Effects of COVID-19
As of the date of this Quarterly Report, there remain significant uncertainties
regarding the current novel Coronavirus (COVID-19) pandemic (including the
ongoing impact of its "delta variant"), including the scope of health issues,
the possible duration of the pandemic and the extent of local and worldwide
social, political and economic disruption it may cause in the future.
To date, the COVID-19 pandemic has had a discernable short-term negative impact
on the ability of our company to obtain capital needed to accelerate the
development of our business, as well as to obtain needed inventory, due to
supply chain delays. We are unable to predict when such limitations will ease.
Overall, our company is not of a size that has required us to implement
"company-wide" policies in response to the COVID-19 pandemic. Further, our
product manufacturing operations have experienced no negative consequences
attributable to the COVID-19 pandemic, inasmuch as these operations involve a
limited number of persons. However, as the states continue to re-open, re-close,
then re-open their economies, the scope and nature of the impacts of COVID-19 on
our company will evolve day-by-day, week-by-week.
The COVID-19 pandemic can be expect to continue to result in regional and local
quarantines, labor stoppages and shortages, changes in consumer purchasing
patterns, mandatory or elective shut-downs of retail locations, disruptions to
supply chains, including the inability of our suppliers to deliver materials on
a timely basis, or at all, severe market volatility, liquidity disruptions and
overall economic instability. It can be further expected that the COVID-19
pandemic will continue to have unpredictably adverse impacts on our business,
financial condition and results of operations. This situation is changing
rapidly and additional impacts may arise of which we are not currently aware.
We intend to continue to assess the evolving impact of the COVID-19 pandemic,
not only on our company, but on the operations of our customers, consumers and
supply chains, and intend to make adjustments accordingly. However, the extent
to which the COVID-19 pandemic may impact our business, financial condition and
results of operations will depend on how the COVID-19 pandemic and its impact
continues to impact the United States and, to a lesser extent, the rest of the
world, all of which remains highly uncertain and cannot be predicted at this
time.
In light of these uncertainties, for purposes of the discussion below, except
where otherwise indicated, the descriptions of our business, our strategies, our
risk factors and any other forward-looking statements, including regarding us,
our business and the market generally, do not reflect the potential impact of
the COVID-19 pandemic or our responses thereto.
Basis of Presentation
Our company was a "shell company" from 2014 through all of 2019. Effective
January 1, 2020, we acquired Black Bird Potentials Inc. ("BB Potentials"), in a
transaction accounted for as a "reverse merger". This Management's Discussion
and Analysis of Financial Condition and Results of Operations section includes
financial results of Black Bird Biotech, Inc., including its subsidiaries, Black
Bird Potentials Inc. ("BB Potentials"), Big Sky American Dist., LLC ("Big Sky
American") and Black Bird Hemp Manager, LLC.
Cautionary Statement
The following discussion and analysis should be read in conjunction with our
financial statements and related notes, beginning on page F-1 of this Quarterly
Report.
Our actual results may differ materially from those anticipated in the following
discussion, as a result of a variety of risks and uncertainties. We assume no
obligation to update any of the forward-looking statements included herein.
Implications of Being an Emerging Growth Company
As a company with less than $1.07 billion in revenue during our last fiscal
year, we qualify as an "emerging growth company", as defined in the Jumpstart
Our Business Startups Act of 2012 (the "JOBS Act"). As an emerging growth
company, we may take advantage of specified reduced disclosure and other
requirements that are otherwise applicable generally to public companies. These
provisions include:
· Only two years of audited financial statements in addition to any required
unaudited interim financial statements with correspondingly reduced
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" disclosure.
· Reduced disclosure about our executive compensation arrangements.
· Not having to obtain non-binding advisory votes on executive compensation
or golden parachute arrangements.
· Exemption from the auditor attestation requirement in the assessment of
our internal control over financial reporting.
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We may take advantage of these exemptions for up to five years or such earlier
time that we are no longer an emerging growth company. We would cease to be an
emerging growth company if we have more than $1.07 billion in annual revenue, we
have more than $700 million in market value of our stock held by non-affiliates,
or we issue more than $1 billion of non-convertible debt over a three-year
period. We may choose to take advantage of some but not all of these reduced
burdens. We have taken advantage of these reduced reporting burdens herein, and
the information that we provide may be different than what you might get from
other public companies in which you hold stock.
