UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended SeptemberJune 30, 20162017
or
¨ TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from _______________ to ______________
Commission File Number: 333-206260
FIRST FOODS GROUP, INC. |
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(Exact name of registrant as specified in its charter) | (Exact name of registrant as specified in its charter) |
NEVADA |
| 47-4145514 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
| 720 Monroe Street, Suite E210 | |
Hoboken, NJ 07030 |
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(Address of principal executive offices) (Zip Code) | (Address of principal executive offices) (Zip Code) | |
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(201) 471-0988 |
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Registrant's telephone number, including area code | Registrant's telephone number, including area code | |
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(Former name, former address and former fiscal year, if changed since last report) | (Former name, former address and former fiscal year, if changed since last report) | |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the proceeding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One).
Large accelerated filer | ¨ | Accelerated filer | ¨ | |
Non-accelerated filer | ¨ | Smaller reporting company | x | |
(Do not check if a smaller reporting company) |
| Emerging growth company | x | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
As of November 8, 2016,August 11, 2017, the number of shares outstanding of the registrant’s class of common stock was 14,150,000.
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LITERA GROUP, INC.
FINANCIAL STATEMENTS and
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Period Ended September 30, 2016
LITERA GROUP, INC.
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LITERA GROUP, INC. September 30, December 31, 2016 2015 (Unaudited) ASSETS Cash Accounts receivable Total Current Assets TOTAL ASSETS LIABILITIES AND STOCKHOLDERS' DEFICIT Accrued liabilities Total Current Liabilities TOTAL LIABILITIES Preferred stock; $0.001 par value, 5,000,000 shares authorized, no shares issued or outstanding Common stock; $0.001 par value, 70,000,000 shares authorized, 14,150,000 issued and outstanding Additional paid-in capital Deficit accumulated during the development stage Total Stockholders' Deficit TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT Condensed Balance Sheets (Unaudited) June 30, 2017 December 31, 2016 ASSETS Cash Prepaid expenses TOTAL ASSETS LIABILITIES AND STOCKHOLDERS' DEFICIT LIABILITIES Accounts payable and accrued liabilities Due to shareholder Deferred compensation TOTAL LIABILITIES Commitments STOCKHOLDERS' DEFICIT Preferred stock: $0.001 par value, 5,000,000 shares authorized, no shares issued and outstanding Common stock: $0.001 par value, 70,000,000 shares authorized, 16,372,857 and 14,150,000 shares issued and outstanding, respectively Additional paid-in capital Accumulated deficit Total stockholders' deficit TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT ASSETS 23,824 61,573 $ 3,500 $ - 27,324 61,573 $ 27,324 $ 61,573 CURRENT LIABILITIES $ - $ 671 - 671 - 671 STOCKHOLDERS' DEFICIT - - 14,150 14,150 42,949 42,949 (29,775 ) 3,803 27,324 60,902 $ 27,324 $ 61,573 $ 686 $ 17,355 40,282 - $ 40,968 $ 17,355 $ 187,673 $ 17,355 146,450 - 114,701 - 448,824 17,355 - - 16,373 14,150 3,692,779 42,949 (4,117,008 ) (57,099 ) (407,856 ) - $ 40,968 $ 17,355
The accompanying notes are an integral part of these unaudited condensed financial statements.statements
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LITERA GROUP, INC. (Unaudited) For the Three Months Ended For the Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Professional Fees General and administrative REVENUES $ 10,000 $ 13,500 $ 38,000 $ 13,500 EXPENSES 6,344 9,635 38,704 9,635 12,449 884 32,874 1,383 LOSS FROM OPERATIONS (8,793 ) 2,981 (33,578 ) 2,482 NET INCOME (LOSS) $ (8,793 ) $ 2,981 $ (33,578 ) $ 2,482 BASIC AND DILUTED LOSS PER SHARE OF COMMON STOCK $ (0.00 ) $ 0.00 $ (0.00 ) $ 0.00 WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 14,150,000 14,150,000 14,150,000 14,150,000
Condensed Statements of Operations (Unaudited) For the three months ended June 30, For the six months ended June 30, 2017 2016 2017 2016 REVENUES OPERATING EXPENSES Professional Fees General and Administrative Total Operating Expenses LOSS FROM OPERATIONS NET LOSS BASIC AND DILUTED LOSS PER COMMON SHARE WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING $ - $ 16,500 $ - $ 28,000 86,255 8,885 129,552 32,360 2,027,952 19,631 3,930,357 20,425 2,114,207 28,516 4,059,909 52,785 (2,114,207 ) (12,016 ) (4,059,909 ) (24,785 ) $ (2,114,207 ) $ (12,016 ) $ (4,059,909 ) $ (24,785 ) $ (0.13 ) $ (0.11 ) $ (0.26 ) $ (0.23 ) 15,995,746 110,558 15,343,165 108,006
The accompanying notes are an integral part of these unaudited condensed financial statements.statements
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LITERA GROUP, INC. (Unaudited) For the Nine Months Ended September 30, 2016 2015 Net loss Adjustments to reconcile net loss to cash flows from operating activities Services contributed by shareholder Changes in operating assets and liabilities Accounts receivable Accrued expenses Net Cash Provided by (Used in) Operating Activities Common stock issued for cash Net Cash Provided by (Used in) Financing Activities NON-CASH FINANCING ACTIVITIES: CASH PAID FOR: Interest Income Taxes Condensed Statements of Cash Flows (Unaudited) 2017 2016 CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss Adjustments to reconcile net loss to net cash used in operating activities: Common stock issued to officers for services rendered Common stock issued to consultants for services rendered Changes in operating assets and liabilities: Prepaid expenses Accounts payable and accrued liabilities Deferred compensation Net cash used in operating activities CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from shareholder loans Repayment of shareholder loans Net cash provided by financing activities NET DECREASE IN CASH CASH AT BEGINNING OF PERIOD CASH AT END OF PERIOD SUPPLEMENTAL CASH FLOW INFORMATION: CASH PAID FOR: Interest Income taxes OPERATING ACTIVITIES $ (33,578 ) $ 2,482 - 499 (3,500 ) - (671 ) - (37,749 ) 2,981 INVESTING ACTIVITIES - - FINANCING ACTIVITIES - 20,100 - 20,100 NET CHANGE IN CASH (37,749 ) 23,081 CASH AT BEGINNING OF PERIOD 61,573 - CASH AT END OF PERIOD $ 23,824 $ 23,081 SUPPLEMENTAL CASH FLOW INFORMATION: $ - $ - $ - $ - For the six months ended June 30, $ (4,059,909 ) $ (24,785 ) 2,510,625 - 1,141,428 - (40,282 ) - 170,318 (671 ) 114,701 - (163,119 ) (25,456 ) 175,647 - (29,197 ) - 146,450 - (16,669 ) (25,456 ) 17,355 61,573 $ 686 $ 36,117 $ - $ - $ - $ -
The accompanying notes are an integral part of these unaudited condensed financial statements.statements
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LITERA GROUP, INC.First Foods Group, Inc.
