The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 - Nature of Operations and Basis of Presentation
Organization and Nature of Operations
Bergio International, Inc. (the Company) was incorporated in the State of Delaware on July 24, 2007 under the name Alba Mineral Exploration, Inc. On October 21, 2009, as a result of a Share Exchange Agreement, the corporations name was changed to Bergio International, Inc. On February 19, 2020, the Company changed its state of incorporation to Wyoming. The Company is engaged in the product design, manufacturing, distribution of fine jewelry primarily in the United States and is headquartered in Fairfield, New Jersey. The Companys intent is to take advantage of the Bergio brand and establish a chain of retail stores worldwide. Our branded product lines are products and/or collections designed by our designer and CEO Berge Abajian and will be the centerpiece of our retail stores.
In September 2019, Bergio International, Inc. filed a Certificate of Amendment to the Certificate of Incorporation to effectuate a 1-for-10,000 reverse stock split of the Companys common stock. All share and per share data have been adjusted to reflect such stock split. In July 2020, the Company filed a Registration Statement on Form S-1 with the purpose of providing funds for its operational plans as well as paying off debt to improve the Companys financial position. There can be no assurance that the Company can raise sufficient from this offering to fund its plans.
Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary consisting of normal recurring adjustments to present fairly the financial position of the Company as of September 30, 2020, the results of operations for the three and nine months ended September 30, 2020 and 2019, and statements of cash flows for the nine months ended September 30, 2020 and 2019. These results are not necessarily indicative of the results to be expected for the full year. The financial statements have been prepared in accordance with the requirements of Form 10-Q and consequently do not include disclosures normally made in an Annual Report on Form 10-K. The December 31, 2019 balance sheet included herein was derived from the audited financial statements included in the Companys Annual Report on Form 10-K as of that date. Accordingly, the financial statements included herein should be reviewed in conjunction with the financial statements and notes thereto included in the Companys Annual Report on Form 10-K/A for the fiscal year ended December 31, 2019, as filed with the Securities and Exchange Commission (SEC) on May 15, 2020 (the Annual Report).
Impact of the COVID-19 Coronavirus
The Companys operations have been affected by the recent and ongoing outbreak of the coronavirus disease 2019 (COVID-19) which in March 2020, was declared a pandemic by the World Health Organization. The ultimate disruption which may be caused by the outbreak is uncertain; however, it may result in a material adverse impact on the Companys financial position, operations and cash flows. Possible areas that may be affected include, but are not limited to, disruption to the Companys customers and revenue, including a significant disruption in consumer demand and accessories, labor workforce, inability of customers to pay outstanding accounts receivable due and owing to the Company as they limit or shut down their businesses, customers seeking relief or extended payment plans relating to accounts receivable due and owing to the Company, unavailability of products and supplies used in operations, and the decline in value of assets held by the Company, including property and equipment. As such, the comparability of the Company's operating results has been affected by significant adverse impacts related to the COVID-19 pandemic.
The Company has increased its online presence to minimize the impact of having to close its retail stores as well as directing efforts towards its wholesale operations.
9
BERGIO INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 2 - Going Concern
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern.
The Company has suffered recurring losses and has an accumulated deficit of $11,833,815 as of September 30, 2020. As of September 30, 2020, the Company had $323,493 in convertible debentures as well as $465,908 in loans payable. At September 30, 2020, the Company also had a stockholders deficit of $365,061. 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 establish Bergio 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 CEO Berge 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.
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.
Note 3 - Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and include the Company and its wholly-owned subsidiary. All significant inter-company accounts and transactions have been eliminated.
During the nine months ended September 30, 2020, there have been no other material changes in the Companys significant accounting policies to those previously disclosed in the Companys Annual Report.
The Company evaluated subsequent events, which are events or transactions that occurred after September 30, 2020 through the issuance of the accompanying financial statements.
