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 September 30, 2017
2022
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. | |
(Exact name of registrant as specified in its charter) | |
|
| 47-4145514 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
720 Monroe Street,First Foods Group, Inc. c/o Incorp Services, Inc.,
3773 Howard Hughes Parkway, Suite E210500S,
Hoboken, NJ 07030Las Vegas, NV 89169-6014
(Address of principal executive offices) (Zip Code)
(201) 471-0988
Registrant’s telephone number, including area code
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
None |
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 preceding 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 has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One).
Large accelerated filer |
| Accelerated filer |
|
Non-accelerated |
| Smaller reporting company |
|
| Emerging growth company |
|
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 9, 2017,18, 2022, the number of shares outstanding of the registrant’s class of common stock was 16,322,857,27,058,338, par value of $0.001 per share.
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| 3 | ||||||
| Condensed Consolidated Balance Sheets at September 30, |
| 3 | ||||
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| 4 | |||||
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| 5 | |||||
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| 6 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| 29 |
20
2 |
Table of Contents |
First Foods Group, Inc. and Subsidiary |
Condensed Consolidated Balance Sheets |
First Foods Group, Inc.(Unaudited)
Condensed Consolidated Balance Sheets
(Unaudited)
September 30, December 31, ASSETS Cash Prepaid expenses and other current assets TOTAL ASSETS LIABILITIES AND STOCKHOLDERS’ DEFICIT LIABILITIES Accounts payable and accrued liabilities Due to shareholder Deferred compensation TOTAL LIABILITIES Commitments STOCKHOLDERS’ DEFICIT Series A convertible preferred stock: $0.001 par value, 1 share authorized, no shares issued and outstanding Series B convertible preferred stock: $0.001 par value, 4,999,999 shares authorized, no shares issued and outstanding Common stock: $0.001 par value, 70,000,000 shares authorized, 16,372,857 and 14,150,000 shares issued and outstanding, respectively Additional paid-in capital Accumulated deficit Total stockholders’ deficit TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
2017
2016$ 271 $ 17,355 23,044 - $ 23,315 $ 17,355 $ 282,231 $ 17,355 167,350 - 182,344 - 631,925 17,355 - - - - 16,373 14,150 4,114,654 42,949 (4,739,637 ) (57,099 ) (608,610 ) - $ 23,315 $ 17,355
|
| September 30, 2022 |
|
| December 31, 2021 |
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ASSETS |
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CURRENT ASSETS |
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Cash |
| $ | 1,478 |
|
| $ | 5,627 |
|
Restricted cash |
|
| 5,900 |
|
|
| 5,900 |
|
Inventory, net of reserve $23,625 and $0, respectively |
|
| 32,648 |
|
|
| 56,936 |
|
Merchant cash advances, net of allowance $168,734 and $131,703, respectively |
|
| 6,053 |
|
|
| 37,541 |
|
Prepaid expenses and other current assets |
|
| 79,094 |
|
|
| 89,888 |
|
TOTAL CURRENT ASSETS |
|
| 125,173 |
|
|
| 195,892 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
| 3,408 |
|
|
| 139,103 |
|
Operating lease right-of-use assets |
|
| 125,468 |
|
|
| 177,062 |
|
TOTAL ASSETS |
| $ | 254,049 |
|
| $ | 512,057 |
|
LIABILITIES AND DEFICIT | ||||||||
CURRENT LIABILITIES |
|
|
|
|
|
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|
|
Accounts payable and accrued liabilities |
| $ | 1,512,867 |
|
| $ | 1,074,216 |
|
Accounts payable and accrued liabilities - related parties |
|
| 949,476 |
|
|
| 718,114 |
|
Put liability |
|
| 29,421 |
|
|
| 29,421 |
|
Deferred revenue |
|
| 49,579 |
|
|
| 81,953 |
|
Loans, net of unamortized debt discount $6,508 and $48,514, respectively |
|
| 1,360,592 |
|
|
| 1,288,586 |
|
Related party loans, net of unamortized debt discount $0 and $19,304, respectively |
|
| 686,063 |
|
|
| 471,009 |
|
Operating lease liabilities |
|
| 77,577 |
|
|
| 69,078 |
|
TOTAL CURRENT LIABILITIES |
|
| 4,665,575 |
|
|
| 3,732,377 |
|
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|
|
|
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|
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|
Loans - long term |
|
| 150,000 |
|
|
| 150,000 |
|
Related party loans – long term |
|
| 100,000 |
|
|
| 0 |
|
Operating lease liabilities - long term |
|
| 50,665 |
|
|
| 109,975 |
|
TOTAL LIABILITIES |
|
| 4,966,240 |
|
|
| 3,992,352 |
|
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Commitments (Note 8) |
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DEFICIT |
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FIRST FOODS GROUP, INC. DEFICIT: |
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Preferred stock, 20,000,000 shares authorized: |
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Series A convertible preferred stock: $0.001 par value, 1 share authorized, 1 issued and outstanding ($577,005 liquidation preference) |
|
| - |
|
|
| - |
|
Series B convertible preferred stock: $0.001 par value, 4,999,999 shares authorized, 354,999 issued and outstanding, respectively ($118,235 liquidation preference) |
|
| 355 |
|
|
| 355 |
|
Series C convertible preferred stock: $0.001 par value, 3,000,000 shares authorized, 660,000 shares issued and outstanding ($165,000 liquidation preference) |
|
| 660 |
|
|
| 660 |
|
Common stock: $0.001 par value, 100,000,000 shares authorized, 27,058,338 and 26,998,338 shares issued and outstanding, respectively |
|
| 27,058 |
|
|
| 26,998 |
|
Additional paid-in capital |
|
| 11,910,385 |
|
|
| 12,062,341 |
|
Accumulated deficit |
|
| (16,346,124 | ) |
|
| (15,335,458 | ) |
Total First Foods Group, Inc. Deficit |
|
| (4,407,666 | ) |
|
| (3,245,104 | ) |
|
|
|
|
|
|
|
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|
Noncontrolling interests |
|
| (304,525 | ) |
|
| (235,191 | ) |
TOTAL DEFICIT |
|
| (4,712,191 | ) |
|
| (3,480,295 | ) |
TOTAL LIABILITIES AND DEFICIT |
| $ | 254,049 |
|
| $ | 512,057 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements statements.
3 |
Table of Contents |
First Foods Group, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
First Foods Group, Inc. and Subsidiary |
Condensed Consolidated Statements of Operations |
(Unaudited) |
For the three months For the nine months 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
ended
September 30,
ended
September 30,$ - $ 10,000 $ - $ 38,000 2,500 6,344 132,052 38,704 620,130 12,449 4,550,486 32,874 622,630 18,793 4,682,538 71,578 (622,630 ) (8,793 ) (4,682,538 ) (33,578 ) $ (622,630 ) $ (8,793 ) $ (4,682,538 ) $ (33,578 ) $ (0.04 ) $ (0.00 ) $ (0.30 ) $ (0.00 ) 16,372,857 14,150,000 15,690,167 14,150,000
|
| For the Three Months Ended September 30, |
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| For the Nine Months Ended September 30, |
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| 2022 |
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| 2021 |
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| 2022 |
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| 2021 |
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REVENUES |
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Product sales, net |
| $ | 13,374 |
|
| $ | 55,678 |
|
| $ | 91,708 |
|
| $ | 312,142 |
|
Merchant cash advance income, net |
|
| 811 |
|
|
| 4,371 |
|
|
| 1,188 |
|
|
| 37,786 |
|
Total Revenues |
|
| 14,185 |
|
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| 60,049 |
|
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| 92,896 |
|
|
| 349,928 |
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OPERATING EXPENSES |
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Cost of product sales |
|
| 6,790 |
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| 35,446 |
|
|
| 47,264 |
|
|
| 201,530 |
|
Legal fees |
|
| 2,498 |
|
|
| 2,703 |
|
|
| 31,596 |
|
|
| 5,799 |
|
General and administrative |
|
| 268,910 |
|
|
| 466,717 |
|
|
| 1,008,887 |
|
|
| 1,400,527 |
|
Provision for merchant cash advances |
|
| (3,493 | ) |
|
| (7,916 | ) |
|
| 33,306 |
|
|
| (152,254 | ) |
Impairment of assets |
|
| - |
|
|
| - |
|
|
| 92,736 |
|
|
| - |
|
Total Operating Expenses |
|
| 274,705 |
|
|
| 496,950 |
|
|
| 1,213,789 |
|
|
| 1,455,602 |
|
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|
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|
LOSS FROM OPERATIONS |
|
| (260,520 | ) |
|
| (436,901 | ) |
|
| (1,120,893 | ) |
|
| (1,105,674 | ) |
|
|
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|
OTHER INCOME (EXPENSE) |
|
|
|
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|
|
|
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Other income |
|
| - |
|
|
| 110,000 |
|
|
| 291,482 |
|
|
| 110,000 |
|
Loss on extinguishment of loans payable |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (299,773 | ) |
Interest expense |
|
| (52,393 | ) |
|
| (175,997 | ) |
|
| (250,589 | ) |
|
| (535,947 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
| (312,913 | ) |
|
| (502,898 | ) |
|
| (1,080,000 | ) |
|
| (1,831,394 | ) |
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS |
|
| (312,913 | ) |
|
| (502,898 | ) |
|
| (1,080,000 | ) |
|
| (1,831,394 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interest share of loss |
|
| 18,196 |
|
|
| 34,848 |
|
|
| 69,334 |
|
|
| 71,904 |
|
Deemed dividends |
|
| - |
|
|
| (198,240 | ) |
|
| - |
|
|
| (337,930 | ) |
|
|
|
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|
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|
|
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|
|
Net loss attributed to shareholders of First Foods Group, Inc. |
| $ | (294,717 | ) |
| $ | (666,290 | ) |
| $ | (1,010,666 | ) |
| $ | (2,097,420 | ) |
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BASIC AND DILUTED LOSS PER COMMON SHARE ATTRIBUTABLE TO FIRST FOODS GROUP, INC. STOCKHOLDERS |
| $ | (0.01 | ) |
| $ | (0.03 | ) |
| $ | (0.04 | ) |
| $ | (0.09 | ) |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING ATTRIBUTABLE TO FIRST FOODS GROUP, INC. STOCKHOLDERS - BASIC AND DILUTED |
|
| 27,058,338 |
|
|
| 25,493,726 |
|
|
| 27,050,426 |
|
|
| 24,104,168 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statementsstatements.
