First Foods Group, Inc. - Quarter Report: 2021 September (Form 10-Q)

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, 2021

☐ 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: None

Securities registered pursuant to Section 12(g) of the Securities Exchange Act: 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 ☒

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

Title of

each class

Trading

Symbol(s)

Name of each exchange

on which registered

None

As of November 10, 2021, the number of shares outstanding of the registrant’s class of common stock was 25,915,004, 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, 2021 and December 31, 2020	3

	Condensed Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2021 and 2020	4

	Condensed Consolidated Statements of Changes in Deficit for the Three and Nine Months ended September 30, 2021 and 2020	5

	Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2021 and 2020	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29

Item 4.	Controls and Procedures	29

PART II OTHER INFORMATION

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 3.	Defaults Upon Senior Securities	31

Item 4.	Mine Safety Disclosures	31

Item 5.	Other Information	31

Item 6.	Exhibits	32

SIGNATURES		33

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

First Foods Group, Inc. and Subsidiary

Condensed Consolidated Balance Sheets

(Unaudited)

	September 30, 2021			December 31, 2020
ASSETS
CURRENT ASSETS
Cash	$	33,924		$	50,386
Restricted cash		29,421			-
Accounts receivable		424			-
Inventory, net		57,508			46,240
Merchant cash advances, net of allowance $136,569 and $291,380, respectively		43,509			121,079
Prepaid expenses and other current assets		103,045			148,805
TOTAL CURRENT ASSETS		267,831			366,510

Property and equipment, net		200,110			242,438
Operating lease right-of-use assets		193,287			239,247
TOTAL ASSETS	$	661,228		$	848,195

LIABILITIES AND DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	960,844		$	645,092
Accounts payable and accrued liabilities - related parties		629,204			465,506
Put liability		29,421			-
Deferred revenue		84,961			105,058
Loans, net of unamortized debt discount		1,460,164			966,155
Related party loans, net of unamortized debt discount		428,922			685,279
Operating lease liabilities		66,420			60,403
TOTAL CURRENT LIABILITIES		3,659,936			2,927,493

Loans, net of unamortized debt discount - long term		153,600			300,024
Operating lease liabilities - long term		128,242			179,053
TOTAL LIABILITIES		3,941,778			3,406,570

Commitments

DEFICIT
FIRST FOODS GROUP, INC. DEFICIT:
Preferred stock, 20,000,000 shares authorized:
Series A convertible preferred stock: $0.001 par value, 1 share authorized, 1 issued and outstanding ($577,005 liquidation preference)		-			-
Series B convertible preferred stock: $0.001 par value, 4,999,999 shares authorized, 354,999 and 473,332 issued and outstanding, respectively ($118,235 and $160,000 liquidation preference, respectively)		355			473
Series C convertible preferred stock: $0.001 par value,3,000,000 shares authorized, 660,000 shares issued and outstanding ($165,000 liquidation preference)		660			660
Common stock: $0.001 par value,100,000,000 shares authorized, 25,563,448 and 22,367,179 shares issued and outstanding, respectively		25,563			22,367
Additional paid-in capital		11,621,741			10,515,601
Accumulated deficit		(14,714,186	)		(12,954,696	)
Total First Foods Group, Inc. Deficit		(3,065,867	)		(2,415,595	)

Noncontrolling interests		(214,683	)		(142,780	)
Total deficit		(3,280,550	)		(2,558,375	)
TOTAL LIABILITIES AND DEFICIT	$	661,228		$	848,195

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

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First Foods Group, Inc. and Subsidiary

Condensed Consolidated Statements of Operations

(Unaudited)

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2021			2020			2021			2020

REVENUES
Product sales, net	$	55,678		$	12,092		$	312,142		$	24,475
Merchant cash advance income, net		4,371			19,444			37,786			128,748
Total Revenues		60,049			31,536			349,928			153,223

OPERATING EXPENSES
Cost of product sales		35,446			7,838			201,530			13,289
Professional fees		2,703			28,827			5,799			59,154
General and administrative		466,717			522,033			1,400,527			1,490,095
Provision for merchant cash advances		(7,916	)		(105,798	)		(152,254	)		374,087
Total Operating Expenses		496,950			452,900			1,455,602			1,936,625

LOSS FROM OPERATIONS		(436,901	)		(421,364	)		(1,105,674	)		(1,783,402	)

OTHER INCOME (EXPENSE)
Other income		110,000			-			110,000			1,000
Loss on extinguishment of loans payable		-			-			(299,773	)		-
Interest expense		(175,997	)		(191,868	)		(535,947	)		(515,945	)

Loss before income taxes		(502,898	)		(613,232	)		(1,831,394	)		(2,298,347	)

Provision for income taxes		-			-			-			-

NET LOSS		(502,898	)		(613,232	)		(1,831,394	)		(2,298,347	)

Non-controlling interest share of loss		34,848			20,245			71,904			51,520
Deemed dividends		(198,240	)		-			(337,930	)		-

Net loss attributed to shareholders of First Foods Group, Inc.	$	(666,290	)	$	(592,987	)	$	(2,097,420	)	$	(2,246,827	)

BASIC AND DILUTED LOSS PER COMMON SHARE ATTRIBUTABLE TO FIRST FOODS GROUP, INC. STOCKHOLDERS	$	(0.03	)	$	(0.03	)	$	(0.09	)	$	(0.11	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING ATTRIBUTABLE TO FIRST FOODS GROUP, INC. STOCKHOLDERS - BASIC AND DILUTED		25,493,726			21,804,346			24,104,168			21,208,267

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

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First Foods Group, Inc. and Subsidiary

Condensed Consolidated Statements of Changes in Deficit

(Unaudited)

	Preferred Stock						Common Stock				Additional paid-in			Accumulated			Total First Foods Group,			Non-controlling			Total
	Shares			Amount			Shares		Amount		capital			deficit			Inc. deficit			interests			deficit

Balance at December 31, 2020		1,133,333		$	1,133			22,367,179	$	22,367	$	10,515,601		$	(12,954,696	)	$	(2,415,595	)	$	(142,780	)	$	(2,558,375	)

Common stock issued for cash to a related party		-			-			249,999		250		49,750			-			50,000			-			50,000
Common stock issued to consultants for services		-			-			36,765		37		4,963			-			5,000			-			5,000
Common stock issued for related party loan		-			-			140,000		140		28,520			-			28,660			-			28,660
Common stock issued with loans payable		-			-			18,000		18		4,662			-			4,680			-			4,680
Stock based compensation		-			-			-		-		65,542			-			65,542			-			65,542
Warrants issued for director services		-			-			-		-		43,693			-			43,693			-			43,693
Net loss		-			-			-		-		-			(471,473	)		(471,473	)		(26,307	)		(497,780	)
Balance at March 31, 2021		1,133,333		$	1,133			22,811,943	$	22,812	$	10,712,731		$	(13,426,169	)	$	(2,689,493	)	$	(169,087	)	$	(2,858,580	)

Common stock issued for cash to a related party		-			-			249,999		250		49,750			-			50,000			-			50,000
Stock compensation consultant - Put liability		-			-			112,390		112		(112	)		-			-			-			-
Common stock issued for related party loan		-			-			50,000		50		10,450			-			10,500			-			10,500
Common stock issued for conversion of loans payable		-			-			191,424		192		31,067			-			31,259			-			31,259
Common stock issued for conversion of loans payable - related party		-			-			2,000,000		2,000		458,000			-			460,000			-			460,000
Stock based compensation		-			-			-		-		74,253			-			74,253			-			74,253
Warrants issued for director services		-			-			-		-		44,179			-			44,179			-			44,179
Warrants issued for related party loan		-			-			-		-		20,200			-			20,200			-			20,200
Warrants issued for conversion of loan payable		-			-			-		-		83,513			-			83,513			-			83,513
Net loss		-			-			-		-		-			(819,968	)		(819,968	)		(10,748	)		(830,716	)
Balance at June 30, 2021		1,133,333		$	1,133			25,415,756	$	25,416	$	11,484,031		$	(14,246,137	)	$	(2,735,557	)	$	(179,835	)	$	(2,915,392	)

