0001477932-20-004809.txt : 20200813 0001477932-20-004809.hdr.sgml : 20200813 20200813102117 ACCESSION NUMBER: 0001477932-20-004809 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 72 CONFORMED PERIOD OF REPORT: 20200630 FILED AS OF DATE: 20200813 DATE AS OF CHANGE: 20200813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: First Foods Group, Inc. CENTRAL INDEX KEY: 0001648903 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE PRODUCTION [7812] IRS NUMBER: 474145514 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-206260 FILM NUMBER: 201097749 BUSINESS ADDRESS: STREET 1: C/O INCORP SERVICES, INC. STREET 2: 3773 HOWARD HUGHES PARKWAY, SUITE 500S CITY: LAS VEGAS STATE: NV ZIP: 89169-6014 BUSINESS PHONE: 201-471-0988 MAIL ADDRESS: STREET 1: C/O INCORP SERVICES, INC. STREET 2: 3773 HOWARD HUGHES PARKWAY, SUITE 500S CITY: LAS VEGAS STATE: NV ZIP: 89169-6014 FORMER COMPANY: FORMER CONFORMED NAME: Litera Group Inc DATE OF NAME CHANGE: 20150722 10-Q 1 fifg_10q.htm FORM 10-Q fifg_10q.htm

 

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 June 30, 2020

 

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)

 

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 ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

 

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

    

As of August 11, 2020, the number of shares outstanding of the registrant’s class of common stock was 21,741,104, 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 June 30, 2020 and December 31, 2019

 

3

 

Condensed Consolidated Statements of Operations for the Three and Six Months ended June 30, 2020 and 2019

 

4

 

Condensed Consolidated Statements of Changes in Deficit for the Three and Six Months ended June 30, 2020 and 2019

 

5

 

Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2020 and 2019

 

6

 

Notes to Condensed Consolidated Financial Statements

 

7

 

Item 2.

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

 

23

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

27

 

Item 4.

Controls and Procedures

 

28

 

PART II OTHER INFORMATION

 

Item 1.

Legal Proceedings

 

29

 

Item 1A.

Risk Factors

 

29

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

30

 

Item 3.

Defaults Upon Senior Securities

 

30

 

Item 4.

Mine Safety Disclosures

 

30

 

Item 5.

Other Information

 

30

 

Item 6.

Exhibits

 

30

 

SIGNATURES

 

31

 

 
2

Table of Contents

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

First Foods Group, Inc. and Subsidiary

Condensed Consolidated Balance Sheets

(Unaudited)

 

 

 

 

 

 

 

June 30,

2020

 

 

December 31,

2019

 

ASSETS

CURRENT ASSETS

 

 

 

 

 

 

Cash

 

$ 198,508

 

 

$ 24,353

 

Accounts receivable, net

 

 

424

 

 

 

13,487

 

Inventory, net

 

 

51,575

 

 

 

10,556

 

Merchant cash advances, net of allowance $554,479 and $97,495, respectively

 

 

159,996

 

 

 

877,457

 

Prepaid expenses and other current assets

 

 

96,765

 

 

 

56,935

 

Deferred merchant advance commissions

 

 

1,394

 

 

 

15,290

 

TOTAL CURRENT ASSETS

 

 

508,662

 

 

 

998,078

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

224,051

 

 

 

-

 

Operating lease right-of-use assets

 

 

267,704

 

 

 

-

 

TOTAL ASSETS

 

$ 1,000,417

 

 

$ 998,078

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND DEFICIT

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$ 832,631

 

 

$ 751,675

 

Deferred revenue

 

 

200,205

 

 

 

193,163

 

Loans, net

 

 

257,400

 

 

 

165,270

 

Related party loans, net

 

 

631,947

 

 

 

620,623

 

Operating lease liabilities

 

 

57,891

 

 

 

-

 

TOTAL CURRENT LIABILITIES

 

 

1,980,074

 

 

 

1,730,731

 

 

 

 

 

 

 

 

 

 

Loans, net - long term

 

 

895,501

 

 

 

483,240

 

Operating lease liabilities - long term

 

 

209,813

 

 

 

-

 

TOTAL LIABILITIES

 

 

3,085,388

 

 

 

2,213,971

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

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, 473,332 issued and outstanding ($160,000 liquidation preference)

 

 

473

 

 

 

473

 

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, 21,557,771 and 20,313,771 shares issued and outstanding, respectively

 

 

21,558

 

 

 

20,314

 

Additional paid-in capital

 

 

9,931,793

 

 

 

9,116,998

 

Accumulated deficit

 

 

(11,947,102 )

 

 

(10,293,260 )

Total First Foods Group, Inc. Deficit

 

 

(1,992,618 )

 

 

(1,154,815 )

 

 

 

 

 

 

 

 

 

Noncontrolling interests

 

 

(92,353 )

 

 

(61,078 )

Total deficit

 

 

(2,084,971 )

 

 

(1,215,893 )

TOTAL LIABILITIES AND DEFICIT

 

$ 1,000,417

 

 

$ 998,078

 

  

 

 

 

 

 

 

 

 

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

June 30,

 

 

For the Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUES

 

 

 

 

 

 

 

 

 

 

 

 

Product sales, net

 

$ 8,778

 

 

$ 31,545

 

 

$ 12,383

 

 

$ 31,545

 

Merchant cash advance income, net

 

 

15,933

 

 

 

41,916

 

 

 

109,302

 

 

 

156,753

 

Total Revenues

 

 

24,711

 

 

 

73,461

 

 

 

121,685

 

 

 

188,298

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product sales

 

 

4,703

 

 

 

20,983

 

 

 

5,451

 

 

 

20,983

 

Professional fees

 

 

17,896

 

 

 

25,615

 

 

 

30,327

 

 

 

54,847

 

General and administrative

 

 

358,176

 

 

 

391,340

 

 

 

968,062

 

 

 

790,248

 

Provision for merchant cash advances

 

 

76,853

 

 

 

(6,099 )

 

 

479,885

 

 

 

22,239

 

Total Operating Expenses

 

 

457,628

 

 

 

431,839

 

 

 

1,483,725

 

 

 

888,317

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS FROM OPERATIONS

 

 

(432,917 )

 

 

(358,378 )

 

 

(1,362,040 )

 

 

(700,019 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income

 

 

1,000

 

 

 

-

 

 

 

1,000

 

 

 

-

 

Interest expense

 

 

(170,704 )

 

 

(27,914 )

 

 

(324,077 )

 

 

(52,864 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

 

(602,621 )

 

 

(386,292 )

 

 

(1,685,117 )

 

 

(752,883 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS

 

 

(602,621 )

 

 

(386,292 )

 

 

(1,685,117 )

 

 

(752,883 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-controlling interest share of loss

 

 

17,926

 

 

 

10,580

 

 

 

31,275

 

 

 

17,627

 

Dividends on preferred stock

 

 

-

 

 

 

(4,950 )

 

 

-

 

 

 

(9,900 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$ (584,695 )

 

$ (380,662 )

 

$ (1,653,842 )

 

$ (745,156 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$ (0.03 )

 

$ (0.02 )

 

$ (0.08 )

 

$ (0.04 )

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

 

 

21,226,672

 

 

 

17,952,371

 

 

 

20,916,568

 

 

 

17,887,548

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

Total First Foods

 

 

Non-

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

paid-in

capital

 

 

Accumulated deficit

 

 

Group, Inc. deficit

 

 

controlling interests

 

 

Total

deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

 

 

1,133,333

 

 

$ 1,133

 

 

 

20,313,771

 

 

$ 20,314

 

 

$ 9,116,998

 

 

$ (10,293,260 )

 

$ (1,154,815 )

 

$ (61,078 )

 

$ (1,215,893 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued to consultants for services

 

 

-

 

 

 

-

 

 

 

400,000

 

 

 

400

 

 

 

95,600

 

 

 

-

 

 

 

96,000

 

 

 

-

 

 

 

96,000

 

Common stock issued for related party loan

 

 

-

 

 

 

-

 

 

 

25,000

 

 

 

25

 

 

 

4,975

 

 

 

-

 

 

 

5,000

 

 

 

-

 

 

 

5,000

 

Common stock issued with loans payable

 

 

-

 

 

 

-

 

 

 

224,000

 

 

 

224

 

 

 

53,908

 

 

 

-

 

 

 

54,132

 

 

 

-

 

 

 

54,132

 

Warrants issued for director services

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

197,348

 

 

 

-

 

 

 

197,348

 

 

 

-

 

 

 

197,348

 

Warrants issued with loan payable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

20,717

 

 

 

-

 

 

 

20,717

 

 

 

-

 

 

 

20,717

 

Warrants issued in lieu of deferred compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

250,000

 

 

 

-

 

 

 

250,000

 

 

 

-

 

 

 

250,000

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,069,147 )

 

 

(1,069,147 )

 

 

(13,349 )

 

 

(1,082,496 )

Balance at March 31, 2020

 

 

1,133,333

 

 

$ 1,133

 

 

 

20,962,771

 

 

$ 20,963

 

 

$ 9,739,546

 

 

$ (11,362,407 )

 

$ (1,600,765 )

 

$ (74,427 )

 

$ (1,675,192 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued to consultants for services

 

 

-

 

 

 

-

 

 

 

150,000

 

 

 

150

 

 

 

25,200

 

 

 

-

 

 

 

25,350

 

 

 

-

 

 

 

25,350

 

Common stock issued for related party loan

 

 

-

 

 

 

-

 

 

 

445,000

 

 

 

445

 

 

 

94,699

 

 

 

-

 

 

 

95,144

 

 

 

-

 

 

 

95,144

 

Warrants issued for director services

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

72,348

 

 

 

-

 

 

 

72,348

 

 

 

-

 

 

 

72,348

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(584,695 )

 

 

(584,695 )

 

 

(17,926 )

 

 

(602,621 )

Balance at June 30, 2020

 

 

1,133,333

 

 

$ 1,133

 

 

 

21,557,771

 

 

$ 21,558

 

 

$ 9,931,793

 

 

$ (11,947,102 )

 

$ (1,992,618 )

 

$ (92,353 )

 

$ (2,084,971 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2018

 

 

1,133,333

 

 

$ 1,133

 

 

 

17,709,087

 

 

$ 17,709

 

 

$ 7,081,559

 

 

$ (7,637,029 )

 

$ (536,628 )

 

$ 8,382

 

 

$ (528,246 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued to consultants for services

 

 

-

 

 

 

-

 

 

 

7,500

 

 

 

8

 

 

 

1,492

 

 

 

-

 

 

 

1,500

 

 

 

-

 

 

 

1,500

 

Warrants issued for director services

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

71,553

 

 

 

-

 

 

 

71,553

 

 

 

-

 

 

 

71,553

 

Warrants issued for consultant services

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

25,385

 

 

 

-

 

 

 

25,385

 

 

 

-

 

 

 

25,385

 

Common stock issued for services

 

 

-

 

 

 

-

 

 

 

100,000

 

 

 

100

 

 

 

29,900

 

 

 

-

 

 

 

30,000

 

 

 

-

 

 

 

30,000

 

Common stock issued for loans payable

 

 

-

 

 

 

-

 

 

 

50,000

 

 

 

50

 

 

 

7,075

 

 

 

-

 

 

 

7,125

 

 

 

-

 

 

 

7,125

 

Dividend on preferred stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(4,950 )

 

 

-

 

 

 

(4,950 )

 

 

-

 

 

 

(4,950 )

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(359,544 )

 

 

(359,544 )

 

 

(7,047 )

 

 

(366,591 )

Balance at March 31, 2019

 

 

1,133,333

 

 

$ 1,133

 

 

 

17,866,587

 

 

$ 17,867

 

 

$ 7,212,014

 

 

$ (7,996,573 )

 

$ (765,559 )

 

$ 1,335

 

 

$ (764,224 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued to consultants for services

 

 

-

 

 

 

-

 

 

 

176,415

 

 

 

176

 

 

 

40,074

 

 

 

-

 

 

 

40,250

 

 

 

-

 

 

 

40,250

 

Warrants issued for director services

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

72,348

 

 

 

-

 

 

 

72,348

 

 

 

-

 

 

 

72,348

 

Warrants issued for consultant services

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7,479

 

 

 

-

 

 

 

7,479

 

 

 

-

 

 

 

7,479

 

Common stock issued with loans payable

 

 

-

 

 

 

-

 

 

 

12,500

 

 

 

13

 

 

 

3,675

 

 

 

-

 

 

 

3,688

 

 

 

-

 

 

 

3,688

 

Dividend on preferred stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(4,950 )

 

 

-

 

 

 

(4,950 )

 

 

-

 

 

 

(4,950 )

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(375,712 )

 

 

(375,712 )

 

 

(10,580 )

 

 

(386,292 )

Balance at June 30, 2019

 

 

1,133,333

 

 

$ 1,133

 

 

 

18,055,502

 

 

$ 18,056

 

 

$ 7,330,640

 

 

$ (8,372,285 )

 

$ (1,022,456 )

 

$ (9,245 )

 

$ (1,031,701 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 
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First Foods Group, Inc. and Subsidiary

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

For the Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net Loss

 

$ (1,685,117 )

 

$ (752,883 )

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

 

 

 

 

 

 

 

 

Non-employee stock based compensation

 

 

121,350

 

 

 

104,615

 

Employee stock based compensation

 

 

269,696

 

 

 

143,901

 

Amortization of debt discount

 

 

219,320

 

 

 

16,401

 

Depreciation and amortization expense

 

 

12,741

 

 

 

-

 

Change in merchant allowance

 

 

456,984

 

 

 

-

 

Provision for merchant cash advances

 

 

479,885

 

 

 

22,239

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

13,063

 

 

 

(31,545 )

Inventory

 

 

(11,205 )

 

 

-

 

Merchant cash advances

 

 

(219,408 )

 

 

259,814

 

Deferred merchant advance commissions

 

 

13,896

 

 

 

21,113

 

Prepaid expenses and other current assets

 

 

(21,606 )

 

 

(21,433 )

Accounts payable and accrued liabilities

 

 

342,919

 

 

 

265,000

 

Deferred revenue

 

 

7,042

 

 

 

(81,985 )

Net cash used in operating activities

 

 

(440 )

 

 

(54,763 )

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchase of equipment

 

 

(156,605 )

 

 

-

 

Net cash used in investing activities

 

 

(156,605 )

 

 

-

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Dividend payment

 

 

-

 

 

 

(18,150 )

Proceeds from loans

 

 

301,200

 

 

 

75,000

 

Repayment of loans

 

 

(50,000 )

 

 

-

 

Proceeds from related party loans

 

 

80,000

 

 

 

-

 

Net cash provided by financing activities

 

 

331,200

 

 

 

56,850

 

 

 

 

 

 

 

 

 

 

NET INCREASE IN CASH

 

 

174,155

 

 

 

2,087

 

CASH AT BEGINNING OF PERIOD

 

 

24,353

 

 

 

30,426

 

CASH AT END OF PERIOD

 

$ 198,508

 

 

$ 32,513

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

NON-CASH FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Common stock issued with related party loans

 

$ 100,144

 

 

$ -

 

Common stock issued with loans

 

$ 54,132

 

 

$ 10,813

 

Warrants issued with loans

 

$ 20,717

 

 

$ -

 

Warrants issued in lieu of deferred compensation

 

$ 250,000

 

 

$ -

 

Purchase of assets and settlement of accrued expenses through issuance of loan payable

 

$ 140,188

 

 

$ -

 

Right-of-use assets obtained in exchange for liabilities

 

$ 267,704

 

 

$ -

 

 

 

 

 

 

 

 

 

 

CASH PAID FOR:

 

 

 

 

 

 

 

 

Interest

 

$ 54,900

 

 

$ 40,848

 

Income taxes

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

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

 

 
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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 and participating in merchant cash advances (“MCA”) through its 1st Foods Funding Division. First Foods continues to pursue new foodservice brands and menu concepts.

 

On August 31, 2017, the Company formed Holy Cacao, Inc., a Nevada corporation (“Holy Cacao”). Holy Cacao has 100 shares of no par value common stock authorized, issued and outstanding with 85 shares owned by the Company and 15 shares owned by non-controlling interests. Holy Cacao 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 marijuana-based ingredient, 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. On February 27, 2019, the United States Patent and Trademark Office (the “USPTO”) approved Holy Cacao’s trademark brand, “The Edibles’ Cult.” On November 26, 2019, the USPTO approved Holy Cacao’s trademark brand, “Purely Irresistible.” The Company has submitted multiple applications to the USPTO for additional brand names, including “Mystere” and “Southeast Edibles” among others. On February 5, 2019, the Company signed a Consulting Agreement with a consultant to assist in the manufacturing, packaging and distribution of the Company’s chocolate product line. On March 26, 2019, the Company signed a Facility Access and Wholesale Production Purchase and Sale Agreement that allows it to use a fully staffed and fully equipped state of the art manufacturing facility to produce its specialty chocolate product line and sell it to manufacturing and wholesaling companies. On March 1, 2020, the Company’s Board of Directors made a strategic decision to broaden the appeal of its hemp-based chocolate products to a wider base of customers, who are particularly discerning about the cleanliness of the Company’s manufacturing facility and quality of its hemp-based chocolate products, by successfully obtaining worldwide Kosher certification from the Union of Orthodox Jewish Congregations of America, Kashruth Division (the “OU”), which is the largest and most recognized certification of its kind in the world. On March 9, 2020, the Company retained Tartikov Beth Din (“BD”) to allow BD to supervise the hemp-based chocolate products produced by the Company in accordance with OU certification standards. On July 13, 2020, Michael Kaplan was appointed to the Board of Directors and, as of August 1, 2020, accepted the role of Chief Marketing Officer with authority to oversee the Company’s sales and marketing operations, and responsibility for developing oversight processes and procedures. On August 4, 2020 the Company retained Moises Davidovits as its full-time chocolatier. Mr. Davidovits is a third-generation chocolatier who is responsible for the manufacturing, packaging and distribution of the Company’s chocolate product line, as well as the formulation of all of the Company’s proprietary chocolate recipes.

 

On October 25, 2017, the Company entered into 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. On November 8, 2018, the Company also began providing cash advances directly to merchants.

 

 
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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.

 

In order to continue as a going concern, the Company will need, among other things, additional capital resources. As of June 30, 2020, the Company had approximately $257,000 in third-party short-term debt that is due within the next twelve months. Management’s plan is to 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.

 

In December 2019, a novel strain of coronavirus surfaced. The spread of COVID-19 around the world in the first quarter of 2020 has caused significant volatility in U.S. and international markets. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. and international economies. The Company’s financial position, operations and cash flows as of June 30, 2020 have been adversely affected, and may be further affected in the future, by the recent and ongoing outbreak of the coronavirus disease 2019 (COVID-19) which in March 2020, was declared a pandemic by the World Health Organization. The ultimate disruption which may be caused by the outbreak is uncertain; however, it may result in a material adverse impact on the Company’s financial position, operations and cash flows. Possible areas that may be materially affected include, but are not limited to, disruption to the Company’s labor workforce, unavailability of products and supplies used in operations, and the decline in value of assets held by the Company. As of June 30, 2020 and through the filing date of the financial statements, the Company has continued to collect receivables from its cash advances but has experienced an increase in payment delinquencies and has had two customers renegotiate the terms of their cash advances due to COVID-19. The Company has taken a reserve allowance on its MCA’s.

 

Use of Estimates

 

The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements were prepared using generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, these unaudited condensed consolidated financial statements do not include all information or notes required by generally accepted accounting principles for annual financial statements and should be read in conjunction with the Company’s annual consolidated financial statements included within the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on March 25, 2020.

 

In the opinion of management, the unaudited condensed consolidated financial statements included herein contain all adjustments necessary to present fairly the Company’s financial position and the results of its operations and cash flows for the interim periods presented. Such adjustments are of a normal recurring nature. The results of operations for the six months ended June 30, 2020 may not be indicative of results for the full year.

 

The noncontrolling interest represents the proportionate share of the proceeds received and also the income and loss pickup from the fifteen-percent sale of equity interest in our wholly owned subsidiary; Holy Cacao.

 

 
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Principles of Consolidation

 

The unaudited condensed consolidated financial statements represent the consolidation of the accounts of the Company and its subsidiary in conformity with GAAP. All intercompany accounts and transactions have been eliminated in consolidation.

 

Cash and Cash Equivalents

  

The Company considers all highly liquid temporary cash investments with an original maturity of twelve months or less to be cash equivalents. At June 30, 2020 and December 31, 2019, the Company had no cash equivalents.

   

The Company’s cash is held with financial institutions, and the account balances may exceed the Federal Deposit Insurance Corporation (FDIC) insurance limit at times. Accounts are insured by the FDIC up to $250,000 per financial institution. The Company has not experienced any losses in such accounts with these financial institutions.

  

Merchant Cash Advances

 

The Company participates in the merchant cash advance industry by directly advancing sums to a merchant or a merchant advance provider, TIER, who in turn advances sums to merchants or other merchant cash advance providers. Each reporting period, the Company reviews the carrying value of these advances and determines whether an impairment reserve is necessary. At June 30, 2020, the Company reserved an amount equal to 78% of the outstanding merchant cash advance balance at period end based on the potential impact of COVID 19. In addition, during the six months ended June 30, 2020 the Company wrote off 21 merchant advances for a total of $22,901. These expenses are included in provision for merchant cash advances expense on the accompanying unaudited condensed consolidated statements of operations.

 

Revenue Recognition

 

We completed, related to our merchant cash advance business line, our assessment of the impact of ASC 606 and determined that we recognize revenue in accordance with ASC 860, Transfers and Servicing, which is explicitly excluded from the scope of ASC 606. We participate in the servicing of merchant cash advances that have been provided to third parties, which in accordance with ASC 860, causes us to recognize merchant cash advance (“MCA”) income. We also have product sales from our Holy Cacao division that follow ASC 606.

 

Product sales are measured based on consideration specified in a contract with a customer that we expect to receive in exchange for goods, net of any variable considerations (e.g. rights to return product, sales incentives, etc.). The Company recognizes revenue when it satisfies a performance obligation by transferring control of a product to a customer. These criteria are assumed to have been met upon delivery of the products requested by the customer to the customer’s carrier. The Company applied the practical expedient available under ASC 606 to disregard determining significant financing components, if the good is transferred and payment is received within one year.

 

When a merchant cash advance is purchased, the Company records a merchant cash advance participation receivable for the purchase price. The purchase price consists of the merchant cash advance principal plus an up-front commission that is amortized over the term of the merchant cash advance. The amount of the commission is negotiated between the Company and TIER for each contract. The standard commission is 15% of the merchant cash advance principal but can be reduced depending upon the credit worthiness of the merchant. The average commission paid by the Company since inception has been approximately 7%. If a merchant cash advance contract is signed in one period, but not paid until a subsequent period, a corresponding liability is established in the current period.

 

At the time the Company participates in a merchant cash advance, the Company records a deferred revenue liability, which is the total future receivable due to the Company less the principal amount of the merchant cash advance. Revenue is recognized and the deferred liability is reduced over the term of the merchant cash advance.

 

TIER maintains a bank account on behalf of the Company. Each day, TIER receives payment, reflected in the bank account, for each merchant cash advance TIER has purchased on behalf of the Company from various merchant cash advance providers. The Company reduces its merchant cash advance balance by the cash received, which is net of platform fees. Platform fees are a daily charge associated with the ACH service and the financial and reporting management software platform provided by TIER. The platform fees are also negotiated between the Company and TIER for each contract but are typically 4% of the daily merchant cash advance principal amount.

 

For each merchant cash advance entered into by the Company, TIER receives a daily payment as payments are made on the advance, for each merchant cash advance TIER has purchased on behalf of the Company from various merchant cash advance providers. The Company reduces its merchant cash advance balance by the cash received, which is net of a 2% commission to TIER.

 

 
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Inventory

 

Inventory, consisting of raw materials, work in process and products available for sale, are accounted for using the first-in, first-out method, and are valued at the lower of cost or net realizable value. This valuation requires management to make judgements based on currently available information, about the likely method of disposition, such as through sales to individual customers and returns. The Company has no allowance for inventory reserves.

