Bergio International, Inc. - Quarter Report: 2022 June (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2022
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 333-150029
BERGIO INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
| Wyoming | 27-1338257 | |
| (State or other jurisdiction
of | (I.R.S. Employer |
12 Daniel Road E.
Fairfield, NJ 07004
(Address of principal executive offices)
(973) 227-3230
(Registrant’s telephone number, including area code)
| Title of each class | Trading Symbol(s) |
Name of each exchange | ||
| 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. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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. Yes ☒ No ☐
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 | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| Emerging growth company | ☐ | ||
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 ☐ No ☒
As of August 9, 2022 there were 3,378,098,362 shares outstanding of the registrant’s common stock.
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BERGIO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| Assets: | ||||||||
| Current assets: | ||||||||
| Cash | $ | 494,473 | $ | 1,093,195 | ||||
| Accounts receivable | 56,230 | 26,323 | ||||||
| Accounts receivable - related parties | 85,156 | 25,001 | ||||||
| Inventory | 3,000,810 | 3,206,107 | ||||||
| Prepaid expenses and other current assets | 86,214 | 33,559 | ||||||
| Total current assets | 3,722,883 | 4,384,185 | ||||||
| Property and equipment, net | 69,774 | 90,416 | ||||||
| Goodwill | 5,681,167 | 5,681,167 | ||||||
| Intangible assets, net | 390,297 | 511,275 | ||||||
| Operating lease right of use assets | 53,408 | 101,090 | ||||||
| Investment in unconsolidated affiliate | 6,603 | 6,603 | ||||||
| Total Assets | $ | 9,924,132 | $ | 10,774,736 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY: | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 1,738,325 | $ | 2,091,811 | ||||
| Accounts payable and accrued liabilities - related party | 29,445 | |||||||
| Accrued compensation - CEO | 403,460 | |||||||
| Secured notes payable, net of debt discount | 338,925 | |||||||
| Notes payable - current portion, net of debt discount | 788,372 | 855,158 | ||||||
| Convertible notes payable, net of debt discount | 24,987 | 946,286 | ||||||
| Loans payable and accrued interest | 923,465 | 969,646 | ||||||
| Deferred compensation - CEO | 346,163 | |||||||
| Advances from CEO and accrued interest | 145,347 | |||||||
| Derivative liability - convertible debt | 83,016 | 478,212 | ||||||
| Derivative liability - acquisition | 103,124 | 500,020 | ||||||
| Operating lease liabilities - current | 37,498 | 76,494 | ||||||
| Total current liabilities | 4,131,692 | 6,748,062 | ||||||
| Long-term liabilities: | ||||||||
| Notes payable - long-term | 261,866 | 261,776 | ||||||
| Operating lease liabilities - long-term | 15,912 | 24,595 | ||||||
| Total long term liabilities | 277,778 | 286,371 | ||||||
| Total Liabilities | 4,409,470 | 7,034,433 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock 10,000,000 shares authorized Series A preferred stock - $0.001 par value, 75 shares authorized, 75 and 75 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively | ||||||||
| Convertible Series B preferred stock - $0.00001 par value, 4,900 shares authorized, 3,000 and 3,000 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively ($100 per share liquidation value) | ||||||||
| Convertible Series C preferred stock - $0.00001 par value, 5,000,000 shares authorized, none and 5 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively ($100 per share liquidation value) | ||||||||
| Convertible Series D preferred stock - $0.00001 par value, 2,500,000 shares authorized, 1,680,000 and shares issued and outstanding, respectively at June 30, 2022 and December 31, 2021, respectively ($1 per share liquidation value) | 17 | |||||||
| Common stock, $0.00001 par value; 9,000,000,000 shares authorized, 3,067,694,630 and 1,216,519,661 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | 30,677 | 12,165 | ||||||
| Common stock issuable ( and 16,021,937 shares as of June 30, 2022 and December 31, 2021, respectively) | 160 | |||||||
| Treasury stock | 103,700 | |||||||
| Additional paid-in capital | 24,327,637 | 18,634,146 | ||||||
| Accumulated deficit | (17,587,581 | ) | (14,452,396 | ) | ||||
| Total Bergio International, Inc. stockholders’ equity | 6,770,750 | 4,297,775 | ||||||
| Non-controlling interest in subsidiaries | (1,256,088 | ) | (557,472 | ) | ||||
| Total Stockholders’ equity | 5,514,662 | 3,740,303 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 9,924,132 | $ | 10,774,736 | ||||
The accompanying unaudited condensed notes are an integral part of these unaudited condensed consolidated financial statements.
1
BERGIO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | |||||||||||||
| Net revenues | $ | 2,458,531 | $ | 2,137,320 | $ | 4,415,032 | $ | 3,286,634 | ||||||||
| Net revenues - related parties | 666 | 139,716 | ||||||||||||||
| Total net revenues | 2,459,197 | 2,137,320 | 4,554,748 | 3,286,634 | ||||||||||||
| Cost of revenues | 1,118,184 | 378,090 | 2,465,758 | 688,256 | ||||||||||||
| Gross profit | 1,341,013 | 1,759,230 | 2,088,990 | 2,598,378 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling and marketing expenses | 786,519 | 1,416,672 | 1,406,786 | 1,981,777 | ||||||||||||
| Professional and consulting expenses | 557,662 | 336,367 | 1,111,614 | 508,135 | ||||||||||||
| Compensation and related expenses | 377,256 | 281,785 | 657,274 | 377,885 | ||||||||||||
| General and administrative expenses | 240,893 | 198,647 | 498,590 | 569,904 | ||||||||||||
| Total operating expenses | 1,962,330 | 2,233,471 | 3,674,264 | 3,437,701 | ||||||||||||
| Loss from operations | (621,317 | ) | (474,241 | ) | (1,585,274 | ) | (839,323 | ) | ||||||||
| Other income (expenses) | ||||||||||||||||
| Interest expense | 26,281 | (306,144 | ) | (1,068,952 | ) | (353,058 | ) | |||||||||
| Derivative expense | (88,837 | ) | (16,900 | ) | (214,203 | ) | ||||||||||
| Amortization of debt discount and deferred financing cost | (84,654 | ) | (511,863 | ) | (402,494 | ) | (670,865 | ) | ||||||||
| Loss from foreign currency transactions | (1,563 | ) | (5,488 | ) | ||||||||||||
| Fraud loss caused by computer hackers | (1,407 | ) | (20,807 | ) | ||||||||||||
| Change in fair value of derivative liabilities | 379,338 | (645,644 | ) | 556,554 | (769,211 | ) | ||||||||||
| Interest income | 197 | 822 | 361 | 822 | ||||||||||||
| Other income | 6,096 | 24,406 | 17,905 | 24,406 | ||||||||||||
| Gain from extinguishment of debt, net | 111,649 | 81,000 | 261,404 | 423,309 | ||||||||||||
| Total other income (expense) | 435,937 | (1,446,260 | ) | (678,417 | ) | (1,558,800 | ) | |||||||||
| Loss before provision for income taxes | (185,380 | ) | (1,920,501 | ) | (2,263,691 | ) | (2,398,123 | ) | ||||||||
| Provision for income taxes | ||||||||||||||||
| Net loss | (185,380 | ) | (1,920,501 | ) | (2,263,691 | ) | (2,398,123 | ) | ||||||||
| Losses attributable to non-controlling interest | 205,891 | 300,884 | 698,616 | 377,152 | ||||||||||||
| Net income (loss) attributable to Bergio International, Inc. | $ | 20,511 | $ | (1,619,617 | ) | (1,565,075 | ) | (2,020,971 | ) | |||||||
| Deemed dividend | (740,878 | ) | (1,555,878 | ) | ||||||||||||
| Net loss available to Bergio International, Inc. common stockholders | $ | (720,367 | ) | $ | (1,619,617 | ) | $ | (3,120,953 | ) | $ | (2,020,971 | ) | ||||
| Net loss per common share: | ||||||||||||||||
| (0.00 | ) | (0.00 | ) | (0.00 | ) | (0.01 | ) | |||||||||
| Weighted average common shares outstanding: | ||||||||||||||||
| 2,949,593,963 | 353,052,392 | 2,485,386,364 | 246,224,350 | |||||||||||||
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 CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
For the Six Months Ended June 30, 2022 and 2021
(Unaudited)
| Series A Preferred Stock | Series B Preferred Stock | Series C Preferred Stock | Series D Preferred Stock | Common Stock | Common Stock Issuable | Additional Paid In | Treasury | Accumulated | Non-controlling | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Stock | Deficit | Interest | (Deficit) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2021 | 75 | $ | 3,000 | $ | 5 | $ | $ | 1,216,519,661 | $ | 12,165 | 16,021,937 | $ | 160 | $ | 18,634,146 | $ | 103,700 | $ | (14,452,396 | ) | $ | (557,472 | ) | $ | 3,740,303 | |||||||||||||||||||||||||||||||||||||||||||
| Series D preferred stock issued for cash, net of offering cost | 855,000 | 9 | 814,991 | 815,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Deemed dividend upon issuance of Series D preferred stock | - | - | - | - | - | - | 815,000 | (815,000 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for debt conversion including accrued interest and fees | 1,412,677,073 | 14,127 | 2,271,529 | 2,285,656 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accretion of stock-based compensation for services | - | - | - | - | - | - | 15,621 | 15,621 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accrued dividends on preferred stock | - | - | - | - | - | - | (6,563 | ) | (6,563 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cancellation of treasury stock | - | - | - | - | - | - | 103,700 | (103,700 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | (1,585,586 | ) | (492,725 | ) | (2,078,311 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2022 | 75 | 3,000 | 5 | 855,000 | 9 | 2,629,196,734 | 26,292 | 16,021,937 | 160 | 22,654,987 | (16,859,545 | ) | (1,050,197 | ) | 4,771,706 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series D preferred stock issued for cash, net of offering cost | 825,000 | 8 | - | 739,992 | 740,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Deemed dividend upon issuance of Series D preferred stock | - | - | - | - | - | - | 740,000 | (740,000 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for conversion of Series C preferred stock | (5 | ) | 135,896,517 | 1,359 | (1,359 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification of derivative liability to equity upon conversion of Series C preferred stock | - | - | - | - | - | - | 67,284 | 67,284 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for debt conversion including accrued interest and fees | 232,079,442 | 2,321 | 110,779 | 113,100 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for common stock issuable | 16,021,937 | 160 | (16,021,937 | ) | (160 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cashless exercise of stock warrants | 54,500,000 | 545 | 333 | (878 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accretion of stock-based compensation for services | - | - | - | - | - | - | 15,621 | 15,621 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accrued dividends on preferred stock | - | - | - | - | - | - | (7,669 | ) | (7,669 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | 20,511 | (205,891 | ) | (185,380 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2022 | 75 | $ | 3,000 | $ | $ | 1,680,000 | $ | 17 | 3,067,694,630 | $ | 30,677 | $ | $ | 24,327,637 | $ | $ | (17,587,581 | ) | $ | (1,256,088 | ) | $ | 5,514,662 | |||||||||||||||||||||||||||||||||||||||||||||
| Series A Preferred Stock | Series B Preferred Stock | Series C Preferred Stock | Series D Preferred Stock | Common Stock | Common Stock Issuable | Additional Paid In | Treasury | Accumulated | Non-controlling | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Stock | Deficit | Interest | (Deficit) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2020 | 51 | $ | $ | $ | $ | 90,823,799 | $ | 908 | $ | $ | 11,532,849 | $ | 103,700 | $ | (11,808,505 | ) | $ | (171,048 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for cash | 33,403,000 | 334 | 233,486 | 233,820 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for debt conversion | 46,056,319 | 460 | 164,392 | 164,852 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Value of preferred stock at issuance associated with the acquisition of Aphrodite’s Marketing | 3,000 | 5 | 5 | 664,105 | 664,105 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock warrants granted in connection with the issuance of convertible notes | 687,500 | 687,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Proceeds from grants | 5,000 | 5,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | (401,354 | ) | (76,268 | ) | (477,622 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2021 | 51 | 3,000 | 5 | 5 | 170,283,118 | 1,702 | 13,287,332 | 103,700 | (12,209,859 | ) | (76,268 | ) | 1,106,607 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for cash | 389,288,142 | 3,893 | 2,721,124 | 2,725,017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for debt conversion | 20,937,374 | 210 | 94,092 | 94,302 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Beneficial conversion feature in connection with the issuance of convertible notes | - | - | - | - | - | - | 687,500 | 687,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accrued dividends on preferred stock | - | - | - | - | - | - | (2,305 | ) | (2,305 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | (1,619,617 | ) | (300,884 | ) | (1,920,501 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2021 | 51 | $ | 3,000 | $ | 5 | $ | 5 | $ | 580,508,634 | $ | 5,805 | $ | $ | $ | 16,790,048 | $ | 103,700 | $ | (13,831,781 | ) | $ | (377,152 | ) | $ | 2,690,620 | |||||||||||||||||||||||||||||||||||||||||||
