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. 31
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. 32 Results of Operations Overview Net revenues increased during the six months endedJune 30, 2022 due to Aphrodite's Marketing and GearBubble Tech acquisition as compared to the six months endedJune 30, 2021 despite the impact of the current pandemic. Our retail operations have been impacted by the pandemic. We continue to evaluate our initiatives. We are expanding our online presence and have been experiencing positive results, but it is too early to assess the real impact. The Company continues to position itself for the future with the acquisition of Aphrodite's Marketing 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
June 30, June 30, Increase Percent Increase
2022 2021 (Decrease) (Decrease)Net revenues$ 2,458,531 $ 2,137,320 $ 321,211 15.02 % Net revenues - related parties 666 -
666 100 %
Total net revenues 2,459,197 2,137,320 321,877 15.06 %
Cost of revenues 1,118,184 378,090 740,094 195.75 %
Gross profit $ 1,341,013 $ 1,759,230 $ (418,217 ) (23.77 %)
Gross profit as a % of sales 54.55 % 82.31 %
Six Months Ended
June 30, June 30, Increase Percent Increase
2022 2021 (Decrease) (Decrease)Net revenues$ 4,415,032 $ 3,286,634 $ 1,128,398 34.33 % Net revenues - related parties 139,716 -
139,716 100 % Total net revenues 4,554,748 3,286,634 1,268,114 38.58 % Cost of revenues 2,465,758 688,256 1,777,502 258.26 % Gross profit$ 2,088,990 $ 2,598,378 $ (509,388 ) (19.60 %)
Gross profit as a % of sales 45.86 % 79.06 % Net Revenues Total net revenues for the three months endedJune 30, 2022 including net revenues - related parties which amounted to$2,459,197 increased by$321,877 as compared to$2,137,320 . Total net revenues for the six months endedJune 30, 2022 including net revenues - related parties which amounted to$4,554,748 increased by$1,268,114 as compared to$3,286,634 . This increase in total net revenues is the result of the acquisition of Aphrodite's Marketing and GearBubble Tech which expanded the selling opportunities internationally and nationwide thru out the US. 33 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 endedJune 30, 2022 increased by$740,097 to$1,118,184 as compared to$688,256 . Cost of revenues for the six months endedJune 30, 2022 increased by$1,777,502 to$2,465,758 as compared to$378,090 . This increase is the result of increase in net revenues related to the acquisition of Aphrodite's Marketing and GearBubble Tech. Gross Profit
Gross profit decreased by$418,217 to$1,341,013 for the three months endedJune 30, 2022 as compared to$1,759,230 for the six months endedJune 30, 2021 . Gross profit decreased by$509,388 to$2,088,990 for the six months endedJune 30, 2022 as compared to$2,598,378 for the six months endedJune 30, 2021 . This decrease is primarily attributable to increase in cost of revenues as discussed above. Operating Expenses
Operating expenses decreased by$271,141 to$1,962,330 for the three months endedJune 30, 2022 as compared to$2,233,471 for the three months endedJune 30, 2021 . The decrease was primarily attributable to i) decrease in selling and, marketing expenses of$630,153 primarily attributable to decrease advertising and marketing activities through social media, digital marketing, and promotional campaigns ii) increase professional and consulting expenses of$221,295 primarily related to increase in consulting and contractor fees related to increase operations as a result of the acquisition of Aphrodite's Marketing and GearBubble Tech, iii) increase in compensation and related taxes of$95,471 primarily related to the increase in number of employees as a result of the acquisition of Aphrodite's Marketing and GearBubble Tech and iv) increase in general and administrative expenses of$42,246 . The overall decrease in operating expenses reflect the decrease in advertising and marketing expenses through social media and digital marketing activities. Operating expenses increased by$236,563 to$3,674,264 for the six months endedJune 30, 2022 as compared to$3,437,701 for the six months endedJune 30, 2021 . The increase was primarily attributable to i) decrease in selling and, marketing expenses of$574,991 primarily attributable to decrease advertising and marketing activities through social media, digital marketing, and promotional campaigns ii) increase professional and consulting expenses of$603,479 primarily related to increase in consulting and contractor fees related to increase operations as a result of the acquisition of Aphrodite's Marketing and GearBubble Tech, iii) increase in compensation and related taxes of$279,389 primarily related to the increase in number of employees as a result of the acquisition of Aphrodite's Marketing and GearBubble Tech and iv) decrease in general and administrative expenses of$71,314 due to decrease in depreciation and office expenses. The overall increase in operating expenses reflect the increase in business operations as a result of the acquisition of Aphrodite's Marketing and GearBubble Tech. Loss from Operations
As a result of the above, we had a loss from operation of$621,317 for the three months endedJune 30, 2022 as compared to a loss from operations of$474,241 for the three months endedJune 30, 2021 . We had a loss from operation of$1,585,274 for the six months endedJune 30, 2022 as compared to a loss from operations of$839,323 for the six months endedJune 30, 2021 . Other Income (Expense) For the three months endedJune 30, 2022 , the Company had other income (expense) of$435,937 as compared to other expense of$1,446,260 for the six months endedJune 30, 2021 , a change of$1,882,197 . The increase in other income is primarily attributed to the decrease in amortization of debt discount and deferred financing cost of$427,209 , decrease in interest expense of$332,425 due to the repayments of debt, and decrease in change in fair value of derivative liabilities of$1,024,982 , and decrease in derivative expense of$88,837 . For the six months endedJune 30, 2022 , the Company had other expense of$678,417 as compared to other expense of$1,558,800 for the six months endedJune 30, 2021 , a decrease of$880,383 in other expense. The decrease in other expense is primarily attributed to the decrease in amortization of debt discount and deferred financing cost of$268,371 , decrease in change in fair value of derivative liabilities of$1,325,765 , decrease in derivative expense of$197,303 , and decrease in gain from extinguishment of debt of$161,905 offset by increase in interest expense of$715,894 due to note conversions. 34
Net Income (Loss) Attributable to
As a result of the above, we had net income (loss) attributable toBergio International, Inc. $20,511 for the three months endedJune 30, 2022 as compared to ($1,619,617 ) for the three months endedJune 30, 2021 . As a result of the above, we had net loss attributable toBergio International, Inc. $1,565,075 for the six months endedJune 30, 2022 as compared to$2,020,971 for the six months endedJune 30, 2021 .
