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) include failure of First Foods to earn significant revenues or profits;
(d) inadequate capital to continue or expand its business, and inability to
raise additional capital or financing to implement its business plans;
(e) decline in demand for First Foods' products and services;
rapid adverse changes in markets; due to, among other things,
(f) international conflicts, terrorism, environmental issues, world and
national health issues, and inflation;
litigation with or legal claims and allegations by outside parties against
(g) First Foods, including but not limited to challenges to First Foods'
intellectual property rights;
reliance on proprietary merchant advance credit models, which involve the
(h) 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.
19
Table of Contents
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 if 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.
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 September 30, 2022, our cash balance was $7,378, which includes restricted
cash of $5,900, and our current liabilities were $4,746,099.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations
are based upon our unaudited condensed consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these unaudited condensed
consolidated financial statements requires us to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenues and expenses,
and related disclosure of contingent assets and liabilities. We monitor our
estimates on an on-going basis for changes in facts and circumstances, and
material changes in these estimates could occur in the future. Changes in
estimates are recorded in the period in which they become known. We base our
estimates on historical experience and other assumptions that we believe to be
reasonable under the circumstances. Actual results may differ from our
estimates, if past experience or other assumptions do not turn out to be
substantially accurate.
20
Table of Contents
Results of Operations for the Three Months Ended September 30, 2022 compared to
the Three Months Ended September 30, 2021
Total net sales decreased 76% or $45,864 during the three months ended September
30, 2022 compared to 2021, primarily due to the Company dedicating resources to
the chocolate producing division of the Company and less to the wholesaling
division and merchant cash advance division.
Products Performance
The following table shows net sales by category for the three months ended
September 30, 2022 and 2021:
2022 Change 2021
Net sales by category:
Chocolate products $ 13,374 -76 % $ 55,678
Merchant cash advances 811 -81 % 4,371
Total net sales $ 14,185 -76 % $ 60,049
Chocolate products
Chocolate products sales decreased during 2022 compared to 2021 due primarily to
increased supply chain costs and a decrease in marketing and advertising.
Merchant cash advances
Merchant cash advances sales decreased during 2022 compared to 2021 due to the
Company focusing upon and dedicating resources to the chocolate producing
division of the Company.
Cost of Product Sales
Products cost of sales for the three months ended September 30, 2022 and 2021
were as follows:
September 30, September 30,
2022 2021
Cost of Product Sales:
Chocolate products $ 6,790 $ 35,446
Cost of product sales
The decrease in cost of product sales in September 30, 2022 as compared to
September 30, 2021 was due to a decrease in product sales.
General and administrative expenses for the three months ended September 30,
2022 was $268,910 compared to $466,717 for the three months ended September 30,
2021. The decrease in general and administrative expenses was primarily due to
decreased costs associated with compensation expenses, and consulting and
accounting fees.
21
Table of Contents
Provision for merchant cash advances for the three months ended September 30,
2022 was $(3,493) compared to $(7,916) for the three months ended September 30,
2021. The increase in provision for merchant cash advances was due to less
recoveries of reserved MCAs in the current period that the prior period.
There were no impairment expense for the three months ended September 30, 2022
and 2021, respectively.
Results of Operations for the Nine Months Ended September 30, 2022 compared to
the Nine Months Ended September 30, 2021
Total net sales decreased 73% or $257,032 during the nine months ended September
30, 2022 compared to the nine months ended September 30, 2021, primarily due to
the Company dedicating resources to the chocolate producing division of the
Company and less to the wholesaling division and merchant cash advance division.
Products Performance
The following table shows net sales by category for the nine months ended
September 30, 2022 and 2021:
2022 Change 2021
Net sales by category:
Chocolate products $ 91,708 -71 % $ 312,142
Merchant cash advances 1,188 -97 % 37,786
Total net sales $ 92,896 -73 % $ 349,928
Chocolate products
Chocolate products sales decreased during the nine months ended September 30,
2022 compared to the nine months ended September 30, 2021 due primarily to
increased supply chain costs and a decrease in marketing and advertising.
