Statements, other than historical facts, contained in this Quarterly Report on
Form 10-Q, including statements of potential acquisitions and our strategies,
plans and objectives, are "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Although we believe that our forward-looking statements are
based on reasonable assumptions, we caution that such statements are subject to
a wide range of risks, trends and uncertainties that could cause actual results
to differ materially from those projected. Among those risks, trends and
uncertainties are important factors that could cause actual results to differ
materially from the forward looking statements, including, but not limited to;
the time management devotes to identifying a target business; management's
ability to consummate a business combination; the financial condition of the
target company with which we may enter a business combination; the effect of
existing and future laws; governmental regulations; political and economic
conditions; and conditions in the capital markets. We undertake no duty to
update or revise these forward-looking statements.
When used in this Form 10-Q, the words, "expect," "anticipate," "intend,"
"plan," "believe," "seek," "estimate" and similar expressions are intended to
identify forward-looking statements, although not all forward-looking statements
contain these identifying words. Because these forward-looking statements
involve risks and uncertainties, actual results could differ materially from
those expressed or implied by these forward-looking statements for a number of
important reasons.
Overview
Bloomios manufactures, markets and distributes U.S. hemp-derived supplements and
cosmetic products through wholesale and retail distribution channels in the U.S.
through its wholly-owned subsidiary Bloomios Private Label ("BPL"). BPL is an
innovative leader in quality manufacturing, processing, sourcing and
distributing of cannabidiol products to wholesalers and retailers. BPL provides
support at each step from custom formulation, order fulfillment, and brand
development. We offer one of the largest collections of customizable
hemp-derived products that includes over 220 products across 12 categories in
addition to custom formulation and manufacturing services. Our product
categories include gummies, edibles, tinctures, oils, salves, capsules, balms,
lotions, creams, beverages, and pet treats.
On April 19, 2021, the Company filed what is commonly called a Super 8K that
provides the information that would be filed via a Form 10 registration. Upon
making that filing with the SEC disclosing the cessation of the Company's status
as a shell company. Due to the Company's former shell status, certain exemptions
are not available for different mandated periods of time. The Company is
prohibited from using Form S-8 until sixty calendar days after the date it filed
its Super 8K. Additionally, Rule 144 under the Act provides an exemption from
the registration requirements of the Securities Act and allows the holders of
restricted securities to sell their securities utilizing one of the provisions
of this Rule. However, Rule 144 specifically precludes reliance by holders of
securities of shell companies such as ours has been historically classified or
any issuer that has been at any time previously a shell company, except if the
following conditions are met:
· The issuer of the securities that was formerly a shell company has ceased
to be a shell company;
· The issuer of the securities is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act;
· The issuer of the securities has filed all Exchange Act reports and
material required to be filed, as applicable, during the preceding 12
months (or such shorter period that the issuer was required to file such
reports and materials), other than current reports on Form 8-K; and
· At least one year has elapsed from the time that the issuer filed current
comprehensive disclosure with the SEC reflecting its status as an entity
that is not a shell company.
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The Company has met all of the conditions above.
Our common stock is a "penny stock," as defined in Rule 3a51-1 promulgated by
the SEC under the Exchange Act. The penny stock rules require a broker-dealer,
among other things, prior to a transaction in penny stock not otherwise exempt
from the rules, to deliver a standardized risk disclosure document that provides
information about penny stocks and the nature and level of risks in the penny
stock market. A broker-dealer also must provide the customer with current bid
and offer quotations for the penny stock, the compensation of the broker-dealer
and its salesperson in the transaction, and monthly account statements showing
the market value of each penny stock held in the customer's account. In
addition, the penny stock rules require that the broker-dealer, not otherwise
exempt from such rules, must make a special written determination that the penny
stock is suitable for the purchaser and receive the purchaser's written
agreement to the transaction. These disclosure rules have the effect of reducing
the level of trading activity in the secondary market for a stock that becomes
subject to the penny stock rules. So long as our common stock is subject to the
penny stock rules, it may be more difficult for us and you to sell your common
stock.
