Statements in this Quarterly Report on Form 10-Q (this "Quarterly Report") which are not historical in nature are "forward-looking statements" within the meaning of the federal securities laws. These statements often include words such as "believe," "expect," "project," "anticipate," "intend," "plan," "outlook," "estimate," "target," "seek," "will," "may," "would," "should," "could," "forecast," "mission," "strive," "more," "goal," or similar expressions and are based upon various assumptions and our experience in the industry, as well as historical trends, current conditions, and expected future developments. However, you should understand that these statements are not guarantees of performance or results, and there are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from those expressed in the forward-looking statements, including, among others:





  ? any declines in the consumption of food prepared away from home;
  ? the extent and duration of the negative impact of the COVID-19 pandemic on us;
  ? cost inflation/deflation and commodity volatility;
  ? competition;
  ? reliance on third-party suppliers and interruption of product supply or
    increases in product costs;
  ? changes in our relationships with customers and group purchasing
    organizations;
  ? our ability to increase or maintain the highest margin portions of our
    business;
  ? effective integration of acquired businesses;
  ? achievement of expected benefits from cost savings initiatives;
  ? increases in fuel costs;
  ? economic factors affecting consumer confidence and discretionary spending;
  ? changes in consumer eating habits;
  ? reputation in the industry;
  ? labor relations and costs and continued access to qualified and diverse labor;
  ? cost and pricing structures;
  ? changes in tax laws and regulations and resolution of tax disputes;
  ? environmental, health and safety and other government regulation, including
    actions taken by national, state and local governments to contain the COVID-19
    pandemic, such as travel restrictions or bans, social distancing requirements,
    and required closures of non-essential businesses;
  ? product recalls and product liability claims;
  ? adverse judgments or settlements resulting from litigation;
  ? disruption of existing technologies and implementation of new technologies;
  ? cybersecurity incidents and other technology disruptions;
  ? management of retirement benefits and pension obligations;
  ? extreme weather conditions, natural disasters and other catastrophic events,
    including pandemics and the rapid spread of contagious illnesses;
  ? risks associated with intellectual property, including potential infringement;
    indebtedness and restrictions under agreements governing indebtedness; and
  ? interest rate increases.

You should read the following discussion of our financial condition and results of operations together with the audited consolidated financial statements and notes to the financial statements included elsewhere in this Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry, business and future financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed under "Item 1A. Risk Factors" and other sections in this Annual Report.

The following discussion highlights Pacific Ventures' results of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described and provides information that management believes is relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein. The following discussion and analysis are based on Pacific Ventures' audited Financial Report, which we have prepared in accordance with United States generally accepted accounting principles. You should read this discussion and analysis together with such financial statements and the related notes thereto.





Basis of Presentation

The audited financial statements for our fiscal years ended December 31, 2020 and 2019 include a summary of our significant accounting policies and should be read in conjunction with the discussion below. In the opinion of management, all material adjustments necessary to present fairly the results of operations for such periods have been included in these audited financial statements. All such adjustments are of a normal recurring nature.





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Overview

Overview 2017 ― During 2017, the South Carolina distributor expanded the account base for SnöBar and has many successful placements for the brand. Furthermore, additional funding has also been unavailable to pursue additional geographic markets, both domestic and international. Despite such challenges, during 2017, the Company continued development of the Snobar Product Line with the goal to fulfill the current orders that the brand has in hand from the Company's distributor in South Carolina as well as from other accounts. In addition, the Company further continued with its strategy of selectively pursue strategic acquisitions in its industry and related industries, culminating in the execution of the Asset Purchase Agreement with San Diego Farmers Outlet, Inc. The Company is currently working on satisfying the closing conditions under the Asset Purchase Agreement, including obtaining the necessary Financing, and hope to close the transaction during the second quarter of 2018. There can be no assurance, however, that the Financing and the asset acquisition will be consummated or as to the date by which the asset acquisition may be consummated, if at all.