Notes to theUnaudited CondensedFinancial Statements
September 30, 2016
NOTE 1 -– BUSINESS, SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND LIQUIDITY
Nature of Business
First Foods Group, Inc. (the "Company" or “First Foods” formerly known as Litera Group, Inc. ("Litera", or the "Company") was incorporated under the laws of the State of Nevada on June 1, 2015. Litera2015, as “Litera Group, Inc.”. The Company is a developmental stagean emerging growth corporation originally formed to provide products and services within the theater and film production industry.community. The Company developsdeveloped screenplays, stage plays, comedy sketch and skit scripts, short film scripts and other literary and dramatic works, as well as offeroffered abridgment and adaptation services. The Company's target market iswas independent film and theatrical producers and small and experimental production studios that scout for new projects to produce and distribute. The Company amended its Articles of Incorporation with the State of Nevada in order to change its name from Litera Group, Inc. to First Foods Group, Inc. (the “Amendment”). The board of directors of the Company approved the Amendment on February 15, 2017. The shareholders of the Company approved the Amendment by written consent on February 15, 2017. The Amendment became effective on February 16, 2017. First Foods is now focused on providing management services and funding options for new foodservice brands and menu concepts. First Foods Group, Inc. is also growing its own new concepts, both through proprietary development and through mergers, acquisitions, and licensing arrangements.
On April 21, 2017, the Company entered into a binding term sheet (the “Term Sheet”) with Oded Brenner (“Brenner”). Pursuant to the Term Sheet, the Company and Brenner will form an entity that will own the intellectual property rights to "Blue Stripes-Cacao Shop" (the "IP Entity"), for the United States. The Company has 120 days from the date of the Term Sheet to raise a minimum of $1,250,000 and complete the closing. Each party will own 50% of the IP Entity. Additionally, the Company and Brenner will form a new entity (the "Operating Entity"), of which, the Company shall own 51% and Brenner 49%, which will be granted the unlimited and exclusive license, at no cost, from the IP Entity, to open company-owned and franchise locations under the "Blue Stripe-Cacao Shop" marks and to sell products under the "Blue Stripe" marks (the "Brand"), both at retail and via the Internet. As part of the closing process, after the money is raised, the Company shall also use its best efforts to negotiate a three-year employment agreement with Brenner, who would then commit to work full-time for the Company and its subsidiaries/affiliates. As of the date of this filing, the Company has not raised any capital or completed a closing for the Term Sheet.
On June 19, 2017, the Company entered into a binding term sheet (the “TBS Term Sheet”) with The Big Salad Franchise Company, LLC, a Michigan limited liability company ("TBS"). The Company has 60 days from the date of the Term Sheet to complete the closing. Pursuant to the TBS Term Sheet, the Company will purchase 100% of TBS for payment of $850,000 in cash. Additionally, John Bornoty (the “Sole Member”) shall receive a 10% equity interest in a subsidiary to be formed by Company (“NewCo”), that will operate the TBS franchise program subsequent to Closing (the $850,000 plus the 10% equity interest is collectively known as the "Purchase Price"). Upon Closing, Sole Member will be named Chief Executive Officer of NewCo and will enter into an Executive Employment Agreement ("EEA") with NewCo that includes an annual salary of $90,000.00, plus other benefits and bonuses in accordance with those provided to the officers of the Company. The EEA shall have a three-year term, with renewal options if approved by the Board of the Company and Sole Member.
In the opinion of management, the accompanying condensed financial statements presented in this Quarterly Report on Form 10-Q reflect all normal recurring adjustments necessary to present fairly the financial position and results of operations and cash flows for the interim periods presented herein, but are not necessarily indicative of the results of operations for the year ending December 31, 2017. These condensed financial statements should be read in conjunction with the Company’s audited financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2016 filed on March 27, 2017, and with the disclosures and risk factors presented therein. The December 31, 2016 condensed balance sheet has been derived from the audited financial statements.
Going Concern
The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.
The Company does not have sufficient cash flow for the next twelve months from the date of this report. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying condensed financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
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First Foods Group, Inc.
Notes to Unaudited Condensed Financial Statements
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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.
Basis of Presentation
The Company's condensed financial statements are presented in accordance with generally accepted accounting principles in the United States of America. The Company's fiscal year end is December 31.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchasedtemporary cash investments with aan original maturity of threetwelve months or less to be cash equivalents toequivalents. At June 30, 2017 and December 31, 2016, respectively, the extent the funds are not being held for investment purposes.
LITERA GROUP, INC.
Notes to the Condensed Financial Statements
September 30, 2016
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)Company had $686 and $17,355 in cash.
Revenue Recognition
ThePrior to December 30, 2016, the Company will generategenerated revenues from the sale of play and screenplaymovie scripts. Revenues arewere recognized when the following conditions arewere met:
1. | Persuasive evidence of a sale or license agreement exists with a | |
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2. | The script is complete and has been delivered or is immediately available to be delivered in accordance with the terms of the agreement. | |
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3. | The license period for the arrangement has started and the customer can begin exploitation, exhibition or sale. | |
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4. | The arrangement fee is fixed or determinable | |
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5. | Collection of the arrangement fee is reasonably assured. |
If any of the above conditions are not met, the Company will defer revenue until all conditions are met.
Income Taxes
The Company provides for income taxes using anthe asset and liability approach. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. As of June 30, 2017 and December 31, 2016, the Company had a full valuation allowance against deferred tax assets. With the change in ownership occurring December 30, 2016, the Company is subject to certain NOL limitations under Section 382 of the Internal Revenue Code.
Per Share Data
In accordance with "ASC-260 - Earnings per Share", the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. At SeptemberThere were no dilutive shares outstanding as of June 30, 2016, the Company had no stock equivalents that were anti-dilutive2017 and excluded in the loss per share computation2016.
Fair Value of Financial Instruments
Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair value. The carrying value of cash, and cash equivalents andprepaid expenses, accounts payable and accrued liabilities approximate their fair value because of the short-term nature of these instruments. Management is of the opinion that the Company is not exposed to significant market or credit risks arising from these financial instruments.
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LITERA GROUP, INC.First Foods Group, Inc.
Notes to theUnaudited Condensed Financial Statements
September 30, 2016
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
Stock Based Compensation
The Company accounts for stock-based compensation to employees in accordance with FASB ASC 718. Stock-based compensation to employees is measured at the grant date, based on the fair value of the award, and is recognized as expense over the requisite employee service period. The Company accounts for stock-based compensation to other than employees in accordance with FASB ASC 505-50. Equity instruments issued to other than employees are valued at the earlier of a commitment date or upon completion of the services, based on the fair value of the equity instruments and is recognized as expense over the service period. The Company estimates the fair value of stock-based payments using the Black-Scholes option-pricing model for common stock and warrants and the closing price of the Company's common stock for common share issuances.
