UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended:
Commission File Number:
(Exact name of registrant as specified in its charter)
| ||
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(
(Registrant’s telephone number, including area code)
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
N/A |
| N/A |
| N/A |
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.00001 par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months, and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ |
| Accelerated filer | ☐ |
☒ |
| Smaller reporting company | ||
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| Emerging growth company |
i
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of November 8, 2022 there were
ii
TABLE OF CONTENTS
iii
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BERGIO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2022 |
| December 31, 2021 | |||
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ASSETS: |
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Current assets: |
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Cash |
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Accounts receivable |
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Accounts receivable - related parties |
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Inventory |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Goodwill |
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Intangible assets, net |
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Operating lease right of use assets |
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Investment in unconsolidated affiliate |
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Total Assets |
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LIABILITIES AND STOCKHOLDERS’ EQUITY: |
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Current liabilities: |
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Accounts payable and accrued liabilities |
| $ |
| $ | ||
Accrued compensation - CEO |
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Secured notes payable, net of debt discount |
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Notes payable - current portion, net of debt discount |
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Convertible notes payable, net of debt discount |
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Loans payable and accrued interest |
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Deferred compensation - CEO |
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Advances from CEO and accrued interest |
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Derivative liability - convertible debt |
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Derivative liability - acquisition |
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Operating lease liabilities - current |
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Total current liabilities |
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Long-term liabilities: |
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Notes payable - long-term |
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Operating lease liabilities - long-term |
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Total long term liabilities |
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Total Liabilities |
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Commitments and contingencies |
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The accompanying unaudited condensed notes are an integral part of these unaudited condensed consolidated financial statements.
1
BERGIO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
- CONTINUED -
| September 30, 2022 |
| December 31, 2021 | |||
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| (Unaudited) |
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Stockholders’ equity |
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Preferred stock Series A preferred stock - $ authorized, at September 30, 2022 and December 31, 2021, respectively |
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Convertible Series B preferred stock - $ authorized, at September 30, 2022 and December 31, 2021, respectively ($ |
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Convertible Series C preferred stock - $ authorized, at September 30, 2022 and December 31, 2021, respectively ($ |
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Convertible Series D preferred stock - $ authorized, at September 30, 2022 and December 31, 2021, respectively ($ |
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Common stock, $ as of September 30, 2022 and December 31, 2021, respectively |
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Common stock issuable ( September 30, 2022 and December 31, 2021, respectively) |
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Treasury stock |
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Additional paid-in capital |
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Accumulated deficit |
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Total Bergio International, Inc. stockholders’ equity |
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Non-controlling interest in subsidiaries |
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Total Stockholders’ equity |
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Total Liabilities and Stockholders’ Equity |
| $ |
| $ | ||
The accompanying unaudited condensed notes are an integral part of these unaudited condensed consolidated financial statements.
2
BERGIO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
| For the Three Months Ended September 30, |
| For the Nine Months Ended September 30, | ||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||
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Net revenues |
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Net revenues - related parties |
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Total net revenues |
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Cost of revenues |
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Gross profit |
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Operating expenses: |
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Selling and marketing expenses |
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Professional and consulting expenses |
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Compensation and related expenses |
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General and administrative expenses |
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Total operating expenses |
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Loss from operations |
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Other income (expenses) |
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Interest expense |
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Derivative expense |
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Amortization of debt discount and deferred financing cost |
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Loss from foreign currency transactions |
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Fraud loss caused by computer hackers |
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Change in fair value of derivative liabilities |
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Interest income |
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Other income |
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Gain from extinguishment of debt, net |
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Total other expenses, net |
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Loss before provision for income taxes |
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Provision for income taxes |
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Net loss |
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Losses attributable to non-controlling interest |
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Net loss attributable to Bergio International, Inc. |
| $ | ( |
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Deemed dividend |
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Net loss available to Bergio International, Inc. common stockholders |
| $ | ( |
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Net loss per common share: |
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Basic and diluted |
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Weighted average common shares outstanding: |
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Basic and diluted |
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The accompanying unaudited condensed notes are an integral part of these unaudited condensed consolidated financial statements.
