0001477932-23-008680.txt : 20231120 0001477932-23-008680.hdr.sgml : 20231120 20231120150719 ACCESSION NUMBER: 0001477932-23-008680 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 61 CONFORMED PERIOD OF REPORT: 20230930 FILED AS OF DATE: 20231120 DATE AS OF CHANGE: 20231120 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: 231422477 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 September 30, 2023

 

or

 

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

 

For the Transition period from __________ to __________

 

Commission File Number:333-206260

 

FIRST FOODS GROUP, INC.

(Exact name of registrant as specified in its charter)

 

Nevada

 

47-4145514

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

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

3773 Howard Hughes Parkway, Suite 500S,

Las Vegas, NV 89169-6014

(Address of principal executive offices) (Zip Code)

 

(201) 471-0988

Registrant’s telephone number, including area code

 

___________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

 

None

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐     No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒     No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated Filer

Smaller reporting company

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No ☒

 

As of November 20, 2023, the number of shares outstanding of the registrant’s class of common stock was 27,058,338, par value of $0.001 per share.

 

 

 

 

TABLE OF CONTENTS

 

 

Pages

 

PART I. FINANCIAL INFORMATION

 

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

 

3

 

Condensed Consolidated Balance Sheets at September 30, 2023 and December 31, 2022

 

3

 

Condensed Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2023 and 2022

 

4

 

Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the Three and Nine Months ended September 30, 2023 and 2022

 

5

 

Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2023 and 2022

 

6

 

Notes to Condensed Consolidated Financial Statements

 

7

 

Item 2.

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

 

22

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

28

 

Item 4.

Controls and Procedures

 

28

 

PART II OTHER INFORMATION

 

Item 1.

Legal Proceedings

 

30

 

Item 1A.

Risk Factors

 

30

 

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

 

31

 

SIGNATURES

 

32

 

 
2

Table of Contents

  

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

First Foods Group, Inc. and Subsidiary

Condensed Consolidated Balance Sheets

 

 

 

September 30,

2023

 

 

December 31,

2022

 

 

 

(Unaudited)

 

 

(Audited)

 

ASSETS

 

CURRENT ASSETS

 

 

 

 

 

 

Cash and restricted cash

 

$5,668

 

 

$6,425

 

Inventory

 

 

43

 

 

 

106

 

Merchant cash advances, net of allowance $166,111 and $163,842, respectively

 

 

-

 

 

-

 

Prepaid expenses and other current assets

 

 

19,435

 

 

 

23,365

 

TOTAL CURRENT ASSETS

 

 

25,146

 

 

 

29,896

 

 

 

 

 

 

 

 

 

 

Security deposit

 

 

24,060

 

 

 

24,060

 

TOTAL ASSETS

 

$49,206

 

 

$53,956

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$872,725

 

 

$760,801

 

Accrued compensation and liabilities - related parties

 

 

2,186,493

 

 

 

1,869,131

 

Put liability

 

 

29,421

 

 

 

29,421

 

Deferred revenue

 

 

61,508

 

 

 

61,133

 

Loans, net of unamortized debt discount

 

 

1,369,450

 

 

 

1,368,505

 

Related party loans

 

 

1,086,823

 

 

 

870,313

 

Operating lease liabilities

 

 

50,665

 

 

 

80,592

 

TOTAL CURRENT LIABILITIES

 

 

5,657,085

 

 

 

5,039,896

 

 

 

 

 

 

 

 

 

 

Loans - long term

 

 

150,000

 

 

 

150,000

 

Operating lease liabilities - long term

 

 

-

 

 

 

29,383

 

TOTAL LIABILITIES

 

 

5,807,085

 

 

 

5,219,279

 

 

 

 

 

 

 

 

 

 

Commitments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

FIRST FOODS GROUP, INC. STOCKHOLDERS’ DEFICIT:

 

 

 

 

 

 

 

 

Preferred stock, 20,000,000 shares authorized:

 

 

 

 

 

 

 

 

Series A convertible preferred stock: $0.001 par value, 1 share authorized, 1 issued and outstanding as of September 30, 2023 and December 31, 2022, respectively ($577,005 liquidation preference)

 

 

-

 

 

 

-

 

Series B convertible preferred stock: $0.001 par value, 4,999,999 shares authorized, 354,999 issued and outstanding as of September 30, 2023 and December 31, 2022, respectively ($118,235 liquidation preference)

 

 

355

 

 

 

355

 

Series C convertible preferred stock: $0.001 par value, 3,000,000 shares authorized, 660,000 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively ($165,000 liquidation preference)

 

 

660

 

 

 

660

 

Common stock: $0.001 par value, 100,000,000 shares authorized, 27,058,338 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

 

 

27,058

 

 

 

27,058

 

Additional paid-in capital

 

 

11,929,574

 

 

 

11,916,116

 

Accumulated Stockholders’ Deficit

 

 

(17,378,014)

 

 

(16,768,055 )

Total First Foods Group, Inc. Stockholders’ Deficit

 

 

(5,420,367)

 

 

(4,823,866 )

 

 

 

 

 

 

 

 

 

Noncontrolling interests

 

 

(337,512)

 

 

(341,457 )

Total Stockholders’ Deficit

 

 

(5,757,879)

 

 

(5,165,323 )

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

$49,206

 

 

$53,956

 

 

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

September 30,

 

 

For the Nine Months Ended

September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUES

 

 

 

 

 

 

 

 

 

 

 

 

Product sales, net

 

$513

 

 

$13,374

 

 

$4,824

 

 

$91,708

 

Merchant cash advance income, net

 

 

-

 

 

 

811

 

 

 

539

 

 

 

1,188

 

Total Revenues

 

 

513

 

 

 

14,185

 

 

 

5,363

 

 

 

92,896

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product sales

 

 

-

 

 

 

6,790

 

 

 

76

 

 

 

47,264

 

Legal fees

 

 

3,112

 

 

 

2,498

 

 

 

7,511

 

 

 

31,596

 

General and administrative

 

 

180,754

 

 

 

268,910

 

 

 

645,503

 

 

 

1,008,887

 

Provision for merchant cash advances

 

 

(529)

 

 

(3,493)

 

 

(351)

 

 

33,306

 

Impairment of assets

 

 

-

 

 

 

-

 

 

 

-

 

 

 

92,736

 

Total Operating Expenses

 

 

183,337

 

 

 

274,705

 

 

 

652,739

 

 

 

1,213,789

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS FROM OPERATIONS

 

 

(182,824)

 

 

(260,520)

 

 

(647,376)

 

 

(1,120,893)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income

 

 

51,462

 

 

 

-

 

 

 

169,462

 

 

 

291,482

 

Interest expense

 

 

(46,675)

 

 

(52,393)

 

 

(128,100)

 

 

(250,589)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

 

(178,037)

 

 

(312,913)

 

 

(606,014)

 

 

(1,080,000)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS

 

 

(178,037)

 

 

(312,913)

 

 

(606,014)

 

 

(1,080,000)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-controlling interest share of loss

 

 

