BLACK BIRD BIOTECH, INC. Effects of COVID-19
The COVID-19 pandemic had a discernable short-term negative impact on the ability of our company to obtain capital needed to accelerate the development of our business, as well as to obtain needed inventory, due to supply chain delays. While these limitations have eased, we are unable to predict when such limitations will be entirely resolved.
Overall, our company is not of a size that required us to implement "company-wide" policies in response to the COVID-19 pandemic. Further, our product manufacturing operations have experienced no negative consequences attributable to the COVID-19 pandemic, inasmuch as these operations involve a limited number of persons.
For purposes of the discussion below, except where otherwise indicated, the descriptions of our business, our strategies, our risk factors and any other forward-looking statements, including regarding us, our business and the market generally, do not reflect the potential impact of the COVID-19 pandemic or
our responses thereto. Basis of Presentation This Management's Discussion and Analysis of Financial Condition and Results of Operations section includes financial results of our company,Black Bird Biotech, Inc. , including its subsidiaries,Black Bird Potentials Inc. (BB Potentials), Big Sky American Dist., LLC (Big Sky American) and BlackBird Hemp Manager, LLC, for the years endedDecember 31, 2022 and 2021. Cautionary Statement The following discussion and analysis should be read in conjunction with our financial statements and related notes, beginning on page F-1 of this Annual Report. Our actual results may differ materially from those anticipated in the following discussion, as a result of a variety of risks and uncertainties, including those described herein under "Disclosure Regarding Forward-Looking Statements." We assume no obligation to update any of the forward-looking statements included herein.
Implications of Being an
We qualify as an "emerging growth company" under the JOBS Act. As a result, we
are permitted to, and intend to, rely on exemptions from certain disclosure
requirements. For so long as we are an emerging growth company, we will not be
required to:
· have an auditor report on our internal controls over financial
reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
· comply with any requirement that may be adopted by the Public Company
Accounting Oversight Board regarding mandatory audit firmrotation or a
supplement to the auditor's report providing additional information
about the audit and the financial statements (i.e., an auditor
discussion and analysis);
· submit certain executive compensation matters to shareholder advisory
votes, such as "say-on-pay" and "say-on-frequency;" and
· disclose certain executive compensation related items such as the
correlation between executive compensation and performance and
comparisons of the CEO's compensation to median employee compensation.
12
Table of Contents
In addition, Section 107 of the JOBS Act also provides that an emerging growth
company can take advantage of the extended transition period provided in Section
7(a)(2)(B) of the Securities Act for complying with new or revised accounting
standards. In other words, an emerging growth company can delay the adoption of
certain accounting standards until those standards would otherwise apply to
private companies. We have elected to take advantage of the benefits of this
extended transition period. Our financial statements may therefore not be
comparable to those of companies that comply with such new or revised accounting
standards.
We will remain an "emerging growth company" for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed$1.07 billion , (ii) the date that we become a "large accelerated filer" as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds$700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than$1 billion in non-convertible debt during the preceding three year period. Critical Accounting Policies In General. Our accounting policies are discussed in detail in the footnotes to our financial statements beginning on page F-1. We consider our critical accounting policies related to revenue recognition, inventory and fair value of financial instruments. Change in Accounting Principle. InAugust 2020 , theFinancial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-06-Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging- Contracts in Entity's Own Equity (Subtopic 815-40)-Accounting For Convertible Instruments and Contracts in an Entity's Own Equity. The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted net income per share calculation in certain areas. The new guidance is effective for annual and interim periods beginning afterDecember 15, 2021 , and early adoption is permitted for fiscal years beginning afterDecember 15, 2020 . Our company has early-adopted ASU 2020-06 for the year beginningJanuary 1, 2021 . Overview and Outlook
With the acquisition of BB Potentials effective
Through BB Potentials, our company is the exclusive worldwide manufacturer and distributor of MiteXstream, an EPA-registered plant-based biopesticide (EPA Reg. No. 95366-1) effective in the eradication of mites and similar pests, including spider mites, a pest that destroys crops, especially cannabis, hops, coffee, and house plants, as well as molds and mildew. Also through BB Potentials, we manufacture and sell CBD products, including CBD Oils, gummies and pet treats, and CBD-infused personal care products, under the Grizzly Creek Naturals brand name. Big Sky American distributes our Grizzly Creek Naturals products, as well as an array of other consumer retail products, inWestern Montana . In addition, for 2020 and 2021, BB Potentials was a licensed grower of industrial hemp under the Montana Hemp Pilot Program and, in connection therewith, established "Black Bird American Hemp" as the brand name under which these efforts were to be conducted. For the foreseeable future, we have suspended our hemp-related efforts.