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 CASH FLOWS
(Unaudited)
| For the Six Months Ended | ||||||||
| June 30, 2022 | June 30, 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss attributable to Bergio International, Inc. | $ | (1,565,075 | ) | $ | (2,020,971 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Non-controlling interest in subsidiaries | (698,616 | ) | (377,152 | ) | ||||
| Amortization expense | 120,978 | 93,614 | ||||||
| Depreciation expense | 20,642 | 34,445 | ||||||
| Stock-based compensation | 31,242 | 110,640 | ||||||
| Amortization of debt discount and deferred financing costs | 402,494 | 670,865 | ||||||
| Derivative expense | 16,900 | 214,203 | ||||||
| Forgiveness of debt | (18,291 | ) | ||||||
| Gain from settlement of loan included in other income | (6,000 | ) | ||||||
| Change in fair value of derivative liabilities | (556,554 | ) | 769,211 | |||||
| Gain from extinguishment of debt | (261,404 | ) | (423,309 | ) | ||||
| Non-cash interest upon conversion of debt | 1,025,660 | 10,375 | ||||||
| Amortization of right of use assets | (47,682 | ) | ||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | (90,062 | ) | (36,271 | ) | ||||
| Inventory | 205,297 | (396,301 | ) | |||||
| Prepaid expenses and other current assets | (52,655 | ) | 289,657 | |||||
| Accounts payable and accrued liabilities | (234,035 | ) | 428,940 | |||||
| Accrued compensation - CEO | 403,460 | |||||||
| Operating lease obligations | 47,679 | |||||||
| Deferred compensation - CEO | (346,163 | ) | (99,408 | ) | ||||
| NET CASH USED IN OPERATING ACTIVITIES | (1,577,894 | ) | (755,753 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property and equipment | (44,355 | ) | ||||||
| NET CASH USED IN INVESTING ACTIVITIES | (44,355 | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from sale of common stock | 2,958,837 | |||||||
| Proceeds from sale of preferred stock, net of offering cost | 1,555,000 | |||||||
| Proceeds from government grant | 5,000 | |||||||
| Proceeds from note payable | 110,000 | 18,291 | ||||||
| Proceeds from loans payable | 595,600 | |||||||
| Proceeds from convertible notes, net of debt issuance cost | 76,250 | 1,617,500 | ||||||
| Repayment on convertible debt | (30,000 | ) | ||||||
| Repayment on note payable | (180,414 | ) | ||||||
| Repayment on loans payable | (641,406 | ) | (839,976 | ) | ||||
| Repayment on debt | (567,403 | ) | ||||||
| Repayment on secured notes payable | (400,000 | ) | ||||||
| Advance from (payments to) Chief Executive Officer, net | (135,858 | ) | (13,114 | ) | ||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 979,172 | 3,149,135 | ||||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS: | (598,722 | ) | 2,349,027 | |||||
| CASH AND CASH EQUIVALENTS - beginning of period | 1,093,195 | 70,081 | ||||||
| CASH AND CASH EQUIVALENTS - end of period | $ | 494,473 | $ | 2,419,108 | ||||
| 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 | $ | 1,373,096 | $ | 163,727 | ||||
| Deemed dividend upon issuance of Series D preferred stock | $ | 1,555,878 | $ | |||||
| Initial derivative liability recorded in connection with convertible notes payable | $ | 76,250 | $ | |||||
| 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.
4
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022 AND 2021
(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 51% of Aphrodite’s Marketing.
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 100% of the issued and outstanding shares of GearBubble to a subsidiary of the Company known as GearBubble Tech, Inc. (“GearBubble Tech”), 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. The Company owns 51% of GearBubble Tech.
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 3,000,000,000 shares. On July 9, 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 3,000,000,000 shares to 6,000,000,000 shares. 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 9,000,000,000 shares.
Basis of Presentation
The accompanying interim 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 June 30, 2022. 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, 2021, and footnotes thereto included in the Company’s Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 29, 2022 (the “Annual Report”). The results of operations for the six months ended June 30, 2022, 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.
5
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022 AND 2021
(UNAUDITED)
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 increase 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 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 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 51% interest in Aphrodite’s Marketing. Additionally, on July 1, 2021, the Company entered into a Merger Agreement with GearBubble which resulted to the acquisition of 51% interest in the Merger Sub, GearBubble Tech. As of June 30, 2022, the Company recorded a non-controlling interest balance of $(1,256,088) in connection with the majority-owned subsidiaries, Aphrodite’s Marketing and GearBubble Tech as reflected in the accompanying unaudited condensed consolidated balance sheet and losses attributable to non-controlling interest of $698,616 and $377,152 during the six months ended June 30, 2022 and 2021, respectively as reflected in the accompanying unaudited condensed consolidated statements of operations.
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 $1,565,075 and $1,577,894, respectively, for the six months ended June 30, 2022. Additionally, the Company had an accumulated deficit of approximately $17,588,000 at June 30, 2022. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance date of this report. Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive or raise additional capital pursuant to debt or equity financings. The Company may seek to raise additional capital through additional debt and/or equity financings to fund its operations in the future; however, no assurance can be provided that the Company will be able to raise additional capital on favorable terms, or at all. If the Company is unable to raise additional capital or secure additional lending in the future to fund its business plan, the Company may need to curtail or cease its operations. Between January 2022 and April 2022, the Company has received net proceeds of $1,555,000 from the sale of Series D convertible preferred stock.
The Company has increased its online presence and provide for the expansion of the Company’s branded product lines through the Company’s majority owned subsidiaries, Aphrodite Marketing and GearBubble Tech of which the Company owns 51%, will greatly 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.
6
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022 AND 2021
(UNAUDITED)
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 June 30, 2022. 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 six months ended June 30, 2022 and 2021 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, valuation of beneficial conversion features on convertible debt, allowance for uncollectable receivables, valuation of equity based instruments issued for other than cash, the fair value of warrants issued with debt and equity instruments, the valuation allowance on deferred tax assets, and stock-based compensation.
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.
7
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022 AND 2021
(UNAUDITED)
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.
| ● | 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. The Company directs its customers to the Company’s ecommerce platform through social media, digital marketing, and promotional campaigns. Marketing costs were $1,406,786 and $1,981,777 for the six months ended June 30, 2022 and 2021. Marketing costs were $786,519 and $1,416,672 for the three months ended June 30, 2022 and 2021, are included in selling and marketing expenses on the unaudited condensed statement of operations.
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.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current period presentation. The reclassified amounts have no impact on the Company’s previously reported financial position or results of operations and relates to the presentation of selling and marketing expenses, and compensation and related expenses, separately on the unaudited condensed consolidated statements of operation previously included in the general and administrative expenses, and the presentation of accounts receivable – related party separately on the consolidated balance sheets previously included in accounts receivable.
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 June 30, 2022. 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).
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BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022 AND 2021
(UNAUDITED)
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. |
| 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 consolidated balance sheets for cash, due from and to related parties, prepaid expenses, accounts payable and accrued liabilities 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 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 June 30, 2022:
| June 30, 2022 | December 31, 2021 | |||||||||||||||||||||||
| Description | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||
| Total derivative liabilities | $ | $ | $ | 186,140 | $ | $ | $ | 978,232 | ||||||||||||||||
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 June 30, 2022 and December 31, 2021. 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 $250,000. To reduce its risk associated with the failure of such financial institutions, the Company evaluates, at least annually, the rating of the financial institutions in which it holds deposits. At June 30, 2022 and December 31, 2021, the Company had cash in excess of FDIC limits of approximately $59,000, and $380,000, respectively.
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.
9
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022 AND 2021
(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 June 30, 2022 and December 31, 2021, 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 six months ended June 30, 2022 and 2021.
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 (see Note 13). 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.
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.
10
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022 AND 2021
(UNAUDITED)
Concentration Risk
Concentration of Revenues
For the six months ended June 30, 2022 and 2021, no customer accounted for over 10% of total revenues.
Concentration of Accounts Receivable
As of June 30, 2022, total accounts receivable amounted to $141,386 and four customers represented 67% (23% - related party customer, 20% - related party customer, 11% - unrelated party customer and 13% - unrelated party customer) of this balance. As of December 31, 2021, total accounts receivable amounted to $51,324 and two customers represented 75% (48% - related party customer and 27% - unrelated party customer) of this balance.
Concentration of Purchases
The Company purchased approximately 32% of its finished products from two vendors (10% and 12%) during the six months ended June 30, 2022.
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:
| June 30, 2022 | December 31, 2021 | |||||||
| Leasehold improvements | $ | 391,722 | $ | 391,722 | ||||
| Office and computer equipment | 581,352 | 581,352 | ||||||
| Selling equipment | 8,354 | 8,354 | ||||||
| Furniture and fixtures | 20,511 | 20,511 | ||||||
| Total at cost | 1,001,939 | 1,001,939 | ||||||
| Less: Accumulated depreciation | (932,165 | ) | (911,523 | ) | ||||
| $ | 69,774 | $ | 90,416 | |||||
Depreciation expense for the six months ended June 30, 2022 and 2021 was $20,642 and $34,445, respectively.
Depreciation expense for the three months ended June 30, 2022 and 2021 was $10,085 and $10,030, respectively.
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.
At June 30, 2021, there were 1,032,197,126 shares issuable upon the exercise of warrants and conversion of convertible debt were not included in the computation of diluted net loss because their inclusion would be anti-dilutive.