Overview 2018 ― During the 2018 fiscal year, the Company completed an asset acquisition of San Diego Farmers Outlet, Inc. (SDFO), a California Corporation with over thirty-five (35) years in business servicing restaurant and retail produce customers in southern California's three largest counties, supplying quality food and produce. SDFO does business under the name of Farmers Outlet and San Diego Farmers Outlet. On Sept. 24, 2018, the Company announced the signing of a definitive Asset Purchase Agreement to acquire a food and beverage distribution company that is involved in the sale of food, beverages and general merchandise to retailers, households, hotels, restaurants, "mom and pop" markets, liquor stores, gas stations and other retail outlets.

Overview 2019 ― During the 2019 fiscal year, the Company completed an asset acquisition of Seaport Meat Company, (Seaport Meat), a California Corporation with over thirty (30) years in business servicing restaurant and retail, and institutional customers in Southern California and Arizona. Seaport Meat is a USDA meat processing plant that supplies quality meats, seafood, dry goods, dairy and produce. Seaport Meat Company operates a distribution and manufacturing facility in Spring Valley, California their 12,000 square foot facility is HACCP-compliant and is a USDA Licensed processing facility with on-site daily inspections. HACCP is a management system in which food safety is addressed through the analysis and control of biological, chemical, and physical hazards from raw material production, procurement and handling, to manufacturing, distribution and consumption of the finished product. Having a USDA certified facility allows consumers to be confident that the Food Safety and Inspection Service (FSIS), the public health agency in the USDA, ensured that meat and poultry products are safe, wholesome, and correctly labeled and packaged

The Company's customers range from a wide variety of restaurants, including many well known in Southern CA, to institutions, schools (UCSD, SDSU, etc.) and re-distributors such as US Foods and Sysco as well as to local distributors. They supply wholesale food and restaurant supplies to San Diego, Los Angeles, Orange and Riverside and offer same day service. In addition, they have clients in Arizona and Colorado that come to their facility to pick up their orders.

Because Seaport Meat Company of America can efficiently add new product lines, they can easily expand the distribution of Pacific Ventures' San Diego Farmers Outlet and SnoBar product line, thereby accelerating Pacific Ventures' revenue growth. The combination of a distribution and product company is unique in the San Diego area and will position the company for rapid growth.

They manufacture and wholesale custom processed beef, pork, chicken, lamb, veal and seafood. In addition, they are redistributors of a wide variety of dry goods, frozen foods, disposables and janitorial products. Their sales, distribution and finance processes are very efficient and can be expanded to add new product lines, including fresh produce and dairy

Overview 2020- During 2020, the U.S. foodservice industry faced unprecedented challenges as the COVID-19 pandemic caused substantial disruption across many of our customers' operations and, in some cases, resulted in permanent closures of restaurants. As a company, we took several actions to increase liquidity, conserve cash, manage working capital, and reduce expenses to align with the decrease in demand.





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We also acted quickly to protect the health and safety of our communities by implementing new protocols and enhanced safety measures to protect our frontline associates and customers, many of whom are "essential workers" and unable to work remotely. As we adapted to rapidly changing conditions, we also increased our efforts to stay connected to our current customers and attract new customer.

As was widely reported in the media, the U.S. meat industry experienced meat shortages due to massive outbreaks of COVID-19 and in some cases large facilities were forced to close, meat prices reached an all-time high due to the lack of product and increase in demand. While many of our competitors chose to pass these increases in price to the customers, The Companies Management made a conscious decision to support our customers by lowering our margins in order to offset the increase in prices caused by the pandemic. By lowering our margins during the second and third quarters we attracted many new customers and won the loyalty of its current customer base.

The Company was able to maintain the historical average of the prior year's revenues but did share the burden of the pandemic.

During the onset of the pandemic Seaport's sales staff and management acted quickly to recover any lost revenue due to the massive government mandated shutdown. Some of our largest customers were forced to stay closed for almost a year which include Petco Park (home of the San Diego Padres), and the SoCal County Fairs. We acted quickly, and attracted more business from Hospitals, Nursing Homes, and Naval Bases just to name a few.

