Item 1. Financial Statements
First Foods Group, Inc.
Condensed Balance Sheets
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March 31,
2017
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December 31,
2016
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(Unaudited)
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(Note 1)
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ASSETS
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Cash
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$
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14,162
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$
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17,355
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Prepaid Expenses
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37,538
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-
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TOTAL ASSETS
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$
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51,700
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$
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17,355
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LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
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LIABILITIES
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Accounts Payable and Accrued Liabilities
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$
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101,557
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$
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-
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Due to Shareholder
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69,500
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17,355
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Deferred Compensation
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45,095
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-
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TOTAL LIABILITIES
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216,152
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17,355
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STOCKHOLDERS' EQUITY (DEFICIT)
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Preferred stock: $0.001 par value, 5,000,000 shares authorized, no shares issued and outstanding
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-
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-
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Common stock: $0.001 par value, 70,000,000 shares authorized, 15,650,000 and 14,150,000 shares issued and outstanding, respectively
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15,650
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14,150
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Additional Paid-in-Capital
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1,822,699
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42,949
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Accumulated Deficit
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(2,002,801
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)
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(57,099
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)
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Total Stockholders' Equity (Deficit)
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(164,452
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)
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-
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
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$
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51,700
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$
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17,355
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The accompanying notes are an integral part of these unaudited condensed financial statements.
First Foods Group, Inc.
Condensed Statements of Operations
(Unaudited)
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For the three months ended
March 31,
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2017
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2016
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REVENUES
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$
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-
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$
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11,500
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OPERATING EXPENSES
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Professional Fees
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43,297
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-
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General and Administrative
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1,902,405
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24,269
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Total Operating Expenses
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1,945,702
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24,269
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LOSS FROM OPERATIONS
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(1,945,702
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)
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(12,769
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)
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NET LOSS
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$
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(1,945,702
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)
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$
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(12,769
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)
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BASIC AND DILUTED LOSS PER COMMON SHARE
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(0.13
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)
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-
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WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
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14,583,333
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12,325,000
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The accompanying notes are an integral part of these unaudited condensed financial statements.
First Foods Group, Inc.
Condensed Statements of Cash Flows
(Unaudited)
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For the three months ended
March 31,
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2017
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2016
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net Loss
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(1,945,702
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)
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$
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(12,769
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)
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Adjustments to reconcile net loss to net cash used in operating activities:
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Common stock issued to officers for services rendered
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1,781,250
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-
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Changes in operating assets and liabilities:
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Prepaid expenses
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(2,730
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)
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-
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Accounts payable and accrued liabilities
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66,749
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(671
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)
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Deferred compensation
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45,095
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-
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Net cash used in operating activities
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(55,338
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)
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(13,440
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)
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CASH FLOWS FROM FINANCING ACTIVITIES:
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Proceeds from shareholder
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52,145
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-
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Net cash provided by financing activities
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52,145
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-
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NET DECREASE IN CASH
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(3,193
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)
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(13,440
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)
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CASH AT BEGINNING OF PERIOD
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17,355
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61,573
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CASH AT END OF PERIOD
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14,162
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$
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48,133
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The accompanying notes are an integral part of these unaudited condensed financial statements.
First Foods Group, Inc.
Notes to Condensed Financial Statements
NOTE 1 – BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
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 now focused on providing management services and funding options for new foodservice brands and menu concepts. First Foods Group, Inc. is also growing its own new concepts, both through proprietary development and through mergers, acquisitions, and licensing arrangements. The Company has assembled a team of distinguished food service professionals with experience and success at the highest levels of the industry.
In the opinion of management, the accompanying condensed financial statements presented in this Quarterly Report on Form 10-Q reflect all normal recurring adjustments necessary to present fairly the financial position and results of operations and cash flows for the interim periods presented herein, but are not necessarily indicative of the results of operations for the year ending December 31, 2017. These condensed financial statements should be read in conjunction with the Company’s audited financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2016, and with the disclosures and risk factors presented therein. The December 31, 2016 condensed balance sheet has been derived from the audited financial statements.