(3,107)

 

 

18,196

 

 

 

(3,945)

 

 

69,334

 

Deemed dividends

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$(181,144)

 

$(294,717)

 

$(609,959)

 

$(1,010,666)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$(0.01)

 

$(0.01)

 

$(0.02)

 

$(0.04)

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

 

 

27,058,338

 

 

 

27,058,338

 

 

 

27,058,338

 

 

 

27,050,426

 

 

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 Stockholders’ Deficit

(Unaudited)

 

 

Preferred Stock

 

 

Common Stock

 

 

Additional paid-in

 

 

Accumulated

 

 

Total First Foods Group,

 

 

Non-controlling

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 capital

 

 

 deficit

 

 

Inc. deficit

 

 

 interests

 

 

 Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2021

 

 

1,015,000

 

 

$1,015

 

 

 

26,998,338

 

 

$26,998

 

 

$12,062,341

 

 

$(15,335,458 )

 

$(3,245,104 )

 

$(235,191 )

 

$(3,480,295 )

Common stock issued with loans payable

 

 

-

 

 

 

-

 

 

 

60,000

 

 

 

60

 

 

 

12,540

 

 

 

-

 

 

 

12,600

 

 

 

-

 

 

 

12,600

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

30,154

 

 

 

-

 

 

 

30,154

 

 

 

-

 

 

 

30,154

 

Warrants issued for director services

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

41,508

 

 

 

-

 

 

 

41,508

 

 

 

-

 

 

 

41,508

 

Warrants issued for loan payable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

28,088

 

 

 

-

 

 

 

28,088

 

 

 

-

 

 

 

28,088

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(479,952 )

 

 

(479,952 )

 

 

(21,672 )

 

 

(501,624 )

Balance at March 31, 2022

 

 

1,015,000

 

 

$1,015

 

 

 

27,058,338

 

 

$27,058

 

 

$12,174,631

 

 

$(15,815,410 )

 

$(3,612,706 )

 

$(256,863 )

 

$(3,869,569 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

11,480

 

 

 

-

 

 

 

11,480

 

 

 

-

 

 

 

11,480

 

Accumulated catch up adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(291,482 )

 

 

-

 

 

 

(291,482 )

 

 

-

 

 

 

(291,482 )

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(235,997 )

 

 

(235,997 )

 

 

(29,466 )

 

 

(265,463 )

Balance at June 30, 2022

 

 

1,015,000

 

 

$1,015

 

 

 

27,058,338

 

 

$27,058

 

 

$11,894,629

 

 

$(16,051,407 )

 

$(4,128,705 )

 

$(286,329 )

 

$(4,415,034 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7,968

 

 

 

-

 

 

 

7,968

 

 

 

-

 

 

 

7,968

 

Warrants issued for loan payable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7,788

 

 

 

-

 

 

 

7,788

 

 

 

-

 

 

 

7,788

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(294,717)

 

 

(294,717)

 

 

(18,196)

 

 

(312,913)

Balance at September 30, 2022

 

 

1,015,000

 

 

$1,015

 

 

 

27,058,338

 

 

$27,058

 

 

$11,910,385

 

 

$(16,346,124)

 

$(4,407,666)

 

$(304,525)

 

$(4,712,191)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2022

 

 

1,015,000

 

 

$1,015

 

 

 

27,058,338

 

 

$27,058

 

 

$11,916,116

 

 

$(16,768,055 )

 

$(4,823,866 )

 

$(341,457 )

 

$(5,165,323 )

Stock based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,607

 

 

 

-

 

 

 

5,607

 

 

 

-

 

 

 

5,607

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(258,760 )

 

 

(258,760 )

 

 

304

 

 

 

(258,456 )

Balance at March 31, 2023

 

 

1,015,000

 

 

$1,015

 

 

 

27,058,338

 

 

$27,058

 

 

$11,921,723

 

 

$(17,026,815 )

 

$(5,077,019 )

 

$(341,153 )

 

$(5,418,172 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,670

 

 

 

-

 

 

 

5,670

 

 

 

-

 

 

 

5,670

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(170,055)

 

 

(170,055)

 

 

534

 

 

 

(169,521)

Balance at June 30, 2023

 

 

1,015,000

 

 

$1,015

 

 

 

27,058,338

 

 

$27,058

 

 

$11,927,393

 

 

$(17,196,870 )

 

$(5,241,404 )

 

$(340,619)

 

$(5,582,023)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,181

 

 

 

-

 

 

 

2,181

 

 

 

-

 

 

 

2,181

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(181,144)

 

 

(181,144)

 

 

3,107

 

 

 

(178,037)

Balance at September 30, 2023

 

 

1,015,000

 

 

$1,015

 

 

 

27,058,338

 

 

$27,058

 

 

$11,929,574

 

 

$(17,378,014)

 

$(5,420,367)

 

$(337,512)

 

$(5,757,879)

 

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

 

 
5

Table of Contents

  

First Foods Group, Inc. and Subsidiary

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

For the Nine Months Ended

September 30,

 

 

 

2023

 

 

2022

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net Loss

 

$(606,014)

 

$(1,080,000)

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

 

 

 

 

 

 

 

 

Employee stock based compensation

 

 

13,458

 

 

 

91,110

 

Amortization of debt discount

 

 

4,545

 

 

 

109,786

 

Accumulative catch up adjustment

 

 

-

 

 

 

(291,482)

Depreciation and amortization expense

 

 

-

 

 

 

53,615

 

Impairment of assets

 

 

-

 

 

 

92,736

 

Change in merchant allowance

 

 

-

 

 

 

37,031

 

Non-cash lease expense

 

 

-

 

 

 

51,594

 

Inventory reserve

 

 

-

 

 

 

23,625

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Inventory

 

 

63

 

 

 

663

 

Merchant cash advances

 

 

-

 

 

 

(5,543)

Prepaid expenses and other current assets

 

 

3,930

 

 

 

138

 

Operating lease liabilities

 

 

(59,310)

 

 

(50,811)

Accounts payable and accrued liabilities

 

 

111,923

 

 

 

438,651

 

Accrued compensation and liabilities - related party

 

 

317,363

 

 

 

231,362

 

Deferred revenue

 

 

375

 

 

(32,374)

Net cash used in operating activities

 

 

(213,667)

 

 

(329,899)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from loans

 

 

-

 

 

 

30,000

 

Repayment of loans

 

 

(3,600)

 

 

 

 

Proceeds from related party loans

 

 

216,510

 

 

 

295,750

 

Net cash provided by financing activities

 

 

212,910

 

 

 

325,750

 

 

 

 

 

 

 

 

 

 

NET INCREASE IN CASH AND RESTRICTED CASH

 

 

(757)

 

 

(4,149)

CASH AND RESTRICTED CASH AT BEGINNING OF THE PERIOD

 

 

6,425

 

 

 

11,527

 

CASH AND RESTRICTED CASH AT END OF THE PERIOD

 

$5,668

 

 

$7,378

 

 

 

 

 

 

 

 

 

 