3
BERGIO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
For the Nine Months Ended September 30, 2022
(Unaudited)
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| Series A Preferred Stock |
| Series B Preferred Stock |
| Series C Preferred Stock |
| Series D Preferred Stock |
| Common Stock |
| Common Stock Issuable |
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Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Additional Paid In Capital |
| Treasury Stock |
| Accumulated Deficit |
| Non-controlling Interest |
| Total Stockholders’ Equity (Deficit) | ||||||||||||
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Balance, December 31, 2021 |
| $ |
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Series D preferred stock issued for cash, net of offering cost |
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Deemed dividend upon issuance of Series D preferred stock |
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Issuance of common stock for debt conversion including accrued interest and fees |
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Accretion of stock-based compensation for services |
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Accrued dividends on preferred stock |
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Cancellation of treasury stock |
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Net loss |
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Balance, March 31, 2022 |
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Series D preferred stock issued for cash, net of offering cost |
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Deemed dividend upon issuance of Series D preferred stock |
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Issuance of common stock for conversion of Series C preferred stock |
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Reclassification of derivative liability to equity upon conversion of Series C preferred stock |
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Issuance of common stock for debt conversion including accrued interest and fees |
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Issuance of common stock for common stock issuable |
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Cashless exercise of stock warrants |
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Accretion of stock-based compensation for services |
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Accrued dividends on preferred stock |
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Net loss |
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Balance, June 30, 2022 |
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Issuance of common stock for debt conversion including accrued interest and fees |
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Issuance of common stock for conversion of Series D preferred stock and accrued dividends |
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Common stock issuable for services to CEO |
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Common stock issued for services |
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Accretion of stock-based compensation for services |
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Accrued dividends on preferred stock |
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Net loss |
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Balance, September 30, 2022 |
| $ |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ |
| $ |
| $ |
| $ | ( |
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| $ | |||||||||||||||
The accompanying unaudited condensed notes are an integral part of these unaudited condensed consolidated financial statements.
4
BERGIO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
For the Nine Months Ended September 30, 2021
(Unaudited)
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| Series A Preferred Stock |
| Series B Preferred Stock |
| Series C Preferred Stock |
| Series D Preferred Stock |
| Common Stock |
| Common Stock Issuable |
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Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Additional Paid In Capital |
| Treasury Stock |
| Accumulated Deficit |
| Non-controlling Interest |
| Total Stockholders’ Equity (Deficit) | ||||||||||||
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Balance, December 31, 2020 |
| $ |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ |
| $ |
| $ |
| $ | ( |
| $ |
| $ | ( | |||||||||||||||
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Common stock issued for cash |
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Issuance of common stock for debt conversion |
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Value of preferred stock at issuance associated with the acquisition of Aphrodite’s Marketing |
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Common stock warrants granted in connection with the issuance of convertible notes |
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Proceeds from grants |
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Net loss |
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Balance, March 31, 2021 |
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Common stock issued for cash |
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Issuance of common stock for debt conversion |
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Beneficial conversion feature in connection with the issuance of convertible notes |
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Accrued dividends on preferred stock |
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| ( | |||||||||||||||
Net loss |
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| ( |
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Balance, June 30, 2021 |
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Common stock issued for cash |
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Issuance of common stock for debt conversion |
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Non-controlling interest upon acquisition of GearBubble |
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Accrued dividends on preferred stock |
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| ( |
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| ( | |||||||||||||||
Net loss |
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| ( |
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| ( |
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| ( | ||||||||||
Balance, September 30, 2021 |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| $ |
| $ |
| $ | ( |
| $ | ( |
| $ | |||||||||||||||
The accompanying unaudited condensed notes are an integral part of these unaudited condensed consolidated financial statements.