Net Loss Available to
As a result of the above, we had net loss available toBergio International, Inc. common stockholders of$720,367 for the three months endedJune 30, 2022 as compared to$1,619,617 for the three months endedJune 30, 2021 after the recognition of deemed dividend of$740,878 upon the issuance of the Series D Preferred Stock. As a result of the above, we had net loss available toBergio International, Inc. common stockholders of$3,120,953 for the six months endedJune 30, 2022 as compared to$2,020,971 for the six months endedJune 30, 2021 after the recognition of deemed dividend of$1,555,878 upon the issuance of
the Series D Preferred Stock.
Liquidity and Capital Resources
The following table summarizes working capital atJune 30, 2022 , compared toDecember 31, 2021 : June 30, December 31, Increase/ 2022 2021 (Decrease) Current Assets$ 3,722,883 $ 4,384,185 $ (661,302 ) Current Liabilities$ 4,131,692 $ 6,748,062 $ (2,616,370 ) Working Capital Deficit$ (408,809 ) $ (2,363,877 ) $ 1,955,068 AtJune 30, 2022 the Company had working capital deficit of$408,809 as compared to$2,363,877 atDecember 31, 2021 . This decrease in working capital deficit is primarily attributed to the decrease in liabilities.
During the six months ended
Cash used in operating activities: For the six months endedJune 30, 2022 , the Company used$1,577,894 in cash for operations as compared to$755,753 in cash used for operations for the six months endedJune 30, 2021 . This increase in cash used in operations is primarily attributed to net loss of$1,565,075 , amortization expense of$120,978 , non-cash interest upon conversion of debt of$1,025,660 , amortization of debt discount and deferred financing cost of$402,494 , offset by non-controlling interest of$698,616 , change in fair value of derivative liabilities of$556,554 , gain from extinguishment of debt$261,404 , and decrease in changes in operating assets and liabilities of$66,478 primarily attributable to increase in accounts receivable of$90,062 , increase in accrued compensation - CEO of$403,460 , decrease in inventory of$205,297 , decrease in accounts payable and accrued liabilities of$234,034 , and decrease in deferred compensation - CEO$346,163 . For the six months endedJune 30, 2021 , the Company used$755,753 in cash for operations as compared to$14,754 in cash used for operations for the six months endedJune 30, 2020 . This increase in cash used in operations is primarily attributed to increase in net loss, increase in depreciation and amortization expense, increase in amortization of debt discount and deferred financing cost, increase in derivative expense, increase in change in fair value of derivative liabilities, increase in inventory, increase in accounts payable and accrued liabilities offset by increase in gain from extinguishment of debt and decrease in prepaid expenses.
Cash used in investing activities: For the six months endedJune 30, 2022 , the Company used$0 in cash for investing activities as compared to$44,355 of cash in investing activities for the six months endedJune 30, 2021 for purchase
of
property and equipment.
35
Cash provided by financing activities: Cash provided by financing activities for
the six months ended June 30, 2022 was $979,172 as compared to $3,149,135 for
the six months ended June 30, 2021 and was primarily the result of net proceeds
received from convertible notes of $76,250 , sale of preferred stock of
$1,555,000 , proceeds from loans $595,600 , proceeds from a note of $110,000
offset by repayments of loans payable of $641,606 , repayment of secured notes of
$400,000 , repayment of note of $180,414 and repayment of advances to CEO of
$135,858 .
Cash provided by financing activities for the six months ended June 30, 2021 was
$3,149,135 and was primarily the result of increases in funds raised proceeds
from the proceeds from notes payable of $1,617,500 , sale of common stock of
$2,958,837 offset by repayments of loans payable, debt and convertible debtfor a total of$1,437,379 .
Our indebtedness is comprised of loans payable, convertible notes, and promissory note intended to provide capital for the ongoing manufacturing of our jewelry line, in advance of receipt of the payment from our retail distributors.
Convertible Notes From time to time the Company enters into certain financing agreements for convertible notes. For the most part, the Company settles these obligations with the Company's common stock. As ofJune 30, 2022 , principal amounts under the convertible notes payable was$80,000 , net of debt discount of$55,013 atJune 30, 2022 . Notes Payable
The Company has total notes payable of
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$17,587,581 as ofJune 30, 2022 . As ofJune 30, 2022 , the Company has principal amounts of convertible notes of$80,000 , notes payable (current and long-term portion) of$1,050,238 and loans payable of$923,465 . These factors raise substantial doubt about the Company's ability to continue as a going concern. The recoverability of a major portion of the recorded asset amounts shown in the accompanying unaudited condensed consolidated balance sheet is dependent upon continued operations of the Company, which in turn, is dependent upon the Company's ability to raise capital and/or generate positive cash flows from operations. These unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence. Research and Development
We are not anticipating significant research and development expenditures in the near future.
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Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, results or operations, liquidity, capital expenditures or capital resources that is deemed material. Critical Accounting Policies Our critical accounting policies are described in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report. There have been no changes in our critical accounting policies. Our significant accounting policies are described in our notes to the consolidated financial statements for the year endedDecember 31, 2021 which is included in our Annual Report.
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