Emerging Growth Company
We are an "emerging growth company" as defined in Section 2(a)(19) of the
Securities Act of 1933, as amended (the "Securities Act"), as modified by the
Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). As such, we are
eligible to take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are not
"emerging growth companies" including, but not limited to, not being required to
comply with the auditor attestation requirements of Section 404 of the
Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), reduced disclosure
obligations regarding executive compensation in our periodic reports and proxy
statements, and exemptions from the requirements of holding a non-binding
advisory vote on executive compensation and stockholder approval of any golden
parachute payments not previously approved. We intend to take advantage of all
of these exemptions.
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, and delay compliance with new or revised accounting
standards until those standards are applicable to private companies. We have
elected to take advantage of the benefits of this extended transition period.
We could be an "emerging growth company" until the last day of the first fiscal
year following the fifth anniversary of our first common equity offering,
although circumstances could cause us to lose that status earlier if our annual
revenues exceed $1.0 billion, if we issue more than $1.0 billion in
non-convertible debt in any three-year period or if we become a
"large-accelerated filer" as defined in Rule 12b-2 under the Exchange Act.
Smaller Reporting Company
We also qualify as a "smaller reporting company" under Rule 12b-2 of the
Exchange Act, which is defined as a company with a public equity float of less
than $250 million or less than $100 million in annual revenues and no public
float or a public float of less than $700 million. To the extent that we remain
a smaller reporting company, we will have reduced disclosure requirements for
our public filings, including: (1) less extensive narrative disclosure than
required of other reporting companies, particularly in the description of
executive compensation and (2) the requirement to provide only two years of
audited financial statements, instead of three years. In addition, until such
time as the public float of our common stock exceeds $75 million, we will be a
non-accelerated filer and will not be required to comply with the auditor
attestation requirements of Section 404(b) of the Sarbanes Oxley Act.
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Results of Operations
Results of Operations during the three- and nine-months September 30, 2022, as
compared to the three- and nine-months September 30, 2021
Three & Nine months ended September 30, 2022
Our net revenue for the three months ended September 30, 2022, was $1,197,927
compared to $2,214,325 for the same period in 2021. Our net revenue for the nine
months ended September 30, 2022, was $3,957,356, compared to $6,832,375 for the
same period in 2021. The decrease in revenue was due to retooling of the
manufacturing facility. The retooling has been completed and revenues are
expected to increase going forward.
Our cost of goods sold for the three months ended September 30, 2022, was
$597,621, compared to $1,353,743 for the same period in 2021. Our cost of goods
sold for the nine months ended September 30, 2022, was $1,967,220, compared to
$3,747,353 for the same period in 2021. The decrease is a result of the decrease
in revenue and the corresponding cost of goods. For the three months ended
September 30, 2022, the cost of goods sold was approximately 50% of the revenue.
We have invested in improved production equipment, and we anticipate a reduction
in the cost of goods sold, resulting in improved gross profit margins.
Our general and administrative expense for the three months ended September 30,
2022, was $225,390, compared to $209,026 for the same period in 2021. Our
general and administrative expense for the nine months ended September 30, 2022,
was $889,437, compared to $645,262 for the same period in 2020. These increases
are directly related to the acquisition and related expenses. For the three
months ended September 30, 2022, our general and administrative expense was
approximately 74.2% of the revenue and is expected to decrease as revenues
increase.
Our salary expense for the three months ended September 30, 2022, was $647,073
compared to $385,722 for the same period in 2021. Our salary expense for the
nine months ended September 30, 2022, was $1,890,090, compared to $1,108,876 for
the same period in 2021. These increases are directly related to the acquisition
and the increase in the administrative salaries and related expenses and are
expected to remain consistent as the business grows as there is minimal need for
additional salaries.
Our rent and facility expense for the three months ended September 30, 2022, was
$105,438, compared to $101,528 for the same period in 2021. Our rent and
facility expense for the nine months ended September 30, 2022, was $310,422,
compared to $330,998 for the same period in 2021.
Our utilities expense for the three months ended September 30, 2022, was
$40,002, compared to $30,165 the same period in 2021. Our utilities expense for
the nine months ended September 30, 2022, was $106,467, compared to $91,861 for
the same period in 2021. We expect this to increase as we ramp production
equipment.
