UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

☒   QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For Quarterly Period Ended March 31, 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)

 

Nevada

 

47-4145514

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

First Foods Group, Inc. c/o Incorp Services, Inc.,

3773 Howard Hughes Parkway, Suite 500S,

Las 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 ☒

 

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.

 

Large accelerated filer

Accelerated filer

Non-accelerated Filer

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 ☒

 

As of May 20, 2022, the number of shares outstanding of the registrant’s class of common stock was 27,058,338, par value of $0.001 per share.

 

 

 

 

TABLE OF CONTENTS

 

 

Pages

 

PART I. FINANCIAL INFORMATION

 

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

 

3

 

Condensed Consolidated Balance Sheets at March 31, 2022 and December 31, 2021

 

3

 

Condensed Consolidated Statements of Operations for the Three Months ended March 31, 2022 and 2021

 

4

 

Condensed Consolidated Statements of Changes in Deficit for the Three Months ended March 31, 2022 and 2021

 

5

 

Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2022 and 2021

 

6

 

Notes to Condensed Consolidated Financial Statements

 

7

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

19

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

22

 

Item 4.

Controls and Procedures

 

23

 

PART II OTHER INFORMATION

 

Item 1.

Legal Proceedings

 

24

 

Item 1A.

Risk Factors

 

24

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

24

 

Item 3.

Defaults Upon Senior Securities

 

24

 

Item 4.

Mine Safety Disclosures

 

24

 

Item 5.

Other Information

 

24

 

Item 6.

Exhibits

 

25

 

SIGNATURES

 

26

 

2

Table of Contents

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

First Foods Group, Inc. and Subsidiary

Condensed Consolidated Balance Sheets

 

 

 

March 31,

2022

 

 

December 31,

2021

 

 

 

(Unaudited)

 

 

(audited)

 

ASSETS

 

CURRENT ASSETS

 

 

 

 

 

 

Cash

 

$ 5,988

 

 

$ 5,627

 

Restricted cash

 

 

5,900

 

 

 

5,900

 

Inventory

 

 

58,936

 

 

 

56,936

 

Merchant cash advances, net of allowance $132,663 and $131,703, respectively

 

 

36,900

 

 

 

37,541

 

Prepaid expenses and other current assets

 

 

90,174

 

 

 

89,888

 

TOTAL CURRENT ASSETS

 

 

197,898

 

 

 

195,892

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

128,594

 

 

 

139,103

 

Operating lease right-of-use assets

 

 

160,363

 

 

 

177,062

 

TOTAL ASSETS

 

$ 486,855

 

 

$ 512,057

 

LIABILITIES AND DEFICIT

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$ 1,238,123

 

 

$ 1,074,216

 

Accounts payable and accrued liabilities - related parties

 

 

794,556

 

 

 

718,114

 

Put liability

 

 

29,421

 

 

 

29,421

 

Deferred revenue

 

 

82,089

 

 

 

81,953

 

Loans, net of unamortized debt discount

 

 

1,325,244

 

 

 

1,288,586

 

Related party loans, net of unamortized debt discount

 

 

574,021

 

 

 

471,009

 

Operating lease liabilities

 

 

71,816

 

 

 

69,078

 

TOTAL CURRENT LIABILITIES

 

 

4,115,270

 

 

 

3,732,377

 

 

 

 

 

 

 

 

 

 

Loans - long term

 

 

150,000

 

 

 

150,000

 

Operating lease liabilities - long term

 

 

91,154

 

 

 

109,975

 

TOTAL LIABILITIES

 

 

4,356,424

 

 

 

3,992,352

 

 

 

 

 

 

 

 

 

 

Commitments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DEFICIT

 

 

 

 

 

 

 

 

FIRST FOODS GROUP, INC. DEFICIT:

 

 

 

 

 

 

 

 

Preferred stock, 20,000,000 shares authorized:

 

 

 

 

 

 

 

 

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

 

 

12,174,631

 

 

 

12,062,341

 

Accumulated deficit

 

 

(15,815,410 )

 

 

(15,335,458 )

Total First Foods Group, Inc. Deficit

 

 

(3,612,706 )

 

 

(3,245,104 )

 

 

 