4 |
Table of Contents |
First Foods Group, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
First Foods Group, Inc. and Subsidiary | ||||||||||||||||||||||||||||||||||||
Condensed Consolidated Statements of Changes in Deficit | ||||||||||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||||||
|
| Preferred Stock |
|
| Common Stock |
|
| Additional paid-in |
|
| Accumulated |
|
| Total First Foods Group, |
|
| Non-controlling |
|
| Total |
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| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| capital |
|
| deficit |
|
| Inc. deficit |
|
| interests |
|
| deficit |
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|
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|
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Balance at December 31, 2020 |
|
| 1,133,333 |
|
| $ | 1,133 |
|
|
| 22,367,179 |
|
| $ | 22,367 |
|
| $ | 10,515,601 |
|
| $ | (12,954,696 | ) |
| $ | (2,415,595 | ) |
| $ | (142,780 | ) |
| $ | (2,558,375 | ) |
Common stock issued for cash to a related party |
|
| - |
|
|
| - |
|
|
| 249,999 |
|
|
| 250 |
|
|
| 49,750 |
|
|
| - |
|
|
| 50,000 |
|
|
| - |
|
|
| 50,000 |
|
Common stock issued to consultants for services |
|
| - |
|
|
| - |
|
|
| 36,765 |
|
|
| 37 |
|
|
| 4,963 |
|
|
| - |
|
|
| 5,000 |
|
|
| - |
|
|
| 5,000 |
|
Common stock issued for related party loan |
|
| - |
|
|
| - |
|
|
| 140,000 |
|
|
| 140 |
|
|
| 28,520 |
|
|
| - |
|
|
| 28,660 |
|
|
| - |
|
|
| 28,660 |
|
Common stock issued with loans payable |
|
| - |
|
|
| - |
|
|
| 18,000 |
|
|
| 18 |
|
|
| 4,662 |
|
|
| - |
|
|
| 4,680 |
|
|
| - |
|
|
| 4,680 |
|
Stock based compensation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 65,542 |
|
|
| - |
|
|
| 65,542 |
|
|
| - |
|
|
| 65,542 |
|
Warrants issued for director services |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 43,693 |
|
|
| - |
|
|
| 43,693 |
|
|
| - |
|
|
| 43,693 |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (471,473 | ) |
|
| (471,473 | ) |
|
| (26,307 | ) |
|
| (497,780 | ) |
Balance at March 31, 2021 |
|
| 1,133,333 |
|
|
| 1,133 |
|
|
| 22,811,943 |
|
|
| 22,812 |
|
|
| 10,712,731 |
|
|
| (13,426,169 | ) |
|
| (2,689,493 | ) |
|
| (169,087 | ) |
|
| (2,858,580 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash to a related party |
|
| - |
|
|
| - |
|
|
| 249,999 |
|
|
| 250 |
|
|
| 49,750 |
|
|
| - |
|
|
| 50,000 |
|
|
| - |
|
|
| 50,000 |
|
Common stock issued to consultants for services - put liability |
|
| - |
|
|
| - |
|
|
| 112,390 |
|
|
| 112 |
|
|
| (112 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Common stock issued for related party loan |
|
| - |
|
|
| - |
|
|
| 50,000 |
|
|
| 50 |
|
|
| 10,450 |
|
|
| - |
|
|
| 10,500 |
|
|
| - |
|
|
| 10,500 |
|
Common stock issued for conversion of loans payable |
|
| - |
|
|
| - |
|
|
| 191,424 |
|
|
| 192 |
|
|
| 31,067 |
|
|
| - |
|
|
| 31,259 |
|
|
| - |
|
|
| 31,259 |
|
Common stock issued for conversion of loans payable - related party |
|
| - |
|
|
| - |
|
|
| 2,000,000 |
|
|
| 2,000 |
|
|
| 458,000 |
|
|
| - |
|
|
| 460,000 |
|
|
| - |
|
|
| 460,000 |
|
Stock based compensation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 74,253 |
|
|
| - |
|
|
| 74,253 |
|
|
| - |
|
|
| 74,253 |
|
Warrants issued for director services |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 44,179 |
|
|
| - |
|
|
| 44,179 |
|
|
| - |
|
|
| 44,179 |
|
Warrants issued for related party loan |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 20,200 |
|
|
| - |
|
|
| 20,200 |
|
|
| - |
|
|
| 20,200 |
|
Warrants issued for conversion of loan payable – related party |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 83,513 |
|
|
| - |
|
|
| 83,513 |
|
|
| - |
|
|
| 83,513 |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (819,968 | ) |
|
| (819,968 | ) |
|
| (10,748 | ) |
|
| (830,716 | ) |
Balance at June 30, 2021 |
|
| 1,133,333 |
|
| $ | 1,133 |
|
|
| 25,415,756 |
|
| $ | 25,416 |
|
| $ | 11,484,031 |
|
| $ | (14,246,137 | ) |
| $ | (2,735,557 | ) |
| $ | (179,835 | ) |
| $ | (2,915,392 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued to consultants for services |
|
| - |
|
|
| - |
|
|
| 34,091 |
|
|
| 34 |
|
|
| 4,398 |
|
|
| - |
|
|
| 4,432 |
|
|
| - |
|
|
| 4,432 |
|
Stock compensation consultant - Put liability |
|
| - |
|
|
| - |
|
|
| 35,601 |
|
|
| 35 |
|
|
| (35 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Common stock issued with loans payable |
|
| - |
|
|
| - |
|
|
| 78,000 |
|
|
| 78 |
|
|
| 12,402 |
|
|
| - |
|
|
| 12,480 |
|
|
| - |
|
|
| 12,480 |
|
Preferred stock waived by director |
|
| (118,333 | ) |
|
| (118 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (118 | ) |
|
| - |
|
|
| (118 | ) |
Stock based compensation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 54,610 |
|
|
| - |
|
|
| 54,610 |
|
|
| - |
|
|
| 54,610 |
|
Warrants issued for director services |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 3,398 |
|
|
| - |
|
|
| 3,398 |
|
|
| - |
|
|
| 3,398 |
|
Warrants issued for loan payable |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 47,597 |
|
|
| - |
|
|
| 47,597 |
|
|
| - |
|
|
| 47,597 |
|
Warrants issued for related party loan |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 15,340 |
|
|
| - |
|
|
| 15,340 |
|
|
| - |
|
|
| 15,340 |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (468,049 | ) |
|
| (468,049 | ) |
|
| (34,848 | ) |
|
| (502,897 | ) |
Balance at September 30, 2021 |
|
| 1,015,000 |
|
| $ | 1,015 |
|
|
| 25,563,448 |
|
| $ | 25,563 |
|
| $ | 11,621,741 |
|
| $ | (14,714,186 | ) |
| $ | (3,065,867 | ) |
| $ | (214,683 | ) |
| $ | (3,280,550 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2021 |
|
| 1,015,000 |
|
| $ | 1,015 |
|
|
| 26,998,338 |
|
| $ | 26,998 |
|
| $ | 12,062,341 |
|
| $ | (15,335,458 | ) |
| $ | (3,245,104 | ) |
| $ | (235,191 | ) |
| $ | (3,480,295 | ) |
Common stock issued with loans payable |
|
| - |
|
|
| - |
|
|
| 60,000 |
|
|
| 60 |
|
|
| 12,540 |
|
|
| - |
|
|
| 12,600 |
|
|
| - |
|
|
| 12,600 |
|
Stock based compensation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 30,154 |
|
|
| - |
|
|
| 30,154 |
|
|
| - |
|
|
| 30,154 |
|
Warrants issued for consulting services |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 41,508 |
|
|
| - |
|
|
| 41,508 |
|
|
| - |
|
|
| 41,508 |
|
Warrants issued for loan payable |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 28,088 |
|
|
| - |
|
|
| 28,088 |
|
|
| - |
|
|
| 28,088 |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (479,952 | ) |
|
| (479,952 | ) |
|
| (21,672 | ) |
|
| (501,624 | ) |
Balance at March 31, 2022 |
|
| 1,015,000 |
|
|
| 1,015 |
|
|
| 27,058,338 |
|
|
| 27,058 |
|
|
| 12,174,631 |
|
|
| (15,815,410 | ) |
|
| (3,612,706 | ) |
|
| (256,863 | ) |
|
| (3,869,569 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 11,480 |
|
|
| - |
|
|
| 11,480 |
|
|
| - |
|
|
| 11,480 |
|
Accumulated catch up adjustment |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (291,482 | ) |
|
| - |
|
|
| (291,482 | ) |
|
| - |
|
|
| (291,482 | ) |
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (235,997 | ) |
|
| (235,997 | ) |
|
| (29,466 | ) |
|
| (265,463 | ) |
Balance at June 30, 2022 |
|
| 1,015,000 |
|
| $ | 1,015 |
|
|
| 27,058,338 |
|
| $ | 27,058 |
|
| $ | 11,894,629 |
|
| $ | (16,051,407 | ) |
| $ | (4,128,705 | ) |
| $ | (286,329 | ) |
| $ | (4,415,034 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 7,968 |
|
|
| - |
|
|
| 7,968 |
|
|
| - |
|
|
| 7,968 |
|
Warrants issued for loan payable |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 7,788 |
|
|
| - |
|
|
| 7,788 |
|
|
| - |
|
|
| 7,788 |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (294,717 | ) |
|
| (294,717 | ) |
|
| (18,196 | ) |
|
| (312,913 | ) |
Balance at September 30, 2022 |
|
| 1,015,000 |
|
| $ | 1,015 |
|
|
| 27,058,338 |
|
| $ | 27,058 |
|
| $ | 11,910,385 |
|
| $ | (16,346,124 | ) |
| $ | (4,407,666 | ) |
| $ | (304,525 | ) |
| $ | (4,712,191 | ) |
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: Accounts receivable Prepaid expenses and other current assets 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 For the nine months
ended
September 30,$ (4,682,538 ) $ (33,578 ) 2,932,500 - 1,141,428 - - (3,500 ) (23,044 ) - 264,876 (671 ) 182,344 - (184,434 ) (37,749 ) 196,547 - (29,197 ) - 167,350 - (17,084 ) (37,749 ) 17,355 61,573 $ 271 $ 23,824 $ - $ - $ - $ -
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
5 |
Table of Contents |
First Foods Group, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
First Foods Group, Inc. and Subsidiary |
Condensed Consolidated Statements of Cash Flows |
(Unaudited) |
|
| For the Nine Months Ended September 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
Net loss |
| $ | (1,080,000 | ) |
| $ | (1,831,394 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Non-employee stock based compensation |
|
| - |
|
|
| 9,431 |
|
Employee stock based compensation |
|
| 91,110 |
|
|
| 285,675 |
|
Accumulative catch up adjustment |
|
| (291,482 | ) |
|
| - |
|
Loss on extinguishment of loans payable |
|
| - |
|
|
| 299,773 |
|
Impairment of asset |
|
| 92,736 |
|
|
| - |
|
Amortization of debt discount |
|
| 109,786 |
|
|
| 382,726 |
|
Depreciation and amortization expense |
|
| 53,615 |
|
|
| 43,205 |
|
Change in merchant allowance |
|
| 37,031 |
|
|
| (154,811 | ) |
Merchant cash advance direct write off |
|
| - |
|
|
| (1,312 | ) |
Non-cash lease expense |
|
| 51,594 |
|
|
| 45,960 |
|
Put liability |
|
| - |
|
|
| 29,421 |
|
Inventory reserve |
|
| 23,625 |
|
|
| - |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Inventory |
|
| 663 |
|
|
| (11,268 | ) |
Merchant cash advances |
|
| (5,543 | ) |
|
| 233,693 |
|
Prepaid expenses and other current assets |
|
| 138 |
|
|
| 45,336 |
|
Operating lease liabilities |
|
| (50,811 | ) |
|
| (44,794 | ) |
Accounts payable and accrued liabilities |
|
| 438,651 |
|
|
| 315,752 |
|
Accounts payable and accrued liabilities – related party |
|
| 231,362 |
|
|
| 163,698 |
|
Deferred revenue |
|
| (32,374 | ) |
|
| (20,097 | ) |
Net cash used in operating activities |
|
| (329,899 | ) |
|
| 209,006 |
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Purchase of equipment |
|
| - |
|
|
| (877 | ) |
Net cash used in investing activities |
|
| - |
|
|
| (877 | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from sale of common stock – related party |
|
| - |
|
|
| 100,000 |
|
Proceeds from loans |
|
| 30,000 |
|
|
| 200,101 |
|
Repayment of loans |
|
| - |
|
|
| (53,480 | ) |
Forgiveness of Preferred Series B stock |
|
| - |
|
|
| (118 | ) |
Proceeds from related party loans |
|
| 295,750 |
|
|
| 112,500 |
|
Repayments of related party loans |
|
| - |
|
|
| (136,161 | ) |
Net cash provided by financing activities |
|
| 325,750 |
|
|
| 222,842 |
|
|
|
|
|
|
|
|
|
|
NET (DECREASE) INCREASE IN CASH AND RESTRICTED CASH |
|
| (4,149 | ) |
|
| 12,959 |
|
CASH AND RESTRICTED CASH AT BEGINNING OF THE PERIOD |
|
| 11,527 |
|
|
| 50,386 |
|
CASH AND RESTRICTED CASH AT END OF THE PERIOD |
| $ | 7,378 |
|
| $ | 63,345 |
|
|
|
|
|
|
|
|
|
|
CASH AND RESTRICTED CASH CONSIST OF THE FOLLOWING: |
|
|
|
|
|
|
|
|
END OF THE PERIOD |
|
|
|
|
|
|
|
|
Cash |
| $ | 1,478 |
|
| $ | 33,924 |
|
Restricted Cash |
|
| 5,900 |
|
|
| 29,421 |
|
|
| $ | 7,378 |
|
| $ | 63,345 |
|
SUPPLEMENTAL CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
NON-CASH FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Common stock issued with loans |
| $ | 12,600 |
|
| $ | 17,160 |
|
Common stock issued with related party loans |
| $ | - |
|
| $ | 39,160 |
|
Common stock issued for conversion of loan payable |
| $ | - |
|
| $ | 250,000 |
|
Common stock issued for conversion of related party loans |
| $ | - |
|
| $ | 25,000 |
|
Warrants issued with loans |
| $ | 35,876 |
|
| $ | 47,597 |
|
Warrants issued with related party loans |
| $ | - |
|
| $ | 35,540 |
|
|
|
|
|
|
|
|
|
|
CASH PAID FOR: |
|
|
|
|
|
|
|
|
Interest |
| $ | 8,452 |
|
| $ | 100,065 |
|
Income taxes |
| $ | - |
|
| $ | - |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
6 |
Table of Contents |
Nature of Business
First Foods Group, Inc. (the “Company” or “First Foods” formerly known as Litera Group, Inc.) was incorporated under the laws of the State of Nevada on June 1, 2015, as “Litera Group, Inc.”. The Company is an emerging growth corporation originally formed to provide products and services within the theater and film production community. The Company developed screenplays, stage plays, comedy sketch and skit scripts, short film scripts and other literary and dramatic works, as well as offered abridgment and adaptation services. The Company’s target market was 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 nowa smaller reporting company focused on providing management servicesdeveloping its specialty chocolate product line through its Holy Cacao subsidiary and funding options for new foodservice brands and menu concepts, including the participationparticipating in merchant cash advances by(“MCAs”) through its 1st Foods Funding Division. First Foods Group, Inc. is also growingcontinues to pursue new brands and concepts, including the wholesaling of various health-related products through its own new concepts, both through proprietary development and through mergers, acquisitions, and licensing arrangements.FFGI Wholesale Division.