The Company made concerted efforts to let our customers know that we appreciate their loyalty and continued support during these challenging times.





Strategy

In Fiscal Year 2021, the Company's strategy is focused on:





  ? incrementally increase sales and profitability of San Diego Farmers Outlet
    (SDFO) and Seaport Meat Company.
  ? expanding Snöbar production and distribution
  ? acquisition of food production or distribution companies that are synergistic
    with SDFO and Seaport Meat Company.

We plan to grow SDFO's wholesale business by expanding its delivery territory from 25 miles to a 75-mile radius and add to the current fleet of delivery trucks. The Company has already begun marketing to new restaurants in the area, most notably Asian and Italian restaurants, and have let restaurants know that SDFO can deliver the finest produce in market.

We plan to relaunch Snöbar production and distribution by partnering with third-party manufacturers and co-packers, and with third-party distributors that can sell Snöbar products to high-end restaurants, resorts, cruise lines and hotels worldwide. Initially, the focus will be on establishing major accounts in four core markets consisting of Southern California, Phoenix, Las Vegas and Miami. The larger vision is to sell products in grocery stores such as Kroger, Wal-Mart and others, and thereafter to begin a national marketing program to all U.S. retailers. It is essentially a top-down marketing plan where products are placed with the largest retailer then trickle down to the smallest seller in each market area

We plan to acquire food production and distribution businesses that will help the Company grow its food, beverage and alcohol-related products businesses. We continue to engage in preliminary discussions with potential investors in order to properly fund potential acquisitions, however, there are no assurances that the required funding will be available on terms acceptable to us, or at all.





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Going Concern

The accompanying consolidated financial statements have been prepared assuming we will continue as a going concern. As discussed in this Annual Report and in the notes to the Company's consolidated financial statements included elsewhere herein, we have incurred operating losses, and as of December 31, 2020 and 2019, we have accumulated deficit of $16,063,780 and $10,040,367 respectively. For the year ended December 31, 2020, we have a working capital deficiency of $4,589,002. These factors raise substantial doubt about our ability to continue as a going concern. Additionally, our independent registered public accounting firm included an explanatory paragraph in their report for the years ended December 31, 2020 and 2019 regarding concerns about our ability to continue as a going concern.

Our ability to continue as a going concern is dependent upon our generating operating cash flow and raising capital sufficient to fund operations. We have discussed our strategy and plans relating to these matters elsewhere in this Current Report although the consolidated financial statements included herein do not include any adjustments that might result from the outcome of these uncertainties. Our business strategy may not be successful in funding ongoing operations and accelerating our domestic and international expansion, and if we cannot continue as a going concern, our stockholders may lose their entire investment in us.

Plan of Operations for the Next Twelve Months

Our plan is to achieve meaningful sales revenue from the sale of the SDFO and Seaport Meat Company products to meet our operating needs. It is also unlikely that we will be able to satisfy all of our obligations to pay interest and repay principal due and payable within the next 12 months under the various forms of our outstanding debt. Although we have been able to extend the maturity dates as well as repayment terms of a substantial amount of such debt, there is no assurance that we will be able to further extend such repayments or maturity dates to avoid a default, as such further extension depends on the consent of the holders of such debt. If we are unable to make such payments and repayments and unable to extend and delay required payments or maturities of such debt, the holders of such debt will have the right to take legal action seeking enforcement of the debt. If any legal action is taken against us, we would face the risk of having to deplete our limited cash resources to defend against such suit or face the entry of a default judgment. In either event, such action would have grave impact on our operations. Our ability to continue operations will be dependent upon the successful completion of additional long-term or permanent equity financing, the support of creditors and shareholders, and, ultimately, the achievement of profitable operations. There can be no assurances that we will be successful, which would in turn significantly affect our ability to be successful in our new business plan. If not, we will likely be required to reduce operations or liquidate assets. We will continue to evaluate our projected expenditures relative to our available cash and to seek additional means of financing in order to satisfy our working capital and other cash requirements.