CASH AND RESTRICTED CASH CONSIST OF THE FOLLOWING:

 

 

 

 

 

 

 

 

END OF THE PERIOD

 

 

 

 

 

 

 

 

Cash

 

 

(232)

 

 

1,478

 

Restricted Cash

 

 

5,900

 

 

 

5,900

 

 

 

$5,668

 

 

$7,378

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

NON-CASH FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Common stock issued with loans

 

$-

 

 

$12,600

 

Warrants issued with loans

 

$-

 

 

$35,876

 

 

 

 

 

 

 

 

 

 

CASH PAID FOR:

 

 

 

 

 

 

 

 

Interest

 

$4,254

 

 

$8,452

 

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 GOING CONCERN

 

Nature of Business

 

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

 

Holy Cacao is a majority owned subsidiary that is dedicated to producing, packaging, distributing and selling specialty chocolate products, including specialty chocolate products infused with a hemp-based ingredient in accordance with the Company’s understanding of the Agricultural Act of 2014 (the “2014 Farm Bill”) and/or the Agriculture Improvement Act of 2018 (the “2018 Farm Bill,” and together with the 2014 Farm Bill, collectively, the “Farm Bill”), which renders the production of hemp in compliance with the provisions of the Farm Bill federally lawful. The Company has not been, is not, and has no current plans to be involved in producing, packaging, distributing or selling any product that is infused with a 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. Holy Cacao holds four trademarks for the brands, “The Edibles Cult”, “Purely Irresistible”, “Mystere” and “Southeast Edibles”.

 

The Company also has a contract with TIER Merchant Advances LLC (“TIER”) to participate in the purchase of future receivables from qualified TIER merchants for the purpose of generating revenue for the Company. The Company also provides cash advances directly to merchants.

 

 
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Quarterly Reporting

 

The accompanying unaudited condensed consolidated financial statements (“financial statements”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and have been consistently applied. Certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP, but which are not required for interim reporting purposes, have been omitted. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to present fairly the financial position as of September 30, 2023 and the results of operations and cash flows for the interim periods ended September 30, 2023 and 2022, have been included. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on April 17, 2023. Operating results for the nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2023.

 

Liquidity and Going Concern

 

The Company’s 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 September 30, 2023, the Company had approximately $1,369,000 in third-party short-term debt and approximately $0 in associated debt discount and approximately $1,087,000 in related-party short-term debt and $0 in associated debt discount that is due within the next twelve months. Management’s plan is to continue to increase revenue, obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its operating expenses and seeking equity and/or debt financing. However, neither any members of management nor any significant shareholders are currently committed to invest funds with us and; therefore, we cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

 

The Company does not have sufficient cash flow for the next twelve months from the date of this report. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. These reasons raise substantial doubt about the Company’s ability to continue as a going concern.

 

Use of Estimates

 

The preparation of 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 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 Company’s consolidated financial statements are presented in accordance with generally accepted accounting principles in the United States of America (“GAAP”).

 

 
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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 85% owned subsidiary; Holy Cacao.

 

Principles of Consolidation

 

The 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 September 30, 2023 and December 31, 2022, 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.

 

Restricted Cash

 

As of September 30, 2023 restricted cash included $5,900, which was restricted pursuant to the requirements in the sales consultant agreement entered into November 2020.

 

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 September 30, 2023, the Company reserved an amount equal to 100% of the outstanding merchant cash advance balance at period end based on the potential impact of COVID 19. As of September 30, 2023 and December 31, 2022 the outstanding reserve balance was $166,111 and $163,842, respectively.

 

Revenue Recognition

 

We completed, related to our merchant cash advance business line, our assessment of the impact of Accounting Standards Codification (“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.

 

 
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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.

 

The following table shows net sales by category for September 30, 2023 and 2022:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2023

 

 

Change

 

 

2022

 

Net sales by category:

 

 

 

 

 

 

 

 

 

Chocolate products

 

$4,824

 

 

 

-95%

 

$91,708

 

Merchant cash advances

 

 

539

 

 

 

-42%

 

 

1,188

 

Total net sales

 

$5,363

 

 

 

-94%

 

$92,896

 

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts based on a review of all outstanding amounts. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions and sets up an allowance for doubtful accounts when collection is uncertain. Customers’ accounts are written off when all attempts to collect have been exhausted. The Company considers an invoice past due once the term of the invoice has passed and payment has not been received. No interest is charged on past due invoices. Recoveries of accounts receivable previously written off are recorded as income when received. As of September 30, 2023, the Company had no allowance for doubtful accounts.

 

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 an allowance for inventory reserves.

 

Inventory consisted of the following as of September 30, 2023 and December 31, 2022:

 

 

 

September 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Raw Materials

 

$24,249

 

 

$24,249

 

Work in Process

 

 

11,948

 

 

 

11,948

 

Finished Goods

 

 

2,036

 

 

 

2,099

 

Inventory Allowance

 

 

(38,190 )

 

 

38,190 )

Total

 

$43

 

 

$106

 

 

 
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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 consolidated statements of operations and stockholders’ 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 Assets

 

The Company evaluates its 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.

 

Leases

 

The Company determines if an arrangement is a lease at the inception of a contract. Operating lease right-of-use (“ROU”) assets are included in right-of-use assets on the consolidated balance sheets. The current and long-term components of operating lease liabilities are included in the operating lease liabilities and operating lease liabilities – long term, respectively on the consolidated balance sheets.

 

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. Certain leases may include options to extend or terminate the lease. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded in the consolidated balance sheet.

 

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%.

 

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 nine months ended September 30, 2023 and 2022, were approximately $16,200 and $50,200, respectively. These expenses are included in general and administrative expenses on the accompanying consolidated statements of operations.

 

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 consolidated balance sheets as of September 30, 2023 and December 31, 2022, respectively.

 

 
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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 December 31, 2022, 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 September 30, 2023 and December 31, 2022 because their effect would be antidilutive.

 

The Company had 5,779,775 and 5,429,775 warrants to purchase common stock outstanding at September 30, 2023 and December 31, 2022, respectively. The Company had 4,470,000 warrants to purchase Series B preferred stock outstanding at September 30, 2023 and December 31, 2022. The Company has outstanding one (1) Series A preferred share that is convertible into five (5) shares of the Company’s common stock outstanding at September 30, 2023 and December 31, 2022. Additionally, the Company has 354,999 Series B preferred shares, and 660,000 Series C preferred shares outstanding that are convertible into 1,774,995 and 660,000 shares of common stock, respectively, at September 30, 2023 and December 31, 2022, 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, accounts receivable, vendor deposits, 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 for the nine months ended September 30, 2023 and 2022, were approximately $21,100 and $40,000, respectively. These expenses are included in general and administrative expenses on the accompanying consolidated statements of operations.

 

Non-Controlling Interests in Condensed Consolidated Financial Statements

 

In June 2011, the Financial Accounting Standards Board (“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 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 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 then 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 non-controlling interests.

