company’s Common Stock to employees of the Company and/or its Subsidiaries. The terms of the ESOP allow the Company’s Board of Directors discretion to award the Company’s Common Stock, in the form of options, stock appreciation rights, restricted stock awards, restricted stock units, and performance award shares, to such employees, upon meeting the criteria set forth therein, from time to time. Subject to adjustments as provided in the plan, the shares of common stock that may be issued with respect to awards granted under the plan shall not exceed an aggregate of 1,000,000,000 shares of common stock. The Company shall reserve such number of shares for awards under the plan, subject to adjustments as provided in the plan. The maximum number of shares of common stock under the plan that may be issued as incentive stock options shall be
On July 9, 2021, and under the terms of the ESOP, the Company’s Board of Directors approved the future issuance of
Preferred Stock
The Company has authorized the issuance of
Certificate of Designation of Series A Preferred Stock
In September 2011, the Company filed a Certificate of Designation for Series A Preferred Stock with the Wyoming Secretary of State, and designated
26
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
Designation. The Company had designated 51 shares which was amended and increased from 51 to 75 shares of preferred stock as Series A Preferred Stock. Each share of Series A Preferred Stock has a par value of $
Dividends. There will be no dividends due or payable on the Series A Preferred Stock. Any future terms with respect to dividends shall be determined by the board of directors of the Company.
Liquidation. Upon any liquidation, the holders of Series A Preferred Stock are entitled to receive net assets on a pro rata basis. Each holder of Series A Preferred Stock is entitled to receive ratably any dividends declared by the board of directors of the Company.
Voting Rights. Each one (1) share of the Series A Preferred Stock shall have voting rights equal to One Percent (1%) of the issued and outstanding shares of the Corporation’s Common Stock on the date of any such vote, such that the Holder of all Seventy-Five (75) shares of Series A Preferred Stock, shall always have voting rights equal to Seventy Five Percent (75%) of the issued and outstanding shares of the Company’s Common Stock.
Conversion. The Series A Preferred stock in non-convertible.
As of September 30, 2023 and December 31, 2022, there were
Certificate of Designation of Series B 2% Convertible Preferred Stock
On February 10, 2021, the Company filed a Certificate of Designation for Series B Convertible Preferred Stock (the “Certificate of Designations”) with the Wyoming Secretary of State, designating
Designation. The Company had designated 49 shares which was amended and increased from 49 to 4,900 shares of preferred stock as Series B Convertible Preferred Stock. Each share of Series B Convertible Preferred Stock has a par value of $
Dividends. Holders of Series B Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors out of funds legally available therefor, and the Company shall accrue, quarterly in arrears on March 31, June 30, September 30, and December 31 of each year, commencing on the Issuance Date, cumulative dividends on the Series B Preferred Stock at the rate per share (as a percentage of the Stated Value per share) equal to two percent (2%) per annum on the Stated Value., payable in additional shares of Series B Preferred Stock. So long as any shares of Series B Preferred Stock remain outstanding, neither the Company nor any subsidiary thereof shall, without the consent of the Holders of eighty percent (80%) of the shares of Series B Preferred Stock then outstanding (the “Requisite Holders), redeem, repurchase or otherwise acquire directly or indirectly any Junior Securities (as defined in Section 7), nor shall the Company directly or indirectly pay or declare any dividend or make any distribution upon, nor shall any distribution be made in respect of, any Junior Securities, nor shall any monies be set aside for or applied to the purchase or redemption (through a sinking fund or otherwise) of any Junior Securities.
Liquidation. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary or a Sale (as defined below) (a “Liquidation”), the holders of the Series B Preferred Stock shall be entitled to receive out of the assets of the Company, whether such assets are capital or surplus, for each share of Series B Preferred Stock an amount equal to the Stated Value plus all accrued but unpaid dividends per share, whether declared or not, and all other amounts in respect thereof then due and payable prior to any distribution or payment shall be made to the holders of any Junior Securities, and if the assets of the Company shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of Series B Preferred Stock shall be distributed among the holders of Series B Preferred Stock ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.
27
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
Voting Rights. Each holder of the Series B Preferred Stock shall have the right to vote on any matter that may from time to time be submitted to the Company’s shareholders for a vote, on an as-converted basis, either by written consent or by proxy.
Conversion at Option of Holder. Each share of Series B Preferred Stock shall be convertible into 0.01% of the total issued and outstanding shares of the Company’s Common Stock, (such that all 4,900 authorized shares of Series B Preferred Stock, if issued and outstanding, would be convertible in the aggregate into 49% of the total issued and outstanding shares of the Company’s Common Stock) (as determined at the earlier of (i) the date of Conversion of the Series B Preferred Stock; and (ii) eighteen (18) months following February 8, 2021) (“Conversion Ratio”), at the option of a Holder, at any time and from time to time, from and after the issuance of the Series B Preferred Stock.
As of September 30, 2023 and December 31, 2022, there were
Certificate of Designation of Series C 2% Convertible Preferred Stock
On February 10, 2021, the Company filed a Certificate of Designation for Series C Convertible Preferred Stock with the Wyoming Secretary of State, which designated 5 shares of preferred stock as Series C Convertible Preferred Stock. In April 2022, the Company increased the designation to
Designation. The Company has designated 5 shares of preferred stock as Series C Convertible Preferred Stock. Each share of Series C Convertible Preferred Stock has a par value of $
Dividends. Holders of Series C Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors out of funds legally available therefor, and the Company shall accrue, quarterly in arrears on March 31, June 30, September 30, and December 31 of each year, commencing on the Issuance Date, cumulative dividends on the Series C Preferred Stock at the rate per share (as a percentage of the Stated Value per share) equal to two percent (2%) per annum on the Stated Value., payable in additional shares of Series C Preferred Stock. So long as any shares of Series C Preferred Stock remain outstanding, neither the Company nor any subsidiary thereof shall, without the consent of the Holders of eighty percent (80%) of the shares of Series C Preferred Stock then outstanding, redeem, repurchase or otherwise acquire directly or indirectly any Junior Securities, nor shall the Company directly or indirectly pay or declare any dividend or make any distribution upon, nor shall any distribution be made in respect of, any Junior Securities, nor shall any monies be set aside for or applied to the purchase or redemption of any Junior Securities.