Critical Accounting Policies
In General. Our accounting policies are discussed in detail in the footnotes to
our financial statements beginning on page F-1. We consider our critical
accounting policies related to revenue recognition, inventory and fair value of
financial instruments.
Change in Accounting Principle. In August 2020, the Financial Accounting
Standards Board ("FASB") issued Accounting Standards Update ("ASU")
2020-06-Debt-Debt with Conversion and Other Options (Subtopic 470-20) and
Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic
815-40)-Accounting For Convertible Instruments and Contracts in an Entity's Own
Equity. The ASU simplifies accounting for convertible instruments by removing
major separation models required under current GAAP. Consequently, more
convertible debt instruments will be reported as a single liability instrument
with no separate accounting for embedded conversion features. The ASU removes
certain settlement conditions that are required for equity contracts to qualify
for the derivative scope exception, which will permit more equity contracts to
qualify for it. The ASU also simplifies the diluted net income per share
calculation in certain areas. The new guidance is effective for annual and
interim periods beginning after December 15, 2021, and early adoption is
permitted for fiscal years beginning after December 15, 2020. Our company has
early adopted ASU 2020-06 for the year beginning January 1, 2021.
Overview and Outlook
With the acquisition of BB Potentials effective January 1, 2020, BB Potentials'
operations became the operations of our company.
Through BB Potentials, our company is the exclusive worldwide manufacturer and
distributor of MiteXstream, an EPA-registered plant-based biopesticide (EPA Reg.
No. 95366-1) effective in the eradication of spider mites, a pest that destroys
crops, especially cannabis, hops, coffee, and house plants, as well as molds and
mildew. Also through BB Potentials, we manufacture and sell CBD products,
including CBD Oils, gummies and pet treats, and CBD-infused personal care
products, as well as hand sanitizer gel and spray products, under the Grizzly
Creek Naturals brand name. Big Sky American distributes our Grizzly Creek
Naturals products, as well as an array of other consumer retail products, in
Western Montana. In addition, BB Potentials is a licensed grower of industrial
hemp under the Montana Hemp Pilot Program and has established "Black Bird
American Hemp" as the brand name under which these efforts will be conducted.
Principal Factors Affecting Our Financial Performance
Following our acquisition of BB Potentials, our future operating results can be
expected to be primarily affected by the following factors:
· our ability to establish and maintain the value proposition of our
MiteXstream biopesticide, vis-a-vis other available pest control products;
· our ability to generate sales channels for MiteXstream; and
· our ability to contain our operating costs.
Results of Operations
Six Months Ended June 30, 2021 ("Interim 2021") and 2020 ("Interim 2020").
Beginning in April 2021, Big Sky American began its consumer product
distribution operations in Northwest Montana, which had a positive impact on our
operating results for the second quarter of 2021, when compared to our operating
results for the first quarter of 2021. During Interim 2021, our business
operations generated $35,212 (unaudited) in revenues from sales of consumer
products, including our Grizzly Creek Naturals products, with a cost of goods
sold of $23,631 (unaudited), resulting in a gross profit of $11,581 (unaudited).
During Interim 2020, our business operations generated $35,874 (unaudited) in
revenues from consumer product sales, including sales of our Grizzly Creek
Naturals products, with a cost of goods sold of $13,265 (unaudited), resulting
in a gross profit of $22,609 (unaudited).
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During Interim 2021, we incurred operating expenses of $378,453 (unaudited),
which were comprised of $117,787 (unaudited) in consulting services, $9,927
(unaudited) in website expenses, $43,773 (unaudited) in legal and professional
services, $-0- (unaudited) for product license, $6,660 (unaudited) in rent,
$5,078 (unaudited) in advertising and marketing expense and $193,559 (unaudited)
in general and administrative expense, resulting in a net loss of $(474,047)
(unaudited).