 

The following table summarizes the results of operations for Holy Cacao for the period:

 

 

 

For The Nine Months Ended

 

 

 

September 30,

 

 

 

 2023

 

 

 2022

 

Revenue

 

$4,824

 

 

$91,708

 

Cost of Goods Sold

 

 

(76)

 

 

(47,264)

Operating Expense

 

 

(147,913)

 

 

(506,672)

Other Income

 

 

169,462

 

 

 

-

 

Income (Loss) from Operations

 

$26,297

 

 

$(462,228)

 

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. The Company adopted ASU 2016-13 as of January 1, 2023, there was no material impact on its consolidated financial statements.

 

 
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In May 2021, the FASB issued ASU 2021-04, “Earnings Per Share (Topic 260), Debt - Modifications and Extinguishments (Subtopic 470-50), Compensation - Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity – Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force).” The ASU addresses how an issuer should account for modifications or an exchange of freestanding written call options classified as equity that is not within the scope of another Topic. For both public and private companies, the ASU is effective for fiscal years beginning after December 15, 2021. The Company adopted ASU 2021-04 as of January 1, 2022, there was no material impact on its consolidated financial statements.

 

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 Board. As of September 30, 2023 and December 31, 2022, the Company has accrued $1,016,667 and $829,167, respectively, in relation to the employment agreements and $30,547 and $27,828, 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 earned $40,000 per year for his role as Chairman of the Board and no longer takes compensation. As of September 30, 2023, the Company has accrued a total of $40,000 of compensation for his role as Interim CEO under a previous agreement.

 

The Company has a consulting agreement with R and W Financial (a company owned by a director) for $5,000 a month. The agreement is for an indefinite period of time and is subject to cancellation by either party with written notice of 30 days. The outstanding balance as of September 30, 2023 and 2022 was $230,765 and $162,068, respectively.

 

Related Party Loans

 

 

 

 

 

 

 

 

Associated equity instruments recorded as debt discount

 

 

 

 

 

 

 

 

 

 

Original

 

New

 

Common

 

 

Fair Value of Common

 

 

 

 

 

Fair

Value of

 

 

 

 

 

 

 

 

 

 

Interest

 

 

Maturity

 

Maturity

 

Shares

 

 

Shares

 

 

Warrants

 

 

Warrants

 

 

September 30,

 

 

December 31,

 

 

 

 

Rate

 

 

Date

 

Date**

 

issued

 

 

issued

 

 

issued

 

 

issued

 

 

2023

 

 

2022

 

 

1

 

 

 

12%*

 

4/17/22

 

10/17/24

 

 

 

 

 

 

 

 

 

 

 

 

 

$100,000

 

 

$100,000

 

 

2

 

 

 

0%*

 

4/24/22

 

4/26/24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

179,813

 

 

 

179,813

 

 

3

 

 

 

12%*

 

4/16/22

 

7/31/23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

150,000

 

 

 

150,000

 

 

4

 

 

 

0%*

 

9/15/22

 

 7/15/23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

500

 

 

 

500

 

 

5

 

 

 

0%*

 

5/30/22

 

12/31/23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

649,510

 

 

 

433,000

 

 

6

 

 

 

0%*

 

8/24/22

 

7/15/23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,000

 

 

 

7,000

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$1,086,823

 

$

870,313

 

 

* - unsecured note

 

 
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During the nine months ended September 30, 2023 and 2022, the Company recorded $0 and $19,304 of interest expense related to the amortization of debt discount and $17,951 and $17,951 of regular interest, respectively.

 

During the three months ended September 30, 2023 and 2022, the Company recorded $0 and $0 of interest expense related to the amortization of debt discount and $6,049 and $6,049 of regular interest, respectively. 

 

As of September 30, 2023 and December 31, 2022, accrued interest was $110,100 and $80,051, respectively.

 

Related Party Payables

 

As of September 30, 2023 and December 31, 2022, the Company owed a Director $278,514 and $262,518, respectively, for expenses incurred on behalf of the Company.

 

Director Agreements

 

The Company annually revisits the board of directors’ agreements, which include quarterly compensation of $10,000 per director for the fiscal year. Three of the five board members currently are compensated under these terms, while the other two board members remain unpaid. As of September 30, 2023 and December 31, 2022, the Company has accrued $590,000 and $500,000, respectively, in relation to the director agreements and is included in Accounts payable and accrued liabilities - related parties on the consolidated balance sheet.

 

On July 7, 2020, our Board of Directors appointed Michael Kaplan to the Board of Directors who currently remains as an uncompensated board member (see note 6 for details). If terminated with cause by the Company, the consultant shall not thereafter be entitled to any form of compensation, the unvested warrants shall terminate, and he shall be paid a buyout fee in the amount of 250,000 fully vested warrants. If terminated without cause by the Company, all unvested warrants shall be accelerated and vest in one-half the time it was previously scheduled to vest.

 

NOTE 3 – PROPERTY AND EQUIPMENT

 

Property and equipment, net consists of the following:

 

 

 

September 30,

2023

 

 

December 31,

2022

 

Leasehold improvements

 

$40,000

 

 

$40,000

 

Equipment

 

 

240,392

 

 

 

240,392

 

Less: Accumulated depreciation and amortization

 

 

(141,289 )

 

 

(141,289 )

Less: Impairment

 

 

(139,103 )

 

 

(139,103 )

Total

 

$-

 

 

$-

 

 

 
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NOTE 4 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

 

Accounts payable and accrued liabilities consist of the following:

 

 

 

September 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Accounts Payable

 

$333,153

 

 

$322,547

 

Interest

 

 

502,493

 

 

 

391,160

 

Other

 

 

37,079

 

 

 

47,094

 

Total third party payables

 

 

872,725

 

 

 

760,801

 

Related party payables, officers and director fees

 

 

2,186,493

 

 

 

1,869,131

 

Total payables

 

$3,059,218

 

 

$2,629,932

 

 

NOTE 5 – LOANS AND LONG-TERM LOANS

 

 

 

 

Interest Rate

 

 

Original Maturity Date

 

New

Maturity Date

****

 

Common Shares issued

 

 

Fair Value of Common Shares issued ($)

 

 

Warrants issued

 

 

Fair Value of Warrants issued ($)

 

 

September 30, 2023

 

 

December 31,

2022

 

 

1

 

 

 

12%*

 

4/16/2022

 

12/31/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

$50,000

 

 

$50,000

 

 

2

 

 

 

12%*

 

4/22/2022

 

12/31/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18,000

 

 

 

18,000

 

 

3

 

 

 

12%*

 

6/30/2022

 

12/31/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

250,000

 

 

 

250,000

 

During the nine months ended September 30, 2023

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

During the nine months ended September 30, 2022

 

 

-

 

 

 

-

 

 

 

125,000

 

 

 

28,088

 

 

 

-

 

 

 

-

 

 

4

 

 

 

12%*

 

4/16/2022

 

12/31/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

410,000

 

 

 

410,000

 

 

5

 

 

 

12%*

 

4/16/2022

 

12/31/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

140,000

 

 

 

140,000

 

 

6

 

 

 