Going Concern
The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying condensed financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Basis of Presentation
The Company's condensed financial statements are presented in accordance with generally accepted accounting principles in the United States of America.
NOTE 1 – BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
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:
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1.
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Persuasive evidence of a sale or license agreement exists with a customer.
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2.
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The script is complete and has been delivered or is immediately available to be delivered in accordance with the terms of the agreement.
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3.
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The license period for the arrangement has started and the customer can begin exploitation, exhibition or sale.
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4.
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The arrangement fee is fixed or determinable
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5.
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Collection of the arrangement fee is reasonably assured.
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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 March 31, 2017, the Company recorded a full valuation allowance against deferred tax assets.
Per Share Data
In accordance with "ASC-260 - Earnings per Share", the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.
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, 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 the effective date for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). Early adoption is permitted to the original effective date for annual reporting periods beginning after December 15, 2016 (including interim reporting periods within those periods). The amendments may be applied retrospectively to each prior period (full retrospective) or retrospectively with the cumulative effect recognized as of the date of initial application (modified retrospective). The Company will adopt ASU 2014-09 in the first quarter of fiscal 2018 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 financial statements.
NOTE 2 – RELATED PARTY
Employment Agreements
On February 27, 2017, 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 Company for his appointment as Chairman of the Board, (ii) $10,000 per month for his role as Interim CEO, which shall be deferred until the Company raises at least $1,500,000 in financing, and (iii) $10,000 for every new franchising client he obtains, and (iv) $2,000 per month for legal services. In conjunction with this individual’s appointment, the former Chief Executive Officer resigned, but will remain as the Secretary and a director of the Company. The shares were valued at $1,500,000, representing a market value of $2.00 per share based on trading.
On March 1, 2017, 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 trading, and recognized over a 12-month service period as a result of a clawback provision.
Due to Shareholder
Throughout the quarter ended March 31, 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 in the amount of $69,500.
NOTE 3 – STOCKHOLDERS' EQUITY
On December 30, 2016, as a result of a private transaction, the control block of voting stock of the Company, represented by 10,500,000 shares of common stock (the “Shares”), was transferred from the founder of the Company to Rosenweiss Capital LLC, and a change of control of the Company occurred. The consideration paid for the Shares, which represent 74% of the issued and outstanding share capital of the Company on a fully-diluted basis, was $200,000.
On February 27, 2017, a consulting contract containing an award of 750,000 shares of common stock (see Note 2) was executed for the Interim CEO to serve as a Director and Chairman of the Board. The shares were valued at $1,500,000, representing a market value of $2.00 per share. The shares were fully vested at the date of grant and recorded in general and administrative expenses on the condensed statement of operations.
On March 1, 2017, an employment agreement containing an award of 750,000 shares of common stock was executed for the CFO (see Note 2). The shares were valued at $1,687,500, representing a fair market value of $2.25 per share. The shares are subject to a clawback provision during the CFO’s first year of service from February 1, 2017 through January 31, 2017. As such, the value of the shares is being amortized over 12 months. During the period ended March 31, 2017, the Company recorded $281,250 of compensation expense which is included in general and administrative expenses on the condensed statement of operations.
NOTE 4 – SUBSEQUENT EVENTS
On April 21, 2017, the Company entered into a binding term sheet (the “Term Sheet”) with Oded Brenner (“Brenner”). Pursuant to the Term Sheet, the Company and Brenner will form an entity that will own the intellectual property rights to "Blue Stripes-Cacao Shop" (the "IP Entity"), for the United States. Each party will own 50% of the IP Entity. Additionally, the Company and Brenner will form a new entity (the "Operating Entity"), of which, the Company shall own 51% and Brenner 49%, which will be granted the unlimited and exclusive license, at no cost, from the IP Entity, to open company-owned and franchise locations under the "Blue Stripe-Cacao Shop" marks and to sell products under the "Blue Stripe" marks (the "Brand"), both at retail and via the Internet.