5
BERGIO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
| For the Nine Months Ended September 30, | ||||
| 2022 |
| 2021 | |||
|
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| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
| ||
Net loss attributable to Bergio International, Inc. |
| $ | ( |
| $ | ( |
Adjustments to reconcile net loss to net cash used in operating activities |
|
|
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|
Non-controlling interest in subsidiaries |
|
| ( |
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| ( |
Amortization expense |
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Depreciation expense |
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Stock-based compensation |
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Amortization of debt discount and deferred financing costs |
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Derivative expense |
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| ||
Forgiveness of debt |
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| ( | |
Gain from settlement of loan included in other income |
|
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| ( | |
Change in fair value of derivative liabilities |
|
| ( |
|
| |
Gain from extinguishment of debt |
|
| ( |
|
| ( |
Non-cash interest upon conversion of debt |
|
|
|
| ||
Amortization of right of use assets |
|
| ( |
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| |
Change in operating assets and liabilities: |
|
|
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|
|
|
Accounts receivable |
|
| ( |
|
| |
Inventory |
|
|
|
| ( | |
Prepaid expenses and other current assets |
|
| ( |
|
| |
Accounts payable and accrued liabilities |
|
| ( |
|
| |
Accrued compensation - CEO |
|
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| ||
Operating lease obligations |
|
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| ||
Deferred compensation - CEO |
|
| ( |
|
| ( |
NET CASH USED IN OPERATING ACTIVITIES |
|
| ( |
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| ( |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
|
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|
Cash acquired from the acquisition of GearBubble |
|
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|
| ||
Cash paid upon acquisition of GearBubble |
|
|
|
| ( | |
Purchase of property and equipment |
|
|
|
| ( | |
NET CASH USED IN INVESTING ACTIVITIES |
|
|
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| ( | |
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|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
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|
|
Proceeds from sale of common stock |
|
|
|
| ||
Proceeds from sale of preferred stock, net of offering cost |
|
|
|
| ||
Proceeds from government grant |
|
|
|
| ||
Proceeds from note payable |
|
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| ||
Proceeds from loans payable |
|
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| ||
Proceeds from convertible notes, net of debt issuance cost |
|
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|
| ||
Repayment on convertible debt |
|
|
|
| ( | |
Repayment on note payable |
|
| ( |
|
| |
Repayment on loans payable |
|
| ( |
|
| ( |
Repayment on debt |
|
|
|
| ( | |
Repayment on secured notes payable |
|
| ( |
|
| |
Advance from (payments to) Chief Executive Officer, net |
|
| ( |
|
| ( |
NET CASH PROVIDED BY FINANCING ACTIVITIES |
|
|
|
| ||
|
|
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|
NET CHANGE IN CASH AND CASH EQUIVALENTS: |
|
| ( |
|
| |
CASH AND CASH EQUIVALENTS - beginning of period |
|
|
|
| ||
CASH AND CASH EQUIVALENTS - end of period |
| $ |
| $ | ||
The accompanying unaudited condensed notes are an integral part of these unaudited condensed consolidated financial statements.