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 would form an entity that would own the intellectual property rights to “Blue Stripes-Cacao Shop” (the “IP Entity”) for the United States. The Company had 120 days from the date of the Term Sheet to perform due diligence activities and complete the closing. Upon the completion of due diligence, Company Management and the Board of Directors determined that it was in the best interest of the shareholders to forego a US-wide cacao concept. Instead, on August 31, 2017 the Company formed its own wholly owned cacao subsidiary named Holy Cacao Inc., a Nevada corporation. On November 3, 2017 the Company entered into a consulting agreement with Oded Brenner which is a performance-based agreementmajority owned subsidiary that requires Mr. Brenneris dedicated to perform specificproducing, packaging, marketingdistributing and product development dutiesselling specialty chocolate products, including specialty chocolate products infused with a hemp-based ingredient in connectionaccordance with the Company’s launchunderstanding of its Holy Cacao subsidiary. Holy Cacao willthe Agricultural Act of 2014 (the “2014 Farm Bill”) and/or the Agriculture Improvement Act of 2018 (the “2018 Farm Bill,” and together with the 2014 Farm Bill, collectively, the “Farm Bill”), which renders the production of hemp in compliance with the provisions of the Farm Bill federally lawful. The Company has not been, is not, and has no current plans to be dedicatedinvolved in producing, packaging, distributing or selling any product that is infused with a still-illegal marijuana-based ingredient THQ, although it intends to providing specialty chocolate to particular states withinrevisit the US. matter as regulations change in jurisdictions in which it operates.
The Company is currently in the process of negotiating productionalso dedicated to licensing its intellectual property (“IP”), including its name, brand, and packaging, contractsto third parties. The Company may license its IP to third parties that may produce, package, and distribute hemp-based products pursuant with the Company’s understanding of the Farm Bill. The Company may license its IP to third party providers in anticipation of operating activities to commence in 2018.parties that may produce, package, and distribute marijuana-based products, but only as such licensing is legal. Holy Cacao holds four trademarks for the brands, “The Edibles Cult”, “Purely Irresistible”, “Mystere” and “Southeast Edibles”.
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 had 60 days from the date of the Term Sheet to perform due diligence activities and complete the closing. Upon the completion of due diligence, Company Management and the Board of Directors determined that it was in the best interest of the shareholders to forego the TBS transaction.
On October 25, 2017, the Company entered intoalso has a contract with TIER Merchant AdvanceAdvances LLC (“TIER”) to participate in the purchase of future receivables from qualified TIER merchants for the purpose of generating near-term and long-term revenue for the Company. The Company also provides cash advances directly to merchants.
Quarterly Reporting
The accompanying unaudited condensed consolidated financial statements (“financial statements”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and have been consistently applied. Certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP, but which are not required for interim reporting purposes, have been omitted. In the opinion of management, the accompanying condensed consolidated financial statements presented in this Quarterly Report on Form 10-Q reflect all adjustments (consisting of normal recurring adjustmentsaccruals) considered necessary to present fairly the financial position as of September 30, 2022 and the 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.ended September 30, 2022 and 2021, have been included. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in its Annual Report on Form 10-Kand notes thereto for the year ended December 31, 20162021 included in the Company’s Annual Report on Form 10-K, as filed on March 27, 2017, and with the disclosuresSecurities and risk factors presented therein. TheExchange Commission on April 14, 2022. Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2016 condensed balance sheet has been derived from the audited financial statements.2022.
7 |
Table of Contents |
Impairment of Long-Lived Assets
Long-lived assets are comprised of property and equipment. The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset or group of assets may not be recoverable. If these circumstances exist, recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset group to future undiscounted net cash flows expected to be generated by the asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. During the nine months ended September 30, 2022 and 2021, the Company impaired property and equipment for a total of $92,736 and $0, respectively.
Liquidity and Going Concern
The Company’s unaudited condensed consolidated financial statements are prepared using generally accepted accounting principles in the United States of America (“GAAP”) 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.
First Foods Group, Inc.
Notes These factors raise substantial doubt regarding the Company’s ability to Unaudited Condensed Consolidated Financial Statementscontinue as a going concern for the next 12 months following the issuance of these unaudited condensed consolidated financial statements.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. As of September 30, 2022, the Company had approximately $1,361,000 in third-party short-term debt and approximately $6,500 in associated debt discount and approximately $786,000 in related-party short-term debt and $0 in associated debt discount that is due within the next twelve months. Management’s plan is to increase revenue, obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its operating expenses and seeking equity and/or debt financing. However, neither any members of management nor any significant shareholders are currently committed to invest funds with us and, therefore, we 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 unaudited condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
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 consolidated financial statements are presented in accordance with generally accepted accounting principles in the United States of America (“GAAP”).
Principles of Consolidation
The unaudited condensed consolidated financial statements represent the consolidation of the accounts of the Company and its subsidiaries in conformity with GAAP. All intercompany accounts and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid temporary cash investments with an original maturity of twelve months or less to be cash equivalents. At September 30, 2017 and December 31, 2016, respectively, the Company had $271 and $17,355 in cash.
Revenue Recognition
Prior to December 30, 2016, the Company generated revenues from the sale of movie scripts. Revenues were recognized when the following conditions were met:
|
|
|
|
|
|
|
|
|
|
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 the 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 September 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.
Table of Contents |
Recent Accounting Pronouncements
First Foods Group, Inc.
NotesFrom time to Unaudited Condensed Consolidated Financial Statements
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 stockholderstime, new accounting pronouncements are issued by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per common share exceptFASB or other standard setting bodies. Unless otherwise discussed, the Company believes that the denominator is increased to include the numberimpact of additional common sharesrecently issued standards that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no dilutive shares outstanding as of September 30, 2017 and 2016.
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, prepaid 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.
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 theyet 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 will adopt ASU 2014-09 in the first quarter of 2019 and plans to apply the full retrospective approach. The Company does not anticipate that the adoption of ASU 2014-09 will have a material impact on its consolidated financial position or results of operations upon adoption.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses” to improve information on credit losses for financial assets and net investment in leases that are not accounted for at fair value through net income. ASU 2016-13 replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses. In April 2019 and May 2019, the FASB issued ASU No. 2019-04, ”Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments” and ASU No. 2019-05, ”Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief” which provided additional implementation guidance on the previously issued ASU. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments - Credit Loss (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842),” which defers the effective date for public filers that are considered small reporting companies (“SRC”) as defined by the Securities and Exchange Commission to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Since the Company is an SRC, implementation is not needed until January 1, 2023. The Company will continue to evaluate the effect adopting ASU 2016-13 will have on the Company’s consolidated financial statements.
NOTE 2 – PREPAID EXPENSESRecently Adopted Accounting Pronouncements
In May 2021, the FASB issued ASU 2021-04, “Earnings Per Share (Topic 260)– Debt - Modifications and Extinguishments (Subtopic 470-50), Compensation - Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity – Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force).” The following table represents prepaid expensesASU addresses how an issuer should account for modifications or an exchange of freestanding written call options classified as equity that is not within the scope of another Topic. For both public and other current assets asprivate companies, the ASU is effective for fiscal years beginning after December 15, 2021. Transition is prospective. Early adoption is permitted. The Company’s adoption of September 30, 2017 and December 31, 2016, respectively.ASU 2021-04 on January 1, 2022 did not have a material impact on its unaudited condensed consolidated financial statements.
Year Ended September 30, December 31, Insurance Financing fees Employee receivable Total
2017
2016$ 17,063 $ - 5,000 - 981 - $ 23,044 $ -
NOTE 32 – RELATED PARTY TRANSACTIONS
EmploymentConsulting Agreements
On February 27, 2017, Harold Kestenbaum an individual newly appointed by the Board of Directors of the Company assumed 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 of the CompanyMr. Kestenbaum earned $40,000 per year for his appointmentrole as Chairman of the Board (ii) $10,000 per monthand no longer takes compensation. As of September 30, 2022, the Company has accrued a total of $40,000 of compensation for his role as Interim CEO which shall be deferred untilunder the Company raises at least $1,500,000 in financing, and (iii) $10,000 for every new franchising client he obtains, and (iv) $2,000 per month for legal services upon acquisition of a franchising client. In conjunction with this individual’s appointment, the former Chief Executive Officer resigned, but will remain as the Secretary and a director of the Company. The shares were valued at $1,500,000, representing a market value of $2.00 per share based on the closing price on the day of trading.previous agreement.
Table of Contents |
As of September 30, 2022, the Company has a consulting agreement with R and W Financial (a company owned by a director) for $5,000 a month. The agreement is for an indefinite period of time and is subject to cancellation by either party with written notice of 30 days. The outstanding balance as of September 30, 2022 and December 31, 2021 was $193,725 and $146,303, respectively.
First Foods Group, Inc.
Notes to Unaudited Condensed Consolidated Financial StatementsRelated Party Loans
|
|
|
|
|
|
|
|
|
| Associated equity instruments recorded as debt discount |
|
|
|
|
|
|
| |||||||||||||||||
|
|
|
|
|
| Original |
| New |
| Common |
|
| Fair Value of Common |
|
|
|
| Fair Value of |
|
|
|
|
| |||||||||||
|
|
| Interest |
|
| Maturity |
| Maturity |
| Shares |
|
| Shares |
|
| Warrants |
|
| Warrants |
|
| September 30, |
|
| December 31, |
| ||||||||
|
|
| Rate |
|
| Date |
| Date*** |
| issued |
|
| issued |
|
| issued |
|
| issued |
|
| 2022 |
|
| 2021 |
| ||||||||
| 1 |
|
|
| 12%* |
| 4/17/22 |
| 10/31/23 |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 100,000 |
|
| $ | 100,000 |
| |||||
| 2 |
|
|
| 0%* |
| 4/24/22 |
| 12/31/22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 179,813 |
|
|
| 179,813 |
| |
| 3 |
|
|
| 12%* |
| 4/16/22 |
| 12/31/22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 150,000 |
|
|
| 150,000 |
| |
During the nine months ended September 30, 2022 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
| ||||||||||
During the nine months ended September 30, 2021 |
|
| 130,000 |
|
|
| 26,500 |
|
|
| 200,000 |
|
|
| 35,540 |
|
|
|
|
|
|
|
|
| ||||||||||
| 4 |
|
|
| 0%* |
| 9/15/22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 500 |
|
|
| 500 |
| |
| 5 |
|
|
| 0%* |
| 5/30/22 |
| 12/31/22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 348,750 |
|
|
| 60,000 |
| |
| 6 |
|
|
| 0%* |
| Loans fully repaid in 2021 |
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| - |
| ||||||||||
During the nine months ended September 30, 2022 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
| ||||||||||
During the nine months ended September 30, 2021 |
|
| 60,000 |
|
|
| 12,660 |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
| ||||||||||
0%** |
|
| 12/31/22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 7,000 |
|
|
| - |
| |||||
Unamortized debt discount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
| (19,304 | ) | |||||||
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 786,063 |
|
| $ | 471,009 |
|
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 of the Company, and (ii) $20,833 per month, which shall be deferred until the Company raises at least $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 closing price on the day of trading, and are recognized over a 12-month service period as a result of a clawback provision.
