BERGIO INTERNATIONAL, INC. Forward Looking Statements
This quarterly report on Form 10-Q and other reports (collectively, the "Filings") filed byBergio International, Inc. ("Bergio" or the "Company") from time to time with theU.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 endedDecember 31, 2021 , filed with theSEC onMarch 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 ofthe 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 inthe 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 establishBergio 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 CEOBerge 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 inItaly with top quality Italian leather ranging in price from$450 to$875 , which are very competitive entry prices. 30
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 inNew Jersey as well as subcontracts with facilities located inItaly .
OnMarch 5, 2014 , the Company formed a wholly owned subsidiary calledCrown Luxe, Inc. in theState of Delaware ("Crown Luxe"). Crown Lux was established to operate the Company's first retail store, which was opened inBergen County, New Jersey in 2014.
During the fall of 2018, we opened our second retail store at the new
OnFebruary 10, 2021 ,Bergio International, Inc. entered into an Acquisition Agreement withDigital Age Business, Inc. , aFlorida 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'sMarketing, Inc. , aWyoming 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'sMarketing, Inc. We own 51% of Aphrodite'sMarketing, Inc. OnJuly 1, 2021 , we entered into an Agreement and Plan of Merger withGearBubble, Inc. , aNevada 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 asGearBubble Tech, Inc. , aWyoming 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% ofGearBubble 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 withBergio'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 inMarch 2020 , was declared a pandemic by theWorld 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. 31 Results of Operations Overview
Net revenues increased during the three months endedMarch 31, 2022 due to Aphrodite's Marketing and GearBubble Tech acquisition as compared to the three months endedMarch 31, 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 inFebruary 2021 and GearBubble Tech inJuly 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 CEOBerge 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 inAtlantic City, NJ . Our initial store in northernNew 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
? 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
Increase Percent Increase
March 31, 2022 March 31, 2021 (Decrease) (Decrease)
Net revenues $ 1,956,501 $ 1,149,314 $ 807,187 70.23 %
Net revenues - related parties 139,050 - 139,050 100 % Total net revenues 2,095,551 1,149,314 946,237 82.33 % Cost of revenues 1,347,574 310,166 1,037,408 334.47 % Gross profit$ 747,977 $ 839,148 $ (91,171 ) (10.86 %) Gross profit as a % of sales 35.69 % 73.01 % Net Revenues
Total net revenues for the three months endedMarch 31, 2022 including net revenues - related parties which amounted to$2,095,551 increased by$946,237 as compared to$1,149,314 . 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. 32 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 endedMarch 31, 2022 increased by$1,037,408 to$1,347,574 as compared to$310,166 . 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
This decrease is primarily attributable to increase in cost of revenues as discussed above.
Operating Expenses Operating expenses increased by$586,782 to$1,711,934 for the three months endedMarch 31, 2022 as compared to$1,125,152 for the three months endedMarch 31, 2021 . The increase was primarily attributable to i) increase in selling and marketing expenses of$62,313 primarily attributable to increase advertising and, marketing activities through social media, digital marketing, and promotional campaigns, sales commissions, and related cost of shipping products to customers ii) increase professional and consulting expenses of$329,960 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$183,918 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$10,591 . 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$963,957 for the three months endedMarch 31, 2022 as compared to a loss from operations of$286,004 for the three months endedMarch 31, 2021 . Other Income (Expense)
For the three months endedMarch 31, 2022 , the Company had other expense of$1,114,354 as compared to other expense of$191,618 for the three months endedMarch 31, 2021 , an increase of$922,736 in other expense. The increase in other expense is primarily attributed to the increase in amortization of debt discount of$158,838 and increase in interest expense of$969,242 due to note conversions offset by decrease in change in fair value of derivative liabilities of$300,783 , decrease in derivative expense of$108,467 , and decrease in gain from extinguishment of debt of$192,554 .
Net Loss Attributable to
As a result of the above, we had net loss attributable to
Net Loss Available to
As a result of the above, we had net loss available toBergio International, Inc. common stockholders of$2,400,586 for the three months endedMarch 31, 2022 as compared to$401,354 for the three months endedMarch 31, 2021 after the recognition of deemed dividend of$815,000 upon the issuance of the Series
D
Preferred Stock.