On April 28, 2017, 222,857 shares of common stock were issued to Integrity Media, Inc. (IMI) for advertising, promotion, and due diligence efforts and expenses. The shares were recorded by the Company at $501,428, representing a fair market value of $2.25 per share which was based on the trading price. This amount will be recognized over the service period of February 21, 2017 to February 21, 2018. During the period ended March 31, 2017, the Company recorded advertising expense of $41,786 which is included in general and administrative expenses on the condensed statements of operations.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statements
This Form 10-Q may contain "forward-looking statements," as that term is used in federal securities laws, about First Foods Group, Inc.'s financial condition, results of operations and business.
These statements include, among others:
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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
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statements of First Foods's expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts. These statements may be made expressly in this Form 10-Q. You can find many of these statements by looking for words such as "believes," "expects," "anticipates," "estimates," "opines," or similar expressions used in this Form 10-Q. These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause First Foods's actual results to be materially different from any future results expressed or implied by First Foods in those statements. The most important facts that could prevent First Foods from achieving its stated goals include, but are not limited to, the following:
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(a)
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volatility or decline of First Foods's stock price;
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(b)
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potential fluctuation of quarterly results;
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(c)
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failure of First Foods to earn revenues or profits;
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(d)
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inadequate capital to continue or expand its business, and inability to raise additional capital or financing to implement its business plans;
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(e)
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decline in demand for First Foods's products and services;
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(f)
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rapid adverse changes in markets;
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(g)
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litigation with or legal claims and allegations by outside parties against First Foods, including but not limited to challenges to First Foods's intellectual property rights; and
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(h)
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insufficient revenues to cover operating costs;
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There is no assurance that First Foods will be profitable, First Foods may not be able to successfully develop, manage or market its products and services, First Foods may not be able to attract or retain qualified executives and personnel, First Foods may not be able to obtain customers for its products or services, additional dilution in outstanding stock ownership may be incurred due to the issuance of more shares, warrants and stock options, or the exercise of outstanding warrants and stock options, and other risks inherent in First Foods' businesses.
Because the statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. First Foods cautions you not to place undue reliance on the statements, which speak only as of the date of this Form 10-Q. The cautionary statements contained or referred to in this section should be considered in connection with any subsequent written or oral forward-looking statements that 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.
Current Overview
First Foods is currently an “emerging growth company” under the JOBS Act. A company loses its “emerging growth company” status on (i) the last day of the fiscal year during which it had total annual gross revenues of $1,000,000,000 or more; (ii) the last day of the fiscal year following the fifth anniversary of the date of its first sale of common equity securities pursuant to an effective registration statement under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); (iii) the date on which it has, during the previous 3-year period, issued more than $1,000,000,000 in non-convertible debt; or (iv) the date on which it is deemed to be a ‘large accelerated filer’, as defined in Section 240.12b– 2 of title 17, Code of Federal Regulations, or any successor thereto. As an “emerging growth 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’s internal control for financial reporting. Furthermore, Section 103 of the JOBS Act provides that as an “emerging growth 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 growth company.” However, an “emerging growth 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.”) was incorporated under the laws of the State of Nevada on June 1, 2015. It was formed for the purpose of providing products and services within the film and theater production industry. The founder, Mr. Wade Gardner, was appointed CEO, President, Secretary, CFO, Treasurer and Director of the Company. The Board voted to seek capital to carry out our business plan. Initial funding of $20,100 was received through the sale of common stock to Mr. Gardner who purchased 10,500,000 shares of the Company’s Common Stock on June 5, 2015.
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 amended its Articles of Incorporation with the State of Nevada in order to change its name from “Litera Group, Inc.” to “First Foods Group, Inc.” (the “Amendment”). The board of directors of the Company approved the Amendment on February 15, 2017. The shareholders of the Company approved the Amendment by written consent on February 15, 2017.