Long Lived Assets
The Company follows the provisions of ASC 360 for its long-lived assets. The Company's long-lived assets, which include rights/ownership of undeveloped film scripts, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset's expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605-Revenue Recognition and most industry-specific guidance throughout the ASC. ASU 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. In July 2015, the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). Early adoption is permitted to the original effective date for annual reporting periods beginning after December 15, 2016 (including interim reporting periods within those periods). The amendments may be applied retrospectively to each prior period (full retrospective) or retrospectively with the cumulative effect recognized as of the date of initial application (modified retrospective). The Company has evaluated recent accounting pronouncementswill adopt ASU 2014-09 in the first quarter of fiscal 2019 and theirplans to apply the full retrospective approach. The Company does not anticipate that the adoption has not had or is not expected toof ASU 2014-09 will have a material impact on the Company'sits financial position or statements.
NOTE 2 - STOCKHOLDERS' EQUITY– PREPAID EXPENSES
During 2015,The following table represents prepaid expenses as of June 30, 2017 and December 31, 2016, respectively
Year Ended June 30, 2017 December 31, 2016 Insurance Advertising and promotion Total $ 27,301 $ - 12,981 - $ 40,282 $ -
NOTE 3 – RELATED PARTY
Employment Agreements
On February 27, 2017, Harold Kestenbaum an individual newly appointed by the Board of Directors of the Company issued 10,500,000assumed the role of Chairman of the Board of Directors and Interim Chief Executive Officer (“Interim CEO”). Pursuant to the consulting contract, the Interim CEO shall receive (i) 750,000 shares of common stock to the founder of the Company for his appointment as Chairman of the Board, (ii) $10,000 per month for his role as Interim CEO, which shall be deferred until the Company raises at least $1,500,000 in exchangefinancing, and (iii) $10,000 for cashevery new franchising client he obtains, and (iv) $2,000 per month for legal services. In conjunction with this individual’s appointment, the former Chief Executive Officer resigned, but will remain as the Secretary and a director of $20,100 and expensesthe Company. The shares were valued at $1,500,000, representing a market value of $499, and 3,650,000$2.00 per share based on the closing price on the day of trading.
On March 1, 2017, Mark J. Keeley an individual newly appointed by the Board of Directors of the Company assumed the role of Chief Financial Officer (“CFO”). Pursuant to the Employment Agreement, the CFO shall receive (i) 750,000 shares of common stock to various unrelated parties for cashof the Company, and (ii) $20,833 per month, which shall be deferred until the Company raises at $0.01least $1,500,000 in financing. The 750,000 shares of common stock are valued at $1,687,500, representing a fair market value of $2.25 per share based on the aggregate cash proceeds from this issuance totaled $36,500.closing price on the day of trading, and are recognized over a 12-month service period as a result of a clawback provision.
NOTE 3 - SUBSEQUENT EVENTSA Company director, Hershel Weiss, owns the building that includes the Company’s office address and provides office space to the Company at no cost.
In accordance with ASC 855-10Due to Shareholder
Throughout the period ended June 30, 2017, the Company management reviewed all material events throughSecretary, who is also a director and a shareholder of the dateCompany, provided non-interest bearing short term loans to the Company. A total of this report$175,647 was advanced during the six months ended June 30, 2017, and determined that there are no material subsequent events to report.the Company repaid $29,197, for a balance of $146,450.
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First Foods Group, Inc.
Notes to Unaudited Condensed Financial Statements
NOTE 4 – STOCKHOLDERS' DEFICIT
On December 30, 2016, as a result of a private transaction, the control block of voting stock of the Company, represented by 10,500,000 shares of common stock (the "Shares"), was transferred from the founder of the Company to Rosenweiss Capital LLC, and a change of control of the Company occurred. The consideration paid for the Shares, which represent 74% of the issued and outstanding share capital of the Company on a fully-diluted basis, was $200,000.
On February 27, 2017, a consulting contract containing an award of 750,000 shares of common stock (see Note 2) was executed for the Interim CEO to serve as a Director and Chairman of the Board. The shares were valued at $1,500,000, representing a market value of $2.00 per share. The shares were fully vested at the date of grant and recorded in general and administrative expenses on the condensed statement of operations.
On March 1, 2017, an employment agreement containing an award of 750,000 shares of common stock was executed for the CFO (see Note 2). The shares were valued at $1,687,500, representing a fair market value of $2.25 per share. The shares are subject to a clawback provision during the CFO’s first year of service from February 1, 2017 through January 31, 2018. As such, the value of the shares is being amortized over 12 months. During the six months ended June 30, 2017, the Company recorded $703,125 of compensation expense which is included in general and administrative expenses on the condensed statement of operations.
On April 27, 2017, 100,000 shares of common stock were granted to Robert E. Hunt for strategic business to market services. The shares were recorded by the Company at $145,000, representing a fair market value of $1.45 per share which was based on the fair market value. This amount was recorded as compensation expense which is included in general and administrative expenses on the condensed statement of operations.
On April 28, 2017, 222,857 shares of common stock were issued to Integrity Media, Inc. for advertising, promotion, and due diligence efforts and expenses. The shares were recorded by the Company at $501,428, representing a fair market value of $2.25 per share which was based on the fair market value. This amount was recorded as compensation expense which is included in general and administrative expenses on the condensed statement of operations.
On May 11, 2017, the Company entered into consulting agreement to place up to $1.5 million worth of common stock within six months to provide funds to complete an acquisition. The Company may incur fees up to $135,000 in relation to this agreement with a $10,000 retainer payable immediately in common stock valued on the date of signing. The remaining $125,000 is to be placed into escrow and released on the date of closing valued at the closing asking price. Of the $10,000 retainer, $5,000 is non-refundable. As of June 30, 2017 and through the date of these financial statements, the Company has recorded $5,000 as prepaid expense and accrued liabilities and no shares have been issued related to this agreement.
On May 24, 2017, 250,000 shares of common stock were granted for consulting services to develop and disseminate corporate information. The shares were recorded by the Company at $495,000, representing a fair market value of $1.98 per share which was based on the fair market value. The shares were fully vested at the date of grant and recorded in general and administrative expenses on the condensed statement of operations.
On June 23, 2017, 150,000 shares of common stock were granted to Robert Kanuth for board of director services. The shares were recorded by the Company at $307,500, representing a fair market value of $2.05 per share which was based on the trading price. The shares were fully vested at the date of grant and recorded in general and administrative expenses on the condensed statement of operations.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statements
This Form 10-Q may contain "forward-looking statements," as that term is used in federal securities laws, about LiteraFirst Foods Group, Inc.'s financial condition, results of operations and business.