During Interim 2020, we incurred operating expenses of $127,697 (unaudited),
which were comprised of $39,299 (unaudited) in consulting services, $3,334
(unaudited) in website expenses, $42,950 (unaudited) in legal and professional
services and $31,329 (unaudited) in general and administrative expense,
resulting in a net loss of $(105,149) (unaudited).
We expect that our revenues will increase from quarter to quarter, beginning
with the third quarter of 2021 based on two primary circumstances: (1) sales of
MiteXstream are expected to begin during the last half of the third quarter of
2021; and (2) the operations of Big Sky American are expected to expand over
time. There is no assurance that material sales of MiteXstream will be realized
or that the operations of Big Sky American will yield increased sales. We expect
to incur operating losses through at least the fourth quarter of 2021.
Further, because of our current lack of capital and the current lack of brand
name awareness of MiteXstream and Grizzly Creek Naturals, we cannot predict the
levels of our future revenues. However, our management believes that MiteXstream
will become the most dynamic, fastest growing part of our business.
Plan of Operation and Recent Developments
MiteXstream. Pursuant to our agreement with Touchstone Enviro Solutions, Inc.
("Touchstone"), a company owned by three of our directors, Fabian G. Deneault,
Eric Newlan and L. A. Newlan, Jr., BB Potentials possesses the exclusive rights,
even as to Touchstone, to manufacture, sell and distribute MiteXstream. The
exclusivity granted would be reduced to a status of non-exclusivity, should be
fail to manufacture at least 2,500 gallons of concentrate in any year during the
term of the MiteXstream Agreement; provided, however, that such minimum required
is deemed to have been satisfied through December 31, 2022. We are required to
pay Touchstone a royalty of $10 per gallon of MiteXstream manufactured by us or
by any sublicensee of ours. For no further consideration, we were granted the
rights to use the "MiteXstream" trademark and the "Harnessing the Power of
Water" trademark.
Based on informal testing done by, and discussions with, cannabis cultivation
industry participants, our management believes that MiteXstream will become the
most dynamic, fastest growing part of our business. However, no prediction can
be made in this regard.
Effective December 16, 2020, MiteXstream was approved as a biopesticide by the
U.S. Environmental Protection Agency (EPA Reg. No. 95366-1). We have begun to
seek approval for use of MiteXstream in the various states; the state approval
process takes between one and eight months, variously. To date, MiteXstream is
approved for sale in six states, Nevada, Colorado, Washington, Oregon, Montana
and Kentucky, with applications pending in nine additional states, including
California. Until we obtain the required pesticide certification in a state, we
will not sell any MiteXstream. In addition, we intend to seek approval of
MiteXstream in countries around the world, although no specific time for such
actions has been set.
We have begun to market MiteXstream through channels known to our management.
However, until July 2021, supply chain interruptions prevented us from producing
commercial quantities. These supply chain interruptions have been resolved and
sales of MiteXstream are expected to begin in the last half of the third quarter
of 2021.
In March 2021, we entered into a distribution agreement with IFC Fulfillment
Company ("IFC"), a Los Angeles-based export firm, whereby IFC was appointed the
exclusive distributor for MiteXstream in China, Hong Kong and Taiwan. Our
Director, Jack Jie Qin, a Company director, facilitated the signing of the IFC
Agreement. As of the date of this Quarterly Report, IFC has not made a sales of
MiteXstream.
When we obtain sufficient capital, it is our intention to hire a national sales
director. There is no assurance that we will be able to achieve this objective.
In any event, we have begun efforts to secure a a small number of established
distributors through which to sell MiteXstream in the United States and
internationally. There is no assurance we will be successful in these efforts.
CBD and Other Consumer Products. We have created "Grizzly Creek Naturals" as the
brand name for our CBD-related products, which are manufactured by our company
using CBD purchased from third parties. We currently manufacture and sell our
line of Grizzly Creek Naturals CBD products, including CBD Oils and Gummies, CBD
Topicals and CBD dog treats. We also manufacture and sell hand sanitizer gel and
spray products (without CBD) under our Grizzly Creek Naturals brand. In
addition, since the operations of Big Sky American commenced in April 2021, we
sell an array of consumer products, including Grizzly Creek Naturals product, to
approximately 250 customers located in Western Montana.