Common stock issued to consultants for services		-			-			34,091		34		4,398			-			4,432			-			4,432
Stock compensation consultant - Put liability		-			-			35,601		35		(35	)		-			-			-			-
Common stock issued with loans payable		-			-			78,000		78		12,402			-			12,480			-			12,480
Preferred stock waived by director		(118,333	)		(118	)		-		-		-			-			(118	)		-			(118	)
Stock based compensation		-			-			-		-		54,610			-			54,610			-			54,610
Warrants issued for director services		-			-			-		-		3,398			-			3,398			-			3,398
Warrants issued for loan payable		-			-			-		-		47,597			-			47,597			-			47,597
Warrants issued for related party loan		-			-			-		-		15,340			-			15,340			-			15,340
Net loss		-			-			-		-		-			(468,049	)		(468,049	)		(34,848	)		(502,897	)
Balance at September 30, 2021		1,015,000		$	1,015			25,563,448	$	25,563	$	11,621,741		$	(14,714,186	)	$	(3,065,867	)	$	(214,683	)	$	(3,280,550	)

Balance at December 31, 2019		1,133,333		$	1,133			20,313,771	$	20,314	$	9,116,998		$	(10,293,260	)	$	(1,154,815	)	$	(61,078	)	$	(1,215,893	)

Common stock issued to consultants for services		-			-			400,000		400		95,600			-			96,000			-			96,000
Common stock issued for loans payable		-			-			224,000		224		53,908			-			54,132			-			54,132
Common stock issued for related party loan		-			-			25,000		25		4,975			-			5,000			-			5,000
Warrants issued for director services		-			-			-		-		197,348			-			197,348			-			197,348
Warrants issued with loan payable		-			-			-		-		20,717			-			20,717			-			20,717
Warrants issued in lieu of deferred compensation		-			-			-		-		250,000			-			250,000			-			250,000
Net loss		-			-			-		-		-			(1,069,147	)		(1,069,147	)		(13,349	)		(1,082,496	)
Balance at March 31, 2020		1,133,333		$	1,133			20,962,771	$	20,963	$	9,739,546		$	(11,362,407	)	$	(1,600,765	)	$	(74,427	)	$	(1,675,192	)

Common stock issued to consultants for services		-			-			150,000		150		25,200			-			25,350			-			25,350
Common stock issued for related party loan		-			-			445,000		445		94,699			-			95,144			-			95,144
Warrants issued for director services		-			-			-		-		72,348			-			72,348			-			72,348
Net loss		-			-			-		-		-			(584,695	)		(584,695	)		(17,926	)		(602,621	)
Balance at June 30, 2020		1,133,333		$	1,133			21,557,771	$	21,558	$	9,931,793		$	(11,947,102	)	$	(1,992,618	)	$	(92,353	)	$	(2,084,971	)

Common stock issued for cash to a related party		-			-			249,999		250		49,750			-			50,000			-			50,000
Common stock issued for related party loan		-			-			35,000		35		8,365			-			8,400			-			8,400
Common stock issued with loans payable		-			-			150,000		150		45,350			-			45,500			-			45,500
Stock based compensation		-			-			-		-		103,644			-			103,644			-			103,644
Warrants issued for director services		-			-			-		-		114,409			-			114,409			-			114,409
Net loss		-			-			-		-		-			(592,987	)		(592,987	)		(20,245	)		(613,232	)
Balance at September 30, 2020		1,133,333		$	1,133			21,992,770	$	21,993	$	10,253,311		$	(12,540,089	)	$	(2,263,652	)	$	(112,598	)	$	(2,376,250	)

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

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First Foods Group, Inc. and Subsidiary
Condensed Consolidated Statements of Cash Flows
(Unaudited)

	For The Nine Months Ended September 30,
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss	$	(1,831,394	)	$	(2,298,349	)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-employee stock based compensation		9,431			121,350
Employee stock based compensation		285,675			487,749
Loss on extinguishment of loan payable		299,773			-
Amortization of debt discount		382,726			355,555
Depreciation and amortization expense		43,205			24,037
Change in merchant allowance		(154,811	)		345,580
Merchant cash advance direct write off		(1,312	)		374,087
Non-cash lease expense		45,960			14,018
Changes in operating assets and liabilities:
Accounts receivable		(424	)		13,063
Inventory		(11,268	)		(12,601	)
Merchant cash advances		233,693			8,495
Deferred merchant advance commissions		-			15,242
Prepaid expenses and other current assets		45,760			(12,250	)
Operating lease liabilities		(44,794	)		(13,913	)
Accounts payable and accrued liabilities		315,752			346,857
Accounts payable and accrued liabilities - related party		163,698			166,640
Put liability		29,421			-
Deferred revenue		(20,097	)		10,041
Net cash used in operating activities		(209,006	)		(54,399	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment		(877	)		(197,924	)
Net cash used in investing activities		(877	)		(197,924	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock		-			50,000
Proceeds from sale of common stock - related party		100,000			-
Proceeds from loans		200,101			351,200
Repayment of loans		(53,480	)		(116,655	)
Forgiveness of Preferred Series B stock		(118	)		-
Proceeds from related party loans		112,500			80,000
Repayments of related party loans		(136,161	)		(60,000	)
Net cash provided by financing activities		222,842			304,545

NET INCREASE IN CASH AND RESTRICTED CASH		12,959			52,222
CASH AND RESTRICTED CASHAT BEGINNING OF PERIOD		50,386			24,353
CASH AND RESTRICTED CASH AT END OF PERIOD	$	63,345		$	76,575

CASH AND RESTRICTED CASH CONSIST OF THE FOLLOWING:
END OF PERIOD
Cash		33,924			76,575
Restricted Cash		29,421			-
		63,345		$	76,575
SUPPLEMENTAL CASH FLOW INFORMATION:
NON-CASH FINANCING ACTIVITIES:
Common stock issued with loans	$	17,160		$	99,632
Common stock issued with related party loans	$	39,160		$	108,544
Common stock issued for conversion of loans payable	$	250,000		$	-
Common stock issued for conversion of related party loans	$	25,000		$	-
Warrants issued with loans	$	47,597		$	20,717
Warrants issued with related party loans	$	35,540		$	-
Warrants issued in lieu of deferred compensation	$	-		$	250,000
Purchase of assets and settlement of accrued expenses through issuance of loan payable	$	-		$	140,188
Right-of-use assets obtained in exchange for liabilities	$	-		$	267,704

CASH PAID FOR:
Interest	$	100,065		$	84,930
Income taxes	$	-		$	-

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

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NOTE 1 – BUSINESS SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND LIQUIDITY

Nature of Business

First Foods Group, Inc. (the “Company” or “First Foods”) is a smaller reporting company focused on developing its specialty chocolate product line through its Holy Cacao subsidiary, participating in merchant cash advances (“MCAs”) through its 1^st 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 near-term and long-term revenue for the Company. The Company also provides cash advances directly to merchants.

Reclassification

Certain reclassifications have been made to the Company’s consolidated financial statements for the period ended December 31, 2020 to conform to the current period’s unaudited condensed consolidated financial statement presentation. Approximately $465,500 worth of related party payables were reclassed to its own line item to confirm with current period presentation. There was no effect on total assets, equity and net loss.

Liquidity and Going Concern

The Company’s unaudited condensed consolidated financial statements are prepared using generally accepted accounting principles in the United States of America (“GAAP”) applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. As of September 30, 2021, the Company had approximately $1,520,000 in third-party short-term debt and approximately $60,000 in associated debt discount and approximately $430,000 in related-party short-term debt and approximately $1,000 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.

