UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM S-1


REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933


BERGIO INTERNATIONAL INC.

(Exact name of registrant as specified in its charter)


Delaware

3910

27-1338257

(State or jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)


12 Daniel Road E.

Fairfield, NJ 07004

 (Address and telephone number of principal executive offices)


(973) 227-3230

(Name, address and telephone number of agent for service)


Copies to:


Lucosky Brookman LLP

33 Wood Avenue South, 6th Floor

Iselin, New Jersey 08830

Fax: (732) 395-4401


Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement.


If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. ý


If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨


If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨


If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:


Large accelerated filer  

¨

 

Non-accelerated filer

¨

Accelerated filer

¨

 

Smaller reporting company  

ý




 




CALCULATION OF REGISTRATION FEE


Title of Class of Securities

to be Registered

 

Amount

 To Be Registered (1)

 

Proposed

Maximum

Aggregate

Price Per Share (2)

 

Proposed

Maximum

Aggregate

Offering

Price

 

Amount of

Registration

Fee

 

 

 

 

 

 

 

 

 

Common Stock, $0.001 par value per share, issuable pursuant to the Equity Agreement

 

 

9,500,000  

(1)

$

0.01

 

$

95,000

 

$

10.89


(1)

We are registering 9,500,000 shares of our common stock (the “Shares”) that we will put to TCA Global Credit Master Fund, LP, a Cayman Islands limited partnership (“TCA” or the “Selling Security Holder”), pursuant to a committed equity facility agreement (the “Equity Agreement”) between the Selling Security Holder and the registrant entered into on December 23, 2011.  In the event of stock splits, stock dividends, or similar transactions involving the registrant’s common stock, the number of shares of common stock registered shall, unless otherwise expressly provided, automatically be deemed to cover the additional securities to be offered or issued pursuant to Rule 416 promulgated under the Securities Act of 1933, as amended (the “Securities Act”).  In the event that adjustment provisions of the Equity Agreement require the registrant to issue more shares than are being registered in this registration statement, for reasons other than those stated in Rule 416 of the Securities Act, the registrant will file a new registration statement to register those additional shares.


(2)

Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(c) under the Securities Act, using the closing price as reported on the Over-the-Counter Bulletin Board (the “OTCBB”) on January 31, 2012, which was $0.01 per share.
















2





THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
































3





The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the U.S. Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.


PRELIMINARY PROSPECTUS


SUBJECT TO COMPLETION, DATED FEBRUARY 1, 2012


BERGIO INTERNATIONAL INC.


9,500,000 Shares of Common Stock


This prospectus relates to the resale of up to 9,500,000 shares of our common stock, par value $0.001 per share (the “Shares”), by TCA, which are Shares that we will put to TCA by delivering an advance notice pursuant to the Equity Agreement.


The Equity Agreement with TCA provides that, for a period of twenty-four (24) months commencing on the effective date of the registration statement, TCA is committed to purchase up to $2,500,000 of our common stock.  We may draw on the facility from time to time, as and when we determine appropriate in accordance with the terms and conditions of the Equity Agreement.  The 9,500,000 Shares included in this prospectus represent a portion of the Shares issuable to the Selling Security Holder under the Equity Agreement.


TCA is an “underwriter” within the meaning of the Securities Act in connection with the resale of our common stock under the Equity Agreement.  No other underwriter or person has been engaged to facilitate the sale of shares of our common stock in this offering.  TCA will pay us ninety-five percent (95%) of the lowest daily volume weighted average price of the Company’s common stock for the five (5) consecutive trading days after the Company delivers to TCA an advance notice in writing requiring TCA to advance funds (an “Advance”) to the Company, subject to the terms of the Equity Agreement.


We will not receive any proceeds from the sale of these Shares offered by the Selling Security Holder.  However, we will receive proceeds from the sale of our Shares under the Equity Agreement.  The proceeds will be used for working capital or general corporate purposes.  We will bear all costs associated with this registration.


Our common stock is quoted on the OTCBB under the symbol “BRGO.OB.”  The Shares registered hereunder are being offered for sale by the Selling Security Holder at prices established on the OTCBB during the term of this offering.  On January 31, 2012, the closing price as reported on the OTCBB was $0.01 per share.  These prices will fluctuate based on the demand for our common stock.


This investment involves a high degree of risk. You should purchase shares only if you can afford a complete loss.  See “Risk Factors” beginning on page 10 .


Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete.  Any representation to the contrary is a criminal offense.


The date of this prospectus is_________, 2012




4





TABLE OF CONTENTS


 

Page

 

 

Prospectus Summary

6

Summary Financial Data

9

Risk Factors

10

Forward-Looking Statements

18

Use of Proceeds

18

Selling Security Holders

18

Plan of Distribution

20

Description of Securities to be Registered

22

Description of Business

22

Description of Property

26

Legal Proceedings

26

Management’s Discussion and Analysis of Financial Condition and Results of Operations

27

Market Price of and Dividends on Registrant’s Common Equity and Related Stockholder Matters

38

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

39

Directors, Executive Officers, Promoters and Control Persons

39

Executive Compensation

41

Security Ownership of Certain Beneficial Owners and Management

44

Transactions with Related Persons, Promoters, and Certain Control Persons

45

Additional Information

45

Indemnification for Securities Act Liabilities

45

Legal Matters

46

Experts

46


You may only rely on the information contained in this prospectus or that we have referred you to.  We have not authorized anyone to provide you with different information.  This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities other than the common stock offered by this prospectus.  This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any common stock in any circumstances in which such offer or solicitation is unlawful.  Neither the delivery of this prospectus nor any sale made in connection with this prospectus shall, under any circumstances, create any implication that there has been no change in our affairs since the date of this prospectus is correct as of any time after its date.














5





PROSPECTUS SUMMARY


This summary provides an overview of certain information contained elsewhere in this Prospectus and does not contain all of the information that you should consider or that may be important to you.  Before making an investment decision, you should read the entire Prospectus carefully, including the “Risk Factors” section, the financial statements and the notes to the financial statements.  In this Prospectus, the terms “Bergio,” “Company,” “we,” “us” and “our” refer to Bergio International Inc.


Company Overview


We were incorporated as “Alba Mineral Exploration, Inc.” on July 24, 2007, in the State of Delaware for the purpose of engaging in the exploration of mineral properties.  On October 21, 2009, we entered into an exchange agreement with Diamond Information Institute, whereby we acquired all of the issued and outstanding common stock of Diamond Information Institute, Inc. (“Diamond Information Institute”) and changed the name of the Company to Bergio International Inc. (the “Exchange Agreement”).


We are entering into our 18th year of operations and concentrate on boutique, upscale jewelry stores.  We currently sell our jewelry to approximately 150 independent jewelry retailers across the United States and have spent over $3 million in branding the Bergio name through tradeshows, trade advertising, national advertising and billboard advertising since launching the line in 1995.  Our products consist of a wide range of unique styles and designs made from precious metals such as, gold, platinum, and Karat gold, as well as diamonds and other precious stones.  We have approximately 50 to 75 product styles in our inventory, with prices ranging from $400 to $200,000.  We have manufacturing control over our line as a result of having a manufacturing facility in New Jersey as well as subcontracts with facilities in Italy and Bangkok.


It is our intention to establish Bergio as a holding company for the purpose of acquiring established jewelry design and manufacturing firms who possess branded product lines.  Branded product lines are products and/or collections whereby the jewelry manufacturers have established their products within the industry through advertising in consumer and trade magazines as well as possibly obtaining federally registered trademarks of their products and collections.  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.


We intend to acquire design and manufacturing firms throughout the United States and Europe.  If and when we pursue any potential acquisition candidates, we intend to target the top 10% of the world’s jewelry manufactures that have already created an identity and brand in the jewelry industry.  We intend to locate potential candidates through our relationships in the industry and expect to structure the acquisition through the payment of cash, which will most likely be provided from third party financing, as well as our common stock but not cash generated from our operations.  In the event we obtain financing from third parties for any potential acquisitions, Bergio may agree to issue our common stock in exchange for the capital received.  However, as of the date hereof, we do not have any binding agreements with any potential acquisition candidates.


Our future operations are contingent upon increasing revenues and raising capital for on-going operations and expansion of our product lines.  Because we have a limited operating history, you may have difficulty evaluating our business and future prospects.


We also face the risk that we may not be able to effectively implement our business plan.  If we are not effective in addressing these risks, we may not operate profitably and we may not have adequate working capital to meet our obligations as they become due.





6




We have incurred net losses since our inception.    For the nine months ended September 30, 2011, we incurred a net loss of $261,565 and used cash of $218,966 in operations.  We currently have sufficient cash to sustain our operations for a period of approximately 1 month.  We will require additional funds through the receipt of conventional sources of capital or through future sales of our common stock, until such time as our revenues are sufficient to meet our cost structure, and ultimately achieve profitable operations.  Management estimates that it will need approximately $200,000 over the next twelve months to fund all of the Company’s current product development and marketing projects.  There is no assurance we will be successful in raising additional capital or achieving profitable operations.  Furthermore, the large number of shares available from the selling Security Holder pursuant to the prospectus and the depressive effect of the availability of such shares could make it difficult for us to raise funds from other sources.  Wherever possible, our board of directors will attempt to use non-cash consideration to satisfy obligations.  In many instances, we believe that the non-cash consideration will consist of restricted shares of our common stock.  These actions will result in dilution of the ownership interests of existing stockholders and may further dilute common stock book value, and that dilution may be material.


About This Offering


This offering relates to the resale of up to 9,500,000 shares of our common stock by the Selling Security Holder, which are the Shares that we will put to TCA pursuant to the Equity Agreement.  The 9,500,000 shares included in this prospectus represent a portion of the aggregate shares issuable to the Selling Security Holder under the Equity Agreement.  Pursuant to the Equity Agreement:


·

TCA agreed to purchase from the Company, from time to time, in the Company s discretion (subject to the conditions set forth therein), for a period of twenty-four (24) months, commencing on the effective date of the registration statement filed by the Company for resale of the Shares issuable under the Purchase Agreement, up to $2,500,000 of the Company s common stock;


·

Pursuant to a registration rights agreement between the Company and TCA entered into in connection with the Equity Agreement, the Company agreed to file a registration statement with the U.S. Securities and Exchange Commission (the “SEC”) for the resale of not less than the maximum number of shares of common stock allowable pursuant to Rule 415 under the Securities Act, of shares of common stock issuable under the Equity Agreement, by February 6, 2012;


·

The purchase price for the shares of common stock sold under the Equity Agreement will be equal to ninety-five percent (95%) of the lowest daily volume weighted average price of the Company s common stock for the five (5) consecutive trading days (the Pricing Period ) after the Company delivers to TCA an Advance notice in writing (the Market Price ) requiring TCA to Advance funds to the Company, subject to the terms of the Equity Agreement.


·

The maximum amount of common stock that TCA shall be obligated to purchase with respect to any single Advance under the Equity Agreement will be the greater of: (i) an amount calculated by multiplying the Market Price applicable to the relevant Advance notice by 500,000 shares or (ii) two hundred percent (200%) of the Market Price applicable to the relevant Advance notice.


·

As further consideration for TCA entering into and structuring the equity facility, the Company shall pay to TCA a fee by issuing to TCA that number of shares of the Company s common stock that equal a dollar amount of one hundred and twenty-five thousand dollars ($125,000) (the “Facility Fee Shares”).  The Facility Fee Shares shall be issued by the Company to TCA in four (4) quarterly installments, the first of such issuances being the date of execution of the Equity Agreement.  It is the intention of the Company and TCA that the value of the Facility Fee Shares shall equal $125,000.  In the event the value of the Facility Fee Shares issued to TCA does not equal $125,000 after a ninth month evaluation date, the Equity Agreement provides for an adjustment provision allowing for necessary action to adjust the number of shares issued.


We relied on an exemption from the registration requirements of the Securities Act.  The transaction does not involve a private offering, TCA is an “accredited investor” and/or qualified institutional buyer and TCA has access to information about the Company and its investment.




7




At an assumed purchase price under the Purchase Agreement of $0.0095 (equal to 95% of the closing price of our common stock of $0.01 on January 31, 2012), we will be able to receive up to $90,250 in gross proceeds, assuming the sale of the entire 9,500,000 Shares being registered hereunder pursuant to the Equity Agreement.  At an assumed purchase price of $0.0095 under the Equity Agreement, we would be required to register 253,657,895 additional shares to obtain the balance of $2,500,000 under the Equity Agreement.  The Company is currently authorized to issue 200,000,000 shares of its common stock.  TCA has agreed, subject to certain exceptions listed in the Equity Agreement, to refrain from holding an amount of shares which would result in TCA or its affiliates from owning more than 9.99% of the then-outstanding shares of the Company’s common stock at any one time.


We will bear the expenses of this offering which we estimate to be approximately $40,000, including legal expenses of approximately $25,000, accounting expenses of approximately $10,000, and miscellaneous expenses, including printer costs, of approximately $5,000.


There are substantial risks to investors as a result of the issuance of shares of our common stock under the Equity Agreement.  These risks include dilution of stockholders, significant decline in our stock price and our inability to draw sufficient funds when needed.


TCA will periodically purchase our common stock under the Equity Agreement and will, in turn, sell such shares to investors in the market at the market price.  This may cause our stock price to decline, which will require us to issue increasing numbers of common shares to TCA to raise the same amount of funds, as our stock price declines.


Summary of the Shares offered by the Selling Security Holder


Common stock Offered by the Selling Security Holder

 

9,500,000 shares of common stock.

 

 

 

Common Stock Outstanding Before the Offering

 

36,832,454 as of January 31, 2012

 

 

 

Common Stock Outstanding After the Offering

 

46,332,454 shares, assuming the sale of all of the shares being registered in this Registration Statement.

 

 

 

Terms of the Offering

 

The Selling Security Holder will determine when and how it will sell the common stock offered in this prospectus.

 

 

 

Termination of the Offering

 

Pursuant to the Equity Agreement, this offering will terminate twenty-four (24) months after the registration statement to which this prospectus is made a part is declared effective by the SEC.

 

 

 

Use of Proceeds

 

We will not receive any proceeds from the sale of the shares of common stock offered by the Selling Security Holder.  However, we will receive proceeds from the sale of our common stock under the Equity Agreement.  The proceeds from the offering will be used for working capital and general corporate purpose.  See “Use of Proceeds.”

 

 

 

Risk Factors

 

The common stock offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investment.  See “Risk Factors” beginning on page 10.

 

 

 

OTCBB Symbol

 

BRGO.OB




8




SUMMARY FINANCIAL DATA


The following selected financial information is derived from the Company’s Financial Statements appearing elsewhere in this Prospectus and should be read in conjunction with the Company’s Financial Statements, including the notes thereto, appearing elsewhere in this Prospectus.


STATEMENTS OF OPERATIONS:  

For the years ended

December 31,

 

2010

 

 

2009

Revenues

$

1,445,570

 

 

$

975,354

 

 

 

 

 

 

 

Total operating expenses

 

954,369

 

 

 

789,417

Operating income (loss)

 

(321,630)

 

 

 

(504,771)

Net income (loss)

$

(838,999)

 

 

$

(597,725)

 

 

 

 

 

 

 

Basic and diluted earnings (loss) per common share

$

(0.10)

 

 

$

(0.20)

Weighted average common shares outstanding basic and diluted

 

8,718,321

 

 

 

2,926,124


BALANCE SHEETS:

At December 31,

2010

  

  

At December 31,

2009

 

 

 

 

 

Cash and cash equivalents

$

4,262

 

 

$

--

Current assets

$

2,265,507

 

 

$

1,722,903

Total assets

$

2,388,642

 

 

$

1,888,210

Current liabilities

$

1,240,384

 

 

$

2,100,386

Total liabilities

$

1,292,010

 

 

$

2,305,981

Total stockholders’ equity (deficit)

$

1,096,632

 

 

$

(417,771)

 

STATEMENTS OF OPERATIONS:

For the quarters ended

September 30,

 

2011

 

 

2010

Revenues

$

1,029,774

 

 

$

892,509

 

 

 

 

 

 

 

Total operating expenses

$

642,681

 

 

$

771,164

Operating loss

$

(279,671)

 

 

$

(306,899)

Net income (loss)

$

(261,565)

 

 

$

772,764

 

 

 

 

 

 

 

Basic and diluted earnings (loss) per common share

$

(0.01)

 

 

$

(0.10)

Weighted average common shares outstanding basic and diluted

 

18,915,122

 

 

 

7,935,213


BALANCE SHEETS:

At September 30,

2011

 

 

At September 30,

2010

 

 

 

 

 

Cash and cash equivalents

$

--

 

 

$

--

Current assets

$

2,025,317

 

 

$

2,151,830

Total assets

$

2,141,988

 

 

$

2,280,462

Current liabilities

$

1,054,057

 

 

$

984,420

Total liabilities

$

1,092,197,

 

 

$

1,144,262

Total stockholders’ equity (deficit)

$

1,049,791

 

 

$

1,136,200




9




RISK FACTORS


An investment in the Company’s common stock involves a high degree of risk.  You should carefully consider the risks described below as well as other information provided to you in this prospectus, including information in the section of this document entitled “Forward Looking Statements.”  If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected, the value of our common stock could decline, and you may lose all or part of your investment.


An investment in the Company’s common stock involves a high degree of risk.  An investor should carefully consider the risks described below as well as other information contained in this report.  If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected, the value of our common stock could decline, and an investor may lose all or part of his or her investment.


Risks Related To Our Business and Industry


WE HAVE HAD LIMITED OPERATIONS, HAVE INCURRED LOSSES SINCE INCEPTION, HAVE SUFFICIENT CASH TO SUSTAIN OUR OPERATIONS FOR A PERIOD OF APPROXIMATELY ONE MONTH, AND WE NEED ADDITIONAL CAPITAL TO EXECUTE OUR BUSINESS PLAN.


For the nine months ended September 30, 2011, we incurred a net loss of $261,565 and used cash of $218,966 in operations.  As of September 30, 2011, we have an accumulated deficit of $3,197,685.  We will require additional funds through the receipt of conventional sources of capital or through future sales of our common stock, until such time as our revenues are sufficient to meet our cost structure, and ultimately achieve profitable operations.  We currently have sufficient cash to sustain our operations for a period of approximately one month.  Management estimates that it will need approximately $200,000 over the next twelve months to fund all of the Company’s current product development and marketing projects.  There is no assurance we will be successful in raising additional capital or achieving profitable operations.  Wherever possible, our board of directors will attempt to use non-cash consideration to satisfy obligations.  In many instances, we believe that the non-cash consideration will consist of restricted and unrestricted shares of our common stock.  These actions will result in dilution of the ownership interests of existing stockholders and may further dilute common stock book value, and that dilution may be material.


A DECLINE IN DISCRETIONARY CONSUMER SPENDING MAY ADVERSELY AFFECT OUR INDUSTRY, OUR OPERATIONS, AND ULTIMATELY OUR PROFITABILITY.


Luxury products, such as fine jewelry, are discretionary purchases for consumers.  Any reduction in consumer discretionary spending or disposable income may affect the jewelry industry more significantly than other industries.  Many economic factors outside of our control could affect consumer discretionary spending, including the financial markets, consumer credit availability, prevailing interest rates, energy costs, employment levels, salary levels, and tax rates.  Any reduction in discretionary consumer spending could materially adversely affect our business and financial condition.


OUR OPERATING RESULTS MAY BE ADVERSELY IMPACTED BY WORLDWIDE POLITICAL AND ECONOMIC UNCERTAINTIES AND SPECIFIC CONDITIONS IN THE MARKETS WE ADDRESS.


In the recent past, general worldwide economic conditions have experienced a downturn due to slower economic activity, concerns about inflation, increased energy costs, decreased consumer confidence, reduced corporate profits and capital spending, and adverse business conditions.  Any continuation or worsening of the current global economic and financial conditions could materially adversely affect (i) our ability to raise, or the cost of, needed capital, (ii) demand for our current and future products and (iii) our ability to commercialize products.  We cannot predict the timing, strength, or duration of any economic slowdown or subsequent economic recovery, worldwide, or in the display industry.




10




BECAUSE WE ARE HIGHLY DEPENDENT ON OUR KEY EXECUTIVE OFFICER FOR THE SUCCESS OF OUR BUSINESS PLAN AND MAY BE DEPENDENT ON THE EFFORTS AND RELATIONSHIPS OF THE PRINCIPALS OF FUTURE ACQUISITIONS AND MERGERS, IF ANY OF THESE INDIVIDUALS BECOME UNABLE TO CONTINUE IN THEIR ROLE, OUR BUSINESS COULD BE ADVERSELY AFFECTED.


We believe our success will depend, to a significant extent, on the efforts and abilities of Berge Abajian, our Chief Executive Officer.  If we lost Mr. Abajian, we would be forced to expend significant time and money in the pursuit of a replacement, which would result in both a delay in the implementation of our business plan and the diversion of limited working capital.  We can give you no assurance that we could find a satisfactory replacement for Mr. Abajian at all, or on terms that are not unduly expensive or burdensome.


If we grow and implement our business plan, we will need to add managerial talent to support our business plan.  There is no guarantee that we will be successful in adding such managerial talent.  These professionals are regularly recruited by other companies and may choose to change companies.  Given our relatively small size compared to some of our competitors, the performance of our business may be more adversely affected than our competitors would be if we lose well-performing employees and are unable to attract new ones.


BECAUSE WE INTEND TO ACQUIRE BUSINESSES AND SUCH ACTIVITY INVOLVES A NUMBER OF RISKS, OUR CORE BUSINESS MAY SUFFER.


We may consider acquisitions of assets or other business.  Any acquisition involves a number of risks that could fail to meet our expectations and adversely affect our profitability.  For example:


·

The acquired assets or business may not achieve expected results;


·

We may incur substantial, unanticipated costs, delays or other operational or financial problems when integrating the acquired assets;


·

We may not be able to retain key personnel of an acquired business;


·

Our management s attention may be diverted; or


·

Our management may not be able to manage the acquired assets or combined entity effectively or to make acquisitions and grow our business internally at the same time.


If these problems arise we may not realize the expected benefits of an acquisition.


BECAUSE THE JEWELRY INDUSTRY IN GENERAL IS AFFECTED BY FLUCTUATIONS IN THE PRICES OF PRECIOUS METALS AND PRECIOUS AND SEMI-PRECIOUS STONES, WE COULD EXPERIENCE INCREASED OPERATING COSTS THAT WILL AFFECT OUR BOTTOM LINE.


The availability and prices of gold, diamonds, and other precious metals and precious and semi-precious stones may be influenced by cartels, political instability in exporting countries and inflation.  Shortages of these materials or sharp changes in their prices could have a material adverse effect on our results of operations or financial condition.  A significant change in prices of key commodities, including gold, could adversely affect our business or reduce operating margins and impact consumer demand if retail prices increased significantly, even though we historically incorporate any increases in the purchase of raw materials to our consumers.  Additionally, a significant disruption in our supply of gold or other commodities could decrease the production and shipping levels of our products, which may materially increase our operating costs and ultimately affect our profit margins.




11




BECAUSE WE DEPEND ON OUR ABILITY TO IDENTIFY AND RESPOND TO FASHION TRENDS, IF WE MISJUDGE THESE TRENDS, OUR ABILITY TO MAINTAIN AND GAIN MARKET SHARE WILL BE EFFECTED.


The jewelry industry is subject to rapidly changing fashion trends and shifting consumer demands.  Accordingly, our success may depend on the priority that our target customers place on fashion and our ability to anticipate, identify, and capitalize upon emerging fashion trends.  If we misjudge fashion trends or are unable to adjust our products in a timely manner, our net sales may decline or fail to meet expectations and any excess inventory may be sold at lower prices.


OUR ABILITY TO MAINTAIN OR INCREASE OUR REVENUES COULD BE HARMED IF WE ARE UNABLE TO STRENGTHEN AND MAINTAIN OUR BRAND IMAGE.


We have spent significant amounts of time and money in branding our Bergio and Bergio Bridal lines.  We believe that primary factors in determining customer buying decisions, especially in the jewelry industry, are determined by price, confidence in the merchandise and quality associated with a brand.  The ability to differentiate products from competitors of the Company has been a factor in attracting consumers.  However, if the Company’s ability to promote its brand fails to garner brand recognition, its ability to generate revenues may suffer.  If the Company fails to differentiate its products, its ability to sell its products wholesale will be adversely affected.  These factors could result in lower selling prices and sales volumes, which could adversely affect its financial condition and results of operations.


WE MAINTAIN A RELATIVELY LARGE INVENTORY OF OUR RAW MATERIALS AND IF THIS INVENTORY IS LOST DUE TO THEFT, OUR RESULTS OF OPERATIONS WOULD BE NEGATIVELY IMPACTED.


We purchase large volumes of precious metals and store significant quantities of raw materials and jewelry products at our facility in New Jersey.  Although we have an insurance policy with Lloyd’s of London, if we were to encounter significant inventory losses due to third party or employee theft from our facility which required us to implement additional security measures, this would increase our operating costs.  Also such losses of inventory could exceed the limits of, or be subject to an exclusion from, coverage under our current insurance policy.  Claims filed by us under our insurance policies could lead to increases in the insurance premiums payable by us or possible termination of coverage under the relevant policy.


IF WE WERE TO EXPERIENCE SUBSTANTIAL DEFAULTS BY OUR CUSTOMERS ON ACCOUNTS RECEIVABLE, THIS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR LIQUIDITY AND RESULTS OF OPERATIONS.


Approximately $345,976 of our working capital consists of accounts receivable from customers.  If customers responsible for a large amount of accounts receivable were to become insolvent or otherwise unable to pay for our products, or to make payments in a timely manner, our liquidity and results of operations could be materially adversely affected.  An economic or industry downturn could materially affect the ability to collect these accounts receivable, which could then result in longer payment cycles, increased collections costs and defaults in excess of management’s expectations.  A significant deterioration in the ability to collect on accounts receivable could affect our cash flow and working capital position.


WE MAY NOT BE ABLE TO INCREASE SALES OR OTHERWISE SUCCESSFULLY OPERATE OUR BUSINESS, WHICH COULD HAVE A SIGNIFICANT NEGATIVE IMPACT ON OUR FINANCIAL CONDITION.


We believe that the key to our success is to increase our revenues and available cash.  We may not have the resources required to promote our business and its potential benefits.  If we are unable to gain market acceptance of our business, we will not be able to generate enough revenue to achieve and maintain profitability or to continue our operations.




12




We may not be able to increase our sales or effectively operate our business.  To the extent we are unable to achieve sales growth, we may continue to incur losses.  We may not be successful or make progress in the growth and operation of our business.  Our current and future expense levels are based on operating plans and estimates of future sales and revenues and are subject to increase as strategies are implemented.  Even if our sales grow, we may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall.


Further, if we substantially increase our operating expenses to increase sales and marketing, and such expenses are not subsequently followed by increased revenues, our operating performance and results would be adversely affected and, if sustained, could have a material adverse effect on our business.  To the extent we implement cost reduction efforts to align our costs with revenue, our sales could be adversely affected.


WE MAY BE UNABLE TO MANAGE GROWTH, WHICH MAY IMPACT OUR POTENTIAL PROFITABILITY.


Successful implementation of our business strategy requires us to manage our growth.  Growth could place an increasing strain on our management and financial resources.  To manage growth effectively, we will need to:


·

Establish definitive business strategies, goals and objectives;


·

Maintain a system of management controls; and


·

Attract and retain qualified personnel, as well as, develop, train and manage management-level and other employees.


If we fail to manage our growth effectively, our business, financial condition or operating results could be materially harmed, and our stock price may decline.


Risks Related to Our Common Stock


IF WE FAIL TO REMAIN CURRENT ON OUR REPORTING REQUIREMENTS, WE COULD BE REMOVED FROM THE OTCBB WHICH WOULD LIMIT THE ABILITY OF BROKER-DEALERS TO SELL OUR SECURITIES AND THE ABILITY OF STOCKHOLDERS TO SELL THEIR SECURITIES IN THE SECONDARY MARKET.


Companies trading on the OTCBB, such as us, must be reporting issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTCBB.  More specifically, the Financial Industry Regulatory Authority (“FINRA”) has enacted Rule 6530, which determines eligibility of issuers quoted on the OTCBB by requiring an issuer to be current in its filings with the SEC.  Pursuant to Rule 6530(e), if we file our reports late with the SEC three times our securities will be removed from the OTCBB for failure to timely file.  As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.


OUR COMMON STOCK IS CONSIDERED A “PENNY STOCK,” AND IS SUBJECT TO ADDITIONAL SALE AND TRADING REGULATIONS THAT MAY MAKE IT MORE DIFFICULT TO SELL.


Our common stock is considered to be a “penny stock” since it does not qualify for one of the exemptions from the definition of “penny stock” under Section 3a51-1 of the Exchange Act.  Our common stock is a “penny stock” because it meets one or more of the following conditions (i) the stock trades at a price less than $5.00 per share; (ii) it is not traded on a “recognized” national exchange; (iii) it is not quoted on the Nasdaq Stock Market, or even if so, has a price less than $5.00 per share; or (iv) is issued by a company that has been in business less than three years with net tangible assets less than $5 million.




13




The principal result or effect of being designated a “penny stock” is that securities broker-dealers participating in sales of our common stock will be subject to the “penny stock” regulations set forth in Rules 15-2 through 15g-9 promulgated under the Exchange Act.  For example, Rule 15g-2 requires broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document at least two business days before effecting any transaction in a penny stock for the investor’s account.  Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor.  This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor's financial situation, investment experience and investment objectives.  Compliance with these requirements may make it more difficult and time consuming for holders of our common stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise.


BECAUSE OUR CURRENT CHIEF EXECUTIVE OFFICER AND SOLE DIRECTOR, MR. BERGE ABAJIAN, OWNS A SIGNIFICANT PERCENTAGE OF OUR COMPANY, HE WILL BE ABLE TO EXERCISE SIGNIFICANT INFLUENCE OVER OUR COMPANY, DESPITE YOUR ABILITY TO VOTE.


Berge Abajian, our chief executive officer and sole director, beneficially owns a significant percentage of our common stock and maintains voting control through his ownership of preferred stock.  Accordingly, Mr. Abajian will be able to determine the composition of our board of directors, will retain the effective voting power to approve all matters requiring shareholder approval, will prevail in matters requiring shareholder approval, including, in particular the election and removal of directors, and will continue to have significant influence over our business.  As a result of his ownership and position in the Company, Mr. Abajian is able to influence all matters requiring shareholder action, including significant corporate transactions.  In addition, sales of significant amount of shares held by Mr. Abajian, or the prospect of these sales, could adversely affect the market price of our common stock.


THE MARKET PRICE FOR OUR COMMON SHARES IS PARTICULARLY VOLATILE GIVEN OUR STATUS AS A RELATIVELY UNKNOWN COMPANY WITH A SMALL AND THINLY TRADED PUBLIC FLOAT, LIMITED OPERATING HISTORY AND LACK OF PROFITS WHICH COULD LEAD TO WIDE FLUCTUATIONS IN OUR SHARE PRICE. YOU MAY BE UNABLE TO SELL YOUR COMMON SHARES AT OR ABOVE YOUR PURCHASE PRICE, WHICH MAY RESULT IN SUBSTANTIAL LOSSES TO YOU.


The market for our common shares is characterized by significant price volatility when compared to the shares of larger, more established companies that trade on a national securities exchange and have large public floats, and we expect that our share price will continue to be more volatile than the shares of such larger, more established companies for the indefinite future.  The volatility in our share price is attributable to a number of factors.  First, as noted above, our common shares are, compared to the shares of such larger, more established companies, sporadically and thinly traded.  As a consequence of this limited liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of those shares in either direction.  The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand.  Secondly, we are a speculative or “risky” investment due to our limited operating history and lack of profits to date, and uncertainty of future market acceptance for our potential products.  As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a larger, more established company that trades on a national securities exchange and has a large public float.  Many of these factors are beyond our control and may decrease the market price of our common shares, regardless of our operating performance.  We cannot make any predictions or projections as to what the prevailing market price for our common shares will be at any time, including as to whether our common shares will sustain their current market prices, or as to what effect that the sale of shares or the availability of common shares for sale at any time will have on the prevailing market price.




14




WE WILL INCUR INCREASED COSTS AS A RESULT OF BEING A PUBLIC COMPANY, WHICH COULD AFFECT OUR PROFITABILITY AND OPERATING RESULTS.


We voluntarily file annual, quarterly and current reports with the SEC.  In addition, the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and the rules subsequently implemented by the SEC and the Public Company Accounting Oversight Board have imposed various requirements on public companies, including requiring changes in corporate governance practices.  We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities of ours more time-consuming and costly.  We expect to spend between $50,000 and $100,000 in legal and accounting expenses annually to comply with our SEC reporting obligations and Sarbanes-Oxley.  These costs could affect profitability and our results of operations.


WE HAVE NOT PAID DIVIDENDS IN THE PAST AND DO NOT EXPECT TO PAY DIVIDENDS FOR THE FORESEEABLE FUTURE.  ANY RETURN ON INVESTMENT MAY BE LIMITED TO THE VALUE OF OUR COMMON STOCK.


No cash dividends have been paid on the Company’s common stock.  We expect that any income received from operations will be devoted to our future operations and growth.  The Company does not expect to pay cash dividends in the near future.  Payment of dividends would depend upon our profitability at the time, cash available for those dividends, and other factors as the Company’s board of directors may consider relevant.  If the Company does not pay dividends, the Company’s common stock may be less valuable because a return on an investor’s investment will only occur if the Company’s stock price appreciates.


IF WE ARE UNABLE TO FAVORABLY ASSESS THE EFFECTIVENESS OF OUR INTERNAL CONTROL OVER FINANCIAL REPORTING, OUR STOCK PRICE COULD BE ADVERSELY AFFECTED.


Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, our management will be required to report on the effectiveness of our internal control over financial reporting in each of our annual reports.  Our management will need to provide such a report commencing with our first annual report after we have filed an annual report with the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act for the prior fiscal year, which will be our annual report for the year ended December 31, 2011.  We may not be able to favorably assess the effectiveness of our internal controls over financial reporting as of December 31, 2011, or beyond.  If this occurs, investor confidence and our stock price could be adversely affected.


WE ARE REGISTERING AN AGGREGATE OF 9,500,000 SHARES OF COMMON STOCK TO BE ISSUED UNDER THE EQUITY AGREEMENT.  THE SALE OF SUCH SHARES COULD DEPRESS THE MARKET PRICE OF OUR COMMON STOCK.


We are registering an aggregate of 9,500,000 Shares of common stock under the registration statement of which this prospectus forms a part for issuance pursuant to the Equity Agreement.  Notwithstanding TCA’s ownership limitation, the 9,500,000 Shares would represent approximately 20.96% of our shares of common stock outstanding immediately after our exercise of the put right under the Equity Agreement.  The sale of these Shares into the public market by TCA could depress the market price of our common stock.  At the assumed offering price of $0.0095 per share, we will be able to receive up to $90,250 in gross proceeds, assuming the sale of the entire 9,500,000 Shares being registered hereunder pursuant to the Equity Agreement.  We would be required to register 253,657,895 additional shares to obtain the balance of $2,500,000 under the Equity Agreement at the assumed offering price of $0.0095.  Due to the floating offering price, we are not able to determine the exact number of shares that we will issue under the Equity Agreement.






15




THE COMPANY MAY NOT HAVE ACCESS TO THE FULL AMOUNT AVAILABLE UNDER THE EQUITY AGREEMENT.


We have not drawn down funds and have not issued shares of our common stock under the Equity Agreement with TCA.  Our ability to draw down funds and sell shares under the Equity Agreement requires that the registration statement, of which this prospectus is a part, be declared effective by the SEC, and that this registration statement continue to be effective.  In addition, the registration statement of which this prospectus is a part registers 9,500,000 Shares issuable under the Equity Agreement, and our ability to access the Equity Agreement to sell any remaining shares issuable under the Equity Agreement is subject to our ability to prepare and file one or more additional registration statements registering the resale of these shares.  These subsequent registration statements may be subject to review and comment by the staff of the SEC, and will require the consent of our independent registered public accounting firm.  Therefore, the timing of effectiveness of these subsequent registration statements cannot be assured.  The effectiveness of these subsequent registration statements is a condition precedent to our ability to sell the shares of common stock subject to these subsequent registration statements to TCA under the Equity Agreement.  Even if we are successful in causing one or more registration statements registering the resale of some or all of the shares issuable under the Equity Agreement to be declared effective by the SEC in a timely manner, we will not be able to sell shares under the Equity Agreement unless certain other conditions are met.  Accordingly, because our ability to draw down amounts under the Equity Agreement is subject to a number of conditions, there is no guarantee that we will be able to draw down any portion or all of the $2,500,000 available to us under the Equity Agreement.


CERTAIN RESTRICTIONS ON THE EXTENT OF PUTS AND THE DELIVERY OF ADVANCE NOTICES MAY HAVE LITTLE, IF ANY, EFFECT ON THE ADVERSE IMPACT OF OUR ISSUANCE OF SHARES IN CONNECTION WITH THE EQUITY AGREEMENT, AND AS SUCH, TCA MAY SELL A LARGE NUMBER OF SHARES, RESULTING IN SUBSTANTIAL DILUTION TO THE VALUE OF SHARES HELD BY EXISTING SHAREHOLDERS.


TCA has agreed, subject to certain exceptions listed in the Equity Agreement, to refrain from holding an amount of shares which would result in TCA or its affiliates owning more than 9.99% of the then-outstanding shares of the Company’s common stock at any one time.  These restrictions, however, do not prevent TCA from selling shares of common stock received in connection with a put, and then receiving additional shares of common stock in connection with a subsequent put.  In this way, TCA could sell more than 9.99% of the outstanding common stock in a relatively short time frame while never holding more than 9.99% at one time.


ASSUMING WE UTILIZE THE MAXIMUM AMOUNT AVAILABLE UNDER THE EQUITY LINE OF CREDIT, EXISTING SHAREHOLDERS COULD EXPERIENCE SUBSTANTIAL DILUTION UPON THE ISSUANCE OF COMMON STOCK.