On February 27, 2017, Harold Kestenbaum accepted the appointment to be Chairman of the Board of Directors of First Foods Group, Inc. and Interim Chief Executive Officer. On February 27, 2017, the Board of Directors of the Company resolved to appoint Mr. Kestenbaum as the Chairman of the Board of Directors and as the Interim Chief Executive Officer. In conjunction with Mr. Kestenbaum’s appointment, Abraham Rosenblum agreed to resign as Chief Executive Officer, but will remain on the Board of Directors of the Company.
On March 1, 2017, Mark J. Keeley accepted the appointment to be the Chief Financial Officer of the Company. On March 1, 2017, the Board of Directors of the Company resolved to appoint Mr. Keeley as the Chief Financial Officer.
The Company previously was quoted on the OTCQB under “LRGP.” However, the Company is now quoted on the OTCQB under “FIFG.”
Our principal executive offices are located at 720 Monroe Street, Suite E210, Hoboken, NJ 07030. Our telephone number is (424) 543-4066 and our fax number is (424) 543-5072.
First Foods was an emerging growth corporation that was dedicated to the creation and commercialization of literary and dramatic products and services with the aim of achieving profitability and sustaining growth of our business. First Foods is now focused on providing management services and funding options for new foodservice brands and menu concepts. First Foods is also growing its own new concepts, both through proprietary development and through mergers, acquisitions, and licensing arrangements. The Company has assembled a team of distinguished food service professionals with experience and success at the highest levels of the industry.
As an emerging company, we continually analyze our business plan and operations in the light of market conditions and developments. We intend 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.
OUR PRINCIPAL PRODUCTS AND SERVICES
We are primarily a service based company, providing franchise marketing and consulting services to new and emerging food service franchise companies. We will work with both existing restaurant franchise companies and those restaurant companies that are looking to franchise their operations. We will also be targeting potential acquisitions of restaurant companies that are either franchising currently or who wish to launch a franchise operation.
TARGET MARKET AND OUR NICHE WITHIN
Our target market will be existing and emerging restaurant companies, whose goal it is to expand via the franchise model. Based upon the experience of our board, we feel that this focus will serve us well.
COMPETITION, OUR COMPETITIVE STRATEGY AND METHODS OF COMPETITION
There are other venture capital companies who target franchise companies, but not very many just concentrate on the restaurant industry, as we will be doing.
MARKETING, MARKETING OBJECTIVES AND STRATEGIES
The Company markets its services directly to existing and emerging restaurant companies, focusing specifically on brand development, franchising, and capital formation.
Our Marketing Objectives are as follows:
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Establishing and promoting our presence in our selected targeted market;
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Creating and maintaining a target list of existing and emerging restaurant companies; and
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Building a network of food service industry professional relationships and referrals.
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To promote and market our services, we may involve the following strategies:
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Establishing an online presence by designing a corporate website reflecting our scope of services offered. We will also engage in a search engine optimization campaign to improve visibility of our website and assist us with awareness for our products and services. Optimizing a website may involve editing its content and HTML and associated coding to both increase its relevance to specific keywords and to remove barriers to the indexing activities of search engines.
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Approaching our industry target market by email. The most basic method of contacting is a carefully thought out query letter, sent via email, which consists of a one-paragraph synopsis of a project, a bio, a logline, in standard business format. Focusing specifically on our selected target market community who have needs and interests that our Company can address.
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Engaging a PR campaign to obtain publicity and increase visibility for our business.
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Participating in industry conferences and trade shows.
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Currently, the Company’s officers and directors promote our services through many channels, including networking at local industry events and Internet sources. We anticipate that, as the Company grows over the next twelve months, pools of expertise will be acquired by recruiting within the food service industry and by using technical and marketing consultants, which will allow qualified individuals to join our management team and Board of Directors.
RESEARCH AND DEVELOPMENT
The Company has not expended funds for research and development costs since inception. First Foods has not undertaken any research and development activities regarding our target market and marketability of our products.