10
BERGIO INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 4 - Net Loss per Share
Basic income (loss) per share includes no dilution and is computed by dividing earnings available to common stockholders by the weighted average number of common shares outstanding for the period. Dilutive earnings per share reflect the potential dilution of securities that could occur through the effect of common shares issuable upon the exercise of stock options, warrants and convertible securities. Basic net loss per share equaled the diluted loss per share for the nine months ended September 30, 2020 and 2019, since the effect of shares potentially issuable upon the exercise or conversion was anti-dilutive. Equity instruments that may dilute earnings per share in the future are listed in Note 7 below. For the nine months ended September 30, 2020, 121,387,510 shares issuable upon the exercise of warrants and conversion of convertible debt were not included in the computation of diluted net loss because their inclusion would be anti-dilutive. For the three and nine months ended September 30, 2019, 616,288 shares issuable upon the conversion of convertible debt were not included in the computation of diluted net loss because their inclusion would be anti-dilutive. In September 2019, Bergio International, Inc. filed a Certificate of Amendment to the Certificate of Incorporation to effectuate a 1-for-10,000 reverse stock split of the Companys common stock. All share and per share data has been adjusted to reflect such stock split.
The following table sets forth the computation of earnings per share:
|
Three Months Ended
September 30,
|
|
2020
|
|
2019
|
Basic net income (loss) per share computation:
|
|
|
|
Net income (loss)
|
$
|
388,846
|
|
$
|
(52,335)
|
Weighted-average common shares outstanding
|
|
45,425,191
|
|
|
539,141
|
Basic net income (loss) per share
|
$
|
0.01
|
|
$
|
(0.21)
|
|
|
|
|
|
|
Diluted net loss per share computation:
|
|
|
|
|
|
Net income (loss)
|
$
|
388,846
|
|
$
|
(52,335)
|
Weighted-average common shares outstanding
|
|
45,425,191
|
|
|
539,141
|
Incremental shares attributable to the shares issuable upon conversion of convertible debt
|
|
121,387,510
|
|
|
-
|
Total adjusted weighted-average shares
|
|
166,812,701
|
|
|
539,141
|
Diluted net income (loss) per share
|
$
|
0.00
|
|
$
|
(0.21)
|
|
Nine Months Ended
September 30,
|
|
2020
|
|
2019
|
Basic net loss per share computation:
|
|
|
|
Net loss
|
$
|
(173,360)
|
|
$
|
(254,528)
|
Weighted-average common shares outstanding
|
|
34,217,798
|
|
|
539,141
|
Basic net loss per share
|
$
|
(0.01)
|
|
$
|
(0.38)
|
|
|
|
|
|
|
Diluted net loss per share computation:
|
|
|
|
|
|
Net loss
|
$
|
(173,360)
|
|
$
|
(254,528)
|
Weighted-average common shares outstanding
|
|
34,217,798
|
|
|
539,141
|
Incremental shares attributable to the shares issuable upon conversion of convertible debt
|
|
-
|
|
|
-
|
Total adjusted weighted-average shares
|
|
34,217,798
|
|
|
539,141
|
Diluted net loss per share
|
$
|
(0.01)
|
|
$
|
(0.38)
|
11
BERGIO INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 5 - New Authoritative Accounting Guidance
No other recently issued accounting pronouncements had or are expected to have a material impact on the Companys condensed consolidated financial statements.
Note 6 - Convertible Debt
Fife, Typenex and Iliad
In December 2012, the Company entered into a $325,000 convertible note with Fife consisting of three tranches to be drawn down with the first tranche totaling $125,000, including $25,000 in loan costs and additional two tranches totaling $200,000. The note bears a 5% annual interest rate and matures eighteen months from the date of issuance. The note is convertible into shares of the Companys common stock based on 70% of the average of the three lowest closing prices of the common stock for the proceeding 15 consecutive trading days immediately prior to the conversion. During 2013, the conversion price was fixed at $0.005 per share. As of December 31, 2012, the Company only drew down the first tranche totaling $125,000. On February 11, 2013, April 5, 2013, April 23, 2013, and July 1, 2013, the Company drew down an additional $250,000.
On September 5, 2014, the Company, Fife, Typenex and Iliad Research and Trading, LLP (Iliad) entered into an Assignment and Assumption Agreement and Note Purchase Agreement (the Note Purchase Agreement) whereby Iliad acquired all of Fifes and Typenexs right, title, obligations and interest in, to and arising under the Company Notes (as defined in the Note Purchase Agreement) and the Note Purchase Documents (as defined in the Note Purchase Agreement).
