Effects of COVID-19
The COVID-19 pandemic had a discernable short-term negative impact on the
ability of our company to obtain capital needed to accelerate the development of
our business, as well as to obtain needed inventory, due to supply chain delays.
While these limitations have eased, we are unable to predict when such
limitations will be entirely resolved.
Overall, our company is not of a size that required us to implement
"company-wide" policies in response to the COVID-19 pandemic. Further, our
product manufacturing operations have experienced no negative consequences
attributable to the COVID-19 pandemic, inasmuch as these operations involve a
limited number of persons.
For purposes of the discussion below, except where otherwise indicated, the
descriptions of our business, our strategies, our risk factors and any other
forward-looking statements, including regarding us, our business and the market
generally, do not reflect the potential impact of the COVID-19 pandemic or our
responses thereto.
Basis of Presentation
This Management's Discussion and Analysis of Financial Condition and Results of
Operations section includes financial results of our company, Black Bird
Biotech, Inc., including its subsidiaries, Black Bird Potentials Inc. (BB
Potentials), Big Sky American Dist., LLC (Big Sky American) and Black Bird Hemp
Manager, LLC, for the three months ended March 31, 2022 and 2021.
Cautionary Statement
The following discussion and analysis should be read in conjunction with our
financial statements and related notes, beginning on page F-1 of this Offering
Circular.
Our actual results may differ materially from those anticipated in the following
discussion, as a result of a variety of risks and uncertainties, including those
described herein under "Disclosure Regarding Forward-Looking Statements." We
assume no obligation to update any of the forward-looking statements included
herein.
Implications of Being an Emerging Growth Company
We qualify as an "emerging growth company" under the JOBS Act. As a result, we
are permitted to, and intend to, rely on exemptions from certain disclosure
requirements. For so long as we are an emerging growth company, we will not be
required to:
· have an auditor report on our internal controls over financial reporting
pursuant to Section 404(b) of the Sarbanes-Oxley Act;
· comply with any requirement that may be adopted by the Public Company
Accounting Oversight Board regarding mandatory audit firm rotation or a
supplement to the auditor's report providing additional information about
the audit and the financial statements (i.e., an auditor discussion and
analysis);
· submit certain executive compensation matters to shareholder advisory
votes, such as "say-on-pay" and "say-on-frequency;" and
· disclose certain executive compensation related items such as the
correlation between executive compensation and performance and
comparisons of the CEO's compensation to median employee compensation.
In addition, Section 107 of the JOBS Act also provides that an emerging growth
company can take advantage of the extended transition period provided in Section
7(a)(2)(B) of the Securities Act for complying with new or revised accounting
standards. In other words, an emerging growth company can delay the adoption of
certain accounting standards until those standards would otherwise apply to
private companies. We have elected to take advantage of the benefits of this
extended transition period. Our financial statements may therefore not be
comparable to those of companies that comply with such new or revised accounting
standards.
We will remain an "emerging growth company" for up to five years, or until the
earliest of (i) the last day of the first fiscal year in which our total annual
gross revenues exceed $1.07 billion, (ii) the date that we become a "large
accelerated filer" as defined in Rule 12b-2 under the Securities Exchange Act of
1934, which would occur if the market value of our ordinary shares that is held
by non-affiliates exceeds $700 million as of the last business day of our most
recently completed second fiscal quarter or (iii) the date on which we have
issued more than $1 billion in non-convertible debt during the preceding three
year period.
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Critical Accounting Policies
In General. Our accounting policies are discussed in detail in the footnotes to
our financial statements beginning on page F-1. We consider our critical
accounting policies related to revenue recognition, inventory and fair value of
financial instruments.