Liquidation. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary or a Sale (as defined below) (a “Liquidation”), the holders of the Series C Preferred Stock shall be entitled to receive out of the assets of the Company, whether such assets are capital or surplus, for each share of Series C Preferred Stock an amount equal to the Stated Value plus all accrued but unpaid dividends per share, whether declared or not, and all other amounts in respect thereof then due and payable prior to any distribution or payment shall be made to the holders of any Junior Securities, and if the assets of the Company shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of Series C Preferred Stock shall be distributed among the holders of Series C Preferred Stock ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.
Voting Rights. Each holder of the Series C Preferred Stock shall have the right to vote on any matter that may from time to time be submitted to the Company’s shareholders for a vote, on an as-converted basis, either by written consent or by proxy.
Conversion at Option of Holder. Each share of Series C Preferred Stock was convertible into 1% of the total issued and outstanding shares of the Company’s Common Stock (as determined at the earlier of (i) the date of Conversion of the Series C Preferred Stock; and (ii) eighteen (18) months following February 8, 2021) (“Conversion Ratio”), at the option of a Holder, at any time and from time to time, from and after the issuance of the Series C Preferred Stock, except that such conversion will automatically be adjusted so that the Holder’s total beneficial ownership does not
28
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
exceed greater than 9.99% of the issued and outstanding shares of the Company’s Common Stock. In April 2022, the Company filed an Amended and Restated Certificate of Designation, Preference and Rights of the Series C Convertible Preferred Stock whereby the conversion term was amended to:
(a)Conversion at Option of holder. Each share of Series C Preferred Stock shall be convertible into 21.34 post-split shares (10,670 pre-split shares) of Common Stock (“Conversion Ratio”), at the option of a Holder, at any time and from time to time, from and after the issuance of the Series C Preferred Stock; provided that, for period of twenty for (24) months from the Issuance Date, if the Company issues shares of common stock, including common stock as the result of the purchase, exercise, or conversion of outstanding derivative or convertible securities (or securities, including any derivative securities, containing the right to purchase, exercise or convert into shares of common stock) (the “Dilution Shares”) such that the outstanding number of shares of common stock on a fully diluted basis shall be greater than 2,133,812 post-split shares (1,066,906,000 pre-split shares) (inclusive of conversions of Series C Preferred Stock at the Conversion Ratio immediately above), then the Conversion Ratio for the Series C Preferred Stock then outstanding and unconverted as of the date the Dilution Shares are issued shall be adjusted to equal the Conversion Ratio multiplied by a fraction, the numerator of which shall be the number of shares outstanding on a fully diluted basis after the issuance of the Dilution Shares, and the denominator shall equal to the sum of the currently issued and outstanding shares plus the Dilution Shares. A Ho1der shall affect a conversion by surrendering to the Company the original certificate or certificates representing the ·Shares of series C Preferred Stock to be converted to the Company, together with a completed form of conversion notice (the “Conversion Notice”). Each Conversion Notice shall specify the number of shares of Series C Preferred Stock to be converted, the date on which such conversion is to be affected, which date may not be prior to the Date the Holder delivers such Conversion Notice (the “Conversion Date”), and the Conversion Price determined. If no Conversion Date is specified in a Conversion Notice, the Conversion Date shall be the date that the Conversion Notice is delivered and each Conversion Notice, once given, shall be irrevocable.
On February 10, 2021, the Company issued
On April 18, 2022, the Company received a notice of conversion from the holder of the 5 shares of Series C Convertible Preferred Stock converting into
As of September 30, 2023 and December 31, 2022, there were no shares of Series C Convertible Preferred Stock issued and outstanding.
Certificate of Designation of Series D 3% Convertible Preferred Stock
On January 4, 2022, the Company filed a Certificate of Designation for Series D Convertible Preferred Stock with the Wyoming Secretary of State, designating 2,500,000 shares of preferred stock as Series D Convertible Preferred Stock. In February 2022, the Company filed an Amended and Restated Certificate of Designation, Preference and Rights of the Series D Convertible Preferred Stock. The Company amended and cancelled the mandatory provision and also amended the fixed conversion price from $0.50 to $0.40 post-split ($0.001 to $0.0008 pre-split). In April 2022, the Company filed another Amended and Restated Certificate of Designation, Preference and Rights of the Series D Convertible Preferred Stock whereby the Company amended the fixed conversion price from $0.40 to $0.25 post-split ($0.0008 to $0.0005 pre-split). In October 2022, the fixed conversion price was adjusted from $0.25 to $0.10 post-split ($0.0005 to $0.0002 pre-split) due to the subsequent sale of the Company’s common stock at $0.10 post-split ($0.0002 pre-split) per share in October 2022.
Designation. The Company has designated
29
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
Dividends. Each share of Series D Convertible Preferred Stock is entitled to an annual dividend equal to 3% of the stated value which shall be cumulative, payable solely upon redemption, liquidation or conversion. Upon the occurrence of an event of default, the dividend rate shall automatically increase to 18%.