 

Inventory consisted of the following as of June 30, 2020 and December 31, 2019:

 

 

 

June 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Raw Materials

 

$ 41,463

 

 

$ 2,854

 

Work in Process

 

 

1,550

 

 

 

5,410

 

Finished Goods

 

 

8,562

 

 

 

2,292

 

Total

 

$ 51,575

 

 

$ 10,556

 

 

Property and Equipment

 

Property and equipment are stated at cost, less accumulated depreciation and amortization. Expenditures for maintenance and repairs are charged to expense when incurred, while renewals and betterments that materially extend the life of an asset are capitalized. When assets are sold, retired or otherwise disposed of, the cost and accumulated depreciation are removed from the balance sheets and any resulting gain or loss is reflected in the unaudited condensed consolidated statements of operations and members’ deficit in the period realized.

 

Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the assets, which are as follows:

 

Property – Leasehold Improvements

4 years

Equipment

5 years

 

Impairment of Long-Lived Assets

 

Long-lived assets are comprised of property and equipment. The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset or group of assets may not be recoverable. If these circumstances exist, recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset group to future undiscounted net cash flows expected to be generated by the asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. There were no impairments to long-lived assets for the six months ended June 30, 2020 and 2019.

  

Research and Development

 

The Company’s policy is to engage market and branding consultants to research and develop specialty chocolate products, including chocolate products infused with a hemp-based ingredient, and packaging targeted to particular states within the US. The research and development costs for the three months ended June 30, 2020 and 2019, were $27,500 and $18,510, respectively. The research and development costs for the six months ended June 30, 2020 and 2019, were approximately $32,000 and $33,510, respectively. These expenses are included in general and administrative expenses on the accompanying unaudited condensed consolidated statements of operations.

 

 
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Deferred Financing Costs

 

The Company records origination and other expenses related to its debt obligations as deferred financing costs. These expenses are deferred and amortized over the life of the related debt instrument. In accordance with Accounting Standards Update (“ASU”) No. 2015-03, deferred finance costs, net of accumulated amortization have been included as a contra to the corresponding loans in the accompanying unaudited condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019, respectively.

 

Stock Based Compensation

 

The Company measures and recognizes compensation expense for all stock-based payments at fair value over the requisite service period. The Company uses the Black-Scholes option pricing model to determine the weighted average fair value of options and warrants. For restricted stock grants, fair value is determined as the closing price of our common stock on the date of grant. Equity-based compensation expense is recorded in administrative expenses based on the classification of the employee or vendor. The determination of fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by our stock price, as well as by assumptions regarding a number of subjective variables. These variables include, but are not limited to, the expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors.

 

Income Taxes

 

The Company provides for income taxes using the asset and liability approach. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. As of June 30, 2020 and December 31, 2019, the Company had a full valuation allowance against deferred tax assets. With the historical change in ownership, the Company is subject to certain NOL limitations under Section 382 of the Internal Revenue Code.

 

Per Share Data

 

In accordance with “ASC-260 - Earnings per Share”, the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no dilutive shares outstanding as of June 30, 2020 and 2019 because their effect would be antidilutive.

 

The Company had 1,499,750 and 403,750 warrants to purchase common stock outstanding at June 30, 2020 and 2019, respectively. The Company had 4,470,000 and 3,370,000 warrants to purchase Series B preferred stock outstanding at June 30, 2020 and 2019, respectively. The Company has outstanding one (1) Series A preferred share that is convertible into five (5) shares of the Company’s common stock. Additionally, the Company has 473,332 Series B preferred shares, and 660,000 Series C preferred shares outstanding that are convertible into 2,366,660 and 660,000 shares of common stock at June 30, 2020 and 2019, respectively. The warrants and preferred stock were not included in the Company’s weighted average number of common shares outstanding because they would be anti-dilutive.

 

Fair Value of Financial Instruments

 

Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair value. The carrying value of cash, merchant cash advances, prepaid expenses, accounts payable and accrued liabilities approximate their fair value because of the short-term nature of these instruments. Management is of the opinion that the Company is not exposed to significant market or credit risks arising from these financial instruments.

 

 
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Advertising and Promotion

 

Advertising and promotion costs are expensed as incurred. Advertising and promotion costs recognized in the unaudited condensed consolidated statements of operations for the three months ended June 30, 2020 and 2019, were approximately $5,700 and $34,150, respectively and approximately $21,000 and $44,900, respectively, for the six months ended June 30, 2020 and 2019.

 

Non-Controlling Interests in Condensed Consolidated Financial Statements

 

In June 2011, the FASB issued ASC 810-10-65-1, to clarify that a non-controlling (minority) interest in a subsidiary is an ownership interest in the entity that should be reported as equity in the condensed consolidated financial statements. It also requires consolidated net income to include the amounts attributable to both the parent and non-controlling interest, with disclosure on the face of the unaudited condensed consolidated income statement of the amounts attributed to the parent and to the non-controlling interest. In accordance with ASC 810-10-45-21, those losses attributable to the parent and the non-controlling interest in subsidiaries may exceed their interests in the subsidiary’s equity. The excess and any further losses attributable to the parent and the non-controlling interest shall be attributed to those interests even if that attribution results in a deficit non-controlling interest balance. During the year ended December 31, 2017, the Company entered into a subscription agreement for the sale of a ten-percent equity interest in its wholly owned subsidiary, Holy Cacao, for $200,000 in cash proceeds, in the aggregate. During the year ended December 31, 2019, 5% equity was issued to a service provider due to the completion of Holy Cacao’s first sale of its product, as per the agreement with the service provider. The Company’s periodic reporting now includes the results of operations of Holy Cacao, with the fifteen-percent ownership reported as noncontrolling interests. For the three and six months ended June 30, 2020, the cost of goods sold was approximately $4,700 and $5,500, respectively, and the operating expense for Holy Cacao was $122,000 and $215,000, respectively. There was approximately $8,800 and $12,400 of revenue for Holy Cacao for the three and six months ended June 30, 2020, respectively.

 

The Company conducts business as two operating segments, First Foods and Holy Cacao. The Company does not distinguish between the two segments and has only one reportable segment based on quantitative thresholds. The accounting policies of the segments are the same as the accounting policies of the Company as a whole. The operating results of these business segments are regularly reviewed by the Company’s chief operating decision maker.

 

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 unaudited condensed consolidated financial statements.

 

 
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NOTE 2 – RELATED PARTY TRANSACTIONS

 

Employment Agreement

 

On March 1, 2017, Mark J. Keeley assumed the role of Chief Financial Officer (“CFO”). Pursuant to his Employment Agreement, the CFO shall receive $20,833 per month. Additionally, Mr. Keeley earns an additional $40,000 per year for his role as a Director of the Company. On March 18, 2020, the Company issued its CFO and Director warrants to purchase 500,000 shares of Series B Preferred Stock in lieu of $250,000 of deferred salary (see Note 6). As of June 30, 2020 and December 31, 2019, the Company has accrued $204,667 and $329,167, respectively, in relation to the employment agreements and $18,766 and $16,953, respectively, in relation to the payroll tax liability.

 

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 earns $40,000 per year for his role as Chairman of the Board. As of June 30, 2020, the Company has accrued a total of $40,000.

 

As of June 30, 2020, the Company has two consulting agreements with R and W Financial (a company owned by a director) in which the first agreement is for $5,000 a month and the second is for $4,250 every two weeks. Both agreements are for an indefinite period of time and are subject to cancellation by either party with written notice of 30 days and 10 days, respectively. The outstanding balance as of June 30, 2020 was $52,713.

 

Related Party Loans

  

 

 

 

 

 

June 30,

2020

 

 

December 31,

2019

 

1.

Note payable at 12%, matures 10/31/2020

 

{a} *

 

$ 100,000

 

 

$ 100,000

 

2.

Non-interest bearing note payable, matures on 4/25/2021

 

*

 

 

179,813

 

 

 

179,813

 

3.

Note payable at 12%, matures 9/13/2020. The Company has recorded debt discount and amortized it over the applicable life of the debt.

 

{b} *

 

 

100,000

 

 

 

100,000

 

4.

Note payable at 12%, matures 4/9/2021. The Company has recorded debt discount and amortized it over the applicable life of the debt.

 

{c} *

 

 

250,000

 

 

 

250,000

 

5.

Non-interest bearing note payable, matures on 11/15/2020. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt.

 

{d} *

 

 

80,000

 

 

 

-

 

 

Unamortized debt discount

 

 

 

 

(77,866 )

 

 

(9,190 )

 

Total

 

 

 

$ 631,947

 

 

$ 620,623

 

___________________ 

 

{a} - On April 22, 2020, the Company extended the note to October 31, 2020 based on the same terms and conditions.

{b} - On June 28, 2020, the Company extended the note to September 13, 2020 based on the same terms and conditions. In association with this and prior extensions the company issued 35,000 and 25,000 shares of common stock, respectively, with a total fair value of $10,544, which will be recorded a debt discount and amortized over the life of the loan.

{c} - On April 10, 2020, the Company extended the note to April 9, 2021 based on the same terms and conditions. In association with the extension the company issued 250,000 shares of common stock with a fair value of $60,000, which will be recorded a debt discount and amortized over the life of the loan.

{d} - On June 28, 2020, the Company issued a non-interest bearing promissory note of $80,000. In connection with this note the company issued 160,000 shares of common stock with a fair value of $29,600, which was recorded as a debt discount and amortized over the life of the loan.

* - unsecured note  

 

During the three months ended June 30, 2020 and 2019, the Company recorded $21,081 and $1,830 of interest expense related to the amortization of debt discount and $13,463 and $4,763 of regular interest, respectively. During the six months ended June 30, 2020 and 2019, the Company recorded $31,468 and $3,640 of interest expense related to the amortization of debt discount and $26,926 and $9,447 of regular interest, respectively. As of June 30, 2020 and December 31, 2019, accrued interest was $33,667 and $21,753, respectively.

 

All of the above transactions were approved by disinterested directors.

 

 
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Director Agreements

 

On May 10, 2018, the directors of the Company were awarded share-based compensation for the service period of May 10, 2018 through December 31, 2020, as a one-time award of the ability to purchase a particular amount of warrants, ranging from 80,000 to 400,000 (collectively the “Warrants”) with the following terms:

 

 

Number and Type – Each Director is entitled to a one-time award of Warrants for the number of shares of Series B Preferred Stock of the Company. Each share of Series B Preferred Stock shall have voting rights equal to five (5) votes per share. Each share of Series B Preferred Stock is convertible into five (5) shares of the Company’s Common Stock (the “Common Stock”), including liquidation preference over Common Stock.

 

 

 

 

Duration – The Warrants entitle each Director to purchase the Series B Preferred Stock from the Company, after January 1, 2019 and before December 31, 2027.

 

 

 

Purchase Price - The purchase price is $0.60 per share of Series B Preferred Stock.

 

 

 

Cashless Exercise - If on the date the Director surrenders all or a portion of the Warrants for the purchase of Series B Preferred Stock or the equivalent number of shares of Common Stock, the per share market value of one share of Common Stock is greater than the exercise price of the equivalent Warrant, in lieu of exercising the Warrant by payment of cash, the Director may exercise the Warrant by a cashless exercise and shall receive a ratably lower number of shares of Series B Preferred Stock or the equivalent number of shares of Common Stock.

 

 

 

Vesting - The Warrants are subject to a 32-month period whereby the Warrants vest in equal monthly increments from May 10, 2018 through December 31, 2020. Any unvested warrants are forfeited, if the Director ceases to be a Director.

 

The Company issued warrants with respect to 1,280,000 Series B Preferred Stock, in the aggregate. The Company will expense the fair value of these warrants in the amount of $768,000 ratably during the years ended December 31, 2018, 2019 and 2020. For the three months ended June 30, 2020 and 2019, the Company recorded $72,348 as compensation expense related to the warrants. For the six months ended June 30, 2020 and 2019, the Company recorded $144,696 and $143,901 as compensation expense related to the warrants, respectively.

 

On February 26, 2019, the Company entered into director agreements with each of the Directors of the Company. Pursuant to the agreements, each Director may be compensated with share-based and/or cash-based compensation. The Directors’ compensation for the period January 1, 2019 through December 31, 2019 was $10,000 per quarter per Director to be paid on a date determined by the Board of Directors. In addition, the Directors were able to receive a one-time award of the ability to purchase a particular amount of warrants, as determined by the Board of Directors. On January 1, 2020, the director agreements were renewed with the same terms. As of June 30, 2020 and December 31, 2019 the Company has accrued $240,000 and $160,000, respectively, in relation to the director agreements.

 

On December 31, 2019, three of the Directors of the Company were awarded share-based compensation for services performed during the service period of January 1, 2019 through December 31, 2019, as a one-time award to each purchase 200,000 warrants (collectively the “Warrants”) with the following terms:

 

 

Number and Type – Each Director is entitled to a one-time award of Warrants for the number of shares of Series B Preferred Stock of the Company. Each share of Series B Preferred Stock shall have voting rights equal to five (5) votes per share. Each share of Series B Preferred Stock is convertible into five (5) shares of the Company’s common stock, including liquidation preference over common stock.

 

 

Duration – The Warrants entitle each Director to purchase the Series B Preferred Stock from the Company after December 31, 2019 and before December 30, 2029.

 

 

Purchase Price - The purchase price is $1.20 per share of Series B Preferred Stock. These warrants have a price protection clause which was triggered, resulting in the exercise price of the warrants being adjusted to an exercise price of $0.75. The effect was immaterial.

 

 

Cashless Exercise - If on the date the Director surrenders all or a portion of the Warrants for the purchase of Series B Preferred Stock or the equivalent number of shares of Common Stock, the per share market value of one share of Common Stock is greater than the exercise price of the equivalent Warrant, in lieu of exercising the Warrant by payment of cash, the Director may exercise the Warrant by a cashless exercise and shall receive a ratably lower number of shares of Series B Preferred Stock or the equivalent number of shares of Common Stock.

 

 

Vesting - The Warrants are fully vested at issuance.

 

The Company issued warrants with respect to 600,000 Series B Preferred Stock, in the aggregate. The Company expensed the fair value of these warrants in the amount of $720,000 for the year ended December 31, 2019.

 

 
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NOTE 3 – PROPERTY AND EQUIPMENT

 

Property and equipment, net consists of the following:

 

 

 

June 30,
2020

 

 

December 31,
2019

 

Leasehold improvements

 

$ 40,000

 

 

$ -

 

Equipment

 

 

196,792

 

 

 

-

 

Less: Accumulated depreciation and amortization

 

 

(12,741 )

 

 

-

 

Total

 

$ 224,051

 

 

$ -

 

 

NOTE 4 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

 

Accounts payable and accrued liabilities consist of the following:

 

 

 

June 30,

2020

 

 

December 31,

2019

 

Accounts payable

 

$ 451,100

 

 

$ 305,679

 

Interest

 

 

73,109

 

 

 

24,136

 

Salaries

 

 

262,933

 

 

 

386,121

 

Other

 

 

45,489

 

 

 

35,739

 

Total

 

$ 832,631

 

 

$ 751,675

 

 

 
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NOTE 5 – LOANS AND LONG-TERM LOANS

 

June 30,

2020

December 31,

2019

1.

Note payable at 12%, matures 7/20/2020. In connection with the original issuance, as well as subsequent extension, the Company has recorded debt discount and amortized it over the applicable life of the debt.

{a} *

$

50,000

$

100,000

 

2.

Note payable at 12%, matures 1/22/2021. In connection with the original issuance, as well as subsequent extension, the Company has recorded debt discount and amortized it over the applicable life of the debt.

*

18,000

18,000

 

3.

Note payable at 12%, matures 7/8/2020. In connection with the original issuance, as well as subsequent extension, the Company has recorded debt discount and amortized it over the applicable life of the debt.

{b} *

50,000

50,000

 

4.

Note payable at 12%, matures 6/11/2021. In connection with the original issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt.

*

25,000

25,000

 

5.

Note payable at 12%, matures 7/21/2021. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt.

*

250,000

250,000

 

6.

Note payable at 12%, matures 10/1/2021. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt.

*

410,000

410,000

 

7.

Note payable at 12%, matures 10/15/2021. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt.

*

140,000

140,000

 

8.

Note payable at 12%, matures 10/30/2021. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt.

*

200,000

200,000

 

9.

Note payable at 12%, matures 7/9/2021. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt.

*

60,000

-

 

10.

Note payable at 12%, matures 1/28/2022. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt.

*

96,000

-

 

11.

Note payable at 3.75%, matures 6/25/2050.

**

150,000

-

 

12.

Non-interest bearing note payable, matures on 9/30/2021.

{c} *

140,188

-

 

Unamortized debt discount

(436,287)

(544,490)

 

Total

 

1,152,901

 

648,510

 

Less: short term loans, net

257,400

165,270

 

Total long-term loans, net

$

895,501

$

483,240

 

________________  

 

{a} - On July 24, 2020, the Company extended the note to July 20, 2021 based on the same terms and conditions. In association with the extension the company issued 50,000 shares of common stock with a fair value on $17,500, which will be recorded a debt discount and amortized over the new life of the loan. 

{b} - On July 8, 2020, the Company extended the note to January 8, 2022 based on the same terms and conditions. In association with the extension the company issued 50,000 shares of common stock with a fair value on $16,000, which will be recorded a debt discount and amortized over the new life of the loan. 

{c} - On June 23, 2020, the Company issued a non-interest bearing promissory note for $140,188. In exchange for this note the Company received $80,187 of equipment and leasehold improvement, $29,814 of inventory, $18,224 of prepaid expenses and $11,963 of settlement of accrued expenses. 

* - unsecured note          

**- secured note and collateralized by all tangible and intangible personal property 

  

During the three months ended June 30, 2020 and 2019, the Company recorded $95,705 and $6,515 of interest expense related to the amortization of debt discount and $38,863 and $12,654 of regular interest, respectively. During the six months ended June 30, 2020 and 2019, the Company recorded $187,852 and $12,761 of interest expense related to the amortization of debt discount and $76,959 and $24,874 of regular interest, respectively. As of June 30, 2020 and December 31, 2019, accrued interest was $39,442 and $2,383, respectively.

 

 
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NOTE 6 – STOCKHOLDERS’ DEFICIT

 

On January 9, 2019, the Company issued 50,000 shares of common stock based on the fair market value on the date of issuance, in connection with third party note 1. (See Note 5).

 

On March 26, 2019, the Company signed a Facility Access and Wholesale Production Purchase and Sale Agreement for a term of twelve (12) months, which was extended through June 23, 2020, with an unrelated party to use the party’s leased commercial chocolate product manufacturing facility in exchange for paying the following:

 

 

(a)

the full amount of the party’s lease obligations of $6,433 per month plus taxes and common area maintenance fees through May 31, 2019 and $6,626 per month plus taxes and common area maintenance fees for 12 months through March 31, 2020; The contract auto renewed for the subsequent year.

 

(b)

66.6% of the party’s expenses related to payroll for employees that make the Company’s product; and

 

(c)

66.6% of the party’s operating expenses specifically related to the Company’s product including utilities, equipment, maintenance and insurance expenses.

 

On February 5, 2019, the Company also issued 100,000 shares of the Company’s common stock based on the fair market value on the date of issuance, as a charitable contribution to a non-profit entity in support of the entity’s environmental regeneration efforts.

 

On June 23, 2020, the Company entered into a new lease agreement and the above-mentioned agreement is now inactive. See Note 7. 

 

On January 10, 2020, the Company issued 60,000 shares of common stock based on the fair market value on the date of issuance, in connection with third party note 9. (See Note 5).

 

On January 21, 2020, the Company issued 50,000 shares of the Company’s common stock based on the fair market value on the date of issuance, in connection with the amendment of the third party note 1. (see Note 5).

 

On January 23, 2020, the Company issued 18,000 shares of the Company’s common stock based on the fair market value on the date of issuance, in connection with the amendment of the third party note 2. (see Note 5).

 

On January 29, 2020, the Company issued 96,000 shares of the Company’s common stock based on the fair market value on the date of issuance, in connection with third party note 10. (see Note 5).

 

On March 6, 2020, the Company entered into a six-month agreement with a strategic investment consultant. The investment consultant was awarded 400,000 shares of the Company’s common stock based on the fair market value on the date of issuance.

 

On March 13, 2020 and June 28, 2020, the Company issued 25,000 and 35,000 shares of the Company’s common stock based on the fair market value on the date of issuance, respectively, in connection with the extension of the maturity date of related party note 3. (see Note 2).

 

On May 6, 2020, the Company issued 250,000 shares of the Company’s common stock based on the fair market value on the date of issuance, in connection with the extension of the maturity date of related party note 4. (see Note 2).

 

On May 13, 2020, the Company entered into a three-month agreement with a consultant. The Consultant was awarded 150,000 shares of the Company’s common stock based on the fair market value on the date of issuance.

 

On June 15, 2020, the Company issued 160,000 shares of common stock based on the fair market value on the date of issuance in connection related party note 5. (see Note 2).

 

 
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Warrant Activity

 

Common Stock Warrants

 

On February 5, 2019, the Company signed a Consulting Agreement for a six (6) month term with a consultant to run the day-to-day manufacturing, packaging and distribution of the Company’s chocolate product line. The Consulting Agreement has a $7,000 monthly fee. In addition, the Company issued a warrant to the Consultant to purchase 60,000 shares of the Company’s common stock at the closing market price of $0.30 on February 5, 2019 with a term of three (3) years. The Company valued these warrants using the Black-Scholes option pricing model with the following inputs: exercise price of $0.30; fair market value of underlying stock of $0.30; expected term of 3 years; risk free rate of 2.50%; volatility of 388.56%; and dividend yield of 0%. The total fair value of these warrants is $17,988 and was expensed at issuance. The six-month Consulting Agreement ended on August 5, 2019 and was extended on a monthly basis through December 5, 2019, after which time the consultant was retained by R and W Financial to continue his services as a consultant for the company through R and W Financial. See Note 10 for subsequent issuance of warrants.

 

On January 29, 2020, the Company issued a promissory note of $96,000 (see Note 5). In connection with this note the Company issued warrants to purchase 96,000 shares of the Company’s common stock with an exercise price of $0.22 per share. The warrants are valued at $20,717 based on the Black Scholes Model and included in the debt discount. The warrants are fully vested as of the issue dates with an exercise term of three (3) years.

  

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, 2018

 

 

343,750

 

 

$ 0.08

 

Granted

 

 

1,060,000

 

 

 

0.31

 

Exercised

 

 

-

 

 

 

-

 

Forfeited or cancelled

 

 

-

 

 

 

-

 

Outstanding, December 31, 2019

 

 

1,403,750

 

 

$ 0.26

 

Granted

 

 

96,000

 

 

 

0.22

 

Exercised

 

 

-

 

 

 

-

 

Forfeited or cancelled

 

 

-

 

 

 

-

 

Outstanding, June 30, 2020

 

 

1,499,750

 

 

$ 0.25

 

 

As of June 30, 2020, 1,499,750 warrants for common stock were exercisable and the intrinsic value of these warrants was $27,638, there is no remaining expense and the weighted average remaining contractual life was 1.96 years for warrants outstanding.

 

As of June 30, 2019, 388,125 warrants for common stock were exercisable and the intrinsic value of these warrants was $66,281. As of June 30, 2019, the weighted average remaining contractual life was 2.13 years for warrants outstanding and the remaining expense is approximately $1,315 over the remaining amortization period which is 1 month.

 

Preferred Stock Warrants

 

On March 18, 2020, the Company issued its CFO and Director warrants to purchase 500,000 shares of Series B Preferred Stock in lieu of $250,000 of deferred salary. The warrants have an exercise price of $0.75 per share, are fully vested at issuance, and are exercisable from March 18, 2020 through March 17, 2030. The fair value of these warrants was $375,000 and the additional $125,000 over the deferred salary amount was recorded as compensation expense during the six months ended June 30, 2020. As a result of this issuance, the price protection clause on the director’s warrants issued on December 31, 2019 was triggered resulting in the warrants being reset to an exercise price of $0.75, and the effect was immaterial.

 

 
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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, 2018

 

 

3,370,000

 

 

$ 0.57

 

Granted

 

 

600,000

 

 

 

1.20

 

Outstanding, December 31, 2019

 

 

3,970,000

 

 

$ 0.67

 

Granted

 

 

500,000

 

 

 

0.75

 

Exercised

 

 

-

 

 

 

-

 

Forfeited or cancelled

 

 

-

 

 

 

-

 

Outstanding, June 30, 2020

 

 

4,470,000

 

 

$ 0.68

 

 

As of June 30, 2020, 4,230,000 warrants for Series B preferred stock were exercisable and the intrinsic value of these warrants was $714,060, the weighted average remaining contractual life was 7.89 years for warrants outstanding and the remaining expense is $146,286 over the remaining amortization period which is 6 months.