 

 

 

 

 

 

Noncontrolling interests

 

 

(256,863 )

 

 

(235,191 )

Total deficit

 

 

(3,869,569 )

 

 

(3,480,295 )

TOTAL LIABILITIES AND DEFICIT

 

$ 486,855

 

 

$ 512,057

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

3

Table of Contents

 

First Foods Group, Inc. and Subsidiary

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

For the Three Months Ended

March 31,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

REVENUES

 

 

 

 

 

 

Product sales, net

 

$ 14,457

 

 

$ 16,025

 

Merchant cash advance income, net

 

 

348

 

 

 

26,313

 

Total Revenues

 

 

14,805

 

 

 

42,338

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

Cost of product sales

 

 

2,481

 

 

 

3,741

 

Legal fees

 

 

1,149

 

 

 

999

 

General and administrative

 

 

404,485

 

 

 

487,387

 

Provision for merchant cash advances

 

 

(346 )

 

 

(137,498 )

Total Operating Expenses

 

 

407,769

 

 

 

354,629

 

 

 

 

 

 

 

 

 

 

LOSS FROM OPERATIONS

 

 

(392,964 )

 

 

(312,291 )

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

Interest expense

 

 

(108,660 )

 

 

(185,489 )

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

 

(501,624 )

 

 

(497,780 )

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

NET LOSS

 

 

(501,624 )

 

 

(497,780 )

 

 

 

 

 

 

 

 

 

Non-controlling interest share of loss

 

 

21,672

 

 

 

26,307

 

 

 

 

 

 

 

 

 

 

Net loss attributed to shareholders of First Foods Group, Inc.

 

$ (479,952 )

 

$ (471,473 )

 

 

 

 

 

 

 

 

 

BASIC AND DILUTED LOSS PER COMMON SHARE ATTRIBUTABLE TO FIRST FOODS GROUP, INC. STOCKHOLDERS

 

$ (0.02 )

 

$ (0.02 )

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING ATTRIBUTABLE TO FIRST FOODS GROUP, INC. STOCKHOLDERS - BASIC AND DILUTED

 

 

27,342,986

 

 

 

22,619,887

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 

 

4

Table of Contents

 

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

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 capital

 

 

 deficit

 

 

Inc. deficit

 

 

 interests

 

 

deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 )

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 director 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 )

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

5

Table of Contents

 

First Foods Group, Inc. and Subsidiary

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

For the Three Months Ended

March 31,

 

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net Loss

 

$ (501,624 )

 

$ (497,780 )

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Non-employee stock based compensation

 

 

-

 

 

 

5,000

 

Employee stock based compensation

 

 

71,662

 

 

 

109,235

 

Amortization of debt discount

 

 

62,857

 

 

 

130,051

 

Depreciation and amortization expense

 

 

10,510

 

 

 

12,798

 

Change in merchant allowance

 

 

961

 

 

 

(138,458 )

Merchant cash advance direct write off

 

 

-

 

 

 

960

 

Non-cash lease expense

 

 

16,699

 

 

 

14,873

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Inventory

 

 

(2,000 )

 

 

(2,929 )

Merchant cash advances

 

 

(320 )

 

 

189,396

 

Prepaid expenses and other current assets

 

 

(286 )

 

 

35,197

 

Vendor deposits

 

 

-

 

 

 

(62,430 )

Operating lease liabilities

 

 

(16,083 )

 

 

(14,769 )

Accounts payable and accrued liabilities

 

 

163,907

 

 

 

193,431

 

Accounts payable and accrued liabilities - related party

 

 

76,442

 

 

 

-

 

Deferred revenue

 

 

136

 

 

 

(7,702 )

Net cash used in operating activities

 

 

(117,139 )

 

 

(33,127 )

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from sale of common stock - related party

 

 

-

 

 

 

50,000

 

Proceeds from loans

 

 

30,000

 

 

 

-

 

Repayment of loans

 

 

-

 

 

 

(13,375 )

Proceeds from related party loans

 

 

87,500

 

 

 

62,250

 

Repayments of related party loans

 

 

-

 

 

 

(74,411 )

Net cash provided by financing activities

 

 

117,500

 

 

 

24,464

 