Change in Accounting Principle. In August 2020, the Financial Accounting
Standards Board ("FASB") issued Accounting Standards Update ("ASU")
2020-06-Debt-Debt with Conversion and Other Options (Subtopic 470-20) and
Derivatives and Hedging- Contracts in Entity's Own Equity (Subtopic
815-40)-Accounting For Convertible Instruments and Contracts in an Entity's Own
Equity. The ASU simplifies accounting for convertible instruments by removing
major separation models required under current GAAP. Consequently, more
convertible debt instruments will be reported as a single liability instrument
with no separate accounting for embedded conversion features. The ASU removes
certain settlement conditions that are required for equity contracts to qualify
for the derivative scope exception, which will permit more equity contracts to
qualify for it. The ASU also simplifies the diluted net income per share
calculation in certain areas. The new guidance is effective for annual and
interim periods beginning after December 15, 2021, and early adoption is
permitted for fiscal years beginning after December 15, 2020. Our company has
early-adopted ASU 2020-06 for the year beginning January 1, 2021.
Overview and Outlook
Through BB Potentials, our company is the exclusive worldwide manufacturer and
distributor of MiteXstream, an EPA-registered plant-based biopesticide (EPA Reg.
No. 95366-1) effective in the eradication of mites and similar pests, including
spider mites, a pest that destroys crops, especially cannabis, hops, coffee, and
house plants, as well as molds and mildew. Also through BB Potentials, we
manufacture and sell CBD products, including CBD Oils, gummies and pet treats,
and CBD-infused personal care products, under the Grizzly Creek Naturals brand
name. Big Sky American distributes our Grizzly Creek Naturals products, as well
as an array of other consumer retail products, in Western Montana. In addition,
for 2020 and 2021, BB Potentials was a licensed grower of industrial hemp under
the Montana Hemp Pilot Program and, in connection therewith, established "Black
Bird American Hemp" as the brand name under which these efforts were to be
conducted. For the foreseeable future, we have suspended our hemp-related
efforts.
Principal Factors Affecting Our Financial Performance
Our future operating results can be expected to be primarily affected by the
following factors:
· our ability to establish and maintain the value proposition of our
MiteXstream biopesticide, vis-a-vis other available pest control
products;
· our ability to generate sales channels for MiteXstream; and
· our ability to contain our operating costs.
Recent Developments
Spire+. In March 2022, our company launched the first major initiative in
marketing our MiteXstream biopesticide on a national basis, when we entered into
a consulting agreement with Spire+, a Cornelius, North Carolina-based leading
sales and marketing agency that specializes in brand building, marketing,
communications and business development. Spire+ has begun work to implement a
comprehensive go-to-market strategy for MiteXstream, including e-commerce,
traditional retail and a category-specific distribution model. Spire+, an
affiliate of Spire Sports + Entertainment, LLC, has a long history of building
and executing successful sales and marketing programs for brands, such as
Toyota, 5-hour ENERGY, Auto-Owners Insurance, ENEOS Motor Oil, Petro-Canada, STP
and Parker Hannifin.
New Sales Executive Officer. Following our executing the agreement with Spire+,
in April 2022, we hired William J. LoBell to serve as our Executive Vice
President of Sales and Development. In addition to working directly with Spire+
to expand sales of MiteXstream, Mr. LoBell seeks to establish additional sales
channels for the biopesticide product.
Results of Operations
Three Months Ended March 31, 2022 ("Interim 2022") and 2021 ("Interim 2021").
Our purchase of certain distribution-related assets pursuant to the Big Sky APA
was made with an expectation that an immediately accessible larger number of
retail locations would allow us to increase more quickly sales of our CBD
products. Big Sky American, since beginning its consumer product distribution
operations in Northwest Montana in April 2021, has had a positive impact on our
operating results, when compared to our prior operating results. However, our
anticipated increase in sales of our CBD products has not yet occurred. Rather,
sales of non-CBD consumer products, in large measure, accounted for the overall
increase in our product sales for Interim 2022. During Interim 2022, sales of
MiteXstream were insignificant.
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During Interim 2022, our business operations generated $13,802 (unaudited)
venues from sales with a cost of goods sold of $7,970 (unaudited), resulting in
a gross profit of $5,832 (unaudited). During Interim 2021, our business
operations generated $2,207 (unaudited) in revenues from sales of our Grizzly
Creek Naturals products with a cost of goods sold of $1,521 (unaudited),
resulting in a gross profit of $686 (unaudited).