 

As of June 30, 2019, 2,650,000 warrants for Series B preferred stock were exercisable and the intrinsic value of these warrants was $2,212,100. As of June 30, 2019, the weighted average remaining contractual life was 8.25 years for warrants outstanding and the remaining expense is $437,267 over the remaining amortization period which is 1.50 years.

 

NOTE 7 – LEASES

 

On June 23, 2020, the Company entered into an operating lease agreement with terms 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.

 

The assets and liabilities from operating leases are recognized at the commencement date based on the present value of remaining lease payments over the lease term using the Company’s secured incremental borrowing rates or implicit rates, when readily determinable. Short-term leases, which have an initial term of 12 months or less, are not recorded on the unaudited consolidated balance sheet.

 

The Company’s operating lease does not provide an implicit rate that can readily be determined. Therefore, the Company uses a discount rate based on our incremental borrowing rate, which is determined using the average interest rate of our long-term debt as of June 23, 2020.

 

The Company’s weighted-average remaining lease term relating to its operating leases is 3.83 years, with a weighted-average discount rate of 12.00%.

 

The Company incurred no lease expense or operating cash flow during the three and six months ended June 30, 2020 due to the start of the lease on June 23, 2020 and payments starting on July 1, 2020.

 

The company does not include the non-lease components that are associated with the lease and accounts for them outside of the lease in accordance with ASC Topic 842 Leases. The percentage of cost associated with the lease component was 100%.

 

The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s operating leases as of June 30, 2020.

 

Maturity of Lease Liability

 

 

 

Remainder of 2020

 

$ 43,612

 

2021

 

 

85,860

 

2022

 

 

86,881

 

2023

 

 

89,487

 

2024

 

 

30,122

 

Total undiscounted operating lease payments

 

$ 335,962

 

Less: Imputed interest

 

 

68,258

 

Present value of operating lease liabilities

 

$ 267,704

 

 

 
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Table of Contents

 

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.

 

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. In the event that this agreement is terminated by FIFG within twelve months of signing of this agreement, a claw back provision can be invoked by FIFG whereby the Shares shall be returned to FIFG. Additionally, FIFG 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.

 

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.

 

NOTE 9 – CONCENTRATION RISKS

 

The Company recognizes the concentration of its merchant cash advances, which could inherently create a potential risk to future working capital in the event that the Company is not able to collect all, or a majority, of the outstanding merchant cash advances. The Company actively mitigates its portfolio concentration risk by monitoring its merchant cash advance provider’s ability to participate in merchant cash advances from alternative providers and spreading merchant cash advance participation across various merchants.

 

As of June 30, 2020, the Company’s receivables from merchant cash advances included $108,208 from two merchants ($34,964 and $73,244), representing 68% of the Company’s merchant cash advances. The Company earned $7,228 of MCA income from the same two merchants ($5,116 and $2,112), representing 45% of the Company’s MCA income for the three months ended June 30, 2020. The Company earned $82,447 of MCA income from the same two merchants ($57,181 and $25,266), representing 75% of the Company’s MCA income for the six months ended June 30, 2020.

 

 
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As of December 31, 2019, the Company’s receivables from merchant cash advances included $713,124 from two merchants ($179,853 and $533,271), representing 91% of the Company’s merchant cash advances. The Company earned $13,350 of MCA income from one merchant, representing 32% of the Company’s MCA income for the three months ended June 30, 2019. The Company earned $46,839 of MCA income from two merchants ($25,852 and $20,987), representing 30% of the Company’s MCA income for the six months ended June 30, 2019.

 

As of June 30, 2020, there was no accounts payable concentration other than amounts owed to related parties which makes up 65% of the balance. As of December 31, 2019, there was no accounts payable concentration other than amounts owed to related parties which makes up 61% of the balance.

 

For the three months ended June 30, 2020, the Company had purchase concentrations of 90% from one vendor. For the six months ended June 30, 2020, the Company had purchase concentrations of 73% and 14% from two vendors. For the three and six months ended June 30, 2019, the Company had purchase concentrations of 100% from one vendor.

 

NOTE 10 – SUBSEQUENT EVENTS

 

On July 19, 2020, the Company issued 50,000 shares of the Company’s common stock based on the fair market value on the date of issuance, in connection with the amendment of the third party note 3. (see Note 5).

 

On July 13, 2020, our Board of Directors appointed Michael Kaplan to the Board of Directors. Mr. Kaplan is currently not expected to be named as a member of any committees of our Board of Directors.

 

Mr. Kaplan’s compensation as a director for the initial twelve months will consist of one million (1,000,000) warrants which will vest at the rate of 83,333 warrants per month for the initial eleven months and the balance in the twelfth month, provided he is a director on each vesting date, with the initial tranche vesting on the day he takes office and then on each monthly anniversary of such date thereafter. Each Warrant will be exercisable for 36 months after it vests and will be exercisable at a price of $0.18 per share. The warrants are valued at $177,200 based on the Black Scholes Model. If he remains in office beyond twelve months, commencing with month thirteen, his compensation will be similar to the majority of the directors then in office.

 

Prior to Mr. Kaplan’s appointment to the Board of Directors, on July 7, 2020 we entered into (i) a Subscription Agreement with Mr. Kaplan to sell to him one million (1,000,000) shares of common stock at a purchase price of $0.20 per share for a total purchase price of $200,000, which shares shall be purchased in twelve (12) equal monthly installments of 83,333 shares (the last installment to cover 83,337 shares) with the initial purchase occurring on the date thereof and subsequent instalments on each monthly anniversary thereafter (ii) 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, and (iii) an arrangement with Mr. Kaplan that in the event he raises outside investment in the Company in the amount of $500,000 - $2,000,000, he will receive one warrant for each dollar he so raises. The warrants to purchase two million shares of common stock are valued at $354,400 based on the Black Scholes Model.

 

 
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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.

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 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.

     

If terminated with cause by the Company, the consultant shall not thereafter be entitled to any form of compensation and 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.

 

Effective August 1, 2020, Mr. Kaplan will also have the title Chief Marketing Officer with authority to oversee the Company’s sales and marketing operations, and responsibility for developing oversight processes and procedures.

 

On July 24, 2020, the Company issued 50,000 shares of the Company’s common stock based on the fair market value on the date of issuance, in connection with the amendment of the third party note 1. (see Note 5).

 

On July 31, 2020, the Company issued a warrant to purchase 100,000 shares of the Company’s common stock to a consultant for services. The warrants are valued at $31,500 based on the Black Scholes Model.

 

On August 4, 2020, the Company signed an Employment Agreement for a term of three. The employee, Mr. Moises Davidovits, will assist with the manufacturing, packaging and distribution of the Company’s chocolate product line. The Employment Agreement has a $7,000 monthly salary. In addition, the Company issued a warrant to Mr. Davidovits to purchase 300,000 shares of the Company’s common stock with a term of three (3) years. The warrants are valued at $97,470 based on the Black Scholes Model. In addition, he will receive a warrant to purchase 300,000 of the Company’s common stock for each of the two remaining years under the Employment Agreement with an exercise price equal to the closing market price of the Company’s common stock on the first day of each of such two annual employment periods. 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. Each of the warrants will be exercisable within a three-year period from the date of issue. Once per quarter, Mr. Davidovits 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 Mr. Davidovits’ employment is terminated by the Company without cause, he 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. He additionally shall be entitled to retain all warrants scheduled to vest within the following six months.

 
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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,” “estimates,” “opines,” “plans,” 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;

 

(f)

rapid adverse changes in markets; due to among other things, war, terrorism, weather conditions, environmental factors, pandemic, economic crises, legislation, etc.;

 

(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; and

 

(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.

 

In December 2019, a novel strain of coronavirus surfaced. The spread of COVID-19 around the world in the first quarter of 2020 has caused significant volatility in U.S. and international markets. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. and international economies. The Company’s financial position, operations, and cash flows as of June 30, 2020 have been adversely affected, and may be further affected in the future, by the recent and ongoing outbreak of the coronavirus disease 2019 (COVID-19) which in March 2020, was declared a pandemic by the World Health Organization. The ultimate disruption which may be caused by the outbreak is uncertain; however, it may result in a material adverse impact on the Company’s financial position, operations and cash flows. Possible areas that may be affected include, but are not limited to, disruption to the Company’s labor workforce, unavailability of products and supplies used in operations, and the decline in value of assets held by the Company. As of June 30, 2020 and through the filing date of the financial statements, the Company has continued to collect its receivables from its cash advances but has experienced an increase in payment delinquencies and has had two customers renegotiate the terms of their cash advance due to COVID-19.

 

 
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There is no assurance that First Foods will be profitable, due to, among other potential reasons, that First Foods may not be able to successfully develop, manage or market its products and services, First Foods may not be able to attract or retain qualified executives and personnel, First Foods may not be able to obtain customers for its products or services, additional dilution in outstanding stock ownership may be incurred due to the issuance of more shares, warrants and stock options, or the exercise of outstanding warrants and stock options, and other risks inherent in First Foods’ 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.

 

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 more than $100,000,000 and had a public float of more 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.” 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 and participating in merchant cash advances through its 1st Foods Funding Division. First Foods continues to pursue new foodservice brands and menu concepts.

 

On August 31, 2017, the Company formed Holy Cacao, Inc., a Nevada corporation (“Holy Cacao”). Holy Cacao has 100 shares of no par value common stock authorized, issued and outstanding with 85 shares owned by the Company and 15 shares owned by non-controlling interests. Holy Cacao 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 marijuana-based ingredient, 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. On February 27, 2019, the United States Patent and Trademark Office (the “USPTO”) approved Holy Cacao’s trademark brand, “The Edibles’ Cult.” On November 26, 2019, the USPTO approved Holy Cacao’s trademark brand, “Purely Irresistible.” The Company has submitted multiple applications to the USPTO for additional brand names, including “Mystere” and “Southeast Edibles” among others. On February 5, 2019, the Company signed a Consulting Agreement with a consultant to assist in the manufacturing, packaging and distribution of the Company’s chocolate product line. On March 26, 2019, the Company signed a Facility Access and Wholesale Production Purchase and Sale Agreement that allows it to use a fully staffed and fully equipped state of the art manufacturing facility to produce its specialty chocolate product line and sell it to manufacturing and wholesaling companies. On March 1, 2020, the Company’s Board of Directors made a strategic decision to broaden the appeal of its hemp-based chocolate products to a wider base of customers, who are particularly discerning about the cleanliness of the Company’s manufacturing facility and quality of its hemp-based chocolate products, by successfully obtaining worldwide Kosher certification from the Union of Orthodox Jewish Congregations of America, Kashruth Division (the “OU”), which is the largest and most recognized certification of its kind in the world. On March 9, 2020, the Company retained Tartikov Beth Din (“BD”) to allow BD to supervise the hemp-based chocolate products produced by the Company in accordance with OU certification standards. On July 13, 2020, Michael Kaplan was appointed to the Board of Directors and, as of August 1, 2020, accepted the role of Chief Marketing Officer with authority to oversee the Company’s sales and marketing operations, and responsibility for developing oversight processes and procedures. On August 4, 2020 the Company retained Moises Davidovits as its full-time chocolatier. Mr. Davidovits is a third-generation chocolatier who is responsible for the manufacturing, packaging and distribution of the Company’s chocolate product line, as well as the formulation of all of the Company’s proprietary chocolate recipes.

 

 
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On October 25, 2017, the Company entered into 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. On November 8, 2018 the Company also began providing cash advances directly to merchants.

 

The Company 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.

 

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.

  

Results of Operations for the Three Months Ended June 30, 2020 compared to the Three Months Ended June 30, 2019

 

We had $24,711 of revenue for the three months ended June 30, 2020 compared to $73,461 in revenue for the three months ended June 30, 2019. Our decrease in revenue was the result of a decrease in product sales and participation in merchant cash advances. For the three months ended June 30, 2020, our operating expenses were $457,628 which consisted of cost of product sales of $4,703, professional fees of $17,896, general and administrative expenses of $358,176, and provision for potential merchant cash advance of $76,853. Our net loss was $602,621. For the three months ended June 30, 2019, our operating expenses were $431,839 which consisted cost of product sales of $20,983, professional fees of $25,615, general and administrative expenses of $391,340 and a gain of $6,099 of provision for potential merchant cash advances. Our net loss was $386,292. This increase in our net loss was primarily due to increased costs associated with bad debt provision and interest expense.

 

Results of Operations for the Six Months Ended June 30, 2020 compared to the Six Months Ended June 30, 2019

 

We had $121,685 of revenue for the six months ended June 30, 2020 compared to $188,298 in revenue for the six months ended June 30, 2019. Our decrease in revenue was the result of a decrease in product sales and participation in merchant cash advances. For the six months ended June 30, 2020, our operating expenses were $1,483,725 which consisted of cost of product sales of $5,451, professional fees of $30,327, general and administrative expenses of $968,062, and provision for potential merchant cash advance of $479,885. Our net loss was $1,685,117. For the six months ended June 30, 2019, our operating expenses were $888,317 which consisted of cost of product sales of $20,983, professional fees of $54,847, general and administrative expenses of $790,248 and a provision for potential merchant cash advance defaults of $22,239. Our net loss was $752,883. This increase in our net loss was primarily due to increased costs associated with expanding the business, producing products, consulting and accounting fees, advertising and promotion, provision for potential merchant cash advance defaults and interest expense.

 

 
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Cash Flows

 

Operating Activities

 

Net cash used in operating activities for the six months ended June 30, 2020 amounted to $440 and was $54,763 for the six months ended June 30, 2019. This includes a net loss of approximately $1,685,000, offset by non-cash expenses of approximately $1,560,000 related to stock-based compensation, depreciation and amortization expense and reserves for merchant cash advances, and approximately $120,000 related to the change in net working capital items which includes the increase in accounts payable and accrued liabilities, deferred revenue, inventory, prepaid expenses and other current assets and a decrease in accounts receivable and deferred merchant cash commissions. This resulted in a working capital deficiency of $(1,471,412) at June 30, 2020 and $(732,653) at December 31, 2019.

 

Investing Activities

 

Net cash used in investing activities amounted to $156,605 for the six months ended June 30, 2020 and was $0 for the six months ended June 30, 2019. This was due to the purchase of equipment in 2020.

 

Financing Activities

 

Net cash provided by financing activities amounted to $331,200 for the six months ended June 30, 2020 and $56,850 for the six months ended June 30, 2019. This was due to an increase of proceeds from loans in 2020 vs 2019, partially offset by repayment of loans.

 

Liquidity and Capital Resources

 

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.

 

In order to continue as a going concern, the Company will need, among other things, additional capital resources. As of June 30, 2020, the Company had approximately $257,000 of third-party short-term debt that is due within the next twelve months. Management’s plan is to 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, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

 

The Company does not have sufficient cash flow for the next twelve months from the 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.

 

In December 2019, a novel strain of coronavirus (“COVID-19”) surfaced. The spread of COVID-19 around the world in the first quarter of 2020 has caused significant volatility in U.S. and international markets. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. and international economies. The Company’s financial position, operations, and cash flows as of June 30, 2020 have been adversely affected, and may be further affected in the future, by the recent and ongoing outbreak of COVID-19 which in March 2020, was declared a pandemic by the World Health Organization. The ultimate disruption which may be caused by the outbreak is uncertain; however, it may result in a material adverse impact on the Company’s financial position, operations and cash flows. Possible areas that may be affected include, but are not limited to, the decline in value of assets held by the Company. As of June 30, 2020 and through the filing date of the financial statements, the Company has continued to collect its receivables from its cash advances but has experienced an increase in payment delinquencies and has had two customers renegotiate the terms of their cash advance due to COVID-19.

 

 
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Concentration Risks

 

The Company recognizes the concentration of its merchant cash advances, which could inherently create a potential risk to future working capital in the event that the Company is not able to collect all, or a majority, of the outstanding merchant cash advances. The Company actively mitigates its portfolio concentration risk by monitoring its merchant cash advance provider’s ability to participate in merchant cash advances from alternative providers and spreading merchant cash advance participation across various merchants.

 

As of June 30, 2020, the Company’s receivables from merchant cash advances included $108,208 from two merchants ($34,964 and $73,244), representing 68% of the Company’s merchant cash advances. The Company earned $7,228 of MCA income from the same two merchants ($5,116 and $2,112), representing 45% of the Company’s MCA income for the three months ended June 30, 2020. The Company earned $82,447 of MCA income from the same two merchants ($57,181 and $25,266), representing 75% of the Company’s MCA income for the six months ended June 30, 2020.

 

As of December 31, 2019, the Company’s receivables from merchant cash advances included $713,124 from two merchants ($179,853 and $533,271), representing 91% of the Company’s merchant cash advances. The Company earned $13,350 of MCA income from one merchant, representing 32% of the Company’s MCA income for the three months ended June 30, 2019. The Company earned $46,839 of MCA income from two merchants ($25,852 and $20,987), representing 30% of the Company’s MCA income for the six months ended June 30, 2019.

 

As of June 30, 2020, there was no accounts payable concentration other than amounts owed to related parties which makes up 65% of the balance. As of December 31, 2019, there was no accounts payable concentration other than amounts owed to related parties which makes up 61% of the balance.

 

For the three months ended June 30, 2020, the Company had purchase concentrations of 90% from one vendor. For the six months ended June 30, 2020, the Company had purchase concentrations of 73% and 14% from two vendors. For the three and six months ended June 30, 2019, the Company had purchase concentrations of 100% 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 June 30, 2020, 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 June 30, 2020 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 June 30, 2020, 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 Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2019. Except as described below, there have been no material changes from the risk factors previously disclosed in such Annual Report on Form 10-K.

 

We face risks related to health epidemics and other widespread outbreaks of contagious disease, which could significantly disrupt our business and impact our operating results.

 

Significant outbreaks of contagious diseases, and other adverse public health developments, could have a material impact on our business operations and operating results. In December 2019, a strain of novel coronavirus causing respiratory illness and death emerged in the city of Wuhan in the Hubei province of China.

 

Significant development and spread of the coronavirus did not take place until January 2020. At December 31, 2019, only certain events and associated actions had taken place, such as the Wuhan Municipal Health Committee’s issue on December 30, 2019. Although cases were reported to the World Health Organization (“WHO”) on December 31, 2019, the WHO did not announce the coronavirus as a global health emergency until January 30, 2020, which prompted national governments to begin putting actions in place to slow the spread of COVID-19.The coronavirus was subsequently declared a global pandemic by the WHO in March 2020 and has been spreading throughout the world, including the United States, resulting in emergency measures, including travel bans, closure of retail stores, and restrictions on gatherings of more than a maximum number of people. To the extent that these outbreaks are disruptive to local economies and commercial activity, that development has, and will likely continue for the foreseeable future to, create downward pressure on the ability of the merchants to whom we have made merchant cash advances to timely make their payments and for our specialty chocolate product line to be available to consumers or for consumers to purchase our products, even if our products are available. At this time, we cannot predict with any certainty the severity with which this disease will continue to strike the United States. Accordingly, we cannot estimate the extent by which we will be negatively impacted by this disease. In the relatively short period with which the world has been dealing with this pandemic, significant economic turmoil has already impacted world markets. Accordingly, we can expect that our sales, net income and cash flows will be negatively impacted. While the governmental organizations of the United States, as well as governments across the world are implementing emergency economic measures and announcing the consideration of additional emergency economic assistance packages, it is unclear what impact they are having, and will have, on the economy in the United States and worldwide. Great uncertainty surrounds the length of time this disease will continue to spread, the number of people it will impact, directly and indirectly, and the extent governments will continue to impose, or add additional, quarantines, curfews, travel restrictions and closures of retail stores. In addition, even following control of the disease and the end of the pandemic, the economic dislocation caused by the disease to so many people may linger and be so significant that consumers’ focus could be directed away from consumer discretionary spending for products such as ours and for the products and services offered by the merchants to whom we have made merchant cash advances for an extended period of time. For all of these reasons, at this time we cannot quantify the extent of the impact this disease will have on our sales, net income and cash flows, but it could be significant.

 

 
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

The Company issued 595,000 shares of the Company’s common stock during the three months ended June 30, 2020. 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

 

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)

3.3

 

Assignment of Lease and Consent to Assignment and Amendment

10.1

 

Chairman and CEO Agreement, dated May 6, 2020, by and between First Foods Group, Inc. and Harold Kestenbaum

31.1

 

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

32.1

 

Certifications of Chief Executive 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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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: August 13, 2020

 

Harold Kestenbaum,

 

Chairman of the Board and

 

Interim Chief Executive Officer

 

 

By:

/s/ Mark J. Keeley

 

Dated: August 13, 2020

 

Mark J. Keeley,

 

Chief Financial Officer

  

 
31

 

EX-3.3 2 fifg_ex33.htm ASSIGNMENT OF LEASE AND CONSENT fifg_ex33.htm

  EXHIBIT 3.3

 

ASSIGNMENT OF LEASE AND CONSENT TO ASSIGNMENT AND AMENDMENT

 

ASSIGNMENT OF LEASE AND CONSENT TO ASSIGNMENT

 

For and in consideration of the sum of Ten Dollars ($10.00) and other good and valuable consideration, the receipt of which is hereby acknowledged, the undersigned, Genesis Laboratories, LLC, hereinafter referred to as “Assignor”, hereby assigns to First Foods Group Inc. hereinafter referred to as “Assignee”, all of its right, title and interest in and to that certain Lease Agreement bearing date of the December 31, 2016 (“Original Lease”) and as amended by that certain First Amendment ((lease Agreement dated April 21, 2017 (collectively the “Lease”), entered into with Adler Oakes, Ltd., as Landlord, and the Assignor, as Tenant, for certain space described as: 4360 Oakes Road, Units 607 and 608-609, Davie, FL 33314 (“Premises”‘).

 

In consideration thereof, the Assignee hereby agrees to assume all of the terms, conditions and covenants contained in the Lease hereinabove described.

 

The Assignor hereby agrees that in consideration of Landlord consenting to the foregoing assignment that it shall continue to remain liable to the Landlord for the faithful performance of all of the terms, conditions and covenants of the above-described Lease.

 

Each of the parties represents and warrants that it has dealt with no broker or brokers in connection with the execution of this Assignment of Lease and Consent to Assignment, except Adler Realty Services LLC, and each of the parties agrees to indemnify the other against, and hold it harmless from all liabilities arising from any claim for brokerage commissions or finder’s fee resulting from the indemnitor’s acts (including, without limitation, the cost of counsel fees in connection therewith) except for the persons or entities set forth above.

 

Assignor represents it is the sole owner and holder of the Leasehold interest and the same has not been assigned, sublet, hypothecated or encumbered. Assignor shall indemnify Landlord from any claims, causes of action and/or liability arising out of the inaccuracy of this representation.

 

The Assignor, by this Assignment, does assign to Assignee its rights, title and interest to any security deposits and/or prepaid rent, if any, previously paid to the Landlord.

 

Assignor shall pay Landlord an administrative fee of $350.00 as provided under the Lease.                 

 

The effectiveness of this Assignment is upon execution of this Assignment and conditioned upon Assignee obtaining and providing proof of all insurance required of a tenant under the Lease and appropriate occupational license for the Assignee.

 

END OF ASSIGNMENT

SIGNATURES ON NEXT PAGE

 

 
1

 

 

IN WITNESS WHEREOF, the Landlord, Assignor and Assignee have duly signed and executed this document this 23rd day of June, 2020.

 

 

ASSIGNEE:

First Foods Group, Inc., a Nevada corporation

 

 

 

 

 

By:

 

Print name: Mark J. Keeley

 

Title: Chief Financial Officer

  

In CONSIDERATION of the agreement of the Assignor to continue to remain liable to the undersigned, the undersigned hereby consents to the assignment of the above-described Lease to the Assignee.

WITNESSES:   

   

By: AP-Adler Oakes, Ltd, a Florida limited liability partnership, Barbara Navarro.

 

By: Oakes FlexSpace 2 LLC, a Florida limited liability company, its general partner, Maribel Figueroa.