Our Equity Agreement with TCA contemplates the potential future issuance and sale of up to $2,500,000 of our common stock to TCA subject to certain restrictions and obligations.  The following table is an example of the number of shares that could be issued at various prices assuming we utilize the maximum amount remaining available under the Equity Agreement.  These examples assume issuances at a market price of $0.00.95 per share and at 10%, 25%, 50%, and 75% below $0.0095 per share, taking into account TCA’s 5% discount.





16




The following table should be read in conjunction with the footnotes immediately following the table.


Percent below

Current

market price

 

 

Price per

share (1)

 

 

Number of

shares issuable (2)

 

 

Shares

outstanding (3)

 

 

Percent of

outstanding shares (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10

%

 

$

0.008550

 

 

 

292,397,661

 

 

 

329,230,115

 

 

 

88.81

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25

%

 

$

0.007125

 

 

 

350,877,193

 

 

 

387,709,647

 

 

 

90.50

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

50

%

 

$

0.004750

 

 

 

526,315,789

 

 

 

563,148,243

 

 

 

93.46

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

75

%

 

$

0.002375

 

 

 

1,052,631,579

 

 

 

1,089,464,033

 

 

 

96.62

%

 

(1)

Represents purchase prices equal to 95% of $0.01 and potential reductions thereof of 10%, 25%, 50% and 75%.


(2)

Represents the number of shares issuable if the entire $2,500,000 under the Equity Agreement were drawn down at the indicated purchase prices.  Our Articles of Incorporation currently authorizes 200,000,000 shares of common stock.


(3)

Based on 36,832,454 shares of common stock outstanding at January 31, 2012.  Our Articles of Incorporation currently authorizes 200,000,000 shares of common stock.


(4)

Percentage of the total outstanding shares of common stock after the issuance of the shares indicated, without considering any contractual restriction on the number of shares the selling shareholder may own at any point in time or other restrictions on the number of shares we may issue.


TCA WILL PAY LESS THAN THE THEN-PREVAILING MARKET PRICE FOR OUR COMMON STOCK.


The common stock to be issued to TCA pursuant to the Equity Agreement will be purchased at an 5% discount to the average of the lowest closing price of the common stock of any two trading days, consecutive or inconsecutive, during the five consecutive trading days immediately following the date of our advance notice to TCA of our election to put shares pursuant to the Equity Agreement.  TCA has a financial incentive to sell our common stock immediately upon receiving the shares to realize the profit equal to the difference between the discounted price and the market price.  If TCA sells the shares, the price of our common stock could decrease.  If our stock price decreases, TCA may have a further incentive to sell the shares of our common stock that it holds.  These sales may have a further impact on our stock price.


YOUR OWNERSHIP INTEREST MAY BE DILUTED AND THE VALUE OF OUR COMMON STOCK MAY DECLINE BY EXERCISING THE PUT RIGHT PURSUANT TO OUR EQUITY AGREEMENT.


Effective December 23, 2011, we entered into a $2,500,000 Equity Agreement with TCA.  Pursuant to the Equity Agreement, when we deem it necessary, we may raise capital through the private sale of our common stock to TCA at a price equal to ninety-five percent (95%) of the lowest daily volume weighted average price of the Company’s common stock for the five trading days immediately following the date our advance notice is delivered.  Because the put price is lower than the prevailing market price of our common stock, to the extent that the put right is exercised, your ownership interest may be diluted.




17




WE HAVE NOT PAID DIVIDENDS IN THE PAST AND DO NOT EXPECT TO PAY DIVIDENDS FOR THE FORESEEABLE FUTURE. ANY RETURN ON INVESTMENT MAY BE LIMITED TO THE VALUE OF OUR COMMON STOCK.


No cash dividends have been paid on the Company’s common stock.  We expect that any income received from operations will be devoted to our future operations and growth.  The Company does not expect to pay cash dividends in the near future.  Payment of dividends would depend upon our profitability at the time, cash available for those dividends, and other factors as the Company’s board of directors may consider relevant.  If the Company does not pay dividends, the Company’s common stock may be less valuable because a return on an investor’s investment will only occur if the Company’s stock price appreciates.


FORWARD-LOOKING STATEMENTS


Statements in this prospectus may be “forward-looking statements.”  Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions.  These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management.  These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict.  Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above and those risks discussed from time to time in this prospectus, including the risks described under “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus and in other documents which we file with the SEC.  In addition, such statements could be affected by risks and uncertainties related to our ability to raise any financing which we may require for our operations, competition, government regulations and requirements, pricing and development difficulties, our ability to make acquisitions and successfully integrate those acquisitions with our business, as well as general industry and market conditions and growth rates, and general economic conditions.  Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this prospectus, except as may be required under applicable securities laws.


USE OF PROCEEDS


The Selling Security Holder is selling all of the shares of our common stock covered by this prospectus for its own account.  Accordingly, we will not receive any proceeds from the resale of our common stock.  However, we will receive proceeds from any sale of the common stock to TCA under the Equity Agreement.  We intend to use the net proceeds received for working capital or general corporate needs.


SELLING SECURITY HOLDERS


We agreed to register for resale 9,500,000 Shares that we will put to TCA pursuant to the Equity Agreement.  The Equity Agreement with TCA provides that TCA is committed to purchase up to $2,500,000 of our common stock.  We may draw on the facility from time to time, as and when we determine appropriate in accordance with the terms and conditions of the Equity Agreement.


Selling Security Holder Pursuant to the Equity Agreement


TCA is the potential purchaser of our common stock under the Equity Agreement.  The 9,500,000 Shares offered in this prospectus are based on the Equity Agreement between TCA and us.  TCA may from time to time offer and sell any or all of the Shares that are registered under this prospectus.  The purchase price is ninety-five percent (95%) of the lowest daily volume weighted average price of the Company’s common stock for the five trading days immediately following the date on which the Company is deemed to provide an advance notice under the Equity Agreement.




18




We are unable to determine the exact number of Shares that will actually be sold by TCA according to this prospectus due to:


·

the ability of TCA to determine when and whether it will sell any of the Shares under this prospectus; and


·

the uncertainty as to the number of Shares that will be issued upon exercise of our put options through the delivery of an Advance notice under the Equity Agreement.


The following information contains a description of how TCA acquired (or shall acquire) the shares to be sold in this offering.  TCA has not held a position or office, or had any other material relationship with us, except as follows.


TCA is a limited partnership organized and existing under the laws of the Cayman Islands.  All investment decisions of, and control of, TCA is held by its general partner TCA Global Credit Fund GP, Ltd (“TCA GP”).  Robert Press is the manager of TCA GP, and he has voting and investment power over the shares beneficially owned by TCA.  TCA acquired, or will acquire, all shares being registered in this offering in the financing transaction with us.


TCA intends to sell up to 9,500,000 Shares of our common stock pursuant to the Equity Agreement under this prospectus.  On December 23, 2011, the Company and TCA entered into the Equity Agreement pursuant to which we have the opportunity, for a twenty-four (24) month period, beginning on the date on which the SEC first declares effective this registration statement registering the resale of our shares by TCA, to sell shares of our common stock for a total price of $2,500,000.  For each share of our common stock purchased under the Equity Agreement, TCA will pay ninety-five percent (95%) of the lowest daily volume weighted average price of the Company’s common stock for the five trading days immediately following the date on which the Company is deemed to provide an advance notice of a sale of common stock under the Equity Agreement.


We relied on an exemption from the registration requirements of the Securities Act.  The transaction does not does involve a private offering, TCA is an “accredited investor” and/or qualified institutional buyer and TCA has access to information about the Company and its investment.


At an assumed purchase price under the Equity Agreement of $0.0095 (equal to 95% of the closing price of our common stock of $0.01 on January 31, 2012), we will be able to receive up to $90,250 in gross proceeds, assuming the sale of the entire 9,500,000 Shares of our common stock being registered hereunder pursuant to the Equity Agreement.  At an assumed purchase price of $0.0095 under the Equity Agreement, we would be required to register 253,657,895 additional shares to obtain the balance of $2,500,000 under the Equity Agreement.


There are substantial risks to investors as a result of the issuance of shares of our common stock under the Equity Agreement.  These risks include dilution of stockholders and significant decline in our stock price.


TCA will periodically purchase shares of our common stock under the Equity Agreement and will in turn, sell such shares to investors in the market at the prevailing market price.  This may cause our stock price to decline, which will require us to issue increasing numbers of shares to TCA to raise the same amount of funds, as our stock price declines.


TCA and any participating broker-dealers are “underwriters” within the meaning of the Securities Act.  All expenses incurred with respect to the registration of the common stock will be borne by us, but we will not be obligated to pay any underwriting fees, discounts, commission or other expenses incurred by the Selling Security Holder in connection with the sale of such shares.


Except as indicated below, neither the Selling Security Holder nor any of its associates or affiliates has held any position, office, or other material relationship with us in the past three years.




19




The following table sets forth the name of the Selling Security Holder, the number of shares of common stock beneficially owned by the Selling Security Holder as of the date hereof and the number of share of common stock being offered by the Selling Security Holder.  The shares being offered hereby are being registered to permit public secondary trading, and the Selling Security Holder may offer all or part of the shares for resale from time to time.  However, the Selling Security Holder is under no obligation to sell all or any portion of such shares nor is the Selling Security Holder obligated to sell any shares immediately upon effectiveness of this prospectus.  All information with respect to share ownership has been furnished by the Selling Security Holder.  The column entitled “Amount Beneficially Owned After the Offering” assumes the sale of all shares offered.


Name

 

Shares Beneficially Owned Prior

to Offering

 

Shares

to Be Offered

 

Amount Beneficially Owned After Offering (1)

 

Percent Beneficially Owned After Offering

 

 

 

 

 

 

 

 

 

TCA Global Credit Master Fund, LP (2)

 

1,736,111

 

9,500,000

 

1,736,111

 

4.71%


(1)

The number assumes the Selling Security Holder sells all of its shares being offering pursuant to this prospectus.


(2)

TCA Global Credit Master Fund, LP is a limited partnership organized and existing under the laws of the Cayman Islands.  TCA Global Credit Fund GP, Ltd. is the general partner of TCA and has voting and investment power over the shares beneficially owned by TCA.  Robert Press is the manager of TCA GP, and he has voting and investment power over the shares beneficially owned by TCA.


The above table assumes that TCA purchases the maximum amount of registrable Shares in this registration statement.


PLAN OF DISTRIBUTION


This prospectus relates to the resale of up to 9,500,000 Shares issued pursuant to the Equity Agreement held by the Selling Security Holder.


The Selling Security Holder and its successors-in-interest may, from time to time, sell any or all of their shares of our common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions.  The Selling Security Holder may use any one or more of the following methods when selling shares:


·

ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;


·

block trades in which the broker-dealer will sell the shares as agent;


·

purchases by a broker-dealer as principal and resale by the broker-dealer for its account;


·

privately negotiated transactions;


·

broker-dealers may agree with the Selling Stock Holder to sell a specified number of such shares at a stipulated price per share;


·

through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;


·

a combination of any such methods of sale; or


·

any other method permitted pursuant to applicable law.




20




The Selling Security Holder or successors in-interest may also sell the shares directly to market makers acting as principals and/or broker-dealers acting as agents for itself or its customers.  Such broker-dealers may receive compensation in the form of discounts, concessions or commissions from the Selling Security Holder and/or the purchasers of shares for whom such broker-dealers may act as agents or to whom they sell as principal or both, which compensation as to a particular broker-dealer might be in excess of customary commissions.  Market makers and block purchasers purchasing the shares will do so for their own account and at their own risk.  It is possible that the Selling Security Holder will attempt to sell shares of the Company’s common stock in block transactions to market makers or other purchasers at a price per share which may be below the then market price.  The Selling Security Holder cannot assure that all or any of the shares offered in this prospectus will be issued to, or sold by, the Selling Security Holder.  In addition, any brokers, dealers or agents, upon effecting the sale of any of the shares offered in this prospectus are “underwriters” as that term is defined under the Securities Act or the Exchange Act, or the rules and regulations under such acts.  In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.


Discounts, concessions, commissions and similar selling expenses, if any, attributable to the sale of shares will be borne by the Selling Security Holder.  The Selling Security Holder may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares if liabilities are imposed on that person under the Securities Act.


The Selling Security Holder may from time to time pledge or grant a security interest in some or all of the shares of our common stock owned by it and, if it defaults in the performance of its secured obligations, the pledgee or secured parties may offer and sell such the shares of common stock from time to time under this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or any other applicable provision of the Securities Act amending the list of selling security holders to include the pledgee, transferee or other successors in interest as selling security holders under this prospectus.


The Selling Security Holder also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus and may sell the shares of common stock from time to time under this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling security holders to include the pledgee, transferee or other successors in interest as selling security holders under this prospectus.


We are required to pay all fees and expenses incident to the registration of the shares of common stock.  Otherwise, all discounts, commissions or fees incurred in connection with the sale of our common stock offered hereby will be paid by the Selling Security Holder.


The Selling Security Holder acquired the securities offered hereby in the ordinary course of business and has advised us that it has not entered into any agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of its shares of common stock, nor is there an underwriter or coordinating broker acting in connection with a proposed sale of shares of common stock by the Selling Security Holder.  We will file a supplement to this prospectus if the Selling Security Holder enters into a material arrangement with a broker-dealer for sale of common stock being registered.  If the Selling Security Holder uses this prospectus for any sale of the shares of common stock, it will be subject to the prospectus delivery requirements of the Securities Act.


Pursuant to a requirement by the Financial Industry Regulatory Authority, or FINRA, the maximum commission or discount to be received by any FINRA member or independent broker/dealer may not be greater than eight percent (8%) of the gross proceeds received by us for the sale of any securities being registered pursuant to SEC Rule 415 under the Securities Act.


The anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of our common stock and activities of the Selling Security Holder.  The Selling Security Holder will act independently of us in making decisions with respect to the timing, manner and size of each sale.




21




TCA is an “underwriter” within the meaning of the Securities Act in connection with the sale of our common stock under the Equity Agreement.  As further consideration for TCA entering into and structuring the equity facility, the Company shall pay to TCA the Facility Fee Shares.  The Facility Fee Shares shall be issued by the Company to TCA in four (4) quarterly installments, the first of such issuances being the date of execution of the Equity Agreement.  It is the intention of the Company and TCA that the value of the Facility Fee Shares shall equal $125,000.  In the event the value of the Facility Fee Shares issued to TCA does not equal $125,000 after a ninth month evaluation date, the Equity Agreement provides for an adjustment provision allowing for necessary action to adjust the number of shares issued.


We will pay all expenses incident to the registration, offering and sale of the shares of our common stock to the public hereunder other than commissions, fees and discounts of underwriters, brokers, dealers and agents.  If any of these other expenses exists, we expect TCA to pay these expenses.  We have agreed to indemnify TCA and its controlling persons against certain liabilities, including liabilities under the Securities Act.  We estimate that the expenses of the offering to be borne by us will be approximately $40,000.  We will not receive any proceeds from the resale of any of the shares of our common stock by TCA.  We may, however, receive proceeds from the sale of our common stock under the Equity Agreement.


DESCRIPTION OF SECURITIES TO BE REGISTERED


This prospectus includes 9,500,000 Shares of our common stock offered by the Selling Security Holder.  The following description of our common stock is only a summary.  You should also refer to our certificate of incorporation and bylaws, which have been incorporated by reference as exhibits to the registration statement of which this prospectus forms a part.


We are authorized to issue 200,000,000 shares of common stock, par value of $0.001 per share and 10,000,000 shares of preferred stock, par value of $0.001 per share, of which 51 have been designated as Series A Preferred Stock.  As of January 31, 2012, 36,843,849 shares of the Company’s common stock are issued and outstanding and 51 shares of the Series A Preferred Stock are issued and outstanding.  The holders of common stock are entitled to one vote per share for the election of directors and on all other matters to be voted upon by the stockholders.


There is no cumulative voting.  Subject to preferences that may be applicable to any outstanding securities, the holders of common stock are entitled to receive, when and if declared by the board of directors, out of funds legally available for such purpose, any dividends on a pro rata basis.  In the event of our liquidation, dissolution or winding up, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of preferred stock, if any, then outstanding.  The common stock has no preemptive or conversion rights or other subscription rights.  There are no redemption or sinking fund provisions applicable to the common stock.


DESCRIPTION OF BUSINESS


Company Overview


We were incorporated as “Alba Mineral Exploration, Inc.” on July 24, 2007, in the State of Delaware for the purpose of engaging in mineral properties. On October 21, 2009, we entered into the Exchange Agreement with Diamond Information Institute, whereby we acquired all of the issued and outstanding common stock of Diamond Information Institute and changed the name of the Company to Bergio International Inc.


As a result of entering into the Exchange Agreement, we have determined to pursue the business plan of Diamond Information Institute.  We are now in the business of designing and manufacturing upscale jewelry.






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Our Business


We are entering into our 18th year of operations and concentrate on supplying our jewelry products to boutique, upscale jewelry stores. We currently sell our jewelry to approximately 50 independent jewelry retailers across the United States and have spent over $3 million in branding the “Bergio” name through tradeshows, trade advertising, national advertising and billboard advertising, since launching the line in 1995.  We have manufacturing control over our line as a result of having a manufacturing facility in New Jersey as well as subcontracts with facilities in Italy.


It is our intention to establish Bergio International as a holding company for the purpose of acquiring established jewelry design and manufacturing firms who possess branded product lines. Branded product lines are products and/or collections whereby the jewelry manufacturers have established their products within the industry through advertising in consumer and trade magazines as well as possibly obtaining federally registered trademarks and patents of their products and collections. 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.


We intend to acquire design and manufacturing firms throughout the United States and Europe. If and when we pursue any potential acquisition candidates, we intend to target the top 10% of the world’s jewelry manufacturers that have already created an identity and brand in the jewelry industry. We intend to locate potential candidates through our relationships in the industry and expect to structure the acquisition through the payment of cash, which will most likely be provided from third party financing, as well as our common stock but not cash generated from our operations. In the event we obtain financing from third parties for any potential acquisitions, Bergio International may agree to issue our common stock in exchange for the capital received. However, as of the date of this report, we do not have any binding agreements with any potential acquisition candidates or arrangements with any third parties for financing.


Principal Products and Services


We have historically sold our products directly to distributors, retailers and other wholesalers, who then in turn sell their products to consumers through retail stores. Independent retail jewelers that offer the current Bergio line are not under formal contracts and most sell competing products as well.


Our products consist of a wide range of unique jewelry styles and designs made from precious metals such as gold, platinum and Karat gold, as well as other precious stones. We continuously innovate and change our designs based upon consumer trends. As a result of new designs being created we believe we are able to differentiate ourselves from our competition and strengthen our brands. We sell our products to our customers at price points that reflect the market price of the base material plus a markup reflecting our design fee and processing fees.


Each year, most jewelry manufacturers bring new products to market. We believe that we are a trendsetter in jewelry manufacturing. As a result, we come out with a variety of products throughout the year that we believe have commercial potential to meet what we feel are new trends within the industry. The “Bergio” designs consist of upscale jewelry that includes white diamonds, yellow diamonds, pearls, and colored stones, in 18K gold, platinum, and palladium. We currently design and produce approximately 75 to 100 product styles. Current retail prices for our products range from $400 to $200,000.


Our product range is divided into three fashion lines: (i) 18K gold line, (ii) a bridal line, and (iii) a couture and/or one of kind pieces. Our officer and director, Mr. Abajian, consults regularly with the design teams of his Italian manufacturers, which usually results in a constant continuation of new products and sometimes entire lines being developed. Typically, new products come on line approximately every year and most recently, Bergio International introduced its latest collection, Byzantine, Cestino, and Safari Collections, which launched in June 2010 and consists of approximately 35 pieces made with pink gold and diamonds. In 2011, we are introducing two additional collections, Sistina and Rocca Collections. Depending on the timing and styling at any point in time, our products and collections would fall in one of the various categories shown below:



23





(1)

Whimsical . The whimsical line includes charms, crosses and other “add-on” pieces.


(2)

Fine . The proposed middle line will consist of fashion jewelry utilizing colored stones, diamonds and pearls applied to a variety of applications such as necklaces, pendants, earrings, bracelets and rings. The metals that we intend to use for the Middle line include platinum, 18K white & yellow gold.


(3)

Couture . The Couture line is our most luxurious line, and consists of one-of-a-kind pieces, new showcase products each year, and predominantly utilizes diamonds, platinum and other precious metals and stones of the highest grade and quality available.


(4)

Bridal . The Bridal line is our core business. We attempt to stay on the forefront of trends and designs in the bridal market with the latest in wedding sets, engagement rings and wedding bands for both men and women.


Each year, we attempt to expand and/or enhance these lines, while constantly seeking to identify trends that we believe exist in the market for new styles or types of merchandise.  Design and innovation are the primary focus of our manufacturing and we are less concerned with the supply and capacity of raw materials.  Over the last 15 years, Mr. Abajian has been the primary influencer over the Bergio collections.  Mr. Abajian with his contacts, which are located mostly overseas, regularly meets to discuss, conceptualize and develop Bergio’s various products and collections.  When necessary, additional suppliers and design teams can be brought in as the market needs dictate.  Management intends to maintain a diverse line of jewelry to mitigate concentration of sales and continuously expand our market reach.


Distribution Methods and Marketing


We continue to devote our efforts towards brand development and utilize marketing concepts in an attempt to enhance the marketability of our products. During the past several years, we have carried out our brand development strategy based on our product quality and design excellence, which is highlighted through our sales personnel. We have established significant networks and relationships with retailers which allow our products to be promoted and sold nationwide. We maintain a broad base of customers and concentrate on retailers that sell fashionable and high end jewelry. We also work with our customers to adjust product strategies based on the customer’s feedback to try and decrease the likelihood of overstocked or undesired products.


We intend to further promote our products and brand by participating in trade shows and various exhibitions, consumer and trade advertisements, billboard advertisements, as well as make specialty appearances in retail stores carrying our products.


Sources and Availability of Raw Materials and Principal Suppliers


Most of the inventory and raw materials we purchase occurs through our manufacturers located in Europe. The inventory that we directly maintain is based on recent sales and revenues of our products but ultimately is at the discretion of Mr. Abajian and his experience in the industry. Our inventories are commodities that can be incorporated into future products or can be sold on the open market. Additionally, we perform physical inventory inspections on a quarterly basis to assess upcoming styling needs and consider the current pricing in metals and stones needed for our products.


We acquire all raw gemstones, precious metals and other raw materials used for manufacturing our products on the open market. We are not constrained in our purchasing by any contracts with any suppliers and acquire raw material based upon, among other things, availability and price on the open wholesale market.


Approximately 95% of our product line is now produced in our facility in Fairfield, New Jersey and 5% is contracted to our manufacturing supplier in Italy, who then procure the raw materials in accordance with the specifications and designs submitted by Bergio International. However, the general supply of precious metals and stones used by us can be reasonably forecast even though the prices will fluctuate. Any price differentials in the precious metals and stones will typically be passed on to the customer.



24





For the raw materials not procured by contracted manufacturers, we have approximately five suppliers that compete for our business, with our largest gold suppliers being ASD Casting Inc. Most of our precious stones are purchased from various diamond dealers. We do not have any formal agreements with any of our suppliers but have established an ongoing relationship with each of our suppliers.


Customers


During the year ended December 31, 2010, the Company did not have one customer that accounted for approximately 5% or more of our annual sales. All of our sales are generated from our customer base of 50 customers, which includes luxury department store retailer Neiman Marcus.


Intellectual Property


Bergio is a federally registered trademarked name that we own. Since the first trademark of “Bergio” was filed, all advertising, marketing, trade shows and overall presentation of our product to the public has prominently displayed this trademark. As additional lines are designed and added to our products, we may trademark new names to distinguish the particular products and jewelry lines.


Employees


As of January 31, 2012, we had 3 full-time employees and 2 part-time employees.  Of our current employees, 1 is sales and marketing personnel, 2 are manufacturing and 2 hold administrative and executive positions.  No personnel are covered by a collective bargaining agreement.  We intend to use the services of independent consultants and contractors when possible or until we are able to hire internal personnel.


Competition and Market Overview


The jewelry design and manufacture industry is extremely competitive and has low barriers to entry. We compete with other jewelry designers and manufacturers of upscale jewelry as well as retail jewelry stores. There are over 4,000 jewelry design and manufacture companies worldwide, several of which have greater experience, brand name recognition and financial resources than Bergio International.


Our management believes that the jewelry industry competes in the global marketplace and therefore must be adaptable to remain competitive.  Recently the U.S. economy has encountered a slowdown and Bergio International anticipates the U.S. economy will most likely remain weak at least through the end of 2011.  Consumer spending for discretionary goods such as jewelry is sensitive to changes in consumer confidence and ultimately consumer confidence is affected by general business considerations in the U.S. economy.  Consumer discretionary spending generally declines during times of falling consumer confidence, which may affect the retail sale of our products. U.S. consumer confidence reflected these slowing conditions throughout 2010.  The impact of the slowing U.S. economy is not usually known until the second quarter of any given year in our industry, thus it is hard to estimate the actual impact the slowing economy will have on our business.


According to the United States Department of Commerce outlook in 2008, the United States apparent consumption of precious metal jewelry was expected to grow over the next few years at a slow but steady rate, before picking up considerably in 2011.  A stronger economy, more spending by the baby boomers and young professionals with an overall trend toward luxury products will lead to future growth.  From 2007 to 2011, apparent consumption of precious metal jewelry is expected to increase by an average of 3.9% per year, totaling $14.0 billion in 2011.  Therefore, we intend to make strong efforts to maintain our brand in the industry through our focus on the innovation and design of our products as well as being able to consolidate and increase cost efficiency when possible through acquisitions.


Environmental Regulation and Compliance


The United States environmental laws do not materially impact our manufacturing as we are using state of the art equipment that complies with all relevant environmental laws.




25




Approximately 5% of the Company’s manufacturing is contracted to quality suppliers in the vicinity of Valenza, Italy, with the remaining 95% of setting and finishing work being conducted in Bergio International’s Fairfield, New Jersey facility.  The setting and finishing work done in our New Jersey facility involves the use of precision lasers, rather than using old soldering procedures which uses gas and oxygen to assemble different elements. Soap and water is used as a standard to clean the jewelry.  Also, a standard polishing compound is used for the finishing work but it does not have a material impact on our cost and effect of compliance with environmental laws.


Government Regulation


Currently, we are subject to all of the government regulations that regulate businesses generally such as compliance with regulatory requirements of federal, state, and local agencies and authorities, including regulations concerning workplace safety, labor relations, and disadvantaged businesses.  In addition, our operations are affected by federal and state laws relating to marketing practices in the retail jewelry industry.  We are subject to the jurisdiction of federal, various state and other taxing authorities.  From time to time, these taxing authorities review or audit our business.


Reports to Security Holders


We are subject to the informational requirements of the Exchange Act.  Accordingly, we file annual, quarterly and other reports and information with the U.S. Securities and Exchange Commission.  You may read and copy these reports, statements, or other information we file at the SEC’s public reference room at 450 Fifth Street, N.W., Washington D.C. 20549.  Our filings are also available to the public from commercial document retrieval services and the Internet worldwide website maintained by the U.S. Securities and Exchange Commission at www.sec.gov.


DESCRIPTION OF PROPERTY


Currently, we lease a 1,730 square feet design and manufacturing facility located in Fairfield, New Jersey.  The lease expired in August 31, 2010, and is being renewed on a month-to-month basis.  We also rent office space at this facility.  We pay approximately $1,800 per month.  Our Fairfield, New Jersey facility is presently adequate for the performance of all company functions, which includes manufacturing, design and administrative needs.


Additionally, we anticipate opening additional offices and/or design facilities in other locations as we continue to implement our business plan throughout the United States, when and if any acquisitions are completed in the future.  At the current time, our expansion plans are in the preliminary stages with no formal negotiations being conducted.  Most likely no expansions will take place until additional revenues can be achieved or additional capital can be raised to help offset the costs associated with any expansion.


LEGAL PROCEEDINGS


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.







26




MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS


Some of the statements contained in this prospectus that are not historical facts are “forward-looking statements” which can be identified by the use of terminology such as “estimates,” “projects,” “plans,” “believes,” “expects,” “anticipates,” “intends,” or the negative or other variations, or by discussions of strategy that involve risks and uncertainties.  We urge you to be cautious of the forward-looking statements, that such statements, which are contained in this prospectus, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors affecting our operations, market growth, services, products and licenses.  No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events.  Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:


·

Our ability to attract and retain management, and to integrate and maintain technical information and management information systems;


·

Our ability to raise capital when needed and on acceptable terms and conditions;


·

Our ability to procure or produce products and sell them at a reasonable profit;


·

The intensity of competition for products similar to ours; and


·

General economic conditions.


All written and oral forward-looking statements made are attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements.  Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward-looking statements.


Plan of Operation


We are entering into our 18th year of operations and concentrate on boutique, upscale jewelry stores.  We currently sell our jewelry to approximately 150 independent jewelry retailers across the United States and have spent over $3 million in branding the Bergio name through tradeshows, trade advertising, national advertising and billboard advertising since launching the line in 1995.  Our products consist of a wide range of unique styles and designs made from precious metals such as, gold, platinum, and Karat gold, as well as diamonds and other precious stones.  We have approximately 50 to 75 product styles in our inventory, with prices ranging from $400 to $200,000.  We have manufacturing control over our line as a result of having a manufacturing facility in New Jersey as well as subcontracts with facilities in Italy and Bangkok.


It is our intention to establish Bergio as a holding company for the purpose of acquiring established jewelry design and manufacturing firms who possess branded product lines.  Branded product lines are products and/or collections whereby the jewelry manufacturers have established their products within the industry through advertising in consumer and trade magazines as well as possibly obtaining federally registered trademarks of their products and collections. 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.






27




We intend to acquire design and manufacturing firms throughout the United States and Europe. If and when we pursue any potential acquisition candidates, we intend to target the top 10% of the world’s jewelry manufactures that have already created an identity and brand in the jewelry industry. We intend to locate potential candidates through our relationships in the industry and expect to structure the acquisition through the payment of cash, which will most likely be provided from third party financing, as well as our common stock but not cash generated from our operations. In the event we obtain financing from third parties for any potential acquisitions, Bergio may agree to issue our common stock in exchange for the capital received. However, as of the date of this report, we do not have any binding agreements with any potential acquisition candidates or arrangements with any third parties for financing.


Result of Operations for the Three and Nine Months Ended September 30, 2011 and 2010


The following income and operating expenses tables summarize selected items from the statement of operations for the three and nine months ended September 30, 2011, compared to the three and nine months ended September 30, 2010.


INCOME:


 

 

 

 

 

 

 

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

Sales - net

$ 394,562

 

$ 343,514

 

$ 1,029,774

 

$ 892,509

 

 

 

 

 

 

 

 

Cost of Sales

363,421

 

226,031

 

666,764

 

428,244

 

 

 

 

 

 

 

 

Gross Profit

$ 31,141

 

$ 117,483

 

$ 363,010

 

$ 464,265

 

 

 

 

 

 

 

 

Gross Profit as a Percentage of Revenue

8%

 

34%

 

35%

 

52%


Sales


Net sales for the three months ended September 30, 2011, were $394,562, compared to $343,514 for the three months ended September 30, 2010.  This resulted in an increase of $51,048 from the comparable period. Net sales for the nine months ended September 30, 2011, were $1,029,774, compared to $892,509 for the nine months ended September 30, 2010. This resulted in an increase of $137,265 from the comparable period. The three and nine month increases primarily result from bulk sales of diamonds, which have little profit margin. The decrease in higher margin sales is due to the lack of consumer confidence in the U.S. economy and the continuing high level of unemployment. Such lack of confidence has resulted in a slowdown in discretionary spending which has continued to negatively affect our higher margin sales. We have tried to offset the U.S. slowdown by expanding our customer base into Europe and Asia; however, those economies have also experienced slowdowns in the second and third quarters of 2011.


Typically, revenues experience significant seasonal volatility in the jewelry industry. The first two quarters of any given year typically represent approximately 15%-25% of total year revenues, based on historic results. The holiday buying season during the last two quarters of every year typically account for the remainder of annual sales.


Cost of Sales


Cost of sales for the three months ended September 30, 2011, was $363,421, an increase of $137,390 from $226,031 for the three months ended September 30, 2010. Cost of sales for the nine months ended September 30, 2011, was $666,764, an increase of $238,520 from $428,244 for the nine months ended September 30, 2010. The increase in cost of sales is primarily related to the bulk sales of diamonds which generate very low profit margins of 0% - 5% on labor costs, when incurred.




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Gross Profit


During the three months ended September 30, 2011, our gross profit as a percentage of sales was 8%, compared to a gross profit as a percentage of sales of 34% for the three months ended September 30, 2010. During the nine months ended September 30, 2011, our gross profit as a percentage of sales was 35%, compared to a gross profit as a percentage of sales of 52% for the nine months ended September 30, 2010. Our decrease in gross profit percentage during the periods was primarily attributable to the bulk sale of diamonds as described above.


OPERATING EXPENSES:


 

 

 

 

 

 

 

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

Selling Expenses

$ 40,357

 

$ 51,790

 

$ 236,598

 

$ 186,030

 

 

 

 

 

 

 

 

Total General and Administrative Expenses

103,780

 

94,107

 

406,083

 

585,134

 

 

 

 

 

 

 

 

Total Operating Expenses

144,137

 

145,897

 

642,681

 

771,164

 

 

 

 

 

 

 

 

Other Income (Expenses)

103,652

 

(18,144)

 

18,106

 

(465,865)

 

 

 

 

 

 

 

 

Net Loss

$ (9,344)

 

$ (46,558)

 

$ (261,565)

 

$ (772,764)


Selling Expenses


Total selling expenses were $40,357 for the three months ended September 30, 2011, a decrease of $11,433 from $51,790 for the three months ended September 30, 2010. Total selling expenses were $236,598 for the nine months ended September 30, 2011, an increase of $50,568 from $186,030 for the nine months ended September 30, 2010. Selling expenses include advertising, trade show expenses, travel and selling commissions. The increase in selling expenses during the nine months ended September 30, 2011, is a result of increased advertising and travel expenses as we continue to implement our strategic plan to increase our customer base outside the United States.


General and Administrative Expenses


General and administrative expenses were $103,780 for the three months ended September 30, 2011, compared to $94,107 for the three months ended September 30, 2010, an increase of $9,673. General and administrative expenses were $406,083 for the nine months ended September 30, 2011, compared to $585,134 for the nine months ended September 30, 2010, a decrease of $179,051. General and administrative expenses were fairly consistent during the three month periods. The decrease in general and administrative expenses during the nine month period primarily results from a decrease in share-based costs of $242,900. This decrease was offset by increases in payroll costs and professional fees, incurred in the implementation of our plan to expand our customer base and in our efforts to raise capital.


Income (Loss) from Operations


During the three months ended September 30, 2011, we had a loss from operations totaling $112,996 which represented an increase of $84,582 from the loss from operations of $28,414 for the three months ended September 30, 2010. During the nine months ended September 30, 2011, we had a loss from operations totaling $279,671 which represented a decrease of $27,228 from the loss from operations of $306,899 for the nine months ended September 30, 2010. As discussed above, fluctuations in material and operating costs, along with several low margin sales, were the primary reason for the fluctuations in loss from operations.




29




Other Income (Expense)


We had Other Income of $103,652 in the three months ended September 30, 2011 compared to Other [Expense] of [$18,144] in the three months ended September 30, 2010, an increase of $121,796. We had Other Income of $18,106 in the nine months ended September 30, 2011 compared to Other [Expense] of [$465,865] in the nine months ended September 30, 2010, an increase of $483,971. The change in Other Income [Expense] in the three month periods was primarily a result of the fair value change in our derivative of $149,550 in 2011 compared to $39,125 in 2010. Other Income [Expense] in the nine months ended September 30, 2010 is comprised primarily of the $225,000 gain from the sale of our subsidiary, Diamond, [$595,160] from the expense of share-based financing costs, the fair value change in our derivative of $57,431, amortization of debt discount of [$85,184] and loss on disposal of equipment of [$18,945]. In the nine months ended September 30, 2011 Other Income [Expense] is comprised of the fair value change in our derivative of $123,934 and amortization of debt discount of [$62,323]. Interest expense in the three months ended September 30, 2011 and 2010 and the nine months ended September 30, 2011 and 2010 amounted to $15,080, $17,929, $44,855 and $49,007, respectively, due to lower average debt for the periods.


Net Loss


The Company incurred a net loss of $9,344 for the three months ended September 30, 2011, compared to a net loss of $46,558 for the three months ended September 30, 2010. The Company incurred a net loss of $261,565 for the nine months ended September 30, 2011, compared to a net loss of $772,764 for the nine months ended September 30, 2010. This represented decreases in our net loss of $37,214 in the three month period ended and $511,199 in the nine month period ended, respectively, attributable to the various factors as discussed above.


Results of Operations for the Years Ended December 31, 2010 and 2009


The following income and operating expenses tables summarize selected items from the statement of operations for the year ended December 31, 2010 compared to the year ended December 31, 2009.


INCOME:


 

 

Years Ended December 31,

 

 

Increase/

 

 

 

2010

 

 

2009

 

 

(Decrease)

 

 

 

 

 

 

 

 

 

 

 

Sales - net

 

$

1,445,570

 

 

$

975,354

 

 

 

48

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of Sales

 

 

812,831

 

 

 

690,708

 

 

 

18

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

$

632,739

 

 

$

284,646

 

 

 

122

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit as a Percentage of Revenue

 

 

44

%

 

 

29

%

 

 

52

%


Sales


Net sales for the year ended December 31, 2010 were $1,445,570, compared to $975,354 for the year ended December 31, 2009. This resulted in an increase of approximately $470,000 or 48% from the comparable period. The increase in sales is primarily a result of our efforts to expand our customer base outside the United States and into Europe and Asia as well as a gradual uptick in consumer confidence in the U.S. economy which began in the latter half of 2010.