The potentially dilutive common stock equivalents as of June 30, 2022 were excluded from the dilutive loss per share calculation as they would be antidilutive due to the net loss as follow:
| June 30, 2022 | June 30, 2021 | |||||||
| Common Stock Equivalents: | (Unaudited) | (Unaudited) | ||||||
| Stock Warrants | 1,547,991,666 | 756,575,000 | ||||||
| Convertible Preferred Stock | 4,280,308,389 | 203,178,022 | ||||||
| Convertible Notes | 273,504,274 | 61,050,061 | ||||||
| Total | 6,101,804,329 | 1,020,803,083 | ||||||
11
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022 AND 2021
(UNAUDITED)
Note 6 - Convertible Notes Payable
As of June 30, 2022 and December 31, 2021, convertible notes payable consisted of the following:
June
30, | December
31, | |||||||
| (Unaudited) | ||||||||
| Principal amount | $ | 80,000 | $ | 1,259,000 | ||||
| Less: unamortized debt discount | (55,013 | ) | (312,714 | ) | ||||
| Convertible notes payable, net | $ | 24,987 | $ | 946,286 | ||||
Power Up Lending Group
On July 20, 2021, the Company entered into an 8% convertible note in the amount of $55,000 less legal and financing costs of $3,750 for net proceeds of $51,250 with Power Up Lending Group. The principal and accrued interest was payable on or before July 20, 2022. Any amount of principal or interest on this note which was not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same was paid. At the option of the Holder, but not before 180 days from the date of issuance, the holder may elect to convert all or part of the convertible into the Company’s common stock. The conversion price was 63% multiplied by the lowest trading price (representing a discount rate of 37%) during the previous 15 trading day trading day period ending on the latest complete trading day prior to the date of this note. The outstanding balance at December 31, 2021 was $55,000, with accrued interest of $3,954 at December 31, 2021. During the six months ended June 30, 2022, principal of $55,000 and $2,200 of accrued interest were fully converted into 65,000,000 shares of common stock. The outstanding principal and accrued interest balance at June 30, 2022 was $0.
On July 28, 2021, the Company entered into an 8% convertible note in the amount of $48,750 less legal and financing costs of $3,750 for net proceeds of $45,000 with Power Up Lending Group. The principal and accrued interest was payable on or before July 28, 2022. Any amount of principal or interest on this note which was not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same was paid. At the option of the Holder, but not before 180 days from the date of issuance, the holder may elect to convert all or part of the convertible into the Company’s common stock. The conversion price was 63% multiplied by the lowest trading price (representing a discount rate of 37%) during the previous 15 trading day trading day period ending on the latest complete trading day prior to the date of this note. The outstanding balance at December 31, 2021 was $48,750, with accrued interest of $2,351 at December 31, 2021. During the six months ended June 30, 2022, principal of $48,750 and $1,950 of accrued interest were fully converted into 66,710,526 shares of common stock. The outstanding principal and accrued interest balance at June 30, 2022 was $0.
On September 14, 2021, the Company entered into an 8% convertible note in the amount of $78,750 less legal and financing costs of $3,750 for net proceeds of $75,000 with Power Up Lending Group. The principal and accrued interest was payable on or before September 14, 2022. Any amount of principal or interest on this note which was not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same was paid. At the option of the Holder, but not before 180 days from the date of issuance, the holder may elect to convert all or part of the convertible into the Company’s common stock. The conversion price was 63% multiplied by the lowest trading price (representing a discount rate of 37%) during the previous 15 trading day trading day period ending on the latest complete trading day prior to the date of this note. The outstanding balance at December 31, 2021 was $78,750, with accrued interest of $2,140 at December 31, 2021. During the six months ended June 30, 2022, principal of $78,750 and $3,150 of accrued interest were fully converted into 124,478,952 shares of common stock. The outstanding principal and accrued interest balance at June 30, 2022 was $0.
On October 4, 2021, the Company entered into an 8% convertible note in the amount of $53,750 less legal and financing costs of $3,750 for net proceeds of $50,000 with Power Up Lending Group. The principal and accrued interest is payable on or before October 4, 2022. Any amount of 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 from the due date thereof until the same is paid. At the option of the Holder, but not before 180 days from the date of issuance, the holder may elect to convert all or part of the convertible into the Company’s common stock. The conversion price shall mean 63% multiplied by the lowest trading price (representing a discount rate of 37%) during the previous 15 trading day trading day period ending on the latest complete trading day prior to the date of this note. The outstanding balance at December 31, 2021 was $53,750, with accrued interest of $1,037 at December 31, 2021. During the six months ended June 30, 2022, principal of $53,750 and $2,150 of accrued interest were fully converted into 88,730,159 shares of common stock. The outstanding principal and accrued interest balance at June 30, 2022 was $0.
12
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022 AND 2021
(UNAUDITED)
Sixth Street Lending, LLC
On November 8, 2021, the Company entered into an 8% convertible note in the amount of $55,000 less legal and financing costs of $3,750 for net proceeds of $51,250 with Sixth Street Lending, LLL. The principal and accrued interest is payable on or before November 8, 2022. Any amount of 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 from the due date thereof until the same is paid. At the option of the Holder, but not before 180 days from the date of issuance, the holder may elect to convert all or part of the convertible into the Company’s common stock. The conversion price shall mean 63% multiplied by the lowest trading price (representing a discount rate of 37%) during the previous 15 trading day trading day period ending on the latest complete trading day prior to the date of this note. The outstanding balance at December 31, 2021 was $55,000, with accrued interest of $639 at December 31, 2021. There were no conversions during the six months ended June 30, 2022. During the six months ended June 30, 2022, principal of $55,000 and $2,200 of accrued interest were fully converted into 143,349,283 shares of common stock. The outstanding principal and accrued interest balance at June 30, 2022 was $0.
On March 8, 2022, the Company entered into an 8% convertible note in the amount of $80,000 less legal and financing costs of $3,750 for net proceeds of $76,250 with Sixth Street Lending, LLC. The principal and accrued interest is payable on or before March 8, 2023. Any amount of 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 from the due date thereof until the same is paid. At the option of the Holder, but not before 180 days from the date of issuance, the holder may elect to convert all or part of the convertible into the Company’s common stock. The conversion price shall mean 65% multiplied by the average two lowest trading price (representing a discount rate of 35%) during the previous 10 trading day trading day period ending on the latest complete trading day prior to the date of this note. There were no conversions during the six months ended June 30, 2022. The outstanding balance at June 30, 2022 was $80,000, with accrued interest of $1,999.
During the first 90 to 180 days following the date of these notes, the Company has the right to prepay the principal and accrued but unpaid interest due under the above notes issued to Sixth Street Lending LLC, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 120% to 125% as defined in the note agreement. After this initial 180-day period, the Company does not have a right to prepay such notes.
Trillium Partners LLP, 3a Capital Establishment, JP Carey Limited Partners, LP, and JP Carey Enterprises, Inc.
On February 11, 2021, the Company entered into 10% convertible notes totaling $1,512,500 less legal and financing costs of $137,500 for net proceeds of $1,375,000. The principal and accrued interest was payable on or before February 11, 2022. The notes may not be prepaid except under certain conditions. The Company shall pay interest on a quarterly basis in arrears in cash to the Holder commencing on March 1, 2021 and continuing thereafter on each quarterly anniversary of such date until the Obligations have been satisfied in full, on the aggregate then outstanding principal amount of these notes at the rate of ten percent (10%) per annum. Any amount of principal or interest on these notes which were not paid when due shall bear interest at the rate of twenty four percent (24%) per annum from the due date thereof until the same were paid. At the option of the holders, but not before 180 days from the date of issuance, the holders may elect to convert all or part of the convertible into the Company’s common stock. The conversion price in effect on any Conversion Date was equal to $0.0015. Additionally, the Company granted an aggregate of 756,250,000 warrant to purchase shares of the Company’s common stock in connection with the issuance of these convertible notes. The warrants have a term of 5 years from the date of grant and exercisable at an exercise price of $0.002. The Company accounted for the warrants issued with these convertible notes by using the relative fair value method. The total debt discount consisted of beneficial conversion feature of $687,500 and relative fair value of the warrants of $687,500 using a Black-Scholes model with the following assumptions: stock price at valuation date of $0.013 based on the closing price of common stock at date of grant, exercise price of $0.002, dividend yield of zero, expected term of 5.00, a risk-free rate of 0.46%, and expected volatility of 424%. During the year ended December 31, 2021, principal of $544,750, accrued interest of $39,342 and conversion fees of $4,050 were fully converted into 407,365,253, shares of common stock. The outstanding balance at December 31, 2021 was $967,750 with accrued interest of $60,459 at December 31, 2021.
In January 2022, the Company entered into Amendment to the Convertible Promissory Notes Agreements (the “Amendment”) with these lenders whereby the conversion prices of the convertible notes were reduced from $0.0015 to $0.001. Consequently, the Company recorded interest expense of $806,458 from the reduction of the conversion prices during the six months ended June 30, 2022.
13
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022 AND 2021
(UNAUDITED)
During the six months ended June 30, 2022, principal of $967,750, accrued interest of $55,469 and conversion fees of $16,000 were fully converted into a total of 1,058,153,419 shares of common stock and incurred additional interest expense of $35,976 from such conversion. The outstanding principal and accrued interest balance at June 30, 2022 was $0.
Amortization of debt discounts and financing cost
For the six months ended June 30, 2022 and 2021, amortization of debt discounts and financing cost related to all the convertible notes above amounted to $337,701 and $670,865, respectively, which has been amortized and included in amortization of debt discount and deferred financing cost on the accompanying unaudited condensed consolidated statements of operations. For the three months ended June 30, 2022 and 2021, amortization of debt discounts and financing cost related to all the convertible notes above amounted to $80,936 and $511,863, respectively, which has been amortized and included in amortization of debt discount and deferred financing cost on the accompanying unaudited condensed consolidated statements of operations.
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 June 30, 2022 and December 31, 2021, total derivative liabilities amounted $186,140 (consist of derivative liability from convertible debt of $83,016 and derivative liability related to acquisitions of GearBubble and Aphrodite’s Marketing $103,124) and $978,232 (consist of derivative liability from convertible debt of $478,212 and derivative liability related to acquisitions of GearBubble and Aphrodite’s Marketing $500,020), respectively.
The following is a roll forward for the six months ended June 30, 2022 and for the year ended December 31, 2021 of the fair value liability of price adjustable derivative instruments:
| Fair Value of Liability for Derivative Instruments | ||||
| Balance at December 31, 2020 | $ | 201,430 | ||
| Initial valuation of derivative liabilities included in debt discount | 515,000 | |||
| Initial valuation of derivative liabilities related to issuance of Series B and C Preferred Stock | 932,378 | |||
| Initial valuation of derivative liabilities included in derivative expense | 354,904 | |||
| Reclassification of derivative liabilities to gain from extinguishment of debt | (631,052 | ) | ||
| Change in fair value of derivative liabilities | (394,428 | ) | ||
| Balance at December 31, 2021 | 978,232 | |||
| Initial valuation of derivative liabilities included in debt discount | 76,250 | |||
| Initial valuation of derivative liabilities included in derivative expense | 16,900 | |||
| Reclassification of derivative liabilities to gain from extinguishment of debt | (261,404 | ) | ||
| Reclassification of derivative liabilities to additional paid in capital upon conversion | (67,284 | ) | ||
| Change in fair value of derivative liabilities | (556,554 | ) | ||
| Balance at June 30, 2022 | $ | 186,140 | ||
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 June 30, 2022 and December 31, 2021 was $0.0005 and $0.002, respectively. The volatility, expected remaining term, and risk-free interest rates used to estimate the fair value of derivative liabilities at June 30, 2022 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.