6
BERGIO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
- CONTINUED -
|
| For the Nine Months Ended September 30, | ||||
| 2022 |
| 2021 | |||
|
|
|
|
| ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
Interest |
| $ |
| $ | ||
Income taxes |
| $ |
| $ | ||
|
|
|
|
|
|
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
Issuance of common stock issued for convertible debt, loans payable, and accrued interest |
| $ |
| $ | ||
Deemed dividend upon issuance of Series D preferred stock |
| $ |
| $ | ||
Debt discount in connection with the issuance of stock warrants |
| $ |
| $ | ||
Initial amount of ROU asset and related liability |
| $ |
| $ | ||
Initial derivative liability recorded in connection with convertible notes payable |
| $ |
| $ | ||
Initial derivative liability recorded in connection with acquisition of Aphrodite’s Marketing related to the issuance of Series B preferred stock |
| $ |
| $ | ||
Initial derivative liability recorded due to commission fees for the acquisition of Aphrodite’s Marketing related to the issuance of Series C preferred stock |
| $ |
| $ | ||
Issuance of Series B preferred stock issued for the acquisition of Aphrodite’s Marketing |
| $ |
| $ | ||
Non-controlling interest upon acquisition of GearBubble |
| $ |
| $ | ||
Reclassification of derivative liability to equity upon conversion of Series C preferred stock |
| $ |
| $ | ||
|
|
|
|
|
|
|
Net liability assumed in acquisition of Aphrodite's Marketing: |
|
|
|
|
|
|
Cash |
| $ |
| $ | ||
Accounts receivable, net |
|
|
|
| ||
Inventory |
|
|
|
| ||
Prepaid expenses |
|
|
|
| ||
Accounts payable and accrued liabilities |
|
|
|
| ( | |
Loans payable |
|
|
|
| ( | |
Note payable - long term |
|
|
|
| ( | |
Net liability assumed |
|
|
|
| ( | |
|
|
|
|
|
|
|
Net assets assumed in acquisition of GearBubble: |
|
|
|
|
|
|
Cash |
| $ |
| $ | ||
Prepaid expenses and other current assets |
|
|
|
| ||
Property and equipment |
|
|
|
| ||
Accounts payable and accrued liabilities |
|
|
|
| ( | |
Net assets assumed |
| $ |
| $ | ||
The accompanying unaudited condensed notes are an integral part of these unaudited condensed consolidated financial statements.
7
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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
On July 1, 2021 (“Closing”), the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with GearBubble, Inc., a Nevada corporation, (“GearBubble”), pursuant to which the shareholders of GearBubble (the “Equity Recipients”) agreed to sell
On March 24, 2021, the Company filed, with the Wyoming Secretary of State, a Certificate of Amendment, to amend its Articles of Incorporation. The amendment reflected the increase in the authorized shares of common stock from 1,000,000,000 shares to
On September 26, 2022, the Company filed, with the Wyoming Secretary of State, a Certificate of Amendment, to amend its Articles of Incorporation and reflected the increase in the authorized shares of common stock from 9,000,000,000 shares to
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 September 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
8
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
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 nine months ended September 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.
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
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 $
9
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
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 $
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
These unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Note 3 - Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States which includes the Company, its wholly-owned and majority owned subsidiaries as of September 30, 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 nine months ended September 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
10
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
allocates the contract transaction price to each distinct performance obligation. The standalone selling price, or our best estimate of standalone selling price, is used to allocate the transaction price to the separate performance obligations. The Company recognizes revenue when, or as, the performance obligation is satisfied.
Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Also, significant judgment may be required to determine the allocation of transaction price to each distinct performance obligation.
Generally, revenues are recognized at the time of shipment to the customer with the price being fixed and determinable and collectability assured, provided title and risk of loss is transferred to the customer. Provisions, when appropriate, are made where the right to return exists. Shipping and handling costs charged to customers are classified as sales, and the shipping and handling costs incurred are included in cost of sales.
The Company’s subsidiary, GearBubble Tech, recognizes revenue from three sources: (1) e-commerce revenue (2) platform subscription fees and (3) partner and services revenue.
•Revenues are recognized when the merchandise is shipped to the customer and title is transferred and are recorded net of any returns, and discounts or allowances. Shipping cost paid by customers are primarily for ecommerce sales and are included in revenue. Merchandise sales are fulfilled with inventory sourced through our suppliers. Therefore, the Company’s contracts have a single performance obligation (shipment of product).
The Company evaluates the criteria outlined in ASC 606-10-55, Principal versus Agent Considerations, in determining whether it is appropriate to record the gross amount of merchandise sales and related costs or the net amount earned as commissions. The Company evaluates whether it is appropriate to recognize revenue on a gross or net basis based upon its evaluation of whether the Company obtains control of the specified goods by considering if it is primarily responsible for fulfillment of the promise, has inventory risk, and has the latitude in establishing pricing and selecting suppliers, among other factors. The ecommerce sellers have no further obligation to the customer after the promised goods are transferred to the customer. Based on its evaluation of these factors, we have determined we are the principal in these arrangements. Through our suppliers, we have the ability to control the promised goods and as a result, the Company records ecommerce sales on a gross basis.