* - unsecured note |
** - secured by the full value of the Company |
*** - During the nine months ended September 30, 2022 and 2021, the company extended the terms of the notes identified above. The extension of the term was accounted for as a modification to the original note. The company capitalized new costs of $0 and $59,360, for the period ended September 30, 2022 and 2021, respectively, as a result of the modifications. |
On October 25, 2017, Mark J. Keeley was appointed as a director of the Company by the Board of Directors of the Company.
A Company director, Hershel Weiss, owns the building that includes the Company’s office address and provides office space to the Company at no cost.
Due to Shareholder
Throughout the period ended September 30, 2017, the Company Secretary, who is also a director and a shareholder of the Company, provided non-interest bearing short term loans to the Company. A total of $196,547 was advanced during the nine months ended September 30, 2017, and the Company repaid $29,197, for a balance of $167,350.
On October 17, 2017, Obvia LLC, of which the Company Chief Financial Officer, who is also a director and a shareholder of the Company, is a 50% owner, provided a loan to the Company’s Funding Division in the amount of $100,000 bearing an interest rate of the US Prime Federal Funds Rate +1%, to be compounded monthly. The note is secured by the full value of the borrower.
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 3) 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 consolidated 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 3). 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 nine months ended September 30, 2017,2022 and 2021, the Company recorded $1,125,000$19,305 and $92,004 of interest expense related to the amortization of debt discount and $17,951 and $28,307 of regular interest, respectively.
During the three months ended September 30, 2022 and 2021, the Company recorded $0 and $34,534 of interest expense related to the amortization of debt discount and $6,049 and $6,049 of regular interest, respectively.
As of September 30, 2022 and December 31, 2021, accrued interest was $86,100 and $68,149, respectively.
During the nine months ended September 30, 2021, the Company converted $250,000 of loan payable in exchange for 2,000,000 shares of common stock and warrants for the right to purchase 375,000 shares of common stock. The aggregate fair value of the common stock shares issued and for the granted warrants was $543,513. In association with the conversion of the note to common stock and warrants, the company recognized a loss of $293,513.
Related Party Payables
As of September 30, 2022 and December 31, 2021, the Company owed a Director $245,751 and $150,822, respectively, for expenses incurred on behalf of the Company.
Director Agreements
The Company annually revisits the board of director agreements, which include quarterly compensation of $10,000 per director for the fiscal year. Three of the five board members currently are compensated under these terms, while the other two board members remain unpaid. As of September 30, 2022 and December 31, 2021, the Company has accrued $470,000 and $381,000, respectively, in relation to the director agreements which is included in Accounts payable and accrued liabilities – related parties on the unaudited condensed consolidated balance sheet.
10 |
Table of Contents |
On July 7, 2020, our Board of Directors appointed Michael Kaplan to the Board of Directors for a term of 2 years, who currently remains as an uncompensated board member (see note 6 for details). If terminated with cause by the Company, the consultant shall not thereafter be entitled to any form of compensation, the unvested warrants shall terminate, and he shall be paid a buyout fee in the amount of 250,000 fully vested warrants. If terminated without cause by the Company, all unvested warrants shall be accelerated and vest in one-half the time it was previously scheduled to vest.
NOTE 3 – PROPERTY AND EQUIPMENT
Property and equipment, net consists of the following:
|
| September 30, 2022 |
|
| December 31, 2021 |
| ||
Leasehold improvements |
| $ | 33,000 |
|
| $ | 33,000 |
|
Equipment |
|
| 201,024 |
|
|
| 201,024 |
|
Less: Accumulated depreciation, amortization and impairment |
|
| (230,616 | ) |
|
| (94,921 | ) |
Total |
| $ | 3,408 |
|
| $ | 139,103 |
|
The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset or group of assets may not be recoverable. If these circumstances exist, recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset group to future undiscounted net cash flows expected to be generated by the asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. During the nine months ended September 30, 2022 and 2021, the Company impaired property and equipment for a total of $92,736 and $0, respectively. |
11 |
Table of Contents |
NOTE 4 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following:
|
| September 30, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
Accounts Payable |
| $ | 321,803 |
|
| $ | 221,206 |
|
Interest |
|
| 345,887 |
|
|
| 209,311 |
|
Salaries |
|
| 793,589 |
|
|
| 603,371 |
|
Other |
|
| 51,588 |
|
|
| 40,328 |
|
Total third party payables |
|
| 1,512,866 |
|
|
| 1,074,216 |
|
Related party payables, officers and director fees |
|
| 949,476 |
|
|
| 718,114 |
|
Total payables |
| $ | 2,462,343 |
|
| $ | 1,792,330 |
|
NOTE 5 – LOANS AND LONG-TERM LOANS
Associated equity instruments recorded as debt discount
|
|
| Interest Rate |
|
| Original Maturity Date |
| New Maturity Date **** |
| Common Shares issued |
|
| Fair Value of Common Shares issued ($) |
|
| Warrants issued |
|
| Fair Value of Warrants issued ($) |
|
| September 30, 2022 |
|
| December 31, 2021 |
| ||||||||
| 1 |
|
|
| 12%* |
| 4/16/2022 |
| 4/30/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 50,000 |
|
| $ | 50,000 |
| |||||
During the nine months ended September 30, 2022 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
| ||||||||||
During the nine months ended September 30, 2021 |
|
| - |
|
|
| - |
|
|
| 50,000 |
|
|
| 7,675 |
|
|
|
|
|
|
|
|
| ||||||||||
| 2 |
|
|
| 12%* |
| 4/22/2022 |
| 11/30/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 18,000 |
|
|
| 18,000 |
| |
During the nine months ended September 30, 2022 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
| ||||||||||
During the nine months ended September 30, 2021 |
|
| 36,000 |
|
|
| 7,560 |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
| ||||||||||
| 3 |
|
|
| 12%* |
| 6/30/2022 |
| 12/31/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 250,000 |
|
|
| 250,000 |
| |
During the nine months ended September 30, 2022 |
|
| - |
|
|
| - |
|
|
| 125,000 |
|
|
| 28,088 |
|
|
|
|
|
|
|
|
| ||||||||||
During the nine months ended September 30, 2021 |
|
| - |
|
|
| - |
|
|
| 250,000 |
|
|
| 37,125 |
|
|
|
|
|
|
|
|
| ||||||||||
| 4 |
|
|
| 12%* |
| 4/16/2022 |
| 12/31/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 410,000 |
|
|
| 410,000 |
| |
| 5 |
|
|
| 12%* |
| 4/16/2022 |
| 12/31/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 140,000 |
|
|
| 140,000 |
| |
| 6 |
|
|
| 12%* |
| 4/30/2022 |
| 12/31/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 200,000 |
|
|
| 200,000 |
| |
| 7 |
|
|
| 12%* |
| 7/31/2022 |
| 12/31/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 60,000 |
|
|
| 60,000 |
| |
During the nine months ended September 30, 2022 |
|
| 60,000 |
|
|
| 12,600 |
|
|
| 60,000 |
|
|
| 7,788 |
|
|
|
|
|
|
|
|
| ||||||||||
During the nine months ended September 30, 2021 |
|
| 60,000 |
|
|
| 9,600 |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
| ||||||||||
| 8 |
|
|
| 12%* |
| 7/29/2022 |
| 12/31/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 96,000 |
|
|
| 96,000 |
| |
| 9 |
|
| 3.75% ** |
|
| 6/25/2050 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 150,000 |
|
|
| 150,000 |
| |
| 10 |
|
|
| 12.5%* |
| 12/17/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3,600 |
|
|
| 3,600 |
| |
| 11 |
|
|
| 0%* |
| 9/19/2022 |
| 1/15/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 16,500 |
|
|
| 16,500 |
| |
During the nine months ended September 30, 2022 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
| ||||||||||
During the nine months ended September 30, 2021 |
|
| - |
|
|
| - |
|
|
| 16,500 |
|
|
| 2,802 |
|
|
|
|
|
|
|
|
| ||||||||||
| 12 |
|
|
| 0%* |
| 4/16/2022 |
| 8/31/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 50,000 |
|
|
| 50,000 |
| |
| 13 |
|
| 0% *** |
|
| 4/16/2022 |
| 12/31/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 30,000 |
|
|
| 30,000 |
| |
| 14 |
|
|
| 0%* |
| 4/16/2022 |
| 12/31/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 13,000 |
|
|
| 13,000 |
| |
| 15 |
|
| 0% *** |
|
| 5/30/2022 |
| 12/31/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 30,000 |
|
|
| - |
| |
| Unamortized debt discount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (6,508 | ) |
|
| (48,514 | ) | |||||||
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,510,592 |
|
|
| 1,438,586 |
| |||||||
| Less: short term loans, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,360,592 |
|
|
| 1,288,586 |
| |||||||
| Total long-term loans, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 150,000 |
|
| $ | 150,000 |
|
* - unsecured note
** - secured note and collateralized by all tangible and intangible personal property
*** - unsecured note and guaranteed by a Director of the Company
**** - During the nine months ended September 30, 2022 and 2021, the company extended the terms of the notes identified above, the extension of the term was accounted for as a modification to the original note. The company capitalized new costs of $48,476 and $64,757, for the period ended September 30, 2022 and 2021, respectively, as a result of the modifications. On August 1, 2022, the Company extended the terms of Note 7 above. In connection with this extension the Company issued a warrant to purchase 60,000 shares of common stock. The warrants are valued at $7,788 based on the Black Scholes Model, are fully vested as of the issue date and have an exercise term of three (3) years. The Company recorded a debt discount and will amortize it over the life of the loan.
The Company has experienced a shortage of funding because cash outflows for business administration were higher than business revenue and financing expectations. As a result, loans payables of $50,000 due by August 31, 2022 remained unpaid as of September 30, 2022. The Company’s management has successfully loan extensions with the lender in prior periods and will continue to negotiate further extensions with the lender for future periods. The loan with the lender is presented as a current liability as of September 30, 2022.
In connection with the various debts issuances and extensions, the Company periodically, as applicable, records debt discount and amortizes it over the applicable life of the debt. During the three months ended September 30, 2022 and 2021, the Company recorded $4,392 and $94,641 of interest expense related to the amortization of debt discount and $38,553 and $39,852 of regular interest, respectively. During the nine months ended September 30, 2022 and 2021, the Company recorded $90,481 and $290,721 of interest expense related to the amortization of debt discount and $114,402 and $122,841 of regular interest, respectively. As of September 30, 2022 and December 31, 2021, accrued interest was $247,180 and $132,778, respectively.
As of September 30, 2022 and December 31, 2021, accrued interest associated with the economic injury disaster loan was $11,188 and $8,385, respectively.
During the nine months ended September 30, 2021, the Company converted $25,000 of loan payable in exchange for 191,424 shares of common stock. The fair value of the common stock shares issued was $31,260. In association with the conversion of the note to common stock, the company recognized a loss of $6,260.
12 |
Table of Contents |
NOTE 6 – STOCKHOLDERS’ DEFICIT
Warrant Activity
Common Stock Warrants
On July 7, 2020, our Board of Directors appointed Michael Kaplan to the Board of Directors. In connection with the agreement one million (1,000,000) warrants were issued. The warrants are valued at $177,200 based on the Black Scholes Model. For the nine months ended September 30, 2022 and 2021, the Company recorded $0 and $87,872 as compensation expense related to the warrants, respectively. For the three months ended September 30, 2022 and 2021, the Company recorded $0 and $3,398 as compensation expense related to the warrants, respectively.