During Interim 2022, we incurred operating expenses of $508,852 (unaudited),
which were comprised of $63,100 (unaudited) in consulting services, $1,720
(unaudited) in website expenses, $32,785 (unaudited) in depreciation and
amortization, $5,100 (unaudited) in legal and professional services, $1,800
(unaudited) in rent, $102,245 (unaudited) in advertising and marketing expense,
$16,998 (unaudited) in license fee and $285,104 (unaudited) in general and
administrative expense, resulting in a net operating loss of $503,020
(unaudited). In addition, we incurred interest expense of $167,338 (unaudited),
resulting in a net loss for Interim 2022 of $670,358 (unaudited).
During Interim 2021, we incurred operating expenses of $200,155 (unaudited),
which were comprised of $39,347 (unaudited) in consulting services ($6,880
(unaudited) of which was paid by the issuance of common stock), $3,014
(unaudited) in website expenses, $38,673 (unaudited) in legal and professional
services, $1,334 (unaudited) for product license, $4,800 (unaudited) in rent,
$1,366 (unaudited) in advertising and marketing expense and $94,902 (unaudited)
in general and administrative expense, resulting in a net loss of $(208,233)
(unaudited).
We expect that our revenues will increase from quarter to quarter beginning with
the second quarter of 2022, as sales of MiteXstream are expected to increase
from our recently-initiated marketing efforts. There is no assurance that such
will be the case, and we expect to incur operating losses through at least
December 31, 2022. Further, because of our relative current lack of capital and
the current lack of brand name awareness of MiteXstream, we cannot predict the
levels of our future revenues.
Further, because of our relative current lack of capital and the current lack of
brand name awareness of MiteXstream and Grizzly Creek Naturals, we cannot
predict the levels of our future revenues. However, our management believes that
MiteXstream will become the most dynamic, fastest growing part of our business.
Plans for 2022
Substantially all of our available capital, financial and human, will be devoted
to increasing sales of MiteXstream. Through our agreement with Spire+, we will
implement a comprehensive go-to-market strategy for MiteXstream, including
e-commerce, traditional retail and a category-specific distribution model. In
addition, our internal efforts will be focused on developing sales channels
outside the scope of the Spire+ efforts. There is no assurance that we will be
successful in increasing sales of MiteXstream.
Financial Condition, Liquidity and Capital Resources
March 31, 2022. At March 31, 2022, our company had $105,560 (unaudited) in cash
and a working capital deficit of $63,409 (unaudited), compared to $499,766 in
cash and working capital of $574,165 at December 31, 2021. The change in our
working capital position from December 31, 2021, to March 31, 2022, is
attributable primarily our repayment of $200,000 in debt, the payment of
increased marketing expenses and the payment of operating expenses.
Our company's current cash position of approximately $150,000 is not adequate
for our company to maintain its present level of operations through the
remainder of 2022. We must obtain additional capital from third parties to
implement our full business plans. There is no assurance that we will be
successful in obtaining such additional capital.
Capital Sources. We derived capital from sales of our common stock and from
loans. Our capital sources are described below.
Regulation A Offerings. In May 2020, our company filed an Offering Statement on
Form 1-A (File No. 054-11215) (the "Reg A #1") with the SEC with respect to
70,000,000 shares of common stock, as amended, which was qualified by the SEC on
August 4, 2020. During the year ended December 31, 2021, we sold a total of
4,875,000 shares of common stock for a total of $195,000 in cash, under the Reg
A #1, which expired by its terms on August 4, 2021. At the end of August 2021,
our company filed a second Offering Statement on Form 1-A (File No. 024-11621)
(the "Reg A #2") with the SEC with respect to 100,000,000 shares of common
stock, as amended, which was qualified by the SEC on September 9, 2021. During
the year ended December 31, 2021, we sold a total of 93,033,333 shares of common
stock for a total of $1,395,500 in cash, under the Reg A #2.
17
Third-Party Loans.
GPL Ventures LLC. In April 2020, the Company obtained a loan in the amount of
$25,000 from GPL Ventures LLC. In consideration of such loan, the Company issued
a $25,000 face amount convertible promissory note (the "GPL Note") bearing
interest at 10% per annum, with principal and interest due in January 2021. The
GPL Note was convertible into shares of the Company's common stock at the rate
of one share for each $.001 of debt converted anytime after August 30, 2020.