12%*

 

4/30/2022

 

12/31/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

200,000

 

 

 

200,000

 

 

7

 

 

 

12%*

 

7/31/2022

 

12/31/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

60,000

 

 

 

60,000

 

During the nine months ended September 30, 2023

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

During the nine months ended September 30, 2022

 

 

60,000

 

 

 

12,600

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

8

 

 

 

12%*

 

7/29/2022

 

12/31/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

96,000

 

 

 

96,000

 

 

9

 

 

3.75% **

 

 

6/25/2050

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

150,000

 

 

 

150,000

 

 

11

 

 

 

0%*

 

9/19/2022

 

 7/1/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16,500

 

 

 

16,500

 

 

12

 

 

 

0%*

 

4/16/2022

 

12/31/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

50,000

 

 

 

50,000

 

 

13

 

 

0% ***

 

 

4/16/2022

 

7/15/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30,000

 

 

 

30,000

 

 

14

 

 

 

0%*

 

4/16/2022

 

12/31/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,000

 

 

 

13,000

 

 

15

 

 

0% ***

 

 

5/30/2022

 

 12/31/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30,000

 

 

 

30,000

 

 

16

 

 

 

0%

 

11/30/2022

 

12/31/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,950

 

 

 

5,950

 

Unamortized debt discount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

(4,545)

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,519,450

 

 

 

1,518,505

 

Less: short term loans, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,369,450

 

 

 

1,368,505

 

Total long-term loans, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$150,000

 

 

$150,000

 

 

* - unsecured note

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

*** - unsecured note and guaranteed by a Director of the Company

 

During the nine months ended September 30, 2023 and 2022, the Company recorded $4,545 and $90,481 of interest expense related to the amortization of debt discount and $109,858 and $114,402 of regular interest, respectively. As of September 30, 2023 and December 31, 2022, accrued interest was $343,791 and $285,733, respectively.

 

During the three months ended September 30, 2023 and 2022, the Company recorded $683 and $4,392 of interest expense related to the amortization of debt discount and $37,022 and $38,553 of regular interest, respectively.

 

As of September 30, 2023 and December 31, 2022, accrued interest associated with the economic injury disaster loan was $11,580 and $13,278, respectively.

 

 
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NOTE 6 – STOCKHOLDERS’ DEFICIT

 

Warrant Activity

 

Common Stock Warrants

 

On July 7, 2020, our Board of Directors appointed Michael Kaplan to the Board of Directors. In connection with the agreement one million (1,000,000) warrants were issued. The warrants are valued at $177,200 based on the Black Scholes Model. For the nine months ended September 30, 2023 and 2022, the Company recorded $0 and $0 as compensation expense related to the warrants, respectively.

 

Prior to Mr. Kaplan’s appointment to the Board of Directors, on July 7, 2020 the Company entered into a Consulting Agreement with Mr. Kaplan to award him, as full compensation for two (2) years of service, warrants to purchase two million (2,000,000) shares of common stock at an exercise price of $0.18 per share, which was the closing price of our common stock on such date. The warrants are valued at $354,400 based on the Black Scholes Model. Due to the fact that management has assessed the probability of certain milestones being met as probable, the warrants are being straight-lined over the term of services and accelerated whenever a milestone is met. The probability of the remaining milestones being met is reviewed by management every quarter. For the nine months ended September 30, 2023 and 2022, the Company recorded $0 and $41,508 as compensation expense related to the warrants. The warrants shall vest upon the occurrence to the Company of the following milestone events through the efforts of the consultant:

 

No. of Warrants

Milestone

                 100,000

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

                 100,000

 

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

 300,000/500,000

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

                 300,000

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

                 500,000

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

                 500,000

Additional compensation in board seat agreement.

 

On August 4, 2020, the Company signed an Employment Agreement for a term of three years with an annual base salary of eighty four thousand dollars ($84,000). As part of the agreement the Company will issue a warrant to the employee to purchase 300,000 shares a year, for a total of 900,000 shares of the Company’s common stock. The warrants have a term of three (3) years from date of issue and an exercise price equal to the closing market price of the Company’s common stock on August 4, of the corresponding year. The warrants issued on August 4, 2020 and 2021, are valued at $97,470 and $46,050, respectively, based on the Black Scholes Model. The warrants will be subject to a 12-month period whereby the warrants will vest in equal monthly increments for each year of the employment period. Once per quarter, the employee may waive the right to receive 25,000 warrants and receive in exchange for $5,000 worth of shares of the Company’s common stock. In the event the employee’s employment is terminated by the Company without cause, the employee shall be entitled to receive severance in an amount equal to the lesser of three month’s salary or the amount of salary otherwise payable until the termination date. The employee additionally shall be entitled to retain all warrants scheduled to vest within the following nine months. For the nine months ended September 30, 2023 and 2022, the Company recorded $13,457 and $46,050 as compensation expense related to the warrants, respectively.

 

On March 21, 2022, the Company extended the maturity date on one of its promissory notes (see Note 5). In association with this extension the company granted warrants for the right to purchase 125,000 shares of common stock at an exercise price of $0.24 a share. The warrants are valued at $28,088 based on the Black Scholes Model, are fully vested as of the issue date and have an exercise term of three (3) years. The Company recorded a debt discount and will amortize it over the life of the loan.

 

On August 1, 2022, the Company extended the maturity date on one of its promissory notes (see Note 5). In association with this extension the company granted warrants for the right to purchase 60,000 shares of common stock at an exercise price of $0.14 a share. The warrants are valued at $7,788 based on the Black Scholes Model, are fully vested as of the issue date and have an exercise term of three (3) years. The Company recorded a debt discount and will amortize it over the life of the loan.

 

 
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The Company utilized the Black-Scholes option-pricing model to estimate fair value, utilizing the following assumptions for the respective period:

 

 

 

2023

 

 

2022

 

Risk-free interest rate

 

-

 

0.22-3.16

Expected term of options, in years

 

-

 

 

3

 

Expected annual volatility

 

-

 

211.0-235.0

Expected dividend yield

 

-

 

-

Determined grant date fair value per option

 

$-

 

 

$

 0.08-0.22

 

 

A summary of the Company’s warrants to purchase common stock activity is as follows:

 

 

 

Number of

Warrants

(in common

shares)

 

 

Weighted

Average

Exercise

Price

 

Outstanding, December 31, 2021

 

 

5,704,775

 

 

 

0.22

 

Granted

 

 

785,000

 

 

 

0.14

 

Exercised

 

 

-

 

 

 

-

 

Forfeited or cancelled

 

(1,060,000)

 

 

 

0.26

 

Outstanding, December 31, 2022

 

 

5,429,775

 

 

$0.19

 

Granted

 

 

750,000

 

 

 

-

 

Exercised

 

 

-

 

 

 

-

 

Forfeited or cancelled

 

 

(400,000)

 

 

-

 

Outstanding, September 30, 2023

 

 

5,779,775

 

 

 

0.19

 

 

As of September 30, 2023, 5,779,775 warrants for common stock were exercisable and the intrinsic value of these warrants was $0, the weighted average remaining contractual life for warrants outstanding was 0.71 years and the remaining expense is $0 over the remaining amortization period which is three months.