Table of Contents

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

In December 2019, a novel strain of coronavirus surfaced (COVID-19). The spread of COVID-19 around the world in 2020 caused significant volatility in U.S. and international markets. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. and international economies. The Company’s financial position, operations and cash flows as of September 30, 2021 have been adversely affected, and may be further affected in the future, by the ongoing outbreak of COVID-19 which in 2020 was declared a pandemic by the World Health Organization. The ultimate disruption which may be caused by the outbreak is uncertain; however, it may result in a material adverse impact on the Company’s financial position, operations and cash flows. Possible areas that may be materially affected include, but are not limited to, disruption to the Company’s labor workforce, unavailability of products and supplies used in operations, and the decline in value of assets held by the Company. As of September 30, 2021 and through the filing date of the unaudited condensed consolidated financial statements, the Company has continued to collect receivables from its cash advances but has experienced payment delinquencies. The Company has taken a reserve allowance on its MCA’s. As of September 30, 2021, the Company’s Holy Cacao operations have experienced no disruption in customers and revenue, labor workforce, availability of products and supplies used in operations, and the value of assets held by the Company, including inventories.

Use of Estimates

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

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements were prepared using generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, these unaudited condensed consolidated financial statements do not include all information or notes required by generally accepted accounting principles for annual financial statements and should be read in conjunction with the Company’s annual consolidated financial statements included within the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on March 3, 2021.

In the opinion of management, the unaudited condensed consolidated financial statements included herein contain all adjustments necessary to present fairly the Company’s financial position and the results of its operations and cash flows for the interim periods presented. Such adjustments are of a normal recurring nature. The results of operations for the nine months ended September 30, 2021 may not be indicative of results for the full year.

The noncontrolling interest represents the proportionate share of the proceeds received and also the income and loss pickup from the fifteen-percent sale of equity interest in our 85% owned subsidiary; Holy Cacao.

Principles of Consolidation

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

Cash and Cash Equivalents

The Company considers all highly liquid temporary cash investments with an original maturity of twelve months or less to be cash equivalents. At September 30, 2021 and December 31, 2020, the Company had no cash equivalents.

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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, 2021 restricted cash included $29,421, which was restricted pursuant to the requirements in the sales consultant agreement entered into November 2020 (see note 8).

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, 2021, the Company reserved an amount equal to 76% of the outstanding merchant cash advance balance at period end based on the potential impact of COVID 19.

During the nine months ended September 30, 2021, the Company wrote off 4 merchant advances for a total of $5,132. During the nine months ended September 30, 2021, the Company recovered 7 merchant advances for a total of $7,690. During the nine months ended September 30, 2020, the Company recovered 25 merchant advances for a total of $28,507. During the three months ended September 30, 2021, the Company wrote off 1 merchant advances for a total of $1,100. During the three months ended September 30, 2020, the Company recovered 3 merchant advances for a total of $4,010.

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.

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.

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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.

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, 2021, 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 no allowance for inventory reserves.

Inventory consisted of the following as of September 30, 2021 and December 31, 2020:

	September 30,		December 31,
	2021		2020
Raw Materials	$	41,285	$	37,259
Work in Process		10,184		2,790
Finished Goods		6,039		6,191
Total	$	57,508	$	46,240

Property and Equipment

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

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

Property – Leasehold improvements		4 years
Equipment		5 years

Impairment of Long-Lived Assets

Long-lived assets are comprised of property and equipment. The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset or group of assets may not be recoverable. If these circumstances exist, recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset group to future undiscounted net cash flows expected to be generated by the asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. There were no impairments to long-lived assets for the nine months ended September 30, 2021 and 2020.

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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 unaudited condensed 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 unaudited condensed 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 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, 2021 and 2020, were approximately $58,000 and $49,000, respectively. The research and development costs for the three months ended September 30, 2021 and 2020, were approximately $25,000 and $16,000, respectively. These expenses are included in general and administrative expenses on the accompanying unaudited condensed 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 unaudited condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020, respectively.

Stock Based Compensation

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

Income Taxes

The Company provides for income taxes using the asset and liability approach. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. As of September 30, 2021 and December 31, 2020, 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.

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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, 2021 and 2020 because their effect would be antidilutive.

The Company had 5,848,525 and 4,899,750 warrants to purchase common stock outstanding at September 30, 2021 and 2020, respectively. The Company had 4,470,000 warrants to purchase Series B preferred stock outstanding at September 30, 2021 and 2020, respectively. The Company has outstanding one (1) Series A preferred share that is convertible into five (5) shares of the Company’s common stock. Additionally, the Company has 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 at September 30, 2021 and 2020, 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.

Advertising and Promotion

Advertising and promotion costs are expensed as incurred. Advertising and promotion costs recognized in the unaudited condensed consolidated statements of operations for the nine months ended September 30, 2021 and 2020, were approximately $95,600 and $27,600, respectively and for three months ended September 30, 2021 and 2020, were approximately $43,400 and $6,600, respectively. These expenses are included in general and administrative expenses on the accompanying unaudited condensed 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 condensed consolidated financial statements. It also requires consolidated net income to include the amounts attributable to both the parent and non-controlling interest, with disclosure on the face of the unaudited condensed consolidated income statement of the amounts attributed to the parent and to the non-controlling interest. In accordance with ASC 810-10-45-21, those losses attributable to the parent and the non-controlling interest in subsidiaries may exceed their interests in the subsidiary’s equity. The excess and any further losses attributable to the parent and the non-controlling interest shall be attributed to those interests even if that attribution results in a deficit non-controlling interest balance. During the year ended December 31, 2017, the Company entered into a subscription agreement for the sale of a ten-percent equity interest in its 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.

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

	For The Three Months Ended						For The Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Revenue	$	55,678		$	12,000		$	312,142		$	24,500
Cost of Goods Sold		(35,448	)		(7,800	)		(201,531	)		(13,300	)
Operating Expense		(197,357	)		(168,500	)		(589,973	)		(383,500	)
Loss from Operations	$	(177,127	)	$	(164,300	)	$	(479,362	)	$	(372,300	)

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

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial position or results of operations upon adoption.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses” to improve information on credit losses for financial assets and net investment in leases that are not accounted for at fair value through net income. ASU 2016-13 replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses. In April 2019 and May 2019, the FASB issued ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments” and ASU No. 2019-05, “Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief” which provided additional implementation guidance on the previously issued ASU. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments - Credit Loss (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842),” which defers the effective date for public filers that are considered small reporting companies (“SRC”) as defined by the Securities and Exchange Commission to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Since the Company is an SRC, implementation is not needed until January 1, 2023. The Company will continue to evaluate the effect adopting ASU 2016-13 will have on the Company’s unaudited condensed consolidated financial statements.

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, 2021 and December 31, 2020, the Company has accrued $516,667 and $329,167, respectively, in relation to the employment agreements and $23,297 and $20,578, respectively, in relation to the payroll tax liability.

Consulting Agreements

On February 27, 2017, Harold Kestenbaum assumed the role of Chairman of the Board of Directors and Interim Chief Executive Officer (“Interim CEO”). Mr. Kestenbaum earns $40,000 per year for his role as Chairman of the Board. As of September 30, 2021, the Company has accrued a total of $40,000 of compensation for his role as Interim CEO under a previous agreement.

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As of September 30, 2021, 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, 2021 and December 31, 2020 was $130,410 and $82,988, respectively.