Liquidation. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary or upon any deemed liquidation event, after payment or provision for payment of debts and other liabilities of the Company and after payment or provision for ay liquidation preference payable to the holders of any preferred stock ranking senior upon liquidation to the Series D Preferred Stock, if any, but prior to any distribution or payment made to the holders of common stock or the holders of the preferred stock ranking junior upon liquidation to the Series D Preferred Stock, the holders will be entitled to be paid out of the assets of the Company available for distribution an amount equal to the stated value plus any accrued but unpaid dividends, default adjustment, if applicable, and any other fees.
Voting Rights. Except as set forth in the Certificate of Designation, the Series D Preferred Stock shall have no right to vote on any matters requiring shareholder approval or any matters on which the shareholders are permitted to vote. With respect to any voting rights of the Series D Preferred Stock, the Series D Preferred Stock shall vote as a class, each share of Series D Preferred Stock shall have one vote on any such matter, and any such approval may be given via a written consent in lieu of a meeting of the Series D Holders.
Conversion price. The effective conversion price (the “Conversion Price”) shall equal the fixed conversion price equal to $0.10 post-split ($0.0002 pre-split) (subject to equitable adjustments by the Company relating to the Company’s securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). Notwithstanding anything contained herein to the contrary, in the event that, following the date of issuance of the Series D Preferred Stock, the Company consummates a financing of at least $7,500,000, in the aggregate, in one offering or a series of offerings (debt or equity or a combination), the Conversion Price shall be reset to the Variable Conversion Price. The “Variable Conversion Price” shall mean 65% multiplied by the market price (representing a discount rate of 35%). Market price means the average of the lowest trading prices for the common stock during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date.
Most Favored Nation. During the period where any shares of Series D Preferred Stock are issued and outstanding, if the Company engages in any future financing transactions with a third party investor, the Company will provide the Holder with written notice (the “MFN Notice”) thereof promptly but in no event less than 10 days prior to closing any financing transactions. Included with the MFN Notice shall be a copy of all documentation relating to such financing transaction and shall include, upon written request of the Holder, any additional information related to such subsequent investment as may be reasonably requested by the Holder. In the event the Holder determines that the terms of the subsequent investment are preferable to the terms of the securities of the Company issued to the Holder pursuant to the terms of this Designation, the Holder will notify the Company in writing. Promptly after receipt of such written notice from the Holder, the Company agrees to amend and restate the terms of this Designation, to be identical to the instruments evidencing the subsequent investment.
On March 24, 2023, the Company and Trillium Partners, L.P. (the “Holder”) entered into an Exchange Agreement whereby the Holder will exchange (the “Exchange”)
In July 2023, the Company received a notice of conversion from a Series D Preferred Stockholder related to accrued dividends of $1,275 converting into
As of September 30, 2023 and December 31, 2022, there were
30
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
Certificate of Designation of Series E 3% Preferred Stock
On March 24, 2023, the Company filed a Certificate of Designation for Series E Preferred Stock with the Wyoming Secretary of State, designating
Designation. The Company has designated 2,500,000 shares of preferred stock as Series E Preferred Stock. Each share of Series E Preferred Stock has a par value of $
Voting Rights. The Series E Preferred Stock shall have no right to vote on any matters requiring shareholder approval or any matters on which the shareholders are permitted to vote.
Dividends. Each share of Series E Preferred Stock is entitled to an annual dividend equal to 3% of the stated value which shall be cumulative, payable solely upon redemption, liquidation or conversion. Upon the occurrence of an event of default, the dividend rate shall automatically increase to 18%.
Liquidation. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary or upon any deemed liquidation event, after payment or provision for payment of debts and other liabilities of the Company and after payment or provision for ay liquidation preference payable to the holders of any preferred stock ranking senior upon liquidation to the Series E Preferred Stock, if any, but prior to any distribution or payment made to the holders of common stock or the holders of the preferred stock ranking junior upon liquidation to the Series E Preferred Stock, the holders will be entitled to be paid out of the assets of the Company available for distribution an amount equal to the stated value plus any accrued but unpaid dividends, default adjustment, if applicable, and any other fees (collectively the “Adjustment Amount”).
No Conversion Right. The Holder shall have no right at any time to convert all or any part of the outstanding Series E Preferred Stock into shares of common stock.
Mandatory Redemption by the Company. On the date which is the earlier of: (i) December 31, 2023; and (ii) upon the occurrence of an Event of Default (i) or (ii), the Mandatory Redemption Date the Company shall redeem all of the shares of Series E Preferred Stock of the Holders. Within five (5) days of the Mandatory Redemption Date, the Company shall make payment to each Holder of an amount in cash, or kind, equal to (i) the total number of Series E Preferred Stock held by the applicable Holder, multiplied by (ii) the then current Stated Value (including but not limited to the addition of any accrued, unpaid dividends and the Default Adjustment, if applicable) (the "Mandatory Redemption Amount”). The value of any payment in kind shall be as agreed between the Company and respective the Holder.
Default Adjustment. Upon the occurrence and during the continuation of any Event of Default (other than as set forth in Section 8ai of the amendment which is the failure to redeem), the Stated Value shall immediately be increased to $1.50 per share of Series E Preferred Stock; and upon the occurrence and during the continuation of any Event of Default specified in Section 8ai which is the failure to redeem, the Stated Value shall immediately be increased to $2.00 per share of Series E Preferred Stock (the amounts referred to herein shall be referred to collectively as the “Default Adjustment”). In the event of a Default Adjustment, the Company shall immediately, upon the demand of the Majority Holders, redeem the issued and outstanding Series E Preferred Stock and pay to the Holders the amount which is equal to (i) the number of shares of Series E Preferred Stock held by such Holders multiplied by (ii) the Stated Value plus any Adjustment Amount. Upon any Event of Default set forth in Section 8(A)(ix), provided that there is no other default, no Default Adjustment shall occur; however, the Company shall immediately, upon the demand of the Majority Holders, redeem the issued and outstanding Series E Preferred Stock and pay to the Holders the amount which is equal to (i) the number of shares of Series E Preferred Stock held by such Holders multiplied by (ii) the Stated Value plus any Adjustment Amount.
