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Bergio International’s (OTCMKTS: BRGO) Record Quarter Sparkles Despite Covid Lockdown

Bergio International’s (OTCMKTS: BRGO) Record Quarter Sparkles Despite Covid Lockdown
Written by
Michael Sheikh
Published on
October 23, 2020
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Bergio International Inc. (OTCMKTS: BRGO) today announced profitable operations from its Jewelry business. Bergio isn’t just some start up jewelry brand, it's been cultivated over the past 25 years. What is new is their distribution strategy via the largest retailer on the planet called Amazon (NASDAQ: AMZN). They have their own Amazon store, albeit modest at this point which allows customers to get the product very fast from a brand they have all grown to know and love. The designer known as “Berge” also worked behind the scenes at Neiman Marcus. They proudly manufacture high end jewelry here in the United States.What is so stunning about the latest earnings release is the profitability and the gross margins. The company announced $388,846 in net income which equates approximately $500,000 in revenue for the quarter. This is a $2.0 million run rate in sales. Simple math tells us that they will pull down $1.56 million in net income in the next 12 months. While they do have some debt to repay that works out to $.024 in EPS. So with a current market cap of $300,000 this represents a ridiculous value opportunity.

Balance Sheet Clean Up

There is considerable debt on the books but they are in the process of cleaning this all up. Just recently in an 8-K we learned that they settled $474,000 of debt with Illiad Research and Trading for a fixed workout payment of $50,000 per month for 6 months or a total of $300,000. The current cash flow clearly supports this payment. The good news is they don’t need inventory financing because they have $1.1 million in inventory based on their Q2 filing. This company does have tangible assets! There are convertible note holders that were responsible for the stock slide during the past quarter. Approximately 40 million new shares came into the marketplace. From the last quarterly report the convertible debt totalled $632,150 plus $471,073 in accrued interest for a payoff of approximately $1.1 million. The settlement with Iliad Research brings the new debt and interest levels down to approximately $630,000 but adjustments need to be applied. Over the course of the quarter the 40 million new shares appear to be converted at an average price of $.01 and would have lowered the balance to $130,000 based on these assumptions. When the disclosure report is filed for the past quarter investors should expect a serious reduction in convertible debt. The lower the number the more bullish it is for the stock but based on the earnings they may simply be able to repay the debt with their strong cash flow.

Risk Assessment

Since July there has been a big overhang on the stock price. Investors buying the company for a turnaround have had a lot of supply thrown at them by the convertible noteholders. Based on the consolidation of volume seen on the chart investors were patiently waiting for a sign that the dilution was over. Ever since the settlement deal was struck with the noteholder on August 14th the stock has had a couple of false start runs. Based on the earning information released today the company has the means to repay the noteholder and completely clean up the balance sheet. They essentially sounded the all clear that the days of dilution are over. Another factor for investors to consider is that the CEO settled a portion of his debt for 17 million shares which represents a 26% stake in the company. He is highly incentivized to do everything in his power to increase shareholder value. The risk of dilution is almost nil at this point. The only other risk seems to be execution risk. With a track record in the industry of 25 years it seems that they are survivors that just needed time to make the leap to the digital realm. With their Amazon retail store they simply need to keep their product offerings fresh and work on getting good reviews and building a brand story. They need to continue to push the limits of their distribution channels, find more outlets, and effectively employ social media. Given the length of time it took to transition to the Amazon portal is probably their only Achilles heel. The products they make are made in America and very tasteful so they should have great control over their supply chain.

Investment Summary

For the past year Bergio has been making a gross profit, but just didn’t have enough sales momentum that turned into net income. This quarter was transformational with a blowout earnings report. Revenues in this quarter swelled to approximately $500,000 which is equivalent to almost all of what they did last year. In the brand building business this represents its breakout quarter. Brands need momentum and the Amazon store is getting traction and should hopefully sustain it. The company also has a line of handbags, belts, wallets, and watches with a large enough selection to keep the consumer interested and coming back as a repeat customer. The company has a market capitalization of $300K yet reported a net income of $388K which was more than their market cap. Assuming this income dropped to the bottom line that represents earnings for the quarter of $.006 which was higher than the stock price. Their working capital was $242,803 and they had $1.1 million in inventory last quarter. Investors need to look at these numbers and ask themselves if this makes sense. The simple truth is the stock is horrendously undervalued so investors need to figure out what it's worth. Some metrics that help investors value a company are sales. The company has a current $2.0 million run rate but a gross profit margin of 87%. A multiple of 2X sales is very reasonable given the high margins and how much flows to the bottom line. A $4.0 million valuation represents a 6 month price target of $.0625.


Disclosure: Insider Financial and its owners do not have a position in the stocks posted and have posted this article for free without editorial input. This article was written by a guest contributor and solely reflects his opinions.

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