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, 2020 , filed with theSEC onMarch 18, 2021 , 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 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. When designer and CEO,Berge Abajian , creates a collection, he looks well beyond the drawing board. Berge focuses on the womanwho will ultimately wear his pieces, bringing to creation a magnificent piece of jewelry that reflects the beauty and vitality a woman possesses.Bergio creations are a seamless blend of classic elegance and subtle flair, adding to a woman's charm while never overpowering her. It is our intention to establishBergio as a holding company for the purpose of establishing retails stores worldwide & acquisitions. 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. 28
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.
We have spent over$3 million in branding theBergio name through tradeshows, trade advertising, national advertising and billboard advertising since launching the line in 1995. 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 . 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. 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 the fourth quarter of 2014. During the fall of 2018, we opened our second retail store at the newOcean Resort Casino inAtlantic City, New Jersey . We are also contemplating the opening of new stores in future. The Company's operations have been affected by the recent and ongoing outbreak of the coronavirus disease 2019 (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, 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. OnFebruary 10, 2021 we acquired 51% of Aphrodite's Marketing an e-commerce company that sold$9,700,000 in 2020. This acquisition was essential to move the Company into the e-commerce space and also it will assist to launchBergio fine online website to compete with all other jewelry e-commerce companies. OnMay 6, 2021 we signed a binding letter of intent to acquire 51% of GearBubble Tech, in four and half years GearBubble processed over$ 130 Million in sales and generated$27 Million in revenue in 2020. OnJuly 1, 2021 , we have closed the acquisition and acquired 51% of GearBubble Tech.
The Company has increased its online presence with the 2 acquisitions to minimize the impact of having to close its retail stores as well as directing efforts towards its wholesale operations.
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. 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.
29
Results of Operations
Overview
Net revenues increased during the nine months endedSeptember 30, 2021 due to Aphrodite's Marketing and GearBubble Tech acquisition as compared to the nine months endedSeptember 30, 2020 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 and GearBubble Tech 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 negotiated some of our convertible debt.
? Pursuant to a Settlement Agreement, Livingston Asset Management acquired
In satisfaction of the Claim Amount, the Company agreed to issue shares of the
Company's common stock in one or more tranches to
contemplated in the Settlement Agreement and Stipulation Agreement. The effect
of this will be to convert debt to equity.
? Filed a S-1 registration statement with the
approximately
ended
? Raised additional funding from loans.
These events have allowed us to reduce our debt, provided limited funding for
operations, and funding for the Aphrodite's Marketing. 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 consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Three Months Ended Percent
September 30, September 30, Increase Increase
2021 2020 (Decrease) (Decrease)
Net revenues $ 2,175,042 $ 137,340 $ 2,037,702 1,483,69 %
Gross profit $ 764,169 $ 108,245 $ 655,924 605.96 %
Gross profit as a % of sales 35.13 % 78.82 %
Nine months ended Percent
September 30, September 30, Increase Increase
2021 2020 (Decrease) (Decrease)
Net revenues $ 5,461,676 $ 290,677 $ 5,170,999 1,778.95 %
Gross profit $ 3,362,547 $ 189,424 $ 3,173,123 1,675.14 %
Gross profit as a % of sales 61.57 % 65.17 %
30
Net revenues for the three months ended
Gross Profit Gross profit increased by$655,924 to$764,169 for the three months endedSeptember 30, 2021 as compared to$108,245 for the three months endedSeptember 30, 2020 . Gross profit increased by$3,173,123 to$3,362,547 for the nine months endedSeptember 30, 2021 as compared to$189,424 for the nine months endedSeptember 30, 2020 . This increase is primarily attributable to increase in
revenues as discussed above. Operating Expenses Operating expenses increased by$1,611,323 to$1,715,511 for the three months endedSeptember 30, 2021 as compared to$104,188 for the three months endedSeptember 30, 2020 . The increase was primarily attributable to increase in selling, advertising and marketing expenses of$637,756 , increase professional and consulting expenses of$237,756 and increase in general and administrative expenses of$735,811 . The increase in operating expenses reflects the increase in business operations as a result of the acquisition of Aphrodite's Marketing and GearBubble Tech. Operating expenses increased by$4,671,179 to$5,153,212 for the nine months endedSeptember 30, 2021 as compared to$182,033 for the nine months endedSeptember 30, 2020 . The increase was primarily attributable to increase in selling, advertising and marketing expenses of$2,372,315 , increase professional and consulting expenses of$559,061 and increase in general and administrative expenses of$1,739,803 . The increase in operating expenses reflects 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$951,342 for the three months endedSeptember 30, 2021 as compared to an income from operations of$4,057 for the three months endedSeptember 30, 2020 . As a result of the above, we had a loss from operation of$1,790,665 for the nine months endedSeptember 30, 2021 as compared to a loss from operations of$292,609 for the nine months endedSeptember 30, 2020 . Other Income (Expense) For the three months endedSeptember 30, 2021 , the Company had other expense of$495,926 as compared to other income of$384,789 for the three months endedSeptember 30, 2020 , an increase of$880,715 in other expense. The increase in other expense is primarily attributed to the increase in amortization of debt discount of$480,803 , increase in interest expense of$94,816 , decrease in gain on extinguishment of debt of$118,902 , decrease in change in fair value of derivative liabilities of$201,717 and other income of$10,000 . For the nine months endedSeptember 30, 2021 , the Company had other expense of$3,845,391 as compared to other income of$119,249 for the nine months endedSeptember 30, 2020 , an increase of$2,173,975 in other expense. The increase in other expense is primarily attributed to the increase in change in fair value of derivative liabilities of$896,075 , increase in amortization of debt discount of$1,032,201 , increase in interest expense of$401,654 , increase in derivative expense of$184,0456 offset by increase in gain on extinguishment of debt of$304,407 and other income of$34,406 .