As of September 30, 2023, there were
31
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
Dividends on Preferred Stock
As of September 30, 2023 and December 31, 2022, accrued and unpaid dividends related to the Series B, C, D and E Preferred Stock amounted $62,722 and $32,198, respectively and was included in accounts payable and accrued liabilities as reflected in the unaudited condensed consolidated balance sheets. During the nine months ended September 30, 2023 and 2022, total dividends recorded amounted to $
Common Stock Issued and Issuable
On March 24, 2021, the Company filed, with the Wyoming Secretary of State, a Certificate of Amendment, to amend its Articles of Incorporation. The amendment reflected the increase in the authorized shares of common stock from 1,000,000,000 shares to
On April 28, 2022, the Company filed, with the Wyoming Secretary of State, a Certificate of Amendment, to amend its Articles of Incorporation and reflected the increase in the authorized shares of common stock from 6,000,000,000 shares to
On September 26, 2022, the Company filed, with the Wyoming Secretary of State, a Certificate of Amendment, to amend its Articles of Incorporation and reflected the increase in the authorized shares of common stock from 9,000,000,000 shares to
In March 2023, the Company filed, with the Wyoming Secretary of State, a Certificate of Amendment, to amend its Articles of Incorporation and reflected the increase in the authorized shares of common stock from 15,000,000,000 shares to
Between April 2023 and June 2023, the Company issued
In June 2023, the Company issued
Between July 2023 and September 2023, the Company issued
In July 2023, the Company received a notice of conversion from a Series D Preferred Stockholder related to accrued dividends of $1,275 converting into 3,642,857 shares of the Company’s common stock. In connection with the decrease in conversion price of the Series D Convertible Preferred Stock, the Company recognized deemed dividend of 7,623 during the nine months ended September 30, 2023.
32
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
Common Stock Warrants
A summary of the Company’s outstanding stock warrants is presented below:
|
| Number of Warrants |
| Weighted Average Exercise Price |
| Weighted Average Remaining Contractual Life (Years) | |||
Balance at December 31, 2021 |
|
|
| $ |
|
| 4.26 | ||
Granted |
|
|
|
|
|
| 7.00 | ||
Exercised |
|
| ( |
|
|
|
| 2.40 | |
Balance at December 31, 2022 |
|
|
| $ |
|
| 4.71 | ||
Granted |
|
|
|
|
|
| 7.00 | ||
Exercised |
|
| - |
|
| - |
|
| - |
Balance at September 30, 2023 |
|
|
| $ |
|
| 6.09 | ||
Warrants exercisable at September 30, 2023 |
|
|
| $ |
|
| 6.09 |
At September 30, 2023, the aggregate intrinsic value of warrants outstanding was $
In connection with a convertible note dated August 10, 2023, the Company issued an aggregate of
Note 13 - Subsequent Events
Common Stock for Debt Conversion
Between October 2023 and November 2023, the Company issued an aggregate of
Common Stock for Series D Preferred Shares Conversion
Between October 2023 and November 2023, the Company received a notice of conversion from a Series D Preferred Stockholder for
Issuance of Convertible Note
October 26, 2023 Securities Purchase Agreement
On October 26, 2023, the Company entered into a securities purchase agreement with Trillium Partners LP (“Trillium”), which closed on November 6, 2023, pursuant to which Trillium purchased a convertible promissory note (the “October 26, 2023 Trillium Note”) from the Company in the aggregate principal amount of $
33
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
In connection with such note, the Company issued
The following terms shall apply to the above note:
The October 26, 2023 Note bears interest at a rate of 12% per annum, which interest may be paid by the Company to the lenders in shares of the Company’s common stock; but shall not be payable until the October 26, 2023 Note becomes payable, whether at the maturity date or upon acceleration or by prepayment.
During the first 180 days following the date of the October 26, 2023 Note, the Company has the right to prepay the principal and accrued but unpaid interest due under the above notes, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium of 150% as defined in the note agreement. After this initial 180-day period, after the expiration of the prepayment periods set forth above, the Company may submit an optional prepayment notice to the lenders.
The conversion price for the above notes shall be equal to a 50% discount of the market price which means the lowest 30 trading prices of the Common Stock immediately prior to the delivery of a Notice of Conversion. Notwithstanding the foregoing, the lenders shall be restricted from effecting a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned by lenders and its affiliates, exceeds 9.99% of the outstanding shares of the Company’s common stock. Notwithstanding the foregoing, such conversion price and lookback periods are subject to adjustment in favor of the Investor in the event the Company issues securities to another party with more favorable conversion terms (“Most Favored Nation”). During the period where any monies are owed to the lender pursuant to the October 26, 2023 Note, if the Company engages in any future financing transactions with a third party investor, the Company will provide the lender with written notice (the “MFN Notice”) thereof promptly but in no event less than 10 days prior to closing any financing transactions except for exempt issuances as defined in related the note agreement.
The above notes contain certain events of default, upon which principal and accrued interest will become immediately due and payable. In addition, upon an event of default, interest on the outstanding principal shall accrue at a default interest rate of 22% per annum, or if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
Upon certain events of default, the above the October 26, 2023 Note will become immediately due and payable and the Company must pay the lenders 150% of the then-outstanding principal amount of the above October 26, 2023 Note, plus any interest accrued upon such event of default or prior events of default (the “Default Amount”). Further, upon any event of default relating to the failure to issue shares of common stock upon the conversion of such notes, such notes become immediately due and payable in an amount equal to twice the Default Amount.
