Cautionary Statements.

This annual report 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-K.
    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-K. 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.

In addition, there is no assurance that (i) First Foods will be profitable, (ii) First Foods will be able to successfully develop, manage or market its products and services, (iii) First Foods will be able to attract or retain qualified executives and personnel, (iv) First Foods will be able to obtain customers for its products or services, (v) additional dilution in outstanding stock ownership will not be incurred due to the issuance of more shares, warrants and stock options, or the exercise of outstanding warrants and stock options, and (vi) there are no 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-K. 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-K, or to reflect the occurrence of unanticipated events.





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General

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

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

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

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.

As of December 31, 2021, our cash balance was $11,527, which includes restricted cash of $5,900, and our current liabilities were $3,732,377.





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Results of Operations

Results of Operations for the Year Ended December 31, 2021 compared to the Year Ended December 31, 2020





Fiscal 2021 Highlights

Total net sales increased 74% or $154,590 during 2021 compared to 2020, driven by growth in our wholesale and Chocolate Products.





Products Performance
The following table shows net sales by category
for 2021 and 2020:

                                                      2021          Change         2020
Net sales by category:
Chocolate products                                  $  94,387             93 %   $  48,983
Wholesale products                                    228,697            100 %           -
Merchant cash advances                                 39,673            -75 %     159,184
Total net sales                                     $ 362,757             74 %   $ 208,167




Chocolate products

Chocolate products net sales increased during 2021 compared to 2020 due primarily to the product being in the market for the full year in 2021 as compared to only a few months in 2020.





Wholesale products

Wholesale products net sales increased during 2021 compared to 2020 due to the wholesale division starting in 2021. The Company does not plan on continuing the Wholesale division and will be focusing its resources on the Chocolate division.





Merchant cash advances

Merchant cash advances net sales decreased during 2021 compared to 2020 due to the Company winding down that division to focus and put resources to the Chocolate producing division of the Company.





Cost of Product Sales

Products cost of sales for 2021 and 2020 were as follows:





                                 2021          2020
Cost of Product Sales:
Chocolate products             $  32,564     $ 35,077
Wholesale products               200,683            -
Total Cost of Product Sales:   $ 233,247     $ 35,077




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Cost of product sales

The increase in cost of product sales in 2021 as compared to 2020 was due to an increase in FFGI wholesale product sales which has a narrow gross margin when compared to the Holy Cacao sales. Cost of Chocolate sales decreased due to scale and better efficiencies.

Legal fees for the year ended December 31, 2021 was $35,019 compared to $61,641 for the year ended December 31, 2020. This decrease in legal fees was due to fewer contractual obligations being signed which led to lower legal expenses.

General and administrative expenses for the year ended December 31, 2021 was $1,702,035 compared to $1,993,427 for the year ended December 31, 2020. The decrease in general and administrative expenses was primarily due to decreased costs associated with stock-based compensation, and consulting and accounting fees.

Provision for merchant cash advances for the year ended December 31, 2021 was $(154,303) compared to $141,790 for the year ended December 31, 2020. The decrease in provision for merchant cash advances was due to a decrease in our reserve allowance for our merchant cash advances related to COVID-19 as the Company had a much higher collection rate than expected following the Discuss impairment.

Impairment of assets expense for the year ended December 31, 2021 was $46,368. The company has not realized cash flows sufficient to overcome an asset impairment and is, therefore, estimating an impairment of 25% of its asset carrying value. There was no impairment expense in the year ended December 31, 2020.

Liquidity and Capital Resources

Net cash used in operating activities amounted to $333,692 for the year ended December 31, 2021 and $163,541 for the year ended December 31, 2020. This resulted in a working capital deficit of $3,536,485 at December 31, 2021 and $2,560,983 at December 31, 2020. This decrease in working capital was due primarily to an increase in accounts payable and accrued expenses and an increase in loans.

Net cash used in investing activities amounted to $877 for the year ended December 31, 2021 and $199,328 for the year ended December 31, 2020. This was due to more purchases of equipment in 2020 as the company was making additions to equip the factory as compared to 2021.

Net cash provided by financing activities amounted to $295,710 for the year ended December 31, 2021 and $388,902 for the year ended December 31, 2020. This was due to a decrease of proceeds from the issuance of loans in 2021 as compared to 2020.





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 December 31, 2021, the Company's receivables from merchant cash advances included $29,290 from one merchant, representing 78% of the Company's merchant cash advances. The Company earned $22,368 of MCA income from one merchant, representing 56% of the Company's MCA income for the twelve months ended December 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 $84,525 and $27,175 of MCA income from two merchants, representing 53.5% and 17.2%, respectively of the Company's MCA income for the twelve months ended December 31, 2020.





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

For the year ended December 31, 2021, the Company had sales concentrations of 17%, 15% and 15% from three customers. There was no sales concentration for the year ended December 31, 2020.

For the year ended December 31, 2021, the Company had purchase concentrations of 79% from one vendor.

For the year ended December 31, 2020, the Company had purchase concentrations of 49% and 14% from two vendors.





Going Concern

The Company's 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. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its operating expenses and seeking equity and/or debt financing. However, neither any members of management nor any significant shareholders are currently committed to invest funds with us and; therefore, we cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

The Company does not have sufficient cash flow for the next twelve months from the issuance of these audited 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 audited consolidated financial statements do not include any adjustments that might be necessary, if the Company is unable to continue as a going concern.





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Contractual Obligations



Not applicable.



Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these 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 Consolidated Financial Statements.

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