These statements include, among others:
| statements concerning the potential benefits that |
| statements of |
| (a) | volatility or decline of |
| (b) | potential fluctuation of quarterly results; |
| (c) | failure of |
| (d) | inadequate capital to continue or expand its business, and inability to raise additional capital or financing to implement its business plans; | ||
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| decline in demand for | ||
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| rapid adverse changes in markets; |
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| litigation with or legal claims and allegations by outside parties against |
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| insufficient revenues to cover operating costs; |
There is no assurance that LiteraFirst Foods will be profitable, LiteraFirst Foods may not be able to successfully develop, manage or market its products and services, LiteraFirst Foods may not be able to attract or retain qualified executives and personnel, LiteraFirst Foods may not be able to obtain customers for its products or services, additional dilution in outstanding stock ownership may be incurred due to the issuance of more shares, warrants and stock options, or the exercise of outstanding warrants and stock options, and other risks inherent in Litera'sFirst Foods' businesses.
Because the statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. LiteraFirst Foods cautions you not to place undue reliance on the statements, which speak only as of the date of this Form 10-Q. The cautionary statements contained or referred to in this section should be considered in connection with any subsequent written or oral forward-looking statements that LiteraFirst Foods or persons acting on its behalf may issue. LiteraFirst Foods does not undertake any obligation to review or confirm analysts' expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this Form 10-Q, or to reflect the occurrence of unanticipated events.
Current Overview
LiteraFirst Foods is currently an “emerging growth company” under the JOBS Act. A company loses its “emerging growth company” status on (i) the last day of the fiscal year during which it had total annual gross revenues of $1,000,000,000 or more; (ii) the last day of the fiscal year following the fifth anniversary of the date of its first sale of common equity securities pursuant to an effective registration statement under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); (iii) the date on which it has, during the previous 3-year period, issued more than $1,000,000,000 in non-convertible debt; or (iv) the date on which it is deemed to be a ‘large accelerated filer’, as defined in sectionSection 240.12b– 2 of title 17, Code of Federal Regulations, or any successor thereto. As an “emerging growth company,” LiteraFirst Foods is exempt from certain obligations of the Exchange Act including those found in Section 14A(a) and (b) related to shareholder approval of executive compensation and golden parachute compensation and Section 404(b) of the Sarbanes-Oxley Act of 2002 related to the requirement that management assess the effectiveness of the company’s internal control for financial reporting. Furthermore, Section 103 of the JOBS Act provides that as an “emerging growth company”, LiteraFirst Foods is not required to comply with the requirement to provide an auditor’s attestation of ICFR under Section 404(b) of the Sarbanes-Oxley Act for as long as LiteraFirst Foods qualifies as an “emerging growth company.” However, an “emerging growth company” is not exempt from the requirement to perform management’s assessment of internal control over financial reporting.
Litera
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First Foods Group, Inc. (formerly “Litera Group, Inc.”) was incorporated under the laws of the State of Nevada on June 1, 2015. We were formed for the purpose of providing products and services within the film and theater production industry. Our founder, Mr. Wade Gardner, was appointed CEO, President, Secretary, CFO, Treasurer and Director of the Company. The Board voted to seek capital to carry out our business plan. We received our initial funding of $20,100 through the sale of common stock to Mr. Gardner who purchased 10,500,000 shares of our Common Stock on June 5, 2015. Our principal executive offices are located at 5751 Buckingham Pkwy, Culver City, CA 90230, our telephone number is (424) 543-4066 and our fax number is (424) 543-5072.
First Foods, as Litera is a developmental stage corporation that isGroup, Inc., was dedicated to the creation and commercialization of literary and dramatic products and services with the aim of achieving profitability and sustaining growth of our business. Our implemented planFirst Foods is now focused on providing management services and funding options for new foodservice brands and menu concepts. First Foods is also growing its own new concepts, both through proprietary development and through mergers, acquisitions, and licensing arrangements. The Company has assembled a team of operation isdistinguished food service professionals with experience and success at the developmenthighest levels of screenplays, stage plays, comedy sketch and skit scripts, short film scripts and other literary and dramatic works, as well as offer abridgment and adaptation services, within the theater and film production community.industry.
The key to our success lies in the Company’s ability to identify a niche in the entertainment production market and fill the unsatisfied demand. Litera will target independent film and theatrical producers and small and experimental production studios that constantly scout for fresh entertainment material to produce and distribute. To save time and money, indie producers and small studios do not outlay expenses associated with creation of a literary or dramatic work, but instead procure completed aspiring projects to produce or distribute from others. This is the market niche that Litera has focused on.
Since our inception, we have commenced our business operations, including developing products, preliminary marketing of the completed work, as well as closing the first nineteen sales of our projects for an aggregate of $62,500. The Company also has two more finished products available for sale, as well as one more project in advanced development status. We negotiate contract details for our products and services as an option or an outright sale basis. Currently, the Company secured all the resources and skills needed to create and market our products and services internally by utilizing our sole officer and director’s creative writing abilities and his background within the film and theater entertainment. In the future, Litera may pursue additional avenues outside its own walls and look to outsource certain aspects of services and product development and engage playwrights/screenwriters for this purpose. We anticipate that, as the Company grows over the next twelve months, pools of expertise will be acquired by recruiting within the film and theater production industry and by the use of creative and marketing consultants, which will allow Litera to expand its management team and add to the Board of Directors.
Our operations to date have been devoted primarily to startup and development activities and the production and sale of our initial projects as follows:
As an emerging company, we continually analyze our business plan and operations in the light of current trends within the theater and film entertainment, market conditions and developments. We intend to become a self-sustained operational entity. In order to generate revenues, the management will aim to maximize the Company’s business value by creating competitive products and services, addressing market and competition, utilizing specific marketing strategies, and establishing growth strategy for our company.
OUR PRINCIPAL PRODUCTS AND SERVICESOn December 30, 2016, as a result of a private transaction, the control block of voting stock of this company, represented by 10,500,000 shares of common stock (the “Shares”), were transferred from Wade Gardner to Rosenweiss Capital LLC, and a change of control of the Company occurred. The consideration paid for the Shares, which represent 74% of the issued and outstanding share capital of the Company on a fully-diluted basis, was $200,000. In connection with the transaction, Mr. Gardner released the Company from all debts owed to him.
Upon the change of control of the Company, which occurred on December 30, 2016, the existing director and officer resigned immediately. Accordingly, Wade Gardner, serving as the sole director and as the only officer, ceased to be the Company’s President and Principal Accounting Officer. At the effective date of the transfer, Abraham Rosenblum assumed the role of a director and President, Chief Executive Officer, Chief Financial Officer, Secretary, and Treasurer of the Company. At the effective date of the transfer, Hershel Weiss assumed the role of a director of the Company.
On February 16, 2017, the Company amended its Articles of Incorporation with the State of Nevada in order to change its name from “Litera Group, Inc.” to “First Foods Group, Inc.” (the “Amendment”). The board of directors of the Company approved the Amendment on February 15, 2017. The shareholders of the Company approved the Amendment by written consent on February 15, 2017.