14
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022 AND 2021
(UNAUDITED)
| Initial Valuations on new derivative instruments entered into during the six months ended June 30, 2022 | June 30, 2022 | |||||||
| Volatility | 150% to 219 | % | 150 | % | ||||
| Expected Remaining Term (in years) | 0.11 to 0.94 | 0.11 to 0.69 | ||||||
| Risk Free Interest Rate | 0.52 to 2.51 | % | 0.81 to 2.51 | % | ||||
| Expected dividend yield | None | None | ||||||
Note 8 - Loans Payable
Loans payable consisted of the following:
| June 30, 2022 | December
31, | |||||||
| (Unaudited) | ||||||||
| Loans principal amount | $ | 791,759 | $ | 877,316 | ||||
| Accrued interest | 131,706 | 92,330 | ||||||
| Loans payable | $ | 923,465 | $ | 969,646 | ||||
Trillium Partners LP
On June 16, 2020, the Company entered into a loan agreement with Trillium Partners LP in the amount of $12,500. The loan and accrued interest was due on December 31, 2020. Interest accrued at the rate of 10% per annum. The outstanding balances at December 31, 2021 was $12,500 with accrued interest of $1,928. In February 2022, principal of $12,500, accrued interest of $2,068, and conversion fees of $2,800 were converted into 21,710,613 shares of common stock. During the six months ended June 30, 2022, the Company incurred additional interest expense of $31,024 from such conversion into common stock. As of June 30, 2022, the principal balance and accrued interest is $0.
On September 14, 2020, the Company entered into a loan agreement with Trillium Partners LP in the amount of $12,250. The loan and accrued interest was due on March 14, 2021. Interest accrued at the rate of 10% per annum. The outstanding balances at December 31, 2021was $12,250 with accrued interest of $1,225. In February 2022, principal of $12,250, accrued interest of $1,639, and conversion fees of $1,800 were converted into 39,222,875 shares of common stock. During the six months ended June 30, 2022, the Company incurred additional interest expense of $68,755 from such conversion into common stock. As of June 30, 2022, the principal balance and accrued interest is $0.
On September 18, 2020, the Company entered into a loan agreement with Trillium Partners LP in the amount of $15,000. The loan and accrued interest was due on March 18, 2021. Interest accrues at the rate of 10% per annum. The outstanding balances at December 31, 2021 and 2020 were $15,000 for both periods, with accrued interest of $1,927 and $378 at December 31, 2021 and 2020, respectively. In February 2022, principal of $15,000, accrued interest of $3,520, and conversion fees of $1,400 were converted into 37,400,688 shares of common stock. During the six months ended June 30, 2022, the Company incurred additional interest expense of $61,445 from such conversion into common stock. As of June 30, 2022, the principal balance and accrued interest is $0.
On June 16, 2022, the Company received proceeds related to a loan with Trillium Partners LP in the amount of $100,000. The loan and accrued interest were due on demand. Interest accrues at the rate of 3% per annum. As of June 30, 2022, the principal balance and accrued interest is $100,000 and $307, respectively.
Clear Finance Technology Corporation (“Clearbanc”)
The Company’s majority owned subsidiary, Aphrodite’s Marketing, has a capital advance agreement with Clearbanc, an e-commerce platform provider. On February 10, 2021, upon the acquisition of Aphrodite’s Marketing, the Company assumed an outstanding balance of $227,517 with Clearbanc. During the year ended December 31, 2021, the Company has received $526,620 and repaid back $577,507 related to this capital advance agreement. The loan or advance is non-interest bearing and due on demand. As of December 31, 2021, the outstanding balance is $200,930 including accrued interest of $24,300. During the six months ended June 30, 2022, the Company has received $297,500 and repaid back $356,698 related to this capital advance agreement. As of June 30, 2022, the outstanding balance is $141,732.
15
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022 AND 2021
(UNAUDITED)
Shopify
The Company’s majority owned subsidiary, Aphrodite’s Marketing, has a capital advance agreement with Shopify, an e-commerce platform provider with a remittance rate of 7%. On February 10, 2021, upon the acquisition of Aphrodite’s Marketing, the Company assumed an outstanding balance of $359,774 with Shopify. During the year ended December 31, 2021, the Company has received $133,202 and repaid back $472,384 related to this capital advance agreement. The loan or advance is non-interest bearing, due on demand and are secured by all of the assets of Aphrodite’s Marketing. As of December 31, 2021, the outstanding balance is $30,592 including accrued interest of $10,000. During the six months ended June 30, 2022, the Company has received $196,100 and repaid back $129,354 related to this capital advance agreement. As of June 30, 2022, the outstanding balance is $97,338.
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 $75,500 with Jonathan Foltz. During the year ended December 31, 2021, the Company has received $31,636 and repaid back $25,000 related to this loan. The loan is non-interest bearing and due on demand. As of December 31, 2021, the outstanding balance is $82,136. During the six months ended June 30, 2022, the Company has received $2,000 and repaid back $3,354 related to this loan. Additionally, during the six months ended June 30, 2022, Nationwide (see below) has assumed $65,513 of this loan. As of June 30, 2022, the outstanding balance is $15,269.
Digital Age Business
Through the Company’s majority owned subsidiary, Aphrodite’s Marketing, has a loan with Digital Age Business. Jonathan Foltz is the President and CEO of Digital Age Business. The loan is non-interest bearing and due on demand. On February 10, 2021, upon the acquisition of Aphrodite’s Marketing, the Company assumed an outstanding balance of $113,500 with Digital Age Business. During the year ended December 31, 2021, the Company repaid back $71,013 related to this loan. As of December 31, 2021, the outstanding balance is $42,487. During the six months ended June 30, 2022, the Company has repaid back $2,000 related to this loan. Additionally, during the six months ended June 30, 2022, Nationwide (see below) has assumed $40,487 of this loan. As of June 30, 2022, the outstanding balance is $0.
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 $545,720 with Nationwide. Aphrodite’s Marketing did not make the required installment payments pursuant to the loan agreements from December 2020 to February 2021 and as such these loans are currently in default. Interest on defaulted amount ranges from 1% to 3% per month. During the year ended December 31, 2021, the Company repaid back $30,000 related to this loan. As of December 31, 2021, the outstanding balance is $573,750 including accrued interest of $58,030. During the six months ended June 30, 2022, the Company has repaid back $150,000 related to this loan. Additionally, during the six months ended June 30, 2022, Nationwide has assumed a total of $106,000 of loans related to Digital Age Business and Jonathan Foltz (see above). As of June 30, 2022, the outstanding balance is $569,124 including accrued interest of $131,706.
Note 9 – Notes Payable
Unsecured Notes Payable
Notes payable is summarized below:
| June 30, 2022 | December
31, | |||||||
| (Unaudited) | ||||||||
| Principal amount | $ | 1,063,920 | $ | 1,116,934 | ||||
| Less: current portion | (802,054 | ) | (855,158 | ) | ||||
| Notes payable - long term portion | $ | 261,866 | $ | 261,776 | ||||
16
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022 AND 2021
(UNAUDITED)
As of June 30, 2022 and December 31, 2021, notes payable- current portion consisted of the following:
June
30, | December
31, | |||||||
| (Unaudited) | ||||||||
| Principal amount – current portion | $ | 802,054 | $ | 855,158 | ||||
| Less: unamortized debt discount | (13,682 | ) | ||||||
| Notes payable, net | $ | 788,372 | $ | 855,158 | ||||
Minimum principal payments under notes payable are as follows:
| Remainder for the year ended December 31, 2022 | $ | 799,120 | ||
| Year ended December 31, 2023 | 15,492 | |||
| Year ended December 31, 2024 | 15,492 | |||
| Year ended December 31, 2025 | 15,492 | |||
| Year ended December 31, 2026 and thereafter | 218,324 | |||
| Total principal payments | $ | 1,063,920 |
On July 6, 2020, entered into a Loan Authorization and Agreement (“SBA Loan Agreement”) with the Small Business Association (“SBA”) in the amount of $114,800 under the SBA’s Economic Injury Disaster Loan assistance program in light of the impact of the COVID-19 pandemic. Pursuant to the SBA Loan Agreement, the Company received an advanced of $114,800, to be used for working capital purposes only. Pursuant to the SBA Loan Agreement, the Company executed; (i) a note for the benefit of the SBA (“SBA Note”), which contains customary events of default; and (ii) a Security Agreement, granting the SBA a security interest in all tangible and intangible personal property of the Company, which also contains customary events of default. Installment payments, including principal and interest, were due monthly beginning July 6, 2021 but was extended by the SBA to July 6, 2022 in the amount of $560 each month for a term of thirty (30) years. In March 2022, SBA extended the payment due date from 24 months to 30 months from the date of the note. Interest accrues on this note at the rate of 3.75%. This note is collateralized by the assets of the Company. The outstanding balances at December 31, 2021 was $114,800 with accrued interest of $6,564. The outstanding balances at June 30, 2022 was $114,800 with accrued interest of $8,858.
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 $150,000 related to this SBA Loan. Pursuant to the SBA Loan Agreement, the Company received an advanced of $150,000, to be used for working capital purposes only. Pursuant to the SBA Loan Agreement, the Company executed; (i) a note for the benefit of the SBA, which contains customary events of default; and (ii) a Security Agreement, granting the SBA a security interest in all tangible and intangible personal property of the Company, which also contains customary events of default. The SBA Note bears an interest rate of 3.75% per annum which accrue from the date of the advance. Installment payments, including principal and interest, were due monthly beginning June 24, 2021 but was extended by the SBA to June 24, 2022 in the amount of $731. In March 2022, SBA extended the payment due date from 24 months to 30 months from the date of the note. The outstanding balance at December 31, 2021 was $150,000 with accrued interest of $8,577. The outstanding balance at June 30, 2022 was $150,000 with accrued interest of $11,574.
On July 1, 2021, the Company issued a promissory note in the amount of $1,162,000 in connection with the Merger Agreement with GearBubble and is payable to Mr. Donald Wilson who is one of the majority owners of the 49% of GearBubble Tech. The $1,162,000 promissory note is to be paid in 15 equal installments. This note is non-interest bearing and due on demand. Between October 2021 and November 2021, the Company paid a total of $309,867 towards this promissory note. The outstanding balance at December 31, 2021 was $852,133. During the six months ended June 30, 2022, the Company has repaid back $154,933 related to promissory note. As of June 30, 2022, the outstanding balance is $697,200. The Company negotiated with Mr. Donald Wilson to defer the installment payments in the future.
17
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022 AND 2021
(UNAUDITED)
On April 13, 2022, the Company entered into a 12% promissory note in the amount of $127,400 less original issue discount of $13,650 and legal and financing costs of $3,750 for net proceeds of $110,000 with Sixth Street Lending, LLC. The principal and accrued interest is payable on or before April 13, 2023. Any amount of 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 from the due date thereof until the same is paid. Accrued, unpaid Interest and outstanding principal, subject to adjustment, shall be paid in ten (10) payments each in the amount of $14,268.80 (a total payback to the Holder of $142,688.). The first payment shall be due May 30, 2022 with nine (9) subsequent payments each month thereafter. The Company shall have a five (5) day grace period with respect to each payment. The Company has right to accelerate payments or prepay in full at any time with no prepayment penalty. At any time following an Event of Default, the Holder shall have the right, to convert all or any part of the outstanding and unpaid amount of this Note into shares of Common Stock. The conversion price shall mean 75% multiplied by the lowest Trading Price for the Common Stock during the ten (10) Trading Days prior to the Conversion Date (representing a discount rate of 25%). For the three and six months ended June 30, 2022, amortization of debt discounts related to this promissory note amounted to $3,718 for both periods which has been amortized and included in amortization of debt discount and deferred financing cost on the accompanying unaudited condensed consolidated statements of operations. During the six months ended June 30, 2022, the Company has repaid back $25,480 related to this promissory note. The outstanding balance at June 30, 2022 was $101,920 with accrued interest of $764.
