What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-04-28 compared with 2021-11-15 · 166 added, 434 removed, 130 unchanged (82% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

September 30,

Current assets:

Restricted cash

Accounts receivable, net

Trade accounts receivable, net

Other receivables

Inventory, net

8 unchanged sentences

Accrued expenses

Advance payment

Accrued payroll

Accrued vacation

Accrued interest

Accrued payroll and employee related

Lease liability

Loan payable – Paycheck Protection Program

Convertible note, net of discount

Derivative liabilities

Total current liabilities

2 unchanged sentences

Lease liability

Loan payable – Paycheck Protection Program

Convertible note - related party, net of discount

Convertible note, net of discount

Total liabilities

Commitments and contingencies (Note 6,7,8 and 13)

Commitments and contingencies (Note 5)

Stockholders’ equity:

2 unchanged sentences

295,000,000 shares authorized;

167,601,435 and 149,133,372 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

12,919,899 and 12,905,112 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

Additional paid in capital

7 unchanged sentences

Consolidated Statements of Operations

the three and nine months ended September 30, 2021 and 2020

For the three months ended September 30

For the nine months ended September 30

the three months ended March 31, 2022 and 2021

Cost of revenue

Depreciation of manufacturing equipment

Operating expenses:

3 unchanged sentences

Operating loss

( 1,658,229 )

( 2,936,392 )

Other (income)/expenses

(Gain)/Loss from derivative liability

(Gain)/Loss from debt extinguishment - PPP

(Gain)/Loss on extinguishment of debt

Interest expense

Total other (income) expense

$ ( 506,660 )

$ ( 878,257 )

Gain from derivative liability

Total other expense

$ ( 894,509 )

6 unchanged sentences

Consolidated Statements of Cash Flows

the nine months ended September 30, 2021 and 2020

Net Cash (used for) operating activities

the three months ended March 31, 2022 and 2021

Net cash used in operating activities

$ ( 1,132,148 )

2 unchanged sentences

Purchase of property and equipment

Purchase of intangibles

Net Cash (used for) investing activities

Net cash used in investing activities

Financing activities

Cash received for stock

Proceeds from issuance of stock

Proceeds from note payable

Repayment of convertible notes

Payments for Debt issue cost

Payments of operating leases

Net cash from financing activities

Net change in cash and restricted cash

Cash and restricted cash, beginning of year

Cash and restricted cash, end of year

( 1,140,672 )

Cash and restricted cash, beginning of period

Cash and restricted cash, end of period

Cash paid during the period for:

Cash paid for amounts included in the measurement of lease liabilities

Non-cash financing and investing activities:

Executive deferred compensation settled through issuance of warrants

Net carrying value of convertible notes and accrued interest settled through issuance of stock (debt extinguishment)

Accrued interest settled through issuance of stock

Debt discount warrant and derivative liability

Offering and debt issuance costs included in accounts payable

Extinguishment of derivative liability

Equipment included in accrued liability

Equipment included in accounts payable and accrued liability

the accompanying notes to the condensed consolidated financial statements

1 unchanged sentence

to Condensed Consolidated Financial Statements

Summary of Significant Accounting Policies

Description of the Business, Basis of Presentation, and Summary of Significant Accounting Policies

Food Group Inc., (“we,” “us,” “our,” and the “Company”) was incorporated on February

25, 2010 in the State of Delaware.

We are engaged in the manufacturing and distribution of ready to blend beverages, particularly, smoothies,

shakes and frappes.

accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the

United States of America (“GAAP”).

The Company is engaged in the manufacture and distribution of ready-to-drink and ready-to-blend beverages,

particularly, smoothies, shakes and frappes.

of Presentation

accompanying condensed consolidated financial statements are unaudited.

These unaudited interim condensed consolidated financial statements

have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and

applicable rules and regulations of the U.S.

Securities and Exchange Commission (“SEC”) regarding interim financial reporting.

Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been

condensed or omitted pursuant to such rules and regulations.

Accordingly, these interim condensed consolidated financial statements should

be read in conjunction with the audited consolidated financial statements for the fiscal year ended December 31, 2021 included in the

Company’s Annual Report on Form 10-K, as filed with the SEC on March 10, 2022.