In November 2020, the GPL Note was repaid in full in the amount of $28,000, as
follows: $25,000 in principal, $3,000 in interest.
Tri-Bridge Ventures LLC. In April 2020, the Company obtained a loan in the
amount of $25,000 from Tri-Bridge Ventures LLC. In consideration of such loan,
the Company issued a $25,000 face amount convertible promissory note (the
"Tri-Bridge Note") bearing interest at 10% per annum, with principal and
interest due in January 2021. Tri-Bridge Note is convertible into shares of the
Company's common stock at the rate of one share for each $.001 of debt converted
anytime after August 30, 2020.
At December 31, 2021 and 2020, accrued interest on the Tri-Bridge Note was
$4,178 and $1,870, respectively.
At December 31, 2021, the Tri-Bridge Note was past due.
EMA Financial, LLC. In December 2020, the Company obtained a loan from EMA
Financial, LLC which netted us $50,000 in proceeds. In consideration of such
loan, the Company issued a $58,600 face amount convertible promissory note (the
"EMA Note"), with OID of $4,100, bearing interest at 10% per annum, with
principal and interest due in September 2021. The Company had the right to repay
the EMA Note at a premium ranging from 120% to 145% of the face amount. The EMA
Note was convertible into shares of the Company's common stock at a conversion
price equal to the lower of 60% of the market price of the Company's common
stock on the date of issuance of the EMA Note and the date of conversion, any
time after June 15, 2021.
In June 2021, the EMA Note was repaid in full in the amount of $93,697.70, as
follows: $58,600 in principal; $3,499.30 in interest; and $31,598.40 as a
prepayment premium.
Power Up Lending Group Ltd. In January 2021, the Company obtained a loan from
Power Up Lending Group Ltd. which netted the Company $52,000 in proceeds. In
consideration of such loan, the Company issued a $55,500 face amount convertible
promissory note ("Power Up Note #1") bearing interest at 12% per annum, with
principal and interest due in January 2022. The Company had the right to repay
the Power Up Note #1 at a premium ranging from 125% to 145% of the face amount.
The Power Up Note #1 was convertible into shares of the Company's common stock
at a conversion price equal to the lower of 61% of the market price of the
Company's common stock on the date of issuance of the Power Up Note #1 and the
date of conversion, any time after July 14, 2021.
During July 2021, the Power Up Note #1 was repaid in full through conversion
into shares of the Company's common stock, as follows:
Amount Converted Conversion Price Per Share Number Shares
$ 15,000 $ 0.0162 925,926
$ 20,000 $ 0.0143 1,398,601
$ 20,500 $ 0.0143 1,666,434
Total Converted: $55,500 Total Shares: 3,990,961
SE Holdings, LLC. In February 2021, the Company obtained a loan from SE Holdings
LLC which netted the Company $106,000 in proceeds. In consideration of such
loan, the Company issued a $121,000 face amount promissory note (the "SE
Holdings Note"), with OID of $15,000, bearing interest at 9% per annum, with
principal and interest payable in eight equal monthly payments of $15,125
beginning in July 2021. The Company had the right to repay the SE Holdings Note
at any time. Should the Company have been in default on SE Holdings Note, the SE
Holdings Note would have become convertible into shares of the Company's common
stock at a conversion price equal to the lesser of the lowest closing bid price
of the Company's commons stock for the trading day immediately preceding either
(a) the delivery of a notice of default, (b) the delivery of a notice of
conversion resulting from such default or (c) the issue date of the SE Holdings
Note. In addition, the Company issued 2,000,000 shares of its common stock to SE
Holdings as a commitment fee, which shares were valued at $0.065 with a 50%
discount per share, or $65,000, in the aggregate.
Through September 2021, the Company had repaid $45,375 of the SE Holdings Note,
in accordance with the terms of the SE Holdings Note. In October 2021, the
remaining balance of the SE Holdings Note, $75,625, was repaid by the Company.