Related Party Loans

			September 30, 2021			December 31, 2020
1.	Note payable at 12%, matures 10/17/2021.	{a} *	$	100,000		$	100,000
2.	Non-interest bearing note payable, matures on 4/24/2022.	{b} *		179,813			179,813
3.	Note payable at 12%, matures 1/13/2022. The Company has recorded debt discount and amortized it over the applicable life of the debt.	{c} *		100,000			100,000
4.	Note payable at 12%, matured and converted into common stock on 5/10/2021.	{d} *		-			250,000
5.	Non-interest bearing note payable, matured & repaid on 1/05/2021. In connection with the issuance, the Company had recorded debt discount and amortized it over the applicable life of the debt.	*		-			74,411
6.	Non-interest bearing note payable, matures on 1/08/2022.	*		750			-
7.	Non-interest bearing note payable, matures 12/30/2021. The Company has recorded debt discount and amortized it over the applicable life of the debt.	{e} *		50,000			-
	Unamortized debt discount			(1,641	)		(18,945	)
	Total		$	428,922		$	685,279

_________

{a} - On October 17, 2021, the Company extended the note to April 17, 2022 based on the same terms and conditions.
{b} - On April 24, 2021, the Company extended the note to April 24, 2022 based on the same terms and conditions.
{c} - On October 11, 2021, the Company extended the note to January 13, 2022 based on the same terms and conditions. In association with this and prior extensions the company issued 80,000 shares of common stock with a fair value of $16,000, and 200,000 warrants with a fair value of $31,550 which will be recorded as a debt discount and amortized over the life of the loan. The warrants are valued based on the Black Scholes Model, are fully vested as of the issue date and have an exercise term of three (3) years.
{d} - On May 10, 2021, the loan was converted into 2,000,000 shares of common stock. Additionally, the company granted warrants for the right to purchase 375,000 shares of common stock at an exercise price of $0.23 a share. The warrants are valued at $83,513 based on the Black Scholes Model, are fully vested as of the issue date and have an exercise term of three (3) years. In association with the conversion of the note to common stock and warrants, the company recognized a loss of $293,513.
{e} - On April 29, 2021, the Company issued a non-interest bearing promissory note of $50,000. In connection with this note the company issued 50,000 shares of common stock with a fair value of $10,500, which was recorded as a debt discount and amortized over the life of the loan. The loans original maturity date was May 31, 2021 but has been extended to December 30, 2021. In association with this and prior extensions the company granted warrants for the right to purchase 200,000 shares of common stock with a fair value of $36,410 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.
* ‐ unsecured note

During the nine months ended September 30, 2021 and 2020, the Company recorded $92,004 and $70,522 of interest expense related to the amortization of debt discount and $28,307 and $40,537 of regular interest, respectively.

During the three months ended September 30, 2021 and 2020, the Company recorded $34,534 and $39,053 of interest expense related to the amortization of debt discount and $6,049 and $13,611 of regular interest, respectively. As of September 30, 2021 and December 31, 2020, accrued interest was $62,100 and $45,889, respectively.

During the nine months ended September 30, 2021, the Company converted $250,000 of loan payable in exchange for 2,000,000 shares of common stock and warrants for the right to purchase 375,000 shares of common stock. The aggregate fair value of the common stock shares issued and for the granted warrants was $543,513. The Company recorded a loss on conversion of debt of $293,513.

Related Party Payables

As of September 30, 2021, the Company owes a Director $127,804 for expenses incurred on behalf of the company.

All of the above transactions were approved by disinterested directors.

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Director Agreements

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

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

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

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

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

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

The Company issued warrants with respect to 1,280,000 Series B Preferred Stock, in the aggregate. The Company expensed the fair value of these warrants in the amount of $768,000 ratably during the years ended December 31, 2018, 2019 and 2020. There was no expense related to these warrants for the three and nine months ended September 30, 2021. For the three and nine months ended September 30, 2020, the Company recorded $73,143 and $217,839 as compensation expense related to the warrants, respectively.

On January 1, 2020, the Company entered into director agreements with each of the Directors of the Company. Pursuant to the agreements, each Director may be compensated with share-based and/or cash-based compensation. The Directors’ compensation for the period January 1, 2020 through December 31, 2020 was $10,000 per quarter per Director to be paid on a date determined by the Board of Directors. In addition, the Directors were able to receive a one-time award of the ability to purchase a particular amount of warrants, as determined by the Board of Directors. On January 1, 2021, the director agreements were renewed with the same terms. During the nine months ended September 30, 2021, a director agreed to waive 118,333 of preferred B shares of stock and $110,000 of accrued director compensation. The company recorded the forgiveness of accrued director compensation as other income. As of September 30, 2021 and December 31, 2020 the Company has accrued $330,000 and $320,000, respectively, in relation to the director agreements.

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

Mr. Kaplan’s compensation as a director for the initial twelve months will consist of one million (1,000,000) warrants which will vest at the rate of 83,333 warrants per month for the initial eleven months and the balance in the twelfth month, provided he is a director on each vesting date, with the initial tranche vesting on the day he takes office and then on each monthly anniversary of such date thereafter. Each Warrant will be exercisable for 36 months after it vests and will be exercisable at a price of $0.18 per share. The warrants are valued at $177,200 based on the Black Scholes Model. If he remains in office beyond twelve months, commencing with month thirteen, his compensation will be similar to the majority of the directors then in office. The company is currently in negotiation with Mr. Kaplan regarding his compensation. For the nine months ended September 30, 2021 and 2020, the Company recorded $91,270 and $0 as compensation expense related to the warrants, respectively. For the three months ended September 30, 2021 and 2020, the Company recorded $3,398 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 we entered into (i) a Subscription Agreement with Mr. Kaplan to sell to him one million (1,000,000) shares of common stock at a purchase price of $0.20 per share for a total purchase price of $200,000, which shares shall be purchased in twelve (12) equal monthly installments of 83,333 shares (the last installment to cover 83,337 shares) with the initial purchase occurring on the date thereof and subsequent installments on each monthly anniversary thereafter (ii) a Consulting Agreement with Mr. Kaplan to award him, as full compensation for two (2) years of service, warrants to purchase two million (2,000,000) shares of common stock at an exercise price of $0.18 per share, which was the closing price of our common stock on such date. The warrants are valued at $354,400 based on the Black Scholes Model; and (iii) an arrangement with Mr. Kaplan that in the event he raises outside investment in the Company in the amount of $500,000 - $2,000,000, he will receive a warrant with one underlying share for each dollar he so raises. For the nine months ended September 30, 2021 and 2020, the Company recorded $125,909 and $0 as compensation expense related to the warrants, respectively. For the three months ended September 30, 2021 and 2020, the Company recorded $42,431 and $0 as compensation expense related to the warrants, respectively.

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The warrants shall vest upon the occurrence to the Company of certain milestone events through the efforts of the consultant. (See Note 6).

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, 2021			December 31, 2020
Leasehold improvements	$	40,000		$	40,000
Equipment		240,392			239,515
Less: Accumulated depreciation and amortization		(80,282	)		(37,077	)
Total	$	200,110		$	242,438

NOTE 4 – ACCOUNTS PAYABLE, RELATED PARTY PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consist of the following:

	September 30, 2021		December 31, 2020
Accounts payable	$	205,726	$	146,910
Interest		165,466		109,747
Salaries		412,161		349,745
Other		177,494		38,690
Related party payables and officer and director fees		629,204		465,506
Total	$	1,590,052	$	1,110,598

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NOTE 5 – LOANS AND LONG-TERM LOANS