 

By: Adler Newco GP 2, Inc., a Florida Corporation, its managing member, Tina M. Spano.

 

 
2

 

 

AMENDMENT TO LEASE AGREEMENT

 

AP-Adler Oakes, Ltd. (“Landlord”) and First Food Group, Inc. (“Tenant’), for and in consideration of the sum of Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, do covenant and agree as follows:

 

1.

Landlord and Genesis Laboratories, LLC, Tenant’s predecessor in interest entered into that certain Lease Agreement dated December 3 1, 2016 (the “Original Lease”); as amended by that certain First Amendment to Lease Agreement dated April 21, 2017 and as amended by that certain Assignment of Lease and Consent to Assignment dated June 23, 2020 (collectively the “Lease”) for Premises described as: 4360 Oakes Road, Units 607 and 608-609 Davie, FL 33314 consisting of 6,407 rentable square feet.

 

 

2.

The Lease expires by its terms on April 30, 2021 (“Expiration Date”).

 

 

3.

By this Second Amendment to Lease Agreement (“Second Amendment”), Landlord and Tenant agree to extend the term until April 30, 2024 (‘New Expiration Date”). period between the Expiration Date and New Expiration Date for all three Units shall be referred to as the e ‘Extension Term”.

 

 

4.

Base Rent: For the Extension Term, Base Rent owed by Tenant under the Lease, as amended shall be as follows:

 

Period

Monthly Base Rent

Periodic Base Rent

5/1/21 - 4/30/22

$7,098.11

$85, 177.32

5/1122—4/3003

$7,311.06

$87,732.72

5/1/23 - 4/30/24

$7,530.39

$90,364.68

    

Together with applicable sales tax and other additional rent applicable under the Lease.

    

5.

Condition or Premises: Tenant is retaining the Premises in “As-Is” condition.

 

 

6.

Except otherwise expressly set forth herein, this Second Amendment shall not be construed as (i) granting Tenant additional rights, including, but not limited to, any express or implied right to remain in the space after the New Expiration Date or (ii) a modification of any holdover provisions in the Lease.

 

 

7.

To the extent not amended in, or inconsistent with the terms of this Second Amendment, the terms of the Lease shall remain in full force and effect.

 

 

8.

Brokerage: Each of the parties represents and warrants that it has dealt with no broker or brokers in connection with the negotiation or execution of this Second Amendment, except Adler Realty Services, LLC (“Landlord’s Broker’), each of the parties agrees to indemnify the other party hereto (and its members, principals, beneficiaries, partners, officers, directors, employees, mortgagee(s) and agents (collectively, the “Related Parties”)) against, and hold it harmless from, all liabilities arising from any claim for brokerage commissions or finder’s fee resulting from the indemnitor’s acts (including, without limitation, reasonable attorney’s fees in connection therewith); provided, however, Tenant shall not be required to indemnify Landlord for claims made by Landlord’s Broker (or any party claiming by or through Landlord’s Broker).

 

 

9.

Base Year: Base year for Percentage/Proportionate Share during the Extension Term is 2016.

 

 

10.

Security Deposit: Landlord is currently holding a deposit in the sum of $18,223.94 ($11,247.13 as security deposit and $6,976.81 as last month’s rent) transferred from prior tenant Genesis Laboratories. On May 1, 2021, Tenant shall deposit an additional $5,835.67 ($16,039.74 as security deposit and $8,019.87 as last month’s rent) for a total deposit of $24,059.61.

 

 
3

 

 

11.

Option to Renew: Tenant is hereby granted an option to renew the Lease pursuant to the following terms and conditions:

  

 

(a)

Provided that at the time such option is exercised and at the expiration of the Term, (i) Tenant is not in default under the Lease, (ii) Tenant has not assigned this Lease or sublet the Premises, other than to permitted subleases or assignees as permitted in the Lease, (iii) Tenant continues to occupy the Premises, (iv) Tenant’s use is consistent with the general quality of the tenants and uses in the Project, and (v) Tenant remains creditworthy. Tenant is granted one (I) option to renew the Lease for a period of three (3) years.

 

 

 

 

(b)

Base Rent for the option period shall be the of (i) ninety (90%) of market rate, with market rate incorporating an increase in Base Rent for each year of the option period or (b) the Periodic Rent for the last twelve (12) months of the Extension Term with three (3%) percent increases each year of the option period, Market rate shall be based upon comparable rates for similar space in the surrounding area.

 

 

 

 

(c)

Tenant shall exercise its option by providing written notice (“Option Notice”) of its intent to exercise an option at least one hundred twenty (120) days prior to the then applicable expiration period. Failure to provide timely notice shall render the pending option and further option null and void.

 

 

 

 

(d)

Landlord shall have the right but not the obligation to withdraw and void the option if Tenant is in breach (after applicable notice and opportunity to cure) of this Lease at the time of (i) the Option Notice or (ii) at any between the Option Notice and the date the option period is to commence. Landlord shall provide the notice of its withdrawal of option within ten (10) days after the cure period has expired.

 

 

 

 

(e)

Each party shall provide the other with its opinion of market rate at least ninety (90) days prior to the then applicable expiration period. In the event the parties cannot agree as to market rate, the same shall be determined by binding arbitration with American Arbitration Association, with each party picking an arbitrator and the two (2) chosen arbitrators jointly picking a third arbitrator. Until arbitration is concluded, Base Rent for the time in dispute shall be paid as if Base Rent increased four (4%) percent (“Interim Payments”). Upon final determination of appropriate market rate, the parties shall adjust the Interim Payments accordingly. Additional Rent — Passthrough Expenses shall be paid pursuant to the terms of the Lease.

  

12.

Tenant represents that it has not made any assignment, sublease, transfer or conveyance of the Lease or any interest therein or in the Premises unless explicitly recited herein.

 

 

13.

Tenant’s Contact Notice Address: Attn: Hershel Weiss 4360 Oakes Road, Units 607 & 608-609, Davie, FL 33314. Phone: 201-687-0213 Email: hershyw@firstfoodgrp.com

 

 

14.

Landlord Notice Address: AP-Adler Oakes, Ltd. c/o Adler Realty Services, LLC 9050 Pines Blvd, Suite 101, Pembroke Pines, FL 33024,

 

 

15.

Radon Gas: Radon is naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in Florida. Additional information regarding radon and radon testing may be obtained from your county public health unit.

 

 

16.

The person executing this Second Amendment on behalf of Tenant hereby represents that Tenant and any entity signing on behalf of Tenant are valid and existing entities authorized to do business in the State Of Florida and that the actual signatory is fully authorized to act on behalf of the entity(ies) for which the individual is purportedly signing.

  

This Amendment shall be binding upon, and inure to the benefit of, Landlord and Tenant and their respective successors, and assigns. This Second Amendment may be executed in counterparts.

    

 
4

 

 

 

DATED this 23rd               day of June, 2020.

 

 

 

 

Witness as to Landlord:

Landlord:

   

    

 

Tennant:

 

 

 

 

 

First Foods Group, Inc., a Nevada corporation

 

 

 

 

 

 

 

 

By:

 

 

Print name: Mark J. Keeley

 

 

Title: Chief Financial Officer

   

 
5

 

EX-10.1 3 fifg_ex101.htm CHAIRMAN AND CEO AGREEMENT fifg_ex101.htm

 

EXHIBIT 10.1

 

Chairman of the Board of Directors (Chairman) and Interim Chief Executive Officer (CEO) Agreement

 

Effective May 6, 2020 (the “Effective Date”), the January 1, 2020 Director Agreement between Harold Kestenbaum (the “Director and Interim Chief Executive Officer (CEO)”) and First Foods Group, Inc. (the “Corporation”), represented by the Board of Directors of the Corporation (collectively the “Parties”), is hereby amended to include the role of Harold Kestenbaum as the Chairman of the Board of Directors (“Chairman”) and Interim Chief Executive Officer (“CEO”) as follows:

 

Responsibilities and Consideration:

 

-

The Chairman and CEO will continue to serve on the Board of Directors of the Corporation and be responsible for day to day duties for the benefit of the Corporation.

 

 

-

The Chairman and CEO’s compensation may consist of cash-based and/or share-based compensation.

 

 

-

The Chairman and CEO’s cash-based and/or share-based compensation for the period January 1, 2020 through December 31, 2020 will be $10,000 per quarter paid on a date determined by the vote of the Board of Directors.

 

 

-

In addition, the Chairman and CEO may receive a one-time award of the ability to purchase a particular amount of warrants, as determined by the Board of Directors.

 

IN WITNESS WHEREOF, the parties have executed this Term Sheet as of the Effective Date.

 

 

 

 

FIRST FOOD GROUP, INC.

 

 

 

 

 

 

 

By:

/s/ Harold Kestenbaum

 

By:

/s/ Mark J. Keeley

 

 

Harold Kestenbaum

 

 

Mark J. Keeley

 

 

 

 

 

 

 

 

 

By:

/s/ Abraham Rosenblum

 

 

 

 

 

Abraham Rosenblum

 

 

 

 

 

 

 

 

 

 

By:

/s/ Hershel Weiss

 

 

 

 

 

Hershel Weiss

 

 

 

 

 

  

 

 

 

 

By:

/s/ Michael Kaplan

 

 

 

 

 

Michael Kaplan

 

EX-31.1 4 fifg_ex311.htm CERTIFICATION fifg_ex311.htm

 

EXHIBIT 31.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

 

I, Harold Kestenbaum, certify that:

 

1.

I have reviewed this report on Form 10-Q of First Foods Group, Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c.

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

d.

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (of persons performing the equivalent functions):

 

 

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

 

Dated: August 13, 2020

 

/s/ Harold Kestenbaum

 

Harold Kestenbaum,

Interim Chief Executive Officer

 

(Principal Executive Officer)

EX-31.2 5 fifg_ex312.htm CERTIFICATION fifg_ex312.htm

 

EXHIBIT 31.2

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER

 

I, Mark J. Keeley, certify that:

 

1.

I have reviewed this report on Form 10-Q of First Foods Group, Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

c.

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

d.

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (of persons performing the equivalent functions):

 

 

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

 

Dated: August 13, 2020

 

/s/ Mark J. Keeley

 

Mark J. Keeley,

Chief Financial Officer

 

(Principal Financial/Accounting Officer)

EX-32.1 6 fifg_ex321.htm CERTIFICATION fifg_ex321.htm

 

EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO

418 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

  

In connection with the Quarterly Report of First Foods Group, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2020 (the “Report”) I, Harold Kestenbaum, Chief Executive Officer of the Company, certify, pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

 

 

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d)of the Securities Exchange Act of 1934; and

 

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ Harold Kestenbaum

 

Dated: August 13, 2020

Harold Kestenbaum,

Interim Chief Executive Officer

 

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

EX-32.2 7 fifg_ex322.htm CERTIFICATION fifg_ex322.htm

 

EXHIBIT 32.2

 

CERTIFICATION PURSUANT TO

418 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of First Foods Group, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2020 (the “Report”) I, Mark J. Keeley, Chief Financial Officer (Principal Financial/Accounting Officer) of the Company, certify, pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

 

 

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d)of the Securities Exchange Act of 1934; and

 

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ Mark J. Keeley

 

Dated: August 13, 2020

 

Mark J. Keeley,

Chief Financial Officer

 