Prior to Mr. Kaplan’s appointment to the Board of Directors, on July 7, 2020 the Company entered into a Consulting Agreement with Mr. Kaplan to award him, as full compensation for two (2) years of service, warrants to purchase two million (2,000,000) shares of common stock, if certain milestones are reached, at an exercise price of $0.18 per share, which was the closing price of our common stock on such date. The warrants are valued at $354,400 based on the Black Scholes Model. When the warrants were issued management had assessed the probability of certain milestones being met as probable and therefore the warrants were being straight-lined over the term of services and accelerated whenever a milestone is met. During the quarter ending June 30, 2022, management, upon further review, has determined that these milestones will probably not be met and has recorded an accumulative catch up adjustment of $291,482. For the nine months ended September 30, 2022 and 2021, the Company recorded $41,508 and $125,909 as compensation expense related to the warrants, respectively. For the three months ended September 30, 2022 and 2021, the Company recorded $0 and $42,431 as compensation expense related to the warrants, respectively. In July 2022, the term of the consulting agreement ended with no further milestones being completed. No further compensation will be recorded in association to these warrants.
On August 4, 2020, the Company signed an Employment Agreement for a term of three years with an annual base salary of eighty-four thousand dollars ($84,000). As part of the agreement the Company will issue a warrant to the employee to purchase 300,000 shares a year, for a total of 900,000 shares of the Company’s common stock. The warrants have a term of three (3) years from date of issue and an exercise price equal to the closing market price of the Company’s common stock on August 4, of the corresponding year. The warrants issued on August 4, 2020, 2021 and 2022, are valued at $97,470, $46,050 and $22,740, respectively, based on the Black Scholes Model. The warrants will be subject to a 12-month period whereby the warrants will vest in equal monthly increments for each year of the employment period. Once per quarter, the employee may waive the right to receive 25,000 warrants and receive in exchange for $5,000 worth of shares of the Company’s common stock. In the event the employee’s employment is terminated by the Company without cause, the employee shall be entitled to receive severance in an amount equal to the lesser of three month’s salary or the amount of salary otherwise payable until the termination date. The employee additionally shall be entitled to retain all warrants scheduled to vest within the following nine months. For the nine months ended September 30, 2022 and 2021, the Company recorded $49,602 and $57,681 as compensation expense related to the warrants, respectively. For the three months ended September 30, 2022 and 2021, the Company recorded $7,968 and $9,346 as compensation expense related to the warrants, respectively.
13 |
Table of Contents |
On March 21, 2022, the Company extended the maturity date on one of its promissory notes (see Note 5). In association with this extension the company granted warrants for the right to purchase 125,000 shares of common stock at an exercise price of $0.24 a share. The warrants are valued at $28,088 based on the Black Scholes Model, are fully vested as of the issue date and have an exercise term of three (3) years. The Company recorded a debt discount and will amortize it over the life of the loan.
On August 1, 2022, the Company extended the maturity date on one of its promissory notes (see Note 5). In association with this extension the company granted warrants for the right to purchase 60,000 shares of common stock at an exercise price of $0.14 a share. The warrants are valued at $7,788 based on the Black Scholes Model, are fully vested as of the issue date and have an exercise term of three (3) years. The Company recorded a debt discount and will amortize it over the life of the loan.
The Company utilized the Black-Scholes option-pricing model to estimate fair value, utilizing the following assumptions for the respective period:
|
| 2022 |
|
| 2021 |
| ||
Risk-free interest rate |
|
| 0.22-3.16 | % |
| 0.03-0.08 | % | |
Expected term of options, in years |
|
| 3 |
|
|
| 3 |
|
Expected annual volatility |
|
| 211.0-235.0 | % |
| 228.0-247.7 | % | |
Expected dividend yield |
| - | % |
| - | % | ||
Determined grant date fair value per option |
| $ | 0.08 – 0.22 |
|
| $ | 0.14 – 0.22 |
|
A summary of the Company’s warrants to purchase common stock activity is as follows:
|
| Number of Warrants (in common shares) |
|
| Weighted Average Exercise Price |
| ||
Outstanding, December 31, 2020 |
|
| 4,899,750 |
|
| $ | 0.21 |
|
Granted |
|
| 1,148,775 |
|
|
| 0.19 |
|
Exercised |
|
| - |
|
|
| - |
|
Forfeited or cancelled |
|
| (343,750 | ) |
|
| 0.08 |
|
Outstanding, December 31, 2021 |
|
| 5,704,775 |
|
| $ | 0.22 |
|
Granted |
|
| 785,000 |
|
|
| 0.14 |
|
Exercised |
|
| - |
|
|
| - |
|
Forfeited or cancelled |
|
| (310,000 | ) |
|
| 0.25 |
|
Outstanding, September 30, 2022 |
|
| 6,179,775 |
|
| $ | 0.21 |
|
14 |
Table of Contents |
As of September 30, 2022, 4,029,775 warrants for common stock were exercisable and the intrinsic value of these warrants was $300 the weighted average remaining contractual life for warrants outstanding was 1.45 years and the remaining expense is $25,697 over the remaining amortization period which is 10 months.
As of September 30, 2021, 3,948,525 warrants for common stock were exercisable and the intrinsic value of these warrants was $34,346, the weighted average remaining contractual life for warrants outstanding was 2.17 years and the remaining expense is $129,138 over the remaining amortization period which is 1.89 years.
Preferred Stock Warrants
A summary of the Company’s warrants to purchase Series B Preferred Stock activity is as follows:
|
| Number of Warrants (in Series B Preferred Stock) |
|
| Weighted Average Exercise Price |
| ||
Outstanding, December 31, 2020 |
|
| 4,470,000 |
|
| $ | 0.68 |
|
Granted |
|
| - |
|
|
| - |
|
Exercised |
|
| - |
|
|
| - |
|
Forfeited or cancelled |
|
| - |
|
|
| - |
|
Outstanding, December 31, 2021 |
|
| 4,470,000 |
|
| $ | 0.68 |
|
Granted |
|
| - |
|
|
| - |
|
Exercised |
|
| - |
|
|
| - |
|
Forfeited or cancelled |
|
| - |
|
|
| - |
|
Outstanding, September 30, 2022 |
|
| 4,470,000 |
|
| $ | 0.68 |
|
As of September 30, 2022, 4,470,000 warrants for Series B preferred stock were exercisable and the intrinsic value of these warrants was $0, the weighted average remaining contractual life for warrants outstanding was 5.62 years.
As of September 30, 2021, 4,470,000 warrants for Series B preferred stock were exercisable and the intrinsic value of these warrants was $918,810, the weighted average remaining contractual life for warrants outstanding was 6.62 years.
NOTE 7 – LEASES
On June 23, 2020, the Company entered into an operating lease agreement with a term of 4 years, and an option to extend for three years, comprising of office and warehouse space. This option is included in the lease term when it is reasonably certain that the option will be exercised and failure to exercise such option will result in economic penalty and as such the option to extend for the three-year term is not included in the below calculation.
For the nine months ended September 30, 2022 and 2021, the Company incurred lease expense for its operating leases of $65,732 and $65,732, respectively, which was included in general and administrative expenses on the accompanying unaudited condensed consolidated statementstatements 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 byFor the three months ended September 30, 2022 and 2021, the Company at $145,000, representing a fair market valueincurred lease expense for its operating leases of $1.45 per share$21,910 and $21,910, respectively, 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 accompanying unaudited condensed consolidated statementstatements of operations.
The Company’s weighted-average remaining lease term relating to its operating leases is 1.58 years, with a weighted-average discount rate of 12.00%.
15 |
Table of Contents |
The Company had cash payments for operating leases of $64,948 and $64,566 for the nine months ended September 30, 2022 and 2021, respectively and $21,933 and $21,294 for the three months ended September 30, 2022 and 2021, respectively.
The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s operating leases as of September 30, 2022.
Maturity of Lease Liability |
|
|
| |
2022 |
| $ | 21,932 |
|
2023 |
|
| 89,487 |
|
2024 |
|
| 30,121 |
|
Total undiscounted operating lease payments |
|
| 141,541 |
|
Less: Imputed interest |
|
| 13,298 |
|
Present value of operating lease liabilities |
| $ | 128,242 |
|
NOTE 8 – COMMITMENTS
On July 16, 2018, the Company entered into a consulting agreement with a service provider that contains the following terms:
· | A $6,000 per month advance of Holy Cacao equity distribution will be awarded every month Holy Cacao earns a net profit over a period of twenty-four (24) consecutive months following the initial product launch and production sale. | |
· | 300,000 warrants for shares of the Company’s common stock will be awarded after each of two consecutive twelve (12) month periods in which Holy Cacao earns a net profit from gross annual product sales of at least $1M. Each of the two 300,000 warrant awards will vest equally over a twelve (12) month period. As of September 30, 2022, these targets have not been achieved and the Company has determined it is not probable of being met at this time, as such no compensation expense has been recorded. |
On August 14, 2019, the Company entered into an agreement with a CFN Media. In consideration for the services and deliverables provided by CFN Media, the Company will make three (3) cash payments to CFN Media totaling $30,000. Payments will be made in accordance with the following staged schedule:
“Stage 1” - $10,000 due upon the signing of the agreement for the Stage 1 services and deliverables: the interview, lead generation system and two (2) articles, including syndication, distribution and placement. This payment has been made.
“Stage 2” - $10,000 due upon the Company’s receipt of CFN Media’s invoice issued after CFN Media’s completion of Stage 1 and the Company’s confirmation they are ready to continue with Stage 2, which will include CFN Media’s delivery of two (2) Articles with the embedded interview and lead generation, as well as syndication, distribution and placement of services and deliverables.
“Stage 3” - $10,000 due upon the Company’s receipt of CFN Media’s invoice issued after CFN Media’s completion of Stage 2 and the Company’s confirmation they are ready to continue with Stage 3, which will include CFN Media’s delivery of two (2) Articles with the embedded interview and lead generation, as well as syndication, distribution and placement of services and deliverables.
On October 31, 2017, these10, 2019, the Company signed a master distribution agreement with CBD Unlimited, Inc., which is a public company and a master distributor, to distribute the Company’s hemp-based chocolate products. The term of this agreement is four years. The agreement includes the issuance of 250,000 shares of the Company’s common stock at the closing market price of $0.26 per share as of the date of the agreement. Additionally, the Company shall pay the distributor a commission for its services hereunder amounting to applicable percentage of the sales price of any sales or sales contract with a customer.
16 |
Table of Contents |
On January 14, 2020, the Company entered into an agreement with a sales consultant to further the business purpose of the Company. In consideration for the services provided by the consultant, the Consultant shall be paid a fee of ten percent (10%) of each of the consultant’s sales of the Company’s product.
On October 15, 2020, the Company entered into a chocolate sales agreement with a sales consultant. The consultant will receive a commission of the gross sales (net of returns) that were directly generated by the consultant to new customers. The consultant shall receive a sales commission of the gross sales (net of returns) directly generated by the consultant to such distributor and such distributor shall receive a commission of such gross sales (net of returns). Commissions shall be paid within 30 days of the end of the quarter in which they are deemed earned. No commissions are due and no commissions have been earned as of September 30, 2022. In addition, once the consultant has made $75,000 of gross sales (net of returns) he shall receive 75,000 shares of the Company’s common stock. This agreement shall continue for sixty months from the date of the agreement and will automatically extend for additional successive sixty-month terms unless written notice is delivered at least thirty days prior to the end of the current term.