Net Income (Loss) Attributable to
As a result of the above, we had net loss attributable toBergio International, Inc. of$963,613 for the three months endedSeptember 30, 2021 as compared to net income of$388,846 , for the three months endedSeptember 30, 2020 . As a result of the above, we had net loss attributable toBergio International, Inc. $2,984,584 for the nine months endedSeptember 30, 2021 as compared to$173,360 for the nine months endedSeptember 30, 2020 . 31
Liquidity and Capital Resources
The following table summarizes working capital atSeptember 30, 2021 , compared toDecember 31, 2020 : Increase/ September 30, 2021 December 31, 2020 (Decrease) Current Assets $ 4,240,191 $ 1,321,632$ 2,918,559 Current Liabilities $ 7,763,742 $ 1,106,318$ 6,657,424
Working Capital Surplus (Deficit) $ (3,523,551 )
$ 215,314$ (3,738,865 )
AtSeptember 30, 2021 the Company had working capital deficit of$3,523,551 as compared to working capital surplus of$215,314 atDecember 31, 2020 . This decrease in working capital is primarily attributed to the increase in liabilities as result of the acquisition of Aphrodite's Marketing and GearBubble Tech.
During the nine months ended
Cash used in operating activities: For the nine months endedSeptember 30, 2021 , the Company used$2,295,489 in cash for operations as compared to$303,407 in cash used for operations for the nine months endedSeptember 30, 2020 . This increase in cash used in operations is primarily attributed to increase in net loss, increase in depreciation and amortization expense of$174,434 , increase in amortization of debt discount and deferred financing cost of$1,037,701 , increase in derivative expense of$184,056 , increase in change in fair value of derivative liabilities of$896,075 , increase in inventory of 706,869, increase in accounts payable and accrued liabilities of$363,637 offset by non-controlling interest of$860,807 , increase in gain from extinguishment of debt$304,407 and decrease in prepaid expenses of$363,637 . For the nine months endedSeptember 30, 2020 , the Company used$303,407 in cash for operations. This increase in cash used in operations is primarily attributed to decrease in accounts payable and accrued expenses, higher operating loss and an increase in accounts receivable and inventories. Cash used in investing activities: For the nine months endedSeptember 30, 2021 , the Company used$886,209 in cash for investing activities as a result of cash paid for the acquisition of GearBubble Tech for$2,000,000 and purchases of property and equipment of$47,685 offset by cash acquired from the acquisition of GearBubble Tech of$1,161,476 as compared to$0 of cash in investing activities for the nine months endedSeptember 30, 2020 . Cash provided by financing activities: Net provided by financing activities for the nine months endedSeptember 30, 2021 was$4,254,782 as compared to$366,926 for the nine months endedSeptember 30, 2020 . This increase is primarily the result of net proceeds received from convertible notes of$1,788,750 , sale of common stock of$3,768,730 , proceeds from loans and note payable of$391,411 offset partially by repayments of loans payable of$1,077,654 , repayment of debt of$567,403 and repayment of convertible debt of$30,000 . Our indebtedness is comprised of loans payable, convertible notes, and advances from a stockholder/officer intended to provide capital for the ongoing manufacturing of our jewelry line, in advance of receipt of the payment from our retail distributors. Convertible Notes
From time to time the Company enters into certain financing agreements for convertible notes. For the most part, the Company settles these obligations with the Company's common stock. As ofSeptember 30, 2021 , principal amounts under the convertible notes payable was$1,732,500 , net of debt discount of$751,896 atSeptember 30, 2021 . 32
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$14,796,909 as ofSeptember 30, 2021 . As ofSeptember 30, 2021 , the Company has$1,732,500 in principal amounts of convertible notes, notes payable (current and long-term portion) of$1,426,800 and$1,129,958 in loans payable. 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 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. 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. The Company has also 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 newly acquired majority owned subsidiaries, Aphrodite Marketing and GearBubble Tech, of whichBergio owns 51% will greatly enhance our online presence and provide the opportunity for future growth. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence. Research and Development
We are not anticipating significant research and development expenditures in the near future.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, results or operations, liquidity, capital expenditures or capital resources that is deemed material. Critical Accounting Policies Our critical accounting policies are described in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report. There have been no changes in our critical accounting policies. Our significant accounting policies are described in our notes to the consolidated financial statements for the year endedDecember 31, 2020 which is included
in
our Annual Report.
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