On October 17, 2014, the Company entered into a financing arrangement with Iliad to provi0de additional financing in the amount of up to $450,000 through the issuance of a Secured Convertible Promissory Note (the Note). The Company agreed to cover Iliads legal, accounting and other related fees in the amount of $5,000, which is included in the principal balance of the Note. The Note will accrue interest at the rate of 8% per annum until the Note is paid in full. Monies are to be drawn in eight tranches with the initial tranche in the amount of $105,000, and the remaining balance of $350,000 in seven tranches of $50,000 each. The Company drew down the initial tranche on October 17, 2014. The Note has a maturity date of July 17, 2016. The Company continues to negotiate with the lender.
Beginning nine months after October 17, 2014 and on the same day each month thereafter, the Company shall make an installment payment, based upon the unpaid balance. At the option of the Company, payments may be made in cash or by converting the installment amount into shares of the Companys common stock. The conversion price is equal to the lesser of (i) $0.0005 per share and (ii) 67.5% of the average of the three lowest closing bid prices in the 15 trading days immediately preceding the conversion. The Company has the right to prepay the Note at 135% of the outstanding balance at the time of prepayment. During the nine months ended September 30, 2020, there were no conversions. However, the Company did resolve a minor issue. The outstanding balances at September 30, 2020 and December 31, 2019 were $-0-and $7,123, respectively with accrued interest of $-0- and $54 at September 30, 2020 and December 31, 2019, respectively.
During the year ended December 31, 2014, the Company drew down an additional $314,703. During the nine months ended September 30, 2020, principal of $20,768 was converted into 2,610,000 shares of common stock.
In August 2020, the Company and Iliad entered into a Settlement Agreement. Under the terms of the Agreement, the Company and Iliad agreed to settle approximately $474,000 of convertible debt and accrued interest for a total of $300,000 in a note to be paid in monthly installments of $50,000 beginning September 1, 2020.
The outstanding balances at September 30, 2020 and December 31, 2019 were $250,000 and $329,175 respectively, with accrued interest of $-0- and $141,487 at September 30, 2020 and December 31, 2019, respectively.
12
BERGIO INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 6 - Convertible Debt (continued)
111 Recovery Corp. and Vis Vires Group, Inc.
On May 31, 2019, the Vis Vires Group, Inc. (Vis Vires) entered into an assignment agreement with 111 Recovery Corp. wherein Vis Vires assigned all of its rights, title and interests in, to and under the convertible notes (discussed below) to 111 Recovery Corp. from the inception of the notes, together with unpaid accrued interest on the convertible notes. The Company acknowledged and approved this assignment.
On March 11, 2015, the Company entered into an 8% convertible note in the amount of $38,000 with Vis Vires Group, Inc. The principal and accrued interest is payable on or before November 6, 2015. At the option of the Company, but not before nine months from the date of issuance, the holder may elect to convert all or part of the convertible into the Companys common stock. The note is convertible into shares of the Companys common stock at a price equal to 60% of the average of the nine lowest trading prices during the 10 days prior to the date of conversion or $0.00009, whichever is greater. During the nine months ended September 30, 2020, principal of $38,000 was converted into 1,696,054 shares of common stock. The outstanding balance at September 30, 2020 and December 31, 2019 was $-0- and $38,000, respectively, with accrued interest of $-0- and $20,411 at September 30, 2020 and December 31, 2019, respectively. On April 30, 2015, the Company entered into an 8% convertible note in the amount of $33,000 with Vis Vires. The principal and accrued interest is payable on or before November 6, 2015. At the option of the Company, but not before nine months from the date of issuance, the holder may elect to convert all or part of the convertible into the Companys common stock. The note is convertible into shares of the Companys common stock at a price equal to 60% of the average of the three lowest trading prices during the 10 days prior to the date of conversion or $0.00009, whichever is greater. During the nine months ended September 30, 2020 principal of $33,000 and accrued interest of $4,700 was converted into 9,015,614 shares of common stock. The outstanding balance at September 30, 2020 and December 31, 2019 was $-0- and $33,000, respectively, with accrued interest of $25,001 and $31,953 at September 30, 2020 and December 31, 2019, respectively. The Company is currently negotiating an extension to this note.