 

As of September 30, 2022, 6,179,775 warrants for common stock were exercisable and the intrinsic value of these warrants was $0, the weighted average remaining contractual life for warrants outstanding was 1.33 years and the remaining expense is $19,189 over the remaining amortization period which is 12 months.

 

 
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Preferred Stock Warrants

 

A summary of the Company’s warrants to purchase Series B Preferred Stock activity is as follows:

 

 

 

Number of Warrants

(in Series B Preferred

Stock)

 

 

Weighted

Average

Exercise Price

 

Outstanding, December 31, 2021

 

 

4,470,000

 

 

$0.68

 

Granted

 

 

-

 

 

 

-

 

Exercised

 

 

-

 

 

 

-

 

Forfeited or cancelled

 

 

-

 

 

 

-

 

Outstanding, December 31, 2022

 

 

4,470,000

 

 

$0.68

 

Granted

 

 

-

 

 

 

-

 

Exercised

 

 

-

 

 

 

-

 

Forfeited or cancelled

 

 

-

 

 

 

-

 

Outstanding, September 30, 2023

 

 

4,470,000

 

 

$0.68

 

 

As of September 30, 2023, 4,470,000 warrants for Series B preferred stock were exercisable and the intrinsic value of these warrants was $0, the weighted average remaining contractual life for warrants outstanding was 4.62 years.

 

As of September 30, 2022, 4,470,000 warrants for Series B preferred stock were exercisable and the intrinsic value of these warrants was $0, the weighted average remaining contractual life for warrants outstanding was 5.62 years.

 

NOTE 7 – LEASES

 

On June 23, 2020, the Company entered into an operating lease agreement with a term of 4 years, and an option to extend for three years, comprising of office and warehouse space. This option is included in the lease term when it is reasonably certain that the option will be exercised and failure to exercise such option will result in economic penalty and as such the option to extend for the three-year term is not included in the below calculation.

 

For each of the nine months ended September 30, 2023 and 2022, the Company incurred lease expense for its operating leases of $43,821, which was included in general and administrative expenses on the accompanying unaudited condensed consolidated statements of operations. 

 

During the year ended December 31, 2022, the Company recognized an impairment of $107,233 in relation to the Company’s right-of-use assets related to the change in business strategy. The corresponding lease liabilities will remain until the Company satisfies its lease obligations.

 

The Company’s weighted-average remaining lease term relating to its operating leases is 0.58 years, with a weighted-average discount rate of 12.00%.

 

The Company had cash payments for operating leases of $66,896 and $64,948 for each of the nine months ended September 30, 2023 and 2022.

 

The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s operating leases as of September 30, 2023.

 

Maturity of Lease Liability

 

 

 

2023

 

 

22,591

 

2024

 

 

30,122

 

Total undiscounted operating lease payments

 

 

52,713

 

Less: Imputed interest

 

 

2,048

 

Present value of operating lease liabilities

 

$50,665

 

 

 
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NOTE 8 – COMMITMENTS

 

On January 14, 2021, the Company entered into an agreement with a sales consultant to further the business purpose of the Company. In consideration for the services provided by the consultant, the consultant will receive a commission of the gross sales (net of returns) that were directly generated by the consultant to new customers. This agreement shall continue for sixty months from the date of the agreement and will automatically extend for additional successive sixty month terms unless written notice is delivered at least thirty days prior to the end of the current term.

 

On January 4, 2022, the Company entered into a grant agreement with a sales consultant. As compensation for the services, the Company will issue up to 2,380,952 shares of restricted common stock to the sales consultant in monthly installments over the twenty (24) month term of the agreement. The number of shares to be issued by the Company to the sales consultant on a monthly basis will be determined by the amount of net sales of products generated by the sales consultant at the end of each month multiplied by a fixed percentage of 5% divided by the last closing market price of the shares as of the effective date. Additionally, if the sales consultant makes sales using salespeople who are not under contract with the Company, the Company will pay the consultant a cash commission at the end of each month equal to 5% of net sales over the term. During the nine months ended September 30, 2023 and 2022, no shares have been issued, respectively.

 

 On March 2, 2022, the Company entered into two agreements with two consultants to further the business purpose of the Company. In consideration for the services provided by the consultants, the consultants will receive a 10% commission of the gross sales (net of returns) that were directly generated by the consultants to new customers. This agreement shall continue for sixty months from the date of the agreement and will automatically extend for additional successive sixty-month terms unless written notice is delivered at least thirty days prior to the end of the current term.

During the nine months ended September 30, 2023 and 2022, no shares have been issued, respectively.

 

On March 23, 2022, the Company entered into a grant agreement with a sales consultant. As compensation for the services, the Company will issue up to 2,083,333 shares of restricted common stock to the sales consultant in monthly installments over the twenty (24) month term of the agreement. The number of shares to be issued by the Company to the sales consultant on a monthly basis will be determined by the amount of net sales of products generated by the sales consultant at the end of each month multiplied by a fixed percentage of 5% divided by the last closing market price of the shares as of the effective date. During the nine months ended September 30, 2023 and 2022, no shares have been issued, respectively.

 

On April 11, 2022, the Company entered into a memo of understanding with a marketing consultant, who is a National Football League (NFL) celebrity. As compensation for the services, the Company agrees to split the net profit on a 50 / 50 basis derived from the sales of the Company’s products that will be branded under the consultant’s name and result from the marketing consultant’s efforts. The marketing consultant will be paid on a quarterly basis over the two (2) year term.

 

The Company did not incur any commission costs during the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023 and 2022, there were no accrued commissions outstanding.

 

 
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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 September 30, 2023 and December 31, 2022, the Company's concentrations for receivables from merchant cash advances as well as income from merchant cash advances were not significant to warrant concentration risk.

 

For the three months ended September 30, 2023 and 2022, the Company had no purchase concentrations.

 

For the nine months ended September 30, 2023, the Company had no purchase concentrations. For the nine months ended September 30, 2022, the Company had purchase concentrations of 22%, 17% and 12% from three vendors.

 

NOTE 10 – SUBSEQUENT EVENTS

 

As of the date of this filing, the Company did not have any subsequent events to report.

 

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

 

Cautionary Statements

 

This Form 10-Q contains “forward-looking statements,” as that term is used in federal securities laws, about First Foods Group, Inc.’s financial condition, results of operations and business.