Typically, revenues experience significant seasonal volatility in the jewelry industry. The first two quarters of any given year typically represent approximately 15%-25% of total year revenues, based on historic results. The holiday buying season during the last two quarters of every year typically account for the remainder of annual sales.




30




Cost of Sales


Cost of sales for the year ended December 31, 2010 was $812,831 an increase of approximately $122,000, or 18%, from $690,708 for the year ended December 31, 2009. Although total cost of sales increased, which would be expected with our increased sales, as a percentage of sales costs decreased. The rising prices of gold and silver in 2010 allowed us to sell product held in inventory with lower material costs which resulted in a higher gross margin.


Gross Profit:


During the year ended December 31, 2010, our gross profit as a percentage of sales was 44%, compared to a gross profit as a percentage of sales of 29% for the year ended December 31, 2009. Our gross profit increased during 2010, as we were able to sell product with higher gross margins (as disclosed above). In addition, beginning in the latter part of 2009, we made a concerted effort to limit the amount sales returns allowed.


OPERATING EXPENSES:


 

 

Years Ended December 31,

 

 

Increase/

 

 

 

2010

 

 

2009

 

 

(Decrease)

 

 

 

 

 

 

 

 

 

 

 

Selling Expenses

 

$

317,463

 

 

$

212,709

 

 

 

49

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Total General and Administrative Expenses

 

 

636,906

 

 

 

576,708

 

 

 

10

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Expenses

 

$

954,369

 

 

$

789,417

 

 

 

21

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Income [Expense]

 

$

(517,369

)

 

$

(92,954

)

 

 

457

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

$

(838,999

)

 

$

(597,725

)

 

 

40

%


Selling Expenses


Total selling expenses were $317,463 for the year ended December 31, 2010, which was approximately a $105,000 or 49% increase from $212,709 for the year ended December 31, 2009. Selling expenses include advertising, trade show expenses, travel and selling commissions. The increase in selling expenses during the year ended December 31, 2010 is a result of increased advertising and travel expenses as we began to implement our strategic plan to increase our customer base outside the United States.


General and Administrative Expenses


General and administrative expenses were $636,906 for the year ended December 31, 2010 versus $576,708 for the year ended December 31, 2009. The increase in general and administrative expenses primarily results from increases in payroll costs and share-based services incurred as we implement our expansion plans while we try to preserve working capital. We incurred share-based costs of $242,900 in 2010 compared to $48,000 in 2009. This increase was offset by decreases in professional fees, which totaled $114,692 in 2010 compared to $362,046 in 2009.


Loss from Operations


During the year ended December 31, 2010, we had a loss from operations totaling $321,630 which was a decrease of approximately $183,000 (36%) from the loss of $504,771 for the year ended December 31, 2009. As discussed above, our increased sales and gross profit were the primary reasons for the significant decrease in our operating loss.




31




Other Income [Expense]


Other Income [Expense] in the year ended December 31, 2010, is comprised primarily of the $225,000 gain from the sale of our subsidiary, Diamond, and the fair value change in our derivative of $60,206 net of share-based financing costs of $595,160, interest expense of $68,240, and amortization of debt discount of $120,230. Other Income [Expense] in the year ended December 31, 2009, is comprised primarily of interest expense of $93,350.


Net Loss


We incurred a net loss of $838,999 for the year ended December 31, 2010, compared to a net loss of $597,725 for the year ended December 31, 2009. This represented an increase in our net loss of $241,274 (40%) from the comparable period, attributable to the various factors as discussed above. Net loss in the year ended December 31, 2010 would have decreased by approximately $838,000 had we not incurred certain share-based services and financing costs, which would have resulted in us breaking even for the year, and $ (0.00) Loss per common Share compared to $ (0.10) per common share for the same period ended December 31, 2010.


Liquidity and Capital Resources


The following table summarizes working capital at September 30, 2011, compared to December 31, 2010.


 

 

 

 

 

September 30,

2011

December 31, 2010

Increase/

(Decrease)

 

 

 

 

Current Assets

$ 2,025,317

$ 2,265,507

$ (240,190)

 

 

 

 

Current Liabilities

$ 1,054,057

$ 1,240,384

$ (186,327)

 

 

 

 

Working Capital

$ 971,260

$ 1,025,123

$ (53,863)


At September 30, 2011, we had a cash overdraft of $5,051, compared to cash of $4,262 at December 31, 2010. Over the next twelve months we believe that our existing capital combined with cash flow from operations will be sufficient to sustain our current operations. It is anticipated that we will need to sell additional equity and/or debt securities in order to complete or enter into potential mergers and/or acquisitions.


Our working capital decreased by approximately $54,000 during the nine months ended September 30, 2011, primarily due to the following:


Accounts receivable at September 30, 2011, was $345,976, compared to $474,212 at December 31, 2010, which represents a decrease of approximately $128,000 or 27%. We typically offer our customers 60, 90 or 120 day payment terms on sales, depending upon the product mix purchased. When setting terms with our customers, we also consider the term of the relationship with individual customers and management’s assessed credit risk of the respective customer, and may at management’s discretion, increase or decrease payment terms based on those considerations. The decrease in accounts receivable is primarily attributable to our collection efforts during the period.


Inventory at September 30, 2011 and December 31, 2010, was $1,536,852 and $1,602,680, respectively. Our management seeks to maintain a very consistent inventory level that it believes is commensurate with current market conditions and manufacturing requirements related to our anticipated sales volume. We historically do not have an inventory reserve for slow moving or obsolete products due to the nature of our inventory of precious metals and stones, which are commodity-type raw materials and rise in value based on quoted market prices established in actively trade markets. This allows for us to resell or recast these materials into new products and/or designs as the market evolves. We had a decrease in inventory of approximately $66,000 or 4% primarily attributable to a purchase of diamonds in the last quarter of 2010 in the amount of approximately $95,000 which was sold in the first quarter of 2011.



32





Accounts payable and accrued expenses at September 30, 2011, were $195,075, compared to $417,144 at December 31, 2010, which represents a 53% decrease. We utilized cash from the collection of accounts receivable and advances from our major stockholder to pay down payables.


Advances from our major stockholder at September 30, 2011, were $368,075, compared to $317,601 at December 31, 2010. The increase is a result of additional advances received in 2011.


Bank Lines of Credit and Notes Payable


Our indebtedness is comprised of various term loans, capital leases and credit cards intended to provide capital for the ongoing manufacturing of our jewelry line, in advance of receipt of the payment from our retail distributors. At September 30, 2011, we had two outstanding term loans. One of the term loans is for $100,000 with Leaf Financial Corp., which is payable in monthly installments and matures in April 2014. The note bears an annual interest rate of 10.52% and as of September 30, 2011, there was an outstanding balance of $58,024. We also have a $300,000 term loan with JPMorgan Chase Bank, which is payable in monthly installments and matured in June 2011. The note bears an annual interest rate of 7.60% and as of September 30, 2011, there was an outstanding balance of $72,371. The Company is in the process of negotiating an extension of the payment terms with the bank as it continues to pay down principal on the note. Both of these notes are collateralized by our assets as well as a personal guarantee by our Chief Executive Officer, Berge Abajian.


We had a bank line of credit of $55,000 with JPMorgan Chase Bank, which was converted to a term loan and requires a monthly payment of $500 and matured in June 2011. The interest rate is calculated at the bank’s prime rate plus 0.75%. As of September 30, 2011, we had an outstanding balance of $36,971 at an effective annual interest rate of 4.00%. The loan is collateralized by our assets as well as a personal guarantee by our Chief Executive Officer, Berge Abajian. The Company is in the process of negotiating an extension of the payment terms with the bank as it continues to pay down principal on the loan.


In addition to term loans, we have a number of various unsecured credit card obligations. These obligations require minimal monthly payments of interest only and as of September 30, 2011, we have outstanding balances of $154,934, which have interest rates ranging from 3.99% to 24.90%.


Convertible Debt


Asher


On February 1, 2010, the Company issued an 8% secured convertible note (the “February 2010 Note”) in the amount of $50,000 to Asher Enterprises, Inc. (“Asher”). The principal and accrued interest is payable on January 2, 2011, or such earlier date as defined in the note. The note is convertible by Asher at any time after the six month anniversary of the issue date and by the Company at any time after issue with conversion periods as defined in the note. The note is convertible into shares of the Company’s common stock at a price of 62.5% of the average of the three lowest trading prices of the stock during the ten trading day period ending one day prior to the date of conversion. In 2010, $47,000 of the principal was converted into 538,829 shares of company common stock. In January 2011, the balance of the convertible note of $3,000 and $2,000 of accrued interest was converted into 100,000 shares of the Company’s common stock.


On March 12, 2010, the Company issued an 8% secured convertible note (the “March 2010 Note”) in the amount of $30,000 to Asher. The principal and accrued interest is payable on December 13, 2010, or such earlier date as defined in the note. The note is convertible by Asher at any time after the six month anniversary of the issue date and by the Company at any time after issue with conversion periods as defined in the note. The note is convertible into shares of the Company’s common stock at a price of 62.5% of the average of the three lowest trading prices of the stock during the ten trading day period ending one day prior to the date of conversion. In February and March 2011, the convertible note of $30,000 and accrued interest of $1,200 was converted into 1,121,975 shares of the Company’s common stock.




33




In April 2010, the Company issued an 8% secured convertible note (the “April 2010 Note”) in the amount of $40,000 to Asher. The principal and accrued interest is payable on January 13, 2011, or such earlier date as defined in the note. The note is convertible by Asher at any time after the six month anniversary of the issue date and by the Company at any time after issue with conversion periods as defined in the note. The note is convertible into shares of the Company’s common stock at a price of 62.5% of the average of the three lowest trading prices of the stock during the ten trading day period ending one day prior to the date of conversion. In April 2011, the convertible note and accrued interest was converted into 3,847,321 shares of the Company’s common stock.


In May 2010, the Company issued an 8% secured convertible note (the “May 2010 Note”) in the amount of $40,000 to Asher. The principal and accrued interest is payable on February 11, 2011, or such earlier date as defined in the note. The note is convertible by Asher at any time after the six month anniversary of the issue date and by the Company at any time after issue with conversion periods as defined in the note. The note is convertible into shares of the Company’s common stock at a price of 62.5% of the average of the three lowest trading prices of the stock during the ten trading day period ending one day prior to the date of conversion. In May and June 2011, the convertible note and accrued interest was converted into 3,999,843 shares of the Company’s common stock.


In April 2011, the Company issued an 8% convertible note (the “April 2011 Note”) in the amount of $50,000 to Asher. The principal and accrued interest is payable on January 18, 2012, or such earlier date as defined in the note. The note is convertible by Asher at any time after the six month anniversary of the issue date and by the Company at any time after issue with conversion periods as defined in the note. The note is convertible into shares of the Company’s common stock at a price of 62.5% of the average of the three lowest trading prices of the stock during the ten day trading period ending one day prior to the date of conversion.


In July 2011, the Company issued an 8% convertible note (the “July 2011 Note”) in the amount of $32,500 to Asher. The principal and accrued interest is payable on April 18, 2012, or such earlier date as defined in the note. The note is convertible by Asher at any time after the six month anniversary of the issue date and by the Company at any time after issue with conversion periods as defined in the note. The note is convertible into shares of the Company’s common stock at a price of 62.5% of the average of the three lowest trading prices of the stock during the ten day trading period ending one day prior to the date of conversion.


In August 2011, the Company issued an 8% convertible note (the “August 2011 Note”) in the amount of $32,500 to Asher. The principal and accrued interest is payable on May 29, 2012, or such earlier date as defined in the note. The note is convertible by Asher at any time after the six month anniversary of the issue date and by the Company at any time after issue with conversion periods as defined in the note. The note is convertible into shares of the Company’s common stock at a price of 60.0% of the average of the three lowest trading prices of the stock during the ten day trading period ending one day prior to the date of conversion.


In September 2011, the Company issued an 8% convertible note (the “September 2011 Note”) in the amount of $37,500 to Asher. The principal and accrued interest is payable on June 28, 2012 or such earlier date as defined in the note. The note is convertible by Asher at any time after the six month anniversary of the issue date and by the Company at any time after issue with conversion periods as defined in the note. The note is convertible into shares of the Company’s common stock at a price of 62.5% of the average of the three lowest trading prices of the stock during the ten day trading period ending one day prior to the date of conversion.


Asher is entitled to have all shares issued upon conversion of the above notes listed upon each national securities exchange or other automated quotation system, if any, upon which shares of the Company’s common stock are then listed.






34




Tangiers


Effective January 2011, the Company entered into a 7% convertible promissory note agreement (the “January 2011 Note”) in the amount of $25,000 with Tangiers Capital, LLC (“Tangiers”) for the settlement of an accrued termination fee related to the securities purchase agreement with Tangiers. The principal and accrued interest is payable on June 18, 2012, or such earlier date as defined in the agreement. The note, including any accrued interest, is convertible into shares of the Company’s common stock at a price of 80% of the lowest trading price, determined on the then current trading market for the Company’s common stock, for the ten trading days prior to conversion, at the option of the holder. In March and April 2011, the convertible note and accrued interest was converted into 1,965,254 shares of the Company’s common stock.


On November 16, 2009, the Company issued a 7% Secured Convertible Debenture (the “November 2009 Debenture”) in the amount of $25,000 to Tangiers. The principal and accrued interest is payable on August 16, 2010, or such earlier date as defined in the debenture. Upon issuance, the November 2009 Debenture, including any accrued interest, was convertible into shares of the Company’s common stock at a price of 80% of the average of the two lowest trading prices, determined on the then current trading market for the Company’s common stock, for the ten trading days prior to conversion, at the option of the holder. The holder is entitled to “piggyback” registration rights on shares of common stock issued upon conversion. During the year ended December 31, 2010, $18,750 of the convertible note was converted into 290,144 shares of the Company’s common stock. In February 2011, the balance of the note of $6,250 and accrued interest of $1,694 was converted into 141,839 shares of the Company’s common stock.


Strategic


In May 2011, the Company issued a 15% convertible note (the “May 2011 Note”) in the amount of $50,000 to Strategic Business Initiatives, LLC (“Strategic”).  The principal and accrued interest is payable on November 30, 2011, or such earlier date as defined in the note. The Company must give 10 days’ notice to Strategic about its intent to prepay the note. During the ten day period, prior to the Company’s prepayment, Strategic has the option to convert all or a portion of the principal and/or accrued interest into shares of the Company’s common stock at a price of 80% of the five day average closing price immediately prior to the conversion date.


The Company accounts for the fair value of the conversion features 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 Company’s 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 valued the embedded derivative using the Black-Scholes pricing model. The fair values upon issuance of the January 2011 Note of $12,478, the April 2011 Note of $32,704, May 2011 Note of $16,570, July 2011 Note of $30,962, August 2011 Note of $32,500, and the September 2011 Note of $21,507 were recorded as a derivative liability and a discount to the convertible debt. Amortization of debt discount amounted to $62,323 and $85,184 for the nine months ended September 30, 2011 and 2010, respectively.  The derivative liability is revalued each reporting period using the Black-Scholes model. For the nine months ended September 30, 2011 and 2010, the Company recorded an unrealized gain from the change in the fair value of the derivative liability of $123,934 and $57,431, respectively. Convertible debt as of September 30, 2011 ($202,500) and December 31, 2010 ($119,250), is shown net of debt discount in the amount of $91,579 and $7,181, respectively.


The Black-Scholes model was valued with the following inputs:


·

Stock Price - The Stock Price was based on the average closing price of the Company s common stock as of the Valuation Date. Stock Prices ranged from $0.01 to $0.12 in the period 1-01-2011 through 9-30-2011.


·

Variable Conversion Price - The variable conversion price was based on: (i) 80% of the lowest Stock Price out of the last 10 trading days prior to the Valuation Date (Tangiers); and (ii) 62.5% and 60% of the average of the 3 lowest Stock Prices out of the last 10 trading days prior to the Valuation Date (Asher) and (iii) 80% of the stock price for the last 5 trading days prior to valuation date (Strategic).



35





·

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 0 months to 8 months in the period 1-01-2011 through 9-30-2011.


·

Risk Free Rate - The risk free rate was based on the Treasury Note rate as of the Valuation Dates with term commensurate with the remaining term of the debt. The risk free rate ranged from 0.11% to 0.30% in the period 1-01-2011 through 9-30-2011.


·

Volatility - The volatility was based on the historical volatility of three comparable companies as historical volatility of the Company was not useful in developing the expected volatility due to the limited trading history of its stock. The average volatility for the comparable companies ranged from 55.77% to 57.96% in the period 1-01-2011 through 9-30-2011.


Satisfaction of our cash obligations for the next 12 months


A critical component of our operating plan impacting our continued existence is to efficiently manage the production of our jewelry lines and successfully develop new lines through our Company or through possible acquisitions and/or mergers. Our ability to obtain capital through additional equity and/or debt financing, and joint venture partnerships will also be important to our expansion plans. In the event we experience any significant problems assimilating acquired assets into our operations or cannot obtain the necessary capital to pursue our strategic plan, we may have to reduce the growth of our operations. This may materially impact our ability to increase revenue and continue our growth.


Over the next twelve months we believe that our existing capital combined with cash flow from operations and advances from our major stockholder will be sufficient to sustain our current operations. However, in the event we locate potential acquisitions and/or mergers we will most likely need to obtain additional funding through the sale of equity and/or debt securities. There can be no assurance that if additional funding is required we will be able to secure it on terms that are favorable to us or at all.


Summary of product and research and development that we will perform for the term of our plan


We are not anticipating significant research and development expenditures in the near future.


Expected purchase or sale of plant and significant equipment


We do not anticipate the purchase or sale of any plant or significant equipment; as such items are not required by us at this time.


Significant changes in the number of employees


We do not anticipate a significant change in the number of full time employees over the next 12 months.


Off-Balance Sheet Arrangements


We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, results or operations, liquidity, capital expenditures or capital resources that is deemed material.


Critical Accounting Policies


The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America. Preparing financial statements in accordance with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reported period.




36




Accounts Receivable . Management periodically performs a detailed review of amounts due from customers to determine if accounts receivable balances are impaired based on factors affecting the collectability of those balances. Management believes the accounts receivable balance at September 30, 2011, is fully collectible and deems an allowance for doubtful accounts not necessary as of this date.


Long-Lived Assets. In accordance with generally accepted accounting principles, long-lived tangible assets subject to depreciation or amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an asset is determined to be impaired, the loss is measures by the excess of the carrying amount of the asset over its fair value as determined by an estimate of undiscounted future cash flows. As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the future cash flows estimated by management in their impairment analyses may not be achieved.


Equity-Based Compensation. The Company accounts for equity based compensation transactions with employees under the provisions of ASC Topic No. 718, “Compensation: Stock Compensation” (“Topic No. 718”). Topic No. 718 requires the recognition of the fair value of equity-based compensation in net income. The fair value of common stock issued for compensation is measured at the market price on the date of grant. The fair value of the Company’s equity instruments, other than common stocks, is estimated using a Black-Scholes option valuation model. This model requires the input of highly subjective assumptions and elections including expected stock price volatility and the estimated life of each award. In addition, the calculation of equity-based compensation costs requires that the Company estimate the number of awards that will be forfeited during the vesting period. The fair value of equity-based awards granted to employees is amortized over the vesting period of the award and the Company elected to use the straight-line method for awards granted after the adoption of Topic No. 718.


The Company accounts for equity based transactions with non-employees under the provisions of ASC Topic No. 505-50, “Equity-Based Payments to Non-Employees” (“Topic No. 505-50”). Topic No. 505-50 establishes that equity-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The fair value of common stock issued for payments to non-employees is measured at the market price on the date of grant. The fair value of equity instruments, other than common stock, is estimated using the Black-Scholes option valuation model. In general, the Company recognizes an asset or expense in the same manner as if it was to receive cash for the goods or services instead of paying with or using the equity instrument.


Revenue Recognition. The Company’s management recognizes revenue when realized or realizable and earned. In connection with revenue, the Company established a sales return and allowance reserve for anticipated merchandise to be returned based on historical operations. The Company’s sole revenue producing activity as a manufacturer and distributor of upscale jewelry is affected by movement in fashion trends and customer desire for new designs, varying economic conditions affecting consumer spending and changing product demand by retailers affecting their desired inventory levels. Realizing that this may, and in some periods has, resulted in a significant amount of sales returns, management revised the Company policy of accepting merchandise returns. Whereas under prior policy customers had up to 360 days to return merchandise and were allowed credits as offsets to their outstanding accounts receivable, under the current return policy merchandise, with limited exceptions, cannot be returned.


Recently Issued Accounting Standards


There are several new accounting pronouncements issued or proposed by the FASB. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe any of these accounting pronouncements has had or will have a material impact on the Company’s financial position or results of operations.






37





MARKET PRICE OF AND DIVIDENDS ON REGISTRANT’S COMMON EQUITY

 AND RELATED STOCKHOLDER MATTERS


(a) Market Information


The Company’s Common Stock is quoted on the OTCBB under the symbol BRGO.OB.  The following table sets forth the range of the high and low bid quotations of the Company’s common stock for the past three years in the over-the-counter market, as reported by the OTCBB.  The quotations reflect inter-dealer prices without retail mark-up, mark-down or commission, and may not represent actual transactions.


Calendar Quarter Ended:


 

 

High

 

 

Low

 

2011

 

 

 

 

 

 

March 31

 

$

0.11

 

 

$

0.01

 

June 30

 

 

0.07

 

 

 

0.01

 

September 30

 

 

0.12

 

 

 

0.01

 

December 31

 

 

0.09

 

 

 

0.01

 

 

 

 

 

 

 

 

 

 

2010

 

 

 

 

 

 

 

 

March 31

 

$

0.04

 

 

$

0.04

 

June 30

 

 

0.02

 

 

 

0.02

 

September 30

 

 

0.25

 

 

 

0.12

 

December 31

 

 

0.35

 

 

 

0.07

 

 

 

 

 

 

 

 

 

 

2009

 

 

 

 

 

 

 

 

March 31

 

$

0.00

 

 

$

0.00

 

June 30

 

 

0.00

 

 

 

0.00

 

September 30

 

 

0.00

 

 

 

0.00

 

December 31

 

 

0.92

 

 

 

0.44

 


(b) Holders


As of January 31, 2012, we estimate that there were approximately 5,000 holders of record of our common stock.  This figure does not take into account those shareholders whose certificates are held in the name of broker-dealers or other nominees.


(c) Dividends


We have never paid any cash dividends on our common shares, and we do not anticipate that we will pay any dividends with respect to those securities in the foreseeable future.  Our current business plan is to retain any future earnings to finance the expansion development of our business.


(d) Securities Authorized for Issuance under Equity Compensation Plan


As of December 31, 2011, we had an incentive stock and award plan under which 5,000,000 shares had been reserved for issuance.  The following table shows information with respect this plan as of the fiscal year ended December 31, 2011.




38




Equity Compensation Plan Information


Plan category

 

Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)

 

 

Weighted-average exercise price of outstanding options, warrants and rights (b)

 

 

Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)

 

 

 

 

 

 

 

 

 

 

 

Equity compensation plans approved by security holders

 

 

533,553

 

 

 

-

 

 

 

4,466,447

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity compensation plans not approved by security holders

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

533,553

 

 

 

-

 

 

 

4,466,447

 


CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

ACCOUNTING AND FINANCIAL DISCLOSURE


None.


DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS


The following table and text sets forth the names and ages of all our directors and executive officers and our key management personnel as of January 31, 2012.  All of our directors serve until the next annual meeting of stockholders and until their successors are elected and qualified, or until their earlier death, retirement, resignation or removal.  Executive officers serve at the discretion of the board of directors, and are elected or appointed to serve until the next Board of Directors meeting following the annual meeting of stockholders.  Also provided is a brief description of the business experience of each director and executive officer and the key management personnel during the past five years and an indication of directorships held by each director in other companies subject to the reporting requirements under the Federal securities laws.


Name

Age

Position

 

 

 

Berge Abajian

52

Chief Executive Officer, Chairman

 

 

 

Arpi Abajian

49

Secretary


Following is a brief summary of the background and experience of each director and executive officer of Bergio International, Inc.:


Berge Abajian became the Chief Executive Officer of Bergio International in October 2009.  Prior to that, Mr. Abajian served as CEO of the Diamond Information Institute, the predecessor company to Bergio International, from 1988 to October 2009. Mr. Abajian has a BS in Business Administration from Fairleigh Dickinson University and is well known and respected in the jewelry industry. Since 2005, Mr. Abajian has served as the President of the East Coast branch of the Armenian Jewelry Association and has also served as a Board Member on MJSA (Manufacturing Jewelers and Suppliers of America), New York Jewelry Association, and the 2001-2002 Luxury Show.  The Company believes that Mr. Abajian’s experience in the jewelry industry makes him a valuable member of the board of directors.


Arpi Abajian , was appointed our Secretary on October 29, 2009, by the Company’s Board of Directors. For the past 10 years, Ms. Abajian has worked at Bergio (formerly known as Diamond Information Institute) in various administrative positions. Ms. Abajian is currently married to the Chief Executive Officer and Chairman of our company and does not serve on the board of any other companies.




39




Term of Office


Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board, except to the extent governed by an employment agreement.


Involvement in Certain Legal Proceedings


To the best of our knowledge, during the past five years, none of the following occurred with respect to our present or former director, executive officer, or employee: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.


Meetings of Our Board of Directors


Our board of directors did not hold any meetings during the most recently completed fiscal year end. Various matters were approved by consent resolution, which in each case was signed by each of the members of the Board then serving.


Committees of the Board


We do not currently have a compensation committee, executive committee, or stock plan committee.


Audit Committee


We do not have a separately-designated standing audit committee. The entire Board of Directors performs the functions of an audit committee, but no written charter governs the actions of the Board when performing the functions of what would generally be performed by an audit committee. The Board approves the selection of our independent accountants and meets and interacts with the independent accountants to discuss issues related to financial reporting. In addition, the Board reviews the scope and results of the audit with the independent accountants, reviews with management and the independent accountants our annual operating results, considers the adequacy of our internal accounting procedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent auditor.


Nomination Committee


Our board of directors does not maintain a nominating committee. As a result, no written charter governs the director nomination process. Our size and the size of our Board, at this time, do not require a separate nominating committee.


When evaluating director nominees, our directors consider the following factors:


·

The appropriate size of our board of directors;


·

Our needs with respect to the particular talents and experience of our directors;


·

The knowledge, skills and experience of nominees, including experience in finance, administration or public service, in light of prevailing business conditions and the knowledge, skills and experience already possessed by other members of the Board;


·

Experience in political affairs;



40





·

Experience with accounting rules and practices; and


·

The desire to balance the benefit of continuity with the periodic injection of the fresh perspective provided by new Board members.


Our goal is to assemble a Board that brings together a variety of perspectives and skills derived from high quality business and professional experience.  In doing so, the Board will also consider candidates with appropriate non-business backgrounds.


Other than the foregoing, there are no stated minimum criteria for director nominees, although the Board may also consider such other factors as it may deem are in our best interests as well as our stockholders. In addition, the Board identifies nominees by first evaluating the current members of the Board willing to continue in service. Current members of the Board with skills and experience that are relevant to our business and who are willing to continue in service are considered for re-nomination. If any member of the Board does not wish to continue in service or if the Board decides not to re-nominate a member for re-election, the Board then identifies the desired skills and experience of a new nominee in light of the criteria above. Current members of the Board are polled for suggestions as to individuals meeting the criteria described above. The Board may also engage in research to identify qualified individuals. To date, we have not engaged third parties to identify or evaluate or assist in identifying potential nominees, although we reserve the right in the future to retain a third party search firm, if necessary. The Board does not typically consider shareholder nominees because it believes that its current nomination process is sufficient to identify directors who serve our best interests.


Section 16(a) Beneficial Ownership Reporting Compliance


Our officers, directors and shareholders owning greater than ten percent of our shares are not required to comply with Section 16(a) of the Securities Exchange Act of 1934 because we do not have a class of securities registered under Section 12 of the Securities Exchange Act of 1934.


Code of Ethics


We do not currently have a code of ethics that applies to our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer or Controller, or persons performing similar functions. Because we have only limited business operations and four officers and directors, we believe a code of ethics would have limited utility. We intend to adopt such a code of ethics as our business operations expand and we have more directors, officers and employees.


Changes in Nominating Procedures


None.


EXECUTIVE COMPENSATION


Overview


The following is a discussion of our program for compensating our named executive officers and directors.  Currently, we do not have a compensation committee, and as such, our board of directors is responsible for determining the compensation of our named executive officers.


Compensation Program Objectives and Philosophy


The primary goals of our policy of executive compensation are to attract and retain the most talented and dedicated executives possible, to assure that our executives are compensated effectively in a manner consistent with our strategy and competitive practice and to align executive compensation with the achievement of our short- and long-term business objectives.




41




The board of directors considers a variety of factors in determining compensation of executives, including their particular background and circumstances, such as their training and prior relevant work experience, their success in attracting and retaining savvy and technically proficient managers and employees, increasing our revenues, broadening our product line offerings, managing our costs and otherwise helping to lead our Company through a period of rapid growth.


In the near future, we expect that our board of directors will form a compensation committee charged with the oversight of executive compensation plans, policies and programs of our Company and with the full authority to determine and approve the compensation of our chief executive officer and make recommendations with respect to the compensation of our other executive officers.  We expect that our compensation committee will continue to follow the general approach to executive compensation that we have followed to date, rewarding superior individual and company performance with commensurate cash compensation.


Employment Agreements


On September 1, 2011, the Company entered into an amended and restated employment agreement (the “Amended Agreement”) with Mr. Abajian, the Company’s Chief Executive Officer, restating that certain employment agreement by and between parties as of February 28, 2010.


Pursuant to the terms of the Amended Agreement, Mr. Abajian shall serve as the Company’s Chief Executive Officer for a period of five years, commencing retroactively on February 28, 2010, and expiring on February 28, 2015 (the “Term”).  Upon conclusion of the Term, the Amended Agreement shall be automatically renewed for successive one year periods upon the same terms and conditions unless terminated by either of the parties in accordance with the Amended Agreement’s terms.


Mr. Abajian is to receive a base salary in the amount of $175,000 per annum for year one, commencing on February 28, 2010, and shall increase at a rate of three percent (3%) per annum for each consecutive year after 2010, or at such rates as are approved from time to time by the Company’s board of directors.  In addition, Mr. Abajian is to receive an annual bonus equal to one-half percent (0.5%) based upon the Company’s annual net profit before taxes.  Mr. Abajian is also eligible to participate in the Company’s medical insurance plan, life insurance plan or any 401(k), pension or similar plans that are now or may be in the future established, for the general benefit of the Company’s senior executives.  Further, and pursuant to the terms of the Amended Agreement, the Company issued to Mr. Abajian 51 shares of the Company’s Series A Preferred Stock, par value $0.001 per share, subject to certain increases.


Stock-Based Awards under the Equity Incentive Plan


We have adopted an unfunded Non-Qualified Deferred Compensation Plan to compensate our Chief Executive Officer.  Under this Plan, we are not required to reserve funds for compensation, and we are only obligated to pay compensation when and if funds are available.  Any amounts due but unpaid automatically accrue to deferred compensation.  The Plan has the option to be renewed annually at the discretion of our company.  While unfunded and non-recourse, for compliance with GAAP this is disclosed as an accrued expense on the balance sheet.


Retirement Benefits


Currently, we do not provide any Company sponsored retirement benefits to any employee, including the named executive officers.


Perquisites


We have historically, provided only modest perquisites to our named executive officers. We do not view perquisites as a significant element of our compensation structure, but do believe that perquisites can be useful in attracting, motivating and retaining the executive talent for which we compete.  It is expected that our historical practices regarding perquisites will continue and will be subject to periodic review by our by our board of directors.




42




Summary Compensation Table


The table below summarizes all compensation awarded to, earned by, or paid to our executive officers for all services rendered in all capacities to us for the years ended December 31, 2011, 2010 and 2009.


SUMMARY COMPENSATION TABLE


Name and

principal position

Year

Salary

($)

Bonus

($)

Option

Awards

($)

Stock Awards

($)

Non-Equity

Incentive Plan Comp.

($)

Nonqualified

Deferred

Comp.

Earnings ($)

All Other

Comp.

($)

Total

($)


Berge Abajian

Chief Executive Officer, Chief Financial Officer, Chairman

2011

98,558

0

0

0

0

0

15,189 (1)

113,747

 

2010

141,666

0

0

0

0

0

17,873 (1)

159,539

 

2009

13,413

0

0

20,000 (2)

0

0

17,856 (1)

51,269

Arpi Abajian

2011

0

0

0

0

0

0

0

0

Secretary

2010

0

0

0

0

0

0

0

0

 

2009

0

0

0

0

0

0

0

0


(1)

Other compensation was made up of Mr. Abajian’s car expense and health insurance expenses.


(2)

The amounts shown in this column reflect the expense recognized for financial statement reporting purposes for the fiscal year ended December 31, 2011, 2010 and 2009, in accordance with FAS 123(R).  On February 11, 2009, Mr. Abajian was issued 10,942 shares of common stock as compensation in advance for serving on Diamond Information Institute’s Board of Directors for the 2009 fiscal year.  None of the shares owned by Mr. Abajian have any registration rights attached to them.


Incentive Stock and Award Plan


On May 9, 2011, the Company’s Board of Directors approved, authorized and adopted the 2011 Incentive Stock and Award Plan (the “Plan”).  Subject to adjustment for mergers, reorganizations, consolidation, recapitalization, stock dividend or other change in corporate structure, a total of 5,000,000 shares of common stock, par value $0.001 per share is subject to the Plan.  Under the Plan, the Company may grant non-qualified options (the “Non-qualified Options”), incentive options (the “Incentive Options” and together with the Non-qualified Options, the “Options”) and restricted stock (the “Restricted Stock”) to directors, officers, consultants, attorneys, advisors and employees.  Subject to a tax exception, if any Option or Restricted Stock expires or is canceled prior to its exercise or vesting in full, the shares of common stock issuable under the Option or Restricted Stock may be issuable pursuant to future Options or Restricted Stock under the Plan.


The Plan shall be administered by a committee consisting of one (1) director (the “Committee”).  In the absence of such a Committee, the Company’s Board of Directors shall administer the Plan.


Each Option shall contain the following material terms:


(i)

the exercise price, which shall be determined by the Committee at the time of grant, shall not be less than 100% of the Fair Market Value (defined as the closing price on the final trading day immediately prior to the grant on the principal exchange or quotation system on which the Common Stock is listed or quoted, as applicable) of the Common Stock of the Company on the date the Option is granted, provided that if the recipient of the Option owns more than ten percent (10%) of the total combined voting power of the Company, the exercise price shall be at least 110% of the Fair Market Value;


(ii)

the term of each Option shall be fixed by the Committee, provided that such Option shall not be exercisable more than ten (10) years after the date such Option is granted, and provided further that with respect to an Incentive Option, if the recipient owns more than ten percent (10%) of the total combined voting power of the Company, the Incentive Stock Option shall not be exercisable more than five (5) years after the date such Incentive Option is granted;




43




(iii)

subject to acceleration in the event of a Change of Control of the Company (as further described in the Plan), the period during which the Options vest shall be designated by the Committee or, in the absence of any Option vesting periods designated by the Committee at the time of grant, shall vest and become exercisable in equal amounts on each fiscal year of the Company through the five (5) year anniversary of the date on which the Option was granted;


(iv)

no Option is transferable and each is exercisable only by the recipient of such Option except in the event of the death of the recipient; and


(v)

with respect to Incentive Stock Options, the aggregate Fair Market Value of Common Stock that may be issued for the first time during any calendar year shall not exceed $100,000.


Each award of Restricted Stock is subject to the following material terms:


(i)

no rights to an award of Restricted Stock is granted to the intended recipient of Restricted Stock unless and until the grant of Restricted Stock is accepted within the period prescribed by the Committee;


(ii)

Restricted Stock shall not be delivered until they are free of any restrictions specified by the Committee at the time of grant;


(iii)

shares of Restricted Stock are forfeitable until the terms of the Restricted Stock grant have been satisfied; and


(iv)

the Restricted Stock are not transferable until the date on which the Committee has specified such restrictions have lapsed.


Stock Option Grants


We have not granted any stock options to the executive officers or directors since the adoption of the Plan.


Director Compensation


None.


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


The following table sets forth, as of January 31, 2012, certain information as to shares of our common stock owned by (i) each person known by us to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors and executive officers and (iii) all of our executive officers and directors as a group:


Name

 

Title

 

Number of Shares Owned (1)

 

Percent (2)

 

 

 

 

 

 

 

Berge Abajian

 

Chief Executive Officer, Chief Financial Officer, Chairman

 

7,441,300

 

20.20%

 

 

 

 

 

 

 

Arpi Abajian

 

Secretary

 

5,471

 

*%

 

 

 

 

 

 

 

All Directors and Officers as a Group (2 persons)

 

7,446,771

 

20.21%


* denotes less than 1%




44





(1)

Beneficial ownership is determined in accordance with the rules of the U.S. Securities and Exchange Commission and generally includes voting or investment power with respect to securities.  Shares of common stock subject to options, warrants, or convertible debt currently exercisable or convertible, or exercisable or convertible within 60 days of January 27, 2012, are deemed outstanding for computing the percentage of the person holding such option or warrant.  


(2)

Percentages are based on a total of 36,843,849 shares of common stock outstanding on January 27, 2012, and shares issuable upon the exercise of options, warrants exercisable, and debt convertible on or within 60 days of January 27, 2012, as described above.  The inclusion in the aforementioned table of those shares, however, does not constitute an admission that the named shareholder is a direct or indirect beneficial owner of those shares.  Unless otherwise indicated, to our knowledge based upon information produced by the persons and entities named in the table, each person or entity named in the table has sole voting power and investment power, or shares voting and/or investment power with his or her spouse, with respect to all shares of capital stock listed as owned by that person or entity.


TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS


There have been no material transactions since the beginning of our last fiscal year, between us and any officer, director or any stockholder owning greater than 5% of our outstanding shares, nor any of their immediate family members, except as described below.


Director Independence


At this time, the Company does not have any independent directors.