Sims Investment Holdings, Inc.
During 2018, the Company received $125,000 in the form of a note payable. On July 1, 2019 (Maturity Date), the amount was converted into a 10% convertible promissory note. The principal and accrued interest from the original note payable became due on July 1, 2019. The note accrues interest on the unpaid principal balance at the rate of 10% per annum from the date hereof (the Issue Date) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of 10% per annum from the due date until paid (Default Interest). Interest shall be computed on the basis of a 365-day year and the actual number of days elapsed. The note is convertible into shares of the Companys common stock, at the option of the holder. The conversion price shall be $0.01 per common share. There were no conversions during the nine months ended September 30, 2020. The Company is currently in default, and interest accrues at the default interest rate of 10%. The outstanding balances at September 30, 2020 and December 31, 2019 was $125,000 and $125,000, respectively, with accrued interest of $19,028 and $9,514 at September 30, 2020 and December 31, 2019, respectively.
Auctus Funds, LLC.
On November 6, 2019, the Company entered into a 12% convertible promissory note in the amount of $125,000 with Auctus Fund, LLC. The principal and accrued interest is payable on or before August 20, 2020 and interest accrues at the rate of 12% per annum. Interest shall be computed on the basis of a 365-day year and the actual number of days elapsed. Any amount of principal or interest on this note which is not paid when due shall bear interest at the rate of the lesser of (i) twenty-four percent (24%) per annum and (ii) the maximum amount permitted under law from the due date thereof until the same is paid (the Default Interest). The Holder shall have the right from time to time to convert all or any part of the outstanding and unpaid principal, interest, penalties, and all other amounts under this note into fully paid and non-assessable shares of common stock.
13
BERGIO INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 6 - Convertible Debt (continued)
Auctus Funds, LLC. (continued)
The conversion price shall equal the lesser of: (i) the lowest trading price during the previous twenty-five (25) trading day period ending on the latest complete trading day prior to the date of this Note, and (ii) the variable conversion which shall mean 60% multiplied by the lowest trading price for the common stock during the twenty-five (25) trading day period ending on the latest complete trading day prior to the conversion date. Furthermore, the conversion price may be adjusted downward if, within three (3) business days of the transmittal of the notice of conversion to the Borrower or Borrowers transfer agent, the Common Stock has a closing bid which is 5% or lower than that set forth in the Notice of Conversion.
During the nine months ended September 30, 2020, principal of $4,001, $2,764 of accrued interest and fees of $750 were converted into 2,408,500 shares of common stock. The outstanding balances at September 30, 2020 and December 31, 2019 were $115,594 and $125,000, respectively, with accrued interest of $1,114 and $1,910 at September 30, 2020 and December 31, 2019, respectively.
Crown Bridge Partners Inc.
On October 29, 2019, the Company entered into a 10% convertible promissory note in the amount of $100,000 with Crown Bridge Partners, LLC. This Note carries a prorated original issue discount of up to $8,000.00 to cover the Holders accounting fees, due diligence fees, monitoring, and/or other transactional costs incurred in connection with the purchase and sale of the note, which is included in the principal balance of this note. The holder paid $23,000 for the first tranche ($25,000 less $2,000 discount). The maturity date for each tranche funded shall be twelve (12) months from the effective date of each payment as well as any accrued and unpaid interest and other fees. Interest accrues at the rate of 10% per annum and shall be computed on the basis of a 365-day year and the actual number of days elapsed. Any amount of principal or interest on this note which is not paid when due shall bear interest at the rate the of lesser of (i) 15% per annum and (ii) the maximum amount permitted under law from the due date thereof until the same is paid (the Default Interest). The Holder shall have the right from time to time to convert all or any part of the outstanding and unpaid principal, interest, penalties, and all other amounts under this note into fully paid and non-assessable shares of common stock.
The conversion price shall mean 60% multiplied by the lowest trading price (representing a discount rate of 40%) during the previous twenty-five (25) trading day period ending on the latest complete trading day prior to the date of this note. The conversion price shall be subject to a floor price of $0.000035.
During the nine months ended September 30, 2020, principal of $4,050 and fees of $1,000 were converted into 2,000,000 shares of common stock. The outstanding balances at September 30, 2020 and December 31, 2019 were $20,960 and $25,000, respectively, with accrued interest of $2,318 and $438 at September 30, 2020 and December 31, 2019, respectively.