34
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Statements
This quarterly report on Form 10-Q and other reports (collectively, the “Filings”) filed by Bergio International, Inc. (“Bergio” or the “Company”) from time to time with the U.S. Securities and Exchange Commission (the “SEC”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks contained in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 30, 2023, relating to the Company’s industry, the Company’s operations and results of operations, and any businesses that the Company may acquire. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our unaudited condensed unaudited condensed consolidated financial statements and notes thereto appearing elsewhere in this report.
Plan of Operation
The Bergio brand is our most important asset. The Bergio brand is associated with high-quality, handcrafted and individually designed pieces with European sensibility, Italian craftsmanship and a bold flair for the unexpected. Bergio is one of the most coveted brands of fine jewelry. Established in 1995, Bergio’s signature innovative design, coupled with extraordinary diamonds and precious stones, earned the company recognition as a highly sought-after purveyor of rare and exquisite treasures from around the globe.
When designer and PEO, Berge Abajian, creates a collection, he looks well beyond the drawing board. Berge focuses on the woman who will ultimately wear his pieces, bringing to creation a magnificent piece of jewelry that reflects the beauty and vitality a woman possesses. Bergio creations are a seamless blend of classic elegance and subtle flair, adding to a woman’s charm while never overpowering her.
It is our intention to establish Bergio as a holding company for the purpose of establishing retails stores worldwide. Our branded product lines are products and/or collections designed by our designer and CEO Berge Abajian and will be the centerpiece of our retail stores. We also intend to complement our own quality-designed jewelry with other products and our own specially designed handbags. This is in line with our strategy and belief that a brand name can create an association with innovation, design and quality which helps add value to the individual products as well as facilitate the introduction of new products.
It is our intention to open elegant stores in “high-end” areas and provide excellent service in our stores which will be staffed with knowledgeable professionals.
35
We also intend to sell our products on a wholesale basis to limited customers. In 2019 we introduced The Silver Fashion Collection ranging in price from $50 to $1,200. The Company also introduced the Bergio Handbag Collection, manufactured in Italy with top quality Italian leather ranging in price from $450 to $875, which are very competitive entry prices.
Our products consist of a wide range of unique styles and designs made from precious metals such as, gold, platinum, and Karat gold, as well as diamonds and other precious stones. We currently design and produce approximately 100 to 150 product styles. Current retail prices for our products range from $400 to $200,000. We have manufacturing control over our line as a result of having a manufacturing facility in New Jersey as well as subcontracts with facilities located in Italy.
On March 5, 2014, the Company formed a wholly owned subsidiary called Crown Luxe, Inc. in the State of Delaware (“Crown Luxe”). Crown Luxe was established to operate the Company’s first retail store, which was opened in Bergen County, New Jersey in 2014.
During the fall of 2018, we opened our second retail store at the new Ocean Resort Casino in Atlantic City, New Jersey. In March 2023, we opened our third retail store in Marmora, New Jersey. We are also contemplating the opening of new stores in the future.
On February 10, 2021, Bergio International, Inc. entered into an Acquisition Agreement with Digital Age Business, Inc., a Florida corporation, (“Digital Age Business”), pursuant to which the shareholders of Digital Age Business agreed to sell all of the assets and liabilities of its Aphrodite’s business to a recently formed subsidiary of the Company known as Aphrodite’s Marketing, Inc., a Wyoming corporation in exchange for created Series B Preferred Stock of the Company, which collectively, shall be convertible at Shareholders’ option, at any time, in whole or in part, into that number of shares of common stock of the Company which shall equal thirty percent (30%) of the total issued and outstanding common stock of the Company (as determined at the earlier of (i) the date of conversion of the Series B Preferred Stock; and (ii) eighteen (18) months following the Closing). In addition, the Company will provide an additional $5,000,000 in financing for Aphrodite’s Marketing, Inc. We own 51% of Aphrodite’s Marketing, Inc.
On July 1, 2021, we entered into an Agreement and Plan of Merger with GearBubble, Inc., a Nevada corporation, pursuant to which the shareholders of GearBubble agreed to sell 100% of the issued and outstanding shares of GearBubble to a recently formed subsidiary of the Company known as GearBubble Tech, Inc., a Wyoming corporation in exchange for $3,162,000 (the “Cash Purchase Price”), which shall be paid as follows: a) $2,000,000 (which was paid in cash at Closing), b) $1,162,000 to be paid in 15 equal installments, and c) 49,000 of the 100,000 authorized shares of the Merger Sub, such that upon the Closing, 51% of the Merger Sub shall be owned by the Company, and 49% of the Merger Sub shall be owned by the GearBubble Shareholders. We own 51% of GearBubble Tech, Inc.
The funding for these acquisitions were a combination of proceeds from the issuance of common stock from our S-1 Registration Statement and debt in fiscal year 2021.
Aphrodite’s Marketing and GearBubble Tech have increased our online presence and provide for expansion of the Bergio Brand. Aphrodite is a one-stop shop for jewelry, gifts, and surprises for any occasion. The online stores provide a unique gifting experience in the ecommerce space. With their technological experience in ecommerce, we expect to grow the Bergio Brand, and in conjunction with Bergio’s design expertise and years of experience in the jewelry industry, we believe we can successfully grow the business.
The Company has instituted various cost saving measures to conserve cash and has worked with its debtors in an attempt to negotiate the debt terms. The Company has been also investigating various strategies to increase sales and expand its business. The Company is in negotiations with some potential partners, but, at this time, there is nothing concrete, but the Company remains positive about its prospects. However, there is no assurance that the Company will be successful in its endeavors or that it will be able to increase its business.