 

These statements include, among others:

 

·

statements concerning the potential benefits that First Foods Group, Inc. (“First Foods”, “we”, “our”, “us”, the “Company”, or “management”) may experience from its business activities and certain transactions it contemplates or has completed; and

 

·

statements of First Foods’ expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts. These statements may be made expressly in this Form 10-Q. You can find many of these statements by looking for words such as “believes,” “expects,” “anticipates,” “plans”, “estimates,” “opines,” or similar expressions used in this Form 10-Q. These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause First Foods’ actual results to be materially different from any future results expressed or implied by First Foods in those statements. The most important facts that could prevent First Foods from achieving its stated goals include, but are not limited to, the following:

 

 

(a)

volatility or decline of First Foods’ stock price;

 

(b)

potential fluctuation of quarterly results;

 

(c)

failure of First Foods to earn significant revenues or profits;

 

(d)

inadequate capital to continue or expand its business, and inability to raise additional capital or financing to implement its business plans;

 

(e)

decline in demand for First Foods’ products and services;

 

(f)

rapid adverse changes in markets; due to, among other things, international conflicts, terrorism, environmental issues, world and national health issues, and inflation;

 

(g)

litigation with or legal claims and allegations by outside parties against First Foods, including but not limited to challenges to First Foods’ intellectual property rights;

 

(h)

reliance on proprietary merchant advance credit models, which involve the use of qualitative factors that are inherently judgmental and which could result in merchant defaults; and

 

(i)

new regulations impacting the business.

 

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

 

Because the forward-looking statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. First Foods cautions you not to place undue reliance on the statements, which speak only of management’s plans and expectations as of the date of this Form 10-Q. The cautionary statements contained or referred to in this section should be considered in connection with any subsequent written or oral forward-looking statements that First Foods or persons acting on its behalf may issue. First Foods does not undertake any obligation to review or confirm analysts’ expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this Form 10-Q, or to reflect the occurrence of unanticipated events.

 

General

 

First Foods is currently a “smaller reporting company” under the JOBS Act. A company loses its “smaller reporting company” status on (i) the day its public float becomes greater than or equal to $250,000,000 or (ii) had annual revenues of less than $100,000,000 and either: (A) had no public float or (B) had a public float of less than $700,000,000. As a “smaller reporting company” First Foods is exempt from certain obligations of the Exchange Act, including those found in Section 14A(a) and (b) related to shareholder approval of executive compensation and golden parachute compensation and Section 404(b) of the Sarbanes-Oxley Act of 2002 related to the requirement that management assess the effectiveness of the Company’s internal control for financial reporting. Furthermore, Section 103 of the JOBS Act provides that as a “smaller reporting company” First Foods is not required to comply with the requirement to provide an auditor’s attestation of ICFR under Section 404(b) of the Sarbanes-Oxley Act for as long as First Foods qualifies as a “smaller reporting company.” In addition, a “smaller reporting company” may include less extensive narrative disclosure than required of other reporting companies, particularly in the description of executive compensation and provide audited financial statements for two fiscal years, in contrast to other reporting companies, which must provide audited financial statements for three fiscal years. However, a “smaller reporting company” is not exempt from the requirement to perform management’s assessment of internal control over financial reporting.

 

First Foods is focused on developing its specialty chocolate product line through its Holy Cacao subsidiary, participating in merchant cash advances (“MCAs”) through its 1st Foods Funding Division, and introducing new health-related brands, concepts and products through its FFGI Wholesaling Division.

 

Holy Cacao is a majority owned subsidiary that is dedicated to producing, packaging, distributing and selling specialty chocolate products, including specialty chocolate products infused with a hemp-based ingredient in accordance with the Company’s understanding of the Agricultural Act of 2014 (the “2014 Farm Bill”) and/or the Agriculture Improvement Act of 2018 (the “2018 Farm Bill,” and together with the 2014 Farm Bill, collectively, the “Farm Bill”), which renders the production of hemp in compliance with the provisions of the Farm Bill federally lawful. The Company has not been, is not, and has no current plans to be involved in producing, packaging, distributing or selling any product that is infused with a still illegal marijuana-based ingredient such as THQ, although it intends to revisit the matter as regulations change in jurisdictions in which it operates.

 

 
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The Company is also dedicated to licensing its intellectual property (“IP”), including its name, brand, and packaging, to third parties. The Company may license its IP to third parties that may produce, package, and distribute hemp-based products pursuant with the Company’s understanding of the Farm Bill. The Company may license its IP to third parties that may produce, package, and distribute marijuana-based products, but only as such licensing is legal. Holy Cacao holds four trademarks for the brands, “The Edibles Cult”, “Purely Irresistible”, “Mystere” and “Southeast Edibles”.

 

The Company also has a contract with TIER Merchant Advances LLC (“TIER”) to participate in the purchase of future receivables from qualified TIER merchants for the purpose of generating near-term and long-term revenue for the Company. The Company also provides cash advances directly to merchants.

 

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

 

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

 

As of September 30, 2023, our cash balance was $(232), which includes restricted cash of $5,900, and our current liabilities were $5,657,085.

 

Critical Accounting Policies

 

Our discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We monitor our estimates on an on-going basis for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. We base our estimates on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates, if past experience or other assumptions do not turn out to be substantially accurate.

 

Certain of our accounting policies are particularly important to the portrayal and understanding of our financial position and results of operations and require us to apply significant judgment in their application. As a result, these policies are subject to an inherent degree of uncertainty. In applying these policies, we use our judgment in making certain assumptions and estimates. Our critical accounting policies are outlined in Note 1 in the Notes to the Unaudited Condensed Consolidated Financial Statements.

 

 
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Results of Operations for the Three Months Ended September 30, 2023 compared to the Three Months Ended September 30, 2022

 

Fiscal Q1 2022 Highlights

 

Total net sales decreased 96% or $13,672 during the three months ended September 30, 2023 compared to 2022, driven by a decreased demand in our wholesale and Chocolate Products.

 

Products Performance

 

The following table shows net sales by category for the three months ended September 30, 2023 and 2022:

 

 

 

2023

 

 

Change

 

 

2022

 

Net sales by category:

 

 

 

 

 

 

 

 

 

Chocolate products

 

$513

 

 

 

-96%

 

$13,374

 

Merchant cash advances

 

 

-

 

 

 

-100%

 

 

811

 

Total net sales

 

$513

 

 

 

-95%

 

$14,185

 

 

Chocolate products

 

Chocolate products sales decreased during 2023 compared to 2022, due primarily to the saturation of the CBD market.

 

Merchant cash advances

 

Merchant cash advances sales increased during 2023 compared to 2022, representing a de minimis change. 

 

Cost of Product Sales

 

Products cost of sales for September 30, 2023 and 2022 were as follows:

 

 

 

September 30,

2023

 

 

September 30,

2022

 

Cost of Product Sales:

 

 

 

 

 

 

Chocolate products

 

$-

 

 

$6,790

 

 

Cost of product sales

 

The decrease in cost of product sales in September 30, 2023 as compared to September 30, 2022 was due to a decrease in product sales.

 

Legal fees for the three months ended September 30, 2023 was $3,112 compared to $2,498 for the three months ended September 30, 2022.

 

General and administrative expenses for the three months ended September 30, 2023 was $180,754 compared to $268,910 for the three months ended September 30, 2022. The decrease in general and administrative expenses was primarily due to the decrease in rent and consulting and accounting fees .