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

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Business</u></p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">First Foods Group, Inc. (the &#8220;Company&#8221; or &#8220;First Foods&#8221;) is a smaller reporting company focused on developing its specialty chocolate product line and participating in merchant cash advances (&#8220;MCA&#8221;) through its 1<sup>st</sup> Foods Funding Division. First Foods continues to pursue new foodservice brands and menu concepts. </p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">On August 31, 2017, the Company formed Holy Cacao, Inc., a Nevada corporation (&#8220;Holy Cacao&#8221;). Holy Cacao has 100 shares of no par value common stock authorized, issued and outstanding with 85 shares owned by the Company and 15 shares owned by non-controlling interests. Holy Cacao 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&#8217;s understanding of the Agricultural Act of 2014 (the &#8220;2014 Farm Bill&#8221;) and/or the Agriculture Improvement Act of 2018 (the &#8220;2018 Farm Bill,&#8221; and together with the 2014 Farm Bill, collectively, the &#8220;Farm Bill&#8221;), 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 marijuana-based ingredient, 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 (&#8220;IP&#8221;), 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&#8217;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. On February 27, 2019, the United States Patent and Trademark Office (the &#8220;USPTO&#8221;) approved Holy Cacao&#8217;s trademark brand, &#8220;The Edibles&#8217; Cult.&#8221; On November 26, 2019, the USPTO approved Holy Cacao&#8217;s trademark brand, &#8220;Purely Irresistible.&#8221; The Company has submitted multiple applications to the USPTO for additional brand names, including &#8220;Mystere&#8221; and &#8220;Southeast Edibles&#8221; among others. On February 5, 2019, the Company signed a Consulting Agreement with a consultant to assist in the manufacturing, packaging and distribution of the Company&#8217;s chocolate product line. On March 26, 2019, the Company signed a Facility Access and Wholesale Production Purchase and Sale Agreement that allows it to use a fully staffed and fully equipped state of the art manufacturing facility to produce its specialty chocolate product line and sell it to manufacturing and wholesaling companies. On March 1, 2020, the Company&#8217;s Board of Directors made a strategic decision to broaden the appeal of its hemp-based chocolate products to a wider base of customers, who are particularly discerning about the cleanliness of the Company&#8217;s manufacturing facility and quality of its hemp-based chocolate products, by successfully obtaining worldwide Kosher certification from the Union of Orthodox Jewish Congregations of America, Kashruth Division (the &#8220;OU&#8221;), which is the largest and most recognized certification of its kind in the world. On March 9, 2020, the Company retained Tartikov Beth Din (&#8220;BD&#8221;) to allow BD to supervise the hemp-based chocolate products produced by the Company in accordance with OU certification standards. On July 13, 2020, Michael Kaplan was appointed to the Board of Directors and, as of August 1, 2020, accepted the role of Chief Marketing Officer with authority to oversee the Company&#8217;s sales and marketing operations, and responsibility for developing oversight processes and procedures. On August 4, 2020 the Company retained Moises Davidovits as its full-time chocolatier. Mr. Davidovits is a third-generation chocolatier who is responsible for the manufacturing, packaging and distribution of the Company&#8217;s chocolate product line, as well as the formulation of all of the Company&#8217;s proprietary chocolate recipes. </p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">On October 25, 2017, the Company entered into a contract with TIER Merchant Advances LLC (&#8220;TIER&#8221;) 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. On November 8, 2018, the Company also began providing cash advances directly to merchants.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px"><u>Liquidity and Going Concern</u></p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">The Company&#8217;s unaudited condensed consolidated financial statements are prepared using generally accepted accounting principles in the United States of America (&#8220;GAAP&#8221;) 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.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">In order to continue as a going concern, the Company will need, among other things, additional capital resources. As of June 30, 2020, the Company had approximately $257,000 in third-party short-term debt that is due within the next twelve months. Management&#8217;s plan is to 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.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">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.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">In December 2019, a novel strain of coronavirus surfaced. The spread of COVID-19 around the world in the first quarter of 2020 has caused significant volatility in U.S. and international markets. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. and international economies. The Company&#8217;s financial position, operations and cash flows as of June 30, 2020 have been adversely affected, and may be further affected in the future, by the recent and ongoing outbreak of the coronavirus disease 2019 (COVID-19) which in March 2020, was declared a pandemic by the World Health Organization. The ultimate disruption which may be caused by the outbreak is uncertain; however, it may result in a material adverse impact on the Company&#8217;s financial position, operations and cash flows. Possible areas that may be materially affected include, but are not limited to, disruption to the Company&#8217;s labor workforce, unavailability of products and supplies used in operations, and the decline in value of assets held by the Company. As of June 30, 2020 and through the filing date of the financial statements, the Company has continued to collect receivables from its cash advances but has experienced an increase in payment delinquencies and has had two customers renegotiate the terms of their cash advances due to COVID-19. The Company has taken a reserve allowance on its MCA&#8217;s.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px"><u>Use of Estimates</u></p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px"><u>Basis of Presentation</u></p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">The accompanying unaudited condensed consolidated financial statements were prepared using generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, these unaudited condensed consolidated financial statements do not include all information or notes required by generally accepted accounting principles for annual financial statements and should be read in conjunction with the Company&#8217;s annual consolidated financial statements included within the Company&#8217;s Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on March 25, 2020.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">In the opinion of management, the unaudited condensed consolidated financial statements included herein contain all adjustments necessary to present fairly the Company&#8217;s financial position and the results of its operations and cash flows for the interim periods presented. Such adjustments are of a normal recurring nature. The results of operations for the six months ended June 30, 2020 may not be indicative of results for the full year. </p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">The noncontrolling interest represents the proportionate share of the proceeds received and also the income and loss pickup from the fifteen-percent sale of equity interest in our wholly owned subsidiary; Holy Cacao.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px"><u>Principles of Consolidation</u></p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">The unaudited condensed consolidated financial statements represent the consolidation of the accounts of the Company and its subsidiary in conformity with GAAP. All intercompany accounts and transactions have been eliminated in consolidation.</p><p style="margin:0px">&nbsp;</p><p style="margin:0px 0px 0px 0.35pt"><u>Cash and Cash Equivalents</u></p><p style="margin:0px">&nbsp;&nbsp; </p><p style="text-align:justify;margin:0px 0px 0px 0.35pt">The Company considers all highly liquid temporary cash investments with an original maturity of twelve months or less to be cash equivalents. At June 30, 2020 and December 31, 2019, the Company had no cash equivalents.</p><p style="margin:0px">&nbsp;&nbsp;&nbsp; </p><p style="text-align:justify;margin:0px 0px 0px 0.35pt">The Company&#8217;s cash is held with financial institutions, and the account balances may exceed the Federal Deposit Insurance Corporation (FDIC) insurance limit at times. Accounts are insured by the FDIC up to $250,000 per financial institution. The Company has not experienced any losses in such accounts with these financial institutions.</p><p style="margin:0px">&nbsp;&nbsp; </p><p style="text-align:justify;margin:0px"><u>Merchant Cash Advances</u></p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">The Company participates in the merchant cash advance industry by directly advancing sums to a merchant or a merchant advance provider, TIER, who in turn advances sums to merchants or other merchant cash advance providers. Each reporting period, the Company reviews the carrying value of these advances and determines whether an impairment reserve is necessary. At June 30, 2020, the Company reserved an amount equal to 78% of the outstanding merchant cash advance balance at period end based on the potential impact of COVID 19. In addition, during the six months ended June 30, 2020 the Company wrote off 21 merchant advances for a total of $22,901. These expenses are included in provision for merchant cash advances expense on the accompanying unaudited condensed consolidated statements of operations.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px"><u>Revenue Recognition</u></p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">We completed, related to our merchant cash advance business line, our assessment of the impact of ASC 606 and determined that we recognize revenue in accordance with ASC 860, <em>Transfers and Servicing</em>, which is explicitly excluded from the scope of ASC 606. We participate in the servicing of merchant cash advances that have been provided to third parties, which in accordance with ASC 860, causes us to recognize merchant cash advance (&#8220;MCA&#8221;) income. We also have product sales from our Holy Cacao division that follow ASC 606. </p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">Product sales are measured based on consideration specified in a contract with a customer that we expect to receive in exchange for goods, net of any variable considerations (e.g. rights to return product, sales incentives, etc.). The Company recognizes revenue when it satisfies a performance obligation by transferring control of a product to a customer. These criteria are assumed to have been met upon delivery of the products requested by the customer to the customer&#8217;s carrier. The Company applied the practical expedient available under ASC 606 to disregard determining significant financing components, if the good is transferred and payment is received within one year. </p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">When a merchant cash advance is purchased, the Company records a merchant cash advance participation receivable for the purchase price. The purchase price consists of the merchant cash advance principal plus an up-front commission that is amortized over the term of the merchant cash advance. The amount of the commission is negotiated between the Company and TIER for each contract. The standard commission is 15% of the merchant cash advance principal but can be reduced depending upon the credit worthiness of the merchant. The average commission paid by the Company since inception has been approximately 7%. If a merchant cash advance contract is signed in one period, but not paid until a subsequent period, a corresponding liability is established in the current period.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">At the time the Company participates in a merchant cash advance, the Company records a deferred revenue liability, which is the total future receivable due to the Company less the principal amount of the merchant cash advance. Revenue is recognized and the deferred liability is reduced over the term of the merchant cash advance.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">TIER maintains a bank account on behalf of the Company. Each day, TIER receives payment, reflected in the bank account, for each merchant cash advance TIER has purchased on behalf of the Company from various merchant cash advance providers. The Company reduces its merchant cash advance balance by the cash received, which is net of platform fees. Platform fees are a daily charge associated with the ACH service and the financial and reporting management software platform provided by TIER. The platform fees are also negotiated between the Company and TIER for each contract but are typically 4% of the daily merchant cash advance principal amount. </p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">For each merchant cash advance entered into by the Company, TIER receives a daily payment as payments are made on the advance, for each merchant cash advance TIER has purchased on behalf of the Company from various merchant cash advance providers. The Company reduces its merchant cash advance balance by the cash received, which is net of a 2% commission to TIER.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px"><u>Inventory</u></p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">Inventory, consisting of raw materials, work in process and products available for sale, are accounted for using the first-in, first-out method, and are valued at the lower of cost or net realizable value. This valuation requires management to make judgements based on currently available information, about the likely method of disposition, such as through sales to individual customers and returns. The Company has no allowance for inventory reserves.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">Inventory consisted of the following as of June 30, 2020 and December 31, 2019:</p><p style="text-align:justify;margin:0px">&nbsp;</p><table style="border-spacing:0;text-align:left;font:10pt times new roman;width:100%" cellpadding="0"> <tr style="height:15px"> <td> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" colspan="2" style="width:9%;vertical-align:bottom;text-align:center;"> <p style="text-align:center;margin:0px 0px 0px -5.55pt"><strong>June 30,</strong></p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" colspan="2" style="width:9%;vertical-align:bottom;text-align:center;"> <p style="text-align:center;margin:0px 0px 0px -4.75pt"><strong>December 31,</strong></p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px"> <td> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:center;" colspan="2"> <p style="text-align:center;margin:0px"><strong>2020</strong></p></td> <td style="PADDING-BOTTOM: 1px;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:center;" colspan="2"> <p style="text-align:center;margin:0px"><strong>2019</strong></p></td> <td style="PADDING-BOTTOM: 1px;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="margin:0px">Raw Materials</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">41,463</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">2,854</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="margin:0px">Work in Process</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">1,550</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">5,410</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="margin:0px">Finished Goods</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">8,562</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">2,292</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="margin:0px">Total</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 3px double;width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="BORDER-BOTTOM: 3px double;width:9%;vertical-align:bottom;text-align:right;">51,575</td> <td style="PADDING-BOTTOM: 3px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 3px double;width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="BORDER-BOTTOM: 3px double;width:9%;vertical-align:bottom;text-align:right;">10,556</td> <td style="PADDING-BOTTOM: 3px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr></table> <p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px"><u>Property and Equipment</u></p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">Property and equipment are stated at cost, less accumulated depreciation and amortization. Expenditures for maintenance and repairs are charged to expense when incurred, while renewals and betterments that materially extend the life of an asset are capitalized. When assets are sold, retired or otherwise disposed of, the cost and accumulated depreciation are removed from the balance sheets and any resulting gain or loss is reflected in the unaudited condensed consolidated statements of operations and members&#8217; deficit in the period realized.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the assets, which are as follows:</p><p style="text-align:justify;margin:0px">&nbsp;</p><table style="border-spacing:0;font-size:10pt;text-align:justify;margin-left:auto;margin-right:auto;width:85%" cellpadding="0"> <tr style="height:15px;background-color:#cceeff"> <td style="width:72%;vertical-align:top;"> <p style="text-align:justify;margin:0px">Property &#8211; Leasehold Improvements</p></td> <td style="width:28%;vertical-align:top;"> <p style="text-align:center;margin:0px">4 years</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="width:72%;vertical-align:top;"> <p style="text-align:justify;margin:0px">Equipment</p></td> <td style="width:28%;vertical-align:top;"> <p style="text-align:center;margin:0px">5 years</p></td></tr></table> <p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px"><u>Impairment of Long-Lived Assets</u></p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">Long-lived assets are comprised of property and equipment. The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset or group of assets may not be recoverable. If these circumstances exist, recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset group to future undiscounted net cash flows expected to be generated by the asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. There were no impairments to long-lived assets for the six months ended June 30, 2020 and 2019.</p><p style="text-align:justify;margin:0px">&nbsp;&nbsp;</p><p style="text-align:justify;margin:0px"><u>Research and Development</u></p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">The Company&#8217;s policy is to engage market and branding consultants to research and develop specialty chocolate products, including chocolate products infused with a hemp-based ingredient, and packaging targeted to particular states within the US. The research and development costs for the three months ended June 30, 2020 and 2019, were $27,500 and $18,510, respectively. The research and development costs for the six months ended June 30, 2020 and 2019, were approximately $32,000 and $33,510, respectively. These expenses are included in general and administrative expenses on the accompanying unaudited condensed consolidated statements of operations.</p><p style="text-align:justify;margin:0px">&nbsp; </p><p style="margin:0px">&nbsp; </p><p style="text-align:justify;margin:0px"><u>Deferred Financing Costs</u></p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px 0px 0px 0.35pt">The Company records origination and other expenses related to its debt obligations as deferred financing costs. These expenses are deferred and amortized over the life of the related debt instrument. In accordance with Accounting Standards Update (&#8220;ASU&#8221;) No. 2015-03, deferred finance costs, net of accumulated amortization have been included as a contra to the corresponding loans in the accompanying unaudited condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019, respectively.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px"><u>Stock Based Compensation</u></p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">The Company measures and recognizes compensation expense for all stock-based payments at fair value over the requisite service period. The Company uses the Black-Scholes option pricing model to determine the weighted average fair value of options and warrants. For restricted stock grants, fair value is determined as the closing price of our common stock on the date of grant. Equity-based compensation expense is recorded in administrative expenses based on the classification of the employee or vendor. The determination of fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by our stock price, as well as by assumptions regarding a number of subjective variables. These variables include, but are not limited to, the expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px"><u>Income Taxes</u></p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">The Company provides for income taxes using the asset and liability approach. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. As of June 30, 2020 and December 31, 2019, the Company had a full valuation allowance against deferred tax assets. With the historical change in ownership, the Company is subject to certain NOL limitations under Section 382 of the Internal Revenue Code.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px"><u>Per Share Data</u></p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">In accordance with &#8220;ASC-260 - Earnings per Share&#8221;, the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no dilutive shares outstanding as of June 30, 2020 and 2019 because their effect would be antidilutive.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">The Company had 1,499,750 and 403,750 warrants to purchase common stock outstanding at June 30, 2020 and 2019, respectively. The Company had 4,470,000 and 3,370,000 warrants to purchase Series B preferred stock outstanding at June 30, 2020 and 2019, respectively. The Company has outstanding one (1) Series A preferred share that is convertible into five (5) shares of the Company&#8217;s common stock. Additionally, the Company has 473,332 Series B preferred shares, and 660,000 Series C preferred shares outstanding that are convertible into 2,366,660 and 660,000 shares of common stock at June 30, 2020 and 2019, respectively. The warrants and preferred stock were not included in the Company&#8217;s weighted average number of common shares outstanding because they would be anti-dilutive.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px"><u>Fair Value of Financial Instruments</u></p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair value. The carrying value of cash, merchant cash advances, prepaid expenses, accounts payable and accrued liabilities approximate their fair value because of the short-term nature of these instruments. Management is of the opinion that the Company is not exposed to significant market or credit risks arising from these financial instruments.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px"><u>Advertising and Promotion</u></p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">Advertising and promotion costs are expensed as incurred. Advertising and promotion costs recognized in the unaudited condensed consolidated statements of operations for the three months ended June 30, 2020 and 2019, were approximately $5,700 and $34,150, respectively and approximately $21,000 and $44,900, respectively, for the six months ended June 30, 2020 and 2019.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px"><u>Non-Controlling Interests in Condensed Consolidated Financial Statements</u></p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">In June 2011, the FASB issued ASC 810-10-65-1, to clarify that a non-controlling (minority) interest in a subsidiary is an ownership interest in the entity that should be reported as equity in the condensed consolidated financial statements. It also requires consolidated net income to include the amounts attributable to both the parent and non-controlling interest, with disclosure on the face of the unaudited condensed consolidated income statement of the amounts attributed to the parent and to the non-controlling interest. In accordance with ASC 810-10-45-21, those losses attributable to the parent and the non-controlling interest in subsidiaries may exceed their interests in the subsidiary&#8217;s equity. The excess and any further losses attributable to the parent and the non-controlling interest shall be attributed to those interests even if that attribution results in a deficit non-controlling interest balance. During the year ended December 31, 2017, the Company entered into a subscription agreement for the sale of a ten-percent equity interest in its wholly owned subsidiary, Holy Cacao, for $200,000 in cash proceeds, in the aggregate. During the year ended December 31, 2019, 5% equity was issued to a service provider due to the completion of Holy Cacao&#8217;s first sale of its product, as per the agreement with the service provider. The Company&#8217;s periodic reporting now includes the results of operations of Holy Cacao, with the fifteen-percent ownership reported as noncontrolling interests. For the three and six months ended June 30, 2020, the cost of goods sold was approximately $4,700 and $5,500, respectively, and the operating expense for Holy Cacao was $122,000 and $215,000, respectively. There was approximately $8,800 and $12,400 of revenue for Holy Cacao for the three and six months ended June 30, 2020, respectively.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">The Company conducts business as two operating segments, First Foods and Holy Cacao. The Company does not distinguish between the two segments and has only one reportable segment based on quantitative thresholds. The accounting policies of the segments are the same as the accounting policies of the Company as a whole. The operating results of these business segments are regularly reviewed by the Company&#8217;s chief operating decision maker. </p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px"><u>Recent Accounting Pronouncements</u></p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">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.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">In June 2016, the FASB issued ASU 2016-13, &#8220;Financial Instruments &#8211; Credit Losses&#8221; 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, &#8220;Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments&#8221; and ASU No. 2019-05, &#8220;Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief&#8221; which provided additional implementation guidance on the previously issued ASU. In November 2019, the FASB issued ASU 2019-10, &#8220;Financial Instruments - Credit Loss (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842),&#8221; which defers the effective date for public filers that are considered small reporting companies (&#8220;SRC&#8221;) 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&#8217;s unaudited condensed consolidated financial statements.</p></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><p style="text-align:justify;margin:0px"><u>Employment Agreement</u></p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">On March 1, 2017, Mark J. Keeley assumed the role of Chief Financial Officer (&#8220;CFO&#8221;). Pursuant to his Employment Agreement, the CFO shall receive $20,833 per month. Additionally, Mr. Keeley earns an additional $40,000 per year for his role as a Director of the Company. On March 18, 2020, the Company issued its CFO and Director warrants to purchase 500,000 shares of Series B Preferred Stock in lieu of $250,000 of deferred salary (see Note 6). As of June 30, 2020 and December 31, 2019, the Company has accrued $204,667 and $329,167, respectively, in relation to the employment agreements and $18,766 and $16,953, respectively, in relation to the payroll tax liability. </p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px"><u>Consulting Agreements</u></p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">On February 27, 2017, Harold Kestenbaum assumed the role of Chairman of the Board of Directors and Interim Chief Executive Officer (&#8220;Interim CEO&#8221;). Mr. Kestenbaum earns $40,000 per year for his role as Chairman of the Board. As of June 30, 2020, the Company has accrued a total of $40,000. </p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">As of June 30, 2020, the Company has two consulting agreements with R and W Financial (a company owned by a director) in which the first agreement is for $5,000 a month and the second is for $4,250 every two weeks. Both agreements are for an indefinite period of time and are subject to cancellation by either party with written notice of 30 days and 10 days, respectively. The outstanding balance as of June 30, 2020 was $52,713.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px"><u>Related Party Loans</u></p><p style="text-align:justify;margin:0px">&nbsp;&nbsp; </p><table style="border-spacing:0;text-align:left;font:10pt times new roman;width:100%" cellpadding="0"> <tr style="height:15px"> <td> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" style="BORDER-TOP: medium none; BORDER-BOTTOM: black 1pt solid;vertical-align:bottom;text-align:center;" colspan="2"> <p style="text-align:center;margin:0px"><strong>June 30, </strong></p><p style="text-align:center;margin:0px"><strong>2020</strong></p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" style="BORDER-BOTTOM: #000000 1px solid;vertical-align:bottom;text-align:center;" colspan="2"> <p style="text-align:center;margin:0px"><strong>December 31,</strong></p><p style="text-align:center;margin:0px"><strong>2019</strong></p></td> <td style="PADDING-BOTTOM: 1px;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="width:2%;">1.</td> <td style="width:68%;"> <p style="text-align:justify;margin:0px">Note payable at 12%, matures 10/31/2020</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:5%;"> <p style="text-align:center;margin:0px">{a} *</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">100,000</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">100,000</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td>2.</td> <td> <p style="text-align:justify;margin:0px">Non-interest bearing note payable, matures on 4/25/2021</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td> <p style="text-align:center;margin:0px">*</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="vertical-align:bottom;text-align:right;">179,813</td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="vertical-align:bottom;text-align:right;">179,813</td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td>3.</td> <td> <p style="text-align:justify;margin:0px">Note payable at 12%, matures 9/13/2020. The Company has recorded debt discount and amortized it over the applicable life of the debt.</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td> <p style="text-align:center;margin:0px">{b} *</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="vertical-align:bottom;text-align:right;">100,000</td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="vertical-align:bottom;text-align:right;">100,000</td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td>4.</td> <td> <p style="text-align:justify;margin:0px">Note payable at 12%, matures 4/9/2021. The Company has recorded debt discount and amortized it over the applicable life of the debt. </p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td> <p style="text-align:center;margin:0px">{c} *</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="vertical-align:bottom;text-align:right;">250,000</td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="vertical-align:bottom;text-align:right;">250,000</td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td>5.</td> <td> <p style="text-align:justify;margin:0px">Non-interest bearing note payable, matures on 11/15/2020. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt.</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td> <p style="text-align:center;margin:0px">{d} *</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="vertical-align:bottom;text-align:right;">80,000</td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="vertical-align:bottom;text-align:right;">-</td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td> <p style="margin:0px">&nbsp;</p></td> <td> <p style="text-align:justify;margin:0px">Unamortized debt discount</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-TOP: medium none; BORDER-BOTTOM: black 1pt solid;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-TOP: medium none; BORDER-BOTTOM: black 1pt solid;vertical-align:bottom;text-align:right;">(77,866</td> <td style="vertical-align:bottom;white-space: nowrap;">)</td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-TOP: medium none; BORDER-BOTTOM: black 1pt solid;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-TOP: medium none; BORDER-BOTTOM: black 1pt solid;vertical-align:bottom;text-align:right;">(9,190</td> <td style="vertical-align:bottom;white-space: nowrap;">)</td></tr> <tr style="height:15px;background-color:#cceeff"> <td> <p style="margin:0px">&nbsp;</p></td> <td> <p style="text-align:justify;margin:0px">Total</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-TOP: medium none; BORDER-BOTTOM: 2pt double;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="BORDER-TOP: medium none; BORDER-BOTTOM: 2pt double;vertical-align:bottom;text-align:right;">631,947</td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-TOP: medium none; BORDER-BOTTOM: 2pt double;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="BORDER-TOP: medium none; BORDER-BOTTOM: 2pt double;vertical-align:bottom;text-align:right;">620,623</td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr></table> <p style="text-align:justify;margin:0px">___________________&nbsp; </p><table style="border-spacing:0;font-size:10pt;text-align:left;width:100%" cellpadding="0"> <tr style="height:15px"> <td style="width:2%;"> <p style="margin:0px">&nbsp;</p></td> <td> <p style="text-align:justify;margin:0px">{a} - On April 22, 2020, the Company extended the note to October 31, 2020 based on the same terms and conditions. </p><p style="text-align:justify;margin:0px">{b} - On June 28, 2020, the Company extended the note to September 13, 2020 based on the same terms and conditions. In association with this and prior extensions the company issued 35,000 and 25,000 shares of common stock, respectively, with a total fair value of $10,544, which will be recorded a debt discount and amortized over the life of the loan. </p><p style="text-align:justify;margin:0px">{c} - On April 10, 2020, the Company extended the note to April 9, 2021 based on the same terms and conditions. In association with the extension the company issued 250,000 shares of common stock with a fair value of $60,000, which will be recorded a debt discount and amortized over the life of the loan. </p><p style="text-align:justify;margin:0px">{d} - On June 28, 2020, the Company issued a non-interest bearing promissory note of $80,000. In connection with this note the company issued 160,000 shares of common stock with a fair value of $29,600, which was recorded as a debt discount and amortized over the life of the loan. </p><p style="margin:0px">* - unsecured note&nbsp;&nbsp;</p></td></tr></table> <p style="margin:0px">&nbsp; </p><p style="text-align:justify;margin:0px">During the three months ended June 30, 2020 and 2019, the Company recorded $21,081 and $1,830 of interest expense related to the amortization of debt discount and $13,463 and $4,763 of regular interest, respectively. During the six months ended June 30, 2020 and 2019, the Company recorded $31,468 and $3,640 of interest expense related to the amortization of debt discount and $26,926 and $9,447 of regular interest, respectively. As of June 30, 2020 and December 31, 2019, accrued interest was $33,667 and $21,753, respectively. </p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">All of the above transactions were approved by disinterested directors.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px"><u>Director Agreements</u></p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">On May 10, 2018, the directors of the Company were awarded share-based compensation for the service period of May 10, 2018 through December 31, 2020, as a one-time award of the ability to purchase a particular amount of warrants, ranging from 80,000 to 400,000 (collectively the &#8220;Warrants&#8221;) with the following terms:</p><p style="text-align:justify;margin:0px">&nbsp;</p><table style="border-spacing:0;font-size:10pt;width:100%" cellpadding="0"> <tr style="height:15px"> <td style="width:4%;"> <p style="text-align:justify;margin:0px">&nbsp;</p></td> <td style="width:4%;vertical-align:top;"> <p style="text-align:justify;margin:0px"><font style="font-size:14pt">&#8226;</font></p></td> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Number and Type &#8211; Each Director is entitled to a one-time award of Warrants for the number of shares of Series B Preferred Stock of the Company. Each share of Series B Preferred Stock shall have voting rights equal to five (5) votes per share. Each share of Series B Preferred Stock is convertible into five (5) shares of the Company&#8217;s Common Stock (the &#8220;Common Stock&#8221;), including liquidation preference over Common Stock.