Our future operations are contingent upon increasing revenues and raising capital for on-going operations and expansion of our product lines. Because we have a limited operating history, you may have difficulty evaluating our business and future prospects.
The Company’s retail operations have been and continue to be affected by the recent and ongoing outbreak of the coronavirus disease (COVID -19) which in March 2020, was declared a pandemic by the World Health Organization.
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The ultimate disruption which may be caused by the outbreak is uncertain; however, it may result in a material adverse impact on the Company’s financial position, operations and cash flows. Possible areas that may be affected include, but are not limited to, disruption to the Company’s customers and revenue, labor workforce, unavailability of products and supplies used in operations, and the decline in value of assets held by the Company, including property and equipment.
Recent Developments
October 26, 2023 Securities Purchase Agreement
On October 26, 2023, the Company entered into a securities purchase agreement with Trillium Partners LP (“Trillium”), which closed on November 6, 2023, pursuant to which Trillium purchased a convertible promissory note (the “October 26, 2023 Trillium Note”) from the Company in the aggregate principal amount of $8,500, such principal and the interest thereon convertible into shares of the Company’s common stock at the option of Trillium any time after 180 days of the October 26, 2023 Trillium Note. The October 26, 2023 Trillium Note contains debt issue costs of $1,000. The Company intends to use the net proceeds for general working capital purposes. The maturity date is October 31, 2024.
In connection with such note, the Company issued 8,500,000 warrants to purchase common stock to such lender immediately exercisable at an initial exercise price of $0.0003 per share (subject to certain adjustments such as stock split, dividend, consolidation or merger and pro-rata distribution) with an expiry date of October 26, 2030.
Results of Operations
Overview
The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
| Nine Months Ended |
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| |||||
| September 30, 2023 | September 30, 2022 | Increase (Decrease) | Percent Increase (Decrease) | ||||
Net revenues | $ | 3,667,257 | $ | 5,733,883 | $ | (2,066,626) | (36.04)% | |
Net revenues - related parties |
| - |
| 139,716 |
| (139,716) | (100)% | |
Total net revenues |
| 3,667,257 |
| 5,873,599 |
| (2,206,342) | (37.56)% | |
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| |
Cost of revenues |
| 1,877,397 |
| 2,832,043 |
| (954,646) | (33.71)% | |
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| |
Gross profit | $ | 1,789,860 | $ | 3,041,556 | $ | (1,251,696) | (41.15)% | |
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| |
Gross profit as a % of sales |
| 48.81% |
| 51.78% |
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| Three Months Ended |
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| |||||
| September 30, 2023 | September 30, 2022 | Increase (Decrease) | Percent Increase (Decrease) | ||||
Net revenues | $ | 869,472 | $ | 1,318,851 | $ | (449,379) | (34.07)% | |
Net revenues - related parties |
| - |
| - |
| - | -% | |
Total net revenues |
| 869,472 |
| 1,318,851 |
| (449,379) | (34.07)% | |
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| |
Cost of revenues |
| 499,409 |
| 595,063 |
| (95,654) | (16.07)% | |
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| |
Gross profit | $ | 370,063 | $ | 723,788 | $ | (353,725) | (48.87)% | |
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Gross profit as a % of sales |
| 42.56% |
| 54.88% |
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Net Revenues
Total net revenues for the nine months ended September 30, 2023 which amounted to $3,667,257 decreased by $2,066,626 as compared to $5,873,599 which included net revenues - related parties for the nine months ended September 30, 2022. Total net revenues for the three months ended September 30, 2023 which amounted to $869,472 decreased by $449,379 as compared to $1,318,851 for the three months ended September 30, 2022. The decrease in total net revenues during the three and nine months ended September 30, 2023, was primarily attributable to the decrease in revenues of our majority owned subsidiary, Aphrodite’s Marketing, as a result of the decrease in marketing and advertising expenses through social media, digital marketing, and promotional campaigns.
Cost of Revenues
Cost of revenues consists primarily of the cost of the merchandise, shipping fees, credit card processing services, fulfillment cost, ecommerce sellers’ pay-out; costs associated with operation and maintenance of the Company’s platform. Cost of revenues for the nine months ended September 30, 2023 decreased by $954,646 to $1,877,397 as compared to $2,832,043 for the nine months ended September 30, 2022. Cost of revenues for the three months ended September 30, 2023 decreased by $95,654 to $499,409 as compared to 595,063 for the three months ended September 30, 2022.These decreases are primarily attributable to the decrease in net revenues as discussed above.
Gross Profit
Gross profit decreased by $1,251,696 to $1,789,860 for the nine months ended September 30, 2023 as compared to $3,041,556 for the nine months ended September 30, 2022. Gross profit decreased by $353,725 to $370,063 for the three months ended September 30, 2023 as compared to $723,788 for the three months ended September 30, 2022. These decreases are primarily attributable to the decrease in revenues as discussed above.
Operating Expenses
Operating expenses decreased by $2,336,194 to $3,101,924 for the nine months ended September 30, 2023 as compared to $5,438,118 for the nine months ended September 30, 2022. The decrease was primarily attributable to i) decrease in selling and marketing expenses of $1,391,317 primarily attributable to decrease in advertising and marketing activities through social media, digital marketing, and promotional campaigns ii) decrease professional and consulting expenses of $306,062 primarily related to decrease in consulting and contractor fees iii) decrease in compensation and related taxes of $540,813 primarily related to the decrease in number of employees of our majority owned subsidiary, Aphrodite’s Marketing iv) decrease in general and administrative expenses of $98,002 primarily attributable to decrease in rent and office expenses.