On November 9, 2020, the Company entered into an agreement with a consultant. The consultant shall provide the following services: develop a marketing plan and act as a sales agent with respect to the wholesale of various products by the Company. As compensation for the services, the consultant shall receive a cash payment in an amount in excess of 9% of the profit margin. However, in the event the average closing price of the Company’s common stock on the common stock’s primary market over the final ten (10) trading days of any month is greater than or equal to $0.50, then the cash compensation for such month shall only be the amount of profit margin generated by the sales of the products in excess of 14% of gross sales and the amount of profit margin between 9% and 14% of gross sales shall completely belong to the Company. Prior to the payment date of each month, the consultant can elect to receive all or part of the cash compensation due for such month in the form of common stock by providing written notice of such election to the Company. The number of shares to be issued shall be calculated based upon a per share value equal to 80% of the valuation price. This agreement shall commence on the effective date and shall continue for a term of two (2) years. Prior to six months after the effective date this agreement may not be cancelled without cause. After six months this agreement may be sooner terminated by either party upon sixty days written notice. Commencing 120 days after the effective date, absent an effective registration statement by the Company covering the shares, the sales consultant may “Put” to the Company any vested shares at a price per share equal to the grant price at any time during the term. The Company shall maintain a separate account with funds to pay for the Put for as long as the Put is exercisable and replacedthe Put right shall be subject to the terms governing such account. As of September 30, 2022, the Company has recorded a Put liability of $29,421. The Consultant has agreed to lower the restricted cash amount for the Put to $5,900.
On November 9, 2020, the Company entered into a grant agreement with 100,000 warrants.a sales consultant. As compensation for the services, the Company will issue up to three million (3,000,000) shares to the sales consultant in monthly installments over the twenty (24) month term of the agreement. The number of shares to be issued by the Company to the sales consultant on a monthly basis will be determined by the amount of net sales of various wholesale products generated by the sales consultant at the end of each month multiplied by a fixed percentage of nine percent (9%) divided by the last closing market price of the shares as of the effective date. In addition to the shares to be issued, the sales consultant shall be issued three million (3,000,000) warrants were issued with anto purchase shares. One warrant shall be fully vested for every share issued. The exercise price of $0.01 per shareeach warrant shall be equal to the grant price and each warrant shall be exercisable for thirty-six (36) months following the date of vesting. Until such time as the shares underlying the warrants are registered, the warrants may be redeemed effective October 31, 2017 through October 31, 2018.exercised via a cashless exercise. As of September 30, 2022, there were 2,852,009 shares of common stock and 2,942,725 warrants remaining to be issued if certain performance thresholds are met.
On January 14, 2021, the Company entered into an agreement with a sales consultant to further the business purpose of the Company. In consideration for the services provided by the consultant, the consultant will receive a commission of the gross sales (net of returns) that were directly generated by the consultant to new customers. This agreement shall continue for sixty months from the date of the agreement and will automatically extend for additional successive sixty-month terms unless written notice is delivered at least thirty days prior to the end of the current term.
Table of Contents |
On January 4, 2022, the Company entered into a grant agreement with a sales consultant. As compensation for the services, the Company will issue up to 2,380,952 shares of restricted common stock to the sales consultant in monthly installments over the twenty (24) month term of the agreement. The number of shares to be issued by the Company to the sales consultant on a monthly basis will be determined by the amount of net sales of products generated by the sales consultant at the end of each month multiplied by a fixed percentage of 5% divided by the last closing market price of the shares as of the effective date. Additionally, if the sales consultant makes sales using salespeople who are not under contract with the Company, the Company will pay the consultant a cash commission at the end of each month equal to 5% of net sales over the term. During the three and nine months ended September 30, 2022 no shares have been issued.
First Foods Group, Inc.On March 2, 2022, the Company entered into two agreements with two consultants to further the business purpose of the Company. In consideration for the services provided by the consultants, the consultants will receive a 10% commission of the gross sales (net of returns) that were directly generated by the consultants to new customers. This agreement shall continue for sixty months from the date of the agreement and will automatically extend for additional successive sixty-month terms unless written notice is delivered at least thirty days prior to the end of the current term.
On March 23, 2022, the Company entered into a grant agreement with a sales consultant. As compensation for the services, the Company will issue up to Unaudited Condensed Consolidated Financial Statements2,083,333 shares of restricted common stock to the sales consultant in monthly installments over the twenty (24) month term of the agreement. The number of shares to be issued by the Company to the sales consultant on a monthly basis will be determined by the amount of net sales of products generated by the sales consultant at the end of each month multiplied by a fixed percentage of 5% divided by the last closing market price of the shares as of the effective date. During the three and nine months ended September 30, 2022 no shares have been issued.
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 by11, 2022, the Company at $501,428, representingentered into a fair market valuememo of $2.25 per share which was basedunderstanding with a marketing consultant, who is a National Football League (NFL) celebrity. As compensation for the services, the Company agrees to split the net profit on a 50 / 50 basis derived from the fair market value. This amount was recorded as compensation expense which issales of the Company’s products that will be branded under the consultant’s name and result from the marketing consultant’s efforts. The marketing consultant will be paid on a quarterly basis over the two (2) year term.
Commission costs for the nine months ending September 30, 2022 and 2021, were $1,090 and $43,863, respectively. Commission costs for the three months ending September 30, 2022 and 2021, were $1,090 and $8,877, respectively. These expenses are included in general and administrative expenses on the accompanying unaudited condensed consolidated statementstatements of operations.
On May 11, 2017, the Company entered into a 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 September 30, 20172022 and throughDecember 31, 2021, there were no accrued commissions outstanding.
NOTE 9 – CONCENTRATION RISKS
As of September 30, 2022, the dateCompany’s concentrations for receivables from merchant cash advances as well as income from merchant cash advances were not significant to warrant concentration risk.
As of these financial statements,December 31, 2021, the Company’s receivables from merchant cash advances included $29,290 from one merchant, representing 78% of the Company’s merchant cash advances. The Company earned $14,949 and $6,463 of MCA income from two merchants, representing 41% and 18%, respectively, of the Company’s MCA income for the nine months ended September 30, 2021.
For the three months ended September 30, 2022, the Company had no purchase concentration. For the three months ended September 30, 2021, the Company had purchase concentrations of 81% and 12% from two vendors.
For the nine months ended September 30, 2022, the Company had purchase concentrations of 22%, 17% and 12% from three vendors. For the nine months ended September 30, 2021, the Company had purchase concentrations of 60% and 21% from two vendors.
NOTE 10 – SUBSEQUENT EVENTS
Subsequent to the year end, the Company has recorded $5,000 as prepaid expenseextended various loans (see notes 2 and accrued liabilities, no shares have been issued related to this agreement, and the original agreement is in the process of being renegotiated among and between the Company and the consultant.
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 consolidated statement of operations.
On June 23, 2017, 150,000 shares of common stock were granted to Robert Kanuth for fund raising 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 consolidated statement of operations.
On October 25, 2017, the Board of Directors of the Company elected to designate the 5,000,000 preferred shares authorized into two series. Series A Preferred Shares was designated with one share. The remaining 4,999,999 shares were designated as Series B Preferred Shares. The majority shareholder of the Company approved the actions on October 22, 2017. The Board of Directors further resolved to issue the Series A share to Rosenweiss Capital LLC, a related party, for fifty percent (50%) of the voting rights of all outstanding classes of capital stock of the Company at all times and shall offer the Series B as they determine fit. The Board of Directors further resolved that the Board of Directors of the Company file a Certificate of Designation, setting forth such rights, and further resolved that any and all actions heretofore reasonably taken by or on behalf of the Company in the conduct of its business prior to the date hereof are approved, ratified and confirmed in all respects as being the acts and deeds of the Company, including any and all actions heretofore made for or on behalf or in the name of the Company by any of the Company’s officer and directors. The designations, powers, preferences and rights of the shares of Series A Convertible Preferred Stock of the Company Series B Convertible Stock, which such resolution is as follows:
Ranking. The Preferred Stock shall rank, as to payment of dividends, rights to distribution of assets upon liquidation, dissolution rights and/or winding up rights of the Company and such other items as may arise from time to time: (i) senior to the shares of (a) common stock, par value $0.001 per share, of the Company (the “Common Stock”), and (c) any other class or series of capital stock issued by the Company which by its terms does not expressly rank senior to or on a parity with the Preferred Stock (collectively, with the Common Stock and the Series A Stock, the “Junior Stock”), and (ii) pari passu between the Series A Stock and the Series B Stock
Dividend Rights; Distributions5).
(a) At the sole election of the Board, the Board may, at any time and from time to time, declare dividends on the Preferred Stock. Such dividends may be paid, at the sole election of a majority of the Board, either in (i) cash, (ii) shares of Common Stock, (iii) shares of Preferred Stock, (iv) shares of any other equity securities of the Company, or (v) any combination of the foregoing, provided that funds and/or equity securities are legally available to pay such dividends. If the Company elects to pay dividends in shares of Common Stock, Preferred Stock, and/or any other equity securities of the Company, such dividends shall be paid in full shares only, with any shares to be rounded up to a full share for any fractional share to be paid. Dividends declared by the Board of Directors may be paid on any date fixed by the Board to holders of record of shares of Preferred Stock as they appear on the Company’s stock register at the close of business on the record date (the “Record Date”). The Record Date, which shall not be greater than sixty (60) days nor less than ten (10) days before payment of dividends for such Record Date, shall be fixed by the Board.
(b) No dividend payment shall be made on or with respect to any shares of Junior Stock unless, prior thereto, all declared and unpaid dividends on any shares of Preferred Stock shall have been paid on all then outstanding shares of Preferred Stock and/or any then outstanding shares of Parity Stock.
Table of Contents |
First Foods Group, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(c) In addition to any other dividends that a holder of shares of Preferred Stock is entitled to, a holder of Preferred Stock shall be entitled to receive dividends on an as converted basis when, if and as declared by the Board of Directors for distribution to holders of Common Stock from time to time, only when, as and if declared by the Board of Directors, and only out of funds that are legally available.
Voting Rights.Holders of the Series A Stock shall have voting rights equal to fifty percent (50%) of the voting rights of all outstanding classes of capital stock of the Company at all times. Holders of the Series B Stock shall have voting rights equal to equal to five (5) votes per each share of the Series B Stock.
Stated Value. Upon liquidation, dissolution and/or winding up of the Company (and/or any other reason that the stated value of the Preferred Stock is required and/or deemed advisable by the Board to be determined), shares of Preferred Stock then outstanding shall have a stated value per share as determined by the Board in good faith.
Conversion Rights. Holders of Preferred Stock shall have the following rights with respect to conversion of shares of Preferred Stock into shares of Common Stock: a conversion rate of five (5) shares of Common Stock.
NOTE 5 – SUBSEQUENT EVENTS
The Company has analyzed its operations subsequent to September 30, 2017 through the date of this filing, and noted the following subsequent events, in addition to those disclosed in Notes 1, 3 and 4.
On October 31, 2017, the 100,000 shares of common stock issued to Robert E. Hunt on April 27, 2017 were cancelled and replaced with 100,000 warrants. The warrants were issued with an exercise price of $0.01 per share and may be exercised between October 31, 2017 through October 31, 2018.
On November 2, 2017, the Company entered into an unsecured Promissory Note and Share Agreement whereby the Company promised to pay $90,000 to the lender. The lender advanced $50,000 on the date of the agreement and will advance $40,000 on December 1, 2017. The note carries an interest rate of 10% to be paid in cash on the first day of every month until maturity on May 1, 2018. As part of the agreement, the Company issued 50,000 shares of common stock on November 3, 2017.
On November 2, 2017 the Company amended its February 21, 2017 consulting agreement with Integrity Media, Inc. to release the Company from $10,500 of accounts payable that will be recorded by the Company as a gain on the forgiveness of debt in the fourth quarter.
On November 3, 2017 the Company entered into a consulting agreement with Oded Brenner that supersedes and replaces the April 21, 2017 binding term sheet between the Company and Oded Brenner. The consulting agreement is a performance-based agreement that requires Mr. Brenner to perform specific packaging, marketing and product development duties in connection with the Company’s launch of its Holy Cacao subsidiary. In accordance with the consulting agreement, Mr. Brenner will release the Company from $38,950 of accounts payable that will be recorded by the Company as a gain on the forgiveness of debt in the fourth quarter. Mr. Brenner will be compensated $24,000 to be paid in three installments; $8,000 upon the signing of the execution of the consulting agreement, $8,000 upon the Company approving an initial brand design, logo, packaging and recipes, and $8,000 upon the completion and the Company’s final approval and sourcing of design, logo, packaging and recipes.