Principal Factors Affecting Our Financial Performance
Following our acquisition of BB Potentials, our future operating results can be expected to be primarily affected by the following factors:
· our ability to establish and maintain the value proposition of our
MiteXstream biopesticide, vis-a-vis other available pest control
products;
· our ability to generate sales channels for MiteXstream; and
· our ability to contain our operating costs.
Results of Operations
Years Ended December 31, 2022 ("Fiscal 2022") and 2021 ("Fiscal 2021"). During
Fiscal 2022, we established a MiteXstream Store on Amazon.com, which accounted
for approximately $3,500 in sales. While these sales demonstrated the economic
viability of MiteXstream, such sales were not at a level that provided cash for
use in our overall operations. During 2023, we intend to increase our
Amazon-specific marketing, in an attempt to garner more sales through our Amazon
Store .
13
Table of Contents
Our purchase of certain distribution-related assets in Fiscal 2021 pursuant to the Big Sky APA was made with an expectation that an immediately accessible larger number of retail locations would allow us to increase more quickly sales of our CBD products. Big Sky American, since beginning its consumer product distribution operations inNorthwest Montana inApril 2021 , had a positive impact on our Fiscal 2021 operating results, when compared to our prior operating results. However, the anticipated increase in sales of our CBD products has not occurred. Rather, sales of non-CBD consumer products, in large measure, accounted for the overall increase in our product sales for Fiscal 2021. During Fiscal 2021, sales of MiteXstream were insignificant. During Fiscal 2022, our business operations generated$82,563 in revenues from sales with a cost of goods sold of$49,551 , resulting in a gross profit of$33,012 . During Fiscal 2021, our business operations generated$104,458 in revenues with a cost of goods sold of$84,871 , resulting in a gross profit of$19,587 . While we had a small level of sales of MiteXstream during 2022, the decline in our revenues from the year endedDecember 31, 2021 , is attributable primarily to the significant drop in tourism inWestern Montana during the summer of 2022, due to inflationary pressures that resulted an extreme increase in gas prices. During Fiscal 2022, we incurred operating expenses of$1,321,345 , which were comprised of$231,630 in consulting services,$5,337 in website expenses,$43,247 in legal and professional services,$4,800 in rent,$234,519 in advertising and marketing expense and$673,621 in general and administrative expense, resulting in a net operating loss of$1,288,333 . In addition, we incurred interest expense of$370,587 , resulting in a net loss for Fiscal 2022 of$1,658,766 . During Fiscal 2021, we incurred operating expenses of$1,470,714 , which were comprised of$725,240 in consulting services ($573,348 of which was paid by the issuance of common stock),$12,328 in website expenses,$84,457 in legal and professional services,$10,320 in rent,$5,234 in advertising and marketing expense and$523,478 in general and administrative expense, resulting in a net operating loss of$1,451,127 . In addition, we incurred interest expense of$285,327 , resulting in a net loss for Fiscal 2021 of$1,811,302 . We expect that our revenues will increase from quarter to quarter beginning with the first quarter of 2023, as sales of MiteXstream and Grizzly Creek Naturals products are expected to increase from our continuing marketing efforts. There is no assurance that such will be the case, and we expect to incur operating losses through at leastDecember 31, 2023 . Further, because of our relative current lack of capital and the current lack of brand name awareness of MiteXstream, we cannot predict the levels of our future revenues. Further, because of our relative current lack of capital and the current lack of brand name awareness of MiteXstream and Grizzly Creek Naturals, we cannot predict the levels of our future revenues. However, our management believes that MiteXstream will become the most dynamic, fastest growing part of our business. Plans for 2023 Substantially all of our available capital, financial and human, will be devoted to increasing sales of MiteXstream. Through our marketing consulting agreement with Spire+, we are implementing a comprehensive go-to-market strategy for MiteXstream, including e-commerce, traditional retail and a category-specific distribution model. In addition, our internal efforts will be focused on developing sales channels outside the scope of the Spire+ efforts. There is no assurance that we will be successful in increasing sales of MiteXstream.