</p></td></tr> <tr style="height:15px"> <td> <p style="text-align:justify;margin:0px">&nbsp;</p></td> <td> <p style="text-align:justify;margin:0px">&nbsp;</p></td> <td> <p style="text-align:justify;margin:0px">&nbsp;</p></td></tr> <tr style="height:15px"> <td style="width:4%;"> <p style="text-align:justify;margin:0px">&nbsp;</p></td> <td style="width:4%;"> <p style="text-align:justify;margin:0px"><font style="font-size:14pt">&#8226;</font></p></td> <td> <p style="text-align:justify;margin:0px">Duration &#8211; The Warrants entitle each Director to purchase the Series B Preferred Stock from the Company, after January 1, 2019 and before December 31, 2027.</p></td></tr> <tr style="height:15px"> <td></td> <td> <p style="text-align:justify;margin:0px">&nbsp;</p></td> <td> <p style="text-align:justify;margin:0px">&nbsp;</p></td></tr> <tr style="height:15px"> <td> <p style="text-align:justify;margin:0px">&nbsp;</p></td> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px"><font style="font-size:14pt">&#8226;</font></p></td> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Purchase Price - The purchase price is $0.60 per share of Series B Preferred Stock.</p></td></tr> <tr style="height:15px"> <td></td> <td> <p style="text-align:justify;margin:0px">&nbsp;</p></td> <td> <p style="text-align:justify;margin:0px">&nbsp;</p></td></tr> <tr style="height:15px"> <td> <p style="text-align:justify;margin:0px">&nbsp;</p></td> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px"><font style="font-size:14pt">&#8226;</font></p></td> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Cashless Exercise - If on the date the Director surrenders all or a portion of the Warrants for the purchase of Series B Preferred Stock or the equivalent number of shares of Common Stock, the per share market value of one share of Common Stock is greater than the exercise price of the equivalent Warrant, in lieu of exercising the Warrant by payment of cash, the Director may exercise the Warrant by a cashless exercise and shall receive a ratably lower number of shares of Series B Preferred Stock or the equivalent number of shares of Common Stock.</p></td></tr> <tr style="height:15px"> <td></td> <td> <p style="text-align:justify;margin:0px">&nbsp;</p></td> <td> <p style="text-align:justify;margin:0px">&nbsp;</p></td></tr> <tr style="height:15px"> <td> <p style="text-align:justify;margin:0px">&nbsp;</p></td> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px"><font style="font-size:14pt">&#8226;</font></p></td> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Vesting - The Warrants are subject to a 32-month period whereby the Warrants vest in equal monthly increments from May 10, 2018 through December 31, 2020. Any unvested warrants are forfeited, if the Director ceases to be a Director.</p></td></tr></table> <p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">The Company issued warrants with respect to 1,280,000 Series B Preferred Stock, in the aggregate. The Company will expense the fair value of these warrants in the amount of $768,000 ratably during the years ended December 31, 2018, 2019 and 2020. For the three months ended June 30, 2020 and 2019, the Company recorded $72,348 as compensation expense related to the warrants. For the six months ended June 30, 2020 and 2019, the Company recorded $144,696 and $143,901 as compensation expense related to the warrants, respectively.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">On February 26, 2019, the Company entered into director agreements with each of the Directors of the Company. Pursuant to the agreements, each Director may be compensated with share-based and/or cash-based compensation. The Directors&#8217; compensation for the period January 1, 2019 through December 31, 2019 was $10,000 per quarter per Director to be paid on a date determined by the Board of Directors. In addition, the Directors were able to receive a one-time award of the ability to purchase a particular amount of warrants, as determined by the Board of Directors. On January 1, 2020, the director agreements were renewed with the same terms. As of June 30, 2020 and December 31, 2019 the Company has accrued $240,000 and $160,000, respectively, in relation to the director agreements. </p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">On December 31, 2019, three of the Directors of the Company were awarded share-based compensation for services performed during the service period of January 1, 2019 through December 31, 2019, as a one-time award to each purchase 200,000 warrants (collectively the &#8220;Warrants&#8221;) with the following terms:</p><p style="text-align:justify;margin:0px">&nbsp;</p><table style="border-spacing:0;font-size:10pt;width:100%" cellpadding="0"> <tr style="height:15px"> <td style="width:4%;"> <p style="text-align:justify;margin:0px">&nbsp;</p></td> <td style="width:4%;vertical-align:top;"> <p style="text-align:justify;margin:0px"><font style="font-size:14pt">&#8226;</font></p></td> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Number and Type &#8211; Each Director is entitled to a one-time award of Warrants for the number of shares of Series B Preferred Stock of the Company. Each share of Series B Preferred Stock shall have voting rights equal to five (5) votes per share. Each share of Series B Preferred Stock is convertible into five (5) shares of the Company&#8217;s common stock, including liquidation preference over common stock.</p></td></tr></table> <p style="text-align:justify;margin:0px">&nbsp;</p><table style="border-spacing:0;font-size:10pt;width:100%" cellpadding="0"> <tr style="height:15px"> <td style="width:4%;"> <p style="text-align:justify;margin:0px">&nbsp;</p></td> <td style="width:4%;"> <p style="text-align:justify;margin:0px"><font style="font-size:14pt">&#8226;</font></p></td> <td> <p style="text-align:justify;margin:0px">Duration &#8211; The Warrants entitle each Director to purchase the Series B Preferred Stock from the Company after December 31, 2019 and before December 30, 2029.</p></td></tr> <tr style="height:15px"> <td></td> <td></td> <td> <p style="text-align:justify;margin:0px">&nbsp;</p></td></tr> <tr style="height:15px"> <td> <p style="text-align:justify;margin:0px">&nbsp;</p></td> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px"><font style="font-size:14pt">&#8226;</font></p></td> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Purchase Price - The purchase price is $1.20 per share of Series B Preferred Stock. These warrants have a price protection clause which was triggered, resulting in the exercise price of the warrants being adjusted to an exercise price of $0.75. The effect was immaterial.</p></td></tr> <tr style="height:15px"> <td></td> <td></td> <td> <p style="text-align:justify;margin:0px">&nbsp;</p></td></tr> <tr style="height:15px"> <td> <p style="text-align:justify;margin:0px">&nbsp;</p></td> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px"><font style="font-size:14pt">&#8226;</font></p></td> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Cashless Exercise - If on the date the Director surrenders all or a portion of the Warrants for the purchase of Series B Preferred Stock or the equivalent number of shares of Common Stock, the per share market value of one share of Common Stock is greater than the exercise price of the equivalent Warrant, in lieu of exercising the Warrant by payment of cash, the Director may exercise the Warrant by a cashless exercise and shall receive a ratably lower number of shares of Series B Preferred Stock or the equivalent number of shares of Common Stock.</p></td></tr> <tr style="height:15px"> <td></td> <td></td> <td> <p style="text-align:justify;margin:0px">&nbsp;</p></td></tr> <tr style="height:15px"> <td> <p style="text-align:justify;margin:0px">&nbsp;</p></td> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px"><font style="font-size:14pt">&#8226;</font></p></td> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Vesting - The Warrants are fully vested at issuance.</p></td></tr></table> <p style="text-align:justify;margin:0px">&nbsp;</p><p style="margin:0px">The Company issued warrants with respect to 600,000 Series B Preferred Stock, in the aggregate. The Company expensed the fair value of these warrants in the amount of $720,000 for the year ended December 31, 2019. </p></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><p style="text-align:justify;margin:0px">Property and equipment, net consists of the following:</p><p style="text-align:justify;margin:0px">&nbsp;</p><table style="border-spacing:0;text-align:left;font:10pt times new roman;margin-left:auto;margin-right:auto;width:85%" cellpadding="0"> <tr style="height:15px"> <td> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:center;" colspan="2"> <p style="text-align:center;margin:0px"><strong>June 30,<br />2020</strong></p></td> <td style="PADDING-BOTTOM: 1px;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:center;" colspan="2"> <p style="text-align:center;margin:0px"><strong>December 31, <br />2019</strong></p></td> <td style="PADDING-BOTTOM: 1px;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Leasehold improvements</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">40,000</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Equipment</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">196,792</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Less: Accumulated depreciation and amortization</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">(12,741</td> <td style="PADDING-BOTTOM: 1px;width:1%;vertical-align:bottom;white-space: nowrap;">)</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Total</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 3px double;width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="BORDER-BOTTOM: 3px double;width:9%;vertical-align:bottom;text-align:right;">224,051</td> <td style="PADDING-BOTTOM: 3px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 3px double;width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="BORDER-BOTTOM: 3px double;width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="PADDING-BOTTOM: 3px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr></table> <p style="margin:0px">&nbsp;</p></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><p style="text-align:justify;margin:0px">Accounts payable and accrued liabilities consist of the following:</p><p style="text-align:justify;margin:0px">&nbsp;</p><table style="border-spacing:0;text-align:left;font:10pt times new roman;margin-left:auto;margin-right:auto;width:85%" cellpadding="0"> <tr style="height:15px"> <td> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:center;" colspan="2"> <p style="text-align:center;margin:0px"><strong>June 30,</strong></p><p style="text-align:center;margin:0px"><strong>2020</strong></p></td> <td style="PADDING-BOTTOM: 1px;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:center;" colspan="2"> <p style="text-align:center;margin:0px"><strong>December 31,</strong></p><p style="text-align:center;margin:0px"><strong>2019</strong></p></td> <td style="PADDING-BOTTOM: 1px;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Accounts payable</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">451,100</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">305,679</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Interest</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">73,109</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">24,136</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Salaries</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">262,933</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">386,121</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Other</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">45,489</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">35,739</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Total</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 3px double;width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="BORDER-BOTTOM: 3px double;width:9%;vertical-align:bottom;text-align:right;">832,631</td> <td style="PADDING-BOTTOM: 3px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 3px double;width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="BORDER-BOTTOM: 3px double;width:9%;vertical-align:bottom;text-align:right;">751,675</td> <td style="PADDING-BOTTOM: 3px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr></table></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><table style="border-spacing:0;text-align:justify;font:10pt times new roman;margin-left:auto;margin-right:auto;width:100%" cellpadding="0"> <tr style="height:15px"> <td></td> <td></td> <td></td> <td></td> <td></td> <td style="BORDER-TOP: medium none; BORDER-BOTTOM: black 1pt solid;" colspan="2"> <p style="MARGIN: 0px; text-align:center;"><strong>June 30, </strong></p><p style="MARGIN: 0px; text-align:center;"><strong>2020</strong></p></td> <td></td> <td></td> <td style="BORDER-BOTTOM: #000000 1px solid;" colspan="2"> <p style="MARGIN: 0px; text-align:center;"><strong>December 31, </strong></p><p style="MARGIN: 0px; text-align:center;"><strong>2019</strong></p></td> <td></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="width:2%;vertical-align:top;">1.</td> <td style="width:68%;"> <p style="MARGIN: 0px; text-align:justify;">Note payable at 12%, matures 7/20/2020. In connection with the original issuance, as well as subsequent extension, the Company has recorded debt discount and amortized it over the applicable life of the debt.</p></td> <td style="COLOR: black;width:1%;"></td> <td style="COLOR: black;width:5%;"> <p style="MARGIN: 0px; text-align:center;">{a} *</p></td> <td style="COLOR: black;width:1%;"></td> <td style="COLOR: black;width:1%;"> <p style="MARGIN: 0px; text-align:justify;">$</p></td> <td style="COLOR: black;width:9%;"> <p style="MARGIN: 0px; text-align:right;">50,000</p></td> <td style="COLOR: black;width:1%;"></td> <td style="COLOR: black;width:1%;"></td> <td style="COLOR: black;width:1%;"> <p style="MARGIN: 0px; text-align:justify;">$</p></td> <td style="COLOR: black;width:9%;"> <p style="MARGIN: 0px; text-align:right;">100,000</p></td> <td style="width:1%;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;">2.</td> <td> <p style="MARGIN: 0px; text-align:justify;">Note payable at 12%, matures 1/22/2021. In connection with the original issuance, as well as subsequent extension, the Company has recorded debt discount and amortized it over the applicable life of the debt.</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:center;">*</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">18,000</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">18,000</p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;">3.</td> <td> <p style="MARGIN: 0px; text-align:justify;">Note payable at 12%, matures 7/8/2020. In connection with the original issuance, as well as subsequent extension, the Company has recorded debt discount and amortized it over the applicable life of the debt.</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:center;">{b} *</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">50,000</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">50,000</p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;">4.</td> <td> <p style="MARGIN: 0px; text-align:justify;">Note payable at 12%, matures 6/11/2021. In connection with the original issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt. </p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:center;">*</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">25,000</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">25,000</p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;">5.</td> <td> <p style="MARGIN: 0px; text-align:justify;">Note payable at 12%, matures 7/21/2021. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt. </p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:center;">*</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">250,000</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">250,000</p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;">6.</td> <td> <p style="MARGIN: 0px; text-align:justify;">Note payable at 12%, matures 10/1/2021. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt. </p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:center;">*</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">410,000</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">410,000</p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;">7.</td> <td> <p style="MARGIN: 0px; text-align:justify;">Note payable at 12%, matures 10/15/2021. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt. </p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:center;">*</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">140,000</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">140,000</p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;">8.</td> <td> <p style="MARGIN: 0px; text-align:justify;">Note payable at 12%, matures 10/30/2021. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt. </p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:center;">*</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">200,000</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">200,000</p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;">9.</td> <td> <p style="MARGIN: 0px; text-align:justify;">Note payable at 12%, matures 7/9/2021. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt. </p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:center;">*</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">60,000</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">- </p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;">10.</td> <td> <p style="MARGIN: 0px; text-align:justify;">Note payable at 12%, matures 1/28/2022. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt. </p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:center;">*</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">96,000</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">- </p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;">11.</td> <td> <p style="MARGIN: 0px; text-align:justify;">Note payable at 3.75%, matures 6/25/2050. </p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:center;">**</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">150,000</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">- </p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;">12.</td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:justify;">Non-interest bearing note payable, matures on 9/30/2021.</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:center;">{c} *</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">140,188</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">- </p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:justify;">Unamortized debt discount</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="BORDER-BOTTOM: #000000 1px solid; COLOR: black;"></td> <td style="BORDER-BOTTOM: #000000 1px solid; COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">(436,287)</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="BORDER-BOTTOM: #000000 1px solid; COLOR: black;"></td> <td style="BORDER-BOTTOM: #000000 1px solid; COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">(544,490)</p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:justify;">Total</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="BORDER-BOTTOM: 0.5pt solid;">&nbsp;</td> <td style="BORDER-BOTTOM: 0.5pt solid; COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">1,152,901</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="BORDER-BOTTOM: 0.5pt solid;">&nbsp;</td> <td style="BORDER-BOTTOM: 0.5pt solid; COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">648,510</p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td></td> <td>Less: short term loans, net</td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="BORDER-BOTTOM: #000000 1px solid; COLOR: black;"></td> <td style="BORDER-BOTTOM: #000000 1px solid; COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">257,400</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="BORDER-BOTTOM: #000000 1px solid; COLOR: black;"></td> <td style="BORDER-BOTTOM: #000000 1px solid; COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">165,270</p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td></td> <td> <p style="MARGIN: 0px; text-align:justify;">Total long-term loans, net</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="BORDER-BOTTOM: 2pt double; COLOR: black;"> <p style="MARGIN: 0px; text-align:justify;">$</p></td> <td style="BORDER-BOTTOM: 2pt double; COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">895,501</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="BORDER-BOTTOM: 2pt double; COLOR: black;"> <p style="MARGIN: 0px; text-align:justify;">$</p></td> <td style="BORDER-BOTTOM: 2pt double; COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">483,240</p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr></table> <p style="margin:0px">________________&nbsp;&nbsp; </p><table style="border-spacing:0;text-align:justify;font:10pt times new roman;margin-left:auto;margin-right:auto;width:100%" cellpadding="0"> <tr style="height:15px"> <td style="width:2%;"> <p style="margin:0px">&nbsp;</p></td> <td colspan="11"> <p style="MARGIN: 0px; text-align:justify;">{a} - On July 24, 2020, the Company extended the note to July 20, 2021 based on the same terms and conditions. In association with the extension the company issued 50,000 shares of common stock with a fair value on $17,500, which will be recorded a debt discount and amortized over the new life of the loan.&nbsp;</p><p style="MARGIN: 0px; text-align:justify;">{b} - On July 8, 2020, the Company extended the note to January 8, 2022 based on the same terms and conditions. In association with the extension the company issued 50,000 shares of common stock with a fair value on $16,000, which will be recorded a debt discount and amortized over the new life of the loan.&nbsp;</p><p style="MARGIN: 0px; text-align:justify;">{c} - On June 23, 2020, the Company issued a non-interest bearing promissory note for $140,188. In exchange for this note the Company received $80,187 of equipment and leasehold improvement, $29,814 of inventory, $18,224 of prepaid expenses and $11,963 of settlement of accrued expenses.&nbsp;</p><p style="MARGIN: 0px; text-align:justify;">* - unsecured note&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p><p style="MARGIN: 0px; text-align:justify;">**- secured note and collateralized by all tangible and intangible personal property&nbsp;</p></td></tr></table> <p style="margin:0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p><p style="MARGIN: 0px; text-align:justify;">During the three months ended June 30, 2020 and 2019, the Company recorded $95,705 and $6,515 of interest expense related to the amortization of debt discount and $38,863 and $12,654 of regular interest, respectively. During the six months ended June 30, 2020 and 2019, the Company recorded $187,852 and $12,761 of interest expense related to the amortization of debt discount and $76,959 and $24,874 of regular interest, respectively. As of June 30, 2020 and December 31, 2019, accrued interest was $39,442 and $2,383, respectively. </p></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><p style="text-align:justify;margin:0px">On January 9, 2019, the Company issued 50,000 shares of common stock based on the fair market value on the date of issuance, in connection with third party note 1. (See Note 5). </p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">On March 26, 2019, the Company signed a Facility Access and Wholesale Production Purchase and Sale Agreement for a term of twelve (12) months, which was extended through June 23, 2020, with an unrelated party to use the party&#8217;s leased commercial chocolate product manufacturing facility in exchange for paying the following:</p><p style="text-align:justify;margin:0px">&nbsp;</p><table style="border-spacing:0;font-size:10pt;width:100%" cellpadding="0"> <tr style="height:15px"> <td style="width:4%;"> <p style="text-align:justify;margin:0px">&nbsp;</p></td> <td style="width:4%;vertical-align:top;"> <p style="text-align:justify;margin:0px">(a)</p></td> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">the full amount of the party&#8217;s lease obligations of $6,433 per month plus taxes and common area maintenance fees through May 31, 2019 and $6,626 per month plus taxes and common area maintenance fees for 12 months through March 31, 2020; The contract auto renewed for the subsequent year. </p></td></tr> <tr style="height:15px"> <td></td> <td></td> <td></td></tr> <tr style="height:15px"> <td> <p style="text-align:justify;margin:0px">&nbsp;</p></td> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">(b)</p></td> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">66.6% of the party&#8217;s expenses related to payroll for employees that make the Company&#8217;s product; and</p></td></tr> <tr style="height:15px"> <td></td> <td></td> <td></td></tr> <tr style="height:15px"> <td> <p style="text-align:justify;margin:0px">&nbsp;</p></td> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">(c)</p></td> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">66.6% of the party&#8217;s operating expenses specifically related to the Company&#8217;s product including utilities, equipment, maintenance and insurance expenses.</p></td></tr></table> <p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">On February 5, 2019, the Company also issued 100,000 shares of the Company&#8217;s common stock based on the fair market value on the date of issuance, as a charitable contribution to a non-profit entity in support of the entity&#8217;s environmental regeneration efforts.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">On June 23, 2020, the Company entered into a new lease agreement and the above-mentioned agreement is now inactive. See Note 7.&nbsp;</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">On January 10, 2020, the Company issued 60,000 shares of common stock based on the fair market value on the date of issuance, in connection with third party note 9. (See Note 5).</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">On January 21, 2020, the Company issued 50,000 shares of the Company&#8217;s common stock based on the fair market value on the date of issuance, in connection with the amendment of the third party note 1. (see Note 5).</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">On January 23, 2020, the Company issued 18,000 shares of the Company&#8217;s common stock based on the fair market value on the date of issuance, in connection with the amendment of the third party note 2. (see Note 5).</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">On January 29, 2020, the Company issued 96,000 shares of the Company&#8217;s common stock based on the fair market value on the date of issuance, in connection with third party note 10. (see Note 5).</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">On March 6, 2020, the Company entered into a six-month agreement with a strategic investment consultant. The investment consultant was awarded 400,000 shares of the Company&#8217;s common stock based on the fair market value on the date of issuance. </p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">On March 13, 2020 and June 28, 2020, the Company issued 25,000 and 35,000 shares of the Company&#8217;s common stock based on the fair market value on the date of issuance, respectively, in connection with the extension of the maturity date of related party note 3. (see Note 2).</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">On May 6, 2020, the Company issued 250,000 shares of the Company&#8217;s common stock based on the fair market value on the date of issuance, in connection with the extension of the maturity date of related party note 4. (see Note 2).</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">On May 13, 2020, the Company entered into a three-month agreement with a consultant. The Consultant was awarded 150,000 shares of the Company&#8217;s common stock based on the fair market value on the date of issuance. </p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">On June 15, 2020, the Company issued 160,000 shares of common stock based on the fair market value on the date of issuance in connection related party note 5. (see Note 2).</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px"><strong>Warrant Activity</strong></p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px"><u>Common Stock Warrants</u></p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">On February 5, 2019, the Company signed a Consulting Agreement for a six (6) month term with a consultant to run the day-to-day manufacturing, packaging and distribution of the Company&#8217;s chocolate product line. The Consulting Agreement has a $7,000 monthly fee. In addition, the Company issued a warrant to the Consultant to purchase 60,000 shares of the Company&#8217;s common stock at the closing market price of $0.30 on February 5, 2019 with a term of three (3) years. The Company valued these warrants using the Black-Scholes option pricing model with the following inputs: exercise price of $0.30; fair market value of underlying stock of $0.30; expected term of 3 years; risk free rate of 2.50%; volatility of 388.56%; and dividend yield of 0%. The total fair value of these warrants is $17,988 and was expensed at issuance. The six-month Consulting Agreement ended on August 5, 2019 and was extended on a monthly basis through December 5, 2019, after which time the consultant was retained by R and W Financial to continue his services as a consultant for the company through R and W Financial. See Note 10 for subsequent issuance of warrants.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">On January 29, 2020, the Company issued a promissory note of $96,000 (see Note 5). In connection with this note the Company issued warrants to purchase 96,000 shares of the Company&#8217;s common stock with an exercise price of $0.22 per share. The warrants are valued at $20,717 based on the Black Scholes Model and included in the debt discount. The warrants are fully vested as of the issue dates with an exercise term of three (3) years.</p><p style="text-align:justify;margin:0px">&nbsp;&nbsp; </p><p style="text-align:justify;margin:0px">A summary of the Company&#8217;s warrants to purchase common stock activity is as follows:</p><p style="text-align:justify;margin:0px">&nbsp;</p><table style="border-spacing:0;text-align:left;font:10pt times new roman;width:100%" cellpadding="0"> <tr style="height:15px"> <td> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:center;" colspan="2"> <p style="text-align:center;margin:0px"><strong>Number of</strong></p><p style="text-align:center;margin:0px"><strong>Warrants</strong></p><p style="text-align:center;margin:0px"><strong>(in common</strong></p><p style="text-align:center;margin:0px"><strong>shares)</strong></p></td> <td style="PADDING-BOTTOM: 1px;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:center;" colspan="2"> <p style="text-align:center;margin:0px"><strong>Weighted</strong></p><p style="text-align:center;margin:0px"><strong>Average</strong></p><p style="text-align:center;margin:0px"><strong>Exercise</strong></p><p style="text-align:center;margin:0px"><strong>Price</strong></p></td> <td style="PADDING-BOTTOM: 1px;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Outstanding, December 31, 2018</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">343,750</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">0.08</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Granted</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">1,060,000</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">0.31</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Exercised</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Forfeited or cancelled</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Outstanding, December 31, 2019</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 3px double;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 3px double;width:9%;vertical-align:bottom;text-align:right;">1,403,750</td> <td style="PADDING-BOTTOM: 3px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 3px double;width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="BORDER-BOTTOM: 3px double;width:9%;vertical-align:bottom;text-align:right;">0.26</td> <td style="PADDING-BOTTOM: 3px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Granted</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">96,000</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">0.22</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Exercised</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Forfeited or cancelled</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Outstanding, June 30, 2020</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 3px double;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 3px double;width:9%;vertical-align:bottom;text-align:right;">1,499,750</td> <td style="PADDING-BOTTOM: 3px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 3px double;width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="BORDER-BOTTOM: 3px double;width:9%;vertical-align:bottom;text-align:right;">0.25</td> <td style="PADDING-BOTTOM: 3px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr></table> <p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">As of June 30, 2020, 1,499,750 warrants for common stock were exercisable and the intrinsic value of these warrants was $27,638, there is no remaining expense and the weighted average remaining contractual life was 1.96 years for warrants outstanding.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">As of June 30, 2019, 388,125 warrants for common stock were exercisable and the intrinsic value of these warrants was $66,281. As of June 30, 2019, the weighted average remaining contractual life was 2.13 years for warrants outstanding and the remaining expense is approximately $1,315 over the remaining amortization period which is 1 month.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px"><u>Preferred Stock Warrants</u></p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">On March 18, 2020, the Company issued its CFO and Director warrants to purchase 500,000 shares of Series B Preferred Stock in lieu of $250,000 of deferred salary. The warrants have an exercise price of $0.75 per share, are fully vested at issuance, and are exercisable from March 18, 2020 through March 17, 2030. The fair value of these warrants was $375,000 and the additional $125,000 over the deferred salary amount was recorded as compensation expense during the six months ended June 30, 2020. As a result of this issuance, the price protection clause on the director&#8217;s warrants issued on December 31, 2019 was triggered resulting in the warrants being reset to an exercise price of $0.75, and the effect was immaterial.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">A summary of the Company&#8217;s warrants to purchase Series B Preferred Stock activity is as follows:</p><p style="text-align:justify;margin:0px">&nbsp;</p><table style="border-spacing:0;text-align:left;font:10pt times new roman;width:100%" cellpadding="0"> <tr style="height:15px"> <td> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:center;" colspan="2"> <p style="text-align:center;margin:0px"><strong>Number of Warrants</strong></p><p style="text-align:center;margin:0px"><strong>(in Series B Preferred</strong></p><p style="text-align:center;margin:0px"><strong>Stock)</strong></p></td> <td style="PADDING-BOTTOM: 1px;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:center;" colspan="2"> <p style="text-align:center;margin:0px"><strong>Weighted</strong></p><p style="text-align:center;margin:0px"><strong>Average</strong></p><p style="text-align:center;margin:0px"><strong>Exercise Price</strong></p></td> <td style="PADDING-BOTTOM: 1px;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Outstanding, December 31, 2018</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">3,370,000</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">0.57</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Granted</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">600,000</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">1.20</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Outstanding, December 31, 2019</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">3,970,000</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">0.67</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Granted</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">500,000</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">0.75</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Exercised</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Forfeited or cancelled</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">Outstanding, June 30, 2020</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 3px double;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 3px double;width:9%;vertical-align:bottom;text-align:right;">4,470,000</td> <td style="PADDING-BOTTOM: 3px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 3px double;width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="BORDER-BOTTOM: 3px double;width:9%;vertical-align:bottom;text-align:right;">0.68</td> <td style="PADDING-BOTTOM: 3px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr></table> <p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">As of June 30, 2020, 4,230,000 warrants for Series B preferred stock were exercisable and the intrinsic value of these warrants was $714,060, the weighted average remaining contractual life was 7.89 years for warrants outstanding and the remaining expense is $146,286 over the remaining amortization period which is 6 months.