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Power Up Lending Group Ltd. In February 2021, the Company obtained a loan from
Power Up Lending Group Ltd. which netted the Company $43,500 in proceeds. In
consideration of such loan, the Company issued a $43,500 face amount convertible
promissory note ("Power Up Note #2") bearing interest at 12% per annum, with
principal and interest due in January 2022. The Company had the right to repay
the Power Up Note #2 at a premium ranging from 125% to 145% of the face amount.
The Power Up Note #2 was convertible into shares of the Company's common stock
at a conversion price equal to the lower of 61% of the market price of the
Company's common stock on the date of issuance of the Power Up Note #2 and the
date of conversion, any time after August 17, 2021.
During August and September 2021, the Power Up Note #2 was repaid in full
through conversion into shares of the Company's common stock, as follows:
Amount Converted Conversion Price Per Share Number Shares
$ 15,000 $ 0.0137 1,094,891
$ 20,000 $ 0.0093 2,150,538
$ 11,110* $ 0.0081 1,371,605
Total Converted: 46,110 Total Shares: 4,617,034
* This amount includes $2,610 of interest.
Power Up Lending Group Ltd. In April 2021, the Company obtained a loan from
Power Up Lending Group Ltd. which netted the Company $68,750 in proceeds. In
consideration of such loan, the Company issued a $68,750 face amount convertible
promissory note ("Power Up Note #3") bearing interest at 12% per annum, with
principal and interest due in April 2022. The Company had the right to repay the
Power Up Note #3 at a premium ranging from 125% to 145% of the face amount. The
Power Up Note #3 was convertible into shares of the Company's common stock at a
conversion price equal to the lower of 61% of the market price of the Company's
common stock on the date of issuance of the Power Up Note #3 and the date of
conversion, any time after October 22, 2021.
In September 2021, the Power Up Note #3 was repaid in full by the Company, as
follows: $68,750.00 in principal, $27,500.00 in additional principal as a
prepayment premium and $5,063.01 in interest, a total repayment amount of
$101,313.01.
Power Up Lending Group Ltd. In August 2021, the Company obtained a loan from
Power Up Lending Group Ltd. which netted the Company $78,750 in proceeds. In
consideration of such loan, the Company issued a $78,750 face amount convertible
promissory note ("Power Up Note #4") bearing interest at 12% per annum, with
principal and interest due in August 2022. The Company had the right to repay
the Power Up Note #4 at a premium ranging from 125% to 145% of the face amount.
The Power Up Note #3 was convertible into shares of the Company's common stock
at a conversion price equal to the lower of 61% of the market price of the
Company's common stock on the date of issuance of the Power Up Note #4 and the
date of conversion, any time after October 22, 2021.
In September 2021, the Power Up Note #4 was repaid in full by the Company, as
follows: $78,750.00 in principal, $15,750.00 in additional principal as a
prepayment premium and $5,393.84 in interest, a total repayment amount of
$99,893.84.
FirstFire Global Opportunities Fund LLC. In September 2021, the Company obtained
a loan from FirstFire Global Opportunities Fund LLC which netted the Company
$125,000 in proceeds. In consideration of such loan, the Company issued a
$250,000 face amount convertible promissory note ("FirstFire Note"), with OID of
$125,000, due in September 2022. The Company had the right to repay the
FirstFire Note at anytime, with a 20%, or $50,000, reduction in principal owed
if repaid in full on or before November 30, 2021. The FirstFire Note was
convertible into shares of the Company's common stock at a conversion price
equal to $.015 per share, any time after December 1, 2021.
Prior to November 30, 2021, the FirstFire Note was repaid in full by the
Company, in the amount of $200,000 (which included a $50,000 reduction in
principal owed, due to the FirstFire Note's being repaid in full on or before
November 30, 2021).