Critical Accounting Estimates

We regularly evaluate the accounting estimates that we use to prepare our financial statements. A complete summary of these policies is included in the Notes to our audited financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

We believe that of our significant accounting policies, which are described in Note 2 to our consolidated financial statements, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.

Revenue Recognition ― We are generating substantially all our revenue from the domestic sale of fresh produce, meat, and other food related products. Farmers Outlet and Seaport Meat specialty food products that the larger distributors do not carry on a daily basis. Our customers comprise of redistributors, restaurants, hotels, schools, and nursing homes just to name a few. , Sales revenues are generally recognized when the products are shipped or delivered to the customers, net of discounts, returns and allowance and collectability is reasonably assured.





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Concentrations of Credit Risk ― Cash held in banks: we maintain cash balances at a financial institution that is insured by the Federal Deposit Insurance Corporation ("FDIC") up to federally insured limits. At times balances may exceed FDIC insured limits. We have not experienced any losses in such accounts.

Accounts Receivable (AR): AR as at the years-ended December 31, 2020 and 2019, were $1,213,991 and $1,290,637, respectively. Historically, customer accounts typically are collected within a short period of time and based on its assessment of current conditions and its experience collecting such receivables, management believes it has no significant risk related to its concentration within its accounts receivable.





Results of Operations

Year ended December 31, 2020, as compared to the year ended December 31, 2019

Revenues and Cost of Goods Sold. Revenue for the fiscal year ended December 31, 2020 increased to $30,212,420 from $5,918,337 during the comparable period as a result of the acquisition of Seaport Meat Company.

Cost of goods sold ("COGS") is comprised of production costs, shipping, and handling costs. For the fiscal year ended December 31, 2020, we had costs of goods sold of $26,857,783, as compared to $5,070,322 in the comparable period ended December 31, 2020. The percentage of COGS against sales was 85.67% in the fiscal year ended December 31, 2019 to 88.89% in the fiscal year ended December 31, 2020.

Operating Expenses. Our Selling, General and Administrative ("SG&A") expenses consist of sales and marketing, professional services, rents, and general office expenses (including wages for non-officer personnel). During the fiscal year ended December 31, 2020 our SG&A expenses increased to $5,077,008 from $1,365,942 in the comparable prior period, an increase of $3,711,066. These increases were the result of increases in general office expenses, professional services and marketing expenses. On December 31, 2020, total general office expense was $5,077,008, marketing expenses was $45,837 and professional fees was $913,293. Amortization and depreciation expenses increased from $229,036 to $696,144 for the fiscal years December 31, 2019 and December 31, 2020, respectively, due to the addition of depreciable assets in the second quarter of 2019 related to the acquisition of San Diego Market Outlet, Inc and Seaport Meat Company.

Total operating expenses for the fiscal year ended December 31, 2020 were $7,032,283 representing an increase of $4,480,723, as compared to $2,551,560 for the comparable prior period ended December 31, 2019.

Other Non-Operating Income and Expenses. Non-operating expenses for the fiscal year ended December 31, 2020 were $2,204,391, consisting all in interest expense compared to a non-operating expense of $970,488, consisting of also all in interest expense, in the comparable prior period ended December 31, 2019.

Net Loss. Net loss for the fiscal year ended December 31, 2020 was $5,861,821, an increase of $3,209,195 from $2,652,626 in the comparable prior period ended December 31, 2019