Merchant cash advances
Merchant cash advances sales decreased during the nine months ended September
30, 2022 compared to the nine months ended September 30, 2021 due to the Company
focusing upon and dedicating resources to the chocolate producing division of
the Company.
Cost of Product Sales
Products cost of sales for the nine months ended September 30, 2022 and 2021
were as follows:
September 30, September 30,
2022 2021
Cost of Product Sales:
Chocolate products $ 47,264 $ 201,530
22
Table of Contents
Cost of product sales
The decrease in cost of product sales in September 30, 2022 as compared to
September 30, 2021 was due to a decrease in product sales.
Legal fees for the nine months ended September 30, 2022 was $31,596 compared to
$5,799 for the nine months ended September 30, 2021. This increase in legal fees
was due to increased legal rates and legal consultations for potential deals
that were passed on.
General and administrative expenses for the nine months ended September 30, 2022
was $1,008,887 compared to $1,400,527 for the nine months ended September 30,
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 nine months ended September 30,
2022 was $33,306 compared to $(152,254) for the nine months ended September 30,
2021. The increase in provision for merchant cash advances was due to the
Company updating its reserves to accurately reflect its current merchant cash
advances positions.
Impairment of assets expense for the nine months ended September 30, 2022 was
$92,736. The company has not realized cash flows sufficient to overcome an asset
impairment and is, therefore, estimating an impairment of 50% of its asset
carrying value. There was no impairment expense for the nine months ended
September 30, 2021.
Liquidity and Capital Resources
The following table presents our cash flows:
Nine Months Ended
September 30,
2022 2021
Net cash used in operating activities $ (329,899 ) $ (209,006 )
Net cash used in investing activities $ - $ (877 )
Net cash provided by financing activities $ 325,750 $ 222,842
Operating Activities
Our primary uses of cash from our operating activities include payments for
compensation and related costs and other general corporate expenditures.
23
Table of Contents
Net cash used in operating activities increased from the nine months ended
September 30, 2021 to the nine months ended September 30, 2022 primarily due to
the net effect of a decrease in cash received from a decrease in revenues and
cash paid for cost of revenues and operating expenses, changes in operating
assets and liabilities, decrease in stock compensation, increase in accumulative
catch up adjustment and impairment of assets, and change in merchant allowance.
Investing Activities
There was no investing activities for the nine months ended September 30, 2022.
Financing Activities
Cash provided by financing activities consists of proceeds from issuance of
debt.
Net cash provided by financing activities increased from the nine months ended
September 30, 2021 to the nine months ended September 30, 2022 primarily due to
a decrease in repayment of loans.
Going Concern
The Company's unaudited condensed consolidated financial statements are prepared
using generally accepted accounting principles in the United States of America
applicable to a going concern which contemplates the realization of assets and
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.
24
Table of Contents
In order to continue as a going concern, the Company will need, among other
things, additional capital resources. As of September 30, 2022, the Company had
approximately $1,361,000 in third-party short-term debt and approximately $6,500
in associated debt discount and approximately $786,000 in related-party
short-term debt and $0 in associated debt discount that is due within the next
twelve months. Management's plan is to increase revenue, obtain such resources
for the Company by obtaining capital from management and significant
shareholders sufficient to meet its operating expenses and seeking equity and/or
debt financing. However, neither any members of management nor any significant
shareholders are currently committed to invest funds with us and; therefore, we
cannot provide any assurances that the Company will be successful in
accomplishing any of its plans.
The Company does not have sufficient cash flow for the next twelve months from
the 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 September 30, 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 and $6,463 of MCA income from two
merchants, representing 41% and 18%, respectively, of the Company's MCA income
for the nine months ended September 30, 2021.
For the three months ended September 30, 2022, the Company had no purchase
concentration. For the three months ended September 30, 2021, the Company had
purchase concentrations of 81% and 12% from two vendors.
For the nine months ended September 30, 2022, the Company had purchase
concentrations of 22%, 17% and 12% from three vendors. For the nine months ended
September 30, 2021, the Company had purchase concentrations of 60% and 21% from
two vendors.
Off-Balance Sheet Arrangements
No off-balance sheet arrangements exist.
Contractual Obligations
None.
© Edgar Online, source Glimpses
FIRST FOODS GROUP, INC. 