Financial Condition, Liquidity and Capital Resources
December 31, 2022 . AtDecember 31, 2022 , our company had$44,448 in cash and a working capital deficit of$726,463 , compared to$499,766 in cash and working capital of$574,165 atDecember 31, 2021 . The change in our working capital position fromDecember 31, 2021 , toDecember 31, 2022 , is attributable primarily to our incurring$1,013,980 in debt and our repayment of$510,560 in debt, the payment of significantly increased marketing expenses and the payment of operating expenses.
Our company's current cash position of approximately
Capital Sources. We have derived capital from sales of our common stock and from loans. Our capital sources are described below.
Regulation A Offerings. InMay 2020 , our company filed an Offering Statement on Form 1-A (File No. 054-11215) (the "Reg A #1") with theSEC with respect to 70,000,000 shares of common stock, as amended, which was qualified by theSEC onAugust 4, 2020 . During the year endedDecember 31, 2021 , we sold a total of 4,875,000 shares of common stock for a total of$195,000 in cash, under the Reg A #1, which expired by its terms onAugust 4, 2021 . At the end ofAugust 2021 , our company filed a second Offering Statement on Form 1-A (File No. 024-11621) (the "Reg A #2") with theSEC with respect to 100,000,000 shares of common stock, as amended, which was qualified by theSEC onSeptember 9, 2021 . During the year endedDecember 31, 2021 , we sold a total of 93,033,333 shares of common stock for a total of$1,395,500 in cash, under the Reg A #2. 14 Table of Contents Third-Party Loans.
Tri-Bridge Ventures LLC . InApril 2020 , the Company obtained a loan in the amount of$25,000 fromTri-Bridge Ventures LLC . In consideration of such loan, the Company issued a$25,000 face amount convertible promissory note (the "Tri-Bridge Note") bearing interest at 10% per annum, with principal and interest due inJanuary 2021 .Tri-Bridge Note is convertible into shares of the Company's common stock at the rate of one share for each$.001 of debt converted anytime afterAugust 30, 2020 .
During the year ended
Amount Converted Conversion Price Per Share Number Shares
$ 25,000 $ 0.001 24,999,998Total Converted:$25,000
Total Shares: 24,999,988
At
EMA Financial, LLC . InDecember 2020 , the Company obtained a loan fromEMA Financial, LLC which netted us$50,000 in proceeds. In consideration of such loan, the Company issued a$58,600 face amount convertible promissory note (the "EMA Note"), with OID of$4,100 , bearing interest at 10% per annum, with principal and interest due inSeptember 2021 . The Company had the right to repay the EMA Note at a premium ranging from 120% to 145% of the face amount. The EMA Note was convertible into shares of the Company's common stock at a conversion price equal to the lower of 60% of the market price of the Company's common stock on the date of issuance of the EMA Note and the date of conversion, any time afterJune 15, 2021 .
In
Power Up Lending Group Ltd. InJanuary 2021 , the Company obtained a loan fromPower Up Lending Group Ltd. which netted the Company$52,000 in proceeds. In consideration of such loan, the Company issued a$55,500 face amount convertible promissory note ("Power Up Note #1") bearing interest at 12% per annum, with principal and interest due inJanuary 2022 . The Company had the right to repay the Power Up Note #1 at a premium ranging from 125% to 145% of the face amount. The Power Up Note #1 was convertible into shares of the Company's common stock at a conversion price equal to the lower of 61% of the market price of the Company's common stock on the date of issuance of the Power Up Note #1 and the date of conversion, any time afterJuly 14, 2021 .