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">As of June 30, 2019, 2,650,000 warrants for Series B preferred stock were exercisable and the intrinsic value of these warrants was $2,212,100. As of June 30, 2019, the weighted average remaining contractual life was 8.25 years for warrants outstanding and the remaining expense is $437,267 over the remaining amortization period which is 1.50 years.</p></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><p style="text-align:justify;margin:0px">On June 23, 2020, the Company entered into an operating lease agreement with terms 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.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">The assets and liabilities from operating leases are recognized at the commencement date based on the present value of remaining lease payments over the lease term using the Company&#8217;s secured incremental borrowing rates or implicit rates, when readily determinable. Short-term leases, which have an initial term of 12 months or less, are not recorded on the unaudited consolidated balance sheet.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">The Company&#8217;s operating lease does not provide an implicit rate that can readily be determined. Therefore, the Company uses a discount rate based on our incremental borrowing rate, which is determined using the average interest rate of our long-term debt as of June 23, 2020.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">The Company&#8217;s weighted-average remaining lease term relating to its operating leases is 3.83 years, with a weighted-average discount rate of 12.00%. </p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">The Company incurred no lease expense or operating cash flow during the three and six months ended June 30, 2020 due to the start of the lease on June 23, 2020 and payments starting on July 1, 2020. </p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">The company does not include the non-lease components that are associated with the lease and accounts for them outside of the lease in accordance with ASC Topic 842 <em>Leases</em>. The percentage of cost associated with the lease component was 100%. </p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company&#8217;s operating leases as of June 30, 2020.</p><p style="text-align:justify;margin:0px">&nbsp;</p><table style="border-spacing:0;text-align:left;font:10pt times new roman;width:100%" cellpadding="0"> <tr style="height:15px"> <td style="vertical-align:top;"> <p style="margin:0px"><strong>Maturity of Lease Liability</strong></p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" colspan="2" style="width:9%;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="margin:0px">Remainder of 2020</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">43,612</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="margin:0px">2021</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">85,860</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="margin:0px">2022</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">86,881</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="margin:0px">2023</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">89,487</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="margin:0px">2024</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">30,122</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="margin:0px">Total undiscounted operating lease payments</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">335,962</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="margin:0px">Less: Imputed interest</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">68,258</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="margin:0px">Present value of operating lease liabilities</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 3px double;width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="BORDER-BOTTOM: 3px double;width:9%;vertical-align:bottom;text-align:right;">267,704</td> <td style="PADDING-BOTTOM: 3px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr></table></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><p style="text-align:justify;margin:0px">On July 16, 2018, the Company entered into a consulting agreement with a service provider that contains the following terms:</p><p style="text-align:justify;margin:0px">&nbsp; </p><table style="border-spacing:0;font-size:10pt;width:100%" cellpadding="0"> <tr style="height:15px"> <td style="width:4%;"> <p style="text-align:justify;margin:0px">&nbsp;</p></td> <td style="width:4%;vertical-align:top;"> <p style="text-align:justify;margin:0px"><font style="font-family:symbol">&#183;</font></p></td> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">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.</p></td></tr> <tr style="height:15px"> <td></td> <td></td> <td></td></tr> <tr style="height:15px"> <td> <p style="text-align:justify;margin:0px">&nbsp;</p></td> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px"><font style="font-family:symbol">&#183;</font></p></td> <td style="vertical-align:top;"> <p style="text-align:justify;margin:0px">300,000 warrants for shares of the Company&#8217;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.</p></td></tr></table> <p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">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:</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">&#8220;Stage 1&#8221; - $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.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">&#8220;Stage 2&#8221; - $10,000 due upon the Company&#8217;s receipt of CFN Media&#8217;s invoice issued after CFN Media&#8217;s completion of Stage 1 and the Company&#8217;s confirmation they are ready to continue with Stage 2, which will include CFN Media&#8217;s delivery of two (2) Articles with the embedded interview and lead generation, as well as syndication, distribution and placement of services and deliverables.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">&#8220;Stage 3&#8221; - $10,000 due upon the Company&#8217;s receipt of CFN Media&#8217;s invoice issued after CFN Media&#8217;s completion of Stage 2 and the Company&#8217;s confirmation they are ready to continue with Stage 3, which will include CFN Media&#8217;s delivery of two (2) Articles with the embedded interview and lead generation, as well as syndication, distribution and placement of services and deliverables.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">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&#8217;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&#8217;s common stock at the closing market price of $0.26 per share as of the date of the agreement. In the event that this agreement is terminated by FIFG within twelve months of signing of this agreement, a claw back provision can be invoked by FIFG whereby the Shares shall be returned to FIFG. Additionally, FIFG 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.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">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&#8217;s sales of the Company&#8217;s product.</p></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><p style="MARGIN: 0px; text-align:justify;">The Company recognizes the concentration of its merchant cash advances, which could inherently create a potential risk to future working capital in the event that the Company is not able to collect all, or a majority, of the outstanding merchant cash advances. The Company actively mitigates its portfolio concentration risk by monitoring its merchant cash advance provider&#8217;s ability to participate in merchant cash advances from alternative providers and spreading merchant cash advance participation across various merchants.</p><p style="MARGIN: 0px; text-align:justify;">&nbsp;</p><p style="MARGIN: 0px; text-align:justify;">As of June 30, 2020, the Company&#8217;s receivables from merchant cash advances included $108,208&nbsp;from two merchants ($34,964&nbsp;and $73,244), representing 68% of the Company&#8217;s merchant cash advances. The Company earned $7,228 of MCA income from the same two merchants ($5,116 and $2,112), representing 45% of the Company&#8217;s MCA income for the three months ended June 30, 2020. The Company earned $82,447 of MCA income from the same two merchants ($57,181 and $25,266), representing 75% of the Company&#8217;s MCA income for the six months ended June 30, 2020. </p><p style="MARGIN: 0px; text-align:justify;">&nbsp;</p><p style="MARGIN: 0px; text-align:justify;">As of December 31, 2019, the Company&#8217;s receivables from merchant cash advances included $713,124 from two merchants ($179,853 and $533,271), representing 91% of the Company&#8217;s merchant cash advances. The Company earned $13,350 of MCA income from one merchant, representing 32% of the Company&#8217;s MCA income for the three months ended June 30, 2019. The Company earned $46,839 of MCA income from two merchants ($25,852 and $20,987), representing 30% of the Company&#8217;s MCA income for the six months ended June 30, 2019.</p><p style="MARGIN: 0px; text-align:justify;">&nbsp;</p><p style="MARGIN: 0px; text-align:justify;">As of June 30, 2020, there was no accounts payable concentration other than amounts owed to related parties which makes up 65% of the balance. As of December 31, 2019, there was no accounts payable concentration other than amounts owed to related parties which makes up 61% of the balance. </p><p style="MARGIN: 0px; text-align:justify;">&nbsp;</p><p style="MARGIN: 0px; text-align:justify;">For the three months ended June 30, 2020, the Company had purchase concentrations of 90% from one vendor. For the six months ended June 30, 2020, the Company had purchase concentrations of 73% and 14% from two vendors. For the three and six months ended June 30, 2019, the Company had purchase concentrations of 100% from one vendor.</p></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><p style="MARGIN: 0px; text-align:justify;">On July 19, 2020, the Company issued 50,000 shares of the Company&#8217;s common stock based on the fair market value on the date of issuance, in connection with the amendment of the third party note 3. (see Note 5).</p><p style="MARGIN: 0px; text-align:justify;">&nbsp;</p><p style="MARGIN: 0px; text-align:justify;">On July 13, 2020, our Board of Directors appointed Michael Kaplan to the Board of Directors. Mr. Kaplan is currently not expected to be named as a member of any committees of our Board of Directors.</p><p style="MARGIN: 0px; text-align:justify;">&nbsp;</p><p style="MARGIN: 0px; text-align:justify;">Mr. Kaplan&#8217;s compensation as a director for the initial twelve months will consist of one million (1,000,000) warrants which will vest at the rate of 83,333 warrants per month for the initial eleven months and the balance in the twelfth month, provided he is a director on each vesting date, with the initial tranche vesting on the day he takes office and then on each monthly anniversary of such date thereafter. Each Warrant will be exercisable for 36 months after it vests and will be exercisable at a price of $0.18 per share. The warrants are valued at $177,200 based on the Black Scholes Model. If he remains in office beyond twelve months, commencing with month thirteen, his compensation will be similar to the majority of the directors then in office.</p><p style="MARGIN: 0px; text-align:justify;">&nbsp;</p><p style="MARGIN: 0px; text-align:justify;">Prior to Mr. Kaplan&#8217;s appointment to the Board of Directors, on July 7, 2020 we entered into (i) a Subscription Agreement with Mr. Kaplan to sell to him one million (1,000,000) shares of common stock at a purchase price of $0.20 per share for a total purchase price of $200,000, which shares shall be purchased in twelve (12) equal monthly installments of 83,333 shares (the last installment to cover 83,337 shares) with the initial purchase occurring on the date thereof and subsequent instalments on each monthly anniversary thereafter (ii) 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, and (iii) an arrangement with Mr. Kaplan that in the event he raises outside investment in the Company in the amount of $500,000 - $2,000,000, he will receive one warrant for each dollar he so raises. The warrants to purchase two million shares of common stock are valued at $354,400 based on the Black Scholes Model.</p><p style="MARGIN: 0px; text-align:justify;">&nbsp;</p><p style="MARGIN: 0px; text-align:justify;">The warrants shall vest upon the occurrence to the Company of the following milestone events through the efforts of the consultant:</p><p style="MARGIN: 0px; text-align:justify;">&nbsp; </p><table style="border-spacing:0;font-size:10pt;width:100%" cellpadding="0"> <tr style="height:15px"> <td style="BORDER-BOTTOM: 1px solid;width:10%;"> <p style="MARGIN: 0px; text-align:center;"><strong>No. of Warrants</strong></p></td> <td style="width:1%;"></td> <td style="BORDER-BOTTOM: 1px solid;"> <p style="MARGIN: 0px; text-align:center;"><strong>Milestone</strong></p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td> <p style="margin:0px">100,000 </p></td> <td></td> <td> <p style="MARGIN: 0px; text-align:justify;">Acceptance by the Company of a full go-to market strategy for the Company&#8217;s products.</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td> <p style="margin:0px">100,000 </p></td> <td></td> <td> <p style="MARGIN: 0px; text-align:justify;">Acceptance by the Company of a social marketing platform and PR strategy and onboarding of such.</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td> <p style="margin:0px">300,000/500,000 </p></td> <td></td> <td> <p style="MARGIN: 0px; text-align:justify;">300,000 for each MULO retailer that is onboarded - regardless of store count carrying the product; and 500,000, if the onboarded MULO is a national chain.</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td> <p style="margin:0px">300,000 </p></td> <td></td> <td> <p style="MARGIN: 0px; text-align:justify;">Deliverance of full due diligence package for each potential acquisition for which the Company requests the consultant perform due diligence</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td> <p style="margin:0px">500,000 </p></td> <td></td> <td> <p style="MARGIN: 0px; text-align:justify;">Upon the closing of any acquisition which the consultant brought to the Company and provided due diligence.</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td> <p style="margin:0px">500,000 </p></td> <td></td> <td> <p style="MARGIN: 0px; text-align:justify;">Additional compensation in board seat agreement.</p></td></tr></table> <p style="MARGIN: 0px; text-align:justify;">&nbsp;&nbsp; &nbsp;&nbsp;</p><p style="MARGIN: 0px; text-align:justify;">If terminated with cause by the Company, the consultant shall not thereafter be entitled to any form of compensation and 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.</p><p style="MARGIN: 0px; text-align:justify;">&nbsp;</p><p style="MARGIN: 0px; text-align:justify;">Effective August 1, 2020, Mr. Kaplan will also have the title Chief Marketing Officer with authority to oversee the Company&#8217;s sales and marketing operations, and responsibility for developing oversight processes and procedures.</p><p style="MARGIN: 0px; text-align:justify;">&nbsp;</p><p style="MARGIN: 0px; text-align:justify;">On July 24, 2020, the Company issued 50,000 shares of the Company&#8217;s common stock based on the fair market value on the date of issuance, in connection with the amendment of the third party note 1. (see Note 5).</p><p style="MARGIN: 0px; text-align:justify;">&nbsp;</p><p style="MARGIN: 0px; text-align:justify;">On July 31, 2020, the Company issued a warrant to purchase 100,000 shares of the Company&#8217;s common stock to a consultant for services. The warrants are valued at $31,500 based on the Black Scholes Model.</p><p style="MARGIN: 0px; text-align:justify;">&nbsp;</p><p style="MARGIN: 0px 0px 0px 1.4pt; text-align:justify;">On August 4, 2020, the Company signed an Employment Agreement for a term of three. The employee, Mr. Moises Davidovits, will assist with the manufacturing, packaging and distribution of the Company&#8217;s chocolate product line. The Employment Agreement has a $7,000 monthly salary. In addition, the Company issued a warrant to Mr. Davidovits to purchase 300,000 shares of the Company&#8217;s common stock with a term of three (3) years. The warrants are valued at $97,470 based on the Black Scholes Model. In addition, he will receive a warrant to purchase 300,000 of the Company&#8217;s common stock for each of the two remaining years under the Employment Agreement with an exercise price equal to the closing market price of the Company&#8217;s common stock on the first day of each of such two annual employment periods. 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. Each of the warrants will be exercisable within a three-year period from the date of issue. Once per quarter, Mr. Davidovits may waive the right to receive 25,000 warrants and receive in exchange for $5,000 worth of shares of the Company&#8217;s common stock. In the event Mr. Davidovits&#8217; employment is terminated by the Company without cause, he shall be entitled to receive severance in an amount equal to the lesser of three month&#8217;s salary or the amount of salary otherwise payable until the termination date. He additionally shall be entitled to retain all warrants scheduled to vest within the following six months. </p></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><p style="text-align:justify;margin:0px">First Foods Group, Inc. (the &#8220;Company&#8221; or &#8220;First Foods&#8221;) is a smaller reporting company focused on developing its specialty chocolate product line and participating in merchant cash advances (&#8220;MCA&#8221;) through its 1<sup>st</sup> Foods Funding Division. First Foods continues to pursue new foodservice brands and menu concepts. </p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">On August 31, 2017, the Company formed Holy Cacao, Inc., a Nevada corporation (&#8220;Holy Cacao&#8221;). Holy Cacao has 100 shares of no par value common stock authorized, issued and outstanding with 85 shares owned by the Company and 15 shares owned by non-controlling interests. Holy Cacao 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&#8217;s understanding of the Agricultural Act of 2014 (the &#8220;2014 Farm Bill&#8221;) and/or the Agriculture Improvement Act of 2018 (the &#8220;2018 Farm Bill,&#8221; and together with the 2014 Farm Bill, collectively, the &#8220;Farm Bill&#8221;), 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 marijuana-based ingredient, 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 (&#8220;IP&#8221;), 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&#8217;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. On February 27, 2019, the United States Patent and Trademark Office (the &#8220;USPTO&#8221;) approved Holy Cacao&#8217;s trademark brand, &#8220;The Edibles&#8217; Cult.&#8221; On November 26, 2019, the USPTO approved Holy Cacao&#8217;s trademark brand, &#8220;Purely Irresistible.&#8221; The Company has submitted multiple applications to the USPTO for additional brand names, including &#8220;Mystere&#8221; and &#8220;Southeast Edibles&#8221; among others. On February 5, 2019, the Company signed a Consulting Agreement with a consultant to assist in the manufacturing, packaging and distribution of the Company&#8217;s chocolate product line. On March 26, 2019, the Company signed a Facility Access and Wholesale Production Purchase and Sale Agreement that allows it to use a fully staffed and fully equipped state of the art manufacturing facility to produce its specialty chocolate product line and sell it to manufacturing and wholesaling companies. On March 1, 2020, the Company&#8217;s Board of Directors made a strategic decision to broaden the appeal of its hemp-based chocolate products to a wider base of customers, who are particularly discerning about the cleanliness of the Company&#8217;s manufacturing facility and quality of its hemp-based chocolate products, by successfully obtaining worldwide Kosher certification from the Union of Orthodox Jewish Congregations of America, Kashruth Division (the &#8220;OU&#8221;), which is the largest and most recognized certification of its kind in the world. On March 9, 2020, the Company retained Tartikov Beth Din (&#8220;BD&#8221;) to allow BD to supervise the hemp-based chocolate products produced by the Company in accordance with OU certification standards. On July 13, 2020, Michael Kaplan was appointed to the Board of Directors and, as of August 1, 2020, accepted the role of Chief Marketing Officer with authority to oversee the Company&#8217;s sales and marketing operations, and responsibility for developing oversight processes and procedures. On August 4, 2020 the Company retained Moises Davidovits as its full-time chocolatier. Mr. Davidovits is a third-generation chocolatier who is responsible for the manufacturing, packaging and distribution of the Company&#8217;s chocolate product line, as well as the formulation of all of the Company&#8217;s proprietary chocolate recipes. </p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">On October 25, 2017, the Company entered into a contract with TIER Merchant Advances LLC (&#8220;TIER&#8221;) 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. On November 8, 2018, the Company also began providing cash advances directly to merchants.&nbsp;</p></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><p style="text-align:justify;margin:0px">The Company&#8217;s unaudited condensed consolidated financial statements are prepared using generally accepted accounting principles in the United States of America (&#8220;GAAP&#8221;) 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.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">In order to continue as a going concern, the Company will need, among other things, additional capital resources. As of June 30, 2020, the Company had approximately $257,000 in third-party short-term debt that is due within the next twelve months. Management&#8217;s plan is to 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.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">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.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">In December 2019, a novel strain of coronavirus surfaced. The spread of COVID-19 around the world in the first quarter of 2020 has caused significant volatility in U.S. and international markets. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. and international economies. The Company&#8217;s financial position, operations and cash flows as of June 30, 2020 have been adversely affected, and may be further affected in the future, by the recent and ongoing outbreak of the coronavirus disease 2019 (COVID-19) which in March 2020, was declared a pandemic by the World Health Organization. The ultimate disruption which may be caused by the outbreak is uncertain; however, it may result in a material adverse impact on the Company&#8217;s financial position, operations and cash flows. Possible areas that may be materially affected include, but are not limited to, disruption to the Company&#8217;s labor workforce, unavailability of products and supplies used in operations, and the decline in value of assets held by the Company. As of June 30, 2020 and through the filing date of the financial statements, the Company has continued to collect receivables from its cash advances but has experienced an increase in payment delinquencies and has had two customers renegotiate the terms of their cash advances due to COVID-19. The Company has taken a reserve allowance on its MCA&#8217;s.</p></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><p style="text-align:justify;margin:0px">The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.</p></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><p style="text-align:justify;margin:0px">The accompanying unaudited condensed consolidated financial statements were prepared using generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, these unaudited condensed consolidated financial statements do not include all information or notes required by generally accepted accounting principles for annual financial statements and should be read in conjunction with the Company&#8217;s annual consolidated financial statements included within the Company&#8217;s Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on March 25, 2020.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">In the opinion of management, the unaudited condensed consolidated financial statements included herein contain all adjustments necessary to present fairly the Company&#8217;s financial position and the results of its operations and cash flows for the interim periods presented. Such adjustments are of a normal recurring nature. The results of operations for the six months ended June 30, 2020 may not be indicative of results for the full year. </p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">The noncontrolling interest represents the proportionate share of the proceeds received and also the income and loss pickup from the fifteen-percent sale of equity interest in our wholly owned subsidiary; Holy Cacao.</p></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><p style="text-align:justify;margin:0px">The unaudited condensed consolidated financial statements represent the consolidation of the accounts of the Company and its subsidiary in conformity with GAAP. All intercompany accounts and transactions have been eliminated in consolidation.</p></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><p style="margin:0px">The Company considers all highly liquid temporary cash investments with an original maturity of twelve months or less to be cash equivalents. At June 30, 2020 and December 31, 2019, the Company had no cash equivalents.</p><p style="margin:0px">&nbsp;&nbsp;&nbsp; </p><p style="text-align:justify;margin:0px 0px 0px 0.35pt">The Company&#8217;s cash is held with financial institutions, and the account balances may exceed the Federal Deposit Insurance Corporation (FDIC) insurance limit at times. Accounts are insured by the FDIC up to $250,000 per financial institution. The Company has not experienced any losses in such accounts with these financial institutions.</p><p style="margin:0px">&nbsp;&nbsp; </p></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><p style="text-align:justify;margin:0px">The Company participates in the merchant cash advance industry by directly advancing sums to a merchant or a merchant advance provider, TIER, who in turn advances sums to merchants or other merchant cash advance providers. Each reporting period, the Company reviews the carrying value of these advances and determines whether an impairment reserve is necessary. At June 30, 2020, the Company reserved an amount equal to 78% of the outstanding merchant cash advance balance at period end based on the potential impact of COVID 19. In addition, during the six months ended June 30, 2020 the Company wrote off 21 merchant advances for a total of $22,901. These expenses are included in provision for merchant cash advances expense on the accompanying unaudited condensed consolidated statements of operations.</p></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><p style="text-align:justify;margin:0px">We completed, related to our merchant cash advance business line, our assessment of the impact of ASC 606 and determined that we recognize revenue in accordance with ASC 860, <em>Transfers and Servicing</em>, which is explicitly excluded from the scope of ASC 606. We participate in the servicing of merchant cash advances that have been provided to third parties, which in accordance with ASC 860, causes us to recognize merchant cash advance (&#8220;MCA&#8221;) income. We also have product sales from our Holy Cacao division that follow ASC 606. </p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">Product sales are measured based on consideration specified in a contract with a customer that we expect to receive in exchange for goods, net of any variable considerations (e.g. rights to return product, sales incentives, etc.). The Company recognizes revenue when it satisfies a performance obligation by transferring control of a product to a customer. These criteria are assumed to have been met upon delivery of the products requested by the customer to the customer&#8217;s carrier. The Company applied the practical expedient available under ASC 606 to disregard determining significant financing components, if the good is transferred and payment is received within one year. </p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">When a merchant cash advance is purchased, the Company records a merchant cash advance participation receivable for the purchase price. The purchase price consists of the merchant cash advance principal plus an up-front commission that is amortized over the term of the merchant cash advance. The amount of the commission is negotiated between the Company and TIER for each contract. The standard commission is 15% of the merchant cash advance principal but can be reduced depending upon the credit worthiness of the merchant. The average commission paid by the Company since inception has been approximately 7%. If a merchant cash advance contract is signed in one period, but not paid until a subsequent period, a corresponding liability is established in the current period.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">At the time the Company participates in a merchant cash advance, the Company records a deferred revenue liability, which is the total future receivable due to the Company less the principal amount of the merchant cash advance. Revenue is recognized and the deferred liability is reduced over the term of the merchant cash advance.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">TIER maintains a bank account on behalf of the Company. Each day, TIER receives payment, reflected in the bank account, for each merchant cash advance TIER has purchased on behalf of the Company from various merchant cash advance providers. The Company reduces its merchant cash advance balance by the cash received, which is net of platform fees. Platform fees are a daily charge associated with the ACH service and the financial and reporting management software platform provided by TIER. The platform fees are also negotiated between the Company and TIER for each contract but are typically 4% of the daily merchant cash advance principal amount. </p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">For each merchant cash advance entered into by the Company, TIER receives a daily payment as payments are made on the advance, for each merchant cash advance TIER has purchased on behalf of the Company from various merchant cash advance providers. The Company reduces its merchant cash advance balance by the cash received, which is net of a 2% commission to TIER.</p></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><p style="MARGIN: 0px; text-align:justify;">Inventory, consisting of raw materials, work in process and products available for sale, are accounted for using the first-in, first-out method, and are valued at the lower of cost or net realizable value. This valuation requires management to make judgements based on currently available information, about the likely method of disposition, such as through sales to individual customers and returns. The Company has no allowance for inventory reserves.</p><p style="MARGIN: 0px; text-align:justify;">&nbsp;</p><p style="MARGIN: 0px; text-align:justify;">Inventory consisted of the following as of June 30, 2020 and December 31, 2019:</p><p style="MARGIN: 0px; text-align:justify;">&nbsp;</p><table style="border-spacing:0;text-align:left;font:10pt times new roman;width:100%" cellpadding="0"> <tr style="height:15px"> <td> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" colspan="2" style="width:9%;vertical-align:bottom;text-align:center;"> <p style="MARGIN: 0px 0px 0px -5.55pt; text-align:center;"><strong>June 30,</strong></p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" colspan="2" style="width:9%;vertical-align:bottom;text-align:center;"> <p style="MARGIN: 0px 0px 0px -4.75pt; text-align:center;"><strong>December 31,</strong></p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px"> <td> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:center;" colspan="2"> <p style="MARGIN: 0px; text-align:center;"><strong>2020</strong></p></td> <td style="PADDING-BOTTOM: 1px;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:center;" colspan="2"> <p style="MARGIN: 0px; text-align:center;"><strong>2019</strong></p></td> <td style="PADDING-BOTTOM: 1px;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="margin:0px">Raw Materials</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">41,463</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">2,854</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="margin:0px">Work in Process</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">1,550</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">5,410</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="margin:0px">Finished Goods</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">8,562</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">2,292</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="margin:0px">Total</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 3px double;width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="BORDER-BOTTOM: 3px double;width:9%;vertical-align:bottom;text-align:right;">51,575</td> <td style="PADDING-BOTTOM: 3px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 3px double;width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="BORDER-BOTTOM: 3px double;width:9%;vertical-align:bottom;text-align:right;">10,556</td> <td style="PADDING-BOTTOM: 3px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr></table></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><p style="MARGIN: 0px; text-align:justify;">Property and equipment are stated at cost, less accumulated depreciation and amortization. Expenditures for maintenance and repairs are charged to expense when incurred, while renewals and betterments that materially extend the life of an asset are capitalized. When assets are sold, retired or otherwise disposed of, the cost and accumulated depreciation are removed from the balance sheets and any resulting gain or loss is reflected in the unaudited condensed consolidated statements of operations and members&#8217; deficit in the period realized.</p><p style="MARGIN: 0px; text-align:justify;">&nbsp;</p><p style="MARGIN: 0px; text-align:justify;">Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the assets, which are as follows:</p><p style="MARGIN: 0px; text-align:justify;">&nbsp;</p><table style="border-spacing:0;font-size:10pt;text-align:justify;margin-left:auto;margin-right:auto;width:85%" cellpadding="0"> <tr style="height:15px;background-color:#cceeff"> <td style="width:72%;vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Property &#8211; Leasehold Improvements</p></td> <td style="width:28%;vertical-align:top;"> <p style="MARGIN: 0px; text-align:center;">4 years</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="width:72%;vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Equipment</p></td> <td style="width:28%;vertical-align:top;"> <p style="MARGIN: 0px; text-align:center;">5 years</p></td></tr></table></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><p style="text-align:justify;margin:0px">Long-lived assets are comprised of property and equipment. The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset or group of assets may not be recoverable. If these circumstances exist, recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset group to future undiscounted net cash flows expected to be generated by the asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. There were no impairments to long-lived assets for the six months ended June 30, 2020 and 2019.</p></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><p style="text-align:justify;margin:0px">The Company&#8217;s policy is to engage market and branding consultants to research and develop specialty chocolate products, including chocolate products infused with a hemp-based ingredient, and packaging targeted to particular states within the US. The research and development costs for the three months ended June 30, 2020 and 2019, were $27,500 and $18,510, respectively. The research and development costs for the six months ended June 30, 2020 and 2019, were approximately $32,000 and $33,510, respectively. These expenses are included in general and administrative expenses on the accompanying unaudited condensed consolidated statements of operations.</p></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><p style="text-align:justify;margin:0px">The Company records origination and other expenses related to its debt obligations as deferred financing costs. These expenses are deferred and amortized over the life of the related debt instrument. In accordance with Accounting Standards Update (&#8220;ASU&#8221;) No. 2015-03, deferred finance costs, net of accumulated amortization have been included as a contra to the corresponding loans in the accompanying unaudited condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019, respectively.