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Distribution. When it began to manufacture and sell our CBD products in
mid-2019, BB Potentials self-distributed its products. In December 2020, these
distribution efforts we formalized with the formation of Big Sky American. In
February 2021, Big Sky American purchased certain distribution-related assets
associated with approximately 200 retail locations in Western Montana for
$200,000 in cash. Big Sky American currently distributes the Grizzly Creek
Naturals products to approximately 250 retail locations in Western Montana.
Website. We sell our Grizzly Creek Naturals CBD products to consumers through
our website: www.grizzlycreeknaturals.com.
Financial Condition, Liquidity and Capital Resources
Capital Sources.
Regulation A Offering. In May 2020, our company filed an Offering Statement on
Form 1-A (File No. 254-11215) (the "Regulation A Offering") with SEC with
respect to 70,000,000 shares of common stock, as amended, which was qualified by
the SEC on August 4, 2020. For the six months ended June 30, 2021, we sold a
total of 4,875,000 shares of common stock for a total of $195,000 in cash, under
the Regulation A Offering. Subsequent to June 30, 2021, we sold a total of
1,562,500 shares of our common stock for a total of $50,000 under our Regulation
A Offering. In August 2021, our Offering Statement expired.
Third-Party Loans.
GPL Ventures LLC. In April 2020, the Company obtained a loan in the amount of
$25,000 from GPL Ventures LLC. In consideration of such loan, the Company issued
a $25,000 face amount convertible promissory note (the "GPL Note") bearing
interest at 10% per annum, with principal and interest due in January 2021. The
GPL Note was convertible into shares of the Company's common stock at the rate
of one share for each $.001 of debt converted anytime after August 30, 2020.
At June 30, 2020, accrued interest on the GPL Note was $417.
In November 2020, the GPL Note, including accrued interest, was repaid in full
in the amount of $28,000 ($25,000 in principal and $3,000 in interest).
Tri-Bridge Ventures LLC. In April 2020, the Company obtained a loan in the
amount of $25,000 from Tri-Bridge Ventures LLC. In consideration of such loan,
the Company issued a $25,000 face amount convertible promissory note (the
"Tri-Bridge Note") bearing interest at 10% per annum, with principal and
interest due in January 2021. Tri-Bridge Note is convertible into shares of the
Company's common stock at the rate of one share for each $.001 of debt converted
anytime after August 30, 2020.
At June 30, 2021 and 2020, accrued interest on the Tri-Bridge Note was $2,917
and $417, respectively.
At June 30, 2021, the Tri-Bridge Note was past due.
EMA Financial, LLC. In December 2020, the Company obtained a loan from EMA
Financial, LLC which netted us $50,000 in proceeds. In consideration of such
loan, the Company issued a $58,600 face amount convertible promissory note (the
"EMA Note"), with OID of $4,100, bearing interest at 10% per annum, with
principal and interest due in September 2021. The Company had the right to repay
the EMA Note at a premium ranging from 120% to 145% of the face amount. The EMA
Note was convertible into shares of the Company's common stock at a conversion
price equal to the lower of 60% of the market price of the Company's common
stock on the date of issuance of the EMA Note and the date of conversion, any
time after June 15, 2021.
In June 2021, the EMA Note was repaid in full in the amount of $93,697.70, as
follows: $61,119.80 in principal; $3,499.30 in interest; and $29,078.60 as a
prepayment premium.
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Power Up Lending Group Ltd. In January 2021, the Company obtained a loan from
Power Up Lending Group Ltd. which netted the Company $52,000 in proceeds. In
consideration of such loan, the Company issued a $55,500 face amount convertible
promissory note ("Power Up Note #1") bearing interest at 12% per annum, with
principal and interest due in January 2022. The Company had the right to repay
the Power Up Note #1 at a premium ranging from 125% to 145% of the face amount.
The Power Up Note #1 was convertible into shares of the Company's common stock
at a conversion price equal to the lower of 61% of the market price of the
Company's common stock on the date of issuance of the Power Up Note #1 and the
date of conversion, any time after July 14, 2021.
At June 30, 2021, no portion of the Power Up Note #1 had been repaid by the
Company.