Secured Notes Payable
Secured notes payable consisted of the following:
| June 30, 2022 | December
31, | |||||||
| (Unaudited) | ||||||||
| Principal amount | $ | $ | 400,000 | |||||
| Less: unamortized debt discount | (61,075 | ) | ||||||
| Secured notes payable, net | $ | $ | 338,925 | |||||
Trillium Partners LLP and JP Carey Limited Partners, LP
On October 27, 2021, the Company, together with its majority owned subsidiaries, Aphrodite Marketing and GearBubble Tech (collectively the “Borrower”), entered into two Secured Advance Agreements (the “Secured Advance Agreements”) with J.P. Carey Limited Partners L.P. and Trillium Partners L.P. (the “Lenders”). The advances will be issued through separate promissory notes subject to all terms and conditions as defined in the Secured Advance Agreements. Such advances ae secured by a security interest in the Borrower’s existing and future assets (as specifically defined in the Secured Advance Agreements), including all rights to received payments (including credit card payments) from the sale of goods or services, inventory, property and equipment, and general intangibles. If any payments in the promissory notes are not timely paid, it shall be considered an event of default and the Borrower shall pay a late fee of 5% of the late payment. Accordingly, the Company entered into Secured Promissory Notes (the “Secured Notes”) in an aggregate amount of $590,000 less legal and financing costs of $5,000 and original issue discount of $90,000 for net proceeds of $495,000. The Secured Notes were due on February 4, 2022.
Principal and interest shall be paid with weekly payments (each a “Weekly Payment”) as follows: (A) payments of $7,500 shall be paid to the Lenders on each Friday within the month of November 2021; (B) payments of $40,000 shall be paid to the Lender on each Friday within the month of December 2021); (C) payments of $35,000 shall be paid to the Lender on each Friday with the month of January 2022 ; and (D) the remainder of any amounts outstanding pursuant to these Secured Notes and the Secured Advance Agreement (as defined ) including the outstanding repayment amount shall be paid to the Lenders on February 4, 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.
Additionally, the Company granted an aggregate of 41,666,666 warrant to purchase shares of the Company’s common stock in connection with the issuance of these secured promissory notes. The warrants have a term of 7 years from the date of grant and exercisable at an exercise price of $0.006. The Company accounted for the warrants issued with these secured promissory notes by using the relative fair value method. The total debt discount from the relative fair value of the warrants of $162,387 using a Black-Scholes model with the following assumptions: stock price at valuation date of $0.006 based on the closing price of common stock at date of grant, exercise price of $0.006, dividend yield of zero, expected term of 7.00, a risk-free rate of 1.41%, and expected volatility of 482%.
During the year ended December 31, 2021, the Company repaid back $190,000 resulting to a remaining balance of $400,000 as of December 31, 2021. For the years ended December 31, 2021, amortization of debt discounts related to all the secured promissory notes above amounted to $196,312. During the six months ended June 30, 2022, the Company repaid back $110,000 resulting to a remaining balance of $290,000 as of June 30, 2022. During the six months ended June 30, 2022, fully amortized the remaining debt discount of 61,075 which has been amortized and included in amortization of debt discount and deferred financing cost on the accompanying unaudited condensed consolidated statements of operations.
In April 2022, the Company fully paid the remaining balance of $290,000 and accrued default interest of $14,611 to the Lenders. As of June 30, 2022, the outstanding balance is $0.
18
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022 AND 2021
(UNAUDITED)
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 June 30, 2022 and December 31, 2021, $0 and $145,347 was due to such officer, respectively, which primarily consisted of accrued interest. Interest expense was accrued at an average annual market rate of interest which is 3.37% and 3.25% at June 30, 2022 and December 31, 2021, respectively. Interest expense incurred was $13,156 for the year ended December 31, 2021. Interest expense incurred was $2,845 for the six months ended June 30, 2022. In April 2022, the Company repaid the remaining balance of these advances including accrued interest amounting to $148,192. Accrued interest was $0 and $145,347 at June 30, 2022 and December 31, 2021, respectively.
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 $175,000 per year with a 3% annual increase thereafter (the “Base Salary”). The CEO is also entitled to certain bonuses based on net profits before taxes and other customary benefits, as defined in the agreement. In addition, since it is understood that the Company is employing the CEO during a time of economic decline throughout the U.S. and at times and from time to time, the Company may not be in a position to pay the full amount of Base Salary owed the CEO it is understood and agreed to by the Board, that as long as the Company is unable to pay the CEO the full amount of his Base Salary that the Board shall issue to him, from time to time, an amount of shares that will allow him to remain in possession of fifty-one percent (51%) of the Company’s then outstanding shares of common stock. Such issuances shall be made to the CEO at any time when his total share holdings are reduced to an amount less than fifty-one percent (51%) as a result of issuance of shares of common stock made on behalf of the Company. Effective September 1, 2011, the Company authorized and issued 51 shares of Series A Preferred Stock to the Company’s CEO. Additionally, during the year ended December 31, 2021, the Company authorized and issued an additional 24 shares of Series A Preferred Stock to the Company’s CEO in connection with the amended and restated certificate of designation for the Company’s Series A Preferred Stock.
At December 31, 2021, deferred compensation due to CEO amounted to $346,163 and advances from CEO amounted $145,347. In April 2022, the remaining balance of $346,163 of deferred compensation due to CEO was reclassed to accrued compensation- CEO. Additionally, in April 2022, the Company accrued bonus compensation of $100,000 to the CEO. During the six months ended June 30, 2022, the Company has repaid back $42,703 of accrued compensation to CEO. As of June 30, 2022, accrued compensation – CEO amounted $403,460 as reflected in the unaudited condensed consolidated balance sheets.
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 $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 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 500,000,000 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 has not been filed with the Securities and Exchange Commission (“SEC”). As of June 30, 2022, the Company has not met the prerequisite related to the effectiveness of an S-8 Registration Statement. As such the Company deemed that these shares have not been legally issued and the measurement date has not been met and therefore will be recognized until an S-8 Registration Statement becomes effective.
Consulting Fees
The Company incurred consulting fees of $46,905 and $20,800 to an affiliated company owned by Mr. Donald Wilson during the six months ended June 30, 2022. Mr. Donald Wilson is one of the majority owners of the 49% of GearBubble Tech.
19
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022 AND 2021
(UNAUDITED)
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 (see Note 8). Jonathan Foltz is one of the majority owners of the 49% in Acquisition Sub, Aphrodite’s Marketing (see Note 13). As of June 30, 2022 and December 31, 2021, the outstanding balance is $15,269 and $82,136 respectively.
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 June 30, 2022 and December 31, 2021, the outstanding balance is $569,124 and $573,750, respectively.
Through the Company’s majority owned subsidiary, Aphrodite’s Marketing, has a loan with Digital Age Business. Jonathan Foltz is the President and CEO of Digital Age Business (see Note 8). As of June 30, 2022 and December 31, 2021, the outstanding balance is $0 and $42,487, respectively.
Revenues and Accounts Receivable
During the three and six months ended June 30, 2022, the Company generated revenues of $0 and $89,100, respectively, from an affiliated company owned by Mr. Donald Wilson who is one of the majority owners of the 49% of GearBubble Tech. As of June 30, 2022, accounts receivable to this affiliated company amounted $33,001.
During the three and six months ended June 30, 2022, the Company generated revenues of $3,705 and $53,655, respectively, from an affiliated company owned by the brother of the CEO of the Company. As of June 30, 2022, accounts receivable to this affiliated company amounted $28,705.
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 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.
Consulting Agreement
On November 15, 2021, the Company entered into an Engagement Agreement (the “Agreement”) with a consulting company which will act as a financial advisor and investment banker of the Company, whereby the consultant will assist the Company with strategic business plans, investor relations, potential financing and other financial advisory and investment banking services. The engagement period is for 12 months from the date of the agreement.
As consideration for the services, the Company will issue a total of 32,043,874 shares of the Company’s common stock based on the following schedule: i) 16,021,937 shares of common stock upon execution of the Agreement and ii) 16,021,937 shares of common stock upon an uplisting of the Company’s common stock to a national exchange.
Additionally, the Company shall pay compensation of 7% of the total gross proceeds of any financing introduce by the consultant (the “Financing”), cash fee for unallocated expenses of 1%, warrants equal to 5% of the aggregate number of shares of common stock sold in a Financing and transaction fees equal to 3% in cash at the closing of the Financing. The warrants will be exercisable at an exercise price equal to the prices of the securities issued to investors in the Financing.
As of December 31, 2021, the 16,021,937 shares of common stock were not issued and had been recognized as common stock issuable. The Company valued these shares at the fair value of $62,486 or $0.0039 per common share based on the quoted trading price on the date of grant to be expensed over the term of the Agreement. During the three and six months ended June 30, 2022, the Company recognized stock-based compensation of $15,621 and $31,242. The remaining balance of $23,433 shall be expensed during the remainder of year 2022. In May 2022, the Company issued the 16,021,937 shares of common stock to such consultant. Currently, no Financing has occurred under this Agreement.
20
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022 AND 2021
(UNAUDITED)
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 $1,200. The base rent is subject to an annual increase as defined in the lease agreement. In addition to the monthly base rent, the Company is charged separately for common area maintenance which is considered a non-lease component. The second lease has a contingent rental based on 10% of sales. Contingent rentals are not included in operating lease liabilities. The Company’s leases generally do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease. The Company used incremental borrowing rate of 10% as of January 1, 2019 for operating leases that commenced prior to that date. The Company estimated its incremental borrowing rate based on its credit quality, line of credit agreement and by comparing interest rates available in the market for similar borrowings.
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 $6,582. The base rent is subject to an annual increase as defined in the lease agreement. The Company recorded right-of-use assets and operating lease liabilities of $122,946 related to this lease agreement. The Company used incremental borrowing rate of 8% during year 2021. The Company estimated its incremental borrowing rate based on its credit quality, line of credit agreement and by comparing interest rates available in the market for similar borrowings.
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 condensed consolidated balance sheet as of June 30, 2022:
| Remainder of year 2022 | $ | 30,518 | ||
| 2023 | 19,700 | |||
| 2024 | 6,660 | |||
| Total minimum lease payments | 56,878 | |||
| Less amounts representing interest | (3,468 | ) | ||
| Present value of net minimum lease payments | 53,410 | |||
| Less current portion | (37,498 | ) | ||
| Long-term capital lease obligation | $ | 15,912 |
Amended Employment Agreement
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 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 500,000,000 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 has not been filed with the SEC. As of June 30, 2022, the Company has not met the prerequisite related to the effectiveness of an S-8 Registration Statement. As such the Company deemed that these shares have not been legally issued and the measurement date has not been met and therefore will be recognized until an S-8 Registration Statement becomes effective.
21
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022 AND 2021
(UNAUDITED)
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 100,000,000 shares.
On July 9, 2021, and under the terms of the ESOP, the Company’s Board of Directors approved the future issuance of 500,000,000 shares of the Company’s Common Stock to the Company’s CEO, Berge Abajian, subject to the Company increasing its total authorized shares of common stock to 6,000,000,000 which was increased in July 2021 and subject to the effectiveness of an S-8 Registration Statement covering these shares with the SEC. As of December 31, 2021, the Company has not met the prerequisite related to the effectiveness of an S-8 Registration Statement. As such the Company deemed that these shares have not been legally issued and the measurement date has not been met and therefore will be recognized until an S-8 Registration Statement becomes effective.
Preferred Stock
The Company has authorized the issuance of 10,000,000 shares of preferred stock. The Company’s board of directors is authorized, at any time, and from time to time, to provide for the issuance of shares of preferred stock in one or more series, and to determine the designations, preferences, limitations and relative or other rights of the preferred stock or any series thereof.
