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;
        litigation with or legal claims and allegations by outside parties against
    (g) First Foods, including but not limited to challenges to First Foods'
        intellectual property rights;
        reliance on proprietary merchant advance credit models, which involve the
    (h) use of qualitative factors that are inherently judgmental and which could
        result in merchant defaults; and
    (i) new regulations impacting the business.



There is no assurance that First Foods will be profitable, due to, among other potential reasons, that 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 primarily focused on developing its specialty chocolate product line through its core business subsidiary, Holy Cacao, and secondarily participating in MCAs through its 1st Foods Funding Division. First Foods continues to pursue new brands and concepts, including the wholesaling of various health-related products.

Holy Cacao is a majority owned subsidiary that is dedicated to producing, packaging, distributing and selling specialty chocolate products, including specialty chocolate products infused with a hemp-based ingredient in accordance with the Company's understanding of the Agricultural Act of 2014 (the "2014 Farm Bill") and/or the Agriculture Improvement Act of 2018 (the "2018 Farm Bill," and together with the 2014 Farm Bill, collectively, the "Farm Bill"), which renders the production of hemp in compliance with the provisions of the Farm Bill federally lawful. The Company has not been, is not, and has no current plans to be involved in producing, packaging, distributing or selling any product that is infused with a 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 two trademarks for the brands, "The Edibles' Cult" and "Purely Irresistible" and the Company has submitted multiple trademark applications to the United States Patent and Trademark Office (the "USPTO") for additional brand names, including "Mystere" and "Southeast Edibles" among others.

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

The Company 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 March 31, 2021 compared to the Three Months Ended March 31, 2020

We had $42,338 of revenue for the three months ended March 31, 2021 compared to $96,974 in revenue for the three months ended March 31, 2020. The decrease in revenue was driven by a decrease of participation in merchant cash advances due to COVID-19, partially offset by an increase in our product sales.

Cost of product sales for the three months ended March 31, 2021 was $3,741 compared to $748 for the three months ended March 31, 2020. The increase in cost of product sales was due to an increase in product sales.

Professional fees for the three months ended March 31, 2021 was $999 compared to $12,431 for the three months ended March 31, 2020. The decrease in professional fees was due to lower legal expenses.

General and administrative expenses for the three months ended March 31, 2021 was $487,387 compared to $609,886 for the three months ended March 31, 2020. The decrease in general and administrative expenses was primarily due to decreased costs associated with stock-based compensation, consulting and accounting fees, advertising and promotion, lower fees and commissions for our cash advances and travel.

Provision for merchant cash advances for the three months ended March 31, 2021 was ($137,498) compared to $403,032 for the three months ended March 31, 2020. The decrease in provision for merchant cash advances was due to lowering the reserve allowance for our merchant cash advances.





Cash Flows



Operating Activities


Net cash used in operating activities for the three months ended March 31, 2021 amounted to $(33,127) and net cash provided by operating activities for the three months ended March 31, 2020 amounted to $51,697. This includes a net loss from continuing operations of approximately $(498,000), offset by non-cash expenses of approximately $134,500 related to stock-based compensation, 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 $330,200 principally related to the increase in prepaid expenses and other assets, accounts payable and accrued liabilities, vendor deposits and merchant cash advances. This resulted in a working capital deficiency of $(2,999,623) at March 31, 2021 and $(2,560,983) at December 31, 2020.





Investing Activities



Net cash used in investing activities amounted to $0 for the three months ended March 31, 2021 and $156,605 for the three months ended March 31, 2020. This was due to the purchase of equipment in 2020.





Financing Activities


Net cash provided by financing activities amounted to $24,464 for the three months ended March 31, 2021 and $101,200 for the three months ended March 31, 2020. This was due to a decrease in proceeds from loans and an increase in repayment of loans in 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.






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In order to continue as a going concern, the Company will need, among other things, additional capital resources. As of March 31, 2021, the Company had approximately $1,195,000 of third party short term debt that is due within the next twelve months. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its operating expenses and seeking equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

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

In December 2019, a novel strain of coronavirus 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 March 31, 2021 have been adversely affected, and may be further affected in the future, by the recent and 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 March 31, 2021 and through the filing date of the financial statements, the Company has continued to collect receivables from its cash advances but has experienced an increase in payment delinquencies. The Company has taken a reserve allowance on its MCA's. As of March 31, 2020, 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.





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 March 31, 2021, the Company's receivables from merchant cash advances included $32,401 from one merchant, representing 47% of the Company's merchant cash advances. The Company earned $14,949 of MCA income from one merchant, representing 57% of the Company's MCA income for the three months ended March 31, 2021.

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 49.3% of the Company's merchant cash advances. The Company earned $75,219 of MCA income from the same two merchants ($52,065 and $23,154), representing 81% of the Company's MCA income for the three months ended March 31, 2020.

As of March 31, 2021, there was no accounts payable concentration other than amounts owed to related parties which makes up 70% of the balance. As of December 31, 2020, there was no accounts payable concentration other than amounts owed to related parties which makes up 74% of the balance.

For the three months ended March 31, 2021, the Company had purchase concentrations of 85%, from one vendor. For the three months ended March 31, 2020, the Company had purchase concentrations of 71% and 28% from two vendors.

Off-Balance Sheet Arrangements

No off-balance sheet arrangements exist.





Contractual Obligations



None.

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