Financial Condition, Liquidity and Capital Resources

Fiscal years ended December 31, 2020 and 2019

As of December 31, 2020, we had a working capital deficit of $4,589,002 comprised of $58,233 in cash and cash equivalents, $1,213,991 of accounts receivable, $1,216,562 inventory assets, other current assets of $283,379 (includes current portion of Rent to Use Asset) and $16,845 in deposits which were offset by accounts payable of $2,809,136, $902,442 in accrued expenses, $88,417 in lease payables, $3,239,017 in current note payables and $249,000 in lease liability. For the fiscal year ended December 31, 2020 we used $2,327,148 in operating activities. Cash used in investing activities totaled $186,519, consisting of purchase of equipment, building and improvement and fixed assets for $186,519. Cash provided in financing activities totaled $2,255,943, consisting of $1,532,737 in proceeds from notes payable, $3,246,100, $122,815 for debt conversion, $5,000 for issuance of preferred "E" shares, and $161,592 in prior year adjustments, which is offset with note or loan repayments for $315,349, $29,218 and $2,144,550 for non-related notes, related notes and long-term loans, respectively.





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In the comparable prior period in 2019, we had a working capital deficit of $1,118,654 comprised of $315,957 in cash and cash equivalents, $1,290,637 of accounts receivable, $830,504 inventory assets, other current assets of $283,379 (includes current portion of Rent to Use Asset) and $16,845 in deposits which were offset by accounts payable of $1,409,420, $714,962 in accrued expenses, $119,988 in lease payables, $1,362,605 in current note payables and $249,000 in lease liability. For the fiscal year ended December 31, 2019 we used $2,620,665 in operating activities. Cash used in investing activities totaled $4,202,000, consisting of purchase of equipment, building and improvement and fixed assets for $1,384,382 and for goodwill and intangible assets $2,783,239, all of which related to the recent acquisition of Seaport Meat Company. Cash provided in financing activities totaled $6,987,564, consisting of $2,960,899 in proceeds from notes payable, $3,461,606 in proceeds from long term loans, of which $3,015,780 was for the acquisition and working capital of Seaport Meat Company, $119,542 from proceeds from note payables from related parties, $166,000 for debt conversion, $60,000 for issuance of preferred "E" shares, $446,711 in common shares issued for debt conversion and $111,304 in prior year adjustments.

On December 31, 2020, we had cash and cash equivalents of $58,233 as compared to $315,957 on December 31, 2019.

Cash used in operations for the fiscal year ended December 31, 2020 was $2,327,148 as compared to $2,620,665 in the comparable prior fiscal year ended December 31, 2019. Cash used decreased by $293,517 between periods.

For the fiscal year ended December 31, 2020, cash used in investing totaled $186,519. We used $4,202,000 from investing activities December 31, 2019, which was related to the acquisition of Seaport Meat Company.

Cash provided from financing activities on December 31, 2020 was $2,255,943 as compared to $6,987,564 at December 31, 2019.

As of December 31, 2020, we had total current liabilities of $7,378,012 and total liabilities were $18,706,866 as compared to $3,855,976 and $13,386,354, respectively, for December 31, 2019.

We depend upon debt and/or equity financing to fund our ongoing operations and to execute our business plan. If continued funding and capital resources are unavailable at reasonable terms, we may curtail our plan of operations. We will be required to obtain alternative or additional financing from financial institutions or otherwise, in order to maintain and expand our existing operations. The failure by us to obtain such financing would have a material adverse effect upon our business, financial condition and results of operations.





Capital Resources

Our principal sources of liquidity have been cash generated by loan proceeds and cash generated from operations.

We plan to continue raising capital in order to meet our liquidity needs. However, we may be unable to raise sufficient additional capital when we need it or to raise capital on favorable terms. If we are unable to obtain adequate funds on reasonable terms, we may be required to significantly curtail or discontinue operations or obtain funds by entering into financing agreements on unattractive terms.

We do not currently have any contractual restrictions on our ability to incur debt and, accordingly we could incur significant amounts of indebtedness to finance operations. Any such indebtedness could contain covenants which would restrict our operations.

Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.





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Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. The SEC has defined a company's critical accounting policies as the ones that are most important to the portrayal of the company's financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified the critical accounting policies and judgments addressed below. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 2 to our consolidated financial statements. Although we believe that our estimates, assumptions and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments or conditions.

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