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 51 shares of preferred stock as Series A Preferred Stock. In February 2021, the Company filed an amended and restated certificate of designation for the Company’s Series A Preferred Stock increasing the number of shares to 75 shares.
Designation. The Company had designated 51 shares which was amended and increase 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 $0.001 per share and a stated value of $0.001
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 June 30, 2022 and December 31, 2021, there were 75 shares of Series A Preferred Stock issued and outstanding. The Company’s CEO owns 75 shares of shares of the Series A Preferred Stock.
22
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022 AND 2021
(UNAUDITED)
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 4,900 shares of preferred stock as Series B Convertible Preferred Stock.
Designation. The Company had designated 49 shares which was amended and increase 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 $0.00001 per share and a stated value of $100.
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.
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 June 30, 2022 and December 31, 2021, there were 3,000 shares of Series B Convertible Preferred Stock issued and outstanding.
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 5,000,000 authorized shares upon filing an Amended and Restated Certificate of Designation, Preference and Rights of the Series C Convertible Preferred.
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 $0.00001 per share and a stated value of $100.
23
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022 AND 2021
(UNAUDITED)
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 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 10,670 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 one billion sixty-six million nine hundred six thousand (1,066,906,000) 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 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 135,896,517 shares of the Company’s common stock.
As of June 30, 2022 and December 31, 2021, there were none and 5 shares of Series C Convertible Preferred Stock issued and outstanding, respectively.
24
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022 AND 2021
(UNAUDITED)
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 $0.001 to $0.0008. 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 $0.0008 to $0.0005.
Designation. The Company has designated 2,500,000 shares of preferred stock as Series D Convertible Preferred Stock. Each share of Series D Convertible Preferred Stock has a par value of $0.00001 per share and a stated value of $1.00.
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 $0.0005 (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.
Between January 2022 and February 2022, the Company sold an aggregate of 855,000 shares of Series D Convertible Preferred Stock for total net proceeds of $815,000 after deducting legal and financing cost of $10,000 or approximately $0.96 per share. In connection with the issuance of these Series D Convertible Preferred Stock, the Company recognize deemed dividend of $815,000 upon issuance.
In April 2022, the Company sold an aggregate of 825,000 shares of Series D Convertible Preferred Stock for total net proceeds of $740,000 after deducting legal and financing cost of $10,000 or approximately $0.90 per share. Additionally, the Company granted an aggregate of 750,000,000 warrants to purchase shares of the Company’s common stock in connection with the issuance of the sale of these Series D Convertible Preferred Stock. The warrants have a term of 7 years from the date of grant and exercisable at an exercise price of $0.0005 subject to adjustment such as stock dividends, stock splits, and dilutive issuances. Whenever on or after the date of issuance of this warrant, the Company issues or sells, or in for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith) less than the exercise price on the date of issuance (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Exercise Price will be reduced to the greater of: (i) the price per share received by the Company upon such Dilutive Issuance; and (ii)$0.00005. In connection with the issuance of these Series D Convertible Preferred Stock and stock warrants, the Company recognize deemed dividend of $740,000 upon issuance.
Accrued Dividends on Preferred Stock
As of June 30, 2022 and December 31, 2021, accrued dividends related to the Series B, C, and D Convertible Preferred Stock amounted $19,567 and $5,335, respectively.
25
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022 AND 2021
(UNAUDITED)
Common Stock Issued
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 3,000,000,000 shares. On July 9, 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 3,000,000,000 shares to 6,000,000,000 shares. 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 9,000,000,000 shares.
Common Stock for Debt Conversion
From January 2022 through March 2022, the Company issued an aggregate of 1,314,342,897 shares of its common stock at an average contractual conversion price of approximately $0.001 as a result of the conversion of principal, accrued interest, conversion fees of $1,229,018 and incurred additional interest expense of $842,435 for a total of $2,071,453 underlying certain outstanding convertible notes converted during such period.
In February 2022, the Company issued an aggregate of 98,334,176 shares of its common stock at an average conversion price of approximately $0.002 as a result of the conversion of principal, accrued interest and conversion fees of $52,978 and incurred additional interest expense of $161,225 for a total of $214,203 underlying certain outstanding loans payable converted during such period. The 98,334,176 shares of common stock had a fair value of $214,203, or $0.002 per share, based on the quoted trading price on the date of grant.
From April 2022 through May 2022, the Company issued an aggregate of 232,079,442 shares of its common stock at an average contractual conversion price of approximately $0.001 as a result of the conversion of principal of $108,750 and accrued interest of $4,350 for a total of $113,100 underlying certain outstanding convertible notes converted during such period.
Common Stock for Services
In May 2022, the Company issued 16,021,937 shares of common stock to a consultant in connection with an engagement agreement dated November 15, 2021 (see Note 11). Such shares were previously recognized as common stock issuable prior to issuance in May 2022.
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, 2020 | 325,000 | $ | 0.50 | 4.84 | ||||||||
| Granted | 797,916,666 | 0.002 | - | |||||||||
| Balance at December 31, 2021 | 798,241,666 | $ | 0.002 | 4.26 | ||||||||
| Granted | 750,000,000 | $ | 0.0005 | 7.00 | ||||||||
| Exercised | (250,000 | ) | 0.50 | 2.40 | ||||||||
| Balance at June 30, 2022 | 1,547,991,666 | $ | 0.0005 | 5.21 | ||||||||
| Warrants exercisable at June 30, 2022 | 1,547,991,666 | $ | 0.0005 | 5.21 | ||||||||
At June 30, 2022, the aggregate intrinsic value of warrants outstanding was $0.
In February 2021, the Company granted an aggregate of 756,250,000 warrant to purchase shares of the Company’s common stock in connection with the issuance of certain convertible notes in February 2021. The warrants have a term of 5 years from the date of grant and exercisable at an exercise price of $0.002 subject to adjustment such as stock dividends, stock splits, and dilutive issuances. These warrants contain a provision for cashless exercise as defined in the warrant agreement.
In October 2021, the Company granted an aggregate of 41,666,666 warrant to purchase shares of the Company’s common stock in connection with the issuance of secured promissory notes in October 2021. The warrants have a term of 7 years from the date of grant and exercisable at an exercise price of $0.006 subject to adjustment under the anti-dilution provision. These warrants contain a provision for cashless exercise as defined in the warrant agreement.
In April 2022, a warrant holder elected to exercise 250,000 warrants by cashless exercise and converted into 54,500,000 common stock pursuant to the terms of the stock warrant agreement whereby the exercise price was subject to adjustment under an anti-dilution provision. Such warrants were granted in November 2019 and were issued in connection with a convertible note. The Company recognized the value of the effect of a down round feature in such warrants when triggered. Upon the occurrence of the triggering event that resulted in a reduction of the strike price, the Company measured the value of the effect of the feature as the difference between the fair value of the warrants without the down round feature or before the strike price reduction and the fair value of the warrants with a strike price corresponding to the reduced strike price upon the down round feature being triggered. Accordingly, the Company recognized deemed dividend of $878 and a corresponding reduction of income available to common stockholders upon the alternate cashless exercise of these warrants for the three and six months ended June 30, 2022.
26
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022 AND 2021
(UNAUDITED)
In April 2022, the Company sold an aggregate of 825,000 shares of Series D Convertible Preferred Stock for total net proceeds of $740,000 after deducting legal and financing cost of $10,000 or approximately $0.90 per share. Additionally, the Company granted an aggregate of 750,000,000 warrants to purchase shares of the Company’s common stock in connection with the issuance of the sale of these Series D Convertible Preferred Stock. The warrants have a term of 7 years from the date of grant and exercisable at an exercise price of $0.0005 subject to adjustment such as stock dividends, stock splits, and dilutive issuances. Whenever on or after the date of issuance of this warrant, the Company issues or sells, or in for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith) less than the exercise price on the date of issuance (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Exercise Price will be reduced to the greater of: (i) the price per share received by the Company upon such Dilutive Issuance; and (ii)$0.00005.
Note 13 – Business Acquisitions
Aphrodite’s Marketing, Inc.
On February 10, 2021, the Company entered into an Acquisition Agreement with Digital Age Business, Inc., a Florida corporation, 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. (“Acquisition Sub”), a Wyoming corporation in exchange for 3,000 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.
As additional consideration for the purchase of the acquired assets, the Company has also agreed to transfer to the selling shareholders 49,000 of the 100,000 authorized shares of the Acquisition Sub, such that upon the closing date, 51% of the Acquisition Sub shall be owned by the Company, and 49% of the Acquisition Sub shall be owned by the selling shareholders.
Under the terms of the Acquisition Agreement, the Acquisition Sub is expected to meet the adjusted financial projections as set forth in the Acquisition Agreement, in order to earn additional 1,900 Series B Preferred shares, which if earned, shall entitle the selling shareholders to earn up to an additional 19% (the “Additional Shares”) of Series B Preferred Stock, which, including the 30% of Series B Preferred Stock issued at closing, shall together convert up to a maximum of 49% of the Company’s then-issued and outstanding shares of common stock, with the Additional Shares being subject to a two-year vesting period from the date of issuance, based upon additional revenues of Acquisition Sub, as set forth in the Acquisition Agreement.
In addition, the Acquisition Agreement requires that upon closing, Jonathan Foltz, the President and CEO of Digital Age Business, and certain other key employees of Acquisition Sub received employment agreements from Acquisition Sub with respect to their continued employment (the “Employment Agreements”) (which will allow such key employees to participate in any employee stock ownership plan (“ESOP”) as offered to the other Company’s subsidiary employees from time to time) to make certain that current personnel operating the business of Aphrodites.com shall remain in place for all departments of the business of Aphrodite’s Marketing post-closing of the acquisition.
As further consideration for the acquisition, under the Acquisition Agreement, the Company agreed to provide Acquisition Sub with certain financing, as follows (a) upon the signing of the Letter of Intent that preceded this Acquisition Agreement, the Company provided loans to Jonathan Foltz for the benefit of Aphrodites.com in the amounts of $50,000 on January 22, 2021, $35,000 on January 27, 2021, and $50,000 on February 5, 2021, which were used to pay some of the most pressing of Aphrodite’s Liabilities as evidenced by the three promissory notes set forth (b) and upon the signing of this Acquisition Agreement, the Company or its investors will provide equity financing of $615,000 for the benefit of Acquisition Sub, (for which the Company shall enter into a certain Securities Purchase Agreement, Convertible Promissory Note, Warrant, Guaranty, Security Agreement and Registration Rights Agreement (together, the “BRGO Transaction Documents”), (the “Initial Financing”) which will be used to pay for (i) partial extinguishing the Assumed Liabilities set forth in the Acquisition Agreement and (ii) expenses in connection with the acquisition and the audit of Acquisition Sub; (c) and following the closing of the acquisition, the Company will facilitate a second equity financing for the benefit of the Acquisition Sub in the amount of an additional $750,000, which shall take place following the effective date of the Company’s new S-1 Registration Statement (the “Second Financing”), and such funds shall be utilized, in part, to pay for (i) extinguishing the Assumed Liabilities, and (ii) the expenses incurred in connection with the acquisition and the audit of Acquisition Sub and (d) following the closing, the Company will raise an additional $3,500,000, the proceeds of which will be used for the Acquisition Sub, by the sale of shares of common stock of the Company, pursuant to an S-1 Registration Statement (the “Additional Financing”).