ADDITIONAL INFORMATION


We have filed a registration statement on Form S-1 under the Securities Act, relating to the shares of common stock being offered by this prospectus, and reference is made to such registration statement. This prospectus constitutes the prospectus of Bergio International Inc., filed as part of the registration statement, and it does not contain all information in the registration statement, as certain portions have been omitted in accordance with the rules and regulations of the U.S. Securities and Exchange Commission.


You may read and copy any reports, statements or other information we file at the SEC’s public reference facility maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You can request copies of these documents, upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference room. Our SEC filings are also available to the public through the SEC’s Internet website at http://www.sec.gov.


DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION

FOR SECURITIES ACT LIABILITIES


Under our bylaws, we may indemnify an officer or director who is made a party to any proceeding, including a lawsuit, because of his position, if he acted in good faith and in a manner he reasonably believed to be in our best interest.  We may advance expenses incurred in defending a proceeding.  To the extent that the officer or director is successful on the merits in a proceeding as to which he is to be indemnified, we must indemnify him against all expenses incurred, including attorney’s fees.  With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order.  The indemnification is intended to be to the fullest extent permitted by the laws of the State of Delaware


Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the registrant pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is therefore unenforceable.




45




LEGAL MATTERS


The validity of the shares of our common stock offered by the Selling Stock Holders has been passed upon by the law firm of Lucosky Brookman LLP.


EXPERTS


The balance sheets of the Company as of December 31, 2010 and December 31, 2009, and the related statements of operations, statements of changes in shareholders’ deficit and the statements of cash flows for the years ended December 31, 2010 and 2009, included in this registration statement on Form S-1 have been so included in reliance on the report of Silberstein Ungar, PLLC, an independent registered public accounting firm, given upon their authority as experts in accounting and auditing.




















46





BERGIO INTERNATIONAL, INC.


INDEX TO FINANCIAL STATEMENTS


YEARS ENDED DECEMBER 31, 2010 AND 2009


  

PAGES

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

F-2

  

  

BALANCE SHEETS

F-3

  

  

STATEMENTS OF OPERATIONS

F-5

  

  

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

F-6

  

  

STATEMENTS OF CASH FLOWS

F-7

  

  

NOTES TO FINANCIAL STATEMENTS

F-9




















47




Silberstein Ungar, PLLC CPAs and Business Advisors


Phone (248) 203-0080

Fax (248) 281-0940

30600 Telegraph Road, Suite 2175

Bingham Farms, MI 48025-4586

www.sucpas.com


Report of Independent Registered Public Accounting Firm


To the Board of Directors of

Bergio International, Inc.

Fairfield, New Jersey


We have audited the accompanying balance sheets of Bergio International, Inc. (the “Company”) as of December 31, 2010 and 2009, and the related statements of operations, changes in stockholders’ equity (deficit), and cash flows for the years then ended . These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.


We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.


In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bergio International, Inc. as of December 31, 2010 and 2009 and the results of its operations and its cash flows for the years then ended  in conformity with accounting principles generally accepted in the United States of America.



/s/ Silberstein Ungar, PLLC


Bingham Farms, Michigan

March 28, 2011





F-1





BERGIO INTERNATIONAL, INC.

 

BALANCE SHEETS

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

December 31,

 

  

 

2010

 

 

2009

 

  

 

 

 

 

 

 

  

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash

 

$

4,262

 

 

$

--

 

Accounts Receivable - Net

 

 

474,212

 

 

 

341,695

 

Inventory

 

 

1,602,680

 

 

 

1,378,271

 

Prepaid Expenses

 

 

9,353

 

 

 

2,937

 

Other Receivable

 

 

175,000

 

 

 

--

 

  

 

 

 

 

 

 

 

 

Total Current Assets

 

 

2,265,507

 

 

 

1,722,903

 

  

 

 

 

 

 

 

 

 

Property and Equipment - Net

 

 

118,135

 

 

 

160,307

 

  

 

 

 

 

 

 

 

 

Other Assets:

 

 

 

 

 

 

 

 

Investment in Unconsolidated Affiliate

 

 

5,000

 

 

 

5,000

 

  

 

 

 

 

 

 

 

 

Total Assets

 

$

2,388,642

 

 

$

1,888,210

 














The accompanying notes are an integral part of these financial statements.




F-2





BERGIO INTERNATIONAL, INC.

 

BALANCE SHEETS

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

December 31,

 

  

 

2010

 

 

2009

 

  

 

 

 

 

 

 

  

 

 

 

 

 

 

Liabilities and Stockholders' Equity (Deficit):

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Cash Overdraft

 

$

--

 

 

$

13,717

 

Accounts Payable and Accrued Expenses

 

 

417,144

 

 

 

587,443

 

Bank Lines of Credit - Net

 

 

200,866

 

 

 

883,583

 

Convertible Debt, Net

 

 

112,069

 

 

 

15,925

 

Current Maturities of Notes Payable

 

 

110,060

 

 

 

69,335

 

Current Maturities of Capital Leases

 

 

14,656

 

 

 

22,375

 

Advances from Stockholder - Net

 

 

317,601

 

 

 

463,342

 

Derivative Liability

 

 

67,988

 

 

 

9,858

 

Sales Returns and Allowances Reserve

 

 

--

 

 

 

34,808

 

  

 

 

 

 

 

 

 

 

Total Current Liabilities

 

 

1,240,384

 

 

 

2,100,386

 

  

 

 

 

 

 

 

 

 

Long-Term Liabilities

 

 

 

 

 

 

 

 

Notes Payable

 

 

51,626

 

 

 

150,498

 

Bank Lines of Credit

 

 

--

 

 

 

38,380

 

Capital Leases

 

 

--

 

 

 

16,717

 

  

 

 

 

 

 

 

 

 

Total Long-Term Liabilities

 

 

51,626

 

 

 

205,595

 

  

 

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

--

 

 

 

--

 

  

 

 

 

 

 

 

 

 

Total Liabilities

 

 

1,292,010

 

 

 

2,305,981

 

  

 

 

 

 

 

 

 

 

Stockholders' Equity (Deficit)

 

 

 

 

 

 

 

 

Common Stock - $.001 Par Value, 200,000,000 Shares Authorized, 11,159,574 and 4,308,625 Shares Issued and Outstanding as of December 31, 2010 and 2009, respectively

 

 

11,159

 

 

 

4,308

 

Additional Paid-In Capital

 

 

4,021,593

 

 

 

1,675,042

 

Accumulated Deficit

 

 

(2,936,120

)

 

 

(2,097,121

)

  

 

 

 

 

 

 

 

 

Total Stockholders' Equity (Deficit)

 

 

1,096,632

 

 

 

(417,771

)

  

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders'

 

 

 

 

 

 

 

 

Equity (Deficit)

 

$

2,388,642

 

 

$

1,888,210

 




The accompanying notes are an integral part of these financial statements.




F-3





BERGIO INTERNATIONAL, INC.

 

STATEMENTS OF OPERATIONS

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

Years Ended December 31,

 

  

 

2010

 

 

2009

 

  

 

 

 

 

 

 

Sales - Net

 

$

1,445,570

 

 

$

975,354

 

Cost of Sales

 

 

812,831

 

 

 

690,708

 

Gross Profit

 

 

632,739

 

 

 

284,646

 

  

 

 

 

 

 

 

 

 

Selling Expenses

 

 

317,463

 

 

 

212,709

 

  

 

 

 

 

 

 

 

 

General and Administrative Expenses

 

 

 

 

 

 

 

 

Share-Based Compensation

 

 

--

 

 

 

20,000

 

Share-Based Services

 

 

242,900

 

 

 

48,000

 

Other

 

 

394,006

 

 

 

508,708

 

  

 

 

 

 

 

 

 

 

Total General and Administrative Expenses

 

 

636,906

 

 

 

576,708

 

  

 

 

 

 

 

 

 

 

Total Operating Expenses

 

 

954,369

 

 

 

789,417

 

  

 

 

 

 

 

 

 

 

Loss from Operations

 

 

(321,630

)

 

 

(504,771

)

  

 

 

 

 

 

 

 

 

Other Income [Expense]

 

 

 

 

 

 

 

 

Interest Expense

 

 

(68,240

)

 

 

(93,350

)

Gain on Sale of Subsidiary

 

 

225,000

 

 

 

--

 

Financing Costs - Share-Based

 

 

(595,160

)

 

 

--

 

Amortization of Debt Discount

 

 

(120,230

)

 

 

(1,815

)

Change in Fair Value of Derivative

 

 

60,206

 

 

 

1,032

 

Loss on Disposal of Equipment

 

 

(18,945

)

 

 

--

 

Other Income

 

 

--

 

 

 

1,179

 

  

 

 

 

 

 

 

 

 

Total Other Income [Expense]

 

 

(517,369

)

 

 

(92,954

)

  

 

 

 

 

 

 

 

 

Net Loss

 

 

(838,999

)

 

 

(597,725

)

  

 

 

 

 

 

 

 

 

Net Loss Per Common Share - Basic and Diluted

 

$

(0.10

)

 

$

(0.20

)

  

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding - Basic and Diluted

 

 

8,718,321

 

 

 

2,926,124

 





The accompanying notes are an integral part of these financial statements.




F-4





BERGIO INTERNATIONAL, INC.

 

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

  

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Total

 

  

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders’

 

  

 

Shares

 

 

Par Value

 

 

Capital

 

 

Deficit

 

 

Equity(Deficit)

 

Balance - January 1, 2009

 

 

2,547,972

 

 

$

2,548

 

 

$

1,608,802

 

 

$

(1,499,396

)

 

$

111,954

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recapitalization - reverse acquisition into public shell

 

 

5,033,450

 

 

 

5,033

 

 

 

(5,033

)

 

 

--

 

 

 

--

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Spin-out of mineral operations and cancellation of common stock

 

 

(3,310,000

)

 

 

(3,310

)

 

 

3,310

 

 

 

--

 

 

 

--

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for  professional services

 

 

26,261

 

 

 

26

 

 

 

47,974

 

 

 

--

 

 

 

48,000

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for compensation

 

 

10,942

 

 

 

11

 

 

 

19,989

 

 

 

--

 

 

 

20,000

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

 

--

 

 

 

--

 

 

 

--

 

 

 

(597,725

)

 

 

(597,725

)

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - December 31, 2009

 

 

4,308,625

 

 

 

4,308

 

 

 

1,675,042

 

 

 

(2,097,121

)

 

 

(417,771

)

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for professional services

 

 

135,499

 

 

 

135

 

 

 

97,925

 

 

 

--

 

 

 

98,060

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for related party debt and accrued interest

 

 

157,142

 

 

 

158

 

 

 

401,602

 

 

 

--

 

 

 

401,760

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for cash ($30,000) and financing costs ($60,000)

 

 

125,000

 

 

 

125

 

 

 

89,875

 

 

 

--

 

 

 

90,000

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for deferred offering costs

 

 

92,593

 

 

 

93

 

 

 

499,907

 

 

 

--

 

 

 

500,000

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for payment of debt

 

 

1,190,249

 

 

 

1,190

 

 

 

698,809

 

 

 

--

 

 

 

699,999

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for payment of accounts payable

 

 

714,473

 

 

 

714

 

 

 

246,286

 

 

 

--

 

 

 

247,000

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for share liability

 

 

375,000

 

 

 

375

 

 

 

179,625

 

 

 

--

 

 

 

180,000

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for accrued compensation

 

 

3,232,020

 

 

 

3,232

 

 

 

67,601

 

 

 

--

 

 

 

70,833

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for debt conversion

 

 

828,973

 

 

 

829

 

 

 

64,921

 

 

 

--

 

 

 

65,750

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

--

 

 

 

--

 

 

 

--

 

 

 

(838,999

)

 

 

(838,999

)

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - December 31, 2010

 

 

11,159,574

 

 

$

11,159

 

 

$

4,021,593

 

 

$

(2,936,120

)

 

$

1,096,632

 

 

The accompanying notes are an integral part of these financial statements.



F-5





BERGIO INTERNATIONAL, INC.

 

STATEMENTS OF CASH FLOWS

 

  

 

 

 

 

 

 

  

 

Years Ended December 31,

 

  

 

2010

 

 

2009

 

Operating Activities

 

 

 

 

 

 

Net Loss

 

$

(838,999

)

 

$

(597,725

)

Adjustments to Reconcile Net Loss

 

 

 

 

 

 

 

 

to Net Cash Used in Operating Activities:

 

 

 

 

 

 

 

 

Sales Returns and Allowance Reserve

 

 

(34,808

)

 

 

(97,545

)

Depreciation and Amortization

 

 

54,282

 

 

 

63,380

 

Share-Based Compensation

 

 

--

 

 

 

20,000

 

Share-Based Services

 

 

242,900

 

 

 

48,000

 

Share-Based Financing Cost

 

 

595,160

 

 

 

--

 

Gain on Sale of Subsidiary

 

 

(225,000

)

 

 

--

 

Loss on Disposal of Equipment

 

 

18,945

 

 

 

--

 

Allowance for Doubtful Accounts

 

 

(50,620

)

 

 

6,000

 

Amortization of Debt Discount

 

 

120,230

 

 

 

1,815

 

Change in Fair Value of Derivative

 

 

(60,206

)

 

 

(1,032

)

  

 

 

 

 

 

 

 

 

Changes in Assets and Liabilities

 

 

 

 

 

 

 

 

[Increase] Decrease in:

 

 

 

 

 

 

 

 

Accounts Receivable

 

 

(81,897

)

 

 

365,499

 

Inventory

 

 

(245,909

)

 

 

(51,282

)

Prepaid Expenses

 

 

(6,416

)

 

 

36,201

 

Increase [Decrease] in:

 

 

 

 

 

 

 

 

Accounts Payable and Accrued Expenses

 

 

147,535

 

 

 

140,551

 

Total Adjustments

 

 

474,196

 

 

 

531,587

 

  

 

 

 

 

 

 

 

 

Net Cash Used in Operating Activities

 

 

(364,803

)

 

 

(66,138

)

  

 

 

 

 

 

 

 

 

Investing Activities:

 

 

 

 

 

 

 

 

Capital Expenditures

 

 

(28,910

)

 

 

(62,704

)

Proceeds from Sale of Subsidiary

 

 

50,000

 

 

 

--

 

Payments for Disposal

 

 

(2,145

)

 

 

--

 

  

 

 

 

 

 

 

 

 

Net Cash Provided by (Used for) Investing Activities

 

 

18,945

 

 

 

(62,704

)

  

 

 

 

 

 

 

 

 

Financing Activities:

 

 

 

 

 

 

 

 

Increase [Decrease] in Cash Overdraft

 

 

(13,717

)

 

 

6,372

 

Advances under Bank Lines of Credit - Net

 

 

(21,098

)

 

 

11,514

 

Proceeds from Notes Payable

 

 

--

 

 

 

100,000

 

Proceeds from Convertible Debt

 

 

160,000

 

 

 

25,000

 

Repayments of Notes Payable

 

 

(36,647

)

 

 

(59,452

)

Advances  from Stockholder - Net

 

 

256,018

 

 

 

68,810

 

Repayments of Capital Leases

 

 

(24,436

)

 

 

(23,402

)

Proceeds from Sale of Stock

 

 

30,000

 

 

 

--

 

  

 

 

 

 

 

 

 

 

Net Cash Provided by Financing Activities

 

 

350,120

 

 

 

128,842

 

  

 

 

 

 

 

 

 

 

Net Change in Cash

 

 

4,262

 

 

 

--

 

Cash - Beginning of Years

 

 

--

 

 

 

--

 

Cash - End of Years

 

$

4,262

 

 

$

--

 

 

The accompanying notes are an integral part of these financial statements.



F-6





BERGIO INTERNATIONAL, INC.

 

STATEMENTS OF CASH FLOWS

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Years Ended December 31,

 

  

 

2010

 

 

2009

 

  

 

 

 

 

 

 

Supplemental Disclosures of Cash Flow Information:

 

 

 

 

 

 

Interest

 

$

67,000

 

 

$

78,000

 

Income Taxes

 

$

--

 

 

$

--

 

  

 

 

 

 

 

 

 

 

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

 

 

 

 

 

 

 

 

Debt Discount from Fair Value of Imbedded Derivative

 

$

118,336

 

 

$

--

 

Issuance of Common Stock for Deferred Offering Costs

 

$

535,160

 

 

$

--

 

Issuance of Common Stock for Bank Line of Credit

 

$

699,999

 

 

$

--

 

Issuance of Common Stock for Stockholder Advances

 

$

401,759

 

 

$

--

 

Notes Payable Settled with Inventory

 

$

21,500

 

 

$

--

 

Issuance of Common Stock for Vendor Payables

 

$

247,000

 

 

$

50,000

 

Issuance of Common Stock for Accrued Payroll - Related Party

 

$

70,833

 

 

$

--

 

Issuance of Common Stock for Share Liability

 

$

180,000

 

 

$

--

 

Issuance of Common Stock for Convertible Debt

 

$

65,750

 

 

$

--

 







 

















The accompanying notes are an integral part of these financial statements.





F-7





BERGIO INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS



[1] Nature of Operations and Basis of Presentation


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 (defined below), the corporate name was changed to Bergio International, Inc. and the Company implemented a 12 for 1 forward stock split of its common shares. Effective December 27, 2010, the Company implemented a 1-for-12 reverse stock split.  All share and per share data has been adjusted to reflect such stock splits.  The Company is engaged in the product design, manufacturing, distribution of fine jewelry primarily in the United States and is headquartered from its corporate office in Fairfield, New Jersey. Based on the nature of operations, the Company's sales cycle experiences significant seasonal volatility with the first two quarters of the year representing 15% - 25% of annual sales and the remaining two quarters representing the remaining portion of annual sales.


On October 19, 2009, the Company entered into a Share Exchange Agreement (the “Exchange Agreement”), with Diamond Information Institute, Inc. (“Diamond”), a New Jersey corporation. Pursuant to the Exchange Agreement the Company acquired all the issued and outstanding common stock of Diamond, and Diamond became a wholly-owned subsidiary of the Company. In addition, the Company acquired all Diamond’s assets and liabilities effective as of the date of the Exchange Agreement. Per the Exchange Agreement, the Company issued 2,585,175 shares of the Company’s common stock to the shareholders of Diamond (approximately .21884 shares of Company common stock for each share of Diamond common stock), representing approximately 60% of the Company’s aggregate issued and outstanding common stock following the closing of the Exchange Agreement and the Stock Agreement (defined below). The acquisition of Diamond was treated as a recapitalization, and the business of Diamond became the business of the Company. At the time of the recapitalization, the Company was in the exploration development stage and was not engaged in any active business. The accounting rules for recapitalizations require that beginning October 19, 2009, the date of the recapitalization, the balance sheet reflects the consolidated assets and liabilities of Bergio International, Inc. and the equity accounts were recapitalized to reflect the newly capitalized company. The results of operations reflect the operations of Diamond, which became the operations of the Company, for all periods presented.  In February 2010, the Company sold all its shares in Diamond to an unrelated third party for $225,000 and recognized a gain from the sale of $225,000.


In conjunction with the Exchange Agreement, the Company, on October 20, 2009, entered into a Stock Purchase Agreement (the “Stock Agreement”) with certain stockholders of the Company (the “former stockholders”). Pursuant to the Stock Agreement, the Company spun out its 100% interest in Alba Mineral Exploration, Inc., an Alberta, Canada Corporation (“Alba Canada”) to the former stockholders for nominal consideration and the cancellation of all of the shares of common stock of the Company then owned by the former stockholders.  As a result, a total of 3,310,000 shares were cancelled.

 






F-8





BERGIO INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS



Correction of an Error - As of September 30, 2010, the Company corrected certain errors in prior period financial statements (corrected amounts - which reflects the 2010 1-for-12 reserve stock split) related to shares outstanding as of December 31, 2008 (2,547,972), and weighted average shares outstanding and net loss per share for the year ended December 31, 2008 (2,714,868 and $(0.41)), the three months ended March 31, 2009 (2,570,003 and $(0.08)), and the three and six months ended June 30, 2009 (2,585,175 and $(0.05)) and (2,577,630 and $(0.12)). The prior period amounts had been retroactively presented to reflect our recapitalization as a result of our share exchange agreement with Diamond Information Institute, Inc.  The correction had no effect on the previously reported Net Loss in the year ended December 31, 2008, the three months ended March 31, 2009, or the three and six months ended June 30, 2009.


The Company has evaluated the impact of the corrections to outstanding shares as disclosed in the Consolidated Statement of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2009 and 2008 and the affect upon the weighted average common shares outstanding and net loss per share for the year ended December 31, 2008, the three months ended March 31, 2009 and the three and six months ended June 30, 2009 and has determined that there is no change to net loss and no significant change to net loss per share. The Company has evaluated the corrections in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification (“ASC”) Topic No. 250-10-S99 “Accounting Changes and Error Corrections” .  The adjustments, when compared to the operating results or on any trend of losses for all previous financial statements to which this error relates, are not considered by management to be material.  In addition, the Company believes that investors would not consider the amount of the adjustments to be material, and therefore, would not have significantly impacted their investment decisions about the Company.
















F-9





BERGIO INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS



[2] Summary of Significant Accounting Policies


Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.


Revenue Recognition - Revenue is recognized upon the shipment of products to customers with the price to the buyer being fixed and determinable and collectability reasonably assured


Cash and Cash Equivalents - Cash equivalents are comprised of certain highly liquid instruments with a maturity of three months or less when purchased. The Company did not have any cash equivalents on hand at December 31, 2010 and 2009.


Accounts Receivable - Accounts receivable are generated from sales of fine jewelry to retail outlets throughout the United States. At December 31, 2010 and 2009, accounts receivable were substantially comprised of balances due from retailers.


An allowance for doubtful accounts is provided against accounts receivable for amounts management believes may be uncollectible. The Company determines the adequacy of this allowance by regularly reviewing the composition of its accounts receivable aging and evaluating individual customer receivables, considering the customer’s financial condition, credit history and current economic circumstance. As of December 31, 2010, and 2009 an allowance for doubtful accounts of $35,787 and $86,407, respectively has been provided.


Inventories - Inventory consists primarily of finished goods and is valued at the lower of cost or market. Cost is determined using the weighted average method and average cost is recomputed after each inventory purchase or sale.












F-10





BERGIO INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS



Concentrations of Credit Risk - Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivables. The Company places its cash with high credit quality financial institutions. The Company, from time to time, maintains balances in financial institutions beyond the insured amounts. At December 31, 2010 and 2009, the Company had no cash balances beyond the federally insured amounts.


Concentrations of credit risk with respect to accounts receivable is limited due to the wide variety of customers and markets into which the Company's services are provided, as well as their dispersion across many different geographical areas. As is characteristic of the Company's business and of the jewelry industry generally, the Company extends its customers seasonal credit terms. The carrying amount of receivables approximates fair value. The Company routinely assesses the financial strength of its customers and believes its credit risk exposure on accounts receivable is limited. Based on management’s review of accounts receivable, an allowance for doubtful accounts has been recorded for the years ending December 31, 2010 and 2009. The Company does not require collateral to support these financial instruments.


Property and Equipment and Depreciation - Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over estimated useful lives ranging from five (5) to seven (7) years.


Expenditures for repairs and maintenance are charged to expense as incurred whereas expenditures for renewals and improvements that extend the useful life of the assets are capitalized. Upon the sale or retirement, the cost and the related accumulated depreciation are eliminated from the respective accounts and any resulting gain or loss is reported within the Statements of Operations in the period of disposal.


Long-Lived Assets - In accordance with generally accepted accounting principles, long-lived tangible assets subject to depreciation or amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets exceed their fair value as determined by an estimate of undiscounted future cash flows.


Losses on assets held for disposal are recognized when management has approved and committed to a plan to dispose of the assets, and the assets are available for disposal.


Fair Value of Financial Instruments - The Company follows guidance issued by the FASB on “Fair Value Measurements” for assets and liabilities measured at fair value on a recurring basis.  This guidance establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements.


The FASB defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Additionally, the FASB requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.


  







F-11





BERGIO INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS



These inputs are prioritized below:


 

Level 1:

Observable inputs such as quoted market prices in active markets for identical assets or liabilities

 

 

 

 

Level 2:

Observable market-based inputs or unobservable inputs that are corroborated by market data

 

 

 

 

Level 3:

Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions


The Company discloses the estimated fair value for all financial instruments for which it is practicable to estimate fair value.  As of December 31, 2010, the fair value of short-term financial instruments including cash overdraft, accounts receivable, accounts payable and accrued expenses, approximates book value due to their short-term maturity.  The fair value of property and equipment is estimated to approximate its net book value.  The fair value of debt obligations, other than convertible debt obligations, approximates their face values due to their short-term maturities and/or the variable rates of interest associated with the underlying obligations.


The fair value of the Company’s convertible debt is measured on a recurring basis (see Note 7).


The following table presents fair value measurements for major categories of the Company’s financial liabilities measured at fair value on a recurring basis:

 

  

  

December 31, 2010

  

December 31, 2009

  

  

Fair Value Measurements Using

  

Fair Value Measurements Using

  

  

Level 1

  

  

Level 2

  

  

Level 3

  

  

Total

  

  

Level 1

  

  

Level 2

  

  

Level 3

  

  

Total

  

Convertible Debt

  

$

--

  

  

$

112,069

  

  

$

--

  

  

$

112,069

  

  

$

--

  

  

$

15,925

  

  

$

--

  

  

$

15,925

  

 

In addition, the FASB issued, “The Fair Value Option for Financial Assets and Financial Liabilities.  This guidance expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value.  The Company did not elect the fair value option for any of its qualifying financial instruments.


Investments in Unconsolidated Affiliates - Investments in unconsolidated affiliates, in which the Company owns less than 20% or otherwise does not exercise significant influence, are stated at cost.  At December 31, 2010 and 2009, the Company had an investment in which the Company owned less than 1% interest in an unconsolidated affiliate and therefore the investment is carried at cost.









F-12





BERGIO INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS



Equity-Based Compensation - The Company accounts for equity based compensation transactions with employees under the provisions of ASC Topic No. 718, “Compensation: Stock Compensation” (“Topic No. 718”). Topic No. 718 requires the recognition of the fair value of equity-based compensation in net income. The fair value of common stock issued for compensation is measured at the market price on the date of grant.  The fair value of the Company’s equity instruments, other than common stocks, is estimated using a Black-Scholes option valuation model. This model requires the input of highly subjective assumptions and elections including expected stock price volatility and the estimated life of each award. In addition, the calculation of equity-based compensation costs requires that the Company estimate the number of awards that will be forfeited during the vesting period. The fair value of equity-based awards granted to employees is amortized over the vesting period of the award and the Company elected to use the straight-line method for awards granted after the adoption of Topic No. 718.


The Company accounts for equity based transactions with non-employees under the provisions of ASC Topic No. 505-50, “Equity-Based Payments to Non-Employees” (“Topic No. 505-50”). Topic No. 505-50 establishes that equity-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, which ever is more reliably measurable. The fair value of common stock issued for payments to non-employees is measured at the market price on the date of grant. The fair value of equity instruments, other than common stock, is estimated using the Black-Scholes option valuation model. In general, the Company recognizes an asset or expense in the same manner as if it was to receive cash for the goods or services instead of paying with or using the equity instrument.


Advertising and Promotional Costs - Advertising and promotional costs are expensed as incurred and are recorded as part of Selling Expenses in the Statement of Operations.  The total cost for the years ended December 31, 2010 and 2009 was approximately $168,000 and $44,000, respectively.


During the year, the Company prepays costs associated with trade shows which are recorded as Prepaid Expenses in the Balance Sheet and are charged to the Statement of Operations upon the trade shows being conducted. For the years ended December 31, 2010 and 2009, approximately $31,000 and $61,000, respectively, of trade show expenses have been recorded.









F-13





BERGIO INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS



Income Taxes - The Company accounts for income taxes under the provisions of FASB ASC Topic No. 740 “Income Taxes” which requires the use of the liability method of accounting for income taxes. The liability method measures deferred income taxes by applying enacted statutory rates in effect at the balance sheet date to the differences between the tax basis of assets and liabilities and their reported amounts on the financial statements. The resulting deferred tax assets or liabilities are adjusted to reflect changes in tax laws as they occur. A valuation allowance is provided when it is more likely than not that a deferred tax asset will not be realized. At December 31, 2010 and 2009, the entire deferred tax asset has been fully reserved because management has determined that it is not more likely than not that the net operating loss carry forwards will be realized in the future.


The Company does not believe it has any uncertain tax position deemed material as of December 31, 2010 and 2009.  With few exceptions, the Company believes it is no longer subject to U.S. federal and state tax examinations by tax authorities for tax periods prior to 2007.  The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense.  As of December 31, 2010 and 2009, the Company had no accrued interest or penalties. The Company currently has no federal or state tax examinations in progress nor has it had any federal or state examinations since inception.


Basic and Diluted Loss Per Share - Basic earnings 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.  Equity instruments that may dilute earnings per share in the future are listed in Note 7.


Subsequent Events - The Company evaluated subsequent events, which are events or transactions that occurred after December 31, 2010 through the issuance of the accompanying financial statements.


[3] New Authoritative Accounting Guidance


In January 2010, the Financial Accounting Standards Board issued Accounting Standards Update 2010-06 (“ASU 2010-06”), “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements.” ASU 2010-06 requires reporting entities to make new disclosures about recurring or nonrecurring fair value measurements including significant transfers into and out of Level 1 and Level 2 fair value measurements and information on purchases, sales, issuances, and settlements on gross basis in the reconciliation of Level 3 fair value measurements.  ASU 2010-06 is effective for annual reporting periods beginning after December 15, 2009, except for Level 3 reconciliation disclosures which are effective for annual periods beginning after December 15, 2010.  The adoption of ASU 2010-06 in the first quarter of 2010 did not have a material impact on the Company’s financial statement disclosures.


Management does not believe that any other recently issued but not yet effective accounting pronouncements, if adopted, would have an effect on the accompanying financial statements.








F-14





BERGIO INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS



[4] Property and Equipment


Property and equipment and accumulated depreciation and amortization are as follows:


  

 

December 31,

 

 

December 31,

 

  

 

2010

 

 

2009

 

  

 

 

 

 

 

 

Selling Equipment

 

$

8,354

 

 

$

64,353

 

Office and Equipment

 

 

325,530

 

 

 

296,621

 

Leasehold Improvements

 

 

7,781

 

 

 

7,781

 

Furniture and Fixtures

 

 

18,487

 

 

 

18,487

 

  

 

 

 

 

 

 

 

 

Total - At Cost

 

 

360,152

 

 

 

387,242

 

Less: Accumulated Depreciation and Amortization

 

 

242,017

 

 

 

226,935

 

  

 

 

 

 

 

 

 

 

      Property and Equipment - Net

 

$

118,135

 

 

$

160,307

 


Depreciation and amortization expense for the years ended December 31, 2010 and 2009 was approximately $54,000 and $63,000, respectively.


[5] Notes Payable


  

 

December 31,

 

 

December 31,

 

  

 

2010

 

 

2009

 

  

 

 

 

 

 

 

  

 

 

 

 

 

 

Notes payable due in equal monthly installments, monthly payments of $2,500 and one payment on June 30, 2011 equal to the outstanding balance; interest rate of 7.60%.  The notes are collateralized by the assets of the Company. (1)

 

$

91,517

 

 

$

115,259

 

  

 

 

 

 

 

 

 

 

Notes payable due in equal monthly installments, over 60 months,

   maturing through April 2014 at interest rates of 10.52%.  The      notes are collateralized by specific assets of the Company.

 

 

70,169

 

 

 

83,074

 

 

Notes payable due on demand at interest rate of 10%.

 

 

--

 

 

 

21,500

 

  

 

 

 

 

 

 

 

 

Total

 

 

161,686

 

 

 

219,833

 

Less: Current Maturities Included in Current Liabilities

 

 

110,060

 

 

 

69,335

 

  

 

 

 

 

 

 

 

 

    Total Long-Term Portion of Debt

 

$

51,626

 

 

$

150,498

 








F-15





BERGIO INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS



Maturities of long-term debt are as follows:


Years ended

 

 

 

December 31,

 

 

 

2011

 

$

110,060

 

2012

 

 

20,591

 

2013

 

 

22,865

 

2014

 

 

8,170

 

  

 

 

 

 

Total

 

$

161,686

 


(1) Terms are per the Post Judgment Payment and Forbearance Agreement dated October 9, 2009 between the company and the bank.  In the event of a default, the bank may immediately enforce its rights of collection for the full amount under the judgement, less credits for payment made through the date of default.


[6] Bank Lines of Credit


A summary of the Company’s credit facilities is as follows:


  

 

December 31,

 

 

December 31,

 

  

 

2010

 

 

2009

 

Credit Line of $700,000, minimum payment of interest only is due monthly at the bank's prime rate plus .75%. At December 31, 2009, the interest rate was 4.00%. Collateralized by the assets of the Company.

 

$

--

 

 

$

699,999

 

  

 

 

 

 

 

 

 

 

Credit Line of $55,000 monthly payments of $500 and one payment on June 30, 2011 equal to outstanding balance; interest at the bank's prime rate plus .75%. At December 31, 2010 and 2009, the interest rate was 4.00%. Collateralized by the assets of the Company. (1)

 

 

40,153

 

 

 

44,380

 

  

 

 

 

 

 

 

 

 

Various unsecured Credit Cards of $188,200, minimum payment of principal and interest are due monthly at the credit card's annual interest rate. At December 31, 2010 and 2009, the interest rates ranged from 3.99% to 24.90%.

 

 

160,713

 

 

 

177,584

 

  

 

 

 

 

 

 

 

 

Total

 

 

200,866

 

 

 

921,963

 

  

 

 

 

 

 

 

 

 

Less:  Current maturities included in current liabilities

 

 

200,866

 

 

 

883,583

 

  

 

 

 

 

 

 

 

 

Total Long-Term Portion

 

$

--

 

 

$

38,380

 


The Company's CEO and majority shareholder also serves as a guarantor of the Company's debt.








F-16





BERGIO INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS



(1) Terms are per the Post Judgement Payment and Forbearance Agreement dated October 9, 2009 between the company and the bank.  In the event of a default, the bank may immediately enforce its rights of collection for the full amount under the judgement, less credits for payment made through the date of default.


[7] Convertible Debt


On February 1, 2010, the Company issued an 8% secured convertible note (the “February 2010 Note”) in the amount of $50,000 to Asher Enterprises, Inc. (“Asher”).  The principal and accrued interest is payable on January 2, 2011 or such earlier date as defined in the agreement.  The note is convertible by Asher at any time after the six month anniversary of the issue date and by the Company at any time after issue with conversion periods as defined in the agreement.   The note is convertible into shares of the Company’s common stock at a price of 62.5% of the average of the three lowest trading prices of the stock during the ten trading day period ending one day prior to the date of conversion.


During 2010, $47,000 of the convertible note was converted into 538,829 shares of common stock. The balance outstanding at December 31, 2010 is $3,000 (see Note 13).


On March 12, 2010, the Company issued an 8% secured convertible note (the “March 2010 Note”) in the amount of $30,000 to Asher.  The principal and accrued interest is payable on December 13, 2010 or such earlier date as defined in the agreement. The note is convertible by Asher at any time after the six month anniversary of the issue date and by the Company at any time after issue with conversion periods as defined in the agreement.   The note is convertible into shares of the Company’s common stock at a price of 62.5% of the average of the three lowest trading prices of the stock during the ten trading day period ending one day prior to the date of conversion.  At December 31, 2010, the note is past due.


In April 2010, the Company issued an 8% secured convertible note (the “April 2010 Note”) in the amount of $40,000 to Asher.  The principal and accrued interest is payable on January 13, 2011 or such earlier date as defined in the agreement. The note is convertible by Asher at any time after the six month anniversary of the issue date and by the Company at any time after issue with conversion periods as defined in the agreement.   The note is convertible into shares of the Company’s common stock at a price of 62.5% of the average of the three lowest trading prices of the stock during the ten trading day period ending one day prior to the date of conversion (see Note 13).


In May 2010, the Company issued an 8% secured convertible note (the “May 2010 Note”) in the amount of $40,000 to Asher.  The principal and accrued interest is payable on February 11, 2011 or such earlier date as defined in the agreement. The note is convertible by Asher at any time after the six month anniversary of the issue date and by the Company at any time after issue with conversion periods as defined in the agreement.   The note is convertible into shares of the Company’s common stock at a price of 62.5% of the average of the three lowest trading prices of the stock during the ten trading day period ending one day prior to the date of conversion (see Note 13).







F-17





BERGIO INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS



Asher is entitled to have all shares issued upon conversion of the above notes listed upon each national securities exchange or other automated quotation system, if any, upon which shares of the Company common stock are then listed.


On November 16, 2009, the Company issued a 7% Secured Convertible Debenture (the “November 2009 Debenture”) in the amount of $25,000 to Tangiers Capital, LLC. The principal and accrued interest is payable on August 16, 2010 or such earlier date as defined in the agreement. Upon issuance, the November 2009 Debenture, including any accrued interest, was convertible into shares of the Company’s common stock at a price of 80% of the average of the two lowest trading prices, determined on the then current trading market for the Company’s common stock, for the ten trading days prior to conversion, at the option of the holder. The holder is entitled to “piggyback” registration rights on shares of common stock issued upon conversion.


During the year ended December 31, 2010, $18,750 of the convertible note was converted into 290,144 shares of common stock.  At December 31, 2010, the balance of the note of $6,250 is past due.


The Company accounts for the fair value of the conversion features 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 Company’s 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 valued the embedded derivative using the Black-Scholes pricing model. The fair value upon issuance of the February 2010 Note, March 2010 Note, April 2010 Note, and May 2010 Note, $23,500, $27,513, $40,362 and $26,961, respectively, was recorded as a derivative liability and a discount to the convertible debt.  The fair value upon issuance of the November 2009 Debenture, $10,890, was recorded as a derivative liability and a discount to the convertible debt in 2009.  Amortization of debt discount amounted to $120,230 and $1,815 for the years ended December 31, 2010 and 2009, respectively. The derivative liability is revalued each reporting period using the Black-Scholes model. For the years ended December 31, 2010 and 2009, the Company recorded an unrealized gain from the change in the fair value of the derivative liability of $60,206 and $1,032, respectively.  Convertible debt as of December 31, 2010 and 2009, is shown net of debt discount of $7,181 and $9,075, respectively.