 

 

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH

 

 

361

 

 

 

(8,663 )

CASH AND RESTRICTED CASH AT BEGINNING OF THE PERIOD

 

 

11,527

 

 

 

50,386

 

CASH AND RESTRICTED CASH AT END OF THE PERIOD

 

$ 11,888

 

 

$ 41,723

 

 

 

 

 

 

 

 

 

 

CASH AND RESTRICTED CASH CONSIST OF THE FOLLOWING:

 

 

 

 

 

 

 

 

END OF THE PERIOD

 

 

 

 

 

 

 

 

Cash

 

 

5,988

 

 

 

41,723

 

Restricted Cash

 

 

5,900

 

 

 

-

 

 

 

$ 11,888

 

 

$ 41,723

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

NON-CASH FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Common stock issued with loans

 

$ 12,600

 

 

$ 4,680

 

Common stock issued with related party loans

 

$ -

 

 

$ 28,660

 

Warrants issued with loans

 

$ 28,088

 

 

$ -

 

 

 

 

 

 

 

 

 

 

CASH PAID FOR:

 

 

 

 

 

 

 

 

Interest

 

$ 3,130

 

 

$ 45,191

 

Income taxes

 

$ -

 

 

$ -

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

6

Table of Contents

 

NOTE 1 – BUSINESS SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND LIQUIDITY

 

Nature of Business

 

First Foods Group, Inc. (the “Company” or “First Foods”) is a smaller reporting company focused on developing its specialty chocolate product line through its Holy Cacao subsidiary and participating in merchant cash advances (“MCAs”) through its 1st Foods Funding Division. First Foods continues to pursue new brands and concepts, including the wholesaling of various health-related products.

  

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 Company’s understanding of the 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 involved in producing, packaging, distributing or selling any product that is infused with a still-illegal marijuana-based ingredient THQ, although it intends to revisit the matter as regulations change in jurisdictions in which it operates.

 

The Company is also dedicated to licensing its intellectual property (“IP”), including its name, brand, and packaging, to 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 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”.

 

The Company also has a contract with TIER Merchant Advances LLC (“TIER”) to participate in the purchase of future receivables from qualified TIER merchants for the purpose of generating 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, all adjustments (consisting of normal recurring accruals) considered necessary to present fairly the financial position as of March 31, 2022 and the results of operations and cash flows for the interim periods ended March 31, 2022 and 2021, have been included. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on April 14, 2022. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2022.

 

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. These factors raise substantial doubt regarding the Company’s ability to continue 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 March 31, 2022, the Company had approximately $1,367,000 in third-party short-term debt and approximately $42,000 in associated debt discount and approximately $578,000 in related-party short-term debt and approximately $3,800 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.

 

7

Table of Contents

 

Recent Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not 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.

 

Recently 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 ASU 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 private 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 ASU 2021-04 did not have a material impact on its unaudited condensed consolidated financial statements.

 

NOTE 2 – RELATED PARTY TRANSACTIONS

 

Consulting Agreements

 

On February 27, 2017, Harold Kestenbaum assumed the role of Chairman of the Board of Directors and Interim Chief Executive Officer (“Interim CEO”). Mr. Kestenbaum earned $40,000 per year for his role as Chairman of the Board and no longer takes compensation. As of March 31, 2022, the Company has accrued a total of $40,000 of compensation for his role as Interim CEO under the previous agreement.

 

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Table of Contents

 

As of March 31, 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 March 31, 2022 and December 31, 2021 was $162,068 and $146,303, respectively.

 

Related Party 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

 

 

March 31,

2022

 

 

December 31,

2021

 

 

1

 

 

 

12%*

 

4/17/2022

 

10/31/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

$ 100,000

 

 

$ 100,000

 

During the three months ended March 31, 2022

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

During the three months ended March 31, 2021

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

2

 

 

 

0%*

 

4/24/2022

 

8/31/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

179,813

 

 

 

179,813

 

During the three months ended March 31, 2022

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

During the three months ended March 31, 2021

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

3

 

 

 

12%*

 

4/16/2022

 

8/20/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

150,000

 

 

 

150,000

 

During the three months ended March 31, 2022

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

During the three months ended March 31, 2021

 