			September 30, 2021		December 31, 2020
1.	Note payable at 12%, matures 1/23/2022. In connection with the original issuance, as well as subsequent extension, the Company has recorded debt discount and amortized it over the applicable life of the debt.	{a} *	$	50,000	$	50,000
2.	Note payable at 12%, matures 10/22/2021. In connection with the original issuance, as well as subsequent extension, the Company has recorded debt discount and amortized it over the applicable life of the debt.	{b} *		18,000		18,000
3.	Note payable at 12%, matures 1/8/2022. In connection with the original issuance, as well as subsequent extension, the Company has recorded debt discount and amortized it over the applicable life of the debt.	*		50,000		50,000
4.	Note payable at 12%, matured and converted into common stock on 6/11/2021.	{c} *		-		25,000
5.	Note payable at 12%, matures 1/31/2022. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt.	{d} *		250,000		250,000
6.	Note payable at 12%, matures 4/16/2022. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt.	{e} *		410,000		410,000
7.	Note payable at 12%, matures 4/2/2022. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt.	{f} *		140,000		140,000
8.	Note payable at 12%, matures 4/31/2022. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt.	{g} *		200,000		200,000
9.	Note payable at 12%, matures 1/23/2022. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt.	{h} *		60,000		60,000
10.	Note payable at 12%, matures 7/29/2022. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt.	{i} *		96,000		96,000
11.	Note payable at 3.75%, matures 6/25/2050 - Economic injury disaster loan.	**		150,000		150,000
12.	Non-interest bearing note payable, matured and repaid on 9/30/2021.	*		-		53,479
13.	Note payable at 12%, matures 3/9/2022. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt.	{j} *		50,000		50,000
14.	Note payable at 12.5%, matures 12/17/2022.			3,600		-
15.	Non-interest bearing note payable, matures 11/30/2021.	*		100,001		-
16.	Non-interest bearing note payable, matures 9/19/2022. In connection with the issuance, the Company has recorded debt discount and amortized it over the applicable life of the debt.	{k} *		16,500		-
17.	Non-interest bearing note payable, matures 11/17/2021.	*		50,000		-
18.	Non-interest bearing note payable, matures 11/23/2021.	{l} ***		30,000		-
	Unamortized debt discount			(60,337)		(286,300)
	Total			1,613,764		1,266,179
	Less: short term loans, net			1,460,164		966,155
	Total long-term loans, net		$	153,600	$	300,024

{a}	- On August 4, 2021, the Company extended the note to January 23, 2022 based on the same terms and conditions. In association with the extension the company granted warrants with the right to purchase 50,000 shares of common stock with a fair value on $7,675, which will be recorded as a debt discount and amortized over the new life of the loan. The warrants are valued based on the Black Scholes Model, are fully vested as of the issue date and have an exercise term of three (3) years.
{b}	- On August 4, 2021, the Company extended the note to October 22, 2021 based on the same terms and conditions. In association with the extension the company issued 18,000 shares of common stock with a fair value on $2,880, which will be recorded as a debt discount and amortized over the new life of the loan. On October 14, 2021, the Company extended the note to April 22, 2022 based on the same terms and conditions. In association with the extension the company issued 18,000 shares of common stock with a fair value on $2,999, which will be recorded as a debt discount and amortized over the new life of the loan.
{c}	- On June 19, 2021, the Company converted the entire value of the note to 191,424 shares of common stock with a fair value of $31,260. In association with the conversion of the note to common stock, the company recognized a loss of $6,260.
{d}	- On August 6, 2021, the Company extended the note to January 31, 2022. The current interest rate will continue at 12% per annum, however the amount of interest above a rate of 6% per annum will be deemed paid by being added to capital due from the Company to the creditor. This additional capital amount will not bear interest in the period to January 31, 2022. In association with the extension the company granted warrants with the right to purchase 250,000 shares of common stock with a fair value on $37,125, which will be recorded as a debt discount and amortized over the new life of the loan. The warrants are valued based on the Black Scholes Model, are fully vested as of the issue date and have an exercise term of three (3) years.
{e}	- On October 28, 2021, the Company extended the note to April 2, 2022 based on the same terms and conditions. In association with the extension the company modified previously granted warrants by lowering the exercise price to $0.17 and extending the expiration date of the warrants by three (3) years. The value of the modification of the warrants is $12,936, which will be recorded a debt discount and amortized over the extension of the loan.
{f}	- On October 28, 2021, the Company extended the note to April 16, 2022 based on the same terms and conditions. In association with the extension the company modified previously granted warrants by lowering the exercise price to $0.17 and extending the expiration date of the warrants by three (3) years. The value of the modification of the warrants is $23,173, which will be recorded a debt discount and amortized over the extension of the loan.
{g}	- On October 28, 2021, the Company extended the note to April 31, 2022 based on the same terms and conditions. In association with the extension the company modified previously granted warrants by lowering the exercise price to $0.17 and extending the expiration date of the warrants by three (3) years. The value of the modification of the warrants is $11,780, which will be recorded a debt discount and amortized over the extension of the loan.
{h}	- On August 4, 2021, the Company extended the note to January 23, 2022 based on the same terms and conditions. In association with the extension the company issued 60,000 shares of common stock with a fair value on $9,600, which will be recorded as a debt discount and amortized over the new life of the loan.
{i}	- On October 28, 2021, the Company extended the note to July 29, 2022 based on the same terms and conditions. In association with the extension the company modified previously granted warrants by lowering the exercise price to $0.17 and extending the expiration date of the warrants by three (3) years. The value of the modification of the warrants is $3,878, which will be recorded a debt discount and amortized over the extension of the loan.
{j}	- On October 8, 2021, the Company converted the entire value of the note to 333,556 shares of common stock with a fair value of $55,570.
{k}	- On September 20, 2021, the Company issued a non-interest bearing note of $16,500. In connection with this note the company granted warrants for the right to purchase 16,500 shares of common stock at an exercise price of $0.18 a share. The warrants are valued at $2,802 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.
{l}	- On August 23, 2021, the Company issued a non-interest bearing promissory note of $30,000.

*	- unsecured note
**	- secured note and collateralized by all tangible and intangible personal property
***	- unsecured note and guaranteed by a Director of the Company

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During the three months ended September 30, 2021 and 2020, the Company recorded $94,641 and $97,181 of interest expense related to the amortization of debt discount and $39,852 and $41,037 of regular interest, respectively. During the nine months ended September 30, 2021 and 2020, the Company recorded $290,721 and $285,033 of interest expense related to the amortization of debt discount and $122,841 and $117,996 of regular interest, respectively. As of September 30, 2021 and December 31, 2020, accrued interest was $96,385 and $61,099, respectively.

As of September 30, 2021 and December 31, 2020, accrued interest associated with the economic injury disaster loan was $7,043 and $2,759, respectively.

NOTE 6 – STOCKHOLDERS’ DEFICIT

The following table shows the changes in shares of common stock for the nine months ending September 30, 2021 and 2020:

	Shares		Amount

Common stock outstanding, December 31, 2020		22,367,179

Common stock issued for cash to a related party		499,998	$	100,000
Common stock issued to consultants for services		218,847		9,432
Common stock issued for related party loan		190,000		39,160
Common stock issued with loans payable		96,000		17,160
Common stock issued for conversion of loans payable		191,424		31,259
Common stock issued for conversion of related party loans payable		2,000,000		460,000
Common stock outstanding, September 30, 2021		25,563,448	$	657,011

	Shares		Amount

Common stock outstanding, December 31, 2019		20,313,771

Common stock issued for cash to a related party		249,999	$	50,000
Common stock issued to consultants for services		550,000		121,350
Common stock issued with loans payable		374,000		99,632
Common stock issued for related party loans		505,000		108,544
Common stock outstanding, September 30, 2020		21,992,770	$	379,526

Warrant Activity

Common Stock Warrants

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

On July 7, 2020, our Board of Directors appointed Michael Kaplan to the Board of Directors. Mr. Kaplan’s compensation as a director for the initial twelve months will consist of one million (1,000,000) warrants which will vest at the rate of 83,333 warrants per month for the initial eleven months and the balance in the twelfth month, provided he is a director on each vesting date, with the initial tranche vesting on the day he takes office and then on each monthly anniversary of such date thereafter. Each Warrant will be exercisable for 36 months after it vests and will be exercisable at a price of $0.18 per share. The warrants are valued at $177,200 based on the Black Scholes Model. For the nine months ended September 30, 2021 and 2020, the Company recorded $91,270 and $0 as compensation expense related to the warrants, respectively. For the three months ended September 30, 2021 and 2020, the Company recorded $3,398 and $0 as compensation expense related to the warrants, respectively.