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BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022 AND 2021
(UNAUDITED)
It is anticipated that the Additional Financing will be consummated in tranches over the twelve (12) months following the closing; provided that the first tranche of the Additional Financing will be at least $750,000, and will be provided to the Acquisition Sub within 60 days after the Company’s new S-1 Registration Statement is declared effective by the SEC. As noted on Schedule D and Schedule E to the Acquisition Agreement, the foregoing financing, (including the loans shown on Schedule H, the Initial Financing, the Second Financing and the Additional Financing) totals $5,000,000, and any financing provided to Acquisition Sub, which exceeds the $5,000,000 total detailed in Section 2.2.1, shall be added to the Gross Revenue benchmarks set forth on Schedule D and Schedule E to the Acquisition Agreement.
Section 2.2.2 of the Acquisition Agreement further provides that, at the closing of the Acquisition, Southridge Capital (or its affiliates as directed by Southridge Capital) shall receive shares of the Company’s Series C Preferred Stock. Each share of Series C Preferred Stock shall be 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 the Closing.
On February 11, 2021, the Company, Digital Age Business, Acquisition Sub, and the selling shareholders entered into the First Amendment to the February 10, 2021 Acquisition Agreement (the “Amendment”) for the purpose of allocating the Series B Preferred Stock to the selling shareholders without fractional shares, which resulted in changing the Certificate of Designation for the Series B Preferred Stock to reflect a total of 4,900 authorized shares of Series B Preferred Stock, and for the purpose of reflecting a total of 3,000 shares of Series B Preferred Stock to be issued to the selling shareholders upon closing, (and the opportunity for the selling shareholders to earn up to an additional 1,900 shares of Series B Preferred Stock upon reaching certain gross revenue benchmarks).
The Company accounted for the acquisition utilizing the purchase method of accounting in accordance with ASC 805 “Business Combinations”. Accordingly, the Company applied push–down accounting and adjusted to fair value all of the assets acquired directly on the financial statements of the majority owned subsidiary, Aphrodite’s Marketing.
The Company accounted for the value under ASC 805-50-30-2 “Business Combinations” whereby if the consideration is not in the form of cash, the measurement is based on either the cost which shall be measured based on the fair value of the consideration given or the fair value of the assets (or net assets) acquired, whichever is more clearly evident and thus more reliably measurable. The consideration of 3,000 Series B Convertible Preferred Stock was convertible at 51,084,935 shares of common stock at the time of closing. Additionally, since the Series B Convertible Preferred Stock could increase in value over the 18-month exercise period and such terms does not contain an explicit limit in the number of common stock to be delivered upon conversion, the Company accounted for the embedded conversion option in the 3,000 Series B Convertible Preferred Stock issued under the Acquisition Agreement as derivative liabilities. The Company determined that there is a 20% probability of achieving the post-acquisition milestones to earn the Additional Shares.
The Company deemed that the fair value of the consideration given was $0.013 per share based on the quoted trading price on the date of the closing amounting to $664,105 which is more clearly evident and more reliable measurement basis. During year 2021, the Company recorded $821,739 of fair value from the embedded conversion options in the 3,000 Series B Convertible Preferred Stock and 20% probability of achieving the Additional Shares as derivative liability.
The estimated fair values of assets acquired and liabilities assumed are provisional and are based on the information that was available as of the acquisition date to estimate the fair value of assets acquired and liabilities assumed. The Company believes that information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed.
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BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022 AND 2021
(UNAUDITED)
The consideration paid by the Company as follows:
| Equity instrument (3,000 Series B Convertible Preferred Stock) | $ | 664,105 | ||
| Embedded conversion options in the 3,000 Series B Convertible Preferred Stock and 20% probability of achieving the Additional Shares | 821,739 | |||
| Fair value of total consideration transferred | $ | 1,485,844 |
The net purchase price paid by the Company was allocated to assets acquired and liabilities assumed on the records of the Company as follows:
| Current assets (including cash of $60,287) | $ | 1,597,389 | ||
| Liabilities assumed (including loans payable of $2,304,438 and note payable- long term of $150,000) | (3,737,682 | ) | ||
| Total identifiable net liabilities | (2,140,293 | ) | ||
| Non-controlling interest in Aphrodite’s Marketing | ||||
| 725,867 | ||||
| Goodwill | 2,900,270 | |||
| Total | $ | 1,485,844 |
| Acquisition related cost (legal and audit fees included in professional and consulting expenses during year 2021) | $ | 54,360 |
| (1) | For the six months ended June 30, 2022 and 2021, amortization of intangible assets amounted to $120,978 and $93,614, respectively. For the three months ended June 30, 2022 and 2021, amortization of intangible assets amounted to $60,489 for both periods. |
GearBubble Tech, Inc.
Pursuant to the terms of the May 6, 2021 Binding Letter of Intent, 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 100% of the issued and outstanding shares of GearBubble to a subsidiary of the Company known as GearBubble Tech, Inc., a Wyoming corporation (the “Merger Sub”) 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. Accordingly, the Company owns 51% of GearBubble Tech.
Under the terms of the Merger Agreement, the GearBubble Shareholders also have an opportunity to earn shares of the Company’s common stock (“BRGO Incentive Common Shares”) if certain revenue and net income benchmarks are met by Merger Sub in the three years following the Closing of the Acquisition Agreement.
The Merger Agreement requires that following the Closing of the Merger Agreement, Donald Wilson, the President and CEO of GearBubble, and certain other key employees of Acquisition Sub shall receive employment agreements from Acquisition Sub with respect to their continued employment (the “Employment Agreements”) which will allow such key employees to participate in any employee stock ownership plan (“ESOP”) as offered to other Company’s subsidiary employees from time to time) to make certain that current personnel operating the business of GearBubble shall remain in place for all departments of the business of GearBubble post-closing of the Acquisition.
At the Closing, the Equity Recipients will grant the Company the right of first refusal (the “First Refusal Right”) to purchase the Transfer Shares for cash. The aggregate cash price for the Transfer Shares shall equal (i) the average of a minimum of two (2) and a maximum of three (3) independent valuations of Merger Sub, each as of the date when the Company notifies the Equity Recipients of its intent to exercise the First Refusal Right, and each of which shall be undertaken by an independent valuation firm (to be identified by the Company and mutually acceptable to the Equity Recipients), multiplied by (ii) 49%. If the First Refusal Right has not been exercised and the Equity Recipients have not otherwise had a liquidity event with respect to the Merger Sub prior to such date, each Equity Recipient will have a one-time put right (the “Put Right”) that, if elected by such Equity Recipient, would obligate the Company to buy the Transfer Shares held by such Equity Recipient for cash at a price per Transfer Share based upon the independent fair market valuation per share as determined by an independent valuation firm (chosen in the same manner as set forth in the prior sentence).
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BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022 AND 2021
(UNAUDITED)
The consideration paid by the Company as follows:
| Cash | $ | 2,000,000 | ||
| Promissory note | 1,162,000 | |||
| Fair value of total consideration transferred | $ | 3,162,000 |
The net purchase price paid by the Company was allocated to assets acquired and liabilities assumed on the records of the Company as follows:
| Current assets (including cash of $1,161,476) | $ | 1,201,476 | ||
| Equipment, net | 4,412 | |||
| Liabilities assumed | (458,628 | ) | ||
| Total identifiable net assets | 747,260 | |||
| Non-controlling interest in GearBubble Tech | (366,157 | ) | ||
| Goodwill | 2,780,897 | |||
| Total | $ | 3,162,000 |
| Acquisition related cost (legal and audit fees included in professional and consulting expenses during year 2021) | $ | 47,100 |
Note 14 – Subsequent Events
Common Stock for Services
In July 2022, the Company issued 12,857,143 shares of its common stock to a consultant for services rendered. The Company issued 12,857,143 shares of the Company’s common stock valued at approximately $0.0006 per share or $9,000, being the closing price of the stock on the date of grant to such consultant.
Convertible Note Payable
On July 11, 2022, the Company entered into an 8% convertible note in the amount of $80,000 less legal and financing costs of $4,250 for net proceeds of $50,000 with 1800 Diagonal Lending LLC formerly known as Sixth Street Lending, LLC. The principal and accrued interest is payable on or before July 11, 2023. The note may not be prepaid except under certain conditions. Any amount of 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 from the due date thereof until the same is paid. At the option of the Holder, but not before 180 days from the date of issuance, the holder may elect to convert all or part of the convertible into the Company’s common stock. The conversion price shall mean 65% multiplied by the average two lowest trading price (representing a discount rate of 35%) during the previous 15 trading day period ending on the latest complete trading day prior to the date of this note. During the first 90 to 180 days following the date of this note, the Company has the right to prepay the principal and accrued but unpaid interest due under this note together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 120% to 125% as defined in the note agreement. After this initial 180-day period, the Company does not have a right to prepay such note.
Conversion of Series D Preferred Stock
In July 2022, the Company received a notice of conversion from two holders in the aggregate of 145,000 shares of Series D Convertible Preferred Stock and related accrued dividends of $3,772 converting into 297,543,150 shares of the Company’s common stock.
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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, 2021, filed with the SEC on March 29, 2022, 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 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.
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. 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.
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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 Lux 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. 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 subsidiary of the Company known as Aphrodite’s Marketing, Inc., a Wyoming corporation in exchange for 3,000 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 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.
Aphrodite’s Marketing and GearBubble Tech are expected to increase 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 for 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. 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.
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Results of Operations
Overview
Net revenues increased during the six months ended June 30, 2022 due to Aphrodite’s Marketing and GearBubble Tech acquisition as compared to the six months ended June 30, 2021 despite the impact of the current pandemic. Our retail operations have been impacted by the pandemic. We continue to evaluate our initiatives. We are expanding our online presence and have been experiencing positive results, but it is too early to assess the real impact. The Company continues to position itself for the future with the acquisition of Aphrodite’s Marketing in February 2021 and GearBubble Tech in July 2021 and take advantage of the Bergio brand in the E-Commerce space as well as establishing a chain of retail 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. We continue to be excited about our store in Atlantic City, NJ. Our initial store in northern New Jersey has not done as well as we had hoped and the wholesale market has also not been favorable but with the addition of our online presence it has helped the company to reach a favorable balance. The Company has leveraged itself such that as sales increase a larger portion of dollars will flow to the bottom line.
The Company continues to pursue additional financing opportunities and we have initiated measures to strengthen our financial position. As a result, we have accomplished the following:
| ● | We have converted approximately $1,300,000 including accrued interest of $74,000 of our convertible notes and loan into equity. |
| ● | Raised additional funding from convertible notes and sales of our Series D Preferred Stock. |
These events have allowed us to reduce our debt, provided limited funding for operations, and funding for the Aphrodite’s Marketing and GearBubble Tech. We continue to pursue other opportunities. Moreover, there is no assurance that sufficient funding will be available, or if available, that its terms will be favorable to the Company. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
| Three Months Ended | ||||||||||||||||
| June 30, 2022 | June 30, 2021 | Increase (Decrease) | Percent Increase (Decrease) | |||||||||||||
| Net revenues | $ | 2,458,531 | $ | 2,137,320 | $ | 321,211 | 15.02 | % | ||||||||
| Net revenues – related parties | 666 | - | 666 | 100 | % | |||||||||||
| Total net revenues | 2,459,197 | 2,137,320 | 321,877 | 15.06 | % | |||||||||||
| Cost of revenues | 1,118,184 | 378,090 | 740,094 | 195.75 | % | |||||||||||
| Gross profit | $ | 1,341,013 | $ | 1,759,230 | $ | (418,217 | ) | (23.77 | %) | |||||||
| Gross profit as a % of sales | 54.55 | % | 82.31 | % | ||||||||||||
| Six Months Ended | ||||||||||||||||
| June 30, 2022 | June 30, 2021 | Increase (Decrease) | Percent Increase (Decrease) | |||||||||||||
| Net revenues | $ | 4,415,032 | $ | 3,286,634 | $ | 1,128,398 | 34.33 | % | ||||||||
| Net revenues – related parties | 139,716 | - | 139,716 | 100 | % | |||||||||||
| Total net revenues | 4,554,748 | 3,286,634 | 1,268,114 | 38.58 | % | |||||||||||
| Cost of revenues | 2,465,758 | 688,256 | 1,777,502 | 258.26 | % | |||||||||||
| Gross profit | $ | 2,088,990 | $ | 2,598,378 | $ | (509,388 | ) | (19.60 | %) | |||||||
| Gross profit as a % of sales | 45.86 | % | 79.06 | % | ||||||||||||
Net Revenues
Total net revenues for the three months ended June 30, 2022 including net revenues – related parties which amounted to $2,459,197 increased by $321,877 as compared to $2,137,320. Total net revenues for the six months ended June 30, 2022 including net revenues – related parties which amounted to $4,554,748 increased by $1,268,114 as compared to $3,286,634. This increase in total net revenues is the result of the acquisition of Aphrodite’s Marketing and GearBubble Tech which expanded the selling opportunities internationally and nationwide thru out the US.