On February 27, 2017, Harold Kestenbaum accepted the appointment to be Chairman of the Board of Directors of First Foods Group, Inc. and Interim Chief Executive Officer. On February 27, 2017, the Board of Directors of the Company resolved to appoint Mr. Kestenbaum as the Chairman of the Board of Directors and as the Interim Chief Executive Officer. In conjunction with Mr. Kestenbaum’s appointment, Abraham Rosenblum agreed to resign as Chief Executive Officer, but will remain on the Board of Directors of the Company.
On March 1, 2017, Mark J. Keeley accepted the appointment to be the Chief Financial Officer of the Company. On March 1, 2017, the Board of Directors of the Company resolved to appoint Mr. Keeley as the Chief Financial Officer.
On April 21, 2017, the Company entered into a binding term sheet (the “Term Sheet”) with Oded Brenner (“Brenner”). Pursuant to the Term Sheet, the Company and Brenner will form an entity that will own the intellectual property rights to "Blue Stripes-Cacao Shop" (the "IP Entity"), for the United States. Each party will own 50% of the IP Entity. Additionally, the Company and Brenner will form a new entity (the "Operating Entity"), of which, the Company shall own 51% and Brenner 49%, which will be granted the unlimited and exclusive license, at no cost, from the IP Entity, to open company-owned and franchise locations under the "Blue Stripe-Cacao Shop" marks and to sell products under the "Blue Stripe" marks (the "Brand"), both at retail and via the internet. Pursuant to the Term Sheet, the IP Entity will control and supervise the Brand and its menu, design, and any aspect of the roll-out of the Brand, nationally. Brenner shall have control over the creative process, branding, brand image, menu, design of prototypes and in laying the groundwork for the license agreement under which the Operating Entity will operate the coffee houses. Pursuant to the Term Sheet, the Operating Entity will have control over the development of the Brand, the franchise activities, and other growth aspects of the Brand. The Company shall have the right to invest up to $1,250,000 in Brenner's Blue Stripes International company which owns the international rights to the Brand, and in exchange, the Company will receive 10% of the Blue Stripes international rights and development rights, outside the United States. If the Company elects to invest $1,750,000, it will receive 15%. Pursuant to the Term Sheet, the funds invested by the Company shall also be allocated to building two prototype locations, in the New York metro area, one in New York City and the other in suburb of New York City. Brenner shall be paid an annual salary of $150,000 for developing the Brand identity and for creating the menu for the franchise operations. The Company has 120 days from the date of the Term Sheet to raise a minimum of $1,250,000. The Company shall also use its best efforts to negotiate a three-year employment agreement with Brenner, who would then commit to work full-time for the Company and its subsidiaries/affiliates. As of the date of this filing, the Company has not raised any capital or completed a closing for the Term Sheet.
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On June 19, 2017, the Company entered into a binding term sheet (the “TBS Term Sheet”) with The Big Salad Franchise Company, LLC, a Michigan limited liability company ("TBS"). Pursuant to the TBS Term Sheet, the Company will purchase 100% of the assets or member units of TBS, (or a combination to be determined by the Parties) including, but not limited to, all of its revenue streams (exclusive of cash in the bank which John Bornoty ("Sole Member") shall retain), trademarks, logos, recipes, and intellectual property, in consideration of the payment of $850,000 in cash upon the closing of the transactions (the “Closing”). Additionally, the Sole Member shall receive a 10% equity interest in a subsidiary to be formed by Company (“NewCo”), that will operate the TBS franchise program subsequent to Closing (the $850,000 plus the 10% equity interest is collectively known as the "Purchase Price"). TBS will pay its "ordinary" accounts payable prior to the Closing.
Upon Closing, Sole Member will be named Chief Executive Officer of NewCo and will enter into an Executive Employment Agreement ("EEA") with NewCo that includes an annual salary of $90,000.00, plus other benefits and bonuses in accordance with those provided to the officers of the Company. The EEA shall have a three-year term, with renewal options if approved by the Board of the Company and Sole Member. If by the end of a sixty-day due diligence period Sole Member and the Company have not reached a mutually acceptable EEA, either party to the Term Sheet may terminate the obligations under the Term Sheet, rendering it void.
On June 23, 2017, the Company entered into a Consulting Agreement (the “Agreement”), with Robert Kanuth. Pursuant to the Agreement, Robert Kanuth will be appointed to the board of directors of the Company, upon approval by a majority of the current board of directors of the Company. Mr. Kanuth shall also begin leading the Company’s “1st Foods Funding Division,” where he will oversee all capital raising efforts undertaken by the Company, both for internal funding and for any of the Company’s clients desirous of raising capital. As part of this role, Mr. Kanuth will also oversee the Company’s potential investment in merchant advances, including advances to the food and food services industry.
The Company develops literary and dramatic works such as screenplays, stage plays, comedy sketch and skit scripts, short film scripts, etc. for theater/film production. On our clients' request we will also provide abridgment and adaptation services on any products they are interested in. Abridgment is a condensing of a creative work into a shorter form while maintaining the unity of the original. Adaptation is conversion of an original work to another genre or medium (e.g. a short film script into a stage play, etc.)
The process for creating a literary or dramatic work can be an arduous one. For each project we conduct a needs assessment to determine the trends in certain categories of theater and film entertainment that enjoy popularity at the time. The theater and cinema culture is cyclical in nature; every once in a while a certain vision, topic or genre becomes popular, and producers release films and performances that adhere to this style or genre until the current interest and demand fizzle down. Other genres then take over and the process runs full cycle again. For purposes of demand and marketability, choosing a trend/genre that is currentlypreviously was quoted on the edge of popularityOTCQB under “LRGP.” However, the Company is vital, and this is why a proper needs assessment is essential. We consider it the most important aspect of the entire process.
Next, we determine the feasibility of making our product a success. We consider our product a success when it garnishes interest from prospective buyers and results in a sale or option contract. During our feasibility analysis we explore and analyze similar films and performances in a chosen category that were proven successful over time to identify the creative and commercial attributes that made them work in order to utilize them for our projects.
We then identify the audience who we intend to reach through our product. Knowing the audience is important because it determines the content that will appear in the writing, as it may vary greatly dependingnow quoted on the intended audience. Targeting the product at specific audience increases the chances of the product sparking interest from potential buyers, so we must determine the market we intend our product for and cater to this audience’s expectations throughout our writing.