Operating expenses decreased by $722,410 to $812,666 for the three months ended September 30, 2023 as compared to $1,535,076 for the three months ended September 30, 2022. The decrease was primarily attributable to i) decrease in selling and marketing expenses of $289,588 primarily attributable to decrease in advertising and marketing activities through social media, digital marketing, and promotional campaigns ii) decrease professional and consulting expenses of $164,261 primarily related to decrease in consulting and contractor fees iii) decrease in compensation and related taxes of $216,249 primarily related to the decrease in number of employees of our majority owned subsidiary, Aphrodite’s Marketing iv) decrease in general and administrative expenses of $52,312 primarily attributable to decrease in rent and office expenses.
The overall decrease in operating expenses reflect were due to the cost-cutting measures made during the three and nine months ended September 30, 2023.
Loss from Operations
As a result of the above, we had a loss from operations of $1,312,064 for the nine months ended September 30, 2023 as compared to a loss from operations of $2,396,562 for the nine months ended September 30, 2022 and loss from operations of $442,603 for the three months ended September 30, 2023 as compared to a loss from operations of $811,288 for the three months ended September 30, 2022.
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Other Income (Expenses), net
For the nine months ended September 30, 2023, the Company had other (expenses), net of ($2,006,026) as compared to other (expenses), net of ($722,284) for the nine months ended September 30, 2022, a decrease of $28,322 in other expenses, net. The decrease in other expenses, net is primarily attributed to the decrease in amortization of debt discount of $233,243 and decrease in interest expense of $739,131 due to decrease in number of convertible notes, increase in gain from forgiveness of accounts payable of $231,806 that management deemed forgiven, offset by decrease in change in fair value of derivative liabilities of $450,022, increase in derivative expense of $501,599, and decrease in gain from extinguishment of debt of $234,082.
For the three months ended September 30, 2023, the Company had other (expenses), net of ($52,922) as compared to other (expenses), net of ($43,867) for the three months ended September 30, 2022, an increase of $9,055 in other expenses, net. The increase in other expenses, net is primarily attributed to increase in derivative expense of $166,787, offset by the decrease in amortization of debt discount of $5,410, decrease in interest expense of $1,408 related to our notes, loans and advances payable, decrease in change in fair value of derivative liabilities of $159,298, and decrease in gain from extinguishment of debt of $12,982.
Net Loss Attributable to Bergio International, Inc.
As a result of the above, we had net loss attributable to Bergio International, Inc. $1,544,003 for the nine months ended September 30, 2023 as compared to $2,146,779 for the nine months ended September 30, 2022. As a result of the above, we had net loss attributable to Bergio International, Inc. $327,149 for the three months ended September 30, 2023 as compared to $581,704 for the three months ended September 30, 2022.
Net Loss Available to Bergio International, Inc. Common Stockholders
As a result of the above, we had net loss available to Bergio International, Inc. common stockholders of $1,551,626, for the nine months ended September 30, 2023 as compared to $3,702,657 for the nine months ended September 30, 2022 after the recognition of deemed dividend of $7,623 and $1,555,878 related to the Series D Preferred Stock for nine months ended September 30, 2023 and 2022, respectively. We had net loss available to Bergio International, Inc. common stockholders of $334,772 for the three months ended September 30, 2023 as compared to $581,704 for the three months ended September 30, 2022 after the recognition of deemed dividend of $7,623 related to the Series D Preferred Stock.
Liquidity and Capital Resources
The following table summarizes working capital at September 30, 2023, compared to December 31, 2022:
| September 30, 2023 | December 31, 2022 | Increase/ (Decrease) | |||
Current Assets | $ | 3,017,033 | $ | 3,440,464 | $ | (423,431) |
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Current Liabilities | $ | 5,923,379 | $ | 4,254,005 | $ | 1,669,374 |
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Working Capital Deficit | $ | (2,906,346) | $ | (813,541) | $ | 2,092,805 |
At September 30, 2023 the Company had working capital deficit of $2,906,346 as compared to $813,541 at December 31, 2022. This increase in working capital deficit is primarily attributed to the increase in liabilities.
During the nine months ended September 30, 2023, the Company’s principal sources and uses of funds were as follows:
Cash used in operating activities: For the nine months ended September 30, 2023, the Company used $886,156 in cash for operations as compared to $2,175,047 in cash used for operations for the nine months ended September 30, 2022. This decrease in cash used in operations is primarily attributed to net loss of $1,544,003, amortization expense of $181,467, amortization of debt discount and deferred financing cost of $242,324, depreciation of $28,485, derivative expense of $525,902 and increase in changes in operating assets and liabilities of $597,823 primarily attributable to increase in accounts payable and accrued liabilities of $460,849 and increase in accrued compensation of $148,239
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offset by non-controlling interest of $462,023, gain from forgiveness of accounts payable of $231,806, change in fair value of derivative liabilities of $119,086, and gain from extinguishment of debt of $115,232.
For the nine months ended September 30, 2022, the Company used $2,175,047 in cash for operations as compared to $2,295,489 in cash used for operations for the nine months ended September 30, 2021. This increase in cash used in operations is primarily attributed to net loss of $2,146,779, amortization expense of $181,467, non-cash interest upon conversion of debt of $1,025,660, amortization of debt discount and deferred financing cost of $475,567, stock based compensation of $213,674, offset by non-controlling interest of $972,067, change in fair value of derivative liabilities of $569,108, gain from extinguishment of debt $349,314, and decrease in changes in operating assets and liabilities of $16,525 primarily attributable to increase in accounts receivable of $26,998, increase in accrued compensation – CEO of $319,765, decrease in inventory of $226,252, decrease in accounts payable and accrued liabilities of $227,296, and decrease in deferred compensation – CEO $346,163.
Cash used in investing activities: For the nine months ended September 30, 2023, the Company used $4,900 in cash for investing activities for purchase of property and equipment as compared to $0 of cash in investing activities for the nine months ended September 30, 2022.