EMPLOYEES
The Company’s current employees consist of Abraham Rosenblum as the Secretary and Mark J. Keeley as the Chief Financial Officer, as well as Harold Kestenbaum as a consultant serving in the role of interim Chief Executive Officer. These individuals, along with director Hershel Weiss, are responsible for operations, product development, sales and marketing, fund raising, implementation of our general strategy and execution of our business plan.
Our future business and operating results depend significantly on the continued contributions and active participation of the aforementioned individuals. The loss of these key contributors, or their failure to perform, could materially and adversely affect our Company's operations. While we may obtain Key Man insurance, such insurance may not be sufficient to cover the loss incurred in the event these individuals are lost.
Currently, our Chief Executive Officer and our Chief Financial Officer receive deferred compensation for their services and our Secretary and directors receive no compensation for their services during the emerging growth stage of our business operations. Our officers and directors are reimbursed for any out-of-pocket expenses they may incur on our behalf. We anticipate adding two (2) employees over the next twelve (12) months, one of which will be a Chief Marketing Officer and one of which will be a Chief Operations Officer. We do not currently have any benefits, such as health or life insurance, available to our employees.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We monitor our estimates on an on-going basis for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. We base our estimates on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates if past experience or other assumptions do not turn out to be substantially accurate.
Certain of our accounting policies are particularly important to the portrayal and understanding of our financial position and results of operations and require us to apply significant judgment in their application. As a result, these policies are subject to an inherent degree of uncertainty. In applying these policies, we use our judgment in making certain assumption and estimates. Our critical accounting policies are outlined in Note 1 in the Notes to Condensed Financial Statements
Results of Operations for the Three Months Ended March 31, 2017 compared to the Three Months ended March 31, 2016
We had $0 in revenues in the three months ended March 31, 2017 and $11,500 for the three months ended March 31, 2016. Our revenue change is a result of the changing from the sale of dramatic and literary products to providing franchise marketing and consulting services to new and emerging food service franchise companies. We anticipate an increase in sales revenue as we continue to develop our new business plan. Our operating expenses for the three months ended March 31, 2017 were $1,945,702, which primarily consisted of the fair market value of cash and the fair market value of shares issued to the Interim CEO and Chairman of the Board under a consulting contract of $1,520,000, compensation expenses of $281,250, professional fees of $43,297, and deferred salaries of $45,195. For the three months ended March 31, 2016, our operating expenses were $24,269 which consisted of general and administrative expenses. Our 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 for the three months ended March 31, 2017 was $1,945,702. Our net loss for the three months ended March 31, 2016 was $12,769. The increase in net loss is primarily due to the adjustment in our business plan.
Liquidity and Capital Resources
The Company's cash position was $14,162 at March 31, 2017, compared to $17,355 at December 31, 2016. As of March 31, 2017, the Company had current assets of $51,700 and current liabilities of $216,152 compared to $17,355 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 ($164,452) at March 31, 2017 and $0 at December 31, 2016. The change is based on our change in business direction beginning in this quarter.
Net cash used in operating activities amounted to $55,338 and $13,440 for the three months ended March 31, 2017 and 2016, respectively. This is primarily due to a net loss of $1,945,702 and $12,769, respectively.
Net cash used in investing activities amounted to $0 for the three months ended March 31, 2017 and 2016.
Net cash provided by financing activities amounted to $52,145 and $0 for the three months ended March 31, 2017 and 2016, respectively.
The Company does not have sufficient capital to meet its current cash needs, which include the costs of compliance with the continuing reporting requirements of the Securities Exchange Act of 1934, as amended. The Company intends to seek additional capital through the management services and funding options for new foodservice brands and menu concepts. First Foods Group, Inc. is also growing its own new concepts, both through proprietary development and through mergers, acquisitions, and licensing arrangements. Financing options may be available to the Company either via a private placement or through the public sale of stock. There is no assurance, however, that the available funds will be available or adequate. Its need for additional financing is likely to persist.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
JOBS Act
On April 5, 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.
We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we intend to rely on certain of these exemptions, including without limitation, (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1 billion or more; (ii) December 31, 2019; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.