Further, we move to concept development. We identify an idea or a story within a genre that is popular or gaining in popularity based on our needs assessment analysis. This is considered a product’s early development where a story outline is created. Once the story outline takes shape, writing, or actual creative development, begins. It is the most time-consuming part of the process during which a workable script is crafted from a story outline. This crucial phase includes developing the format, narrative (plot, characters, story lines) and dialogue; introducing conflict, climax and resolution; writing out scene-by-scene physical interaction, utilizing symbolism, etc. The drafts are then rewritten and polished numerous times until we believe they are ready to be marketed for sale, at which time a logline and synopsis to convey both the content and the tone of the completed work are prepared for prospective clients' review and consideration. Litera makes sure to prepare these carefully thought out and compelling to engage and excite a prospective client about the potential of the project.
All phases of our product development, marketing and sales are conducted exclusively by Mr. Gardner, who devotes full time to the Company’s operations. To-date, no capital has been expensed for development of our works. Litera develops products "on spec" (i.e. non-commissioned) and advertises them directly to our target market. Mr. Gardner uses his numerous industry contacts and studio introductions that he has developed over course of his career in entertainment business as the starting point in our clientele building. Depending on the complexity of the project, it takes Mr. Gardner about 2-6 weeks to produce a product ready for marketing.
TARGET MARKET AND OUR NICHE WITHIN
It is essential for the Company’s success to identify a niche in the entertainment market and fill the unsatisfied demand. To select a niche in the entertainment market that Litera could cater to, the Company researched core groups of professionals within the large demographic entertainment community who have similar needs and interests that could be targeted with excellent results. All the research data was derived from available industry and marketing information accumulated by our sole officer and director and required no expenses. We were able to establish that, having weathered financial storms in the past decade, the dynamics within the entertainment industry encountered changes which resulted in an acute shortage of development capital for new projects both in film and theater. While major studios and production companies maintain control of the high-end of the market and the big movies and shows, the independent film and theatrical producers have proven themselves to be more efficient making low budget films and theater shows. To save time and money, indie producers and small studios do not outlay expenses associated with creation of a literary or dramatic work, but instead procure completed aspiring projects to produce or distribute from others. Litera will target independent film and theatrical producers and small and experimental production studios that constantly scout for new exciting projects to produce and distribute. This is the market niche that Litera has selected and will focus on.
COMPETITION, OUR COMPETITIVE STRATEGY AND METHODS OF COMPETITION
The film and theater production industry is highly competitive, and our Company faces competition ranging from large and well established film and theater production companies to thousands of small firms engaged in developing and producing play and screenplay options and other material in a similar manner as Litera and seeking to enter the industry.OTCQB under “FIFG.”
Our competitive strategyprincipal executive offices are located at 720 Monroe Street, Suite E210, Hoboken, NJ 07030. Our telephone number is based on the facts that while Litera(424) 543-4066 and our fax number is at a significant disadvantage to more established competitors due to our lack of financial resources, scarcity of relationships within the film and theater production community and absence of major marketing tools, the barriers to entry into the industry are nevertheless relatively low. It takes skills, knowledge and contacts to develop and sell products and services similar to ours. The Company believes that Mr. Gardner's pre-existing industry connections, his experience and background may allow us to tap into the theater and film production industry with a certain level of credibility. We will aim to produce creatively unique projects to gain the competitive edge we need while watching closely for emerging trends in theater and cinema and demands of the audience.
The Company’s primary method of competition is to market specifically to independent and experimental film makers and small theater production companies. To save time and money, indie producers and small studios do not outlay expenses associated with creation of a literary or dramatic work, and therefore, they rely on others to supply them with well-written material. We believe that since we have chosen this specific niche market, we will be able to target the right audience and cater to its demands.
MARKETING, MARKETING OBJECTIVES AND STRATEGIES
Litera markets its products and services directly to the theater and film production community, focusing specifically on independent film and theatrical producers and small and experimental production studios.
Our Marketing Objectives are as follows:
To promote and market our products and services, we may incorporate the following strategies:
Currently, Mr. Gardner promotes our products through many channels, including networking at local film and theater festivals and Internet sources, as well as expanding his personal professional relationships with small and experimental studios and independent producers. While Mr. Gardner has limited experience in developing and expanding a client base and marketing products to them, we anticipate that, as the Company grows over the next sixteen months, pools of expertise will be acquired by recruiting within the theater and film production industry and by the use of technical and marketing consultants, which will allow qualified individuals to join Mr. Gardner on our management team and Board of Directors.
Currently, Litera does not have any existing relationships with PR agents, publicists, producers or producer’s agents.
RESEARCH AND DEVELOPMENT
The Company has not expended funds for research and development costs since inception. Other than utilizing Mr. Gardner’s experiences and available industry and marketing information, Litera has not undertaken any research and development activities regarding our target market and marketability of our products.
THEATRICAL AND FILM PRODUCTION INDUSTRY
The major business centers of film and theatrical production are concentrated in the United States, Europe, India and China. The theatrical and film production industry consists of the technological and commercial institutions that are involved in creation of a film or stage performance, such as: production companies, studios, cinematography, choreography, production, screen/playwriting, pre-production, post production, film and theater festivals, actors, dancers, singers, film and theatrical producers, directors and other personnel. Due to the great expense required to produce a movie or a stage play, the making of a film or a performance usually has to be done in conjunction with an already established production company. However, the production of independent films and small scale stage performances has begun to evolve with the advent of more affordable equipment and more sophisticated consumer technology, as well as the increasing visibility of independent festivals such as Sundance Film Festival or Contemporary American Theater Festival. Independent projects are often described as less commercially-driven art forms which differ significantly from the norms of plot-driven, mainstream classical Hollywood cinema or Broadway theater. Catering specifically to the needs of independent film and theatrical producers and small and experimental production studios is the focus of the Company’s business.
OUR SIGNIFICANT EMPLOYEE
We currently have one employee, Mr. Gardner who is our founder and serves as our sole officer and director. Mr. Gardner currently devotes full time to our business and is responsible for our daily operations including product development, sales and marketing, fund raising, implementation of our general strategy and execution of our business plan.
Our future business and operating results depend significantly on the continued contributions and active participation of Mr. Gardner. This individual would be difficult or impossible to replace. The loss of this key contributor, or his failure to perform, could materially and adversely affect our Company’s operations. While we may obtain Key Man insurance, such insurance may not be sufficient to cover the loss incurred in the event this executive officer is lost.
Currently, our officer and director receives no compensation for his services during the development stage of our business operations. He is reimbursed for any out-of-pocket expenses he may incur on our behalf. In the future, we may approve payment of salaries for officers and directors, but currently, no such plans have been approved. We anticipate adding two (2) employees over the next twelve (12) months, one of which will be a screen/play writer. We do not have any employment agreements in place with our officer and director. We also do not currently have any benefits, such as health or life insurance, available to our employee.(424) 543-5072.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We monitor our estimates on an on-going basis for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. We base our estimates on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates if past experience or other assumptions do not turn out to be substantially accurate.