Subsequent to June 30, 2021, during July 2021, the Power Up Note #1 was repaid
in full through conversion into shares of the Company's common stock, as
follows:
Amount Converted Conversion Price Per Share Number Shares
$ 15,000 $ 0.0162 925,926
$ 20,000 $ 0.0143 1,398,601
$ 20,500 $ 0.0143 1,666,434
Total Converted: $55,500 Total Shares: 3,990,961
SE Holdings, LLC. In February 2021, the Company obtained a loan from SE Holdings
LLC which netted the Company $106,000 in proceeds. In consideration of such
loan, the Company issued a $121,000 face amount promissory note (the "SE
Holdings Note"), with OID of $15,000, bearing interest at 9% per annum, with
principal and interest payable in eight equal monthly payments of $15,125
beginning in July 2021. The Company has the right to repay the SE Holdings Note
at any time. Should the Company default on SE Holdings Note, the SE Holdings
Note becomes convertible into shares of the Company's common stock at a
conversion price equal to the lesser of the lowest closing bid price of the
Company's commons stock for the trading day immediately preceding either (a) the
delivery of a notice of default, (b) the delivery of a notice of conversion
resulting from such default or (c) the issue date of the SE Holdings Note. In
addition, the Company issued 2,000,000 shares of its common stock to SE Holdings
as a commitment fee, which shares were valued at $0.065 with a 50% discount per
share, or $65,000, in the aggregate.
At June 30, 2021, no portion of the SE Holdings Note had been repaid by the
Company.
Power Up Lending Group Ltd. In February 2021, the Company obtained a loan from
Power Up Lending Group Ltd. which netted the Company $43,500 in proceeds. In
consideration of such loan, the Company issued a $43,500 face amount convertible
promissory note ("Power Up Note #2") bearing interest at 12% per annum, with
principal and interest due in January 2022. The Company has the right to repay
the Power Up Note #2 at a premium ranging from 125% to 145% of the face amount.
The Power Up Note #2 may be converted into shares of the Company's common stock
at a conversion price equal to the lower of 61% of the market price of the
Company's common stock on the date of issuance of the Power Up Note #2 and the
date of conversion, any time after August 17, 2021.
At June 30, 2021, no portion of the Power Up Note #2 had been repaid by the
Company.
Power Up Lending Group Ltd. In April 2021, the Company obtained a loan from
Power Up Lending Group Ltd. which netted the Company $68,750 in proceeds. In
consideration of such loan, the Company issued a $68,750 face amount convertible
promissory note ("Power Up Note #3") bearing interest at 12% per annum, with
principal and interest due in April 2022. The Company has the right to repay the
Power Up Note #3 at a premium ranging from 125% to 145% of the face amount. The
Power Up Note #3 may be converted into shares of the Company's common stock at a
conversion price equal to the lower of 61% of the market price of the Company's
common stock on the date of issuance of the Power Up Note #3 and the date of
conversion, any time after October 22, 2021.
At June 30, 2021, no portion of the Power Up Note #3 had been repaid by the
Company.
June 30, 2021. At June 30, 2021, our company had $66,476 (unaudited) in cash and
had working capital of $11,171 (unaudited), compared to $52,974 in cash and a
working capital deficit of $7,609 at December 31, 2020. The change in our
working capital position from December 31, 2020, to June 30, 2021, is
attributable primarily to our applying $200,000 in available cash to the
purchase of distribution assets in February 2021.
Our company's current cash position of approximately $90,000 is adequate for our
company to maintain its present level of operations through the remainder 2021.
However, we must obtain additional capital from third parties to implement our
full business plans. There is no assurance that we will be successful in
obtaining such additional capital.
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Inflation
Our management believes economic conditions point toward significant
inflationary pressures arising in the near future. However, no prediction can be
made in this regard and, further, no prediction can be made with respect to how
the potential impact any inflation would affect our results of operations.
Seasonality
For the foreseeable future, we expect that our operating results will be
impacted by the seasonality of farming operations, including cannabis grow
operations. However, we are currently unable to predict the level to which such
seasonality will impact our business.
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BLACK BIRD BIOTECH, INC. 
