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
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. 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.
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, 2017, the results of operations for the three and nine months ended September 30, 2017 and 2016, and statements of cash flows for the nine months ended September 30, 2017 and 2016. 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, 2016 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 for the fiscal year ended December 31, 2016, as filed with the Securities and Exchange Commission (SEC) on April 17, 2017 (the Annual Report).
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 current liabilities exceeded current assets by $599,046, as of September 30, 2017. As of September 30, 2017, the Company had $538,639 in convertible debentures which are currently due and the Company is currently negotiating terms with the holders of these debentures. At September 30, 2017, the Company also had a stockholders deficit of $323,857. 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.
In addition to obtaining new customers and increasing sales to existing customers, management plans to achieve profitability by increasing its business through partnering with other companies in the jewelry business and finding other channels to distribute its products. 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.
7
BERGIO INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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, 2017, 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, 2017 through the issuance of the accompanying financial statements.
Non-controlling Interest
Non-controlling interest represents third party ownership in the net assets of our consolidated subsidiaries. For financial reporting purposes, the assets and liabilities of our majority owned subsidiaries are consolidated with those of our own, with any third party investors interest shown as non-controlling interest.
On June 1, 2015, the Company acquired a 51% interest in R.S. Fisher, in exchange for funding the companys operations. The minority holder contributed jewelry molds and inventory valued at $349,292.
As of September 30, 2017, the Company sold its 51% interest in R.S. Fisher.
Note 4 - Income (Loss) per Share
Basic earnings (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, 2017, 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 6 below. For the nine months ended September 30, 2017, 8,002,967,583 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. For the three and nine months ended September 30, 2016, 1,411,502,797 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
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BERGIO INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
5 - New Authoritative Accounting Guidance
In August 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-15, Presentation of Financial Statements - Going Concern to provide guidance about managements responsibility to evaluate whether there is substantial doubt about an entitys ability to continue as a going concern. The guidance requires management to assess whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entitys ability to continue as a going concern within one year after the date that the financial statements are issued. When management identifies such conditions or events, a footnote disclosure is required to disclose their nature, as well as managements plans to alleviate the substantial doubt to continue as a going concern. The standard became effective for our fiscal year end 2017 and did not have an impact on the consolidated financial statements.
In April 2016, the FASB issued ASU No. 2016-10,
Revenue from Contracts with Customers: Identifying performance obligations and licensing,
to reduce the cost and complexity of applying the guidance on identifying promised goods or services around identifying performance obligations and implementation guidance on determining whether an entitys promise to grant a license provides a customer with either a right to use the entitys intellectual property (which is satisfied at a point in time) or a right to access the entitys intellectual property (which is satisfied over time). The ASU defines a five-step process to achieve the core principal and, in doing so, it is possible more judgement and estimates may be required within the revenue recognition process than are currently in use. The ASU will be effective for the Company in the first quarter of 2018 using either of two methods: (1) retrospective application to each prior reporting period presented with the option to elect certain practical expedients or (2) retrospective application with the cumulative effect of initially applying the ASU recognized at the date of the initial application and providing certain additional disclosures. Early adoption is permitted as of annual and interim reporting periods beginning after December 15, 2016. The Company is continuing to evaluate the future impact of this ASU on the consolidated financial statements and do not believe there will be a material impact to our revenue upon adoption.
No other recently issued accounting pronouncements had or are expected to have a material impact on the Companys condensed consolidated financial statements.
Note 6 - Bank Lines of Credit
A summary of the Companys credit facilities is as follows:
|
|
|
|
| |
|
September 30,
|
|
December 31,
|
|
2017
|
|
2016
|
Various unsecured Credit Cards, minimum payment of principal and interest are due monthly at the credit cards annual interest rate. September 30, 2017 and December 31, 2016, the interest rates ranged from 6.0% to 22.5%.
|
$
|
360,027
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|
$
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375,292
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Current maturities included in current liabilities
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$
|
360,027
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|
$
|
375,292
|
The Companys CEO also serves as a guarantor of the Companys debt.
9
BERGIO INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 7 - 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 an 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 common shares of the Company 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 June 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 provide 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 7 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 is currently negotiating with the lender (see below).
Beginning six 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, 2017 principal and interest of $27,336 was converted into 402,000,000 shares of common stock. The outstanding balances at September 30, 2017 and December 31, 2016 was $73,414 and $97,609, respectively, with accrued interest of $2,000 and $653 at September 30, 2017 and December 31, 2016, respectively.
During the year ended December 31, 2014, the Company drew down an additional $314,703. There were no conversions during the nine months ended September 30, 2017. The outstanding balances at September 30, 2017 and December 31, 2016 were $329,175, with accrued interest of $59,035 and $39,831 at September 30, 2017 and December 31, 2016, respectively.
Third Party Note
In November 2014, the Company converted a portion of its outstanding accounts payable for legal services to a third party into two convertible promissory notes in the aggregate amount of $63,275. These are demand notes and accrue interest at the rate of 10% on the outstanding balance. The notes are convertible into shares of the Companys common stock based on 65% of the average ten trading days closing bid price during the preceding ten consecutive trading days immediately prior to the conversion. During the nine months ended September 30, 2017, principal of $10,345 was converted into 197,876,624 shares of common stock. The outstanding balances at September 30, 2017 and December 31, 2016 were $12,327 and $22,672, respectively, with accrued interest of $-0- and $9,000 at September 30, 2017 and December 31, 2016, respectively. This note was fully repaid in October 2017.