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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 three months ended June 30, 2022 increased by $740,097 to $1,118,184 as compared to $688,256. Cost of revenues for the six months ended June 30, 2022 increased by $1,777,502 to $2,465,758 as compared to $378,090. This increase is the result of increase in net revenues related to the acquisition of Aphrodite’s Marketing and GearBubble Tech.
Gross Profit
Gross profit decreased by $418,217 to $1,341,013 for the three months ended June 30, 2022 as compared to $1,759,230 for the six months ended June 30, 2021. Gross profit decreased by $509,388 to $2,088,990 for the six months ended June 30, 2022 as compared to $2,598,378 for the six months ended June 30, 2021. This decrease is primarily attributable to increase in cost of revenues as discussed above.
Operating Expenses
Operating expenses decreased by $271,141 to $1,962,330 for the three months ended June 30, 2022 as compared to $2,233,471 for the three months ended June 30, 2021. The decrease was primarily attributable to i) decrease in selling and, marketing expenses of $630,153 primarily attributable to decrease advertising and marketing activities through social media, digital marketing, and promotional campaigns ii) increase professional and consulting expenses of $221,295 primarily related to increase in consulting and contractor fees related to increase operations as a result of the acquisition of Aphrodite’s Marketing and GearBubble Tech, iii) increase in compensation and related taxes of $95,471 primarily related to the increase in number of employees as a result of the acquisition of Aphrodite’s Marketing and GearBubble Tech and iv) increase in general and administrative expenses of $42,246. The overall decrease in operating expenses reflect the decrease in advertising and marketing expenses through social media and digital marketing activities.
Operating expenses increased by $236,563 to $3,674,264 for the six months ended June 30, 2022 as compared to $3,437,701 for the six months ended June 30, 2021. The increase was primarily attributable to i) decrease in selling and, marketing expenses of $574,991 primarily attributable to decrease advertising and marketing activities through social media, digital marketing, and promotional campaigns ii) increase professional and consulting expenses of $603,479 primarily related to increase in consulting and contractor fees related to increase operations as a result of the acquisition of Aphrodite’s Marketing and GearBubble Tech, iii) increase in compensation and related taxes of $279,389 primarily related to the increase in number of employees as a result of the acquisition of Aphrodite’s Marketing and GearBubble Tech and iv) decrease in general and administrative expenses of $71,314 due to decrease in depreciation and office expenses. The overall increase in operating expenses reflect the increase in business operations as a result of the acquisition of Aphrodite’s Marketing and GearBubble Tech.
Loss from Operations
As a result of the above, we had a loss from operation of $621,317 for the three months ended June 30, 2022 as compared to a loss from operations of $474,241 for the three months ended June 30, 2021. We had a loss from operation of $1,585,274 for the six months ended June 30, 2022 as compared to a loss from operations of $839,323 for the six months ended June 30, 2021.
Other Income (Expense)
For the three months ended June 30, 2022, the Company had other income (expense) of $435,937 as compared to other expense of $1,446,260 for the six months ended June 30, 2021, a change of $1,882,197. The increase in other income is primarily attributed to the decrease in amortization of debt discount and deferred financing cost of $427,209, decrease in interest expense of $332,425 due to the repayments of debt, and decrease in change in fair value of derivative liabilities of $1,024,982, and decrease in derivative expense of $88,837.
For the six months ended June 30, 2022, the Company had other expense of $678,417 as compared to other expense of $1,558,800 for the six months ended June 30, 2021, a decrease of $880,383 in other expense. The decrease in other expense is primarily attributed to the decrease in amortization of debt discount and deferred financing cost of $268,371, decrease in change in fair value of derivative liabilities of $1,325,765, decrease in derivative expense of $197,303, and decrease in gain from extinguishment of debt of $161,905 offset by increase in interest expense of $715,894 due to note conversions.
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Net Income (Loss) Attributable to Bergio International, Inc.
As a result of the above, we had net income (loss) attributable to Bergio International, Inc. $20,511 for the three months ended June 30, 2022 as compared to ($1,619,617) for the three months ended June 30, 2021. As a result of the above, we had net loss attributable to Bergio International, Inc. $1,565,075 for the six months ended June 30, 2022 as compared to $2,020,971 for the six months ended June 30, 2021.
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 $720,367 for the three months ended June 30, 2022 as compared to $1,619,617 for the three months ended June 30, 2021 after the recognition of deemed dividend of $740,878 upon the issuance of the Series D Preferred Stock. As a result of the above, we had net loss available to Bergio International, Inc. common stockholders of $3,120,953 for the six months ended June 30, 2022 as compared to $2,020,971 for the six months ended June 30, 2021 after the recognition of deemed dividend of $1,555,878 upon the issuance of the Series D Preferred Stock.
Liquidity and Capital Resources
The following table summarizes working capital at June 30, 2022, compared to December 31, 2021:
| June 30, 2022 | December 31, 2021 | Increase/ (Decrease) | ||||||||||
| Current Assets | $ | 3,722,883 | $ | 4,384,185 | $ | (661,302 | ) | |||||
| Current Liabilities | $ | 4,131,692 | $ | 6,748,062 | $ | (2,616,370 | ) | |||||
| Working Capital Deficit | $ | (408,809 | ) | $ | (2,363,877 | ) | $ | 1,955,068 | ||||
At June 30, 2022 the Company had working capital deficit of $408,809 as compared to $2,363,877 at December 31, 2021. This decrease in working capital deficit is primarily attributed to the decrease in liabilities.
During the six months ended June 30, 2022, the Company’s principal sources and uses of funds were as follows:
Cash used in operating activities: For the six months ended June 30, 2022, the Company used $1,577,894 in cash for operations as compared to $755,753 in cash used for operations for the six months ended June 30, 2021. This increase in cash used in operations is primarily attributed to net loss of $1,565,075, amortization expense of $120,978, non-cash interest upon conversion of debt of $1,025,660, amortization of debt discount and deferred financing cost of $402,494, offset by non-controlling interest of $698,616, change in fair value of derivative liabilities of $556,554, gain from extinguishment of debt $261,404, and decrease in changes in operating assets and liabilities of $66,478 primarily attributable to increase in accounts receivable of $90,062, increase in accrued compensation – CEO of $403,460, decrease in inventory of $205,297, decrease in accounts payable and accrued liabilities of $234,034, and decrease in deferred compensation – CEO $346,163.
For the six months ended June 30, 2021, the Company used $755,753 in cash for operations as compared to $14,754 in cash used for operations for the six months ended June 30, 2020. This increase in cash used in operations is primarily attributed to increase in net loss, increase in depreciation and amortization expense, increase in amortization of debt discount and deferred financing cost, increase in derivative expense, increase in change in fair value of derivative liabilities, increase in inventory, increase in accounts payable and accrued liabilities offset by increase in gain from extinguishment of debt and decrease in prepaid expenses.
Cash used in investing activities: For the six months ended June 30, 2022, the Company used $0 in cash for investing activities as compared to $44,355 of cash in investing activities for the six months ended June 30, 2021 for purchase of property and equipment.
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Cash provided by financing activities: Cash provided by financing activities for the six months ended June 30, 2022 was $979,172 as compared to $3,149,135 for the six months ended June 30, 2021 and was primarily the result of net proceeds received from convertible notes of $76,250, sale of preferred stock of $1,555,000, proceeds from loans $595,600, proceeds from a note of $110,000 offset by repayments of loans payable of $641,606, repayment of secured notes of $400,000, repayment of note of $180,414 and repayment of advances to CEO of $135,858.
Cash provided by financing activities for the six months ended June 30, 2021 was $3,149,135 and was primarily the result of increases in funds raised proceeds from the proceeds from notes payable of $1,617,500, sale of common stock of $2,958,837 offset by repayments of loans payable, debt and convertible debt for a total of $1,437,379.
Our indebtedness is comprised of loans payable, convertible notes, and promissory note 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 June 30, 2022, principal amounts under the convertible notes payable was $80,000, net of debt discount of $55,013 at June 30, 2022.
Notes Payable
The Company has total notes payable of $788,372 classified as current portion and total notes payable – long term portion of $261,866 at June 30, 2022.
Loans Payable
The Company has loans payable and accrued interest of $923,465 at June 30, 2022.
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 our ability to increase revenue and continue our growth.
The Company has suffered recurring losses and has an accumulated deficit of $17,587,581 as of June 30, 2022. As of June 30, 2022, the Company has principal amounts of convertible notes of $80,000, notes payable (current and long-term portion) of $1,050,238 and loans payable of $923,465. 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.
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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, 2021 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, 2021, filed with the SEC on March 29, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the three months ended June 30, 2022, we have issued the following securities which were not registered under the Securities Act. Unless otherwise indicated, all of the share issuances described below were made in reliance on the exemption from registration provided by Section 4(2) of the Securities Act for transactions not involving a public offering.
From April 2022 through May 2022, the Company issued an aggregate of 232,079,442 shares of its common stock at an average contractual conversion price of approximately $0.001 as a result of the conversion of principal of $108,750 and accrued interest of $4,350 for a total of $113,100 underlying certain outstanding convertible notes converted during such period.
In April 2022, the Company sold an aggregate of 825,000 shares of Series D Convertible Preferred Stock for total net proceeds of $740,000 after deducting legal and financing cost of $10,000 or approximately $0.90 per share. Additionally, the Company granted an aggregate of 750,000,000 warrants to purchase shares of the Company’s common stock in connection with the issuance of the sale of these Series D Convertible Preferred Stock. The warrants have a term of 7 years from the date of grant and exercisable at an exercise price of $0.0005 subject to adjustment such as stock dividends, stock splits, and dilutive issuances.
In April 2022, a warrant holder elected to exercise 250,000 warrants by cashless exercise and converted into 54,500,000 common stock pursuant to the terms of the stock warrant agreement whereby the exercise price was subject to adjustment under an anti-dilution provision.
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 135,896,517 shares of the Company’s common stock.
In May 2022, the Company issued 16,021,937 shares of common stock to a consultant in connection with an engagement agreement dated November 15, 2021. Such shares were previously recognized as common stock issuable prior to issuance in May 2022.
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.
| * | 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. | |||
| Date: August 9, 2022 | By: | /s/ Berge Abajian | |
| Name: | Berge Abajian | ||
| Title: | Chief Executive Officer | ||
|
(Principal Executive Officer) (Principal Financial Officer) (Principal Accounting Officer) |
|||
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