Fidelis Capital, LLC.
On November 5, 2019, the Company entered into a 10% convertible promissory note in the amount of $30,000 with Fidelity Capital, LLC. The principal and accrued interest is payable on or before November 5, 2020 and interest accrues at the rate of 10% per annum. If the borrower fails to pay the default amount within five (5) business days of written notice that such amount is due and payable, then the holder shall have the right at any time (and so long and to the extent that there are sufficient authorized shares), to require the borrower, upon written notice, to immediately issue, in lieu of the default amount, the number of shares of common stock of the borrower equal to the default amount divided by the conversion price then in effect.
14
BERGIO INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 6 - Convertible Debt (continued)
Fidelis Capital, LLC. (continued)
The Holder shall have the right from time to time to convert all or any part of the outstanding and unpaid principal, interest, penalties, and all other amounts under this note into fully paid and non-assessable shares of common stock. The conversion price shall mean a price which is a 40% discount to the lowest trading price in the fifteen (15) days prior to the day that the Holder requests conversion.
During the nine months ended September 30, 2020, principal of $18,500, and $1,995 of accrued interest were converted into 2,720,089 shares of common stock. The outstanding balances at September 30, 2020 and December 31, 2019 were $11,500 and $30,000, respectively, with accrued interest of $416 and $467 at September 30, 2020 and December 31, 2019, respectively.
RB Capital Partners, Inc.
On October 15, 2019, the Company entered into a 10% convertible note in the amount of $25,000 with RB Capital Partners, Inc. The note is payable on demand but has a period of twelve months. The principal and accrued interest is payable on or before October 15, 2020. At the option of the Holder, but not before nine months from the date of issuance, the holder may elect to convert all or part of the convertible into the Companys common stock. The note is convertible into shares of the Companys common stock at a fixed price of $0,001. During the nine months ended September 30, 2020, principal of $2,600 was converted into 2,600,000 shares of common stock. The outstanding balance at September 30, 2020 and December 31, 2019 was $21,200 and $25,000, respectively, with accrued interest of $2,301 and $-0- at September 30, 2020 and December 31, 2019, respectively.
On July 1, 2020, the Company entered into a 10% convertible note in the amount of $25,000 with RB Capital Partners, Inc. The note is payable on demand but has a period of twelve months. The principal and accrued interest is payable on or before October 15, 2020. At the option of the Holder, but not before nine months from the date of issuance, the holder may elect to convert all or part of the convertible into the Companys common stock. The note is convertible into shares of the Companys common stock at a fixed price of $0.50. There were no conversions during the nine months ended September 30, 2020. The outstanding balance at September 30, 2020 was $25,000 with accrued interest of $623 at September 30, 2020.
Power Up Lending Group
On July 13, 2020, the Company entered into a 8% convertible note in the amount of $25,000 with Power Up Lending Group. The principal and accrued interest is payable on or before July 13, 2021. The note may not be prepaid except under certain conditions. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (Default Interest). At the option of the Holder, but not before 180 days from the date of issuance, the holder may elect to convert all or part of the convertible into the Companys common stock. The conversion price shall mean 63% multiplied by the lowest trading price (representing a discount rate of 37%) during the previous twenty-five (15) trading day period ending on the latest complete trading day prior to the date of this note. There were no conversions during the nine months ended September 30, 2020. The outstanding balance at September 30, 2020 was $55,000 with accrued interest of $952 at September 30, 2020.
15
BERGIO INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 6 - Convertible Debt (continued)
Gulf Coast M&A Ltd.
On July 8, 2020, the Company entered into a 10% convertible note in the amount of $12,500 with Power Up Lending Group. The principal and accrued interest is payable on or before January 8, 2021. The note may not be prepaid except under certain conditions. At the option of the Holder, but not before nine months from the date of issuance, the holder may elect to convert all or part of the convertible into the Companys common stock. The note is convertible into shares of the Companys common stock at a fixed price of $0,001. There were no conversions during the nine months ended September 30, 2020. The outstanding balance at September 30, 2020 was $12,500 with accrued interest of $288 at September 30, 2020.