Certain of our accounting policies are particularly important to the portrayal and understanding of our financial position and results of operations and require us to apply significant judgment in their application. As a result, these policies are subject to an inherent degree of uncertainty. In applying these policies, we use our judgment in making certain assumption and estimates. Our critical accounting policies are outlined in Note 1 in the Notes to theUnaudited Condensed Financial Statements
Results of Operations for the Three Months Ended June 30, 2017 compared to the Three Months ended June 30, 2016
We had $0 in revenues in the three months ended June 30, 2017 and $16,500 for the three months ended June 30, 2016. Our revenue change is a result of the changing from the sale of dramatic and literary products to providing franchise marketing and consulting services to new and emerging food service franchise companies. We anticipate an increase in sales revenue as we continue to develop our new business plan. Our operating expenses for the three months ended June 30, 2017 were $2,114,207, which primarily consisted of consulting of $693,000, advertising and promotion of $483,912, compensation expenses of $421,875, the fair market value of shares issued to a director for services of $307,500, legal and professional fees of $86,255, and deferred salaries of $68,774. For the three months ended June 30, 2016, our operating expenses were $28,516 which consisted of general and administrative expenses. Our increase in operating expenses is primarily due to changing the focus of the Company from theater related activities to retail food and restaurant activities. Our net loss for the three months ended June 30, 2017 was $2,114,207. Our net loss for the three months ended June 30, 2016 was $12,016. The increase in net loss is primarily due to the adjustment in our business plan.
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Results of Operations for the three monthsSix Months Ended June 30, 2017 compared to the Six Months ended SeptemberJune 30, 2016 and 2015
We had $10,000$0 in revenues in the threesix months ended SeptemberJune 30, 2016, compared to $13,5002017 and $28,000 for the threesix months ended SeptemberJune 30, 2015. The decrease in2016. Our revenue change is a result of the changing from the sale of lessdramatic and literary products to providing franchise marketing and dramatic products.consulting services to new and emerging food service franchise companies. We anticipate a continued trend of literary and dramatic productan increase in sales revenue as we continue to develop such products.our new business plan. Our operating expenses for the six months ended June 30, 2017 were $18,793,$4,059,909, which primarily consisted of the fair market value of cash and the fair market value of shares issued to the Interim CEO and Chairman of the Board under a consulting contract of $1,500,000, compensation expenses of $703,125, consulting of $693,000, advertising and promotion of $534,525, the fair market value of shares issued to consultants of $495,000, the fair market value of shares issued to a director for services of $307,500, professional fees of $6,344$129,552, and general and administrative expensesdeferred salaries of $12,449 for$113,969. For the threesix months ended SeptemberJune 30, 2016. For the three months ended September 30, 2015,2016, our operating expenses were $10,519,$52,785 which consisted of professional fees of $9,635 and general and administrative expenses of $884. The increase in operating expenses was primarily due to increased general and administrative expenses. Our net income was $(8,793) for the three months ended September 30, 2016 and was $2,981 for the three months ended September 30, 2015. The /decrease was primarily due to increased general and administrative expenses.
Results of Operations for the nine months ended September 30, 2016 and 2015
We had $38,000 in revenues in the nine months ended September 30, 2016 and $13,500 in revenue from inception through September 30, 2015. Our revenue increase is a result of the sale of more literary and dramatic products. We anticipate a continued trend of literary and dramatic product sales revenue as we continue to develop such products. Our operating expenses were $71,578, which consisted of professional fees of $38,704 and general and administrative expenses of $32,874 for the nine months ended September 30, 2016. From inception through September 30, 2015, our operating expenses were $11,018, which consisted of professional fees of $9,635 and general and administrative expenses of $1,383. The increase in operating expenses are primarily due to increases in both professional fees, as well as generalchanging the focus of the Company from theater related activities to retail food and administrative costs.restaurant activities. Our net income was $(33,578)loss for the threesix months ended SeptemberJune 30, 2017 was $4,059,909. Our net loss for the six months ended June 30, 2016 and was $2,482 from inception through September 30, 2015.$24,785. The decrease wasincrease in net loss is primarily due to increased expenses.the adjustment in our business plan.
Liquidity and Capital Resources
The Company's cash position was $23,824$686 at SeptemberJune 30, 2017, compared to $17,355 at December 31, 2016. As of SeptemberJune 30, 2016,2017, the Company had current assets of $27,324$40,968 and current liabilities of $0, respectively. As$448,824 compared to $17,355 and $17,355, respectively, as of September 30, 2015, the CompanyDecember 31, 2016, as we had current assets of $23,081 and current liabilities of $0.just begun our revised operations. This resulted in a working capital (deficit) of $27,324($407,856) at SeptemberJune 30, 20162017 and a working capital of $23,081$0 at September 30, 2015.December 31, 2016. The change is based on our change in business direction beginning in this year.
Net cash used in operating activities amounted to $(37,749)$163,119 and $25,456 for the ninesix months ended SeptemberJune 30, 2016.2017 and 2016, respectively. This is primarily due to general operating expenses.a net loss of $4,059,910 and $24,785, respectively, offset by non-cash items included in the net loss of $3,652,053 in stock based compensation during the six months ended June 30, 2017.
Net cash used in investing activities amounted to $0 for the ninesix months ended SeptemberJune 30, 2017 and 2016.
Net cash provided by financing activities amounted to $146,450 and $0 for the ninesix months ended SeptemberJune 30, 2016.2017 and 2016, respectively.
The Company does not have sufficient capital to meet its current cash needs, which include the costs of compliance with the continuing reporting requirements of the Securities Exchange Act of 1934, as amended. The Company intends to seek additional capital through the sale literarymanagement services and dramatic products.funding options for new foodservice brands and menu concepts. First Foods Group, Inc. is also growing its own new concepts, both through proprietary development and through mergers, acquisitions, and licensing arrangements. Financing options may be available to the Company either via a private placement or through the public sale of stock. There is no assurance, however, that the available funds will be available or adequate. Its need for additional financing is likely to persist.
Going Concern
Our financial statements have been prepared on a going concern basis. As of September 30, 2016, we have not generated significant revenues since inception. We expect to finance our operations primarily through our existing cash, our operations and any future financing. However, there exists substantial doubt about our ability to continue as a going concern because we will be required to obtain additional capital in the future to continue our operations and there is no assurance that we will be able to obtain such capital, through equity or debt financing, or any combination thereof, or on satisfactory terms or at all. Additionally, no assurance can be given that any such financing, if obtained, will be adequate to meet our capital needs. If adequate capital cannot be obtained on a timely basis and on satisfactory terms, our operations would be materially negatively impacted. Therefore, our auditor has substantial doubt as to our ability to continue as a going concern. Our ability to complete additional offerings is dependent on the state of the debt and/or equity markets at the time of any proposed offering, and such market’s reception of the Company and the offering terms. There is no assurance that capital in any form would be available to us, and if available, on terms and conditions that are acceptable.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
JOBS Act
On April 5, 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.