 

 

Provision for merchant cash advances for the three months ended September 30, 2023 was $(529) compared to $(3,493) for the three months ended September 30, 2022. The decrease in provision for merchant cash advances was due to the Company updating its reserves to accurately reflect its current merchant cash advances positions.

 

Results of Operations for the Nine Months Ended September 30, 2023 compared to the Nine Months Ended September 30, 2022

 

Total net sales decreased 94% or $87,533 during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, driven by a lesser degree of demand in our wholesale and Chocolate Products.

 

Products Performance

 

The following table shows net sales by category for the nine months ended September 30, 2023 and 2022:

 

 

 

2023

 

 

Change

 

 

2022

 

Net sales by category:

 

 

 

 

 

 

 

 

 

Chocolate products

 

$4,824

 

 

 

-95%

 

$91,708

 

Merchant cash advances

 

 

539

 

 

 

-55%

 

 

1,188

 

Total net sales

 

$5,363

 

 

 

-94%

 

$92,896

 

 

Chocolate products

 

Chocolate products sales decreased during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 due primarily to the saturation of the CBD market.

 

Merchant cash advances

 

Merchant cash advances sales increase during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, representing a de minimis change. 

 

Cost of Product Sales

 

Products cost of sales for the nine months ended September 30, 2023 and 2022 were as follows:

 

 

 

September 30,

2023

 

 

September 30,

2022

 

Cost of Product Sales:

 

 

 

 

 

 

Chocolate products

 

$76

 

 

$47,264

 

 

 
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Cost of product sales

 

The decrease in cost of product sales in September 30, 2023 as compared to September 30, 2022 was due to a decrease in product sales.

 

Legal fees for the nine months ended September 30, 2023 was $7,511 compared to $31,596 for the nine months ended September 30, 2022. This decrease in legal fees was due to the overall decrease in business activity.

 

General and administrative expenses for the nine months ended September 30, 2023 was $645,503 compared to $1,008,887 for the nine months ended September 30, 2022. The decrease in general and administrative expenses was primarily due to decreased costs associated with compensation expenses, rent, and consulting and accounting fees.  

 

Provision for merchant cash advances for the nine months ended September 30, 2023 was $(351) compared to $33,306 for the nine months ended September 30, 2022. The decrease in provision for merchant cash advances was due to the Company updating its reserves to accurately reflect its current merchant cash advances positions.

 

Impairment of assets expense for the nine months ended September 30, 2022 was $92,736. The company has not realized cash flows sufficient to overcome an asset impairment and is, therefore, estimating an impairment of 50% of its asset carrying value. There was no impairment expense for the nine months ended September 30, 2023.

 

Liquidity and Capital Resources

 

The following table presents our cash flows:

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2023

 

 

2022

 

Net cash used in operating activities

 

$(213,667)

 

$(329,899)

Net cash used in investing activities

 

$-

 

 

$-

 

Net cash provided by financing activities

 

$212,910

 

 

$325,750

 

 

 
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Operating Activities

 

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

 

Net cash used in operating activities decreased from the nine months ended September 30, 2022 to the nine months ended September 30, 2023 primarily due to the net effect of a decrease in cash received from revenues and a decrease of cash paid for operating expenses, employee stock based compensation and amortization of debt discount.

 

Investing Activities

 

There were no investing activities for the nine months ended September 30, 2023 and 2022.

 

Financing Activities

 

Cash provided by financing activities consists of proceeds from issuance of proceeds from related party loans.

 

Net cash provided by financing activities decreased from the nine months ended September 30, 2022 to the nine months ended September 30, 2023 primarily due to a decrease of proceeds from related party loans.

 

Going Concern

 

The Company’s unaudited condensed consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business.

 

The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

 

In order to continue as a going concern, the Company will need, among other things, additional capital resources. As of September 30, 2023, the Company had approximately $1,369,000 in third-party short-term debt and approximately $0 in associated debt discount and approximately $1,087,000 in related-party short-term debt and $0 in associated debt discount that is due within the next twelve months. Management’s plan is to increase revenue, obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its operating expenses and seeking equity and/or debt financing. However, neither any members of management nor any significant shareholders are currently committed to invest funds with us and; therefore, we cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

 

The Company does not have sufficient cash flow for the next twelve months from the issuance of these unaudited condensed consolidated financial statements. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

Concentration Risks

 

As of September 30, 2023 and December 31, 2022, the Company's concentrations for receivables from merchant cash advances as well as income from merchant cash advances were not significant to warrant concentration risk.

 

 
27

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For the three months ended September 30, 2023 and 2022, the Company had no purchase concentrations.

 

For the nine months ended September 30, 2023, the Company had no purchase concentrations. For the nine months ended September 30, 2022, the Company had purchase concentrations of 22%, 17% and 12% from three vendors.

 

Off-Balance Sheet Arrangements

 

No off-balance sheet arrangements exist.

 

Contractual Obligations

 

None.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable.

 

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.

 

 
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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 September 30, 2023, 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 September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 
29

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PART II OTHER INFORMATION

 

Item 1. Legal Proceedings

 

As of September 30, 2023, 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.

 

On July 20, 2023, the Company was sued by Jenisa Angeles in the Supreme Court of the State of New York, County of New York.  The lawsuit claims that the Company engaged in discriminatory business practices inasmuch as our website contained access barriers that prevented visually impaired and/or legally blind individuals from purchasing products thereon.  It is too early in the process to make any determination as to our possible liability or estimate the amount of any possible damages.  We intend to investigate the matter and take appropriate action in response thereto.

 

Item 1A. Risk Factors

 

We are not obligated to disclose our risk factors in this report; however, information regarding our risk factors appears in various places in this Quarterly Report and in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022. Except as described below, there have been no material changes from the risk factors previously disclosed in such Annual Report on Form 10-K.

 

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

 

None.

 

Item 3. Defaults Upon Senior Securities

.

There have been no defaults upon senior securities.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

Not Applicable

 

 
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Item 6. Exhibits

 

(a) Exhibits

 

Item 6. Exhibits, Financial Statement Schedules

 

3.1

 

Articles of Incorporation of the Registrant (1)

3.2

 

By-laws of the Registrant (1)

31.1

 

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

31.2

 

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

32.1

 

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

32.2

 

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

101.INS

 

Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

 

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

___________

(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: November 20, 2023

 

Harold Kestenbaum,

 

Chairman of the Board and

 

Interim Chief Executive Officer

 

 

By:

/s/ Mark J. Keeley

 

Dated: November 20, 2023

 

Mark J. Keeley,

 

Chief Financial Officer

 

 
32

 

EX-31.1 2 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: November 20, 2023

 

/s/ Harold Kestenbaum

 

Harold Kestenbaum,

Interim Chief Executive Officer

 

(Principal Executive Officer)

 

EX-31.2 3 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: November 20, 2023

 

/s/ Mark J. Keeley

 

Mark J. Keeley,

Chief Financial Officer

 

(Principal Financial/Accounting Officer)

 

EX-32.1 4 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 September 30, 2023 (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: November 20, 2023

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 5 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 September 30, 2023 (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: November 20, 2023

 

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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