 

80,000

 

 

 

16,000

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

4

 

 

 

0%*

 

9/15/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

500

 

 

 

500

 

During the three months ended March 31, 2022

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

During the three months ended March 31, 2021

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

5

 

 

 

0%*

 

5/30/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

147,500

 

 

 

60,000

 

During the three months ended March 31, 2022

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

During the three months ended March 31, 2021

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

6

 

 

 

0%*

 

Loans fully repaid in 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

During the three months ended March 31, 2022

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

During the three months ended March 31, 2021

 

 

60,000

 

 

 

12,660

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

Unamortized debt discount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,792 )

 

 

(19,304 )

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$ 574,021

 

 

$ 471,009

 

 

* - unsecured note

** - During the three month end periods ended March 31, 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 $28,660, for the period ended March 31, 2022 and 2021, respectively, as a result of the modifications.

 

During the three months ended March 31, 2022 and 2021, the Company recorded $15,512 and $33,354 of interest expense related to the amortization of debt discount and $5,918 and $13,315 of regular interest, respectively.

 

As of March 31, 2022 and December 31, 2021, accrued interest was $74,067 and $68,149, respectively.

 

Related Party Payables

 

As of March 31, 2022 and December 31, 2021, the Company owed a Director $182,488 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 March 31, 2022 and December 31, 2021, the Company has accrued $410,000 and $381,000, respectively, in relation to the director agreements and is included in Accounts payable and accrued liabilities - related parties on the balance sheet.

 

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Table of Contents

 

On July 7, 2020, our Board of Directors appointed Michael Kaplan to the Board of Directors 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:

 

 

 

March 31,

2022

 

 

December 31,

2021

 

Leasehold improvements

 

$ 33,000

 

 

$ 33,000

 

Equipment

 

 

201,024

 

 

 

201,024

 

Less: Accumulated depreciation and amortization

 

 

(105,430 )

 

 

(94,921 )

Total

 

$ 128,594

 

 

$ 139,103

 

 

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Table of Contents

 

NOTE 4 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

 

Accounts payable and accrued liabilities consist of the following:

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Accounts Payable

 

$ 280,872

 

 

$ 221,206

 

Interest

 

 

254,331

 

 

 

209,311

 

Salaries

 

 

666,777

 

 

 

603,371

 

Other

 

 

36,143

 

 

 

40,328

 

Total third party payables

 

 

1,238,123

 

 

 

1,074,216

 

Related party payables, officers and director fees

 

 

794,556

 

 

 

718,114

 

Total payables

 

$ 2,032,679

 

 

$ 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

 

 

March 31,

2022

 

 

December 31,

2021

 

 

1

 

 

 

12%*

 

4/16/2022

 

 8/31/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

$ 50,000

 

 

$ 50,000

 

During the three months ended March 31, 2022

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

During the three months ended March 31, 2021

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

2

 

 

 

12%*

 

4/22/2022

 

11/30/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18,000

 

 

 

18,000

 

During the three months ended March 31, 2022

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

During the three months ended March 31, 2021

 

 

18,000

 

 

 

4,680

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

3

 

 

 

12%*

 

6/30/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

250,000

 

 

 

250,000

 

During the three months ended March 31, 2022

 

 

-

 

 

 

-

 

 

 

125,000

 

 

 

28,088

 

 

 

 

 

 

 

 

 

During the three months ended March 31, 2021

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

4

 

 

 

12%*

 

4/16/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

410,000

 

 

 

410,000

 

During the three months ended March 31, 2022

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

During the three months ended March 31, 2021

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

5

 

 

 

12%*

 

4/16/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

140,000

 

 

 

140,000

 

During the three months ended March 31, 2022

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

During the three months ended March 31, 2021

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

6

 

 

 

12%*

 

4/30/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

200,000

 

 

 

200,000

 

During the three months ended March 31, 2022

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

During the three months ended March 31, 2021

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

7

 

 

 

12%*

 

7/31/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

60,000

 

 

 

60,000

 

During the three months ended March 31, 2022

 

 

60,000

 

 

 

12,600

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

During the three months ended March 31, 2021

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

8

 

 

 

12%*

 