The Black-Scholes model was valued with the following inputs:


Stock Price - The Stock Price was based on the average closing price of the Company’s stock as of the Valuation Date. Stock Prices ranged from $0.51 to $0.01 in the period 1-01-2010 through 12-31-2010.


Variable Conversion Price - The variable conversion price was based on: (i) 80% of the average of the 2 lowest Stock Prices out of the last 10 trading days prior to the Valuation Date (Tangiers); and (ii) 62.5% of the average of the 3 lowest Stock Prices out of the last 10 trading days prior to the Valuation Date (Asher).









F-18





BERGIO INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS



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 9 months to 0 months in the period 1-01-2010 through 12-31-2010.


Risk Free Rate - The risk free rate was based on the Treasury Note rates as of the Valuation Dates with term commensurate with the remaining term of the debt. The risk free rate ranged from 0.27% to 0.61% in the period 1-01-2010 through 12-31-3010.


Volatility - The volatility was based on the historical volatility of three comparable companies as historical volatility of the Company was not useful in developing the expected volatility due to the limited trading history of its stock. The average volatility for the comparable companies ranged from 61.82% to 56.80% in the period 1-01-2010 through 12-31-2010.


[8] Equipment Held Under Capital Leases


The Company's equipment held under the capital lease obligations as of December 31, 2010 and 2009 is summarized as follows:


  

 

December 31,

 

 

December 31,

 

  

 

2010

 

 

2009

 

  

 

 

 

 

 

 

Showroom Equipment

 

$

40,000

 

 

$

96,000

 

Less: Accumulated Amortization

 

 

24,667

 

 

 

54,933

 

  

 

 

 

 

 

 

 

 

      Equipment Held under Capitalized Lease Obligations - Net

 

$

15,333

 

 

$

41,067

 


Amortization related to the equipment held under capital leases is calculated using the straight-line method over the five year useful lives of the assets.  For the years ended December 31, 2010 and 2009, amortization was approximately $9,000 and $19,000, respectively.


As of December 31, 2010 the future minimum lease payments under the capital leases are as follows:


2011

 

$

16,357

 

Less: Amount Representing Imputed Interest

 

 

1,701

 

  

 

 

 

 

Present Value of Net Minimum Capital Lease Payments

 

 

14,656

 

Less: Current Portion of Capitalized Lease Obligations

 

 

14,656

 

  

 

 

 

 

      Non Current Portion of Capitalized Lease Obligations

 

$

--

 


Interest expense related to capital leases for the years ended December 31, 2010 and 2009 was approximately $4,000 and $5,000, respectively.







F-19





BERGIO INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS



[9] Income Taxes


Deferred income tax assets [liabilities] are as follows:


  

 

December 31,

 

 

December 31,

 

  

 

2010

 

 

2009

 

  

 

 

 

 

 

 

Deferred Income Tax Assets:

 

 

 

 

 

 

Net Operating Loss Carryforwards

 

$

289,716

 

 

$

656,485

 

Allowance for Doubtful Accounts

 

 

14,293

 

 

 

34,511

 

Allowance for Sales Returns

 

 

--

 

 

 

13,903

 

Start-up Costs

 

 

18,237

 

 

 

--

 

Totals

 

 

322,246

 

 

 

704,899

 

  

 

 

 

 

 

 

 

 

Deferred Income Tax Liabilities:

 

 

 

 

 

 

 

 

Property and Equipment

 

 

(20,135

)

 

$

(25,925

)

Sec. 481 Adjustment - Accrual Basis

 

 

--

 

 

 

(249,919

)

Totals

 

 

(20,135

)

 

 

(275,844

)

  

 

 

 

 

 

 

 

 

Gross Deferred Tax Asset [Liability]

 

 

302,111

 

 

 

429,055

 

  

 

 

 

 

 

 

 

 

Valuation Allowance for Deferred Taxes

 

 

(302,111

)

 

 

(429,055

)

Net Deferred Tax Asset [Liability]

 

$

--

 

 

$

--

 


Reconciliation of the Federal statutory income tax rate to the effective income tax rate is as follows:


  

 

2010

 

 

2009

 

  

 

 

 

 

 

 

U.S. statutory rate

 

 

(34

%)

 

 

(34

%)

State income taxes - net of federal benefit

 

 

6

%

 

 

6

%

Change in valuation allowance and other

 

 

28

%

 

 

28

%

Effective rate

 

 

--

 

 

 

--

 









F-20





BERGIO INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS



At December 31, 2010, the Company had approximately $660,000 of federal net operating tax loss carryforwards expiring at various dates through 2030.  The Tax Reform Act of 1986 enacted a complex set of rules which limits a company's ability to utilize net operating loss carryforwards and tax credit carryforwards in periods following an ownership change. These rules define an ownership change as a greater than 50 percent point change in stock ownership within a defined testing period which is generally a three-year period. As a result of stock which may be issued by us from time to time and the conversion of warrants, options or the result of other changes in ownership of our outstanding stock, the Company may experience an ownership change and consequently our utilization of net operating loss carryforwards could be significantly limited.


Based upon the net losses historically incurred and, the prospective global economic conditions, management believes that it is not more likely than not that the deferred tax asset will be realized and has provided a valuation allowance of 100% of the deferred tax asset. The valuation allowance (decreased) increased by approximately ($127,000) and $154,000 in the years ended December 31, 2010 and 2009, respectively.


[10] Stockholders' Equity


On February 23, 2010, the Company amended its Certificate of Incorporation to increase the number of authorized common shares.  The Company is authorized to issue 200,000,000 shares of common stock, par value $.001 per share. At December 31, 2010 and 2009, there were 11,159,574 and 4,308,625 common shares issued and outstanding, respectively. In October 2009, the Company effected a 12 for 1 forward split of its common stock. Effective December 27, 2010, the Company implemented a 1-for-12 reverse stock split.  All share and per share data has been retroactively adjusted to reflect such stock splits.


On October 19, 2009, the Company entered into a Share Exchange Agreement (the “Exchange Agreement”), with Diamond Information Institute, Inc. (“Diamond”), a New Jersey corporation. Pursuant to the Exchange Agreement the Company acquired all the issued and outstanding common stock of Diamond, and Diamond became a wholly-owned subsidiary of the Company. In addition, the Company acquired all Diamond’s assets and liabilities effective as of the date of the Exchange Agreement. Per the Exchange Agreement, the Company issued 2,585,175 shares of the Company’s common stock to the shareholders of Diamond (approximately .21884 shares of Company common stock for each share of Diamond common stock), representing approximately 60% of the Company’s aggregate issued and outstanding common stock following the closing of the Exchange Agreement and the Stock Agreement (defined below). The acquisition of Diamond was treated as a recapitalization, and the business of Diamond became the business of the Company. At the time of the recapitalization, the Company was in the exploration development stage and was not engaged in any active business. The accounting rules for recapitalizations require that beginning October 19, 2009, the date of the recapitalization, the balance sheet reflects the consolidated assets and liabilities of Bergio International, Inc. and the equity accounts were recapitalized to reflect the newly capitalized company. The results of operations reflect the operations of Diamond which became the operations of the Company for all periods presented.  In February 2010, the Company sold all its shares in Diamond to an unrelated third party


  







F-21





BERGIO INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS



In conjunction with the Exchange Agreement, the Company, on October 20, 2009, entered into a Stock Purchase Agreement (the “Stock Agreement”) with certain stockholders of the Company (the “former stockholders”). Pursuant to the Stock Agreement, the Company spun out its 100% interest in Alba Mineral Exploration, Inc., an Alberta, Canada corporation (“Alba Canada”) to the former stockholders for nominal consideration and the cancellation of all of the shares of common stock of the Company then owned by the former stockholders. As a result, a total of 3,310,000 shares were cancelled.


In 2009, the Company issued 26,261 shares of common stock valued at $48,000, to its SEC counsel for legal services.


In 2009, the Company issued 10,942 shares of common stock valued at $20,000, to members of its Board of Directors and Advisory Panel for services rendered.


In January 2010, the Company finalized a Securities Purchase Agreement with Tangiers Investments, LP (“Tangiers”) (See Note 12).  Pursuant to the agreement the Company issued Tangiers 92,593 shares of common stock valued at the market price of $500,000 for a one-time commitment fee.


In January 2010, the Company issued 157,142 shares of common stock to Caesar Capital Group, LLC (“Caesar”) to settle approximately $402,000 of stockholder advances and accrued interest.


In February 2010, the Company sold 125,000 shares of common stock to Caesar for $30,000.  The value of the stock on the date of sale based on the market price was $90,000 and the Company recorded an expense for financing costs of $60,000.


In February 2010, through an agreement with Socius CG II, Ltd (“Socius”), the Company settled a $699,999 payment of its credit line with Columbia Bank with the issuance of 1,190,249 shares of common stock to Socius.


In 2010, the Company issued an aggregate of 19,666 shares of common stock for legal services rendered for the registration of securities with the SEC.  The shares are valued at $23,160 the market price, and are recorded as financing costs.


In March 2010, the Company issued 90,833 shares of common stock to a consultant for services rendered.  The shares are valued at the market price of $62,900 and are recorded as share-based consulting expense.


In 2010, the Company issued an aggregate of 714,473 shares of common stock to Socius for settlement of approximately $247,000 in payables.









F-22





BERGIO INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS



In April 2010, the Company issued 25,000 shares of common stock for accounting services rendered for the registration of securities with the SEC.  The shares are valued at $12,000 and are recorded as financing costs.


In April 2010, the Company issued 375,000 shares of common stock valued at $180,000 to settle share liability.  The accrued share liability was expensed as share based services.


In 2010, the Company issued an aggregate of 3,232,020 shares of common stock to its Chief Executive Officer pursuant to his employment agreement (see Note 12).


In 2010, the Company issued an aggregate of 538,829 shares of common stock to Asher for partial conversion of its convertible debt.  The shares are valued at $47,000.


In 2010, the Company issued an aggregate of 290,144 shares of common stock to Tangiers Capital, LLC for partial conversion of its convertible debt.  The shares are valued at $18,750.


[11] Related Party Transactions


The Company receives periodic advances from its principal stockholder based upon the Company's cash flow needs. At December 31, 2010 and 2009, $317,601 and $463,342, respectively was due to the shareholder.  Interest expense is accrued at an average annual market rate of interest which was 3.25% at December 31, 2010 and 2009, respectively.  No terms for repayment have been established. As a result, the amount is classified as a Current Liability.


In the year ended December 31, 2010, the Company issued an aggregate of 3,232,020 shares of common stock to its Chief Executive Officer (“CEO”), in accordance with his employment agreement (See Note 12). The shares are valued at $70,833 the amount of unpaid compensation owed the CEO.


[12] Commitment and Contingencies


Employment Agreement - 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 Company’s then outstanding 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 made on behalf of the Company.








F-23





BERGIO INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS



Operating Leases - The Company leases certain office and manufacturing facilities and equipment. The Company’s office and manufacturing facilities are currently leased on a month to month basis at $1,800 per month. The equipment lease agreements are non-cancelable and expire at various dates through 2011. All these leases are classified as operating leases.


Rent expense for the Company's operating leases for the years ended December 31, 2010 and 2009 was approximately $22,000 and $25,000, respectively.


Acquisition - The Company entered into an Asset Purchase Agreement with Mario Panelli & C. s.a.s. (“Seller”), an Italian distributor of high-end jewelry, and Mario Panelli and Mogni Viviana (“Owners”), wherein the Company agreed to purchase the inventory of the Seller. The Company agreed to pay the Seller an amount equal to 100% of the book value of the Seller’s inventory as determined in accordance with U.S. generally accepted accounting principles. The closing date has been extended pending the Company obtaining adequate financing to complete the transaction.


Equity Financing Agreement - In January 2010, the Company finalized a securities purchase agreement with Tangiers Investors, LP (“Tangiers”) pursuant to which at its discretion the Company could periodically sell to Tangiers shares of common stock up to a maximum purchase of $25,000,000.  The selling price was to be 88% of the lowest volume weighted average price, as defined in the agreement, for the five days immediately following the notice of sale date. In addition, the Company issued Tangiers 92,593 shares of common stock valued at $500,000 for a one-time commitment fee which was recorded as deferred offering costs.  Effective, June 22, 2010, the Company terminated the securities purchase agreement with Tangiers and recorded an expense of $535,160 as share-based financing costs which included the $500,000 commitment fee and $35,160 of professional fees related to a registration statement for common shares to be issued pursuant to the agreement, which was also terminated.


Litigation - The Company, in the normal course of business, is involved in certain legal matters for which it carries insurance, subject to certain exclusions and deductibles.  As of December 31, 2010 and through the date of issuance of these financial statements, there was no asserted or unasserted litigation, claims or assessments warranting recognition and/or disclosure in the financial statements.


Consulting Agreement - The Company entered into an agreement for business development services with a consultant.  Pursuant to the agreement, the Company issued 375,000 shares of Company common stock for the services, which primarily were rendered in the first quarter of 2010.  The shares, which were issued in April 2010, were valued at the market price of $180,000.


[13] Subsequent Events


In January and February 2011, convertible notes with Asher in the amount of $83,000 became past due.







F-24





BERGIO INTERNATIONAL, INC.


INDEX TO FINANCIAL STATEMENTS






 

PAGES

 

 

 

 

BALANCE SHEETS AS OF SEPTEMBER 30, 2011 AND DECEMBER 31, 2010 (UNAUDITED)

FF-1

 

 

STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010 (UNAUDITED)

FF-3

 

 

STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER  30, 2011 AND 2010 (UNAUDITED)

FF-4

 

 

NOTES TO FINANCIAL STATEMENTS

FF-6












 






BERGIO INTERNATIONAL, INC.

BALANCE SHEETS (UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

2011

 

2010

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash

 

$

--

 

$

4,262

Accounts Receivable - Net

 

 

345,976

 

 

474,212

Inventory

 

 

1,536,852

 

 

1,602,680

Prepaid Expenses

 

 

4,989

 

 

9,353

Other Receivables

 

 

137,500

 

 

175,000

 

 

 

 

 

 

 

Total Current Assets

 

 

2,025,317

 

 

2,265,507

 

 

 

 

 

 

 

Property and Equipment - Net

 

 

111,671

 

 

118,135

 

 

 

 

 

 

 

Other Assets:

 

 

 

 

 

 

Investment in Unconsolidated Affiliate

 

 

5,000

 

 

5,000

 

 

 

 

 

 

 

Total Assets

 

$

2,141,988

 

$

2,388,642






See notes to financial statements.




FF-1





BERGIO INTERNATIONAL, INC.

BALANCE SHEETS (UNAUDITED)

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

2011

 

2010

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity:

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Cash Overdraft

 

$

5,051

 

$

--

Accounts Payable and Accrued Expenses

 

 

195,075

 

 

417,144

Bank Lines of Credit - Net

 

 

191,905

 

 

200,866

Convertible Debt - Net

 

 

110,921

 

 

112,069

Current Maturities of Notes Payable

 

 

92,255

 

 

110,060

Current Maturities of Capital Leases

 

 

--

 

 

14,656

Advances from Stockholder - Net

 

 

368,075

 

 

317,601

Derivative Liability

 

 

90,775

 

 

67,988

 

 

 

 

 

 

 

Total Current Liabilities

 

 

1,054,057

 

 

1,240,384

 

 

 

 

 

 

 

Long-Term Liabilities

 

 

 

 

 

 

Notes Payable

 

 

38,140

 

 

51,626

 

 

 

 

 

 

 

Total Long-Term Liabilities

 

 

38,140

 

 

51,626

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

--

 

 

--

 

 

 

 

 

 

 

Total Liabilities

 

 

1,092,197

 

 

1,292,010

 

 

 

 

 

 

 

Stockholders' Equity

 

 

 

 

 

 

Series A Preferred Stock - $.001 Par Value, 51 Shares Authorized, 51 and 0 Shares Issued and Outstanding as of September 30, 2011 and December 31, 2010, respectively

 

 

--

 

 

--

Common Stock - $.001 Par Value, 200,000,000 Shares Authorized, 24,857,413 and 11,159,574  Shares Issued and Outstanding as of September 30, 2011 and December 31, 2010, respectively

 

 

24,857

 

 

11,159

Additional Paid-In Capital

 

 

4,222,619

 

 

4,021,593

Accumulated Deficit

 

 

(3,197,685)

 

 

(2,936,120)

Total Stockholders' Equity

 

 

1,049,791

 

 

1,096,632

 

 

 

 

 

 

 

Total Liabilities and Stockholders' Equity

 

$

2,141,988

 

$

2,388,642






See notes to financial statements.




FF-2





BERGIO INTERNATIONAL, INC.

STATEMENTS OF OPERATIONS (UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

September 30,

 

September 30,

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

 

Sales - Net

$

394,562

 

$

343,514

 

$

1,029,774

 

$

892,509

Cost of Sales

 

363,421

 

 

226,031

 

 

666,764

 

 

428,244

Gross Profit

 

31,141

 

 

117,483

 

 

363,010

 

 

464,265

 

 

 

 

 

 

 

 

 

 

 

 

Selling Expenses

 

40,357

 

 

51,790

 

 

236,598

 

 

186,030

 

 

 

 

 

 

 

 

 

 

 

 

General and Administrative Expenses

 

 

 

 

 

 

 

 

 

 

 

Share-Based Services

 

--

 

 

--

 

 

--

 

 

242,900

Other

 

103,780

 

 

94,107

 

 

406,083

 

 

342,234

 

 

 

 

 

 

 

 

 

 

 

 

Total General and Administrative Expenses

 

103,780

 

 

94,107

 

 

406,083

 

 

585,134

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Expenses

 

144,137

 

 

145,897

 

 

642,681

 

 

771,164

 

 

 

 

 

 

 

 

 

 

 

 

Loss from Operations

 

(112,996)

 

 

(28,414)

 

 

(279,671)

 

 

(306,899)

 

 

 

 

 

 

 

 

 

 

 

 

Other Income [Expense]

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

(15,080)

 

 

(17,929)

 

 

(44,855)

 

 

(49,007)

Amortization of Debt Discount

 

(30,818)

 

 

(39,340)

 

 

(62,323)

 

 

(85,184)

Change in Fair Value of Derivative

 

149,550

 

 

39,125

 

 

123,934

 

 

57,431

Gain on Sale of Subsidiary

 

--

 

 

--

 

 

--

 

 

225,000

Financing Costs - Shared Based

 

--

 

 

--

 

 

--

 

 

(595,160)

Loss on Disposal of Equipment

 

--

 

 

--

 

 

--

 

 

(18,945)

Other income

 

--

 

 

--

 

 

1,350

 

 

--

 

 

 

 

 

 

 

 

 

 

 

 

Total Other Income [Expense]

 

103,652

 

 

(18,144)

 

 

18,106

 

 

(465,865)

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

$

(9,344)

 

$

(46,558)

 

$

(261,565)

 

$

(772,764)

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss Per Common Share - Basic and Diluted

$

--

 

$

--

 

$

(0.01)

 

$

(0.10)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding - Basic and Diluted

 

24,457,248

 

 

10,050,617

 

 

18,915,122

 

 

7,935,213





See notes to financial statements.




FF-3





BERGIO INTERNATIONAL, INC.

STATEMENTS OF CASH FLOWS (UNAUDITED)

 

 

 

 

 

Nine Months Ended

 

 

September 30,

 

 

2011

 

2010

Operating Activities

 

 

 

 

 

 

Net Loss

 

 

$  (261,565)

 

 

$  (772,764)

Adjustments to Reconcile Net Loss to Net Cash Used

 

 

 

 

 

 

for by Operating Activities:

 

 

 

 

 

 

Depreciation and Amortization

 

 

32,377

 

 

40,891

Share-Based Services

 

 

--

 

 

242,900

Share-Based Financing Costs

 

 

--

 

 

595,160

Allowance for Doubtful Accounts

 

 

(35,787)

 

 

(6,000)

Amortization of Debt Discount

 

 

62,323

 

 

85,184

Change in Fair Value of Derivative

 

 

(123,934)

 

 

(57,431)

Gain on Sale of Subsidiary

 

 

--

 

 

(225,000)

Loss on Disposal of Equipment

 

 

--

 

 

18,945

Sales returns and allowances reserve

 

 

--

 

 

(34,808)

Changes in Assets and Liabilities

 

 

 

 

 

 

[Increase] Decrease in:

 

 

 

 

 

 

Accounts Receivable

 

 

164,023

 

 

(94,344)

Inventory

 

 

65,828

 

 

(169,406)

Prepaid Expenses

 

 

4,364

 

 

(5,677)

Increase [Decrease] in:

 

 

 

 

 

 

Accounts Payable and Accrued Expenses

 

 

(126,595)

 

 

(1,981)

Total Adjustments

 

 

42,599

 

 

388,433

 

 

 

 

 

 

 

Net Cash Used for Operating Activities

 

 

(218,966)

 

 

(384,331)

 

 

 

 

 

 

 

Investing Activities:

 

 

 

 

 

 

Capital Expenditures

 

 

(25,913)

 

 

(21,016)

Proceeds from Sale of Subsidiary

 

 

37,500

 

 

50,000

Payments for Disposal

 

 

--

 

 

(2,145)

Net Cash Provided by Investing Activities

 

 

11,587

 

 

26,839

 

 

 

 

 

 

 

Financing Activities:

 

 

 

 

 

 

Increase in Cash Overdraft

 

 

5,051

 

 

12,121

Advances under Bank Lines of Credit - Net

 

 

(8,961)

 

 

(17,439)

Proceeds from Convertible Debt

 

 

202,500

 

 

160,000

Repayments of Notes Payable

 

 

(31,291)

 

 

(26,649)

Advances  from Stockholder - Net

 

 

50,474

 

 

217,767

Repayments of Capital Leases

 

 

(14,656)

 

 

(18,308)

Proceeds from Sale of Stock

 

 

--

 

 

30,000

 

 

 

 

 

 

 

Net Cash Provided by Financing Activities

 

 

203,117

 

 

357,492

 

 

 

 

 

 

 

Net Change in Cash

 

 

(4,262)

 

 

--

 

 

 

 

 

 

 

   Cash - Beginning of Periods

 

 

4,262

 

 

--

 

 

 

 

 

 

 

Cash - End of Periods

 

 

$  --

 

 

$  --


See notes to financial statements.




FF-4





BERGIO INTERNATIONAL, INC.

STATEMENTS OF CASH FLOWS (UNAUDITED)

 

 

 

 

 

 

 

Nine Months Ended

 

 

September 30,

 

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosures of Cash Flow Information:

 

 

 

 

 

 

Cash paid during the years for:

 

 

 

 

 

 

Interest

 

 

$  28,000

 

 

$  53,000

Income Taxes

 

 

$  --

 

 

$  --

 

 

 

 

 

 

 

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

 

 

 

 

 

 

Debt Discount from Fair Value of Imbedded Derivative

 

 

$  146,721

 

 

$  118,336

Issuance of Common Stock for Convertible Debt and Accrued Interest

 

 

$  131,485

 

 

$  43,250

Issuance of Common Stock for Accrued Payroll - Related Party

 

 

$  23,558

 

 

$  66,666

Issuance of Convertible Note for Settlement Agreement

 

 

$  25,000

 

 

$  --

Issuance of Common Stock for Vendor Payables and Accrued Expenses

 

 

$  34,681

 

 

$  247,000

Issuance of Common Stock for Deferred Offering Costs

 

 

$  --

 

 

$  535,160

Issuance of Common Stock for Bank Line of Credit

 

 

$  --

 

 

$  699,999

Issuance of Common Stock for Stockholder Advances

 

 

$  --

 

 

$  401,759

Notes Payable Settled with Inventory

 

 

$  --

 

 

$  21,500

Issuance of Common Stock for Share Liability

 

 

$  --

 

 

$  180,000













See notes to financial statements.




FF-5





BERGIO INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)



[1] Nature of Operations and Basis of Presentation


Nature of Operations - Bergio International, Inc. (“Bergio” or 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 (defined below), the corporate name was changed to Bergio International, Inc. and the Company implemented a 12-for-1 forward stock split of its common shares.  Effective December 27, 2010, the Company implemented a 1-for-12 reverse stock split.  All share and per share data has been adjusted to reflect such stock splits.  The Company is engaged in the product design, manufacturing and distribution of fine jewelry in the United States, Europe and Asia and is headquartered from its corporate office in Fairfield, New Jersey.  Based on the nature of operations, the Company’s sales cycle experiences significant seasonal volatility with the first two quarters of the year representing 15% - 25% of annual sales and the remaining two quarters representing the remaining portion of annual sales.


On October 19, 2009, the Company entered into a Share Exchange Agreement (the “Exchange Agreement”) with Diamond Information Institute, Inc. (“Diamond”), a New Jersey corporation.  Pursuant to the Exchange Agreement, the Company acquired all the issued and outstanding common stock of Diamond, and Diamond became a wholly-owned subsidiary of the Company.  In addition, the Company acquired all of Diamond’s assets and liabilities effective as of the date of the Exchange Agreement.  Per the Exchange Agreement, the Company issued 2,585,175 shares of the Company’s common stock to the shareholders of Diamond (approximately 0.21884 shares of the Company’s common stock for each share of Diamond common stock), representing approximately 60% of the Company’s aggregate issued and outstanding common stock following the closing of the Exchange Agreement and the Stock Agreement (defined below).  The acquisition of Diamond was treated as a recapitalization and the business of Diamond became the business of the Company.  At the time of the recapitalization, the Company was in the exploration development stage and was not engaged in any active business.  The accounting rules for recapitalizations require that beginning October 19, 2009, the date of the recapitalization, the balance sheet reflects the consolidated assets and liabilities of Bergio and the equity accounts were recapitalized to reflect the newly capitalized company.  The results of operations reflect the operations of Diamond, which became the operations of the Company, for all periods presented.  In February 2010, the Company sold all its shares in Diamond to an unrelated third party for $225,000 and recognized a gain from the sale of $225,000.


In conjunction with the Exchange Agreement, on October 20, 2009, the Company entered into a Stock Purchase Agreement (the “Stock Agreement”) with certain stockholders of the Company (the “former stockholders”).  Pursuant to the Stock Agreement, the Company spun out its 100% interest in Alba Mineral Exploration, Inc., an Alberta, Canada Corporation (“Alba Canada”) to the former stockholders for nominal consideration and the cancellation of all of the shares of common stock of the Company then owned by the former stockholders.  As a result, a total of 3,310,000 shares were cancelled.


Basis of Presentation - The accompanying unaudited interim financial statements as of September 30, 2011, and for the three and nine months ended September 30, 2011 and 2010, have been prepared in accordance with accounting principles generally accepted for interim financial statement presentation and in accordance with the instructions to Form 10-Q.  Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statement presentation.  In the opinion of management, the financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position as of September 30, 2011, results of operations for the three and nine months ended September 30, 2011 and 2010, and cash flows for the nine months ended September 30, 2011 and 2010.  The results of operations for the nine months ended September 30, 2011, are not necessarily indicative of the results to be expected for the full year.


[2] Summary of Significant Accounting Policies


Other significant accounting policies are set forth in Note 2 of the audited financial statements included in the Company’s 2010 Annual Report Form 10-K.



FF-6





BERGIO INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)



Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.


Revenue Recognition - Revenue is recognized upon the shipment of products to customers with the price to the buyer being fixed and determinable and collectability reasonably assured.


Inventories - Inventory consists primarily of finished goods and is valued at the lower of cost or market.  Cost is determined using the weighted average method and average cost is recomputed after each inventory purchase or sale.


Fair Value of Financial Instruments - The Company follows guidance issued by the FASB on “Fair Value Measurements” for assets and liabilities measured at fair value on a recurring basis.  This guidance establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements.


The FASB defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Additionally, the FASB requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.


These inputs are prioritized below:


·

Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities.


·

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.


·

Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.


The Company discloses the estimated fair value for all financial instruments for which it is practicable to estimate fair value.  As of September 30, 2011, the fair value of short-term financial instruments including cash overdraft, accounts receivable, accounts payable and accrued expenses, approximates book value due to their short-term maturity.  The fair value of property and equipment is estimated to approximate its net book value.  The fair value of debt obligations, other than convertible debt obligations, approximates their face values due to their short-term maturities and/or the variable rates of interest associated with the underlying obligations.


The fair value of the Company’s convertible debt is measured on a recurring basis (see Note 6).


The following table presents fair value measurements for major categories of the Company’s financial liabilities measured at fair value on a recurring basis:

 

 

 

September 30, 2011

 

 

Fair Value Measurements Using

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Convertible Debt

 

$

--

 

 

$

110,921

 

 

$

--

 

 

$

110,921

 




FF-7





BERGIO INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)



 

 

December 31, 2010

 

 

Fair Value Measurements Using

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Convertible Debt

 

$

--

 

 

$

112,069

 

 

$

--

 

 

$

112,069

 


In addition, the FASB issued “The Fair Value Option for Financial Assets and Financial Liabilities.”  This guidance expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value.  The Company did not elect the fair value option for any of its qualifying financial instruments.


Subsequent Events - The Company evaluated subsequent events, which are events or transactions that occurred after September 30, 2011, through the issuance of the accompanying financial statements.


Recently Issued Accounting Pronouncements - There are several new accounting pronouncements issued or proposed by the FASB.  Each of these pronouncements, as applicable, has been or will be adopted by the Company.  Management does not believe any of these accounting pronouncements has had or will have a material impact on the Company’s financial position or results of operations.


[3] Property and Equipment


Property and equipment and accumulated depreciation and amortization are as follows:


 

September 30,

 

December 31,

 

2011

 

2010

 

 

 

 

Selling Equipment

$  8,354

 

$  8,354

Office and Equipment

351,443

 

325,530

Leasehold Improvements

7,781

 

7,781

Furniture and Fixtures

18,487

 

18,487

 

 

 

 

Total - At Cost

386,065

 

360,152

Less: Accumulated Depreciation and Amortization

274,394

 

242,017

 

 

 

 

      Property and Equipment - Net

$  111,671

 

$  118,135


Depreciation and amortization expense for the three months ended September 30, 2011 and 2010, and the nine months ended September 30, 2011 and 2010, amount to approximately $11,000, $13,000, $32,000 and $41,000, respectively.





FF-8





BERGIO INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)



[4] Notes Payable


 

September 30,

December 31,

 

2011

 

2010

 

 

 

 

Notes payable due in equal monthly installments, of $2,500 and one payment on June 30, 2011 equal to the outstanding balance; interest rate of 7.60%.  The notes are collateralized by the assets of the Company. (1)

$  72,371

 

$  91,517

 

 

 

 

Notes payable due in equal monthly installments, over 60 months, maturing through April 2014 at interest rates of 10.52%.  The notes are collateralized by specific assets of the Company.

58,024

 

70,169

 

 

 

 

Total

130,395

 

161,686

Less: Current Maturities Included in Current Liabilities

92,255

 

110,060

 

 

 

 

    Total Long-Term Portion of Debt

$  38,140

 

$  51,626


Maturities of long-term debt are as follows:


Twelve months ended

 

 

September 30,

 

 

2012

 

$  92,255

2013

 

22,081

2014

 

16,059

 

 

 

      Total

 

$  130,395


(1) Terms are per the Post Judgment Payment and Forbearance Agreement dated October 9, 2009, between the Company and the bank.  In the event of a default, the bank may immediately enforce its rights of collection for the full amount under the judgment, less credits for payment made through the date of default.  The Company is in the process of negotiating an extension of the payment terms with the bank.








FF-9





BERGIO INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)



[5] Bank Lines of Credit


A summary of the Company’s credit facilities is as follows:


 

September 30,

December 31,

 

2011

2010

 

 

 

Credit Line of $55,000 monthly payments of $500 and one payment on June 30, 2011 equal to outstanding balance; interest at the bank’s prime rate plus .75%. At September 30, 2011 and December 31, 2010, the interest rate was 4.00%. Collateralized by the assets of the Company. (1)

$  36,971

40,153

 

 

 

Various unsecured Credit Cards of $161,000, minimum payment of principal and interest are due monthly at the credit card’s annual interest rate. At September 30, 2011 and December 31, 2010, the interest rates ranged from 3.99% to 24.90%.

154,934

160,713

 

 

 

Total

191,905

200,866

 

 

 

Less:  Current maturities included in current liabilities

191,905

200,866

 

 

 

Total Long-Term Portion

$  --

$  --


The Company’s Chief Executive Officer and majority shareholder also serves as a guarantor of the Company’s debt.


(1) Terms are per the Post Judgment Payment and Forbearance Agreement dated October 9, 2009, between the Company and the bank.  In the event of a default, the bank may immediately enforce its rights of collection for the full amount under the judgment, less credits for payment made through the date of default.  The Company is in the process of negotiating an extension of the payment terms with the bank.


[6] Convertible Debt


Asher


On February 1, 2010, the Company issued an 8% secured convertible note (the “February 2010 Note”) in the amount of $50,000 to Asher Enterprises, Inc. (“Asher”).  The principal and accrued interest is payable on January 2, 2011, or such earlier date as defined in the note.  The note is convertible by Asher at any time after the six month anniversary of the issue date and by the Company at any time after issue with conversion periods as defined in the note.  The note is convertible into shares of the Company’s common stock at a price of 62.5% of the average of the three lowest trading prices of the stock during the ten trading day period ending one day prior to the date of conversion.  In 2010, $47,000 of the principal was converted into 538,829 shares of company common stock.  In January 2011, the balance of the convertible note of $3,000 and $2,000 of accrued interest was converted into 100,000 shares of the Company’s common stock.


On March 12, 2010, the Company issued an 8% secured convertible note (the “March 2010 Note”) in the amount of $30,000 to Asher.  The principal and accrued interest is payable on December 13, 2010, or such earlier date as defined in the note.  The note is convertible by Asher at any time after the six month anniversary of the issue date and by the Company at any time after issue with conversion periods as defined in the note.  The note is convertible into shares of the Company’s common stock at a price of 62.5% of the average of the three lowest trading prices of the stock during the ten trading day period ending one day prior to the date of conversion.  In February and March 2011, the convertible note of $30,000 and accrued interest of $1,200 was converted into 1,121,975 shares of the Company’s common stock.



FF-10





BERGIO INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)



In April 2010, the Company issued an 8% secured convertible note (the “April 2010 Note”) in the amount of $40,000 to Asher.  The principal and accrued interest is payable on January 13, 2011, or such earlier date as defined in the note.  The note is convertible by Asher at any time after the six month anniversary of the issue date and by the Company at any time after issue with conversion periods as defined in the note.  The note is convertible into shares of the Company’s common stock at a price of 62.5% of the average of the three lowest trading prices of the stock during the ten trading day period ending one day prior to the date of conversion.  In April 2011, the convertible note and accrued interest was converted into 3,847,321 shares of the Company’s common stock.


In May 2010, the Company issued an 8% secured convertible note (the “May 2010 Note”) in the amount of $40,000 to Asher.  The principal and accrued interest is payable on February 11, 2011, or such earlier date as defined in the note.  The note is convertible by Asher at any time after the six month anniversary of the issue date and by the Company at any time after issue with conversion periods as defined in the note.  The note is convertible into shares of the Company’s common stock at a price of 62.5% of the average of the three lowest trading prices of the stock during the ten trading day period ending one day prior to the date of conversion.  In May and June 2011, the convertible note and accrued interest was converted into 3,999,843 shares of the Company’s common stock.


In April 2011, the Company issued an 8% convertible note (the “April 2011 Note”) in the amount of $50,000 to Asher.  The principal and accrued interest is payable on January 18, 2012, or such earlier date as defined in the note.  The note is convertible by Asher at any time after the six month anniversary of the issue date and by the Company at any time after issue with conversion periods as defined in the note.  The note is convertible into shares of the Company’s common stock at a price of 62.5% of the average of the three lowest trading prices of the stock during the ten day trading period ending one day prior to the date of conversion.


In July 2011, the Company issued an 8% convertible note (the “July 2011 Note”) in the amount of $32,500 to Asher.  The principal and accrued interest is payable on April 18, 2012, or such earlier date as defined in the note.  The note is convertible by Asher at any time after the six month anniversary of the issue date and by the Company at any time after issue with conversion periods as defined in the note.  The note is convertible into shares of the Company’s common stock at a price of 62.5% of the average of the three lowest trading prices of the stock during the ten day trading period ending one day prior to the date of conversion.


In August 2011, the Company issued an 8% convertible note (the “August 2011 Note”) in the amount of $32,500 to Asher.  The principal and accrued interest is payable on May 29, 2012, or such earlier date as defined in the note.  The note is convertible by Asher at any time after the six month anniversary of the issue date and by the Company at any time after issue with conversion periods as defined in the note.  The note is convertible into shares of the Company’s common stock at a price of 60.0% of the average of the three lowest trading prices of the stock during the ten day trading period ending one day prior to the date of conversion.


In September 2011, the Company issued an 8% convertible note (the “September 2011 Note”) in the amount of $37,500 to Asher.  The principal and accrued interest is payable on June 28, 2012 or such earlier date as defined in the note.  The note is convertible by Asher at any time after the six month anniversary of the issue date and by the Company at any time after issue with conversion periods as defined in the note.  The note is convertible into shares of the Company’s common stock at a price of 62.5% of the average of the three lowest trading prices of the stock during the ten day trading period ending one day prior to the date of conversion.


Asher is entitled to have all shares issued upon conversion of the above notes listed upon each national securities exchange or other automated quotation system, if any, upon which shares of the Company’s common stock are then listed.






FF-11





BERGIO INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)



Tangiers


Effective January 2011, the Company entered into a 7% convertible promissory note agreement (the “January 2011 Note”) in the amount of $25,000 with Tangiers Capital, LLC (“Tangiers”) for the settlement of an accrued termination fee related to the securities purchase agreement with Tangiers.  The principal and accrued interest is payable on June 18, 2012, or such earlier date as defined in the agreement.  The note, including any accrued interest, is convertible into shares of the Company’s common stock at a price of 80% of the lowest trading price, determined on the then current trading market for the Company’s common stock, for the ten trading days prior to conversion, at the option of the holder.  In March and April 2011, the convertible note and accrued interest was converted into 1,965,254 shares of the Company’s common stock.