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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, 2021 and 2020, the Company recorded $125,909 and $0 as compensation expense related to the warrants, respectively. For the three months ended September 30, 2021 and 2020, the Company recorded $42,431 and $0 as compensation expense related to the warrants, respectively. 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 as of September 30, 2021.
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 issued a warrant to the employee to purchase 300,000 shares of the Company’s common stock with a term of three (3) years. The warrants are valued at $97,470 based on the Black Scholes Model. In addition, the employee will receive a warrant to purchase 300,000 of the Company’s common stock for each of the two remaining years under the Employment Agreement with an exercise price equal to the closing market price of the Company’s common stock on the first day of each of such two annual employment periods. The warrants will be subject to a 12-month period whereby the warrants will vest in equal monthly increments for each year of the employment period. Each of the warrants will be exercisable within a three-year period from the date of issue. Once per quarter, the employee may waive the right to receive 25,000 warrants and receive in exchange for $5,000 worth of shares of the Company’s common stock. In the event the employee’s employment is terminated by the Company without cause, the employee shall be entitled to receive severance in an amount equal to the lesser of three month’s salary or the amount of salary otherwise payable until the termination date. The employee additionally shall be entitled to retain all warrants scheduled to vest within the following six months. For the nine months ended September 30, 2021 and 2020, the Company recorded $57,681 and $0 as compensation expense related to the warrants, respectively. For the three months ended September 30, 2021 and 2020, the Company recorded $9,346 and $0 as compensation expense related to the warrants, respectively. On August 4, 2021, the Company granted the Employee warrants to purchase up to 300,000 shares of common stock. The warrants are valued at $46,050 based on the Black Scholes Model.

On November 9, 2020, the Company entered into a grant agreement with a sales consultant (see Note 8). On September 30, 2021 and June 29, 2021, the company granted the sales consultant warrants for the right to purchase 17,801 and 39,474 shares of common stock at an exercise price of $0.17 and $0.21 a share, respectively. The warrants are valued at a total of $10,814 based on the Black Scholes Model, are fully vested as of the issue date and have an exercise term of three (3) years. As a result of this issuance, the price protection clause on the director’s warrants issued on December 31, 2019 and on the consultant’s warrant issued on July 31, 2020 and August 4, 2020, were triggered resulting in the warrants being reset to an exercise price of $1.05 and $0.21, respectively. As a result of the modification of the exercise price of these warrants, the Company recognized an incremental value of $198,240 and $337,930, for the three and nine months ended September 30, 2021, respectively, which was recorded as a deemed dividend on the condensed consolidated statement of operations.

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On May 10, 2021, the Company converted a related party loan (see Note 2). In association with the conversion the company issued 2,000,000 shares of common stock and granted warrants for the right to purchase 375,000 shares of common stock at an exercise price of $0.23 a share. The warrants are valued at $83,513 based on the Black Scholes Model, are fully vested as of the issue date and have an exercise term of three (3) years.

On June 30, 2021, the Company extended the maturity date on one of its promissory notes (see Note 2). In association with this extension the company granted warrants for the right to purchase 100,000 shares of common stock at an exercise price of $0.21 a share. The warrants are valued at $20,200 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 4, 2021, the Company extended the maturity date on one of its promissory notes (see Note 2). In association with this extension the company granted warrants for the right to purchase 100,000 shares of common stock at an exercise price of $0.16 a share. The warrants are valued at $15,340 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 4, 2021, 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 50,000 shares of common stock at an exercise price of $0.16 a share. The warrants are valued at $7,675 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 6, 2021, 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 250,000 shares of common stock at an exercise price of $0.16 a share. The warrants are valued at $37,125 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 September 20, 2021, the Company issued a promissory note of $16,500 (see Note 5). In connection with this note the Company issued warrants to purchase 16,500 shares of the Company’s common stock with an exercise price of $0.18 per share. The warrants are valued at $2,802 based on the Black Scholes Model and included in the debt discount. The warrants are fully vested as of the issue dates with an exercise term of three (3) years.

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

	Number of Warrants (in common shares)		Weighted Average Exercise Price
Outstanding, December 31, 2019		1,403,750	$	0.26
Granted		3,496,000		0.20
Exercised		-		-
Forfeited or cancelled		-		-
Outstanding, December 31, 2020		4,899,750	$	0.21
Granted		948,775		0.19
Exercised		-		-
Forfeited or cancelled		-		-
Outstanding, September 30, 2021		5,848,525	$	0.21

As of September 30, 2021, 3,948,525 warrants for common stock were exercisable and the intrinsic value of these warrants was $34,346, the weighted average remaining contractual life for warrants outstanding was 2.17 years and the remaining expense is $129,138 over the remaining amortization period which is 1.89 years.

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As of September 30, 2020, 1,978,917 warrants for common stock were exercisable and the intrinsic value of these warrants was $93,198, the weighted average remaining contractual life for warrants outstanding was 3.12 years and the remaining expense is $515,660 over the remaining amortization period which is 1.75 years.

Preferred Stock Warrants

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

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, 2019		3,970,000	$	0.67
Granted		500,000		0.75
Outstanding, December 31, 2020		4,470,000	$	0.68
Granted		-		-
Exercised		-		-
Forfeited or cancelled		-		-
Outstanding, September 30, 2021		4,470,000	$	0.68

As of September 30, 2021, 4,470,000 warrants for Series B preferred stock were exercisable and the intrinsic value of these warrants was $918,810, the weighted average remaining contractual life for warrants outstanding was 6.62 years.

As of September 30, 2020, 4,350,000 warrants for Series B preferred stock were exercisable and the intrinsic value of these warrants was $2,658,600, the weighted average remaining contractual life for warrants outstanding was 7.63 years and the remaining expense is $364,124 over the remaining amortization period which is 1.25 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 the nine months ended September 30, 2021 and 2020, the Company incurred lease expense for its operating leases of $65,732 and $21,910, respectively, which was included in general and administrative expenses on the accompanying unaudited condensed consolidated statements of operations.

For the three months ended September 30, 2021 and 2020, the Company incurred lease expense for its operating leases of $21,910 and $21,910, respectively, which was included in general and administrative expenses on the accompanying unaudited condensed consolidated statements of operations.

The Company’s weighted-average remaining lease term relating to its operating leases is 2.58 years, with a weighted-average discount rate of 12.00%.

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The Company had cash payments for operating leases of $64,566 and $21,806 for the nine months ended September 30, 2021 and 2020, respectively and $21,294 and $21,806 for the three months ended September 30, 2021 and 2020, respectively.

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, 2021.

Maturity of Lease Liability
2021- remainder of the year		21,294
2022		86,881
2023		89,487
2024		30,121
Total undiscounted operating lease payments	$	227,784
Less: Imputed interest		33,121
Present value of operating lease liabilities	$	194,662

NOTE 8 – COMMITMENTS

On July 16, 2018, the Company entered into a consulting agreement with a service provider that contains the following terms:

	·	A $6,000 per month advance of Holy Cacao equity distribution will be awarded every month Holy Cacao earns a net profit over a period of twenty-four (24) consecutive months following the initial product launch and production sale.

	·	300,000 warrants for shares of the Company’s common stock will be awarded after each of two consecutive twelve (12) month periods in which Holy Cacao earns a net profit from gross annual product sales of at least $1M. Each of the two 300,000 warrant awards will vest equally over a twelve (12) month period.

On August 14, 2019, the Company entered into an agreement with a CFN Media. In consideration for the services and deliverables provided by CFN Media, the Company will make three (3) cash payments to CFN Media totaling $30,000. Payments will be made in accordance with the following staged schedule:

“Stage 1” - $10,000 due upon the signing of the agreement for the Stage 1 services and deliverables: the interview, lead generation system and two (2) articles, including syndication, distribution and placement. This payment has been made.