10
BERGIO INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 7 - Convertible Debt (continued)
Third Party Note (continued)
On April 7, 2015, the convertible promissory notes and accrued interest was assigned to Carebourn Capital L.P. (Carebourn Capital). All terms and conditions remained the same, except that notes are convertible into shares of the Companys common stock equal to 50% of the average ten trading days closing bid price during the preceding ten consecutive trading days immediately prior to the conversion.
KBM Worldwide
On February 4, 2015, the Company entered into an 8% convertible note in the amount of $54,000 with KBM Worldwide, Inc. (KBM Worldwide). The principal and accrued interest is payable on or before November 6, 2015. At the option of the Company, but not before six months from the date of issuance, the holder may elect to convert all or part of such note into the Companys common stock. The note is convertible into shares of the Companys common stock at a price of 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. There were no conversions during the nine months ended September 30, 2017. The outstanding balances at September 30, 2017 and December 31, 2016 were $40,590, with accrued interest of $2,465 and $6,913 at September 30, 2017 and December 31, 2016, respectively.
Vis Vires Group, Inc.
On March 11, 2015, the Company entered into an 8% convertible note in the amount of $38,000 with Vis Vires Group, Inc. (Vis Vires). The principal and accrued interest is payable on or before November 6, 2015. At the option of the Company, but not before six 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. There were no conversions during the nine months ended September 30, 2017. The outstanding balances at September 30, 2017 and December 31, 2016 were $38,000 with accrued interest of $7,862 and $5,582 at September 30, 2017 and December 31, 2016, 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 six 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. There were no conversions during the nine months ended September 30, 2017. The outstanding balance at September 30, 2017 and December 31, 2016 was $33,000 with accrued interest of $6,344 and $4,364 at September 30, 2017 and December 31, 2016, respectively.
JMJ Financial
On April 15 2015, the Company entered into a $250,000 convertible note with JMJ Financial. The consideration was $225,000 and $25,000 original issue discount. The principal and accrued interest is payable on or before May 4, 2016. On April 15, 2015, the Company borrowed $25,000 of this amount. The holder, at its option, may elect to convert all or part of the convertible into the Companys common stock at a price equal to the lesser of $0.018 per share or 60% of the lowest trading price during the 25 days prior to the date of conversion. . During the nine months ended September 30, 2017, principal of $1,096 was converted into 91,000 shares of common stock. The outstanding balance at September 30, 2017 and December 31, 2016 was $12,133 and $13,229, respectively, with accrued interest of $4,554, and $3,761 at September 30, 2017 and December 31, 2016, respectively.
As of September 30, 2017 and December 31, 2016, total convertible debt was $538,639 and $574,275, respectively.
11
BERGIO INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 8 - 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. Amortization of debt discount amounted to $-0- and $7,524 for the nine months ended September 30, 2017 and 2016, respectively. The derivative liability is revalued each reporting period using the Black-Scholes model. As of September 30, 2017 and December 31, 2016, the derivative liability was $18,419 and $46,955, 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, 2017:
Stock Price
- The stock price was based closing price of the Companys stock as of the valuation date, which was $0.0001 at September 30, 2017.
Variable Conversion Prices
- The conversion price was based on: (i) 50% of the average closing bid price during the preceding ten consecutive trading days immediately prior to the conversion at September 30, 2017 for Carebourn Capital; (ii) the lower of $0.018 per share or 60% of the lowest trading price during the 25 days prior to the date of conversion at September 30, 2017 for JMJ Financial.
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 92 days at September 30, 2017.
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, 2017 was 1.06% based on the term of the note.
Volatility
- The volatility was based on the historical volatility of the Company. The average volatility was 150.32% at September 30, 2017.
Note 8 - Related Party Transactions
The Company receives periodic advances from its principal executive officer based upon the Companys cash flow needs. At September 30, 2017, 2016 and December 31, 2016, $148,197 and $242,130, respectively, was due to the principal executive officer, including accrued interest. Interest expense is accrued at an average annual market rate of interest which was 4.25% at September 30, 2017 and 3.75% at December 31, 2016. Interest expense associated with this loan was $6,308 and $17,989 for the three and nine months ended September 30, 2017 as compared to $4,367 and $12,473 for the three and nine months ended September 30, 2016, respectively. No terms for repayment have been established. As a result, the amount is classified as a Current Liability.
12
BERGIO INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 8 - Related Party Transactions (continued)
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. Effective November 3, 2011, the CEO notified the Company that for the one year period, retroactive from April 1, 2011, through December 31, 2012, he would reduce his Base Salary to $100,000. The reduction in base compensation was subsequently extended to December 31, 2013. The CEO is currently deferring his salary to conserve cash. Deferred wages due to the CEO amounted to $584,559 and $453,309 for the periods ended September 30, 2017 and December 31, 2016, respectively.
The Company is in process of extending this agreement.
Note 9 - 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.
13