Cash provided by financing activities: Cash provided by financing activities for the nine months ended September 30, 2023 was $473,991 as compared to $1,269,094 for the nine months ended September 30, 2022. This decrease is primarily the result of net proceeds received from loans and advances payable of $560,516, net proceeds from convertible note and note payable of $140,000, advances from CEO, net of $192,783 offset by repayments of loans and advances payable of $419,408.
Cash provided by financing activities for the nine months ended September 30, 2022 was $1,269,094 as compared to $4,254,782 for the nine months ended September 30, 2021 and was primarily the result of net proceeds received from convertible notes of $126,250, sale of preferred stock of $1,555,000, proceeds from loans $1,003,140, proceeds from a note of $110,000 offset by repayments of loans payable of $776,804, repayment of secured notes of $400,000, repayment of note of $218,634 and repayment of advances to CEO of $129,858.
Our indebtedness is comprised of loans and advances payable, notes payable, convertible notes, and advances from a stockholder/officer intended to provide capital for the ongoing manufacturing of our jewelry line, in advance of receipt of the payment from our retail distributors.
Convertible Notes
From time to time the Company enters into certain financing agreements for convertible notes. For the most part, the Company settles these obligations with the Company’s common stock. As of September 30, 2023, principal amounts under the convertible note payable was $294,422, net of debt discount of $92,263 at September 30, 2023.
Notes Payable
The Company has total notes payable of $701,862 classified as current portion and total notes payable – long term portion of $260,138 at September 30, 2023.
Loans and Advances Payable
The Company has loans and advances payable and accrued interest of $1,415,844 at September 30, 2023.
Satisfaction of Our Cash Obligations for the Next 12 Months
A critical component of our operating plan impacting our continued existence is to efficiently manage our retail operations and successfully develop new lines through our Company or through possible acquisitions and/or mergers as well as opening new retail stores. Our ability to obtain capital through additional equity and/or debt financing, and joint venture partnerships will also be important to our expansion plans. In the event we experience any significant problems assimilating acquired assets into our operations or cannot obtain the necessary capital to pursue our strategic plan, we may have to reduce the growth of our operations. This may materially impact on our ability to increase revenue and continue our growth.
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The Company has suffered recurring losses and has an accumulated deficit of approximately $21.2 million as of September 30, 2023. As of September 30, 2023, the Company has $294,422 in principal amounts of convertible notes, notes payable (current and long-term portion) of $962,000, loans and advances payable of $1,415,844, and advances from CEO including interest of $357,571. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The recoverability of a major portion of the recorded asset amounts shown in the accompanying unaudited condensed consolidated balance sheet is dependent upon continued operations of the Company, which in turn, is dependent upon the Company’s ability to raise capital and/or generate positive cash flows from operations.
These unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
Research and Development
We are not anticipating significant research and development expenditures in the near future.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, results or operations, liquidity, capital expenditures or capital resources that is deemed material.
Critical Accounting Policies
Our critical accounting policies are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report. There have been no changes in our critical accounting policies. Our significant accounting policies are described in our notes to the consolidated financial statements for the year ended December 31, 2022 which is included in our Annual Report.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We do not hold any derivative instruments and do not engage in any hedging activities.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in the reports we file pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our Principal Executive Officer (“PEO”) and Principal Financial Officer (“PFO”), to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide a reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Management designed the disclosure controls and procedures to provide reasonable assurance of achieving the desired control objectives.
We carried out an evaluation, under the supervision and with the participation of our management, including our PEO and PFO, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report. Based upon that evaluation, the PEO and PFO concluded that the Company’s disclosure controls and procedures were not effective.
(b) Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
Item 1A. Risk Factors.
We believe there are no changes that constitute material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 30, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Between July 2023 and September 2023, the Company issued 125,446,273 shares of its common stock and 11,300,000 common stock issuable at an average contractual conversion price of approximately $0.0004 as a result of the conversion of principal of $37,630 underlying certain outstanding convertible notes converted during such period.
In July 2023, the Company received a notice of conversion from a Series D Preferred Stockholder related to accrued dividends of $1,275 converting into 3,642,857 shares of the Company’s common stock
Except as otherwise noted, the securities in the transactions describe above were sold in reliance on the exemption from registration provided in Section 4(a)(2) of the Securities Act for transactions not involving any public offering. All certificates evidencing the shares sold bore a restrictive legend. No underwriter participated in the offer and sale of these securities, and no commission or other remuneration was paid or given directly or indirectly in connection therewith. The proceeds from these sales were used for general corporate purposes.
Item 3. Defaults upon Senior Securities.
There has been no default in payment of principal, interest, sinking or purchase fund installment, or any other material default, with respect to any indebtedness of the Company.
Item 4. Mine Safety Disclosure.
Not applicable.
Item 5. Other Information.
Not applicable.
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Item 6. Exhibits.
Exhibit No. |
| Description |
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| Certification of Principal Executive Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of 2002* | |
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| Certification of Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of 2002* | |
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| Certification of Principal Executive Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* | |
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| Certification of Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* | |
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101.INS |
| XBRL Instance Document * |
101.SCH |
| XBRL Taxonomy Extension Schema * |
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase * |
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase * |
101.LAB |
| XBRL Taxonomy Extension Label Linkbase * |
101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase * |
* Filed herewith
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
| BERGIO INTERNATIONAL, INC. |
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Date: November 17, 2023 | By: | /s/ Berge Abajian |
| Name: | Berge Abajian |
| Title: | Chief Executive Officer |
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| (Principal Executive Officer) |
|
| (Principal Financial Officer) |
|
| (Principal Accounting Officer) |
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