On November 16, 2009, the Company issued a 7% Secured Convertible Debenture (the “November 2009 Debenture”) in the amount of $25,000 to Tangiers.  The principal and accrued interest is payable on August 16, 2010, or such earlier date as defined in the debenture.  Upon issuance, the November 2009 Debenture, including any accrued interest, was convertible into shares of the Company’s common stock at a price of 80% of the average of the two lowest trading prices, determined on the then current trading market for the Company’s common stock, for the ten trading days prior to conversion, at the option of the holder.  The holder is entitled to “piggyback” registration rights on shares of common stock issued upon conversion.  During the year ended December 31, 2010, $18,750 of the convertible note was converted into 290,144 shares of the Company’s common stock.  In February 2011, the balance of the note of $6,250 and accrued interest of $1,694 was converted into 141,839 shares of the Company’s common stock.


Strategic


In May 2011, the Company issued a 15% convertible note (the “May 2011 Note”) in the amount of $50,000 to Strategic Business Initiatives, LLC (“Strategic”).  The principal and accrued interest is payable on November 30, 2011, or such earlier date as defined in the note.  The Company must give 10 days’ notice to Strategic about its intent to prepay the note.   During the ten day period, prior to the Company’s prepayment, Strategic has the option to convert all or a portion of the principal and/or accrued interest into shares of the Company’s common stock at a price of 80% of the five day average closing price immediately prior to the conversion date.


The Company accounts for the fair value of the conversion features 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 Company’s 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 valued the embedded derivative using the Black-Scholes pricing model.   The fair values upon issuance of the January 2011 Note of $12,478, the April 2011 Note of $32,704, May 2011 Note of $16,570, July 2011 N ote of $30,962, August 2011 N ote of $32,500, and the September 2011 N ote of $21,507 were recorded as a derivative liability and a discount to the convertible debt.   Amortization of debt discount amounted to $62,323 and $85,184 for the nine months ended September 30, 2011 and 2010, respectively.   The derivative liability is revalued each reporting period using the Black-Scholes model.  For the nine months ended September 30, 2011 and 2010, the Company recorded an unrealized gain from the change in the fair value of the derivative liability of $123,934 and $57,431, respectively.  Convertible debt as of September 30, 2011 ($202,500) and December 31, 2010 ($119,250), is shown net of debt discount in the amount of $91,579 and $7,181, respectively.






FF-12





BERGIO INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)



The Black-Scholes model was valued with the following inputs:


·

Stock Price - The Stock Price was based on the average closing price of the Company s common stock as of the Valuation Date.  Stock Prices ranged from $0.01 to $0.12 in the period 1-01-2011 through 9-30-2011.


·

Variable Conversion Price - The variable conversion price was based on: (i) 80% of the lowest Stock Price out of the last 10 trading days prior to the Valuation Date (Tangiers); and (ii) 62.5% and 60% of the average of the 3 lowest Stock Prices out of the last 10 trading days prior to the Valuation Date (Asher) and (iii) 80% of the stock price for the last 5 trading days prior to valuation date (Strategic).


·

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 0 months to 8 months in the period 1-01-2011 through 9-30-2011.


·

Risk Free Rate - The risk free rate was based on the Treasury Note rate as of the Valuation Dates with term commensurate with the remaining term of the debt.  The risk free rate ranged from 0.11% to 0.30% in the period 1-01-2011 through 9-30-2011.


·

Volatility - The volatility was based on the historical volatility of three comparable companies as historical volatility of the Company was not useful in developing the expected volatility due to the limited trading history of its stock.  The average volatility for the comparable companies ranged from 55.77% to 57.96% in the period 1-01-2011 through 9-30-2011.



[7] Equipment Held Under Capital Leases


The Company’s equipment held under the capital lease obligations is summarized as follows:


 

September 30,

December 31,

 

2011

2010

 

 

 

Showroom Equipment

$  40,000

$  40,000

Less: Accumulated Amortization

30,667

24,667

 

 

 

      Equipment Held under Capitalized Lease Obligations - Net

$  9,333

$  15,333


Amortization related to the equipment held under capital leases is calculated using the straight-line method over the five year useful lives of the assets.  Amortization for the three months ended September 30, 2011 and 2010, and the nine months ended September 30, 2011 and 2010, amounted to approximately $2,000, $2,000, 6,000 and $6,000, respectively.


Interest expense related to capital leases for the three months ended September 30, 2011 and 2010 and the nine months ended September 30, 2011 and 2010, amounted to approximately $-0-, $1,000, $500, and $3,000, respectively.






FF-13





BERGIO INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)



[8] Income Taxes


Deferred income tax assets [liabilities] are as follows:


 

September 30,

 

December 31,

 

2011

 

2010

 

 

 

 

Deferred Income Tax Assets:

 

 

 

Net Operating Loss Carryforwards

$  353,892

 

$  289,716

Allowance for Doubtful Accounts

--

 

14,293

Start-up Costs

15,806

 

18,237

Totals

369,698

 

322,246

 

 

 

 

Deferred Income Tax Liabilities:

 

 

 

Property and Equipment

(22,102)

 

(20,135)

Totals

(22,102)

 

(20,135)

 

 

 

 

Gross Deferred Tax Asset [Liability]

347,596

 

302,111

 

 

 

 

Valuation Allowance for Deferred Taxes

(347,596)

 

(302,111)

Net Deferred Tax Asset [Liability]

$  --

 

$  --


At December 31, 2010, the Company had approximately $550,000 of federal net operating tax loss carryforwards expiring at various dates through 2030.  The Tax Reform Act of 1986 enacted a complex set of rules which limits a company’s ability to utilize net operating loss carryforwards and tax credit carryforwards in periods following an ownership change. These rules define an ownership change as a greater than 50 percent point change in stock ownership within a defined testing period which is generally a three-year period.  As a result of stock which may be issued by us from time to time and the conversion of warrants, options or the result of other changes in ownership of our outstanding stock, the Company may experience an ownership change and consequently our utilization of net operating loss carryforwards could be significantly limited.


Based upon the net losses historically incurred and, the prospective global economic conditions, management believes that it is not more likely than not that the deferred tax asset will be realized and has provided a valuation allowance of 100% of the deferred tax asset.  The valuation allowance increased decreased by approximately $45,000 and $127,000 in the nine months ended September 30, 2011, and the year ended December 31, 2010, respectively.


[9] Stockholders’ Equity


The Company is authorized to issue 200,000,000 shares of common stock, par value $.001 per share and 51 shares of preferred stock, par value $.001 per share.  At September 30, 2011 and December 31, 2010, there were 24,857,413 and 11,159,574 common shares issued and outstanding, respectively.  In October 2009, the Company effected a 12-for-1 forward split of its common stock.  Effective December 27, 2010, the Company implemented a 1-for-12 reverse common stock split.  All share and per share data has been retroactively adjusted to reflect such stock splits.  Effective September 1, 2011, the Company designated and issued 51 shares of Series A Preferred Stock, par value $0.001 to its Chief Executive Officer (see Note 11).  The Series A Preferred Stock pays no dividends and has no conversion rights.  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.





FF-14





BERGIO INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)



In March 2011, the Company issued an aggregate of 1,988,054 shares of common stock valued at $23,558 to its Chief Executive Officer pursuant to his employment agreement (see Note 11).


During the nine months ended September 30, 2011, the Company issued an aggregate of 9,069,139 shares of common stock to Asher for conversion of $113,000 of convertible debt and $9,170 of accrued interest.  The shares are valued at $122,170 per terms of the convertible note agreements (see Note 6).


During the nine months ended September 30, 2011, the Company issued an aggregate of 2,107,093 shares of common stock to Tangiers for conversion of $31,250 of convertible debt and $3,065 of accrued interest.  The shares are valued at $34,315 per terms of the convertible note agreements (see Note 6).


In August 2011, the Company issued 533,553 shares of common stock for payment of legal fees.  The shares are valued at $34,681, the fair value at date of issuance.


[10] Related Party Transactions


The Company receives periodic advances from its principal shareholder and Chief Executive Officer (the “CEO”) based upon the Company’s cash flow needs.  At September 30, 2011 and December 31, 2010, $368,075 and $317,601, respectively was due to the shareholder.  Interest expense is accrued at an average annual market rate of interest which was 3.25% at September 30, 2011 and December 31, 2010, respectively.  No terms for repayment have been established.  As a result, the amount is classified as a current liability.


In the nine months ended September 30, 2011, the Company issued an aggregate of 1,988,054 shares of common stock to its CEO in accordance with his employment agreement (See Note 11).  The shares are valued at $23,558, which was equal to the amount of unpaid compensation owed the CEO.


[11] Commitment and Contingencies


Employment Agreement - 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 to the CEO, it is understood and agreed to by the Company’s Board of Directors (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 Company’s then outstanding 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 made on behalf of the Company.  The CEO waived the 3% annual increase for 2011.







FF-15





BERGIO INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)



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 which would allow the CEO to maintain a fifty-one percent (51%) share of the Company’s 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 Company’s 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 March 31, 2012, he would reduce his Base Compensation to $100,000.


Operating Leases - The Company leases certain office and manufacturing facilities and equipment.  The Company’s office and manufacturing facilities are currently leased on a month to month basis at $1,800 per month.


The equipment lease agreements are non-cancelable and expire at various dates through 2011.  All these leases are classified as operating leases.


Rent expense for the Company’s operating leases for the three months ended September 30, 2011 and 2010 and the nine months ended September 30, 2011 and 2010 amounted to approximately $5,000, $5,000, $16,000 and $16,000, respectively.


Litigation - The Company, in the normal course of business, is involved in certain legal matters for which it carries insurance, subject to certain exclusions and deductibles.  As of September 30, 2011, and through the date of issuance of these financial statements, there was no asserted or unasserted litigation, claims or assessments warranting recognition and/or disclosure in the financial statements.


[12] Subsequent Events


In October 2011, the Company issued 400,000 shares of common stock to a consultant for services.  The shares are valued at $20,000, the fair value at date of issuance.
















FF-16





PART II


INFORMATION NOT REQUIRED IN PROSPECTUS


Other Expenses of Issuance and Distribution


We will pay all expenses in connection with the registration and sale of the common stock by the selling shareholder. The estimated expenses of issuance and distribution are set forth below.


SEC filing fee

 

$

10.89

 

Legal expenses

 

$

25,000

*

Accounting expenses

 

$

10,000

*

Miscellaneous

 

$

5,000

*

Total

 

$

40,010.89

*


* Estimate


Indemnification of Directors and Officers


Our certificate of incorporation and bylaws provide that we will indemnify an officer, director, or former officer or director, to the full extent permitted by law.  We have been advised that in the opinion of the U.S. Securities and Exchange Commission indemnification for liabilities arising under the Securities Act is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities is asserted by one of our directors, officers, or controlling persons in connection with the securities being registered, we will, unless in the opinion of our legal counsel the matter has been settled by controlling precedent, submit the question of whether such indemnification is against public policy to a court of appropriate jurisdiction. We will then be governed by the court’s decision.


Recent Sales of Unregistered Securities


During the past three years, we have issued the following securities which were not registered under the Securities Act.  Unless otherwise indicated, all of the share issuances described below were made in reliance on the exemption from registration provided by Section 4(2) of the Securities Act for transactions not involving a public offering.


On January 30, 2009, we issued 26,261 shares of our restricted common stock, with a fair value of $1.83 per share or $48,000, to our outside securities counsel for services rendered in connection with the effective filing of Form 15c-211 and submittal to FINRA through a market maker.


On February 11, 2009, we issued 10,942 shares of our common stock, with a fair value of $1.83 per share or $20,000, to our Chief Executive Officer and Chairman for services rendered as the Chairman of the our Board of Directors throughout the 2009 fiscal year.


On October 19, 2009, in connection with the Exchange Agreement, we issued to the previous shareholders of Diamond Information Institute 2,585,175 shares of our common stock in exchange for all of the outstanding shares of Diamond Information Institute.


On November 16, 2009, we entered into a Securities Purchase Agreement (the “Tangiers Agreement”) with Tangiers Capital, LLC (“Tangiers”).  Pursuant to the Tangiers Agreement, we may, at our discretion, periodically sell to Tangiers shares of our common stock for a total purchase price of up to $25,000,000.  Pursuant to the Tangiers Agreement, on December 16, 2009, and finalized on January 22, 2010, Tangiers received a one-time commitment fee equal to $500,000 of our common stock divided by the lowest volume weighted average price of our common stock during the ten business days immediately following the date of the Tangiers Agreement, as quoted by Bloomberg, LP.  As such, we issued to Tangiers 92,593 shares of our common stock.  On June 22, 2010, we mutually agreed with Tangiers to terminate the Tangiers Agreement.




II-1




On January 12, 2010, through two agreements with Caesar Capital Group, LLC (Caesar”), we settled approximately $250,000 and $152,000 of stockholder loans through the issuance of 90,580 and 66,561 shares of common stock, respectively, to Caesar.


On February 9, 2010, through an agreement with Socius CG II, Ltd (“Socius”), we settled a $700,000 payment of our credit line with Columbia Bank with the issuance of 975,000 shares of common stock (subject to adjustment) to Socius.  The offer and sale of the securities above were effected in reliance on Section 3(a)(10) of the Securities Act based on the court’s approval of the issuance of the shares and that the terms and conditions of the exchange of the shares for the release of the claims was fair, reasonable and adequate (procedurally and substantively) to the plaintiffs.


On January 25, 2010, March 3, 2010, March 9, 2010 and March 16, 2010, we issued 4,167, 7,167, 70,000 and 20,833 shares of common stock to two individuals for consulting and legal services rendered for the registration of securities with the SEC.

 

On April 8, 2010, we settled approximately $247,000 in payables with the issuance of 650,000 shares of common stock to Socius.  On May 15, 2010, an additional 64,473 shares were issued.  The offer and sale of the securities above were effected in reliance on Section 3(a)(10) of the Securities Act of 1933 based on the court’s approval of the issuance of the shares and that the terms and conditions of the exchange of the shares for the release of the claims was fair, reasonable and adequate (procedurally and substantively) to the plaintiffs.


On April 15, 2010, we issued 375,000 shares of common stock to a consultant for services previously rendered and recorded as share liability at March 31, 2010.  


On April 16, 2010, we issued 1,392,692 shares of common stock to our CEO pursuant to his employment agreement.


On April 12, 2010 and April 21, 2010, we issued 8,333 and 25,000 shares of common stock to two individuals for consulting and legal services rendered for the registration of securities with the SEC.


On May 17, 2010, we issued 1,073,340 shares of common stock to our CEO pursuant to his employment agreement.


On July 21, 2010, we issued 327,264 shares of common stock to our CEO pursuant to his employee agreement.


On August 4, August 16, August 18 and August 24, 2010, we issued an aggregate of 231,530 shares of common stock to a convertible debt holder for the conversion of debt in the amount of $24,500.


On August 20, 2010, we issued 59,524 shares of common stock to a convertible debt holder for the conversion of debt in the amount of $6,250.


On August 30, 2010, we issued 215,334 shares of common stock to our CEO pursuant to his employee agreement.


On September 7 and September 23, 2010, we issued 63,131 shares and 94,697 shares, respectively, of common stock to a convertible debt holder for the conversion of debt in the amount $12,500.


On October 1, 2010, we issued 223,391 shares of common stock to our Chief Executive Officer pursuant to his employee agreement.


On October 4 and October 18, 2010, we issued 66,138 shares and 83,333 shares, respectively, of common stock to a convertible debt holder for the conversion of debt in the amount $10,000.


On October 29 and November 16, 2010, we issued 112,249 shares and 118,371 shares, respectively, of common stock to a convertible debt holder for the conversion of debt in the amount $12,500.


On January 26, February 3, February 8, March 10 and March 22, 2011, we issued 100,000 shares, 200,000 shares, 238,663 shares, 437,158 shares and 246,154 shares for an aggregate of 1,221,975 shares of common stock to Asher for partial conversion of its convertible debt and accrued interest.



II-2




 

On February 8 and March 22, 2011, we issued 141,839 shares and 762,195 shares for an aggregate of 904,034 shares of common stock to Tangiers for partial conversion of its convertible debt and accrued interest.


On March 31, 2011, we issued an aggregate of 1,988,054 shares of common stock valued at $23,558 to its Chief Executive Officer pursuant to his employment agreement.


On April 1, April 6, April 12, April 20, April 26, April 29, May 4, May 26, June 10, June 23 and June 30, 2011, we issued 659,341 shares, 659,341 shares, 769,231 shares, 721,649 shares 448,718 shares, 589,041 shares, 684,932 shares, 720,000 shares, 707,965 shares, 705,128 shares, and 1,181,818 shares for an aggregate of 7,847,164 shares of common stock to Asher for partial conversion of its convertible debt and accrued interest.  The shares are valued at $85,970.


On April 18, 2011, we issued an aggregate of 1,203,059 shares of common stock to Tangiers for partial conversion of its convertible debt and accrued interest.  The shares are valued at $13,871.


On August 26, 2011, we issued 533,553 shares of common stock for payment of legal fees.  The shares are valued at $34,681, the fair value at date of issuance.


On October 17, 2011, we issued 400,000 shares of common stock to a consultant for professional services rendered.


On October 21, October 24, October 25, October 26 and November 1, 2011, we issued 338,983 shares, 421,941 shares, 578,512 shares, 330,579 shares and 439,650 shares of common stock to Asher for conversion of its convertible debt and accrued interest in the aggregate amount of $52,000.


On November 9, November 17, November 28, and December 2, 2011, we issued 389,105 shares, 662,252 shares, 712,758 shares and 569,109 shares of common stock to Asher for conversion of its convertible debt in the aggregate amount of $39,522.


On November 15, 2011, we issued an aggregate of 1,040,133 shares of common stock to Caesar for conversion of its convertible debt in the amount of $31,100.


On November 18 and December 19, 2011, we issued 500,000 shares and 600,000 shares of common stock to Panache Capital, LLC (“Panache”) for conversion of its convertible debt in the aggregate amount of $16,369.


On December 6, 2011, we issued 2,517,483 shares of common stock to Genesis Capital Management, LLC for conversion of its convertible debt in the amount of $36,000


On December 23, 2011, we issued 1,736,111 shares of common stock to TCA Global Credit Master Fund, LP for payment of 25% ($31,250) of the facility fee per the Committed Equity Facility Agreement dated November 28, 2011.


On January 17, 2012, we issued 750,000 shares of common stock to Panache for conversion of its convertible debt in the amount of $8,304.





II-3





EXHIBITS


Exhibit No.

 

Description

 

 

 

2.1

 

Share Exchange Agreement, dated October 19, 2009, by and between Alba Mineral Exploration, Inc. and Diamond Information Institute, Inc. (as filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the SEC on October 21, 2009)

 

 

 

2.2

 

Stock Purchase Agreement, dated October 20, 2009, by and among Alba Mineral Exploration, Inc., Owen Gibson, individually, Joan Gibson, individually, Darcy Brann, individually, Duane Schaffer, individually, Lindsay Devine, individually, and Dennis Rodowitz, individually (as filed as Exhibit 2.2 to the Company’s Current Report on Form 8-K, filed with the SEC on October 21, 2009)

 

 

 

3.1

 

Articles of Incorporation, as amended (as filed as Exhibit 3.1 to the Company’s Registration Statement on Form S-1/A, filed with the SEC on April 23, 2008)

 

 

 

3.2

 

Certificate of Amendment to the Articles of Incorporation (as filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the SEC on October 22, 2009)

 

 

 

3.3

 

Bylaws, as amended (as filed as Exhibit 3.2 to the Company’s Registration Statement on Form S-1/A, filed with the SEC on April 23, 2008)

 

 

 

3.4

 

Certificate of Designation of Preferences, Rights and Limitations of the Bergio International Inc. Series A Preferred Stock, as filed with the Delaware Secretary of State on September 2, 2011 (as filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the SEC on September 8, 2011)

 

 

 

5.1

 

Opinion of Lucosky Brookman LP *

 

 

 

10.1

 

Order Approving Stipulation for Settlement of Claim, dated February 4, 2010 (as filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on February 5, 2010)

 

 

 

10.2

 

Amended and Restated Employment Agreement, dated September 1, 2011, by and between Bergio International Inc. and Berge Abajian, individually (as filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on September 8, 2011)

 

 

 

10.3

 

Bergio International, Inc. 2011 Stock Incentive and Reward Plan (as filed as Exhibit 10.1 to the Company’s Registration Statement on Form S-8, filed with the SEC on May 10, 2011).

 

 

 

10.4

 

Committed Equity Facility Agreement, dated December 23, 2011, by and between Bergio International Inc. and TCA Global Credit Master Fund, LP *

 

 

 

10.5

 

Registration Rights Agreement, dated December 23, 2011, by and between Bergio International Inc. and TCA Global Credit Master Fund, LP *

 

 

 

23.1

 

Consent of Silberstein Ungar, PLLC *

 

 

 

23.2

 

Consent of Lucosky Brookman LP (included in Exhibit 5.1 herewith)


* filed herewith




II-4





Undertakings


The undersigned registrant hereby undertakes:


(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:


i. To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;


ii. To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.


iii. To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;


(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.


(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.


(4) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.


(5) Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.





II-5





SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Fairfield, State of New Jersey, on February 1, 2012.

 

 

 

BERGIO INTERNATIONAL INC.

 

 

 

 

 

 

 

By:

/s/ Berge Abajian

 

 

Name: Berge Abajian

 

 

Title: Chief Executive Officer

Principal Executive Officer

Chief Financial Officer

Principal Financial Officer

Principal Accounting Officer

 

 

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY OR ON BEHALF OF THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED:

 

Name

 

Position

 

Date

 

 

 

 

 

/s/ Berge Abajian

 

Chief Executive Officer, Principal Executive Officer,

 

February 1, 2012

Berge Abajian

 

Chief Financial Officer, Principal Financial Officer, Principal Accounting Officer and Chairman

 

 

 

 

 

 

 

/s/ Arpi Abajian

 

Secretary

 

February 1, 2012

Arpi Abajian

 

 

 

 

 

 

 

 

 


 
















II-6



 

Exhibit 5.1



[BRGO_EX5002.GIF]



February 1, 2012



Bergio International Inc.

12 Daniel Road

East Fairfield, NJ 07004


Re: Registration Statement on Form S-1


Ladies and Gentlemen:


We have acted as outside counsel to Bergio International Inc., a Delaware corporation (the “Company”), in connection with the preparation and filing by the Company of a registration statement on Form S-1 (the “Registration Statement”) with the U.S. Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”), with respect to the registration of 9,500,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), that are issuable upon delivery of a put notice (the “Notice”) granted to the Company pursuant to the terms and conditions of that certain Equity Facility Agreement, dated December 23, 2011, by and between the Company and TCA Global Credit Master Fund, LP (the “Agreement”).  The shares of Common Stock issuable upon delivery of the Notice are referred to herein as the “Shares.”


This opinion is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act.


In connection with this opinion, we have examined and relied upon the originals or copies of such documents, corporate records, and other instruments as we have deemed necessary or appropriate for the purpose of this opinion, including, without limitation, the following: (a) the articles of incorporation of the Company; (b) the bylaws of the Company; (c) resolutions adopted by the board of directors of the Company relating to the authorization and issuance of the Shares by the Company; (d) the Registration Statement, including all exhibits thereto; and (e) the Agreement.


In our examination, we have assumed the genuineness of all signatures, the legal capacity of all natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies and the authenticity of the originals of such documents, and the accuracy and completeness of the corporate records made available to us by the Company.  As to any facts material to the opinions expressed below, with your permission we have relied solely upon, without independent verification or investigation of the accuracy or completeness thereof: (a) the representations and warranties contained in the Agreement; and (b) certificates and oral or written statements and other information of or from public officials, officers or other representatives of the




Company and others.  With your permission, we have assumed compliance on the part of all parties to the Agreement with their covenants and agreements contained therein.


Based upon the foregoing, and in reliance thereon, we are of the opinion that the Shares covered by the Registration Statement when issued, sold, delivered, and paid for as contemplated by the Registration Statement, will be validly issued, fully paid, and non-assessable shares of Common Stock of the Company.


The opinion expressed herein is limited to the laws of the State of Delaware, including the Delaware Constitution, the Delaware General Corporation Law and all applicable statutory provisions and reported judicial decisions interpreting those laws.  This opinion is limited to the laws in effect as of the date that this Registration Statement is declared effective by the Commission and is provided exclusively in connection with the public offering contemplated by the Registration Statement.


We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference of this firm under the caption “Legal Matters” in the prospectus which is made part of the Registration Statement.  In giving this consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission thereunder.



 

Very truly yours,

 

 

 

 

 

LUCOSKY BROOKMAN LLP

 

 

 

 

 

/s/ Lucosky Brookman LLP

 







 

Exhibit 10.4


COMMITTED EQUITY FACILITY AGREEMENT


This Committed Equity Facility Agreement (the “ Agreement ”) is dated as of the 28th day of November, 2011 the (“ Effective Date ”) by and between TCA GLOBAL CREDIT MASTER FUND, LP , a Cayman Islands limited partnership (the “ Investor ”) and BERGIO INTERNATIONAL, INC. , a Delaware corporation (the “ Company ”).


RECITALS


WHEREAS , the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to the Investor, from time to time as provided herein, and the Investor shall purchase from the Company, up to $2,500,000 of the Company’s common stock, $.001 par value per share (the “ Common Stock ”); and


WHEREAS , such investments will be made in reliance upon the provisions of Regulation D (“ Regulation D ”) of the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (collectively, the “ Securities Act ”), or upon such other exemption from the registration requirements of the Securities Act as may be available with respect to any or all of the transactions to be entered into hereunder;


NOW, THEREFORE , in consideration of the premises and the mutual covenants of the parties hereinafter expressed and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, each intending to be legally bound, agree as follows:


ARTICLE I

CERTAIN DEFINITIONS


For purposes of this Agreement, except as otherwise expressly provided or otherwise defined elsewhere in this Agreement, or unless the context otherwise requires, the capitalized terms in this Agreement shall have the meanings assigned to them in this Article as follows:


1.1

Advance ” shall mean the portion of the Commitment Amount requested by the Company in the Advance Notice.


1.2

Advance Fee ” shall mean an amount in United States funds equal to five percent (5%) of the gross amount of each Advance.


1.3

Advance Notice ” shall mean a written notice in the form of Exhibit “A” attached hereto, executed by an officer of the Company and delivered to the Investor and setting forth the Advance amount that the Company requests from the Investor.


1.4

Advance Notice Date ” shall mean each date the Company delivers (in accordance with Section 2.1(b) of this Agreement) to the Investor an Advance Notice requiring the Investor to advance funds to the Company, subject to the terms of this Agreement.  No Advance Notice Date will be less than five (5) Trading Days after the immediately prior Advance Notice Date given by the Company, if any.




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1.5

Advance Settlement Date ” shall mean the third (3rd) Trading Day after the relevant Pricing Period, or such earlier day as may be available for settlement.


1.6

Affiliate ” shall have the meaning set forth in Rule 405 of the Securities Act.


1.7

Agreement ” shall have the meaning set forth in the preamble paragraph hereto.


1.8

By-Laws ” shall have the meaning set forth in Section 4.4.


1.9

Certificate of Incorporation ” shall have the meaning set forth in Section 4.4.


1.10

Claims ” shall have the meaning set forth in Section 5.1.


1.11

Closing ” shall mean one of the closings of a purchase and sale of Common Stock pursuant to Section 2.2.


1.12

Commitment Amount ” shall mean the aggregate amount of up to $2,500,000 which the Investor has agreed to provide to the Company in order to purchase the Shares pursuant to the terms and conditions of this Agreement.


1.13

Commitment Period ” shall mean the period commencing on the Effective Date, and expiring upon the termination of this Agreement in accordance with Section 10.2.


1.14

Common Stock ” shall have the meaning set forth in the recitals of this Agreement.


1.15

Company ” shall have the meaning set forth in the preamble paragraph hereto.


1.16

Company Indemnitees ” shall have the meaning set forth in Section 5.2.


1.17

Condition Satisfaction Date ” shall have the meaning set forth in Article VII.


1.18

Consolidation Event ” shall have the meaning set forth in Section 6.9.


1.19

Effective Date ” shall mean the date of this Agreement set forth in the introductory paragraph of this Agreement.


1.20

Environmental Laws ” shall have the meaning set forth in Section 4.9.


1.21

Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.


1.22

Facility Fee Shares ” shall have the meaning set forth in Section 12.4(d).


1.23

Indemnified Liabilities ” shall have the meaning set forth in Section 5.1.


1.24

Indemnitee ” shall have the meaning set forth in Section 5.3.


1.25

Indemnitor ” shall have the meaning set forth in Section 5.3.




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1.26

Investor ” shall have the meaning set forth in the preamble paragraph hereto.


1.27

Investor Indemnitees ” shall have the meaning set forth in Section 5.1.


1.28

Market Price ” shall mean the lowest daily VWAP of the Common Stock during the relevant Pricing Period.


1.29

Material Adverse Effect ” shall mean any condition, circumstance, or situation that has resulted in, or would reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of this Agreement or the transactions contemplated herein; (ii) a material adverse effect on the results of operations, assets, business or condition (financial or otherwise) of the Company, taken as a whole; or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under this Agreement.


1.30

Maximum Advance Amount ” shall mean, for each Advance Notice, the greater of: (i) an amount calculated by multiplying the Market Price applicable to the relevant Advance Notice, multiplied by 300,000 Shares; or (ii) two hundred percent (200%) of the Market Price applicable to the relevant Advance Notice.


1.31

Nine Month Valuation Date ” shall have the meaning set forth in Section 12.4(d).


1.32

Ownership Limitation ” shall have the meaning set forth in Section 2.1(a).


1.33

Person ” shall mean an individual, a corporation, a partnership, an association, a trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.


1.34

Preferred Stock ” shall have the meaning set forth in Section 4.4.


1.35

Pricing Period ” shall mean the five (5) consecutive Trading Days after the Advance Notice Date.


1.36

Principal Market ” shall mean the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market, the OTC Bulletin Board, the OTC Markets, the NYSE Euronext or the New York Stock Exchange, whichever is at the time the principal trading exchange or market for the Common Stock.


1.37

Purchase Price ” shall be set at ninety-five percent (95%) of the Market Price during the Pricing Period.






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1.38

Registrable Securities ” shall mean: (i) the Shares; and (ii) any securities issued or issuable with respect to the Shares by way of exchange, stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise.  As to any particular Registrable Securities, once issued such securities shall cease to be Registrable Securities when: (a) the Registration Statement has been declared effective by the SEC and such Registrable Securities have been disposed of pursuant to the Registration Statement; (b) such Registrable Securities have been sold under circumstances under which all of the applicable conditions of Rule 144 (or any similar provision then in force) under the Securities Act (“ Rule 144 ”) are met; or (c) in the opinion of counsel to the Company such Registrable Securities may permanently be sold without registration or without any time, volume or manner of sale limitations pursuant to Rule 144.


1.39

Registration Rights Agreement ” shall mean the Registration Rights Agreement dated the date hereof, regarding the filing of the Registration Statement for the resale of the Registrable Securities, entered into between the Company and the Investor.


1.40

Registration Statement ” shall mean a registration statement on Form S-1 or Form S-3 or on such other form promulgated by the SEC for which the Company then qualifies and which counsel for the Company shall deem appropriate, and which form shall be available for the registration of the resale by the Investor of the Registrable Securities under the Securities Act.


1.41

Regulation D ” shall have the meaning set forth in the recitals of this Agreement.


1.42

SEC ” shall mean the United States Securities and Exchange Commission.


1.43

SEC Documents ” shall have the meaning set forth in Section 4.3.


1.44

Securities Act ” shall have the meaning set forth in the recitals of this Agreement.


1.45

Settlement Document ” shall have the meaning set forth in Section 2.2(a).


1.46

Share Value ” shall have the meaning set forth in Section 12.4(d).


1.47

Shares ” shall mean the shares of Common Stock to be issued from time to time hereunder pursuant to Advances.


1.48

Trading Day ” shall mean any day during which the Principal Market shall be open for business.


1.49

Valuation Date ” shall have the meaning set forth in Section 12.4(d).


1.50

VWAP ” means, for any Trading Day, the daily volume weighted average price of the Common Stock for such date on the Principal Market as reported by Bloomberg L.P. (based on a Trading Day from 9:00 a.m. (New York City time) to 4:02 p.m. (New York City time)).




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ARTICLE II

ADVANCES


2.1

Advances; Mechanics . Subject to the terms and conditions of this Agreement (including, without limitation, the conditions of Article VII hereof), the Company, at its sole and exclusive option, may issue and sell to the Investor, and the Investor shall purchase from the Company, shares of Common Stock on the following terms:


(a)

Advance Notice .  At any time during the Commitment Period, the Company may require the Investor to purchase shares of Common Stock by delivering an Advance Notice to the Investor, subject to the conditions set forth in Article VII; provided, however, that: (i) the amount for each Advance as designated by the Company in the applicable Advance Notice shall not be more than the Maximum Advance Amount; (ii) the aggregate amount of the Advances pursuant to this Agreement shall not exceed the Commitment Amount; (iii) in no event shall the number of Shares issuable to the Investor pursuant to an Advance cause the aggregate number of Shares beneficially owned (as calculated pursuant to Section 13(d) of the Exchange Act) by the Investor and its Affiliates to exceed 9.99% of the then outstanding Common Stock (the “ Ownership Limitation ”); and (iv) in no event shall the aggregate offering price or number of Shares, as the case may be, exceed the aggregate offering price or number of Shares, as the case may be, available for issuance under the Registration Statement (the “ Registration Limitation ”).  Notwithstanding any other provision in this Agreement, the Company acknowledges and agrees that upon receipt of an Advance Notice, the Investor may sell Shares that it is unconditionally obligated to purchase under such Advance Notice prior to taking possession of such Shares.


(b)

Date of Delivery of Advance Notice .  Advance Notices shall be delivered in accordance with the instructions set forth on the bottom of Exhibit “A” .  An Advance Notice shall be deemed delivered on: (i) the Trading Day it is received by the Investor, if such Advance Notice is received prior to 5:00 pm, Eastern Time; or (ii) the immediately succeeding Trading Day if such Advance Notice is received by Investor after 5:00 pm, Eastern Time, on a Trading Day or at any time on a day which is not a Trading Day.  No Advance Notice may be deemed delivered on a day that is not a Trading Day.  The Company may not deliver an Advance Notice to Investor unless at least five (5) Trading Days have elapsed since the immediately preceding Advance Notice Date.


(c)

Ownership Limitation .  In connection with each Advance Notice delivered by the Company, any portion of an Advance that would cause the Investor to exceed the Ownership Limitation shall automatically be deemed to be withdrawn by the Company with no further action required by the Company.


(d)

Registration Limitation .  In connection with each Advance Notice, any portion of an Advance that would cause the Investor to exceed the Registration Limitation shall automatically be deemed to be withdrawn by the Company with no further action required by the Company.  


2.2

Closings .  Each Closing shall take place on the Advance Settlement Date in accordance with the procedures set forth below.  In connection with each Closing, the Company and the Investor shall fulfill each of its obligations as set forth below:




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(a)

Within one (1) Trading Day after the expiration of the Pricing Period applicable with respect to an Advance Notice, the Investor shall deliver to the Company a written document (each a “ Settlement Document ”) setting forth: (i) the amount of the Advance (taking into account any adjustments pursuant to Section 2.1 above); (ii) the Purchase Price; (iii) the Market Price (as supported by a report by Bloomberg L.P. indicating the VWAP for each of the Trading Days during the Pricing Period); and (iv) the number of Shares to be issued and subscribed for in connection with the applicable Advance (which in no event will be greater than the Ownership Limitation or the Registration Limitation), in each case taking into account the terms and conditions of this Agreement.  The Settlement Document shall be in the form attached hereto as Exhibit “B” .


(b)

Upon receipt of the Settlement Document with respect to each Advance, the Company shall, by promptly (and in any event not later than one (1) Trading Day after receipt) signing the Settlement Document and returning it to the Investor, confirm that it has obtained all permits and qualifications, if any, required for the issuance and transfer of the Shares applicable to such Advance, or shall have the availability of exemptions therefrom, and that the sale and issuance of such Shares shall be legally permitted by all laws and regulations to which the Company is subject.  Execution of the Settlement Document by the Company shall also be deemed a representation by the Company that all conditions to an Advance under Article VII have been fully satisfied in all material respects as of each Condition Satisfaction Date.


(c)

On each Advance Settlement Date, the Company will, or will cause its transfer agent to, electronically transfer such number of Shares registered in the name of the Investor as shall equal: (i) the amount of the Advance specified in such Advance Notice and confirmed in the Settlement Document signed by the Company (as may be reduced according to the terms of this Agreement); divided by (ii) the Purchase Price, by crediting the Investor’s account or its designee’s account at the Depository Trust Company through its Deposit Withdrawal Agent Commission System or by such other means of delivery as may be mutually agreed upon by the parties hereto (which in all cases shall be freely tradable, registered shares in good deliverable form, covered by an effective Registration Statement pursuant to which the Investor is permitted to resell such Shares) against payment of the Purchase Price in same day funds to an account designated by the Company.  In the event the Shares cannot be delivered through the Deposit Withdrawal Agent Commission System, then the Company shall cause its transfer agent, on each Advance Settlement Date, to issue and surrender to a common carrier for overnight delivery to the Investor, certificates, registered in the name of the Investor or its designees, representing the Shares applicable to such Advance. No fractional shares shall be issued, and any fractional amounts shall be rounded to the next higher whole number of Shares.  Any certificates evidencing Shares delivered pursuant hereto shall be free of restrictive legends.


(d)

On or prior to the Advance Settlement Date, each of the Company and the Investor shall deliver to the other, as applicable, all documents, instruments and writings required to be delivered by either of them pursuant to this Agreement in order to implement and effect the transactions contemplated herein.