</p></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><p style="text-align:justify;margin:0px">The Company measures and recognizes compensation expense for all stock-based payments at fair value over the requisite service period. The Company uses the Black-Scholes option pricing model to determine the weighted average fair value of options and warrants. For restricted stock grants, fair value is determined as the closing price of our common stock on the date of grant. Equity-based compensation expense is recorded in administrative expenses based on the classification of the employee or vendor. The determination of fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by our stock price, as well as by assumptions regarding a number of subjective variables. These variables include, but are not limited to, the expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors.</p></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><p style="text-align:justify;margin:0px">The Company provides for income taxes using the asset and liability approach. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. As of June 30, 2020 and December 31, 2019, the Company had a full valuation allowance against deferred tax assets. With the historical change in ownership, the Company is subject to certain NOL limitations under Section 382 of the Internal Revenue Code.</p></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><p style="text-align:justify;margin:0px">In accordance with &#8220;ASC-260 - Earnings per Share&#8221;, the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no dilutive shares outstanding as of June 30, 2020 and 2019 because their effect would be antidilutive.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">The Company had 1,499,750 and 403,750 warrants to purchase common stock outstanding at June 30, 2020 and 2019, respectively. The Company had 4,470,000 and 3,370,000 warrants to purchase Series B preferred stock outstanding at June 30, 2020 and 2019, respectively. The Company has outstanding one (1) Series A preferred share that is convertible into five (5) shares of the Company&#8217;s common stock. Additionally, the Company has 473,332 Series B preferred shares, and 660,000 Series C preferred shares outstanding that are convertible into 2,366,660 and 660,000 shares of common stock at June 30, 2020 and 2019, respectively. The warrants and preferred stock were not included in the Company&#8217;s weighted average number of common shares outstanding because they would be anti-dilutive.</p></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><p style="text-align:justify;margin:0px">Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair value. The carrying value of cash, merchant cash advances, prepaid expenses, accounts payable and accrued liabilities approximate their fair value because of the short-term nature of these instruments. Management is of the opinion that the Company is not exposed to significant market or credit risks arising from these financial instruments.</p></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><p style="text-align:justify;margin:0px">Advertising and promotion costs are expensed as incurred. Advertising and promotion costs recognized in the unaudited condensed consolidated statements of operations for the three months ended June 30, 2020 and 2019, were approximately $5,700 and $34,150, respectively and approximately $21,000 and $44,900, respectively, for the six months ended June 30, 2020 and 2019.</p></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><p style="MARGIN: 0px; text-align:justify;">In June 2011, the FASB issued ASC 810-10-65-1, to clarify that a non-controlling (minority) interest in a subsidiary is an ownership interest in the entity that should be reported as equity in the condensed consolidated financial statements. It also requires consolidated net income to include the amounts attributable to both the parent and non-controlling interest, with disclosure on the face of the unaudited condensed consolidated income statement of the amounts attributed to the parent and to the non-controlling interest. In accordance with ASC 810-10-45-21, those losses attributable to the parent and the non-controlling interest in subsidiaries may exceed their interests in the subsidiary&#8217;s equity. The excess and any further losses attributable to the parent and the non-controlling interest shall be attributed to those interests even if that attribution results in a deficit non-controlling interest balance. During the year ended December 31, 2017, the Company entered into a subscription agreement for the sale of a ten-percent equity interest in its wholly owned subsidiary, Holy Cacao, for $200,000 in cash proceeds, in the aggregate. During the year ended December 31, 2019, 5% equity was issued to a service provider due to the completion of Holy Cacao&#8217;s first sale of its product, as per the agreement with the service provider. The Company&#8217;s periodic reporting now includes the results of operations of Holy Cacao, with the fifteen-percent ownership reported as noncontrolling interests. For the three and six months ended June 30, 2020, the cost of goods sold was approximately $4,700 and $5,500, respectively, and the operating expense for Holy Cacao was $122,000 and $215,000, respectively. There was approximately $8,800 and $12,400 of revenue for Holy Cacao for the three and six months ended June 30, 2020, respectively.</p><p style="MARGIN: 0px; text-align:justify;">&nbsp;</p><p style="MARGIN: 0px; text-align:justify;">The Company conducts business as two operating segments, First Foods and Holy Cacao. The Company does not distinguish between the two segments and has only one reportable segment based on quantitative thresholds. The accounting policies of the segments are the same as the accounting policies of the Company as a whole. The operating results of these business segments are regularly reviewed by the Company&#8217;s chief operating decision maker. </p></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><p style="text-align:justify;margin:0px">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.</p><p style="text-align:justify;margin:0px">&nbsp;</p><p style="text-align:justify;margin:0px">In June 2016, the FASB issued ASU 2016-13, &#8220;Financial Instruments &#8211; Credit Losses&#8221; 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, &#8220;Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments&#8221; and ASU No. 2019-05, &#8220;Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief&#8221; which provided additional implementation guidance on the previously issued ASU. In November 2019, the FASB issued ASU 2019-10, &#8220;Financial Instruments - Credit Loss (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842),&#8221; which defers the effective date for public filers that are considered small reporting companies (&#8220;SRC&#8221;) 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&#8217;s unaudited condensed consolidated financial statements.</p></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><table style="border-spacing:0;text-align:left;font:10pt times new roman;width:100%" cellpadding="0"> <tr style="height:15px"> <td> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" colspan="2" style="width:9%;vertical-align:bottom;text-align:center;"> <p style="MARGIN: 0px 0px 0px -5.55pt; text-align:center;"><strong>June 30,</strong></p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" colspan="2" style="width:9%;vertical-align:bottom;text-align:center;"> <p style="MARGIN: 0px 0px 0px -4.75pt; text-align:center;"><strong>December 31,</strong></p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px"> <td> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:center;" colspan="2"> <p style="MARGIN: 0px; text-align:center;"><strong>2020</strong></p></td> <td style="PADDING-BOTTOM: 1px;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:center;" colspan="2"> <p style="MARGIN: 0px; text-align:center;"><strong>2019</strong></p></td> <td style="PADDING-BOTTOM: 1px;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="margin:0px">Raw Materials</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">41,463</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">2,854</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="margin:0px">Work in Process</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">1,550</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">5,410</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="margin:0px">Finished Goods</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">8,562</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">2,292</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="margin:0px">Total</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 3px double;width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="BORDER-BOTTOM: 3px double;width:9%;vertical-align:bottom;text-align:right;">51,575</td> <td style="PADDING-BOTTOM: 3px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 3px double;width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="BORDER-BOTTOM: 3px double;width:9%;vertical-align:bottom;text-align:right;">10,556</td> <td style="PADDING-BOTTOM: 3px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr></table> <p style="MARGIN: 0px; text-align:justify;">&nbsp;</p></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><table style="border-spacing:0;font-size:10pt;text-align:justify;margin-left:auto;margin-right:auto;width:85%" cellpadding="0"> <tr style="height:15px;background-color:#cceeff"> <td style="width:72%;vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Property &#8211; Leasehold Improvements</p></td> <td style="width:28%;vertical-align:top;"> <p style="MARGIN: 0px; text-align:center;">4 years</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="width:72%;vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Equipment</p></td> <td style="width:28%;vertical-align:top;"> <p style="MARGIN: 0px; text-align:center;">5 years</p></td></tr></table></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><table style="border-spacing:0;text-align:left;font:10pt times new roman;width:100%" cellpadding="0"> <tr style="height:15px"> <td> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" style="BORDER-TOP: medium none; BORDER-BOTTOM: black 1pt solid;vertical-align:bottom;text-align:center;" colspan="2"> <p style="MARGIN: 0px; text-align:center;"><strong>June 30, </strong></p><p style="MARGIN: 0px; text-align:center;"><strong>2020</strong></p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" style="BORDER-BOTTOM: #000000 1px solid;vertical-align:bottom;text-align:center;" colspan="2"> <p style="MARGIN: 0px; text-align:center;"><strong>December 31,</strong></p><p style="MARGIN: 0px; text-align:center;"><strong>2019</strong></p></td> <td style="PADDING-BOTTOM: 1px;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="width:2%;">1.</td> <td style="width:68%;"> <p style="MARGIN: 0px; text-align:justify;">Note payable at 12%, matures 10/31/2020</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:5%;"> <p style="MARGIN: 0px; text-align:center;">{a} *</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">100,000</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">100,000</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td>2.</td> <td> <p style="MARGIN: 0px; text-align:justify;">Non-interest bearing note payable, matures on 4/25/2021</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td> <p style="MARGIN: 0px; text-align:center;">*</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="vertical-align:bottom;text-align:right;">179,813</td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="vertical-align:bottom;text-align:right;">179,813</td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td>3.</td> <td> <p style="MARGIN: 0px; text-align:justify;">Note payable at 12%, matures 9/13/2020. The Company has recorded debt discount and amortized it over the applicable life of the debt.</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td> <p style="MARGIN: 0px; text-align:center;">{b} *</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="vertical-align:bottom;text-align:right;">100,000</td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="vertical-align:bottom;text-align:right;">100,000</td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td>4.</td> <td> <p style="MARGIN: 0px; text-align:justify;">Note payable at 12%, matures 4/9/2021. The Company has recorded debt discount and amortized it over the applicable life of the debt. </p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td> <p style="MARGIN: 0px; text-align:center;">{c} *</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="vertical-align:bottom;text-align:right;">250,000</td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="vertical-align:bottom;text-align:right;">250,000</td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td>5.</td> <td> <p style="MARGIN: 0px; text-align:justify;">Non-interest bearing note payable, matures on 11/15/2020. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt.</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td> <p style="MARGIN: 0px; text-align:center;">{d} *</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="vertical-align:bottom;text-align:right;">80,000</td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="vertical-align:bottom;text-align:right;">-</td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td> <p style="margin:0px">&nbsp;</p></td> <td> <p style="MARGIN: 0px; text-align:justify;">Unamortized debt discount</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-TOP: medium none; BORDER-BOTTOM: black 1pt solid;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-TOP: medium none; BORDER-BOTTOM: black 1pt solid;vertical-align:bottom;text-align:right;">(77,866</td> <td style="vertical-align:bottom;white-space: nowrap;">)</td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-TOP: medium none; BORDER-BOTTOM: black 1pt solid;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-TOP: medium none; BORDER-BOTTOM: black 1pt solid;vertical-align:bottom;text-align:right;">(9,190</td> <td style="vertical-align:bottom;white-space: nowrap;">)</td></tr> <tr style="height:15px;background-color:#cceeff"> <td> <p style="margin:0px">&nbsp;</p></td> <td> <p style="MARGIN: 0px; text-align:justify;">Total</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-TOP: medium none; BORDER-BOTTOM: 2pt double;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="BORDER-TOP: medium none; BORDER-BOTTOM: 2pt double;vertical-align:bottom;text-align:right;">631,947</td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-TOP: medium none; BORDER-BOTTOM: 2pt double;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="BORDER-TOP: medium none; BORDER-BOTTOM: 2pt double;vertical-align:bottom;text-align:right;">620,623</td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr></table></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><table style="border-spacing:0;text-align:left;font:10pt times new roman;margin-left:auto;margin-right:auto;width:85%" cellpadding="0"> <tr style="height:15px"> <td></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:center;" colspan="2"> <p style="MARGIN: 0px; text-align:center;"><strong>June 30,<br />2020</strong></p></td> <td style="PADDING-BOTTOM: 1px;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:center;" colspan="2"> <p style="MARGIN: 0px; text-align:center;"><strong>December 31, <br />2019</strong></p></td> <td style="PADDING-BOTTOM: 1px;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Leasehold improvements</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">40,000</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Equipment</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">196,792</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Less: Accumulated depreciation and amortization</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">(12,741</td> <td style="PADDING-BOTTOM: 1px;width:1%;vertical-align:bottom;white-space: nowrap;">)</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Total</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 3px double;width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="BORDER-BOTTOM: 3px double;width:9%;vertical-align:bottom;text-align:right;">224,051</td> <td style="PADDING-BOTTOM: 3px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 3px double;width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="BORDER-BOTTOM: 3px double;width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="PADDING-BOTTOM: 3px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr></table></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><table style="border-spacing:0;text-align:left;font:10pt times new roman;margin-left:auto;margin-right:auto;width:85%" cellpadding="0"> <tr style="height:15px"> <td> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:center;" colspan="2"> <p style="MARGIN: 0px; text-align:center;"><strong>June 30,</strong></p><p style="MARGIN: 0px; text-align:center;"><strong>2020</strong></p></td> <td style="PADDING-BOTTOM: 1px;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:center;" colspan="2"> <p style="MARGIN: 0px; text-align:center;"><strong>December 31,</strong></p><p style="MARGIN: 0px; text-align:center;"><strong>2019</strong></p></td> <td style="PADDING-BOTTOM: 1px;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Accounts payable</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">451,100</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">305,679</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Interest</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">73,109</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">24,136</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Salaries</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">262,933</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">386,121</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Other</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">45,489</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">35,739</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Total</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 3px double;width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="BORDER-BOTTOM: 3px double;width:9%;vertical-align:bottom;text-align:right;">832,631</td> <td style="PADDING-BOTTOM: 3px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 3px double;width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="BORDER-BOTTOM: 3px double;width:9%;vertical-align:bottom;text-align:right;">751,675</td> <td style="PADDING-BOTTOM: 3px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr></table></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><table style="border-spacing:0;text-align:justify;font:10pt times new roman;margin-left:auto;margin-right:auto;width:100%" cellpadding="0"> <tr style="height:15px"> <td></td> <td></td> <td></td> <td></td> <td></td> <td style="BORDER-TOP: medium none; BORDER-BOTTOM: black 1pt solid;" colspan="2"> <p style="MARGIN: 0px; text-align:center;"><strong>June 30, </strong></p><p style="MARGIN: 0px; text-align:center;"><strong>2020</strong></p></td> <td></td> <td></td> <td style="BORDER-BOTTOM: #000000 1px solid;" colspan="2"> <p style="MARGIN: 0px; text-align:center;"><strong>December 31, </strong></p><p style="MARGIN: 0px; text-align:center;"><strong>2019</strong></p></td> <td></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="width:2%;vertical-align:top;">1.</td> <td style="width:68%;"> <p style="MARGIN: 0px; text-align:justify;">Note payable at 12%, matures 7/20/2020. In connection with the original issuance, as well as subsequent extension, the Company has recorded debt discount and amortized it over the applicable life of the debt.</p></td> <td style="COLOR: black;width:1%;"></td> <td style="COLOR: black;width:5%;"> <p style="MARGIN: 0px; text-align:center;">{a} *</p></td> <td style="COLOR: black;width:1%;"></td> <td style="COLOR: black;width:1%;"> <p style="MARGIN: 0px; text-align:justify;">$</p></td> <td style="COLOR: black;width:9%;"> <p style="MARGIN: 0px; text-align:right;">50,000</p></td> <td style="COLOR: black;width:1%;"></td> <td style="COLOR: black;width:1%;"></td> <td style="COLOR: black;width:1%;"> <p style="MARGIN: 0px; text-align:justify;">$</p></td> <td style="COLOR: black;width:9%;"> <p style="MARGIN: 0px; text-align:right;">100,000</p></td> <td style="width:1%;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;">2.</td> <td> <p style="MARGIN: 0px; text-align:justify;">Note payable at 12%, matures 1/22/2021. In connection with the original issuance, as well as subsequent extension, the Company has recorded debt discount and amortized it over the applicable life of the debt.</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:center;">*</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">18,000</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">18,000</p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;">3.</td> <td> <p style="MARGIN: 0px; text-align:justify;">Note payable at 12%, matures 7/8/2020. In connection with the original issuance, as well as subsequent extension, the Company has recorded debt discount and amortized it over the applicable life of the debt.</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:center;">{b} *</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">50,000</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">50,000</p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;">4.</td> <td> <p style="MARGIN: 0px; text-align:justify;">Note payable at 12%, matures 6/11/2021. In connection with the original issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt. </p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:center;">*</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">25,000</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">25,000</p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;">5.</td> <td> <p style="MARGIN: 0px; text-align:justify;">Note payable at 12%, matures 7/21/2021. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt. </p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:center;">*</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">250,000</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">250,000</p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;">6.</td> <td> <p style="MARGIN: 0px; text-align:justify;">Note payable at 12%, matures 10/1/2021. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt. </p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:center;">*</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">410,000</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">410,000</p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;">7.</td> <td> <p style="MARGIN: 0px; text-align:justify;">Note payable at 12%, matures 10/15/2021. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt. </p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:center;">*</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">140,000</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">140,000</p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;">8.</td> <td> <p style="MARGIN: 0px; text-align:justify;">Note payable at 12%, matures 10/30/2021. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt. </p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:center;">*</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">200,000</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">200,000</p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;">9.</td> <td> <p style="MARGIN: 0px; text-align:justify;">Note payable at 12%, matures 7/9/2021. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt. </p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:center;">*</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">60,000</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">- </p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;">10.</td> <td> <p style="MARGIN: 0px; text-align:justify;">Note payable at 12%, matures 1/28/2022. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt. </p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:center;">*</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">96,000</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">- </p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;">11.</td> <td> <p style="MARGIN: 0px; text-align:justify;">Note payable at 3.75%, matures 6/25/2050. </p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:center;">**</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">150,000</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">- </p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;">12.</td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:justify;">Non-interest bearing note payable, matures on 9/30/2021.</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:center;">{c} *</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">140,188</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">- </p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:justify;">Unamortized debt discount</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="BORDER-BOTTOM: #000000 1px solid; COLOR: black;"></td> <td style="BORDER-BOTTOM: #000000 1px solid; COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">(436,287)</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="BORDER-BOTTOM: #000000 1px solid; COLOR: black;"></td> <td style="BORDER-BOTTOM: #000000 1px solid; COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">(544,490)</p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td></td> <td style="COLOR: black;"> <p style="MARGIN: 0px; text-align:justify;">Total</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="BORDER-BOTTOM: 0.5pt solid;">&nbsp;</td> <td style="BORDER-BOTTOM: 0.5pt solid; COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">1,152,901</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="BORDER-BOTTOM: 0.5pt solid;">&nbsp;</td> <td style="BORDER-BOTTOM: 0.5pt solid; COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">648,510</p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td></td> <td>Less: short term loans, net</td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="BORDER-BOTTOM: #000000 1px solid; COLOR: black;"></td> <td style="BORDER-BOTTOM: #000000 1px solid; COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">257,400</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="BORDER-BOTTOM: #000000 1px solid; COLOR: black;"></td> <td style="BORDER-BOTTOM: #000000 1px solid; COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">165,270</p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td></td> <td> <p style="MARGIN: 0px; text-align:justify;">Total long-term loans, net</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="BORDER-BOTTOM: 2pt double; COLOR: black;"> <p style="MARGIN: 0px; text-align:justify;">$</p></td> <td style="BORDER-BOTTOM: 2pt double; COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">895,501</p></td> <td style="COLOR: black;"></td> <td style="COLOR: black;"></td> <td style="BORDER-BOTTOM: 2pt double; COLOR: black;"> <p style="MARGIN: 0px; text-align:justify;">$</p></td> <td style="BORDER-BOTTOM: 2pt double; COLOR: black;"> <p style="MARGIN: 0px; text-align:right;">483,240</p></td> <td> <p style="margin:0px">&nbsp;</p></td></tr></table></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><table style="border-spacing:0;text-align:left;font:10pt times new roman;width:100%" cellpadding="0"> <tr style="height:15px"> <td></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:center;" colspan="2"> <p style="MARGIN: 0px; text-align:center;"><strong>Number of</strong></p><p style="MARGIN: 0px; text-align:center;"><strong>Warrants</strong></p><p style="MARGIN: 0px; text-align:center;"><strong>(in common</strong></p><p style="MARGIN: 0px; text-align:center;"><strong>shares)</strong></p></td> <td style="PADDING-BOTTOM: 1px;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:center;" colspan="2"> <p style="MARGIN: 0px; text-align:center;"><strong>Weighted</strong></p><p style="MARGIN: 0px; text-align:center;"><strong>Average</strong></p><p style="MARGIN: 0px; text-align:center;"><strong>Exercise</strong></p><p style="MARGIN: 0px; text-align:center;"><strong>Price</strong></p></td> <td style="PADDING-BOTTOM: 1px;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Outstanding, December 31, 2018</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">343,750</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">0.08</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Granted</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">1,060,000</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">0.31</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Exercised</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Forfeited or cancelled</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Outstanding, December 31, 2019</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 3px double;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 3px double;width:9%;vertical-align:bottom;text-align:right;">1,403,750</td> <td style="PADDING-BOTTOM: 3px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 3px double;width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="BORDER-BOTTOM: 3px double;width:9%;vertical-align:bottom;text-align:right;">0.26</td> <td style="PADDING-BOTTOM: 3px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Granted</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">96,000</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">0.22</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Exercised</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Forfeited or cancelled</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Outstanding, June 30, 2020</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 3px double;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 3px double;width:9%;vertical-align:bottom;text-align:right;">1,499,750</td> <td style="PADDING-BOTTOM: 3px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 3px double;width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="BORDER-BOTTOM: 3px double;width:9%;vertical-align:bottom;text-align:right;">0.25</td> <td style="PADDING-BOTTOM: 3px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr></table> <p style="MARGIN: 0px; text-align:justify;">&nbsp;</p></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><table style="border-spacing:0;text-align:left;font:10pt times new roman;width:100%" cellpadding="0"> <tr style="height:15px"> <td> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:center;" colspan="2"> <p style="MARGIN: 0px; text-align:center;"><strong>Number of Warrants</strong></p><p style="MARGIN: 0px; text-align:center;"><strong>(in Series B Preferred</strong></p><p style="MARGIN: 0px; text-align:center;"><strong>Stock)</strong></p></td> <td style="PADDING-BOTTOM: 1px;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="hdcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:center;" colspan="2"> <p style="MARGIN: 0px; text-align:center;"><strong>Weighted</strong></p><p style="MARGIN: 0px; text-align:center;"><strong>Average</strong></p><p style="MARGIN: 0px; text-align:center;"><strong>Exercise Price</strong></p></td> <td style="PADDING-BOTTOM: 1px;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Outstanding, December 31, 2018</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">3,370,000</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">0.57</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Granted</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">600,000</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">1.20</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Outstanding, December 31, 2019</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">3,970,000</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">0.67</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Granted</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">500,000</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">0.75</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Exercised</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Forfeited or cancelled</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">-</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="MARGIN: 0px; text-align:justify;">Outstanding, June 30, 2020</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 3px double;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 3px double;width:9%;vertical-align:bottom;text-align:right;">4,470,000</td> <td style="PADDING-BOTTOM: 3px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 3px double;width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="BORDER-BOTTOM: 3px double;width:9%;vertical-align:bottom;text-align:right;">0.68</td> <td style="PADDING-BOTTOM: 3px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr></table></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><table style="border-spacing:0;text-align:left;font:10pt times new roman;width:100%" cellpadding="0"> <tr style="height:15px"> <td style="vertical-align:top;"> <p style="margin:0px"><strong>Maturity of Lease Liability</strong></p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" colspan="2" style="width:9%;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="margin:0px">Remainder of 2020</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">43,612</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="margin:0px">2021</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">85,860</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="margin:0px">2022</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">86,881</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="margin:0px">2023</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="width:9%;vertical-align:bottom;text-align:right;">89,487</td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="margin:0px">2024</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">30,122</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="margin:0px">Total undiscounted operating lease payments</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">335,962</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td style="vertical-align:top;"> <p style="margin:0px">Less: Imputed interest</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 1px solid;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td class="ffcell" style="BORDER-BOTTOM: 1px solid;width:9%;vertical-align:bottom;text-align:right;">68,258</td> <td style="PADDING-BOTTOM: 1px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td style="vertical-align:top;"> <p style="margin:0px">Present value of operating lease liabilities</p></td> <td style="width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td> <td style="BORDER-BOTTOM: 3px double;width:1%;vertical-align:bottom;white-space: nowrap;">$</td> <td class="ffcell" style="BORDER-BOTTOM: 3px double;width:9%;vertical-align:bottom;text-align:right;">267,704</td> <td style="PADDING-BOTTOM: 3px;width:1%;white-space: nowrap;"> <p style="margin:0px">&nbsp;</p></td></tr></table></div> <div style="TEXT-ALIGN: justify; FONT: 10pt TIMES NEW ROMAN"><table style="border-spacing:0;font-size:10pt;width:100%" cellpadding="0"> <tr style="height:15px"> <td style="BORDER-BOTTOM: 1px solid;width:10%;"> <p style="MARGIN: 0px; text-align:center;"><strong>No. of Warrants</strong></p></td> <td style="width:1%;"></td> <td style="BORDER-BOTTOM: 1px solid;"> <p style="MARGIN: 0px; text-align:center;"><strong>Milestone</strong></p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td> <p style="margin:0px">100,000 </p></td> <td></td> <td> <p style="MARGIN: 0px; text-align:justify;">Acceptance by the Company of a full go-to market strategy for the Company&#8217;s products.</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td> <p style="margin:0px">100,000 </p></td> <td></td> <td> <p style="MARGIN: 0px; text-align:justify;">Acceptance by the Company of a social marketing platform and PR strategy and onboarding of such.</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td> <p style="margin:0px">300,000/500,000 </p></td> <td></td> <td> <p style="MARGIN: 0px; text-align:justify;">300,000 for each MULO retailer that is onboarded - regardless of store count carrying the product; and 500,000, if the onboarded MULO is a national chain.</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td> <p style="margin:0px">300,000 </p></td> <td></td> <td> <p style="MARGIN: 0px; text-align:justify;">Deliverance of full due diligence package for each potential acquisition for which the Company requests the consultant perform due diligence</p></td></tr> <tr style="height:15px;background-color:#cceeff"> <td> <p style="margin:0px">500,000 </p></td> <td></td> <td> <p style="MARGIN: 0px; text-align:justify;">Upon the closing of any acquisition which the consultant brought to the Company and provided due diligence.</p></td></tr> <tr style="height:15px;background-color:#ffffff"> <td> <p style="margin:0px">500,000 </p></td> <td></td> <td> <p style="MARGIN: 0px; text-align:justify;">Additional compensation in board seat agreement.</p></td></tr></table></div> 41463 2854 1550 5410 8562 2292 P4Y P5Y 100000000 250000 250000 257000 257000 473332 660000 2366660 660000 2366660 32000 27500 33510 18510 The Company has outstanding one (1) Series A preferred share that is convertible into five (5) shares of the Company&#8217;s common stock 21000 5700 44900 34150 12328 0.07 0.15 0.04 22901 0.04 5 4700 5500 8800 122000 12400 215000 200000 748 93482 3605 1499750 403750 800000 4470000 3370000