During the year ended
Amount Converted Conversion Price Per Share Number Shares
$ 15,000 $ 0.0162 925,926
$ 20,000 $ 0.0143 1,398,601
$ 20,500 $ 0.0143 1,666,434
Total Converted: $55,500 Total Shares: 3,990,961SE Holdings, LLC . InFebruary 2021 , the Company obtained a loan fromSE Holdings LLC which netted the Company$106,000 in proceeds. In consideration of such loan, the Company issued a$121,000 face amount promissory note (the "SE Holdings Note"), with OID of$15,000 , bearing interest at 9% per annum, with principal and interest payable in eight equal monthly payments of$15,125 beginning inJuly 2021 . The Company had the right to repay the SE Holdings Note at any time. Should the Company have been in default on SE Holdings Note, the SE Holdings Note would have become convertible into shares of the Company's common stock at a conversion price equal to the lesser of the lowest closing bid price of the Company's commons stock for the trading day immediately preceding either (a) the delivery of a notice of default, (b) the delivery of a notice of conversion resulting from such default or (c) the issue date of theSE Holdings Note. In addition, the Company issued 2,000,000 shares of its common stock toSE Holdings as a commitment fee, which shares were valued at$0.065 with a 50% discount per share, or$65,000 , in the aggregate.
Through
15
Table of Contents
Power Up Lending Group Ltd. In February 2021 , the Company obtained a loan from
Power Up Lending Group Ltd. which netted the Company $43,500 in proceeds. In
consideration of such loan, the Company issued a $43,500 face amount convertible
promissory note ("Power Up Note #2") bearing interest at 12% per annum, with
principal and interest due in January 2022 . The Company had the right to repay
the Power Up Note #2 at a premium ranging from 125% to 145% of the face amount.
The Power Up Note #2 was convertible into shares of the Company's common stock
at a conversion price equal to the lower of 61% of the market price of the
Company's common stock on the date of issuance of the Power Up Note #2 and the
date of conversion, any time after August 17, 2021 .
During the year ended
Conversion Price
Amount Converted Per Share Number Shares
$ 15,000 $ 0.0137 1,094,891
$ 20,000 $ 0.0093 2,150,538
$ 11,110 * $ 0.0081 1,371,605
Total 46,110 Total 4,617,034
Converted: Shares:
* This amount includes
$2,610 of interest.
Power Up Lending Group Ltd. InApril 2021 , the Company obtained a loan fromPower Up Lending Group Ltd. which netted the Company$68,750 in proceeds. In consideration of such loan, the Company issued a$68,750 face amount convertible promissory note ("Power Up Note #3") bearing interest at 12% per annum, with principal and interest due inApril 2022 . The Company had the right to repay the Power Up Note #3 at a premium ranging from 125% to 145% of the face amount. The Power Up Note #3 was convertible into shares of the Company's common stock at a conversion price equal to the lower of 61% of the market price of the Company's common stock on the date of issuance of the Power Up Note #3 and the date of conversion, any time afterOctober 22, 2021 .
In
Power Up Lending Group Ltd. InAugust 2021 , the Company obtained a loan fromPower Up Lending Group Ltd. which netted the Company$78,750 in proceeds. In consideration of such loan, the Company issued a$78,750 face amount convertible promissory note ("Power Up Note #4") bearing interest at 12% per annum, with principal and interest due inAugust 2022 . The Company had the right to repay the Power Up Note #4 at a premium ranging from 125% to 145% of the face amount. The Power Up Note #4 was convertible into shares of the Company's common stock at a conversion price equal to the lower of 61% of the market price of the Company's common stock on the date of issuance of the Power Up Note #4 and the date of conversion, any time afterOctober 22, 2021 .
In
FirstFire Global Opportunities Fund LLC . InSeptember 2021 , the Company obtained a loan fromFirstFire Global Opportunities Fund LLC which netted the Company$125,000 in proceeds. In consideration of such loan, the Company issued a$250,000 face amount convertible promissory note ("FirstFire Note"), with OID of$125,000 , due inSeptember 2022 . The Company had the right to repay the FirstFire Note at anytime, with a 20%, or$50,000 , reduction in principal owed if repaid in full on or beforeNovember 30, 2021 . The FirstFire Note was convertible into shares of the Company's common stock at a conversion price equal to$.015 per share, any time afterDecember 1, 2021 .