Tiger Trout Capital Puerto Rico, LLC. In September 2021, the Company obtained a
loan from Tiger Trout Capital Puerto Rico, LLC which netted the Company $250,000
in proceeds. In consideration of such loan, the Company issued a $500,000 face
amount convertible promissory note ("Tiger Trout Note"), with OID of $250,000,
with principal due in September 2022. The Company has the right to repay the
Tiger Trout Note at anytime, with a 10%, or $50,000, reduction in principal owed
if repaid in full on or before November 30, 2021. The Tiger Trout Note is
convertible into shares of the Company's common stock at a conversion price
equal to $.015 per share, any time after December 1, 2021.
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During the three months ended March 31, 2022, the Company repaid in full the
remaining $200,000 balance of the Tiger Trout Note.
Sixth Street Lending LLC. In March 2022, we obtained a loan from Sixth Street
Lending LLC which netted our company $200,000 in proceeds. In consideration of
such loan, we issued a $228,200 face amount promissory note (the "Sixth Street
Note #1"), with OID of $24,450 and a one-time interest charge of $25,102, with
principal and interest payable in 10 equal monthly payments of $25,330.20
beginning in May 2022. We have the right to repay the Sixth Street Note #1 at
any time, without penalty. Should we become in default on the Sixth Street Note
#1 , the Sixth Street Note #1 becomes convertible into shares of our common
stock at a conversion price equal to 75% multiplied by the lowest trading price
of our common stock during the 10 trading days prior to the applicable
conversion date.
Subsequent to March 31, 2022, we have derived capital from third-parties, as
described below.
Talos Victory Fund, LLC. In May 2002, we obtained a loan from Talos Victory
Fund, LLC which netted our company $107,780 in proceeds. In consideration of
such loan, we issued a $135,000 face amount promissory note (the "Talos Note
#1"), with OID of $13,500, commissions of $9,720 and legal fees of $4,000. The
Talos Note #1 is due in May 2023 and is convertible into shares of the Company's
common stock at any time at a conversion price of $.005 per share, subject to a
4.99% equity blocker.
Mast Hill Fund, L.P. In May 2002, we obtained a loan from Mast Hill Fund, L.P.
which netted our company $200,000 in proceeds. In consideration of such loan, we
issued a $250,000 face amount promissory note (the "Mast Hill Note #1"), with
OID of $25,000, commissions of $18,000 and legal fees of $7,000. The Mast Hill
Note #1 is due in May 2023 and is convertible into shares of the Company's
common stock at any time at a conversion price of $.005 per share, subject to a
4.99% equity blocker.
Inflation
Our management believes economic conditions point toward significant
inflationary pressures arising in the near future. However, no prediction can be
made in this regard and, further, no prediction can be made with respect to how
the potential impact any inflation would affect our results of operations.
Seasonality
Our Big Sky American operations are subject to seasonal fluctuation, with the
months of May through September providing approximately 70% of Big Sky
American's sales revenues. We expect that our operating results with respect to
MiteXstream will be impacted, in an indeterminate measure, by the seasonality of
farming operations, including cannabis grow operations. However, we are
currently unable to predict the level to which such seasonality will impact our
MiteXstream business.
Off Balance Sheet Arrangements
As of March 31, 2022, there were no off-balance sheet arrangements.
Contractual Obligations
In May 2020, BB Potentials entered into a facility lease with Grizzly Creek
Farms, LLC, an entity owned by one our Directors, Fabian G. Deneault, with
respect to approximately 2,000 square feet of manufacturing space located in
Ronan, Montana. Monthly rent under such lease was $1,500 and the initial term of
such lease expired in December 2025. This lease was terminated effective April
1, 2021. Since such date, Mr. Deneault permits BB Potentials to utilize the
previously-leased facility for storage, at no charge.
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The following sets forth information concerning the sole operating lease for the
facility maintained by us as of the date of this Annual Report.
Address Description Use Yearly Rent Expiration Date
3505 Yucca Drive,
Suite 104 Corporate Office Administrative $7,200 April 2022
Flower Mound, TX (160 sq. ft.)
75028
Capital Expenditures
We made capital expenditures of $185,702 during the year ended December 31,
2021, which included the purchase of distribution assets used by Big Sky
American and the purchase of other distribution-related assets. Without
obtaining additional capital, we will not be able to make any capital
expenditures.
We made no capital expenditures during the year ended December 31, 2020.
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