Item 2.2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statements
This Form 10-Q may containcontains “forward-looking statements,” as that term is used in federal securities laws, about First Foods Group, Inc.’s financial condition, results of operations and business.
These statements include, among others:
| statements concerning the potential benefits that First Foods Group, Inc. (“First Foods”, “we”, “our”, “us”, the “Company”, or “management”) may experience from its business activities and certain transactions it contemplates or has completed; and |
| statements of First |
| (a) | volatility or decline of First Foods’ stock price; |
| (b) | potential fluctuation of quarterly results; |
| (c) | include failure of First Foods to earn significant revenues or profits; |
| (d) | inadequate capital to continue or expand its business, and inability to raise additional capital or financing to implement its business plans; |
| (e) | decline in demand for First Foods’ products and services; |
| (f) | rapid adverse changes in markets; due to, among other things, international conflicts, terrorism, environmental issues, world and national health issues, and inflation; |
| (g) | litigation with or legal claims and allegations by outside parties against First Foods, including but not limited to challenges to First Foods’ intellectual property rights; |
| (h) |
|
| reliance on proprietary merchant advance credit models, which involve the use of qualitative factors that are inherently judgmental and which could result in merchant | |
(i) | new regulations impacting the business. |
There is no assurance that First Foods will be profitable, First Foodsdue to, among other potential reasons, that it may (i) not be able to successfully develop, manage or market its products and services, First Foods may not be able toservices; attract or retain qualified executives and personnel, First Foods may not be able topersonnel; or obtain customers for its products or services, (ii) incur additional dilution in outstanding stock ownership may be incurred due to the issuance of more shares, warrants, and stock options or other convertible securities, or the exercise of outstanding warrants and stock options, and (iii) suffer other risks inherent in First Foods’its business.
Because the forward-looking statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. First Foods cautions you not to place undue reliance on the statements, which speak only of management’s plans and expectations 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 First Foods or persons acting on its behalf may issue. First 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.
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Current OverviewGeneral
First Foods is currently an “emerging growtha “smaller reporting company” under the JOBS Act. A company loses its “emerging growth“smaller reporting company” status on (i) the last day of the fiscal year during which itits public float becomes greater than or equal to $250,000,000 or (ii) had total annual gross revenues of $1,000,000,000less than $100,000,000 and either: (A) had no public float or more; (ii) the last day(B) had a public float 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 moreless than $1,000,000,000 in non-convertible debt; or (iv) the date on which it is deemed to be$700,000,000. As a ‘large accelerated filer’, as defined in Section 240.12b– 2 of title 17, Code of Federal Regulations, or any successor thereto. As an “emerging growth company,”“smaller reporting company” First 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’sCompany’s internal control for financial reporting. Furthermore, Section 103 of the JOBS Act provides that as an “emerging growtha “smaller reporting company”, First 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 First Foods qualifies as an “emerging growtha “smaller reporting company.” In addition, a “smaller reporting company” may include less extensive narrative disclosure than required of other reporting companies, particularly in the description of executive compensation and provide audited financial statements for two fiscal years, in contrast to other reporting companies, which must provide audited financial statements for three fiscal years. However, an “emerging growtha “smaller reporting company” is not exempt from the requirement to perform management’s assessment of internal control over financial reporting.
First Foods Group, Inc. (formerly “Litera Group, Inc.”is focused on developing its specialty chocolate product line through its Holy Cacao subsidiary, participating in merchant cash advances (“MCAs”) was incorporated underthrough its 1st Foods Funding Division, and introducing new health-related brands, concepts and products through its FFGI Wholesaling Division.
Holy Cacao is a majority owned subsidiary that is dedicated to producing, packaging, distributing and selling specialty chocolate products, including specialty chocolate products infused with a hemp-based ingredient in accordance with the lawsCompany’s understanding of the StateAgricultural Act of Nevada on June 1, 2015.
First Foods, as Litera Group, Inc., was dedicated to2014 (the “2014 Farm Bill”) and/or the creationAgriculture Improvement Act of 2018 (the “2018 Farm Bill,” and commercialization of literary and dramatic products and servicestogether with the aim2014 Farm Bill, collectively, the “Farm Bill”), which renders the production of achieving profitability and sustaining growthhemp in compliance with the provisions of our business. First Foods is now focused on providing management services and funding options for new foodservice brands and menu concepts, including the participation in merchant advances by 1st Foods Funding Division. First Foods is also growing its own new concepts, both through proprietary development and through mergers, acquisitions, and licensing arrangements.Farm Bill federally lawful. The Company has assemblednot been, is not, and has no current plans to be involved in producing, packaging, distributing or selling any product that is infused with a team of distinguished food service professionals with experience and success atstill illegal marijuana-based ingredient such as THQ, although it intends to revisit the highest levels of the industry.matter if regulations change in jurisdictions in which it operates.
We intendThe Company is also dedicated to become a self-sustained operational entity. In order to generate revenues, 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.
On 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 amendedlicensing its Articles of Incorporation with the State of Nevada in order to changeintellectual property (“IP”) including its name, from “Litera Group, Inc.”brand, and packaging, 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 would form an entity that would own the intellectual property rights to “Blue Stripes-Cacao Shop” (the “IP Entity”) for the United States.third parties. The Company had 120 days from the date of the Term Sheetmay license its IP to perform due diligence activitiesthird parties that may produce, package, and complete the closing. Upon the completion of due diligence, Company Management and the Board of Directors determined that it was in the best interest of the shareholders to forego a US-wide cacao concept. Instead, on August 31, 2017 the Company formed its own wholly owned cacao subsidiary named Holy Cacao, Inc., a Nevada corporation. On November 3, 2017 the Company entered into a consulting agreement with Oded Brenner which is a performance-based agreement that requires Mr. Brenner to perform specific packaging, marketing and product development duties in connectiondistribute hemp-based products pursuant with the Company’s launchunderstanding of the Farm Bill. The Company may license its IP to third parties that may produce, package, and distribute marijuana-based products, but only as such licensing is legal. Holy Cacao subsidiary. Holy Cacao will be dedicated to providing specialty chocolate to particular states withinholds four trademarks for the US. The Company is currently in the process of negotiating productionbrands, “The Edibles Cult”, “Purely Irresistible”, “Mystere” and packaging contracts with third party providers in anticipation of operating activities to commence in 2018.“Southeast Edibles”.
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 had 60 days from the date of the Term Sheet to perform due diligence activities and complete the closing. Upon the completion of due diligence, Company Management and the Board of Directors determined that it was in the best interest of the shareholders to forego the TBS transaction.
On June 23, 2017, the Company entered into a Consulting Agreement (the “Agreement”), with Robert Kanuth. Pursuant to the Agreement, Robert Kanuth will, upon approval by a majority of the current board of directors of the Company, begin overseeing all capital raising efforts for the Company.
On October 25, 2017, the Company entered intoalso has a contract with TIER Merchant AdvanceAdvances LLC (“TIER”) to participate in the purchase of future receivables from qualified merchants for the purpose of generating near-term and long-term revenue for the Company.
On October 25, 2017, Mark J. Keeley was appointed to be a director of the Company by the Board of Directors of the Company.
On October 25, 2017, the Board of Directors of the Company elected to designate the 5,000,000 preferred shares authorized into two series. Series A Preferred Shares was designated with one share. The remaining 4,999,999 shares were designated as Series B Preferred Shares. The majority shareholder of the Company approved the actions on October 22, 2017. The Board of Directors further resolved to issue the Series A share to Rosenweiss Capital LLC, a related party, for fifty percent (50%) of the voting rights of all outstanding classes of capital stock of the Company at all times and shall offer the Series B as they determine fit. The Board of Directors further resolved that the Board of Directors of the Company file a Certificate of Designation, setting forth such rights, and further resolved that any and all actions heretofore reasonably taken by or on behalf of the Company in the conduct of its business prior to the date hereof are approved, ratified and confirmed in all respects as being the acts and deeds of the Company, including any and all actions heretofore made for or on behalf or in the name of the Company by any of the Company’s officer and directors. The designations, powers, preferences and rights of the shares of Series A Convertible Preferred Stock of the Company Series B Convertible Stock, which such resolution is as follows:
Ranking. The Preferred Stock shall rank, as to payment of dividends, rights to distribution of assets upon liquidation, dissolution rights and/or winding up rights of the Company and such other items as may arise from time to time: (i) senior to the shares of (a) common stock, par value $0.001 per share, of the Company (the “Common Stock”), and (c) any other class or series of capital stock issued by the Company which by its terms does not expressly rank senior to or on a parity with the Preferred Stock (collectively, with the Common Stock and the Series A Stock, the “Junior Stock”), and (ii) pari passu between the Series A Stock and the Series B Stock
Dividend Rights; Distributions.
Voting Rights.Holders of the Series A Stock shall have voting rights equal to fifty percent (50%) of the voting rights of all outstanding classes of capital stock of the Company at all times. Holders of the Series B Stock shall have voting rights equal to equal to five (5) votes per each share of the Series B Stock.
Stated Value. Upon liquidation, dissolution and/or winding up of the Company (and/or any other reason that the stated value of the Preferred Stock is required and/or deemed advisable by the Board to be determined), shares of Preferred Stock then outstanding shall have a stated value per share as determined by the Board in good faith.
Conversion Rights. Holders of Preferred Stock shall have the following rights with respect to conversion of shares of Preferred Stock into shares of Common Stock: a conversion rate of five (5) shares of Common Stock.
On November 3, 2017 the Company entered into a consulting agreement with Oded Brenner which is a performance-based agreement that requires Mr. Brenner to perform specific packaging, marketing and product development duties in connection with the Company’s launch of its Holy Cacao subsidiary.TIER merchants.
The Company previously was quoted on the OTCQB under “LRGP.” However, the CompanyCompany’s common stock is now quoted on the OTCQB under “FIFG.”
OurThe Company’s principal executive offices are located at 720 Monroe Street,First Foods Group, Inc. c/o Incorp Services, Inc., 3773 Howard Hughes Parkway, Suite E210, Hoboken, NJ 07030.500S, Las Vegas, NV 89169-6014. Our telephone number is (424) 543-4066(201) 471-0988.
As of September 30, 2022, our cash balance was $7,378, which includes restricted cash of $5,900, and our fax number is (424) 543-5072.current liabilities were $4,746,099.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these unaudited condensed consolidated 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.
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Results of Operations for the Three Months Ended September 30, 20172022 compared to the Three Months endedEnded September 30, 20162021
We had $0 in revenues inTotal net sales decreased 76% or $45,864 during the three months ended September 30, 20172022 compared to 2021, primarily due to the Company dedicating resources to the chocolate producing division of the Company and $10,000less to the wholesaling division and merchant cash advance division.
Products Performance
The following table shows net sales by category for the three months ended September 30, 2016. Our revenue change is2022 and 2021:
|
| 2022 |
|
| Change |
|
| 2021 |
| |||
Net sales by category: |
|
|
|
|
|
|
|
|
| |||
Chocolate products |
| $ | 13,374 |
|
|
| -76 | % |
| $ | 55,678 |
|
Merchant cash advances |
|
| 811 |
|
|
| -81 | % |
|
| 4,371 |
|
Total net sales |
| $ | 14,185 |
|
|
| -76 | % |
| $ | 60,049 |
|
Chocolate products
Chocolate products sales decreased during 2022 compared to 2021 due primarily to increased supply chain costs and a resultdecrease in marketing and advertising.
Merchant cash advances
Merchant cash advances sales decreased during 2022 compared to 2021 due to the Company focusing upon and dedicating resources to the chocolate producing division of the changing fromCompany.
Cost of Product Sales
Products cost of sales for the salethree months ended September 30, 2022 and 2021 were as follows:
|
| September 30, 2022 |
|
| September 30, 2021 |
| ||
Cost of Product Sales: |
|
|
|
|
|
| ||
Chocolate products |
| $ | 6,790 |
|
| $ | 35,446 |
|
Cost of dramaticproduct sales
The decrease in cost of product sales in September 30, 2022 as compared to September 30, 2021 was due to a decrease in product sales.