7/29/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

96,000

 

 

 

96,000

 

During the three months ended March 31, 2022

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

During the three months ended March 31, 2021

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

9

 

 

3.75% **

 

 

6/25/2050

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

150,000

 

 

 

150,000

 

During the three months ended March 31, 2022

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

During the three months ended March 31, 2021

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

10

 

 

 

12.5%*

 

12/17/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,600

 

 

 

3,600

 

During the three months ended March 31, 2022

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

During the three months ended March 31, 2021

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

11

 

 

 

0%*

 

9/19/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16,500

 

 

 

16,500

 

During the three months ended March 31, 2022

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

During the three months ended March 31, 2021

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

12

 

 

 

0%*

 

4/16/2022

 

8/31/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

50,000

 

 

 

50,000

 

During the three months ended March 31, 2022

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

During the three months ended March 31, 2021

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

13

 

 

0% ***

 

 

4/16/2022

 

5/31/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30,000

 

 

 

30,000

 

During the three months ended March 31, 2022

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

During the three months ended March 31, 2021

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

14

 

 

 

0%*

 

4/16/2022

 

5/31/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,000

 

 

 

13,000

 

During the three months ended March 31, 2022

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

During the three months ended March 31, 2021

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

15

 

 

0% ***

 

 

5/30/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30,000

 

 

 

-

 

During the three months ended March 31, 2022

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

During the three months ended March 31, 2021

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Unamortized debt discount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(41,856 )

 

 

(48,514 )

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 1,475,244

 

 

 

 1,438,586

 

 

Less: short term loans, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 1,325,244

 

 

 

 1,288,586

 

 

Total long-term loans, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

 150,000

 

 

$

 150,000

 

 

11

Table of Contents

 

* - 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 three month end periods ended March 31, 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 $40,688 and $4,680, for the period ended March 31, 2022 and 2021, respectively, as a result of the modifications.

 

The Company has experienced a shortage of funding because cash outflows in the first quarter for business administration were higher than business revenue and financing expectations. As a result, interest payables of $117,255 on the Company’s loans with Acuity Opportunities Fund I, LLC (the “Lender”) (notes 4,5,6 and 8 in the above table) due by April, 16, 2022, April 30, 2022 and July 29, 2022 remained unpaid as of March 31, 2022. The carrying amount of the loans payable in default as of  March 31, 2022 is $846,000. The Company’s management has successfully negotiated interest and 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 March 31, 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 March 31, 2022 and 2021, the Company recorded $47,344 and $96,697 of interest expense related to the amortization of debt discount and $41,856 and $41,303 of regular interest, respectively. As of March 31, 2022 and December 31, 2021, accrued interest was $170,493 and $132,778, respectively.

 

As of March 31, 2022 and December 31, 2021, accrued interest associated with the economic injury disaster loan was $9,771 and $8,385, respectively.

 

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 three months ended March 31, 2022 and 2021, the Company recorded $0 and $43,693 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 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. Due to the fact that management has assessed the probability of certain milestones being met as probable, the warrants are being straight-lined over the term of services and accelerated whenever a milestone is met. The probability of the remaining milestones being met is reviewed by management every quarter. For each of the three months ended March 31, 2022 and 2021, the Company recorded $41,508 as compensation expense related to the warrants. The warrants shall vest upon the occurrence to the Company of the following milestone events through the efforts of the consultant:

 

No. of Warrants

Milestone

                 100,000

Acceptance by the Company of a full go-to market strategy for the Company's products. This milestone has been achieved.

                 100,000

 

Acceptance by the Company of a social marketing platform and PR strategy and onboarding of such.

 300,000/500,000

300,000 for each multi outlet (“MULO”) retailer that is onboarded - regardless of store count carrying the product; and 500,000, if the onboarded MULO is a national chain.

                 300,000

Deliverance of full due diligence package for each potential acquisition for which the Company requests the consultant perform due diligence

                 500,000

Upon the closing of any acquisition which the consultant brought to the Company and provided due diligence.

                 500,000

Additional compensation in board seat agreement.

 

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 and 2021, are valued at $97,470 and $46,050, 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 six months. For the three months ended March 31, 2022 and 2021, the Company recorded $30,153 and $24,034 as compensation expense related to the warrants, respectively.