2.3

Hardship .  In the event the Investor sells shares of the Company’s Common Stock after receipt of an Advance Notice and the Company fails to perform its obligations as mandated in Section 2.2, the Company agrees that in addition to and in no way limiting the rights and obligations set forth in Article V hereto, and in addition to any other remedy to which the Investor is entitled at law or in equity, including, without limitation, specific performance, the Investor shall be entitled to an injunction or injunctions to prevent such breaches of this Agreement and to specifically enforce, without the posting of a bond or other security, the terms and provisions of this Agreement.



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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF INVESTOR


Investor hereby represents and warrants to, and agrees with, the Company that the following are true and correct as of the date hereof:


3.1

Organization and Authorization .  The Investor is duly organized, validly existing and in good standing under the laws of the Cayman Islands and has all requisite power and authority to purchase and hold the Shares.  The decision to invest and the execution and delivery of this Agreement by such Investor, the performance by such Investor of its obligations hereunder and the consummation by such Investor of the transactions contemplated hereby have been duly authorized and requires no other proceedings on the part of the Investor.  The undersigned has the right, power and authority to execute and deliver this Agreement and all other instruments on behalf of the Investor.  This Agreement has been duly executed and delivered by the Investor and, assuming the execution and delivery hereof and acceptance thereof by the Company, will constitute the legal, valid and binding obligations of the Investor, enforceable against the Investor in accordance with its terms.


3.2

Evaluation of Risks .  The Investor has such knowledge and experience in financial, tax and business matters as to be capable of evaluating the merits and risks of, and bearing the economic risks entailed by, an investment in the Company and of protecting its interests in connection with this transaction.  It recognizes that its investment in the Company involves a high degree of risk.


3.3

Investment Purpose .  The securities are being purchased by the Investor for its own account, and for investment purposes.  The Investor agrees not to assign or in any way transfer the Investor’s rights to the securities or any interest therein and acknowledges that the Company will not recognize any purported assignment or transfer except in accordance with applicable Federal and state securities laws.  No other person has or will have a direct or indirect beneficial interest in the securities.  The Investor agrees not to sell, hypothecate or otherwise transfer the Investor’s securities unless the securities are registered under Federal and applicable state securities laws or unless, in the opinion of counsel satisfactory to the Company, an exemption from such laws is available.


3.4

Investor Status .  The Investor is an “ Accredited Investor ” as that term is defined in Rule 501(a)(3) of Regulation D of the Securities Act.


3.5

No Legal Advice From the Company .  The Investor acknowledges that it had the opportunity to review this Agreement and the transactions contemplated by this Agreement with its own legal counsel and investment and tax advisors.  The Investor is relying solely on such counsel and advisors and not on any statements or representations of the Company or any of the Company’s representatives or agents for legal, tax or investment advice with respect to this investment, the transactions contemplated by this Agreement or the securities laws of any jurisdiction.


3.6

Not an Affiliate .  The Investor is not an officer, director or a Person that directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with the Company or any Affiliate of the Company.




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3.7

Trading Activities .  The Investor’s trading activities with respect to the Company’s Common Stock shall be in compliance with all applicable federal and state securities laws, rules and regulations and the rules and regulations of the Principal Market on which the Common Stock is listed or traded.  Neither the Investor nor its Affiliates has an open short position in the Common Stock, and the Investor agrees that it shall not, and that it will cause its Affiliates not to, engage in any short sales of the Common Stock during the Commitment Period; provided that the Company acknowledges and agrees that upon receipt of an Advance Notice the Investor has the right to sell the Shares to be issued to the Investor pursuant to the Advance Notice prior to receiving such Shares.


ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY


Except as stated below, on the disclosure schedules attached hereto, if any, or in the SEC Documents, the Company hereby represents and warrants to the Investor that the following are true and correct as of the Effective Date:

 

4.1

SEC Documents; Financial Statements . The Common Stock is registered pursuant to Section 12(b) of the Exchange Act and the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC under the Exchange Act (all of the foregoing filed within the two (2) years preceding the date hereof or amended after the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein, being hereinafter referred to as the “ SEC Documents ”). The Company is current with its filing obligations under the Exchange Act and all SEC Documents have been filed on a timely basis or the Company has received a valid extension of such time of filing and has filed any such SEC Document prior to the expiration of any such extension. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except: (i) as may be otherwise indicated in such financial statements or the notes thereto; or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).  No other information provided by or on behalf of the Company to the Investor which is not included in the SEC Documents contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are or were made, not misleading.




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4.2

Organization and Qualification .  The Company is duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power to own its properties and to carry on its business as now being conducted.  Each of the Company and its subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect.


4.3

Authorization, Enforcement, Compliance with Other Instruments .  (i) The Company has the requisite corporate power and authority to enter into and perform this Agreement and any related agreements, in accordance with the terms hereof and thereof; (ii) the execution and delivery of this Agreement and any related agreements by the Company and the consummation by it of the transactions contemplated hereby and thereby, have been duly authorized by the Company’s Board of Directors and no further consent or authorization is required by the Company, its Board of Directors or its stockholders; (iii) this Agreement and any related agreements have been duly executed and delivered by the Company; (iv) this Agreement and assuming the execution and delivery thereof and acceptance by the Investor, any related agreements, constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors’ rights and remedies.


4.4

Capitalization .  The authorized capital stock of the Company consists of two hundred million (200,000,000) shares of Common Stock and fifty-one (51) shares of preferred stock, $.001 par value per share (the “ Preferred Stock ”), of which 34,346,343 shares of Common Stock are issued and outstanding as of the date hereof, and of which fifty-one shares of Preferred Stock are issued and outstanding as of the date hereof.  All of such outstanding shares have been validly issued and are fully paid and nonassessable.  The Common Stock is currently quoted on the OTC Bulletin Board under the trading symbol “BRGO.”  Except as disclosed in the SEC Documents, no shares of Common Stock are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company.  Except as disclosed in the SEC Documents, as of the date hereof: (i) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its subsidiaries, or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its subsidiaries; (ii) there are no outstanding debt securities; (iii) there are no outstanding registration statements; and (iv) there are no agreements or arrangements under which the Company or any of its subsidiaries is obligated to register the sale of any of their securities under the Securities Act (except pursuant to this Agreement).  There are no securities or instruments containing anti-dilution or similar provisions that will be triggered by this Agreement or any related agreement or the consummation of the transactions described herein or therein.  The Company has furnished or made available to the Investor true and correct copies of the Company’s Certificate of Incorporation, as amended and as in effect on the date hereof (the “ Certificate of Incorporation ”), and the Company’s By-laws, as in effect on the date hereof (the “ By-laws ”), and the terms of all securities convertible into or exercisable for Common Stock and the material rights of the holders thereof in respect thereto.



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4.5

No Conflict .  The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby will not: (i) result in a violation of the Certificate of Incorporation, any certificate of designations of any outstanding series of Preferred Stock of the Company or By-laws; or (ii) conflict with or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its subsidiaries is a party, or result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and the rules and regulations of the Principal Market on which the Common Stock is quoted) applicable to the Company or any of its subsidiaries or by which any material property or asset of the Company is bound or affected and which would cause a Material Adverse Effect.  Except as disclosed in the SEC Documents, neither the Company nor its subsidiaries is in violation of any term of or in default under its Certificate of Incorporation or By-laws or their organizational charter or by-laws, respectively, or any material contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Company or its subsidiaries that would cause a Material Adverse Effect.  The business of the Company and its subsidiaries is not being conducted in violation of any material law, ordinance or regulation of any governmental entity.  Except as specifically contemplated by this Agreement and as required under the Securities Act and any applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under or contemplated by this Agreement in accordance with the terms hereof or thereof.  All consents, authorization, orders, filings and registrations which the Company is required to make or obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof.  The Company and its subsidiaries are not aware of any fact or circumstance which might give rise to any of the foregoing.


4.6

No Default .  Except as disclosed in the SEC Documents, the Company is not in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any indenture, mortgage, deed of trust or other material instrument or agreement to which it is a party or by which it is or its property is bound, and neither the execution, nor the delivery by the Company, nor the performance by the Company of its obligations under this Agreement or any of the exhibits or attachments hereto, will conflict with or result in the breach or violation of any of the terms or provisions of, or constitute a default or result in the creation or imposition of any lien or charge on any assets or properties of the Company, under its Certificate of Incorporation, By-Laws, any material indenture, mortgage, deed of trust or other material agreement applicable to the Company or instrument to which the Company is a party or by which it is bound, or any statute, or any decree, judgment, order, rules or regulation of any court or governmental agency or body having jurisdiction over the Company or its properties, in each case which default, lien or charge is likely to cause a Material Adverse Effect.





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4.7

Intellectual Property Rights .  The Company and its subsidiaries own or possess adequate rights or licenses to use all material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted.  The Company and its subsidiaries do not have any knowledge of any infringement by the Company or its subsidiaries of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, and, to the knowledge of the Company, there is no claim, action or proceeding being made or brought against, or to the Company’s knowledge, being threatened against the Company or its subsidiaries, regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement; and the Company is not aware of any facts or circumstances which might give rise to any of the foregoing.


4.8

Employee Relations .  Neither the Company nor any of its subsidiaries is involved in any labor dispute nor, to the knowledge of the Company or any of its subsidiaries, is any such dispute threatened.  None of the Company’s or its subsidiaries’ employees is a member of a union and the Company and its subsidiaries believe that their relations with their employees are good.


4.9

Environmental Laws .  The Company and its subsidiaries are: (i) in compliance with any and all applicable material foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“ Environmental Laws ”); (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses; and (iii) are in compliance with all terms and conditions of any such permit, license or approval, in each case except where such noncompliance or nonreceipt would not, individually or in the aggregate, have a Material Adverse Effect.


4.10

Title .  Except as set forth in the SEC Documents, the Company has good and marketable title to its properties and material assets owned by it, free and clear of any pledge, lien, security interest, encumbrance, claim or equitable interest, other than such as are not material to the business of the Company.  Any real property and facilities held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries.


4.11

Insurance .  The Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary for similarly situated companies in the businesses in which the Company and its subsidiaries are engaged.  The Company has not been refused any insurance coverage sought or applied for and the Company does not have any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.


4.12

Regulatory Permits .  The Company and its subsidiaries possess all material certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit.



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4.13

Internal Accounting Controls .  The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.


4.14

No Material Adverse Breaches, etc .  Except as set forth in the SEC Documents, neither the Company nor any of its subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which, in the judgment of the Company’s officers, has or is expected in the future to have a Material Adverse Effect on the Company or its subsidiaries, taken as a whole.


4.15

Absence of Litigation .  Except as set forth in the SEC Documents, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending against or affecting the Company, the Common Stock or any of the Company’s subsidiaries, wherein an unfavorable decision, ruling or finding would have a Material Adverse Effect.


4.16

Subsidiaries .  Except as disclosed in the SEC Documents, the Company does not presently own or control, directly or indirectly, any interest in any other Person.


4.17

Tax Status .  Except as disclosed in the SEC Documents, the Company and each of its subsidiaries has made or filed all foreign, federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject and (unless and only to the extent that the Company and each of its subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith, and the Company and its subsidiaries have set aside on their respective books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply.  There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.


4.18

Certain Transactions .  Except as set forth in the SEC Documents, none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.




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4.19

The Shares . The Shares have been duly authorized and, when issued, delivered and paid for pursuant to this Agreement, will be validly issued and fully paid and non-assessable, free and clear of all liens, claims and encumbrances of any nature or kind, and will be issued in compliance with all applicable United States federal and state securities laws.  The capital stock of the Company, including the Common Stock, shall conform in all material respects to the description thereof to be contained in the Registration Statement. Neither the stockholders of the Company, nor any other Person, have any preemptive rights or rights of first refusal with respect to the Shares or, except as set forth in the SEC Documents, other rights to purchase or receive any of the Shares or any other securities or assets of the Company, and no Person has the right, contractual or otherwise, to cause the Company to issue to it, or register pursuant to the Securities Act, any shares of capital stock or other securities or assets of the Company upon the issuance or sale of the Shares. The Company is not obligated to offer the Shares on a right of first refusal basis or otherwise to any third parties including, without limitation, to current or former shareholders of the Company, underwriters, brokers, or agents.


4.20

Dilution .  The Company is aware and acknowledges that issuance of the Shares could cause dilution to existing shareholders and could significantly increase the outstanding number of shares of Common Stock.


4.21

Acknowledgment Regarding Investor’s Purchase of Shares . The Company acknowledges and agrees that the Investor is acting solely in the capacity of an arm’s length investor with respect to this Agreement and the transactions contemplated hereunder. The Company further acknowledges that the Investor is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereunder and any advice given by the Investor or any of its representatives or agents in connection with this Agreement and the transactions contemplated hereunder is merely incidental to the Investor’s purchase of the Shares hereunder.  The Company is aware and acknowledges that it may not be able to request Advances under this Agreement until a Registration Statement becomes effective, and only in compliance with the rules of the Principal Market.  The Company further is aware and acknowledges that any fees paid or shares issued pursuant to Section 12.4 hereunder shall be earned as of the Effective Date and are not refundable or returnable under any circumstances.


ARTICLE V

INDEMNIFICATION


The Investor and the Company covenant to the other the following with respect to itself:


5.1

Indemnification by the Company .  In consideration of the Investor’s execution and delivery of this Agreement, and in addition to all of the Company’s other obligations under this Agreement, the Company shall, and does hereby agree to, defend, protect, indemnify and hold harmless the Investor, and all of the Investor’s affiliates and subsidiaries, and each Person who controls the Investor within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and the officers, directors, partners, members, employees and agents of each of them (collectively, the “ Investor Indemnitees ”), from and against any and all actions, causes of action, suits, claims, demands, threats and proceedings (collectively, the “ Claims ”), and the Company agrees to reimburse the Investor Indemnitees, or any of them, for any and all losses, costs, penalties, fees, liabilities, obligations, judgments, expenses, and damages, including, without limitation, reasonable attorneys’ fees, paralegals’ fees and other costs, expenses and disbursements reasonably incurred by the Investor Indemnities, or any of them, in connection with investigating, defending or settling any such Claims, including such expenses incurred throughout all trial and appellate levels and administrative and bankruptcy proceedings



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(collectively, the “ Indemnified Liabilities ”), suffered or incurred by the Investor Indemnitees, or any of them, as a result of, or arising out of, or relating to: (a) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement for the registration of the Shares as originally filed or in any amendment thereof, or in any related prospectus, or in supplement, or in any amendment thereof or supplement thereto, or arising out of or which are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided , however , that the Company will not be liable in any such case to the extent that any such Indemnified Liabilities arise out of or are based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Investor specifically for inclusion therein; (b) any misrepresentation or breach of any representation or warranty made by the Company in this Agreement or any other certificate, instrument or document contemplated hereby or thereby; (c) any breach of any covenant, agreement or obligation of the Company contained in this Agreement or any other certificate, instrument or document contemplated hereby or thereby; and (d) any Claim brought or made against the Investor Indemnitees, or any of them, not arising out of any action or inaction of an Investor Indemnitee, and arising out of or resulting from the execution, delivery, performance or enforcement of this Agreement or any other instrument, document or agreement executed pursuant hereto  or thereto by any of the Investor Indemnitees.  To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities, which is permissible under applicable law.


5.2

Indemnification by Investor .  In consideration of the Company’s execution and delivery of this Agreement, and in addition to all of the Investor’s other obligations under this Agreement, the Investor shall, and does hereby agree to, defend, protect, indemnify and hold harmless the Company, and all of the Company’s subsidiaries, and each Person who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and the officers, directors, partners, members, employees and agents of each of them (collectively, the “ Company Indemnitees ”), from and against any and all Claims, and the Investor agrees to reimburse the Company Indemnitees, or any of them, for any and all Indemnified Liabilities, suffered or incurred by the Company Indemnitees, or any of them, as a result of, or arising out of, or relating to: (a) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement for the registration of the Shares as originally filed or in any amendment thereof, or in any related prospectus, or in any amendment thereof or supplement thereto, or arising out of or which are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that any such untrue statement or alleged untrue statement or omission or alleged omission was in connection with information furnished to the Company by Investor specifically for inclusion therein; provided , however , that the Investor will not be liable in any such case to the extent that any such Indemnified Liabilities arise out of or are based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein by the Company; (b) any misrepresentation or breach of any representation or warranty made by the Investor in this Agreement or any other certificate, instrument or document contemplated hereby or thereby; (c) any breach of any covenant, agreement or obligation of the Investor contained in this Agreement or any other certificate, instrument or document contemplated hereby or thereby; and (d) any Claim brought or made against the Company Indemnitees, or any of them, not arising out of any action or inaction of a Company Indemnitee, and arising out of or resulting from the execution, delivery, performance or enforcement of this Agreement or any other instrument, document or agreement executed pursuant hereto or thereto by any of the Company Indemnitees.  To the extent that the foregoing undertaking by the Investor may be



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unenforceable for any reason, the Investor shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities, which is permissible under applicable law.


5.3

Notice of Claim .  For purposes of this Article V, a party that is subject to a Claim and entitled to indemnification hereunder is sometimes hereinafter referred to as the “ Indemnitee ,” and the party having the obligation to indemnify the other is sometimes hereinafter referred to as the “ Indemnitor .”  Promptly after receipt by an Indemnitee of notice of the commencement of any Claim involving an Indemnified Liability, such Indemnitee shall, if an Indemnified Liability in respect thereof is to be made against any Indemnitor, deliver to the Indemnitor a written notice of the commencement thereof; provided, however, that the failure to so notify the Indemnitor: (i) will not relieve the Indemnitor of liability under this Article V, unless and to the extent the Indemnitor did not otherwise learn of such Claim and such failure results in the forfeiture by the Indemnitor of substantial rights and defenses; and (ii) will not, in any event, relieve the Indemnitor from any obligations to the Indemnitee, other than those indemnity obligations provided in this Article V.  In the case of parties indemnified pursuant to Section 5.1 above, counsel to the Indemnitee shall be selected by the Company, and, in the case of parties indemnified pursuant to Section 5.2 above, counsel to the Indemnitee shall be selected by the Investor.  An Indemnitor may participate, at its own expense, in the defense of any such Claim; provided , however , that counsel to the Indemnitor shall not (except with the consent of the Indemnitee) also be counsel to the Indemnitee.  In no event shall the Indemnitor be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all Indemnitees in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. The Indemnitee shall cooperate fully with the Indemnitor in connection with any negotiation or defense of any Claim, and the Indemnitee shall furnish to the Indemnitor all information reasonably available to the Indemnitee which relates to such Claim. The Indemnitor shall keep the Indemnitee fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto.  An Indemnitor will not, without the prior written consent of the Indemnitee, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened Claim in respect of which indemnification or contribution may be sought under this Agreement (whether or not the Indemnitees are actual or potential parties to such Claim) unless: (i) such settlement, compromise or consent includes an unconditional release of each Indemnitee from all liability arising out of such Claim; and (ii) such settlement, compromise or consent does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any Indemnitee.  Following indemnification as provided for hereunder, the Indemnitor shall be subrogated to all rights of the Indemnitee with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made.


5.4

Contribution . In the event that the indemnity provided in Section 5.1 or Section 5.2 is unavailable to or insufficient to hold harmless an Indemnitee for any reason, the Company and the Investor, as applicable, severally agree to contribute to the aggregate Indemnified Liabilities to which the Company and the Investor may be subject, as applicable, in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and by the Investor on the other from transactions contemplated by this Agreement. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the Company and the Investor severally shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and of the Investor on the other in connection with the statements or omissions which resulted in such Indemnified Liabilities as well as any other relevant equitable considerations. Benefits received by the Company shall be deemed to be equal to the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by it, and benefits received by the Investor shall be deemed to be equal to the total discounts received by the



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Investor. Relative fault shall be determined by reference to, among other things, whether any untrue or any alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information provided by the Company on the one hand or the Investor on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company and the Investor agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation which does not take account of the equitable considerations referred to above. The aggregate amount of Indemnified Liabilities incurred by an Indemnitee and referred to above in this Article V shall be deemed to include any legal or other expenses reasonably incurred by such Indemnitee in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 5.4, the Investor shall not be required to contribute any amount in excess of the amount by which the Purchase Price for Shares actually purchased pursuant to this Agreement exceeds the amount of any damages which the Investor has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. For purposes of this Article V, each Person who controls the Investor within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and each director, officer, employee and agent of the Investor shall have the same rights to contribution as the Investor, and each Person who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this Section 5.4.


5.5

Remedies .  The remedies provided for in this Article V are not exclusive and shall not limit any rights or remedies which may otherwise be available to any Indemnitee.


5.6

Survival .  The obligations of the parties to indemnify or make contribution under this Article V shall survive termination of this Agreement.


ARTICLE VI

COVENANTS OF THE COMPANY


6.1

Registration Rights . The Company shall cause the Registration Rights Agreement to remain in full force and effect and the Company shall comply in all material respects with the terms thereof.


6.2

Listing of Common  Stock .  The Company  shall  maintain the Common  Stock’s  authorization  for  quotation on a Principal Market, including the OTC Markets.


6.3

Exchange Act Registration .  The Company will cause its Common Stock to continue to be registered under the Exchange Act, will file in a timely  manner all  reports  and other  documents  required of it as a reporting  company  under the  Exchange Act and will not take any action or file any document (whether or not permitted by Exchange Act or the rules thereunder) to terminate or suspend  such  registration or to terminate or suspend its reporting and filing obligations under said Exchange Act.




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6.4

Transfer Agent Instructions .  Not later than two (2) business days after each Advance  Notice Date and prior to each Closing and the effectiveness of the Registration Statement and resale of the Common Stock by the Investor, the Company will deliver instructions to its transfer agent to issue shares of Common Stock free of restrictive legends.


6.5

Corporate Existence . The Company will take all steps necessary to preserve and continue the corporate existence of the Company.


6.6

Notice of Certain Events Affecting Registration; Suspension of Right to Make an Advance . The Company will immediately notify the Investor upon its becoming aware of the occurrence  of any of the following events in respect of a Registration Statement or related  prospectus relating to an offering of Registrable Securities: (i) receipt of any request for additional information by the SEC or any other Federal or state governmental authority, during the period of effectiveness of the Registration  Statement, for amendments or supplements to the Registration Statement or related prospectus; (ii) the issuance by the SEC or any other Federal or state governmental authority of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iii) receipt of any notification with respect to the suspension of the qualification or exemption from  qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening  of any proceeding for such purpose; (iv) the happening of any event that makes any statement made in the Registration Statement or related prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in the Registration Statement, related prospectus or such other documents so that, in the case of the Registration  Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the related prospectus, it will not  contain any untrue statement of a material fact or omit to state  any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (v) the Company’s reasonable determination that a post-effective amendment to the Registration Statement would be appropriate, in which event the Company will promptly make available to the Investor any such supplement or amendment to the Registration Statement and related prospectus.  The Company shall not deliver to the  Investor any Advance Notice during the continuation of any of the foregoing events.


6.7

Expectations Regarding Advance Notices . Within ten (10) days after the commencement of each calendar quarter occurring subsequent to the commencement of the Commitment Period, the Company must notify the Investor, in writing, as to its reasonable expectations as to the dollar amount it intends to raise during such calendar quarter, if any, through the issuance of Advance Notices.  Such  notification shall constitute only the Company’s good faith estimate and shall in no way obligate the Company to raise such amount, or any amount, or otherwise limit its ability to deliver Advance Notices.


6.8

Intentionally Deleted .  


6.9

Consolidation; Merger .  The Company shall not, at any time after the Effective Date, effect any merger or consolidation of the Company with or into, or a transfer of all or substantially all the assets of the Company to, another entity (a  “ Consolidation  Event ”), unless the resulting  successor or acquiring entity (if  not the Company) assumes by written instrument the obligation to deliver to the Investor such shares of stock and/or securities as the Investor is entitled to receive pursuant to this Agreement.




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6.10

Issuance of the Company’s Common Stock.  The sale of the shares of Common Stock by the Company to the Investor hereunder shall be made in accordance with the provisions and requirements of the Securities Act and Regulation D and any applicable state securities law.


6.11

Expenses .  The Company, whether or not the transactions contemplated hereunder are consummated or this Agreement is terminated, will pay all expenses incident to the performance of its obligations hereunder, including, without limitation: (i) the preparation, printing and filing of the Registration Statement and each amendment and supplement thereto, of each related prospectus and of each amendment and supplement thereto; (ii) the preparation, issuance and delivery of any Shares issued pursuant to this Agreement; (iii) all fees and disbursements of the Company’s counsel, accountants and other advisors; (iv) the qualification of the Shares under securities laws in accordance with the provisions of this Agreement, including filing fees in connection therewith; (v) the fees and expenses incurred in connection with the listing or qualification of the Shares for trading on the Principal Market; or (vi) filing fees of the SEC, the Principal Market and any other regulatory or governmental body or authority.


6.12

Compliance with Laws . The Company will not, directly or indirectly, take any action designed to cause or result in, or that constitutes or might reasonably be expected to constitute, the stabilization or manipulation of the price of any security of the Company or which caused or resulted in, or which would in the future reasonably be expected to cause or result in, stabilization or manipulation of the price of any security of the Company.


6.13

Opinion of Counsel . Prior to the date of the first Advance Notice, the Investor shall have received an opinion letter from counsel to the Company reasonably acceptable to the Investor, containing, at a minimum, the opinions set forth in Exhibit “C” attached hereto.


6.14

Review of Public Disclosures .  None of the public disclosures made by the Company, including, without limitation, press releases, investor relations materials, and scripts of analysts meetings and calls will contain any untrue statements of material fact, nor will they omit to state any material fact required to be stated therein necessary to make the statements made in light of the circumstances under which they were made, not misleading.


6.15

Opinion of Counsel Concerning Resales .  Provided that the Investor’s resale of Common Stock received pursuant to this Agreement may be freely sold by the Investor either pursuant to an effective Registration Statement, in accordance with Rule 144, or otherwise, the Company shall obtain for the Investor, at the Company’s expense, any and all opinions of counsel which may be required by the Company’s transfer agent to issue such shares free of restrictive legends, or to remove legends from such shares.


6.16

Sales . Without the written consent of the Investor, the Company will not, directly or indirectly, offer to sell, sell, contract to sell, grant any option to sell or otherwise dispose of any shares of Common Stock (other than the Shares offered pursuant to the provisions of this Agreement) or securities convertible into or exchangeable for Common Stock, warrants or any rights to purchase or acquire Common Stock, during the period beginning on the 5th Trading Day immediately prior to an Advance Notice Date and ending on the 2nd Trading Day immediately following the corresponding Advance Settlement Date.


6.17

Insider Trading . Notwithstanding any other provision of this Agreement, the Company shall not deliver an Advance Notice during any period in which the Investor is in possession of material non-public information.



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ARTICLE VII

CONDITIONS FOR ADVANCE AND CONDITIONS FOR CLOSING


The right of the Company to deliver an Advance Notice and the obligations of the Investor hereunder to acquire Shares and pay for Shares of the Company’s Common Stock is subject to the satisfaction by the Company, on each Advance Notice Date and on each Advance Settlement Date (a “ Condition Satisfaction Date ”), of each of the following conditions:


7.1

Accuracy of the Company’s Representations and Warranties .  The representations and warranties of the Company shall be true and correct in all material respects.


7.2

Registration of the Common Stock with the SEC .  The Company shall have filed with the SEC a Registration Statement with respect to the resale of the Registrable  Securities  in accordance  with the terms of the Registration Rights Agreement.  As set forth in the Registration Rights  Agreement, the Registration Statement shall have been declared effective by the SEC and shall remain effective on each Condition Satisfaction Date, and: (i) neither the Company nor the Investor shall have received notice that the SEC has issued or intends to issue a stop order with respect to the Registration  Statement, or that the SEC otherwise has suspended or withdrawn the effectiveness of the Registration Statement, either temporarily or permanently, or intends or has threatened to do so (unless the SEC’s concerns have been addressed and the Investor is satisfied, in its sdole discretion, that the SEC no longer is considering or intends to take such action); and (ii) no other suspension of the use or withdrawal of the effectiveness of the Registration Statement or related prospectus shall exist. The Registration Statement  must  have  been  declared effective by the SEC prior to the first Advance Notice Date.


7.3

Authority .  The Company shall have obtained all permits and qualifications required by any applicable state for the offer and sale of the Shares, or shall have the availability of exemptions therefrom.  The sale and issuance of the Shares shall be legally permitted by all laws and regulations to which the Company is subject.


7.4

No Material Notices . None of the following events shall have occurred and be continuing: (i) receipt by the Company of any request for additional information from the SEC or any other federal or state governmental, administrative or self regulatory authority during the period of effectiveness of the Registration Statement, the response to which would require any amendments or supplements to the Registration Statement or related prospectus; (ii) the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iii) receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; (iv) the occurrence of any event that makes any statement made in the Registration Statement or related prospectus, or any document incorporated or deemed to be incorporated therein by reference, untrue in any material respect or that requires the making of any changes in the Registration Statement, related Prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the related prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under and as of the date which they were made, not misleading; and (v) the Company’s reasonable determination that a post-effective amendment to the Registration Statement would be required.



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7.5

Fundamental Changes .  There shall not exist any fundamental changes to the information set forth in the Registration Statement which would require the Company to file a post-effective amendment to the Registration Statement.


7.6

Performance by the Company .  The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to each Condition Satisfaction Date.


7.7

No Injunction .  No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits or directly and adversely affects any of the transactions contemplated by this Agreement, and no proceeding shall have been commenced that may have a Material Adverse Effect.


7.8

No Suspension of Trading in or Delisting of Common Stock .  The Common Stock is trading on a Principal Market and all of the Shares issuable pursuant to such Advance Notice will be listed or quoted for trading on such Principal Market and the Investor believes, in good faith, that trading of the Common Stock on a Principal Market will continue uninterrupted for the foreseeable future.  The issuance of Shares with respect to the applicable Advance Notice will not violate the shareholder approval requirements of the Principal Market.  The Company shall not have received any notice threatening the continued listing of the Common Stock on the Principal Market.


7.9

Authorized .  There shall be a sufficient number of authorized but unissued and otherwise unreserved shares of Common Stock for the issuance of all of the Shares issuable pursuant to such Advance Notice.


7.10

Executed Advance Notice .  The Investor shall have received the Advance Notice executed by an officer of the Company and the representations contained in such Advance Notice shall be true and correct as of each Condition Satisfaction Date.


7.11

Consecutive Advance Notices .  Except with respect to the first Advance Notice, the Company shall have delivered all Shares relating to all prior Advances.



ARTICLE VIII

DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION


8.1

Due Diligence Review . Prior to the filing of the Registration Statement, the Company  shall make available for inspection and review by the Investor, advisors to and representatives of the  Investor and any underwriter participating in any disposition of the Registrable Securities on behalf of the Investor pursuant to the Registration Statement, any such Registration Statement or amendment or supplement  thereto, or any blue sky, NASD, FINRA, or other filing, all financial and other  records, all SEC Documents and other filings with the SEC, and all other corporate documents and properties of the Company as may be reasonably necessary or required by the Investor and any such advisors, representatives and underweriters, and cause the Company’s officers, directors and employees to supply all such information requested by the Investor or any such representative, advisor or underwriter in connection with such Registration Statement (including, without limitation, in response to all questions



20



and other  inquiries  reasonably  made or submitted by any of them), prior to and from time to time after the filing and effectiveness of the Registration  Statement, for the sole purpose of enabling the Investor and such representatives, advisors and underwriters and their respective accountants and attorneys to conduct  initial and ongoing due diligence with respect to the Company and the accuracy of the Registration Statement.


8.2

Company Non-Public Information .  


(a)

Nothing herein shall require the Company to disclose non-public information to the Investor or its advisors or representatives, unless prior to disclosure of such information, the Company identifies such information as being non-public information and provides  the Investor, such   advisors and representatives with the opportunity to accept or refuse to accept such non-public information for review. The Company may, as a condition to disclosing any non-public information  hereunder, require the Investor and its advisors and representatives to enter into a confidentiality  agreement in form reasonably satisfactory to the Company and the Investor.


(b)

The Company represents that it does not disseminate non-public information in violation of the Exchange Act or Securities Act to any investors who purchase stock in the Company in a public offering, to money managers or to securities analysts, provided, however, that notwithstanding anything herein to the contrary, the Company will immediately notify the advisors and representatives of the Investor and, if any, underwriters, of any event or the existence of any circumstance (without any obligation to disclose the specific event or circumstance) of which it becomes aware, constituting non-public information (whether or not requested of the Company specifically or generally during the course of due diligence by such persons or entities), which, if not disclosed in the prospectus included in the Registration Statement would cause such prospectus to include a material misstatement or to omit a material fact required to be stated therein in order to make the statements therein, in light of the circumstances in which they were made, not misleading. Nothing contained in this Article VIII shall be construed to mean that such persons or entities other than the Investor (without the written consent of the Investor prior to disclosure of such information) may not obtain non-public information in the course of conducting due diligence in accordance with the terms of this Agreement and nothing herein shall prevent any such persons or entities from notifying the Company of their opinion that based on such due diligence by such persons or entities, that the Registration Statement contains an untrue statement of material fact or omits a material fact required to be stated in the Registration Statement or necessary to make the statements contained therein, in light of the circumstances in which they were made, not misleading.


ARTICLE IX

CHOICE OF LAW/JURISDICTION


This Agreement shall be governed by and interpreted in accordance with the laws of the State of Florida, without regard to the principles of conflict of laws.  The parties further agree that any action between them shall be heard in a federal or state court in Broward County, Florida, and expressly consent to the jurisdiction and venue of the state courts in and for the 17th Judicial Circuit, sitting in Broward County, Florida and the United States District Court for the Southern District of Florida, for the adjudication of any civil action asserted pursuant to this paragraph.

 



21



ARTICLE X

ASSIGNEMNT; TERMINATION


10.1

Assignment .  Neither this Agreement nor any rights of the parties hereto may be assigned or delegated to any other Person.


10.2

Termination .  


(a)

This Agreement and the obligations of Investor to make Advances hereunder shall terminate twenty-four (24) months after the Effective Date.


(a)

This Agreement and the obligation of the Investor to make an Advance to the Company pursuant to this Agreement shall terminate permanently (including with respect to an Advance Settlement Date that has not yet occurred) in the event that: (i) there shall occur any stop order or suspension of the effectiveness of the Registration Statement for an aggregate of fifty (50) Trading Days, other than due to the acts of the Investor, during the Commitment Period (provided, however, that this termination  provision shall not apply to any period commencing upon the filing of a post-effective amendment to such Registration Statement and ending upon the date on which such post effective amendment is declared effective by the SEC); or (ii) the Company shall at any time fail to comply with any of the terms, covenants or provisions of this Agreement or the Registration Rights Agreement on the part of the Company to comply with, and such failure is not cured within twenty (20) days after receipt of written notice from the Investor.


(b)

Nothing in this Section 10.2 shall be deemed to release the Company from any liability for any breach under this Agreement, or to impair the rights of the Investor to compel specific performance by the Company of its obligations under this Agreement or the Registration Rights Agreement.  The indemnification provisions contained in Article V shall survive termination hereunder.


ARTICLE XI

NOTICES


Any notices, consents, waivers, or other communications required or permitted to be given under the terms of this Agreement must be in writing and in each case properly addressed to the party to receive the same in accordance with the information below, and will be deemed to have been delivered: (i) if mailed by certified mail, return receipt requested, postage prepaid and properly addressed to the address below, then three (3) business days after deposit of same in a regularly maintained U.S. Mail receptacle; or (ii) if mailed by Federal Express, UPS or other nationally recognized overnight courier service, next business morning delivery, then one (1) business day after deposit of same in a regularly maintained receptacle of such overnight courier; or (iii) if hand delivered, then upon hand delivery thereof to the address indicated on or prior to 5:00 p.m., EST, on a Trading Day.  Any notice hand delivered after 5:00 p.m., EST, shall be deemed delivered on the following Trading Day.  Notwithstanding the foregoing, notice, consents, waivers or other communications referred to in this Agreement may be sent by facsimile, e-mail, or other method of delivery, but shall be deemed to have been delivered only when the sending party has confirmed (by reply e-mail or some other form of written confirmation) that the notice has been received by the other party.  The addresses and facsimile numbers for such communications, except for Advance Notices which shall be delivered in accordance with Section 2.1(b) hereof, shall be:



22




If to the Company, to:

Bergio International, Inc.

 

12 Daniel Road East, Suite 301

 

Fairfield, New Jersey 07004

 

Attention:

Bergio Abajian, President

 

Telephone:

(973) 227-3230

 

Facsimile:

(973) 227-3556

 

E-Mail: berge@bergio.com

 

 

With a copy to:

Lucosky Brookman LLP

 (which shall not constitute notice)

33 Wood Avenue South, 6th Floor

 

Iselin, New Jersey 08830

 

Attention:

Joseph Lucosky, Esq.

 

Telephone:

(732) 395-4400

 

Facsimile:

(732) 395-4401

 

E-Mail:

jlucosky@lucbro.com

 

 

If to the Investor:

TCA Global Credit Master Fund, LP

 

1404 Rodman Street

 

Hollywood, Florida 33020

 

Attention:

Robert Press, Director

 

Telephone:

(786) 323-1650

 

Facsimile:

(786) 323-1651

 

E-Mail: bpress@trafcap.com

 

 

With a copy to:

David Kahan, P.A.

 (which shall not constitute notice)

3125 W. Commercial Blvd., Suite 100

 

Ft. Lauderdale, Florida 33309

 

Telephone:

(954) 548-3930

 

Facsimile:

(954) 548-3910

 

E-Mail:

david@dkpalaw.com


ARTICLE XII

MISCELLANEOUS


12.1

Execution; Counterparts .  This Agreement may be executed in one or more counterparts, all of which taken together shall be deemed and considered one and the same Agreement, and same shall become effective when counterparts have been signed by each party and each party has delivered its signed counterpart to the other party.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format file or other similar format file, such signature shall be deemed an original for all purposes and shall create a valid and binding obligation of the party executing same with the same force and effect as if such facsimile or “.pdf” signature page was an original thereof.