General and literary products to providing franchise marketing and consulting services to new and emerging food service franchise companies. We expect to begin generating revenue from our Holy Cacao subsidiary and our funding division. Our operatingadministrative expenses for the three months ended September 30, 2017 were $622,630, which primarily consisted of consulting of $52,853, advertising and promotion of $146,925, compensation expenses of $326,517, legal and professional fees of $2,500, and deferred salaries of $67,794. For the three months ended September 30, 2016, our operating expenses were $18,793 which consisted of general and administrative expenses. Our increase in operating expenses is primarily due2022 was $268,910 compared to changing the focus of the Company from theater related activities to retail food and restaurant activities. Our net loss$466,717 for the three months ended September 30, 20172021. The decrease in general and administrative expenses was $622,630. Our net lossprimarily due to decreased costs associated with compensation expenses, and consulting and accounting fees.
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Provision for merchant cash advances for the three months ended September 30, 20162022 was $8,793.$(3,493) compared to $(7,916) for the three months ended September 30, 2021. The increase in net loss is primarilyprovision for merchant cash advances was due to less recoveries of reserved MCAs in the adjustment in our business plan.current period that the prior period.
Results of Operations for the Nine Months Ended September 30, 20172022 compared to the Nine Months endedEnded September 30, 20162021
We had $0 in revenues inTotal net sales decreased 73% or $257,032 during the nine months ended September 30, 20172022 compared to the nine months ended September 30, 2021, primarily due to the Company dedicating resources to the chocolate producing division of the Company and $38,000less to the wholesaling division and merchant cash advance division.
Products Performance
The following table shows net sales by category for the nine months ended September 30, 2016. Our revenue change is2022 and 2021:
|
| 2022 |
|
| Change |
|
| 2021 |
| |||
Net sales by category: |
|
|
|
|
|
|
|
|
| |||
Chocolate products |
| $ | 91,708 |
|
|
| -71 | % |
| $ | 312,142 |
|
Merchant cash advances |
|
| 1,188 |
|
|
| -97 | % |
|
| 37,786 |
|
Total net sales |
| $ | 92,896 |
|
|
| -73 | % |
| $ | 349,928 |
|
Chocolate products
Chocolate products sales decreased during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 due primarily to increased supply chain costs and a resultdecrease in marketing and advertising.
Merchant cash advances
Merchant cash advances sales decreased during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 due to the Company focusing upon and dedicating resources to the chocolate producing division of the changing fromCompany.
Cost of Product Sales
Products cost of sales for the salenine months ended September 30, 2022 and 2021 were as follows:
|
| September 30, 2022 |
|
| September 30, 2021 |
| ||
Cost of Product Sales: |
|
|
|
|
|
| ||
Chocolate products |
| $ | 47,264 |
|
| $ | 201,530 |
|
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Cost of dramaticproduct sales
The decrease in cost of product sales in September 30, 2022 as compared to September 30, 2021 was due to a decrease in product sales.
Legal fees for the nine months ended September 30, 2022 was $31,596 compared to $5,799 for the nine months ended September 30, 2021. This increase in legal fees was due to increased legal rates and literary products to providing franchise marketinglegal consultations for potential deals that were passed on.
General and consulting services to new and emerging food service franchise companies. We expect to begin generating revenue from our Holy Cacao subsidiary and our funding division. Our operatingadministrative expenses for the nine months ended September 30, 2017 were $4,682,538, which primarily consisted of the fair market value of cash and the fair market value of shares issued2022 was $1,008,887 compared to the Interim CEO and Chairman of the Board under a consulting contract of $1,500,000, consulting of $745,853, advertising and promotion of $681,500, 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 $132,051, compensation expense of $999,642, and deferred salaries of $181,763. For the nine months ended September 30, 2016, our operating expenses were $71,578 which consisted of general and administrative expenses. Our increase in operating expenses are primarily due to changing the focus of the Company from theater related activities to retail food and restaurant activities. Our net loss$1,400,527 for the nine months ended September 30, 20172021. The decrease in general and administrative expenses was $4,682,538. Our net lossprimarily due to decreased costs associated with compensation expenses, and consulting and accounting fees.
Provision for merchant cash advances for the nine months ended September 30, 20162022 was $33,578.$33,306 compared to $(152,254) for the nine months ended September 30, 2021. The increase in net loss is primarilyprovision for merchant cash advances was due to the adjustment in our business plan.Company updating its reserves to accurately reflect its current merchant cash advances positions.
Impairment of assets expense for the nine months ended September 30, 2022 was $92,736. The company has not realized cash flows sufficient to overcome an asset impairment and is, therefore, estimating an impairment of 50% of its asset carrying value. There was no impairment expense for the nine months ended September 30, 2021.
Liquidity and Capital Resources
The Company’sfollowing table presents our cash position was $271 at September 30, 2017, compared to $17,355 at December 31, 2016. Asflows:
|
| Nine Months Ended |
| |||||
|
| September 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Net cash used in operating activities |
| $ | (329,899 | ) |
| $ | (209,006 | ) |
Net cash used in investing activities |
| $ | - |
|
| $ | (877 | ) |
Net cash provided by financing activities |
| $ | 325,750 |
|
| $ | 222,842 |
|
Operating Activities
Our primary uses of September 30, 2017, the Company had current assets of $23,315cash from our operating activities include payments for compensation and current liabilities of $631,925 compared to $17,355related costs and $17,355, respectively, as of December 31, 2016, as we had just begun our revised operations. This resulted in a working capital (deficit) of ($608,610) at September 30, 2017 and $0 at December 31, 2016. The change is based on our change in business direction beginning in this year.other general corporate expenditures.
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Net cash used in operating activities amountedincreased from the nine months ended September 30, 2021 to $184,834the nine months ended September 30, 2022 primarily due to the net effect of a decrease in cash received from a decrease in revenues and $37,749cash paid for cost of revenues and operating expenses, changes in operating assets and liabilities, decrease in stock compensation, increase in accumulative catch up adjustment and impairment of assets, and change in merchant allowance.
Investing Activities
There was no investing activities for the nine months ended September 30, 2017 and 2016, respectively. This is primarily due to a net loss of $4,682,538 and $33,578, respectively, offset by non-cash items included in the net loss of $4,073,928 in stock based compensation during the nine months ended September 30, 2017.2022.
Net cash used in investingFinancing Activities
Cash provided by financing activities amounted to $0 for the nine months ended September 30, 2017 and 2016.consists of proceeds from issuance of debt.
Net cash provided by financing activities amounted to $167,350 and $0 forincreased from the nine months ended September 30, 20172021 to the nine months ended September 30, 2022 primarily due to a decrease in repayment of loans.
Going Concern
The Company’s unaudited condensed consolidated 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 2016, respectively.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.
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In order to continue as a going concern, the Company will need, among other things, additional capital resources. As of September 30, 2022, the Company had approximately $1,361,000 in third-party short-term debt and approximately $6,500 in associated debt discount and approximately $786,000 in related-party short-term debt and $0 in associated debt discount that is due within the next twelve months. Management’s plan is to increase revenue, obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its operating expenses and seeking equity and/or debt financing. However, neither any members of management nor any significant shareholders are currently committed to invest funds with us and; therefore, we cannot provide any assurances that the Company will be successful in accomplishing any of its plans.
The Company does not have sufficient capitalcash flow for the next twelve months from the issuance of these unaudited condensed consolidated financial statements. The ability of the Company to meetcontinue as a going concern is dependent upon its currentability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Concentration Risks
As of September 30, 2022, the Company's concentrations for receivables from merchant cash needs, which includeadvances as well as income from merchant cash advances were not significant to warrant concentration risk.
As of December 31, 2021, the costsCompany’s receivables from merchant cash advances included $29,290 from one merchant, representing 78% of compliance with the continuingCompany’s merchant cash advances. The Company earned $14,949 and $6,463 of MCA income from two merchants, representing 41% and 18%, respectively, of the Company’s MCA income for the nine months ended September 30, 2021.
For the three months ended September 30, 2022, the Company had no purchase concentration. For the three months ended September 30, 2021, the Company had purchase concentrations of 81% and 12% from two vendors.
For the nine months ended September 30, 2022, the Company had purchase concentrations of 22%, 17% and 12% from three vendors. For the nine months ended September 30, 2021, the Company had purchase concentrations of 60% and 21% from two vendors.
Off-Balance Sheet Arrangements
No off-balance sheet arrangements exist.
Contractual Obligations
None.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting requirements ofis defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as amended. The Company intends to seek additional capital through its funding division 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 toa process designed by, or under 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.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
JOBS Act
On April 5, 2012, the JOBS Act was enacted. Section 107supervision 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
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 required to be 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. Disclosure controls and 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 ourCompany’s principal executive officer and principal financial officer as appropriate,and effected by our board of directors, management and other personnel, to allowprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and includes those policies and procedures that:
1. | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; |
2. | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and |
3. | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely decisions regarding required disclosure.basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
OurThe Company’s management, has carried out an evaluation, underincluding the supervision and with the participation of our principalchief executive officer and principalchief financial officer, do not expect that its disclosure controls or internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the effectivenesscontrol system are met. In addition, 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. Because of the designinherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and operationinstances of our disclosure controlsfraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), asthat breakdowns can occur because of simple error or mistake.
As of September 30, 2017. Based upon that evaluation, our principal executive officer and principal2022, management has not completed an effective assessment of the Company’s internal controls over financial officerreporting based on the 2013 Committee of Sponsoring Organizations (COSO) framework. Management has concluded that, as of the end ofduring the period covered by this report, our disclosureinternal controls and procedures were ineffective duenot effective to a lackdetect the inappropriate application of sufficient resources to hire a support staff in order to separate duties between different individuals. The Company lacksU.S. GAAP. Management identified the appropriate personnel to handle all the varying recording and reporting tasks on a timely basis. The Company plans to address thesefollowing material weaknesses as resources become available by hiring additional professional staff, as funding becomes available, outsourcing certain aspects of the recording and reporting functions, and separating responsibilities.set forth below in our internal control over financial reporting.
1. | We lack the necessary corporate accounting resources to maintain adequate segregation of duties. |
In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
2. | We did not perform an effective risk assessment or monitor internal controls over financial reporting. |
Changes in Internal Control over Financial Reporting
There were no changes in the Company’sour internal control over financial reporting that occurred during the last quarter ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’sour internal control over financial reporting.
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PART II OTHER INFORMATION
PART II OTHER INFORMATIONItem 1. Legal Proceedings
From time to time the Company may become a party to legal actions or proceedings in the ordinary course of its business. As of September 30, 2017, there2022, we were no such actionsnot a party to any legal proceedings that could have a material adverse effect on the Company’s business, financial condition or proceedings, either individually or in the aggregate, that, if decided adverselyoperating results. Further, to the Company’s interests,knowledge, no such proceedings have been threatened against the Company believes would be material to its business.Company.
Item 1A.1A. Risk Factors.Factors
Not requiredWe are not obligated to disclose our risk factors in this report; however, information regarding our risk factors appears in various places in this Quarterly Report and in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for emerging growth companies.the year ended December 31, 2021. Except as described below, there have been no material changes from the risk factors previously disclosed in such Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.The Company issued 60,000 shares of the Company’s common stock during the nine months ended September 30, 2022. All of these shares were exempt pursuant to Section 4(1) as they were issued privately without any advertising or finders/brokers fees paid to third parties.
Item 3.3. Defaults Upon Senior Securities
.
There have been no defaults upon senior securities.
Item 4. Mine Safety Disclosures
Not applicable.
Not Applicable
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(a) Exhibits
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SIGNATURESSIGNATURES
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.
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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.
By: | /s/ Harold Kestenbaum |
| Dated: November |
| Harold Kestenbaum, | ||
| Chairman of the Board and | ||
| Interim Chief Executive Officer | ||
By: | /s/ Mark J. Keeley |
| Dated: November |
| Mark J. Keeley, | ||
| Chief Financial Officer |
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Dated: November 13, 2017
Abraham Rosenblum
Secretary and Director
By:
/s/ Hershel Weiss
Dated: November 13, 2017
Hershel Weiss
Director