 

 

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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.

 

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 %

 

0.03-0.08

%

Expected term of options, in years

 

 

3

 

 

 

3

 

Expected annual volatility

 

 

214.0 %

 

228.0-247.7

%

Expected dividend yield

 

-

%

 

-

%

Determined grant date fair value per option

 

$ 0.15 -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

 

 

425,000

 

 

 

0.18

 

Exercised

 

 

-

 

 

 

-

 

Forfeited or cancelled

 

 

(60,000 )

 

 

0.30

 

Outstanding, March 31, 2022

 

 

6,069,775

 

 

$ 0.21

 

 

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As of March 31, 2022, 4,069,775 warrants for common stock were exercisable and the intrinsic value of these warrants was $184,014, the weighted average remaining contractual life for warrants outstanding was 1.92 years and the remaining expense is $61,095 over the remaining amortization period which is four months.

 

As of March 31, 2021, 2,628,917 warrants for common stock were exercisable and the intrinsic value of these warrants was $262,660, the weighted average remaining contractual life for warrants outstanding was 2.56 years and the remaining expense is $294,762 over the remaining amortization period which is 1.25 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, March 31, 2022

 

 

4,470,000

 

 

$ 0.68

 

 

As of March 31, 2022, 4,470,000 warrants for Series B preferred stock were exercisable and the intrinsic value of these warrants was $2,674,350, the weighted average remaining contractual life for warrants outstanding was 6.12 years.

 

As of March 31, 2021, 4,470,000 warrants for Series B preferred stock were exercisable and the intrinsic value of these warrants was $4,350,600, the weighted average remaining contractual life for warrants outstanding was 7.12 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 each of the three months ended March 31, 2022 and 2021, the Company incurred lease expense for its operating leases of $21,911, which was included in general and administrative expenses on the accompanying unaudited condensed consolidated statements of operations. 

 

The Company’s weighted-average remaining lease term relating to its operating leases is 2.08 years, with a weighted-average discount rate of 12.00%.

 

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The Company had cash payments for operating leases of $21,806 for each of the three months ended March 31, 2022 and 2021.

 

The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s operating leases as of March 31, 2022.

 

Maturity of Lease Liability

 

 

 

2022

 

$ 65,587

 

2023

 

 

89,487

 

2024

 

 

30,120

 

Total undiscounted operating lease payments

 

 

185,194

 

Less: Imputed interest

 

 

22,224

 

Present value of operating lease liabilities

 

$ 162,970

 

 

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 March 31, 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 10, 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.

 

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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 as of March 31, 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 the Put right shall be subject to the terms governing such account. As of March 31, 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 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 to purchase shares. One warrant shall be fully vested for every share issued. The exercise price of each 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 exercised via a cashless exercise. As of March 31, 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.

 

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.

 

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 2,083,333 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.

 

On April 11, 2022, the Company entered into a memo of understanding 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 sales 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 three months ending March 31, 2022 and 2021, were $0 and $1,138, respectively. These expenses are included in general and administrative expenses on the accompanying unaudited condensed consolidated statements of operations. As of March 31, 2022 and December 31, 2021, there were no accrued commissions outstanding.

 

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NOTE 9 – CONCENTRATION RISKS

 

As of March 31, 2022, the Company'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 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 of MCA income from one merchant, representing 57% of the Company’s MCA income for the three months ended March 31, 2021. 

 

For the three months ended March 31, 2022, the Company had purchase concentrations of 54% and 27% from two vendors.

 

For the three months ended March 31, 2021, the Company had purchase concentrations of 85% from one vendor.

 

NOTE 10 – SUBSEQUENT EVENTS

 

Subsequent to the year end, the Company has extended various loans (see notes 2 and 5) and has entered into an agreement with a consultant (seen note 8).

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Cautionary Statements

 

This Form 10-Q contains “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 Foods’ 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,” “plans”, “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’ 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:

 

 

(a)

volatility or decline of First Foods’ stock price;

 

(b)

potential fluctuation of quarterly results;

 

(c)

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 defaults; and

 

(i)

new regulations impacting the business.