The Company refunds the full cost of the merchandise returned and all original shipping charges if the returned item is defective or we or our partners have made an error, such as shipping the wrong product. If the return is not a result of a product defect or a fulfillment error and the customer initiate a return of an unopened item within 30 days of delivery, for most products we refund the full cost of the merchandise minus the original shipping charge and actual return shipping fees. If our customer returns an item that has been opened or shows signs of wear, the Company issues a partial refund minus the original shipping charge and actual return shipping fees.
•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.
11
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
Cost of revenues
Cost of revenue consists primarily of the cost of the merchandise, shipping fees, credit card processing services, fulfillment cost, ecommerce sellers’ pay-out; costs associated with operation and maintenance of the Company’s platform.
Marketing
The Company applies ASC 720 “Other Expenses” to account for marketing costs. Pursuant to ASC 720-35-25-1, the Company expenses marketing costs as incurred. Marketing costs include advertising and related expenses for third party personnel engaged in marketing and selling activities, including sales commissions, and third-party e-commerce platform fees and selling fees. The Company directs its customers to the Company’s ecommerce platform through social media, digital marketing, and promotional campaigns. Marketing costs were $
Shipping and Handling Costs
The Company accounts for shipping and handling fees in accordance with ASC 606. While amounts charged to customers for shipping products are included in revenues, the related costs of shipping products to customers are classified in selling and marketing expenses as incurred.
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 September 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).
12
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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 September 30, 2022:
|
| September 30, 2022 |
| December 31, 2021 | ||||||||||||||||||
Description |
| Level 1 |
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| Level 2 |
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| Level 3 |
| Level 1 |
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| Level 2 |
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| Level 3 | ||||||
Total derivative liabilities |
| $ | - |
|
| $ | - |
|
| $ |
| $ | - |
|
| $ | - |
|
| $ | ||
ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding equity instruments.
Cash and Cash Equivalents
Cash equivalents are comprised of certain highly liquid instruments with a maturity of three months or less when purchased. The Company did not have any cash equivalents on hand at September 30, 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 $
13
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
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.
An allowance for doubtful accounts is provided against accounts receivable for amounts management believes may be uncollectible. The Company determines the adequacy of this allowance by regularly reviewing the composition of its accounts receivable aging and evaluating individual customer receivables, considering the customer’s financial condition, credit history and current economic circumstance. While credit losses have historically been within the Company’s expectation and the provision established, the Company cannot guarantee that this will continue. As of September 30, 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 nine months ended September 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.
14
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
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.
Concentration Risk
Concentration of Revenues
For the nine months ended September 30, 2022 and 2021, no customer accounted for over 10% of total revenues.
Concentration of Accounts Receivable
As of September 30, 2022, total accounts receivable amounted to $
Concentration of Purchases
The Company purchased approximately
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.
15
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
Note 4 - Property and Equipment
Property and equipment consist of the following:
| September 30, 2022 |
| December 31, 2021 | |||
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Leasehold improvements |
| $ |
| $ | ||
Office and computer equipment |
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Selling equipment |
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Furniture and fixtures |
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Total at cost |
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Less: Accumulated depreciation |
|
| ( |
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| ( |
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|
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| $ |
| $ | ||
Depreciation expense for the nine months ended September 30, 2022 and 2021 was $
Note 5 - Net Loss per Share
Pursuant to ASC 260-10-45, basic loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the periods presented. Diluted loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. Potentially dilutive common shares consist of common stock issuable for stock options and stock warrants (using the treasury stock method), convertible notes and common stock issuable. These common stock equivalents may be dilutive in the future.
The potentially dilutive common stock equivalents as of September 30, 2022 and 2021 were excluded from the dilutive loss per share calculation as they would be antidilutive due to the net loss as follow:
| September 30, 2022 |
| September 30, 2021 | |||
|
| (Unaudited) |
| (Unaudited) | ||
Common Stock Equivalents: |
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Stock Warrants |
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Convertible Preferred Stock |
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Convertible Notes |
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Total |
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16
BERGIO INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)