Prior to
Tiger Trout Capital Puerto Rico, LLC . InSeptember 2021 , the Company obtained a loan fromTiger Trout Capital Puerto Rico, LLC which netted the Company$250,000 in proceeds. In consideration of such loan, the Company issued a$500,000 face amount convertible promissory note ("Tiger Trout Note"), with OID of$250,000 , with principal due inSeptember 2022 . The Company has the right to repay the Tiger Trout Note at anytime, with a 10%, or$50,000 , reduction in principal owed if repaid in full on or beforeNovember 30, 2021 . The Tiger Trout Note is convertible into shares of the Company's common stock at a conversion price equal to$.015 per share, any time afterDecember 1, 2021 .
During the year ended
16
Table of Contents
1800Diagonal Lending LLC . InMarch 2022 , the Company obtained a loan fromSixth Street Lending LLC , who later assigned the loan to an affiliated company, 1800Diagonal Lending LLC , which netted the Company$200,000 in proceeds. In consideration of such loan, the Company issued a$228,200 face amount promissory note (the "1800 Diagonal Note #1"), with OID of$24,450 and a one-time interest charge of$25,102 , with principal and interest payable in 10 equal monthly payments of$25,330.20 beginning inMay 2022 . The Company has the right to repay the 1800 Diagonal Note #1 at any time, without penalty. Should the Company become in default on the 1800 Diagonal Note #1, the 1800 Diagonal Note #1 becomes convertible into shares of the Company's common stock at a conversion price equal to 75% multiplied by the lowest trading price of the Company's common stock during the 10 trading days prior to the applicable conversion date. As ofDecember 31, 2022 , the Company was current in its repayment obligations under the 1800 Diagonal Note #1 and the 1800 Diagonal Note #1 had a remaining balance of$50,660 atDecember 31, 2022 .Talos Victory Fund, LLC . InMay 2002 , the Company obtained a loan fromTalos Victory Fund, LLC which netted the Company$107,780 in proceeds. In consideration of such loan, the Company issued a$135,000 face amount promissory note (the "Talos Note #1"), with OID of$13,500 , commissions of$9,720 and legal fees of$4,000 . The Talos Note #1 is due inMay 2023 and is convertible into shares of the Company's common stock at any time at a conversion price of$.005 per share, subject to a 4.99% equity blocker. During the year endedDecember 31, 2022 ,$16,200 in accrued interest on the Talos Note #1 was repaid through conversion into shares of the Company's common stock, as follows: Amount Converted Conversion Price Per Share Number Shares $ 16,200 $ 0.001 16,200,000 Total Converted:$16,200 Total Shares: 16,200,000
During the year endedDecember 31, 2022 ,$28,500 in principal on the Talos Note #1 was repaid through conversion into shares of the Company's common stock,
as
follows:
Amount Converted Conversion Price Per Share Number Shares
$ 28,500 $ 0.001 28,500,000
Total Converted: $28,500 Total Shares: 28,500,000
At
Subsequent to
Conversion Price
Amount Converted Per Share Number Shares
$ 106,500 $ 0.001 106,500,000
Total $106,500 Total 106,500,000
Converted: Shares:
Mast Hill Fund, L.P. In May 2002 , the Company obtained a loan from Mast Hill
Fund, L.P. which netted the Company $200,000 in proceeds. In consideration of
such loan, the Company issued a $250,000 face amount promissory note (the "Mast
Hill Note #1"), with OID of $25,000 , commissions of $18,000 and legal fees of
$7,000 . The Mast Hill Note #1 is due in May 2023 and is convertible into shares
of the Company's common stock at any time at a conversion price of $.005 per
share, subject to a 4.99% equity blocker.
In December 2022 , the Mast Hill Note #1 was amended to increase the principal by
$100,000 , which amount represents financing fees. Also in December 31, 2022 , the
Company repaid $100,000 in principal of the Mast Hill Note #1.