In management’s opinion, the unaudited interim

condensed consolidated financial statements reflect all adjustments, which are of a normal and recurring nature, that are necessary for

a fair presentation of financial results for the interim periods presented.

Operating results for any quarter are not necessarily indicative

of the results for the full fiscal year.

December 29, 2021, the Company amended its certificate of incorporation to implement a 1-for-13 reverse stock split of its issued and

outstanding shares of common stock.

All the share numbers, share prices, exercise prices and other per share information throughout these

financial statements have been adjusted, on a retroactive basis, to reflect the 1-for-13 reverse stock split.

of Consolidation

4 unchanged sentences

eliminated upon consolidation.

preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported

amounts of assets and liabilities in the balance sheets and revenues and expenses during the years reported.

Actual results may differ

from these estimates.

Concentration

of Credit Risk

amount of cash on deposit with financial institutions can be in excess of the $ 250,000 federally insured limit.

However, we believe that

cash on deposit that exceeds $ 250,000 in the financial institutions is financially sound and the risk of loss is minimal.

September 30, 2021 and December 31, 2020, the Company had $ 142,382 and $ 142,382 , respectively, in restricted cash related to a co-packing

preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect

the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the years reported.

Actual results

may differ from these estimates.

of Significant Accounting Policies

have been no changes to our significant accounting policies described in our Annual Report on Form 10-K for the year ended December 31,

2021, as filed with the SEC on March 10, 2022 that have had a material impact on our condensed consolidated financial statements and

related notes.

Value Measurement

17 unchanged sentences

used to determine the fair value.

Food Group Inc.

to Condensed Consolidated Financial Statements

financial instruments consist of cash, accounts receivable, accounts payable, advanced payments, restricted cash, convertible debt, derivative

liability and the PPP loan.

The carrying value of our financial instruments approximates their fair value.

The PPP loan approximates

fair value as forgiveness is expected in the near term.

receivable are typically unsecured.

Our credit policy calls for payment generally within 30 days.

The credit worthiness of a customer

is evaluated prior to a sale.

As of September 30, 2021 and December 31, 2020, the Company’s allowance for doubtful accounts was

$ 131,576 and $ 133,424 , respectively.

The allowance was estimated based on evaluation of collectability of outstanding accounts receivable.

consists of raw materials and finished goods and is carried at the lower of cost or net realizable value on a first in first out basis.

The Company monitors the remaining useful life of its inventory and establishes a reserve of obsolescence where appropriate.

As of September

30, 2021 and December 31, 2020, the Company’s inventory reserve was $ 53,188 and $ 59,093 , respectively.

assets are comprised of patents, net of amortization and trademarks.

The patent costs are being amortized over the life of the patent,

which is twenty years from the date of filing the patent application.

In accordance with ASC Topic 350 Intangibles – Goodwill and

Other (“ASC 350”), the costs of internally developing other intangible assets, such as patents, are expensed as incurred.

However, as allowed by ASC 350, costs associated with the acquisition of patents from third parties, legal fees and similar costs relating

to patents have been capitalized.

accordance with ASC 350 legal costs related to trademarks have been capitalized.

We have determined that trademarks have an indeterminable

life and therefore are not being amortized.

Assets and Other Acquired Intangible Assets

evaluate the recoverability of property and equipment and finite-lived intangible assets for possible impairment whenever events or circumstances

indicate that the carrying amount of such assets may not be recoverable.

The evaluation is performed at the lowest level for which identifiable

cash flows are largely independent of the cash flows of other assets and liabilities.

Recoverability of these assets is measured by a

comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate.

If such review indicates

that the carrying amount of property and equipment and intangible assets is not recoverable, the carrying amount of such assets is reduced

to fair value.

We have not recorded any impairment charges during the periods presented.

Plant, and Equipment

plant, and equipment is stated at cost less accumulated depreciation and accumulated impairment loss, if any.

Depreciation is calculated

on a straight-lined basis over the estimated useful lives of the assets.