33
Liquidity and Capital Resources
The following table summarizes working capital atMarch 31, 2022 , compared toDecember 31, 2021 : Increase/ March 31, 2022 December 31, 2021 (Decrease) Current Assets$ 3,803,762 $ 4,384,185$ (580,423 ) Current Liabilities$ 5,044,611 $ 6,748,062$ (1,703,451 ) Working Capital Deficit$ (1,240,849 ) $ (2,363,877 ) $ 1,123,028
At
During the three months ended
Cash used in operating activities: For the three months endedMarch 31, 2022 , the Company used$1,071,273 in cash for operations as compared to$251,308 in cash used for operations for the three months endedMarch 31, 2021 . This increase in cash used in operations is primarily attributed to increase in net loss, increase in amortization expense of$27,364 , increase in amortization of debt discount and deferred financing cost of$158,838 , increase in non-cash interest upon conversion of debt of$1,025,660 , increase in non-controlling interest of$416,457 offset by decrease in derivative expense of$108,466 , decrease in change in fair value of derivative liabilities of$305,583 , decrease in gain from extinguishment of debt$192,554 , decrease in inventory of$95,313 , decrease in prepaid expenses of$19,186 , decrease in accounts payable and accrued liabilities of$266,140 . For the three months endedMarch 31, 2021 , the Company used$251,308 in cash for operations. The cash used in operations is primarily attributed to increase in accounts receivable and inventories partially offset by the decrease in prepaid expenses and other current assets. Cash used in investing activities: For the three months endedMarch 31, 2022 , the Company used$0 in cash for investing activities as compared to$40,169 of cash in investing activities for the three months endedMarch 31, 2021 for purchase of property and equipment. Cash provided by financing activities: Cash provided by financing activities for the three months endedMarch 31, 2022 was$573,933 as compared to$1,052,399 for the three months endedMarch 31, 2021 . This decrease is primarily the result of net proceeds received from convertible notes of$76,250 , sale of preferred stock of$815,000 , proceeds from loans$381,600 offset partially by repayments of loans payable of$336,553 , repayment of secured notes of$110,000 , repayment of note of$154,934 and repayment of advances to CEO of$97,430 .
Cash provided by financing activities for the three months ended
Our indebtedness is comprised of loans payable, convertible notes, and advances from a stockholder/officer intended to provide capital for the ongoing manufacturing of our jewelry line, in advance of receipt of the payment from our retail distributors. Convertible Notes
From time to time the Company enters into certain financing agreements for convertible notes. For the most part, the Company settles these obligations with the Company's common stock. As ofMarch 31, 2022 , principal amounts under the convertible notes payable was$188,750 , net of debt discount of$135,949 at
March 31, 2022 . Notes Payable The Company has total notes payable including secured notes payable of$988,965 classified as current portion and total notes payable - long term portion of$263,035 atMarch 31, 2022 . 34 Loans Payable
The Company has loans payable and accrued interest of
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$16,859,545 as ofMarch 31, 2022 . As ofMarch 31, 2022 , the Company has$188,750 in principal amounts of convertible notes, notes payable (current and long-term portion) of$1,252,000 and loans payable of$994,630 . These factors raise substantial doubt about the Company's ability to continue as a going concern. The recoverability of a major portion of the recorded asset amounts shown in the accompanying unaudited condensed consolidated balance sheet is dependent upon continued operations of the Company, which in turn, is dependent upon the Company's ability to raise capital and/or generate positive cash flows from operations. These unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence. Research and Development
We are not anticipating significant research and development expenditures in the near future.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, results or operations, liquidity, capital expenditures or capital resources that is deemed material. Critical Accounting Policies Our critical accounting policies are described in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report. There have been no changes in our critical accounting policies. Our significant accounting policies are described in our notes to the consolidated financial statements for the year endedDecember 31, 2021 which is included in our Annual Report.
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