 

There is no assurance that First Foods will be profitable, due to, among other potential reasons, that it may (i) not be able to successfully develop, manage or market its products and services; attract or retain qualified executives and personnel; or obtain customers for its products or services, (ii) incur additional dilution in outstanding stock ownership due to the issuance of more shares, warrants, stock options or other convertible securities, or the exercise of outstanding warrants and stock options, and (iii) suffer other risks inherent in 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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General

 

First Foods is currently a “smaller reporting company” under the JOBS Act. A company loses its “smaller reporting company” status on (i) the day its public float becomes greater than or equal to $250,000,000 or (ii) had annual revenues of less than $100,000,000 and either: (A) had no public float or (B) had a public float of less than $700,000,000. As a “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’s internal control for financial reporting. Furthermore, Section 103 of the JOBS Act provides that as a “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 a “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, a “smaller reporting company” is not exempt from the requirement to perform management’s assessment of internal control over financial reporting.

 

First Foods is focused on developing its specialty chocolate product line through its Holy Cacao subsidiary, participating in merchant cash advances (“MCAs”) through 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 Company’s understanding of the 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 involved in producing, packaging, distributing or selling any product that is infused with a still illegal marijuana-based ingredient such as THQ, although it intends to revisit the matter as regulations change in jurisdictions in which it operates.

 

The Company is also dedicated to licensing its intellectual property (“IP”), including its name, brand, and packaging, to 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 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”.

 

The Company also has a contract with TIER Merchant Advances 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.

 

The Company’s common stock is quoted on the OTCQB under “FIFG.”

  

The Company’s principal executive offices are located at First Foods Group, Inc. c/o Incorp Services, Inc., 3773 Howard Hughes Parkway, Suite 500S, Las Vegas, NV 89169-6014. Our telephone number is (201) 471-0988.

 

As of March 31, 2022, our cash balance was $11,888, which includes restricted cash of $5,900, and our current liabilities were $4,115,270.

 

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.

 

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 assumptions and estimates. Our critical accounting policies are outlined in Note 1 in the Notes to the Unaudited Condensed Consolidated Financial Statements.

 

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Results of Operations for the Three Months Ended March 31, 2022 compared to the Three Months Ended March 31, 2021

 

Fiscal Q1 2022 Highlights

  

Total net sales decreased 65% or $27,533 during the three months ended March 31, 2022 compared to 2021, primarily due to the Company phasing out the merchant cash advance division to focus and put resources to the chocolate producing division of the Company.

 

Products Performance

 

The following table shows net sales by category for the three months ended March 31, 2022 and 2021:

 

 

 

2022

 

 

Change

 

 

2021

 

Net sales by category:

 

 

 

 

 

 

 

 

 

Chocolate products

 

$

14,457

 

 

 

-10

%

 

$

16,025

 

Merchant cash advances

 

 

348

 

 

 

-99

%

 

 

26,313

 

Total net sales

 

$

14,805

 

 

 

-65

%

 

$

42,338

 

 

Chocolate products

 

Chocolate products sales decreased slightly during 2022 compared to 2021 due primarily to increased supply chain costs.

 

Merchant cash advances

 

Merchant cash advances sales decreased during 2022 compared to 2021 due to the Company focusing upon and placing resources to the chocolate producing division of the Company.

 

Cost of Product Sales

 

Products cost of sales for March 31, 2022 and 2021 were as follows:

 

 

 

March 31,

2022

 

 

March 31,

2021

 

Cost of Product Sales:

 

 

 

 

 

 

Chocolate products

 

$ 2,481

 

 

$ 3,741

 

 

Cost of product sales

   

The decrease in cost of product sales in March 31, 2022 as compared to March 31, 2021 was due to a decrease in product sales. Gross profit margins increased due to better efficiencies.

 

Legal fees for the three months ended March 31, 2022 was $1,149 compared to $999 for the three months ended March 31, 2021. This slight increase in legal fees was due to slightly increased legal rates.

 

General and administrative expenses for the three months ended March 31, 2022 was $404,485 compared to $487,387 for the three months ended March 31, 2021. The decrease in general and administrative expenses was primarily due to decreased costs associated with compensation expenses, and consulting and accounting fees.