During the year ended
Amount Converted Conversion Price Per Share Number Shares
$ 46,500 $ 0.001 46,500,000
Total Converted: $46,500 Total Shares: 46,500,000
At
17
Table of Contents
GS Capital Partners, LLC . InJune 2022 , we obtained a loan fromGS Capital Partners, LLC which netted our company$63,650 in proceeds. In consideration of such loan, we issued a$70,000 face amount promissory note (the "GS Capital Note #1"), with OID of$6,500 , a finder's fee of$4,900 and legal fees of$3,000 , with principal and interest payable in 10 equal monthly payments of$7,840 beginning inSeptember 2022 . The Company has the right to repay theGS Capital Note #1 at any time, without penalty. Should the Company become in default on the GS Capital Note #1, the GS Capital Note #1 becomes convertible into shares of the Company's common stock at a conversion price equal to 70% multiplied by the lowest trading price of the Company's common stock during the 10 trading days prior to the applicable conversion date. As ofDecember 31, 2022 , the Company was current in its repayment obligations under the GS Capital Note #1 and the GS Capital Note #1 had a remaining balance of$42,000 atSeptember 30, 2022 .Boot Capital, LLC . InAugust 2022 , the Company obtained a loan fromBoot Capital, LLC which netted the Company$56,000 in proceeds. In consideration of such loan, the Company issued a$61,600 face amount promissory note (the "Boot Capital Note #1"), with OID of$5,600 , commissions of$3,360 and legal fees of$2,500 . The Boot Capital Note #1 is due inAugust 2023 and is convertible into shares of the Company's common stock at any time after 180 days of issuance at a conversion price at a 40% discount to the then-market price of the Company's common stock, subject to a 4.99% equity blocker.
At
Mast Hill Fund, L.P. InSeptember 2022 , the Company obtained a loan fromMast Hill Fund, L.P. which netted the Company$130,500 in proceeds. In consideration of such loan, the Company issued a$145,000 face amount promissory note (the "MastHill Note #2"), with OID of$14,500 , commissions of$10,440 and legal fees of$3,000 . The MastHill Note #2 is due inSeptember 2023 and is convertible into shares of the Company's common stock at any time at a conversion price of$.0025 per share, subject to a 4.99% equity blocker.
At
Subsequent toDecember 31, 2022 ,$6,250 in principal of the Boot Capital Note #1 has been repaid through conversion into shares of the Company's common stock, as follows: Amount Converted Conversion Price Per Share Number Shares $ 6,250 $ 0.001 20,833,333 Total Converted:$6,250 Total Shares: 20,8333,333 1800Diagonal Lending LLC . InNovember 2022 , the Company obtained a loan from 1800Diagonal Lending LLC which netted the Company$100,000 in proceeds. In consideration of such loan, the Company issued a$103,750 face amount convertible promissory note ("1800 Diagonal Note #2") bearing interest at 10% per annum, with principal and interest due inNovember 2023 . The Company has the right to repay the 1800 Diagonal Note #2 at a premium ranging from 120% to 125% of the face amount. The 1800 Diagonal Note #2 is convertible into shares of the Company's common stock at a conversion price equal to 65% multiplied by the average of the two lowest trading prices of the Company's common stock during the 15 trading days prior to the applicable conversion date, any time after
May 7, 2023 .
At
Mast Hill Fund, L.P. InDecember 2022 , the Company obtained a loan fromMast Hill Fund, L.P. which netted the Company$179,650 in proceeds. In consideration of such loan, the Company issued a$223,000 face amount senior secured promissory note (the "MastHill Note #3"), with OID of$22,300 , commissions of$16,050 and legal fees of$5,000 . The MastHill Note #3 is due inDecember 2023 and is convertible into shares of our common stock at any time at a conversion price of$.001 per share, subject to a 4.99% equity blocker. In connection with the MastHill Note #3, we issued to Mast Hill 223,000,000 cashless warrants with an exercise price of$.001 per share. Additionally, we issued 11,468,572 cashless warrants with an exercise price of$0.0014 per share to Darbie, as a placement agent fee, in connection with the MastHill Note #3.