Our professional fees expense for the three months ended September 30, 2022, was
$30,751, compared to $38.660 for the same period in 2021. Our professional fees
expense for the nine months ended September 30, 2022, was $141,012, compared to
$86,711or the same period in 2021. This increase is attributable to increase
audit and legal expenses related to increased compliance protocols.
Our consulting expense for the three months ended September 30, 2022, was
$229,500 compared to $166,828 for the same period in 2021. Our consulting
expense for the nine months ended September 30, 2022, was $739,424 compared to
$537,810 for the same period in 2021. This increase is a result in the increase
of outside consultants.
Our depreciation expense for the three months ended September 30, 2022, was
$109,275, compared to $85,806 for the same period in 2021. This increase was
mainly due to the commissioning of new equipment. Our depreciation expense for
the nine months ended September 30, 2022, was $322,308, compared to $273,5160
for the same period in 2021. These increases are due to the acquisition and
acquired assets.
Our share-based expense for the three months ended September 30, 2022, was
$95,217, compared to $0 for the same period in 2021. Our share-based expense for
the nine months ended September 30, 2022, was $285,901, compared to $0 for the
same period in 2021. This increase was mainly due to the issuance of our
employee stock options.
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Our financing fees expense for the three months ended September 30, 2022, was
$1,017,628, compared to $821,100 for the same period in 2021. Our financing fees
expense for the nine months ended September 30, 2022, was $1,268,597, compared
to $1,624,800 for the same period in 2021.
Our Interest expense for the three months ended September 30, 2022, was
$200,879, compared to $56,956 for the same period in 2021. Our Interest expense
for the nine months ended September 30, 2022, was $555,255, compared to $130,150
for the same period in 2021. This increase was mainly due to the increase in
notes payable.
Our net loss for the three months ended September 30, 2022, was $2,100,847
compared to a net profit of $296,209 for the same period in 2021. Our net loss
for the nine-months ended September 30, 2022, was $4,518,778 compared to
$1,432,384 for the same period in 2021. This increase was mainly due to the
factors listed above.
Liquidity and Capital Resources
As of September 30, 2022, the Company current assets of $442,961 and total
assets of $3,245,510. As of December 31, 2021, the Company current assets of
$1,513,667 and total assets of $4,007,465.
As of September 30, 2022, the Company current liabilities of $8,052,337 and
total Liabilities of $8,202,337 As of December 31, 2021, the Company current
liabilities of $5,327,491 and total liabilities of $5,577,014
The Company has funded its operations from contributions made by management and
outside investors. The Company has a funding agreement with a third-party
investor as discussed above; however, the investor's obligation to provide
additional capital is solely at the third-party's discretion.
At present, the Company has business operations which management believes will
allow the Company maintain operations. The Company's cash requirements to
continue to grow the Company may exceed cash flow from operations requiring the
Company to seek additional capital sources. If we require additional financing,
we cannot predict whether equity or debt financing will become available at
terms acceptable to us, if at all. The Company depends upon services provided by
management to fulfill its filing obligations under the Exchange Act.
The following table summarizes our cash flows for the nine months ended
September 30, 2022, and 2021.
2022 2021
Net cash provided (used) from operating activities $ (792,186 ) $ 24,764
Net cash used in investing activities
(24,230 ) (807,010 )
Net cash provided by financing activities 554,261 1,014,023
Net Increase (Decrease) In Cash $ (262,155 ) $ 231,777
Going Concern
Our modest revenues, continuing operating losses and lack of operating capital
create substantial doubt about the Company's ability to continue as a going
concern. The ability of the Company to continue as a going concern is dependent
on growing its revenues and minimizing our expenses, its ability to obtain
capital from our affiliates to fund our operations, generate cash from the sale
of its securities and attain future profitable operations. Management's plans
include selling its equity securities and obtaining debt financing to fund its
capital requirements and ongoing operations; however, there can be no assurance
the Company will be successful in these efforts.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on the Company's financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that are
material to investors.
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Contractual Obligations
As a "smaller reporting company," as defined by Item 10 of Regulation S-K, the
Company is not required to provide the information required by this Item.
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BLOOMIOS, INC. 
