Cautionary Statements

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

These statements include, among others:





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

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




    (a) volatility or decline of First Foods' stock price;
    (b) potential fluctuation of quarterly results;
    (c) failure of First Foods to earn significant revenues or profits;
    (d) inadequate capital to continue or expand its business, and inability to
        raise additional capital or financing to implement its business plans;
    (e) decline in demand for First Foods' products and services;
        rapid adverse changes in markets; due to, among other things,
    (f) international conflicts, terrorism, environmental issues, world and
        national health issues, and inflation;
        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 it may (i) not be able to successfully develop, manage or market its products and services; attract or retain qualified executives and personnel; or obtain customers for its products or services, (ii) incur additional dilution in outstanding stock ownership due to the issuance of more shares, warrants, stock options or other convertible securities, or the exercise of outstanding warrants and stock options, and (iii) suffer other risks inherent in its business.

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





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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." In addition, a "smaller reporting company" may include less extensive narrative disclosure than required of other reporting companies, particularly in the description of executive compensation and provide audited financial statements for two fiscal years, in contrast to other reporting companies, which must provide audited financial statements for three fiscal years. However, a "smaller reporting company" is not exempt from the requirement to perform management's assessment of internal control over financial reporting.

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

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

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

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

The Company's common stock is quoted on the OTCQB under "FIFG."

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

As of March 31, 2022, our cash balance was $11,888, which includes restricted cash of $5,900, and our current liabilities were $4,115,270.





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, 2022 compared to the Three Months Ended March 31, 2021





Fiscal Q1 2022 Highlights

Total net sales decreased 65% or $27,533 during the three months ended March 31, 2022 compared to 2021, primarily due to the Company phasing out the merchant cash advance division to focus and put resources to the chocolate producing division of the Company.





Products Performance



The following table shows net sales by category for the three months ended March
31, 2022 and 2021:



                           2022        Change        2021
Net sales by category:
Chocolate products       $ 14,457          -10 %   $ 16,025
Merchant cash advances        348          -99 %     26,313
Total net sales          $ 14,805          -65 %   $ 42,338




Chocolate products

Chocolate products sales decreased slightly during 2022 compared to 2021 due primarily to increased supply chain costs.





Merchant cash advances

Merchant cash advances sales decreased during 2022 compared to 2021 due to the Company focusing upon and placing resources to the chocolate producing division of the Company.





Cost of Product Sales

Products cost of sales for March 31, 2022 and 2021 were as follows:





                          March 31,       March 31,
                            2022            2021
Cost of Product Sales:
Chocolate products       $     2,481     $     3,741




Cost of product sales

The decrease in cost of product sales in March 31, 2022 as compared to March 31, 2021 was due to a decrease in product sales. Gross profit margins increased due to better efficiencies.

Legal fees for the three months ended March 31, 2022 was $1,149 compared to $999 for the three months ended March 31, 2021. This slight increase in legal fees was due to slightly increased legal rates.

General and administrative expenses for the three months ended March 31, 2022 was $404,485 compared to $487,387 for the three months ended March 31, 2021. The decrease in general and administrative expenses was primarily due to decreased costs associated with compensation expenses, and consulting and accounting fees.

Provision for merchant cash advances for the three months ended March 31, 2022 was $(346) compared to $(137,498) for the three months ended March 31, 2021. The decrease in provision for merchant cash advances was due to the collection of a large balance in prior period from one MCA that was previously fully reserved for due to COVID-19.

Liquidity and Capital Resources

The following table presents our cash flows:





                                               Three Months Ended
                                                   March 31,
                                               2022          2021

Net cash used in operating activities $ (117,139 ) $ (33,127 ) Net cash used in investing activities $ - $ - Net cash provided by financing activities $ 117,500 $ 24,464






Operating Activities

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

Net cash used in operating activities increased from the three months ended March 31, 2021 to the three months ended March 31, 2022 primarily due to the net effect of a decrease in cash received from revenues and cash paid for cost of revenues and operating expenses, changes in operating assets and liabilities, decrease in stock compensation and change in merchant allowance.





Investing Activities

There was no investing activities for the three months ended March 31, 2022 and 2021.





Financing Activities

Cash provided by financing activities consists of proceeds from issuance of debt.

Net cash provided by financing activities increased from the three months ended March 31, 2021 to the three months ended March 31, 2022 primarily due to an increase of proceeds from issuance of loans and a decrease of repayment of loans..





Going Concern

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

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





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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, 2022, the Company had approximately $1,367,000 in third-party short-term debt and approximately $42,000 in associated debt discount and approximately $578,000 in related-party short-term debt and approximately $3,800 in associated debt discount that is due within the next twelve months. Management's plan is to increase revenue, obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its operating expenses and seeking equity and/or debt financing. However, neither any members of management nor any significant shareholders are currently committed to invest funds with us and; therefore, we cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

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





Concentration Risks

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

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 $14,949 of MCA income from one merchant, representing 57% of the Company's MCA income for the three months ended March 31, 2021.

For the three months ended March 31, 2022, the Company had purchase concentrations of 54% and 27% from two vendors.

For the three months ended March 31, 2021, the Company had purchase concentrations of 85% from one vendor.

Off-Balance Sheet Arrangements

No off-balance sheet arrangements exist.





Contractual Obligations



None.

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