 

Provision for merchant cash advances for the three months ended March 31, 2022 was $(346) compared to $(137,498) for the three months ended March 31, 2021. The decrease in provision for merchant cash advances was due to the collection of a large balance in prior period from one MCA that was previously fully reserved for due to COVID-19.

 

Liquidity and Capital Resources

 

The following table presents our cash flows:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Net cash used in operating activities

 

$ (117,139 )

 

$ (33,127 )

Net cash used in investing activities

 

$ -

 

 

$ -

 

Net cash provided by financing activities

 

$ 117,500

 

 

$ 24,464

 

 

Operating Activities

 

Our primary uses of cash from our operating activities include payments for compensation and related costs and other general corporate expenditures.

 

Net cash used in operating activities increased from the three months ended March 31, 2021 to the three months ended March 31, 2022 primarily due to the net effect of a decrease in cash received from revenues and cash paid for cost of revenues and operating expenses, changes in operating assets and liabilities, decrease in stock compensation and change in merchant allowance.

 

Investing Activities

 

There was no investing activities for the three months ended March 31, 2022 and 2021.

 

Financing Activities

 

Cash provided by financing activities consists of proceeds from issuance of debt.

 

Net cash provided by financing activities increased from the three months ended March 31, 2021 to the three months ended March 31, 2022 primarily due to an increase of proceeds from issuance of loans and a decrease of 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 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 March 31, 2022, the Company had approximately $1,367,000 in third-party short-term debt and approximately $42,000 in associated debt discount and approximately $578,000 in related-party short-term debt and approximately $3,800 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 issuance of these unaudited condensed consolidated financial statements. 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.

 

Concentration Risks

 

As of March 31, 2022, the Company'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 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 of MCA income from one merchant, representing 57% of the Company’s MCA income for the three months ended March 31, 2021. 

 

For the three months ended March 31, 2022, the Company had purchase concentrations of 54% and 27% from two vendors.

 

For the three months ended March 31, 2021, the Company had purchase concentrations of 85% from one vendor.

 

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 is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive officer and principal financial officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with 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 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.

 

The Company’s management, including the chief executive officer and chief 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 control 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 inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.

 

As of March 31, 2022, management has not completed an effective assessment of the Company’s internal controls over financial reporting based on the 2013 Committee of Sponsoring Organizations (COSO) framework. Management has concluded that, during the period covered by this report, our internal controls and procedures were not effective to detect the inappropriate application of U.S. GAAP. Management identified the following material weaknesses set forth below in our internal control over financial reporting.

 

 

1.

We lack the necessary corporate accounting resources to maintain adequate segregation of duties.

 

 

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 our internal control over financial reporting that occurred during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II OTHER INFORMATION

 

Item 1. Legal Proceedings

 

As of March 31, 2022, we were not a party to any legal proceedings that could have a material adverse effect on the Company’s business, financial condition or operating results. Further, to the Company’s knowledge, no such proceedings have been threatened against the Company.

 

Item 1A. Risk Factors

 

We 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 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

 

The Company issued 60,000 shares of the Company’s common stock during the three months ended March 31, 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. Defaults Upon Senior Securities

.

There have been no defaults upon senior securities.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

Not Applicable

 

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Item 6. Exhibits

 

(a) Exhibits

 

Item 6. Exhibits, Financial Statement Schedules

 

3.1

 

Articles of Incorporation of the Registrant (1)

3.2

 

By-laws of the Registrant (1)

31.1

 

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

 

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

 

Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002

32.2

 

Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

 

XBRL Instance Document

101.SCH

 

XBRL Taxonomy Extension Schema Document

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

___________

(1)

Filed as an Exhibit to the Form S-1, filed by First Foods Group, Inc. on August 10, 2015, and incorporated herein by reference.

 

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Table of Contents

  

SIGNATURES

 

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.

 

By:

/s/ Harold Kestenbaum

 

Dated: May 23, 2022

 

Harold Kestenbaum,

 

Chairman of the Board and

 

Interim Chief Executive Officer

 

 

By:

/s/ Mark J. Keeley

 

Dated: May 23, 2022

 

Mark J. Keeley,

 

Chief Financial Officer

 

 

26

 

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