We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we intend to rely on certain of these exemptions, including without limitation, (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1 billion or more; (ii) December 31, 2019; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
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Item 3. Quantitative and Qualitative Disclosures aboutAbout Market Risk
Not Applicable.As an emerging growth company, we are not required to provide the information required by this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information we are required to disclosebe disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms of the Commission. Wade Gardner, our President and our Principal Accounting Officer, is responsible for establishing and maintaining our disclosureforms. Disclosure controls and procedures.procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
UnderOur management has carried out an evaluation, under the supervision and with the participation of our management, includingprincipal executive officer and principal financial officer, of the Presidenteffectiveness of the design and Principal Accounting Officer, we have evaluated the effectivenessoperation of our disclosure controls and procedures (as defined in RuleRules 13a-15(e) and Rule 15d-15(e) ofunder the Exchange Act), as of June 30, 2017. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report. Based on that evaluation, the President and Principal Accounting Officer has concluded that, as of September 30, 2016, thesereport, our disclosure controls and procedures were not effectiveineffective due to a lack of sufficient resources to hire a support staff in ensuring thatorder to separate duties between different individuals. The Company lacks the appropriate personnel to handle all information requiredthe varying recording and reporting tasks on a timely basis. The Company plans to be disclosedaddress these material weaknesses as resources become available by us inhiring additional professional staff, as funding becomes available, outsourcing certain aspects of the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarizedrecording and reported, within the time periods specified in the Commission’s rulereporting functions, and forms; and (ii) accumulated and communicated to our management, including our President and Principal Accounting Officer, as appropriate to allow timely decisions regarding required disclosure. separating responsibilities.
The term “internal control over financial reporting” is defined as a process designed by, or under the supervision of, the registrant’s principal executiveIn designing and principal financial officers, or persons performing similar functions, and effected by the registrant’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policiesevaluating our disclosure controls and procedures, that:
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Changes in Internal Controls over Financial Reporting
There were no additional changes in our internal control over financial reportingwe recognize that occurred during the fiscal quarter ended September 30, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations over Internal Controls
Litera’s management does not expect that its disclosureany controls or its internal control over financial reporting will prevent or detect all error and all fraud. A control system,procedures, no matter how well designed and operated, can provide only reasonable not absolute, assurance thatof achieving the desired control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitationsobjectives.
Changes in all control systems,Internal Control over Financial Reporting
There were no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within Litera have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditionsthe Company’s internal control over financial reporting during the last quarter that have materially affected, or deterioration inare reasonably likely to materially affect, the degree of compliance with policies or procedures.Company’s internal control over financial reporting.
Our disclosure controls and procedures are designed to provide reasonable assurance of that our reports will be accurate. Our President and Principal Accounting Officer concludes that our disclosure controls and procedures were effective at that reasonable assurance level, as of the end of the period covered by this Form 10-Q. Our future reports shall also indicate that our disclosure controls and procedures are designed for this reason and shall indicate the related conclusion by the President and Principal Accounting Officer as to their effectiveness.
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| Table of Contents |
We are notFrom time to time the Company may become a party to anylegal actions or proceedings in the ordinary course of its business. As of June 30, 2017, there were no such actions or proceedings, either individually or in the aggregate, that, if decided adversely to the Company’s interests, the Company believes would be material or legal proceeding and, to our knowledge, none is contemplated or threatened.its business.
Not required for emerging growth companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
.
There have been no defaults upon senior securities.
Item 4. Submission of Matters to a Vote of Security HoldersMine Safety Disclosures
None.Not applicable.
Not Applicable
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| Table of Contents |
(a) Exhibits
EXHIBIT NO. |
| DESCRIPTION |
3.1* |
| Articles of Incorporation |
3.11+ |
| Certificate of Amendment to the Certificate of Incorporation |
|
| By-Laws |
10.1# |
|
|
Harold Kestenbaum | ||
10.2** |
|
|
10.3^ |
| Binding Term Sheet, dated April 21, 2017, by and between First Foods Group, Inc. and Oded Brenner |
|
|
|
10.5++ |
| Consulting Agreement, dated June 23, 2017, by and between the Company And Robert Kanuth |
Section 302 Certification of | |||
|   |   |   | | | |
| |||
| 32.2 |   | Section 906 Certification of Chief Executive Officer | 32.2 | | Section 906 Certification of Chief Executive Officer |
| Section 906 Certification of | ||
| 32.3 |   | Section 906 Certification of Chief Financial Officer | 32.3 | | Section 906 Certification of Chief Financial Officer |
| |||
| 101.INS |   | XBRL Instance Document | 101.INS | | XBRL Instance Document |
101.INS |
| XBRL Instance Document | |
| 101.SCH |   | XBRL Taxonomy Extension Schema Document | 101.SCH | | XBRL Taxonomy Extension Schema Document |
101.SCH |
| XBRL Taxonomy Extension Schema Document | |
| 101.CAL |   | XBRL Taxonomy Extension Calculation Linkbase | 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase |
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase | |
| 101.DEF |   | XBRL Taxonomy Extension Definition Linkbase | 101.DEF | | XBRL Taxonomy Extension Definition Linkbase |
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase | |
| 101.LAB | | | XBRL Taxonomy Extension Label Linkbase |
101.LAB | XBRL Taxonomy Extension Label Linkbase | ||
101.LAB | |||
| XBRL Taxonomy Extension | ||
| 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase | 101.PRE | XBRL Taxonomy Extension Presentation Linkbase | ">101.PRE | XBRL Taxonomy Extension Presentation Linkbase |
____________________________
* | Filed as Exhibits to the Form S-1, filed on November 10, 2015, and incorporated herein by reference. |
+ | Filed as an Exhibit to the Form 8-K, filed on February 17, 2017, and incorporated herein by reference. |
# | Filed as an Exhibit to the Form 8-K, filed on |
** | Filed as an Exhibit to the Form 8-K, filed on |
| Filed as an Exhibit to the Form 8-K, filed on |
^^ | Filed as an Exhibit to the Form 8-K, filed on June 23, 2017, and incorporated herein by reference. |
++ | Filed as an Exhibit to the Form 8-K, filed on June 29, 2017, and incorporated herein by reference. |
| 16 |
| Table of Contents |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: | By: | /s/ | |
| |||
|
| Harold Kestenbaum | |
Chief Executive Officer and Chairman of the Board |
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Dated: August 14, 2017 | By: | /s/ |
| |
| ||||
| Harold Kestenbaum, | |||
Chairman of the Board | ||||
| Chief Executive Officer |
Dated: August 14, 2017 | By: | /s/ Mark J. Keeley | |
Mark J. Keeley | |||
Chief Financial Officer |
Dated: August 14, 2017 | By: | /s/ Abraham Rosenblum | |
Abraham Rosenblum | |||
Secretary and Director |
Dated: August 14, 2017 | By: | /s/ Hershel Weiss | |
Hershel Weiss | |||
Director |
|