As of September 30, 2020, and December 31, 2019, total convertible debt was $323,493 and $532,616, respectively, net of debt discount of $63,261 and $179,682 at September 30, 2020 and December 31, 2019, respectively. Total accrued interest was $49,740 and $206,234 September 30, 2020 and December 31, 2019, respectively. Balances for the period ended September 30, 2020 do not include the Iliad Note which was negotiated into a note payable.
Note 7. Derivative Liability
The Company accounts for the fair value of the conversion features of its convertible debt in accordance with ASC Topic No. 815-15 Derivatives and Hedging; Embedded Derivatives (Topic No. 815-15). Topic No. 815-15 requires the Company to bifurcate and separately account for the conversion features as an embedded derivative contained in the Companys convertible debt. The Company is required to carry the embedded derivative on its balance sheet at fair value and account for any unrealized change in fair value as a component of results of operations. The Company values the embedded derivatives using the Black-Scholes pricing model. During the year ended December 31, 2019, the Company recorded debt discount in the amount of $337,496. During the nine months ended September 30, 2020, the Company recorded debt discount in the amount of $5,000. Amortization of debt discount amounted to $65,464 and $171,421 for the three and nine months ended September 30, 2020, respectively, as compared to $-0- and $-0- for the three and nine months ended September 30, 2019. Unamortized debt discount at September 30, 2020 and December 31, 2019 were $63,261 and $179,682, respectively. The derivative liability is revalued each reporting period using the Black-Scholes model. As of September 30, 2020 and December 31, 2019, the derivative liability was $210,802 and $396,220, respectively.
The Black-Scholes model utilized the following inputs to value the derivative liability at the date of issuance of the convertible note at September 30, 2020:
Stock Price - The stock price was based closing price of the Companys stock as of the valuation date, which was $0.0035 at September 30, 2020.
Variable Conversion Prices - The conversion price was based on: (i) 60% multiplied by the lowest trading price in the fifteen (15) days prior to the conversion at September 30, 2020 for Fidelis Capital; (ii) 60% multiplied by the lowest trading price during the previous twenty-five (25) trading day period prior to the conversion at September 30, 2020 for Crown Bridge Partners; (iii) the lesser of: (a) the lowest trading price during the previous twenty-five (25) trading day period ending on the latest complete trading day prior to the date of this Note, and (b) the variable conversion which shall mean 60% multiplied by the lowest trading price for the common stock during the twenty-five (25) trading day period ending on the latest complete trading day prior to the conversion at September 30, 2020 for Auctus Fund, LLC; (iv) 60% multiplied by the lowest trading price in the fifteen (15) days prior to the conversion at September 30, 2020 for Power Up Lending Group.
16
BERGIO INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 7. Derivative Liability (continued)
Time to Maturity - The time to maturity was determined based on the length of time between the valuation date and the maturity of the debt. Time to maturity ranged from 28 to 286 days at September 30, 2020.
Risk Free Rate - The risk free rate was based on the Treasury Note rate as of the valuation dates with a term commensurate with the remaining term of the debt. The risk free rate at September 30, 2020 was 0.12%, based on the term of the note.
Volatility - The volatility was based on the historical volatility of the Company. The average volatility was 659.37% at September 30, 2020.
Note 8 - Loans Payable
PPP Loan
On March 27, 2020, President Trump signed the Coronavirus Aid, Relief and Economic Security (the CARES Act), which, among other things, outlines the provisions of the Paycheck Protection Program (the PPP). The Company determined that it met the criteria to be eligible to obtain a loan under the PPP because, among other reasons, in light of the COVID-19 outbreak and the uncertainty of economic conditions related thereto, the loan was considered necessary to support the Companys ongoing operations and retain all its employees. In addition, President Trump signed into law the Paycheck Protection Program and Health Care Enhancement Act on April 24, 2020, which increased funding provided by the CARES Act. On April 17, 2020 the Company issued a promissory note (the Note) to Columbia Bank in the principal aggregate amount of $18,607.50 (the PPP Loan) pursuant to the Paycheck Protection Program (PPP) under the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act). On September 5, 2020 the Paycheck Protection Program Flexibility Act was signed into law and extended the program until December 31, 2020.
Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of loan granted under the program. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and any payments of mortgage interest, rent, and utilities. No assurance is provided that the Company will obtain forgiveness of the PPP Loan in whole or in part. The PPP Loan has a two-year term and bears interest at a rate of 0.98% per annum. Monthly principal and interest payments are deferred for nine months after the date of disbursement. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. Based on the September 5, 2020 the Paycheck Protection Program Flexibility Act, certain changes will need to be made to the original Note, based on the new law.
SBA Loan
On July 6, 2020, the Small Business Association (SBA) authorized a loan to Bergio International, Inc. in the amount of $114,900. Installment payments, including principal and interest, will begin twelve months from the date of the note in the amount of $560 each month for a term of thirty (30) years. Interest accrues on this note at the rate of 3.75%. This note is collateralized by the assets of the Company. The outstanding balance at September 30, 2020 was $114,900 with accrued interest of $1,015.
Coyne Enterprises, Inc.
On May 23, 2019, the Company entered into a loan agreement with Coyne Enterprises, Inc. in the amount of $30,000. The term of the loan was for the period September 1, 2019 through November 30, 2019. The Company continues to negotiate the extension of this loan. Interest accrues at the rate of 6% per annum and is to be paid quarterly. Prepayment or partial payment can be made with no penalty. The outstanding balance at September 30, 2020 and December 31, 2019 was $30,000 and $30,000, respectively, with accrued interest of $2,400 and $1,050 at September 30, 2020 and December 31, 2019, respectively.
17
BERGIO INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 8 - Loans Payable (continued)
Trillium Partners LP
On June 16, 2020, the Company entered into a loan agreement with Trillium Partner LP in the amount of $12,500. The loan and accrued interest in due on December 31, 2020. Interest accrues at the rate of 10% per annum. The outstanding balance at September 30, 2020 was $12,000 with accrued interest of $315 at September 30, 2020.
On September 14, 2020, the Company entered into a loan agreement with Trillium Partner LP in the amount of $25,000. The loan and accrued interest in due on March 14, 2021. Interest accrues at the rate of 10% per annum. The outstanding balance at September 30, 2020 was $25,000 with accrued interest of $1 at September 30, 2020.
On September 18, 2020, the Company entered into a loan agreement with Trillium Partner LP in the amount of $15,000. The loan and accrued interest in due on March 18, 2021. Interest accrues at the rate of 10% per annum. The outstanding balance at September 30, 2020 was $25,000 with accrued interest of $82 at September 30, 2020.
Note 9 - Advances from Principal Executive Officer and Accrued Interest
The Company also receives periodic advances from its principal executive officer based upon the Companys cash flow needs. At September 30, 2020 and December 31, 2019 $256,124 and $383,717, respectively, was due to such officer, including accrued interest. During the year ended December 31, 2019, the principal executive officer converted $500,000 of deferred compensation for common stock of the Company.
Interest expense is accrued at an average annual market rate of interest which was 3.25% and 4.75% at September 30, 2020 and December 31, 2019, respectively. Interest expense due to such officer was $3,240 and $10,455 for the three and nine months ended September 30, 2020, respectively, as compared to $14,219 and $43,762 for the three and nine months ended September 30, 2019, respectively. Accrued interest was $212,942 and $202,487 at September 30, 2020 and December 31, 2019, respectively. No terms for repayment have been established.
Effective February 28, 2010, the Company entered into an employment agreement with its CEO. The agreement, which is for a five year term, provides for an initial base salary of $175,000 per year with a 3% annual increase thereafter (the Base Salary). The CEO is also entitled to certain bonuses based on net profits before taxes and other customary benefits, as defined in the agreement. In addition, since it is understood that the Company is employing the CEO during a time of economic decline throughout the U.S. and at times and from time to time, the Company may not be in a position to pay the full amount of Base Salary owed the CEO it is understood and agreed to by the Board, that as long as the Company is unable to pay the CEO the full amount of his Base Salary that the Board shall issue to him, from time to time, an amount of shares that will allow him to remain in possession of fifty-one percent (51%) of the Companys then outstanding shares of common stock. Such issuances shall be made to the CEO at any time when his total share holdings are reduced to an amount less than fifty-one percent (51%) as a result of issuance of shares of common stock made on behalf of the Company.