“Stage 2” - $10,000 due upon the Company’s receipt of CFN Media’s invoice issued after CFN Media’s completion of Stage 1 and the Company’s confirmation they are ready to continue with Stage 2, which will include CFN Media’s delivery of two (2) Articles with the embedded interview and lead generation, as well as syndication, distribution and placement of services and deliverables.

“Stage 3” - $10,000 due upon the Company’s receipt of CFN Media’s invoice issued after CFN Media’s completion of Stage 2 and the Company’s confirmation they are ready to continue with Stage 3, which will include CFN Media’s delivery of two (2) Articles with the embedded interview and lead generation, as well as syndication, distribution and placement of services and deliverables.

On October 10, 2019, the Company signed a master distribution agreement with CBD Unlimited, Inc., which is a public company and a master distributor, to distribute the Company’s hemp-based chocolate products. The term of this agreement is four years. The agreement includes the issuance of 250,000 shares of the Company’s common stock at the closing market price of $0.26 per share as of the date of the agreement. Additionally, the Company shall pay the distributor a commission for its services hereunder amounting to applicable percentage of the sales price of any sales or sales contract with a customer.

On January 14, 2020, the Company entered into an agreement with a sales consultant to further the business purpose of the Company. In consideration for the services provided by the consultant, the Consultant shall be paid a fee of ten percent (10%) of each of the consultant’s sales of the Company’s product.

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On October 15, 2020, the Company entered into a chocolate sales agreement with a sales consultant. The consultant will receive a commission of the gross sales (net of returns) that were directly generated by the consultant to new customers. The consultant shall receive a sales commission of the gross sales (net of returns) directly generated by the consultant to such distributor and such distributor shall receive a commission of such gross sales (net of returns). Commissions shall be paid within 30 days of the end of the quarter in which they are deemed earned. No commissions are due as of September 30, 2021. In addition, once the consultant has made $75,000 of gross sales (net of returns) he shall receive 75,000 shares of the Company’s common stock. This agreement shall continue for sixty months from the date of the agreement and will automatically extend for additional successive sixty-month terms unless written notice is delivered at least thirty days prior to the end of the current term.

On November 9, 2020, the Company entered into an agreement with a consultant. The consultant shall provide the following services: develop a marketing plan and act as a sales agent with respect to the wholesale of various products by the Company. As compensation for the services, the consultant shall receive a cash payment in an amount in excess of 9% of the profit margin. However, in the event the average closing price of the Company’s common stock on the common stock’s primary market over the final ten (10) trading days of any month is greater than or equal to $0.50, then the cash compensation for such month shall only be the amount of profit margin generated by the sales of the products in excess of 14% of gross sales and the amount of profit margin between 9% and 14% of gross sales shall completely belong to the Company. Prior to the payment date of each month, the consultant can elect to receive all or part of the cash compensation due for such month in the form of common stock by providing written notice of such election to the Company. The number of shares to be issued shall be calculated based upon a per share value equal to 80% of the valuation price. This agreement shall commence on the effective date and shall continue for a term of two (2) years. Prior to six months after the effective date this agreement may not be cancelled without cause. After six months this agreement may be sooner terminated by either party upon sixty days written notice. Commencing 120 days after the effective date, absent an effective registration statement by the Company covering the shares, the sales consultant may “Put” to the Company any vested shares at a price per share equal to the grant price at any time during the term. The Company shall maintain a separate account with funds to pay for the Put for as long as the Put is exercisable and the Put right shall be subject to the terms governing such account. As of September 30, 2021, the Company has recorded a Put liability of $29,421.

On November 9, 2020, the Company entered into a grant agreement with a sales consultant. As compensation for the services, the Company will issue up to three million (3,000,000) shares to the sales consultant in monthly installments over the twenty (24) month term of the agreement. The number of shares to be issued by the Company to the sales consultant on a monthly basis will be determined by the amount of net sales of various wholesale products generated by the sales consultant at the end of each month multiplied by a fixed percentage of nine percent (9%) divided by the last closing market price of the shares as of the effective date. In addition to the shares to be issued, the sales consultant shall be issued three million (3,000,000) warrants to purchase shares. One warrant shall be fully vested for every share issued. The exercise price of each warrant shall be equal to the grant price and each warrant shall be exercisable for thirty-six (36) months following the date of vesting. Until such time as the shares underlying the warrants are registered, the warrants may be exercised via a cashless exercise. During the nine months ended September 30, 2021 the company issued 147,991 shares of common stock and warrants with the right to purchase up to 57,275 shares of common stock as compensation for services. As of September 30, 2021, there were 2,852,009 shares of common stock and 2,942,743 warrants remaining.

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 July 13, 2021, the Company entered into an agreement with a marketing consultant to further the business purpose of the Company. In consideration for the services provided by the consultant, the Consultant shall be paid a fee of $9,000, half of which is to be paid in cash and half to be paid in common shares at a 20% discount. The company issued the consultant 34,091 shares of common stock at a fair market value of $4,500, using the stock price of $0.13 per share, which represents a 20% discount to the closing price on the day of issuance.

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On July 13, 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 Company will desire to compensate the consultant with up to 240,000 shares of restricted common stock of the Company based upon the consultant’s performance over a six-month term. The shares will be issued each month if certain milestones are met.

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, 2021, the Company’s receivables from merchant cash advances included $29,971 from one merchant, representing 70% of the Company’s merchant cash advances. The Company earned $2,493 of MCA income from the same merchant, representing 57% of the Company’s MCA income for the three months ended September 30, 2021. The Company earned $14,949 and $6,463 of MCA income from two merchants, representing 41% and 18%, respectively, of the Company’s MCA income for the nine months ended September 30, 2021.

As of December 31, 2020, the Company’s receivables from merchant cash advances included $59,719 from two merchants ($25,929 and $33,790), representing 49% of the Company’s merchant cash advances. The Company earned $9,919 of MCA income from one merchant, representing 51% of the Company’s MCA income for the three months ended September 30, 2020. The Company earned $92,723 of MCA income from two merchants ($67,100 and $25,623), representing 72% of the Company’s MCA income for the nine months ended September 30, 2020.

As of September 30, 2021, there was no accounts payable concentration other than amounts owed to related parties. As of December 31, 2020, there was no accounts payable concentration other than amounts owed to related parties.

For the three months ended September 30, 2021, the Company had purchase concentrations of 81% and 12% from two vendors. For the nine months ended September 30, 2021, the Company had purchase concentrations of 60% and 21% from two vendors. For the three months ended September 30, 2020, the Company had purchase concentrations of 36%, 27%, and 25% from three vendors. For the nine months ended September 30, 2020, the Company had purchase concentrations of 64% and 12% from two vendors.

NOTE 10 – SUBSEQUENT EVENTS

On November 1, 2021, the Company issued a non-interest bearing note of $13,000, which matures on December 30, 2021.

On November 9, 2021, the Company issued a non-interest bearing note of $86,127 to a Director of the Company, which matures on November 8, 2022.

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

Cautionary Statements

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

These statements include, among others:

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

statements of First Foods’ expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts. These statements may be made expressly in this Form 10-Q. You can find many of these statements by looking for words such as “believes,” “expects,” “anticipates,” “estimates,” “opines,” 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, war, terrorism, weather conditions, environmental factors, pandemic, economic crisis, legislation, etc.;
	(g)	litigation with or legal claims and allegations by outside parties against First Foods, including but not limited to challenges to First Foods’ intellectual property rights;
	(h)	reliance on proprietary merchant advance credit models, which involve the use of qualitative factors that are inherently judgmental and which could result in merchant defaults; and
	(i)	new regulations impacting the business.