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12.2

Entire Agreement; Amendments .  This Agreement, together with the Registration Rights Agreement, supersedes all other prior oral or written agreements between the Investor, the Company, their affiliates and Persons acting on their behalf with respect to the matters discussed herein, and this Agreement, and the instruments referenced herein, including the Registration Rights Agreement, contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, the Investor makes no representation, warranty, covenant or undertaking with respect to such matters.  No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the party to be charged with enforcement.


12.3

Reporting Entity for the Common Stock .  The reporting entity relied upon for the determination of the trading price or trading volume of the Common Stock on any given Trading Day for the purposes of this Agreement shall be Bloomberg, L.P. or any successor thereto.  The written mutual consent of the Investor and the Company shall be required to employ any other reporting entity.


12.4

Fees .


(a)

Legal and Administrative Fee .  Each of the parties shall pay its own fees and expenses (including the fees of any attorneys, accountants, appraisers or others engaged by such party) in connection with this Agreement and the transactions contemplated hereby, except that the Company shall pay to Investor, upon the execution of this Agreement by the Company, a fee of $7,500 to cover the Investor’s legal and administrative costs and expenses in connection this Agreement.


(b)

Due Diligence Fees .  The Company shall pay to Investor a fee of $5,000 to cover the Investor’s due diligence costs and expenses in connection this Agreement, $2,500 of which shall be paid upon the execution of this Agreement, and $2,500 of which the Investor hereby acknowledges was paid by the Company prior to the date hereof.


(c)

Advance Fee .  On each Advance Settlement Date, the Company shall pay to the Investor the Advance Fee with respect to each Advance made hereunder, which Advance Fee shall be deducted by Investor out of the gross proceeds of each Advance.


(d)

Facility Fee .  


(i)

Share Issuance .  The Company shall pay to Investor a fee for structuring the facility contemplated hereby by issuing to Investor that number of shares of the Company’s Common Stock that equal to a dollar amount that is five percent (5%) of the Commitment Amount, or $125,000.00 (the “ Share Value ”).  For purposes of determining the number of shares issuable to Investor under this Section 12.4(d) (the “ Facility Fee Shares ”), the Company’s Common Stock shall be valued at the VWAP as of the close of the business day immediately prior to the date the Company executes this Agreement (the “ Valuation Date ”).  The Facility Fee Shares shall be issued by the Company to Investor in four (4) quarterly installments (1.25% per quarter), the first of such issuances being on the date of the execution of this Agreement, and the remaining three issuances at ninety (90) days from the date of the execution of this Agreement, one hundred eighty (180) days from the date of the execution of this Agreement and two hundred seventy (270) days from the date of the execution of this Agreement, respectively.  The Investor shall confirm to the Company in writing, the VWAP for the Common Stock as of the Valuation Date, and the corresponding number of Shares issuable on each of such respective issuance dates based on such price.  The Company shall instruct its transfer agent to issue certificates representing the Facility Fee Shares issuable to the Investor immediately upon the Company’s execution of this Agreement and immediately upon each subsequent issuance date, and shall cause its transfer agent



24



to deliver such certificates to Investor within within three (3) Trading Days from the date the Company executes this Agreement, and within three (3) Trading Days from each of such subsequent issuance dates.  In the event such certificates representing the Facility Fee Shares issuable hereunder shall not be delivered to the Investor within said three (3) Trading Day period, at each of the respective issuance dates, same shall be an immediate default under this Agreement and Investor shall have no obligation to make any Advances hereunder until such default is cured.  The Facility Fee Shares, when issued, shall be deemed to be validly issued, fully paid, and non-assessable shares of the Company’s Common Stock. The Facility Fee Shares shall be deemed fully earned as of the date the Company executes this Agreement, regardless of the amount of Advances, if any, that the Company is able to, or chooses to, request hereunder.  The Facility Fee Shares shall be deemed Registrable Securities hereunder and shall be included on any registration statement filed by the Company after the date hereof, unless such shares may be resold without any limitation of any kind pursuant to Rule 144.


(ii)

Adjustments .  It is the intention of the Company and Investor that the value of the Facility Fee Shares on a date that is nine (9) months after the Valuation Date (the “ Nine Month Valuation Date ”) shall be equal to the Share Value.  Valuation of the Facility Fee Shares at the Nine Month Valuation Date shall be undertaken by Investor using the VWAP of the Common Stock for the five (5) Trading Days immediately prior to the Nine Month Valuation Date, as reported by Bloomberg L.P.  In the event the value of the Facility Fee Shares issued to Investor under this Section 12.4(d) (including any proceeds received by the Investor from sales of the Facility Fee Shares at any time prior to the Nine Month Valuation Date, if any), at the Nine Month Valuation Date, is less than the Share Value, then the Investor shall so notify the Company and the Company hereby agrees to either: (i) immediately pay such shortfall in cash to the Investor; or (ii) immediately take all required action necessary or required in order to cause the issuance of additional shares of the Company’s Common Stock to Investor such that at the Nine Month Valuation Date, the Investor shall have been issued Facility Fee Shares having an aggregate value, using the valuation methodology set forth above, equal to the Share Value.  In the event the value of the Facility Shares issued to Investor under this Section 12.4(d) (including any proceeds received by the Investor from sales of the Facility Fee Shares at any time prior to the Nine Month Valuation Date), at the Nine Month Valuation Date, is more than the Share Value, then the Investor shall so notify the Company and the Investor hereby agrees to return to the Company such number of Facility Fee Shares such that at the Nine Month Valuation Date, the Investor shall only retain Facility Fee Shares (or cash proceeds from the sale of Facility Fee Shares) having an aggregate value, using the valuation methodology set forth above, equal to the Share Value.  In the event an additional issuance is required at the Nine Month Valuation Date, the Company shall instruct its transfer agent to issue certificates representing such additional Facility Fee Shares to the Investor immediately subsequent to the Investor’s notification to the Company that additional shares are issuable hereunder, and the Company shall in any event cause its transfer agent to deliver such certificates to Investor within three (3) Trading Days following the date Investor notifies the Company that additional shares are to be issued hereunder.  In the event such certificates representing such additional shares issuable hereunder shall not be delivered to the Investor within said three (3) Trading Day period, same shall be an immediate default under this Agreement and Investor shall have no obligation to make any Advances hereunder until such default is cured.




25



12.5

Brokerage .  Each of the parties hereto represents that it has had no dealings in connection with this transaction with any finder or broker who will demand payment of any fee or commission from the other party.  The Company on the one hand, and the Investor, on the other hand, agree to indemnify the other against and hold the other harmless from any and all liabilities to any person claiming brokerage commissions or finder’s fees on account of services purported to have been rendered on behalf of the indemnifying party in connection with this Agreement or the transactions contemplated hereby.


12.6

Confidentiality .  If for any reason the transactions contemplated by this Agreement are not consummated, each of the parties hereto shall keep confidential any information obtained from any other party (except information publicly available or in such party’s domain prior to the date hereof, and except as required by court order) and shall promptly return to the other parties all schedules, documents, instruments, work papers or other written information without retaining copies thereof, previously furnished by it as a result of this Agreement or in connection herein.


[SIGNATURES ON THE FOLLOWING PAGE]















26



IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date and year set forth above.


 

COMPANY:

 

 

 

BERGIO INTERNATIONAL, INC.

 

 

 

 

 

By: /s/ Berge Abajian

 

Name: Berge Abajian

 

Title: Chief Executive Officer

 

 

 

 

 

INVESTOR:

 

 

 

TCA GLOBAL CREDIT MASTER FUND, LP

 

 

 

By:  TCA Global Credit Fund GP, Ltd., its general partner

 

 

 

 

 

By: /s/ Robert Press

 

Name: Robert Press

 

Title: Director

















27




EXHIBIT “A”


FORM OF ADVANCE NOTICE


[BERGIO INTERNATIONAL, INC. LETTERHEAD]



The undersigned, ________________________, hereby certifies, with respect to the sale of shares of Common Stock of Bergio International, Inc. (the “ Company ”) issuable in connection with this Advance Notice, which Advance Notice is being delivered pursuant to the Committed Equity Facility between the Company and TCA Global Credit Master Fund, LP dated as of November 28, 2011 (the “ Agreement ”), as follows:


1.

The undersigned is the duly elected _______________________ of the Company.


2.

There are no fundamental or material changes to the information set forth in the Registration Statement which would require the Company to file a post-effective amendment to the Registration Statement.


3.

The Company has performed all of the covenants and agreements to be performed by the Company under the Agreement, and the Company has complied in all material respects with all obligations and conditions contained in the Agreement on or prior to the Advance Notice Date, and the Company shall continue to perform and comply with all covenants and agreements to be performed by the Company through the applicable Advance Settlement Date.  All conditions under the Agreement to the delivery of this Advance Notice are satisfied as of the date hereof.  Since the date of the Company’s last financial statements, there has been no Material Adverse Change.


4.

The undersigned hereby represents, warrants and covenants that it has made all filings (“ SEC Filings ”) required to be made by it pursuant to applicable securities laws (including, without limitation, all filings required under the Securities Exchnage Act of 1934).  All SEC Filings and other public disclosures made by the Company, including, without limitation, all press releases, analysts meetings, calls, etc. (collectively, the “ Public Disclosures ”), have been reviewed and approved for release by the Company’s attorneys or general counsel and, if containing financial information, the Company’s independent certified public accountants.  None of the Company’s Public Disclosures contain any untrue statement of a material fact, or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.


5.

The Advance requested by this Advance Notice is for the sale of __________ Shares.


6.

9.99% of the outstanding Common Stock of the Company as of the date hereof is _____________.


7.

The sale of the number of Shares requested by this Advance Notice does not exceed the Ownership Limitation, the Registration Limitation, the Maximum Advance Amount or the Commitment Amount.







The undersigned has executed this Advance Notice as of the _____ day of _____________, 20___.



BERGIO INTERNATIONAL, INC.



By:_____________________________

Name:___________________________

Title:____________________________


________________________________________________________________


Please deliver this Advance Notice by mail, e-mail or facsimile with a follow up phone call to:

____________________________

____________________________

____________________________

____________________________
















EXHIBIT “B”


FORM OF SETTLEMENT DOCUMENT


Via E-Mail and Facsimile

Bergio International, Inc.

Attn: CEO

Fax: (973) 227-3556

E-Mail: berge@bergio.com


Below please find the settlement information with respect to the Advance Notice dated:___________


1.

(a) Amount of Advance Notice:

$

(b) Amount of Advance Notice after adjusting for Ownership Limitation, Registration Limitation, Maximum Advance Amount and Committed Amount, if applicable:

$

2.

Market Price: (VWAP of the Common Stock during the relevant Pricing Period of ________________ to __________________).

$

3.

Purchase Price (Market Price X 95%) per share:

$

4.

Number of Shares due to Investor computed by dividing 1(b) above by 3 above:

 


Please issue the number of Shares due to the Investor to the account of the Investor as follows:

______________________

______________________

______________________


Sincerely,


TCA Global Credit Master Fund, LP


Approved by:


BERGIO INTERNATIONAL, INC.


By:_________________________

Name:______________________

Title:_______________________









EXHIBIT “C”


REQUIRED OPINIONS


1.         The Company is a corporation validly existing and in good standing under the laws of _____________________, with corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Company’s latest Form 10-K or 10-Q (or similar form for filing a quarterly or annual report) filed by the Company under the Securities Exchange Act of 1934, as amended, (the “ Exchange Act ”) and the rules and regulations of the SEC thereunder (the “ Public Filings ”) and to enter into and perform its obligations under the Committed Equity Facility Agreement (the “ Agreement ”).  The Company is also duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted by it as described in the Public Filings makes such qualification necessary.

 

2.         The Company has the requisite corporate power and authority to enter into and perform its obligations under the Agreement and to issue the Shares in accordance with their terms.  The execution and delivery of the Agreement by the Company and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary corporate action, and no further consent or authorization of the Company or its Board of Directors or stockholders is required.  The Agreement, and each document executed or delivered in connection therewith, has each been duly executed and delivered, and the Agreement, and each document executed or delivered in connection therewith, each constitutes valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as my be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors’ rights and remedies.

 

3.         The Shares are duly authorized and, upon issuance in accordance with the terms of the Agreement, will be duly and validly issued, fully paid and non-assessable, free of any liens, encumbrances and preemptive or similar rights contained, to our knowledge, in any agreement filed by the Company as an exhibit to the Company’s Public Filings.

 

4.         The execution, delivery and performance of the Agreement by the Company will not: (i) result in a violation of the Company’s Certificate of Incorporation or By-Laws; (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement or, indenture by which the Company or any of its assets or properties is bound, including, without limitation, and agreement or document filed by the Company as an exhibit to the Company’s Public Filings; or (iii) to our knowledge, result in a violation of any foreign, federal, state or local law, rule or regulation, order, judgment or decree applicable to the Company.

 

5.         To our knowledge, and other then as set forth in the Public Filings, there are no legal or governmental proceedings pending to which the Company is a party or of which any property or assets of the Company is subject which is required to be disclosed in any Public Filings.








 

Exhibit 10.5



REGISTRATION RIGHTS AGREEMENT


THIS REGISTRATION RIGHTS AGREEMENT (the “ Agreement ”) is made and entered into as of the 28 th day of November, 2011 by and between BERGIO INTERNATIONAL, INC. , a Delaware corporation (the “ Company ”) and TCA GLOBAL CREDIT MASTER FUND, LP , a Cayman Islands limited partnership (the “ Investor ”).


WHEREAS , in connection with the Committed Equity Facility Agreement by and between the Company and Investor of even date herewith (the “ CEF Agreement ”), the Company has agreed, upon the terms and subject to the conditions of the CEF Agreement, to issue and sell to the Investor that number of shares of the Company’s common stock, par value $.001 per share (the “ Common Stock ”), which can be purchased pursuant to the terms of the CEF Agreement for an aggregate purchase price of up to Two Million Five Hundred Thousand Dollars ($2,500,000).  Capitalized terms used in this Agreement and not otherwise defined herein shall have the meaning ascribed to such terms in the CEF Agreement; and


WHEREAS ,  in order to induce the Investor to execute and deliver the CEF Agreement, the Company has agreed to provide certain registration rights to the Investor under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the “ Securities Act ”), and applicable state securities laws;


NOW, THEREFORE , in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:


1.

Definitions .  As used in this Agreement, the following terms shall have the following meanings (to the extent any of the following defined terms are also defined in the CEF Agreement, the definitions below shall control for purposes of this Agreement):


(a)

Person ” means a corporation, a limited liability company, an association, a partnership, an organization, a business, an individual, a governmental or political subdivision thereof or a governmental agency.


(b)

Register ,” “ Registered ,” and “ Registration ,” whether capitalized herein or not,  refer to a registration effected by preparing and filing one or more “Registration Statements” (as defined below) in compliance with the Securities Act and pursuant to Rule 415 under the Securities Act or any successor rule providing for offering securities on a continuous or delayed basis (“ Rule 415 ”), and the declaration or ordering of effectiveness of such Registration Statement(s) by the SEC.


(c)

Registrable Securities ” shall have the same meaning ascribed to such term in the CEF Agreement.


(d)

Registration Statement ” means a registration statement under the Securities Act which covers the Registrable Securities.




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2.

Registration .  


(a)

Mandatory Registration .  The Company shall prepare and file with the SEC, no later than forty-five (45) days from December 22, 2011 (the “ Scheduled Filing Deadline ”), a Registration Statement on Form S-1 or on such other form as is available to the Company.  The Company shall use its commercially reasonable efforts to cause the Registration Statement to be declared effective by the SEC by a date that is no later than ninety (90) days from December 22, 2011 (the “ Scheduled Effective Deadline ”), and in any event, the Registration Statement shall be declared effective by the SEC prior to the first sale to the Investor of the Company’s Common Stock pursuant to the CEF Agreement. The Company shall cause the Registration Statement to remain effective until the full completion of the Commitment Period.


(b)

Sufficient Number of Shares Registered .  The Registration Statement to be filed by the Company pursuant to Section 2(a) above shall register for resale thereunder an amount of shares of the Company’s Common Stock that is at least three (3) times the number of Registrable Securities issuable to the Investor under the CEF Agreement (subject to limitations imposed by Rule 415).  In the event the number of shares available under a Registration Statement filed pursuant to Section 2(a) is insufficient to cover all of the Registrable Securities pursuant to the CEF Agreement, the Company shall amend the Registration Statement, or file a new Registration Statement (on the short form available therefor, if applicable), or both, so as to cover all of such Registrable Securities pursuant to the CEF Agreement as soon as practicable, but in any event not later than fifteen (15) days after the necessity therefor arises. The Company shall cause such amendment and/or new Registration Statement to become effective as soon as practicable following the filing thereof. For purposes of the foregoing provision, the number of shares available under a Registration Statement shall be deemed “insufficient to cover all of the Registrable Securities” if at any time the number of Registrable Securities issuable on an Advance Notice Date is greater than the number of shares available for resale under such Registration Statement.


(c)

Failure to Timely File Registration Statement .  In the event the Registration Statement is not declared effective by the SEC by a date that is no later than one hundred eighty (180) days from December 22, 2011 (the “ Late Effective Deadline ”), then in addition to any and all remedies Investor may have at law, in equity or under the CEF Agreement or this Agreement, the Company shall be obligated to pay to Investor, in lawful money of the United States of America by wire transfer to an account designated by Investor, within three (3) Trading Days from the Late Effective Deadline, and monthly thereafter, as applicable, until the earlier to occur of: (i) the Registration Statement is declared effective by the SEC; or (ii) until the “Maximum Cap” (as hereinafter defined) is reached, an amount equal to Four Thousand One Hundred Sixty-Six and 67/100 Dollars ($4,166.67), up to a total maximum payment under this Section 2(c) that equals one percent (1.0%) of the Commitment Amount (the “ Maximum Cap ”).  The Company acknowledges that this fee is to offset certain costs and damages incurred by Investor and attributable to the delay caused by the Company’s failure to have the Registration Statement declared effective by the SEC by the Late Effective Deadline, and these sums shall not be deemed or construed as a penalty.


(d)

Law Firm to File Registration Statement .  The parties agree that the Company shall use the law firm of Lucosky Brookman LLP in connection with the Company’s filing of the Registration Statement hereunder.  Any change of law firms in connection therewith shall require the prior written approval of the Investor, which approval shall not be unreasonably withheld.


3.

Related Obligations .  




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(a)

The Company shall keep the Registration Statement effective pursuant to Rule 415 at all times until the completion of the Commitment Period (the “ Registration Period ”), which Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading.


(b)

The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration Statement and the prospectus used in connection with such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the Securities Act, as may be necessary to keep such Registration Statement effective at all times during the Registration Period, and, during such Registration Period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by such Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such Registration Statement. In the case of amendments and supplements to a Registration Statement which are required to be filed pursuant to this Agreement (including pursuant to this Section 3(b)) by reason of the Company’s filing a report on Form 10-K, Form 10-Q or Form 8-K or any analogous report under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), the Company shall have incorporated such report by reference into the Registration Statement, if applicable, or shall file such amendments or supplements with the SEC within three (3) business days following the day on which the Exchange Act report is filed which created the requirement for the Company to amend or supplement the Registration Statement.


(c)

The Company shall furnish to the Investor without charge: (i) at least one copy of the Registration Statement as declared effective by the SEC and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference, all exhibits and each preliminary prospectus; (ii) ten (10) copies of the final prospectus included in such Registration Statement and all amendments and supplements thereto (or such other number of copies as the Investor may reasonably request); and (iii) such other documents as the Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities owned by the Investor.


(d)

The Company shall: (i) register and qualify the Registrable Securities covered by a Registration Statement under such other securities or “blue sky” laws of such jurisdictions in the United States as the Investor reasonably requests; (ii) prepare and file in those jurisdictions, such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period; (iii) take such other actions as may be reasonably necessary to maintain such registrations and qualifications in effect at all times during the Registration Period; and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to: (w) make any change to its certificate of incorporation or by-laws; (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d); (y) subject itself to general taxation in any such jurisdiction; or (z) file a general consent to service of process in any such jurisdiction. The Company shall promptly notify the Investor of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.




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(e)

As promptly as practicable after becoming aware of such event or development, the Company shall notify the Investor in writing of the happening of any event or development, the result of which would mean that the prospectus included in a Registration Statement, as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (provided that in no event shall such notice contain any material, nonpublic information), and promptly prepare a supplement or amendment to such Registration Statement to correct such untrue statement or omission, and deliver ten (10) copies of such supplement or amendment to the Investor. The Company shall also promptly notify the Investor in writing: (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to the Investor by facsimile or e-mail on the same day of, or the next business day following, such effectiveness); (ii) of any request by the SEC for amendments or supplements to a Registration Statement or related prospectus or related information; and (iii) of the Company’s reasonable determination that a post-effective amendment to a Registration Statement would be appropriate.


(f)

The Company shall use its commercially reasonable efforts to prevent the issuance of any stop order or other suspension of effectiveness of a Registration Statement, or the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction within the United States of America and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and to immediately notify the Investor of the issuance of such order and the resolution thereof, or of the Company’s receipt of actual notice of the initiation or threat of any proceeding for such purpose.


(g)

Upon request of the Investor, the Company shall furnish to the Investor, on the date of the effectiveness of the Registration Statement, and thereafter from time to time on such dates as Investor may reasonably request: (i) a letter, dated such date, from the Company’s independent certified public accountants in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering; and (ii) an opinion, dated as of such date, from counsel representing the Company for purposes of such Registration Statement, in form, scope and substance as is customarily given to an underwriter in an underwritten public offering, addressed to the Investor.


(h)

The Company shall make available for inspection by: (i) the Investor; and (ii) Investor’s accountants, attorneys, underwriters and other agents retained by the Investor (collectively, the “ Inspectors ”) all pertinent financial information and other records, and pertinent corporate documents and properties of the Company (collectively, the “ Records ”), as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company’s officers, directors and employees to supply all information which any Inspector may reasonably request in connection with the Registration Statement. The Investor agrees that Records obtained by it as a result of such inspections which are conspicuously marked by the Company as “Confidential” (subject to the Company’s obligations with respect to material non-public information set forth in Section 8.1(a) herein) shall be deemed confidential and held in strict confidence by the Investor, unless: (x) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in any Registration Statement or is otherwise required under the Securities Act; (y) the release of such Records is ordered pursuant to a final, non-appealable subpoena or order from a court or government body of competent jurisdiction; or (z) the information in such Records has been made generally available to the public other than by disclosure in violation of this or any other agreement of which the Inspector and the Investor has knowledge. The Investor agrees that it shall, upon learning that disclosure of such Records is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the Records deemed confidential.



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(i)

The Company shall hold in confidence and not make any disclosure of information concerning the Investor provided to the Company unless: (i) disclosure of such information is necessary to comply with federal or state securities laws; (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement; (iii) the release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction; or (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other agreement. The Company agrees that it shall, upon learning that disclosure of such information concerning the Investor is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to the Investor and allow the Investor, at the Investor’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information.


(j)

The Company shall use its commercially reasonable efforts either to cause all the Registrable Securities covered by a Registration Statement: (i) to be listed on each securities exchange on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange; or (ii) to secure the inclusion for quotation on the National Association of Securities Dealers, Inc. OTC Bulletin Board for such Registrable Securities. The Company shall pay all fees and expenses in connection with satisfying its obligation under this Section 3(j).


(k)

The Company shall cooperate with the Investor to the extent applicable, to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities to be offered pursuant to a Registration Statement and enable such certificates to be in such denominations or amounts, as the case may be, as the Investor may reasonably request and registered in such names as the Investor may request.


(l)

The Company shall use its commercially reasonable efforts to cause the Registrable Securities covered by the applicable Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable Securities.


(m)

The Company shall make generally available to its security holders as soon as practical, but not later than ninety (90) days after the close of the period covered thereby, an earnings statement (in form complying with the provisions of Rule 158 under the Securities Act) covering a twelve-month period beginning not later than the first day of the Company’s fiscal quarter next following the effective date of the Registration Statement.


(n)

The Company shall otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the SEC in connection with any registration hereunder.


(o)

Within two (2) business days after a Registration Statement which covers Registrable Securities is ordered effective by the SEC, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the Investor) confirmation that such Registration Statement has been declared effective by the SEC in the form attached hereto as Exhibit “A” .


(p)

The Company shall take all other reasonable actions necessary to expedite and facilitate disposition by the Investor of Registrable Securities pursuant to a Registration Statement.




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4.

Obligations of the Investor .  The Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(f) or the first sentence of 3(e), the Investor will immediately discontinue disposition of Registrable Securities pursuant to any Registration Statement(s) covering such Registrable Securities until the Investor’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(e) or receipt of notice that no supplement or amendment is required.  Notwithstanding anything contained herein or in the CEF Agreement to the contrary, the Company shall cause its transfer agent to deliver unlegended certificates for shares of Common Stock to a transferee of the Investor in accordance with the terms of the CEF Agreement in connection with any sale of Registrable Securities with respect to which the Investor has entered into a contract for sale prior to the Investor’s receipt of a notice from the Company of the happening of any event of the kind described in Section 3(f) or the first sentence of 3(e) and for which the Investor has not yet settled.


5.

Expenses of Registration .  All expenses incurred in connection with registrations, filings or qualifications pursuant to this Agreement, including, without limitation, all registration, listing and qualifications fees, printers’ fees, and legal and accounting fees shall be paid by the Company.


6.

Indemnification .  With respect to Registrable Securities which are included in a Registration Statement under this Agreement:


(a)

To the fullest extent permitted by law, the Company will, and does hereby agree to indemnify, hold harmless and defend the Investor, the directors, officers, partners, employees, agents, representatives of, and each Person, if any, who controls the Investor within the meaning of the Securities Act or the Exchange Act (each, an “ Indemnified Person ”), against any losses, claims, demands, threats, damages, liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’ and paralegals’ fees, amounts paid in settlement or any other expenses of any nature whatsoever, joint or several (collectively, the “ Indemnified Damages ”) incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an Indemnified Person is or may be a party thereto (collectively, the “ Claims ”), to which any Indemnified Person may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other “blue sky” laws of any jurisdiction in which Registrable Securities are offered (“ Blue Sky Filing ”), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) any untrue statement or alleged untrue statement of a material fact contained in any final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading; or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities pursuant to a Registration Statement (the matters in the foregoing clauses (i) through (iii) being, collectively, the “ Violations ”). The Company shall reimburse each Indemnified Person promptly as such Indemnified Damages are incurred and are due and payable, in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a): (x) shall not apply to a Claim by an Indemnified Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person expressly for use in connection with the preparation of the Registration Statement or any such amendment thereof or supplement thereto; (y) shall not be available to the extent such Claim is based on a failure of the Investor to deliver or to cause to be delivered the then-current prospectus made available by the



6



Company, if such prospectus was timely made available by the Company pursuant to Section 3(e); and (z) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld, conditioned or delayed. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person.


(b)

In connection with a Registration Statement, the Investor agrees to indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a), the Company, each of its directors, each of its officers, employees, representatives or agents and each Person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act (each an “ Indemnified Party ”), against any Claim or Indemnified Damages to which any of them may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or are based upon any Violation, in each case to the extent, and only to the extent, that such Violation occurs directly as a result of the Company’s reliance upon written information furnished to the Company by the Investor expressly for use in connection with such Registration Statement; and, subject to Section 6(d), the Investor will reimburse any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution contained in Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Investor, which consent shall not be unreasonably withheld; provided, further, however, that the Investor shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed the net proceeds to the Investor as a result of the sale of Registrable Securities pursuant to such Registration Statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(b) with respect to any prospectus shall not inure to the benefit of any Indemnified Party if the untrue statement or omission of material fact contained in the prospectus was corrected and such new prospectus was delivered to the Investor prior to the Investor’s use of the prospectus to which the Claim relates.


(c)

Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of any Claim (including any governmental action or proceeding),  such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement of the Claim and all other information in the possession of the Indemnified Person or Indemnified Party, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that an Indemnified Person or Indemnified Party shall have the right to retain its own counsel with the fees and expenses of not more than one counsel for such Indemnified Person or Indemnified Party to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential conflicts of interest between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding. The Indemnified Party or Indemnified Person shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such Claim and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person which relates to such Claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any Claim effected without its prior written consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent.



7



No indemnifying party shall, without the prior written consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person of a full and unconditional release from all liability in respect to such Claim. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such Claim shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party is prejudiced in its ability to defend such Claim.


(d)

The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Damages are incurred.


(e)

The indemnity agreements contained herein shall be in addition to: (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.


7.

Contribution .  To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however, that: (i) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of fraudulent misrepresentation; and (ii) contribution by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities.


8.

Reports Under the Exchange Act .  With a view to making available to the Investor the benefits of Rule 144 promulgated under the Securities Act or any similar rule or regulation of the SEC that may at any time permit the Investors to sell securities of the Company to the public without registration (“ Rule 144 ”), the Company agrees to:


(a)

make and keep public information available, as those terms are understood and defined in Rule 144;


(b)

file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act so long as the Company remains subject to such requirements (it being understood that nothing herein shall limit the Company’s obligations under the CEF Agreement) and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and


(c)

furnish to the Investor so long as the Investor owns Registrable Securities, promptly upon request: (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange Act; (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company; and (iii) such other information as may be reasonably requested to permit the Investor to sell such securities pursuant to Rule 144 without registration and without any limitations or restrictions.




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9.

Amendment of Registration Rights .  Provisions of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only by a written agreement between the Company and the Investor. Any amendment or waiver effected in accordance with this Section 9 shall be binding upon the Investor and the Company.


10.

Miscellaneous .


(a)

Record Owner .  A Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from the registered owner of such Registrable Securities.


(b)

Further Assurances .  The Company hereby covenants and agrees to execute and deliver any additional documents necessary or desirable, in the reasonable opinion of Investor, or their respective legal counsel, to carry out the intent of this Agreement or enforce its terms, and to otherwise allow Investor to dispose of or re-sell all Registrable Securities, and any other shares of the Company’s Common Stock that may be owned by the Investor, whether or not same are Registrable Securities, including, without limitation, delivering, or causing the Company’s counsel to deliver, any opinions required to remove restrictive legends or to sell any such Registrable Securities or other shares, either pursuant to an effective Registration Statement hereunder, or pursuant to Rule 144, or otherwise.


(c)

Notices .  All notices of request, demand and other communications hereunder shall be addressed to the parties as follows:


If to the Company:

Bergio International, Inc.

 

12 Daniel Road East, Suite 301

 

Fairfield, New Jersy 07004

 

Attn. Mr. Bergio Abajian, CEO

 

Telephone: (973) 227-3230

 

Facsimile: (973) 227-3556

 

E-Mail: berge@bergio.com

 

 

With a copy to:

Lucosky Brookman LLP

(which shall not constitute notice)

33 Wood Avenue South, 6 th Floor

 

Iselin, New Jersey 08830

 

Attn: Joseph Lucosky, Esq.

 

Phone: (732) 395-4400

 

Fax: (732) 395-4401

 

Email: jlucosky@lucbro.com

 

 

If to Investor:

TCA Global Credit Master Fund, LP

 

1404 Rodman Street

 

Hollywood, FL 33020

 

Attn: Mr. Robert Press, Director

 

Telephone: (786) 323-1650

 

Facsimile: (786) 323-1651

 

E-Mail: bpress@trafcap.com

 

 




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With a copy to:

David Kahan, P.A.

(which shall not constitute notice)

3125 W. Commercial Blvd., Suite 100

 

Ft, Lauderdale, FL 33309

 

Attn: David Kahan, Esq.

 

Telephone: (954) 548-3930

 

Facsimile: (954) 548-3910

 

E-Mail: david@dkpalaw.com


unless the address is changed by the party by like notice given to the other parties.  Notice shall be in writing and shall be deemed received: (i) if mailed by certified mail, return receipt requested, postage prepaid and properly addressed to the address above, then three (3) business days after deposit of same in a regularly maintained U.S. Mail receptacle; or (ii) if mailed by Federal Express, UPS or other nationally recognized overnight courier service, next business morning delivery, then one (1) business day after deposit of same in a regularly maintained receptacle of such overnight courier; or (iii) if hand delivered, then upon hand delivery thereof to the address indicated on or prior to 5:00 p.m., EST, on a business day.  Any notice hand delivered after 5:00 p.m., EST, shall be deemed delivered on the following business day.  Notwithstanding the foregoing, notice, requests or demands or other communications referred to in this Agreement may be sent by facsimile, e-mail, or other method of delivery, but shall be deemed to have been delivered only when the sending party has confirmed (by reply e-mail or some other form of written confirmation) that the notice has been received by the other party.


(d)

Entire Agreement .  This Agreement, together with the CEF Agreement, contains the entire understanding and agreement of the parties relating to the subject matter hereof and supersedes all prior and/or contemporaneous understandings and agreements of any kind and nature (whether written or oral) among the parties with respect to such subject matter.


(e)

Governing Law .  The corporate laws of the State of Florida shall govern all issues concerning the relative rights of the Company and the Investor under this Agreement. All other questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of Florida, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Florida or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Florida.  Each party hereby irrevocably submits to the non-exclusive jurisdiction of the State Courts of the State of Florida, sitting in Broward County, Florida and the Federal District Court for the Southern District of Florida, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.




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(f)

Severability .  The parties agree that if any provision of this Agreement be held to be invalid, illegal or unenforceable in any jurisdiction, that holding shall be effective only to the extent of such invalidity, illegally or unenforceability without invalidating or rendering illegal or unenforceable the remaining provisions hereof, and any such invalidity, illegally or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. It is the intent of the parties that this Agreement be fully enforced to the fullest extent permitted by applicable law.


(g)

Binding Effect; Assignment .  This Agreement and the rights and obligations hereunder may not be assigned or delegated by either party, without the prior written consent of the other party. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.  This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.


(h)

Headings .  The section headings contained in this Agreement are inserted for reference purposes only and shall not affect in any way the meaning, construction or interpretation of this Agreement. Any reference to the masculine, feminine, or neuter gender shall be a reference to such other gender as is appropriate. References to the singular shall include the plural and vice versa.


(i)

Waiver .  A waiver of any breach or violation of any term, provision or covenant contained herein shall not be deemed a continuing waiver, or a waiver of any future or past breach or violation, or a waiver of any other term, provision or covenant of this Agreement.  Any such waiver shall only be valid if it is writing and signed by the party granting such waiver.


(j)

Joint Preparation .  The preparation of this Agreement has been a joint effort of the parties and the resulting documents shall not, solely as a matter of judicial construction, be construed more severely against one of the parties than the other.


(k)

Counterparts and Execution .  This Agreement may be executed in one or more counterparts, all of which taken together shall be deemed and considered one and the same Agreement, and same shall become effective when counterparts have been signed by each party and each party has delivered its signed counterpart to the other party.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format file or other similar format file, such signature shall be deemed an original for all purposes and shall create a valid and binding obligation of the party executing same with the same force and effect as if such facsimile or “.pdf” signature page was an original thereof.





[Signatures on the following page]





11



IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective the day and year first above written.


 

COMPANY:

 

 

 

BERGIO INTERNATIONAL, INC., a Delaware corporation

 

 

 

 

 

By: /s/ Berge Abajian

 

Name: Berge Abajian

 

Title: Chief Executive Officer

 

 

 

 

 

 

 

INVESTOR:

 

 

 

TCA GLOBAL CREDIT MASTER FUND, LP

 

 

 

By: TCA Global Credit Fund GP, Ltd., its general partner

 

 

 

 

 

 

 

By:  /s/ Robert Press   

 

Name: Robert Press

 

Title: Director













12



EXHIBIT “A”


FORM OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

Attention: TCA Global Credit Master Fund, LP

 

Re: Bergio International, Inc.

 

Ladies and Gentlemen:

 

We are counsel to Bergio International, Inc. (the “ Company ”), and have represented the Company in connection with that certain Committed Equity Facility Agreement (the “ CEF Agreement ”) entered into by and between the Company and TCA Global Credit Master Fund, LP (the “ Investor ”) pursuant to which the Company issued, or proposes to issue, to the Investor shares of its Common Stock, par value $______ per share (the “ Common Stock ”).  Pursuant to the CEF Agreement, the Company also has entered into a Registration Rights Agreement with the Investor (the “ Registration Rights Agreement ”) pursuant to which the Company agreed, among other things, to register the Registrable Securities (as defined in the Registration Rights Agreement) under the Securities Act of 1933, as amended (the “ Securities Act ”).  In connection with the Company’s obligations under the Registration Rights Agreement, on __________________, the Company filed a Registration Statement on Form ______ (File No. 333-_______) (the “ Registration Statement ”) with the Securities and Exchange Commission (the “ SEC ”) relating to the Registrable Securities which names the Investor as a selling stockholder thereunder.

 

In connection with the foregoing, we advise you that a member of the SEC’s staff has advised us by telephone that the SEC has entered an order declaring the Registration Statement effective under the Securities Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and the Registrable Securities are available for resale under the Securities Act pursuant to the Registration Statement.

 

Very truly yours,

 

By: ______________________



 

 

 

 


 





13


 

Exhibit 23.1




Silberstein Ungar, PLLC CPAs and Business Advisors

Phone (248) 203-0080

Fax (248) 281-0940

30600 Telegraph Road, Suite 2175

Bingham Farms, MI 48025-4586

www.sucpas.com



January 31, 2012



CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors

Bergio International, Inc.

Fairfield, New Jersey


To Whom It May Concern:


Silberstein Ungar, PLLC, hereby consents to the use in the Form S-1, Registration Statement Under the Securities Act of 1933, filed by Bergio International, Inc. of our report dated March 28, 2011, relating to the financial statements of Bergio International, Inc., a Delaware Corporation, as of and for the years ending December 31, 2010 and 2009, and the reference to us under the caption “Experts”.


Sincerely,


/s/ Silberstein Ungar, PLLC


Silberstein Ungar, PLLC


Bingham Farms, Michigan