Effective September 1, 2011, the Company and CEO entered into an Amended and Restated Employment Agreement (the Amended Agreement) which primarily retains the term and compensation of the original agreement. The Amended Agreement, however, removes the section which previously provided for the issuance of Company common stock to the CEO, from time to time, when the Company is unable to pay the CEO the full amount of his Base Salary (as defined in the Amended Agreement) which would allow the CEO to maintain a fifty-one percent (51%) share of the Companys outstanding common stock. However, the CEO does have the right to request all or a portion of his unpaid Base Salary be paid with the Companys restricted common stock. In addition, the Amended Agreement provides for the issuance of 51 shares of newly authorized Series A Preferred Stock to be issued to the CEO. As defined in the Certificate of Designations, Preferences and Rights of the Series A Preferred Stock, each share of Series A Preferred Stock has voting rights such that the holder of 51 shares of Series A Preferred Stock will effectively maintain majority voting control of the Company.
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BERGIO INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 9 - Advances from Principal Executive Officer and Accrued Interest (continued)
On September 30, 2018, the Principal Executive Office signed an agreement with the Company extending payments in the amount of $1,000,000 due him until January 31, 2020 as a result of the financial situation of the Company. This amount was reduced to $500,000 after the PEO converted $500,000 of deferred compensation into 17,000,000 shares of common stock of the Company in 2019. As of September 30, 2020 and December 31, 2019, deferred compensation due to the PEO were $420,571 and $345,571, respectively.
On January 1, 2019, the CEO amended his employment agreement with the Company for a term of one year expiring December 31, 2019. The agreement primarily retains the terms of the Amended Agreement, but lowers the compensation to $100,000 for the year. Effective July 1, 2019, the Principal Executive Officer agreed to stop deferral of his salary at least through December 31, 2019 as a result of the financial situation of the Company as a result of the Companys financial condition. Effective January 1, 2020, the CEOs salary was restated back to $105,000.
As of September 30, 2020, deferred compensation of $320,172 and advances of $179,828 and at December 31, 2019, deferred compensation of $297,513 and advances of $202,487 of the advances, both periods totaling $500,000, were classified as long-term liabilities.
Note 10 - Litigation
We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
Note 11 - Operating Lease Liability
The Company leases retail space at two different locations. One lease has monthly payments from $1,350 to $1,665 which expire in May 2024. The second lease has a contingent rental based on 10% of sales. Contingent rentals are not included in operating lease liabilities. The Company's leases generally do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease. The Company used incremental borrowing rates as of January 1, 2019 for operating leases that commenced prior to that date. The Company estimated its incremental borrowing rate based on its credit quality, line of credit agreement and by comparing interest rates available in the market for similar borrowings. The Company used a discount rate of 10% at September 30, 2020.
19
BERGIO INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 11 - Operating Lease Liability (continued)
The following table reconciles the undiscounted future minimum lease payments (displayed by year in aggregate) under non-cancelable operating leases with terms more than one year to the total operating lease liabilities on the consolidated balance sheet as of September 30, 2020:
2020 remainder
|
$
|
4,425
|
2021
|
|
18,180
|
2022
|
|
18,900
|
2023
|
|
19,700
|
2024
|
|
6,660
|
Total minimum lease payments
|
|
67,865
|
Less amounts representing interest
|
|
(10,787)
|
Present value of net minimum lease payments
|
|
57,077
|
Less current portion
|
|
(13,198)
|
Long-term capital lease obligation
|
$
|
43,879
|
(1)The above amount does not include contingent rentals which may be paid under lease agreement with Ocean Resort Casino. This rental is based upon 10% of gross sales at this location.
Total rent expense under operating leases for the three and nine months ended September 30, 2020 and 2019 was $12,323 and $25,364, respectively, as compared to $15,724 and $43,019 for the three and nine months ended September 30, 2019, respectively.
Note 12 - Reverse Stock Split
In September 2019, Bergio International, Inc. filed a Certificate of Amendment to the Certificate of Incorporation to effectuate a 1-for-10,000 reverse stock split of the Companys common stock. All share and per share data has been adjusted to reflect such stock split.
20