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

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

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General

First Foods is currently a “smaller reporting company” under the JOBS Act. A company loses its “smaller reporting company” status on (i) the day its public float becomes greater than or equal to $250,000,000 or (ii) had annual revenues of less than $100,000,000 and either: (A) had no public float or (B) had a public float of less than $700,000,000. As a “smaller reporting company,” First Foods is exempt from certain obligations of the Exchange Act, including those found in Section 14A(a) and (b) related to shareholder approval of executive compensation and golden parachute compensation and Section 404(b) of the Sarbanes-Oxley Act of 2002 related to the requirement that management assess the effectiveness of the Company’s internal control for financial reporting. Furthermore, Section 103 of the JOBS Act provides that as a “smaller reporting company”, First Foods is not required to comply with the requirement to provide an auditor’s attestation of ICFR under Section 404(b) of the Sarbanes-Oxley Act for as long as First Foods qualifies as a “smaller reporting company.” 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 1^st Foods Funding Division, and introducing new health-related brands, concepts and products through its FFGI Wholesaling Division.

The Company is quoted on the OTCQB under “FIFG.”

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

Critical Accounting Policies

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

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

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Results of Operations for the Three Months Ended September 30, 2021 compared to the Three Months Ended September 30, 2020

We had $60,049 of revenue for the three months ended September 30, 2021 compared to $31,536 in revenue for the three months ended September 30, 2020. The increase in revenue was driven by an increase in our product sales, primarily from sales in our newly formed wholesale division, partially offset by a decrease of participation in merchant cash advances due to COVID-19.

Cost of product sales for the three months ended September 30, 2021 was $35,446 compared to $7,838 for the three months ended September 30, 2020. The increase in cost of product sales was due to an increase in product sales, primarily from the newly formed wholesale division. Gross margin is lower this period compared to last year due to the type of products being sold.

Professional fees for the three months ended September 30, 2021 was $2,703 compared to $28,827 for the three months ended September 30, 2020. The decrease in professional fees was due to lower legal fees incurred because of fewer contractual arrangements.

General and administrative expenses for the three months ended September 30, 2021 was $466,717 compared to $522,033 for the three months ended September 30, 2020. The decrease in general and administrative expenses was primarily due to decreased costs associated with compensation, commissions, advertising and promotion, depreciation, travel, lower fees and commissions for our cash advances and reduced cost for research and development.

Provision for merchant cash advances for the three months ended September 30, 2021 was $(7,916) compared to $(105,798) for the three months ended September 30, 2020. The decrease in provision for merchant cash advances was due to lowering the reserve allowance for our merchant cash advances.

Results of Operations for the Nine Months Ended September 30, 2021 compared to the Nine Months Ended September 30, 2020

We had $349,928 of revenue for the nine months ended September 30, 2021 compared to $153,221 in revenue for the nine months ended September 30, 2020. The increase in revenue was driven by an increase in our product sales, primarily from sales in our newly formed wholesale division, partially offset by a decrease of participation in merchant cash advances due to COVID-19.

Cost of product sales for the nine months ended September 30, 2021 was $201,530 compared to $13,289 for the nine months ended September 30, 2020. The increase in cost of product sales was due to an increase in product sales. Gross margin is lower this period compared to last year due to the type of products being sold.

Professional fees for the nine months ended September 30, 2021 was $5,799 compared to $59,154 for the nine months ended September 30, 2020. The decrease in professional fees was due to lower legal fees incurred because of fewer contractual arrangements.

General and administrative expenses for the nine months ended September 30, 2021 was $1,400,527 compared to $1,490,095 for the nine months ended September 30, 2020. The decrease in general and administrative expenses was primarily due to decreased costs associated with stock-based compensation, consulting and accounting fees, lower fees and commissions for our cash advances and travel.

Provision for merchant cash advances for the nine months ended September 30, 2021 was $(152,254) compared to $374,087 for the nine months ended September 30, 2020. The decrease in provision for merchant cash advances was due to lowering the reserve allowance for our merchant cash advances.

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Cash Flows

Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2021 amounted to $209,006 and net cash used in operating activities for the nine months ended September 30, 2020 amounted to $54,399. This includes a net loss from operations of approximately $(1,831,394), offset by non-cash expenses of approximately $911,000 related to stock-based compensation, loss on conversion of loan payable, depreciation and amortization expense, non-cash lease expense and reserves for merchant cash advances, and cash provided by the change in net working capital items of approximately $712,000 principally related to the increase in prepaid expenses and other assets, operating lease liabilities, accounts payable and accrued liabilities, and merchant cash advances. This resulted in a working capital deficiency of $(3,392,105) at September 30, 2021 and $(2,560,983) at December 31, 2020.

Investing Activities

Net cash used in investing activities amounted to $877 for the nine months ended September 30, 2021 and $197,924 for the nine months ended September 30, 2020. This was due to more equipment purchased during the nine months ended 2020 vs. the nine months ended 2021.

Financing Activities

Net cash provided by financing activities amounted to $222,842 for the nine months ended September 30, 2021 and $304,545 for the nine months ended September 30, 2020. This was primarily due to a decrease in proceeds from loans and an increase in repayment of loans 2021 vs 2020, partially offset by the sale of shares of common stock.

Liquidity and Capital Resources

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

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

In order to continue as a going concern, the Company will need, among other things, additional capital resources. As of September 30, 2021, the Company had approximately $1,520,000 in third-party short-term debt and approximately $60,000 in associated debt discount and approximately $430,000 in related-party short-term debt and approximately $1,000 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, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

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

In December 2019, a novel strain of coronavirus surfaced (COVID-19). The spread of COVID-19 around the world in 2020 caused significant volatility in U.S. and international markets. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. and international economies. The Company’s financial position, operations and cash flows as of September 30, 2021 have been adversely affected, and may be further affected in the future, by the ongoing outbreak of COVID-19 which in 2020 was declared a pandemic by the World Health Organization. The ultimate disruption which may be caused by the outbreak is uncertain; however, it may result in a material adverse impact on the Company’s financial position, operations and cash flows. Possible areas that may be materially affected include, but are not limited to, disruption to the Company’s labor workforce, unavailability of products and supplies used in operations, and the decline in value of assets held by the Company. As of September 30, 2021 and through the filing date of the financial statements, the Company has continued to collect receivables from its cash advances but has experienced payment delinquencies. The Company has taken a reserve allowance on its MCA’s. As of September 30, 2021, the Company’s Holy Cacao operations have experienced no disruption in customers and revenue, labor workforce, availability of products and supplies used in operations, and the value of assets held by the Company, including inventories.

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Concentration Risks

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, 2021, 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.

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

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, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II OTHER INFORMATION

Item 1. Legal Proceedings

As of September 30, 2021, we were not a party to any legal proceedings that could have a material adverse effect on the Company’s business, financial condition or operating results. Further, to the Company’s knowledge, no such proceedings have been threatened against the Company.

Item 1A. Risk Factors

We are not obligated to disclose our risk factors in this report; however, information regarding our risk factors appears in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020. Except as described below, there have been no material changes from the risk factors previously disclosed in such Annual Report on Form 10-K.

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

The Company issued 147,692 and 3,196,269 shares of the Company’s common stock during the three and nine months ended September 30, 2021, respectively. All of these shares were exempt pursuant to Section 4(1) as they were issued privately without any advertising or finders/brokers fees paid to third parties.

Item 3. Defaults Upon Senior Securities

There have been no defaults upon senior securities.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not Applicable

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Item 6. Exhibits

(a) Exhibits

Item 6. Exhibits, Financial Statement Schedules

3.1		Articles of Incorporation of the Registrant (1)
3.2		By-laws of the Registrant (1)
31.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certifications of Chief Executive Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		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 Labels 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 November 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 12, 2021
	Harold Kestenbaum,
	Chairman of the Board and
	Interim Chief Executive Officer

By:	/s/ Mark J. Keeley	Dated: November 12, 2021
	Mark J. Keeley,
	Chief Financial Officer