At
1800Diagonal Lending LLC . InJanuary 2023 , we obtained a loan from 1800Diagonal Lending LLC , which netted the Company$125,330.20 in proceeds. In consideration of such loan, the Company issued a$144,569.20 face amount promissory note (the "1800 Diagonal Note #3"), with OID of$15,489 , a one-time interest charge of$17,348.30 , legal fees of$3,000 and$750 in due diligence fees, with principal and interest payable in 10 equal monthly payments of$16,191.75 beginning inFebruary 2023 . The Company has the right to repay the 1800 Diagonal Note #3 at any time, without penalty. Should the Company become in default on the 1800 Diagonal Note #3, the 1800 Diagonal Note #3 becomes convertible into shares of the Company's common stock at a conversion price equal to 75% multiplied by the lowest trading price of the Company's common stock during the 10 trading days prior to the applicable conversion date.
Related Party Loans. During the year ended
18
Table of Contents
InJune 2021 ,Mr. Newlan advanced the sum of$93,732.70 to the Company. The funds were used to repay the EMA Financial Note (the total repayment amount was$93,697 .70:$58,600 in principal;$3,499.30 in interest; and$31,598.40 as a prepayment premium). Such funds were obtained as a loan on open account, accrue no interest and are due on demand. AtDecember 31, 2021 , such loan had been repaid in full, in the amount of$93,697.70 . During the years endedDecember 31, 2021 and 2020, advances of$772 and$6,670 were received fromAstonia LLC . The amounts dueAstonia LLC bear interest at 5% per year and have a maturity of one year. As ofDecember 31, 2022 and 2021, the Company owedAstonia LLC $5,242 and$5,242 in principal, respectively, and$491 and$268 in accrued and unpaid interest, respectively. Inflation Our management believes economic conditions point toward continuing significant inflationary pressures for the foreseeable future. However, no prediction can be made in this regard and, further, no prediction can be made with respect to how the potential impact any inflation would affect our future results of operations. However, during the summer of 2022, the sales of ourBig Sky American subsidiary were impacted negatively by inflationary pressures that caused a significant reduction in tourism inWestern Montana primarily attributable to a sharp increase in gas prices. Seasonality For the foreseeable future, we expect that our operating results with respect to MiteXstream will be impacted, in an indeterminate measure, by the seasonality of farming operations, including cannabis grow operations. However, we are currently unable to predict the level to which such seasonality will impact
our MiteXstream business.
Off Balance Sheet Arrangements
As of
Contractual Obligations
InMay 2020 , BB Potentials entered into a facility lease withGrizzly Creek Farms, LLC , an entity owned by one our Directors,Fabian G. Deneault , with respect to approximately 2,000 square feet of manufacturing space located inRonan, Montana . Monthly rent under such lease was$1,500 and the initial term of such lease expired inDecember 2025 . This lease was terminated effectiveApril 1, 2021 . Since such date,Mr. Deneault permits BB Potentials to utilize the previously-leased facility for storage, at no charge.
The following sets forth information concerning the sole operating lease for the facility maintained by us as of the date of this Annual Report.
Address Description Use Yearly Rent Expiration Date
11961 Hilltop Road Office/Warehouse Administrative/ $8,700 * January
Building 7 - Suite 22 (1,500 sq. ft.) Warehousing 31,
Argyle, Texas 76226 2025
* We are co-lessees under the lease agreement by which we rent this
facility. Our co-lessee is Petro X Solutions, Inc. , a wholly-ownedsubsidiary of Accredited Solutions, Inc., a publicly-traded company
(symbol: GHMP), an affiliate our company. By agreement with Petro X
Solutions, we are each responsible for 50% of the rent and all
tenancy-related expenses. However, should Petro X Solutions default in
its rent obligations, our company would be responsible for paying the
entire monthly rental amount of $1,450 .
Capital Expenditures
We made no capital expenditures during the years ended December 31, 2022 . We
made capital expenditures of $185,702 during the year ended December 31, 2021 ,
which included the purchase of distribution assets used by Big Sky American and
the purchase of other distribution-related assets. Without obtaining additional
capital, we will not be able to make any capital expenditures.
19
Table of Contents© Edgar Online, source