Leasehold improvements are being amortized over the shorter

of the useful life of the asset or the lease term that includes any expected renewal periods that are deemed to be reasonably assured.

The estimated useful lives used for financial statement purposes are:

and fixtures:

Manufacturing

equipment and customer equipment:

3 years to 7 years

Food Group Inc.

to Condensed Consolidated Financial Statements

financial instruments consist of cash, accounts receivable, accounts payable, advanced payments, restricted cash, as well as our PPP

loan, convertible notes, and derivative liabilities which were settled in 2021.

The carrying value of our financial instruments on March

31, 2022, December 31, 2021 and March 31, 2021 approximates their fair values, except for the derivative liability, which was carried

at fair value prior to its extinguishment.

March 31, 2022 and December 31, 2021, the Company had approximately $ 250,000 and $ 142,000 , respectively, in restricted cash related to

a co-packing agreement.

of each of March 31, 2022 and December 31, 2021, the Company’s allowance for doubtful accounts was approximately $ 121,000 .

allowance was estimated based on evaluation of collectability of outstanding accounts receivable.

receivables consist of amounts due from vendors for materials acquired on their behalf for use in manufacturing the Company’s products.

accordance with ASC 606, Revenue from Contracts with Customers, revenue is recognized when a customer obtains ownership of promised goods.

1 unchanged sentence

The Company applies the following five steps:

Identify the contract with a customer

the contract with a customer

contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s

1 unchanged sentence

for goods or services that are transferred is probable.

For the Company, the contract is the approved sales order, which may also be

supplemented by other agreements that formalize various terms and conditions with customers.

Identify the performance obligation in the contract

For the Company, the contract is the approved sales order, which may also

be supplemented by other agreements that formalize various terms and conditions with customers.

the performance obligation in the contract

obligations promised in a contract are identified based on the goods or services that will be transferred to the customer.

For the Company,

this consists of the delivery of frozen beverages, which provide immediate benefit to the customer.

Determine the transaction price

transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods and

is generally stated on the approved sales order.

Company, this consists of the delivery of frozen beverages, which provide immediate benefit to the customer.

the transaction price

transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods

and is generally stated on the approved sales order.

Variable consideration, which typically includes volume-based rebates or discounts,

are estimated utilizing the most likely amount method.

Allocate the transaction price to performance obligations in the contract

the transaction price to performance obligations in the contract

our contracts contain a single performance obligation, delivery of frozen beverages, the transaction price is allocated to that single

performance obligation.

Recognize Revenue when or as the Company satisfies a performance obligation

Company recognizes revenue from the sale of frozen beverages when title and risk of loss passes and the customer accepts the goods, which

generally occurs at the time of delivery to a customer warehouse.

Customer sales incentives such as volume-based rebates or discounts

are treated as a reduction of sales at the time the sale is recognized.

Shipping and handling costs are treated as fulfillment costs

and presented in distribution, selling and administrative costs.

Revenue when or as the Company satisfies a performance obligation

Company recognizes revenue from the sale of frozen beverages when title and risk of loss passes and the customer accepts the goods,

which generally occurs at the time of delivery to a customer warehouse.

Customer sales incentives such as volume-based rebates or

discounts are treated as a reduction of sales at the time the sale is recognized.

Shipping and handling costs are treated as fulfillment

costs and presented in distribution, selling and administrative costs.

that are received before performance obligations are recorded are shown as current liabilities.

Company evaluated the requirement to disaggregate revenue and concluded that substantially all of its revenue comes from a single product,

frozen beverages.

and Development

for research activities relating to product development and improvement are charged to general and administrative expense as incurred.

We incurred $ 34,454 and $ 147,738 , in research and development expenses for the three months ending September 30, 2021 and 2020, respectively.

For the nine months ending September 30, 2021 and 2020, research and development costs totaled $ 172,900 and $ 326,892 , respectively.

Food Group Inc.

to Condensed Consolidated Financial Statements

company evaluated the requirement to disaggregate revenue and concluded that substantially all of its revenue comes from smoothie

and Storage Costs

and handling costs are included in general and administrative expenses.

For the three months ending September 30, 2021 and 2020, shipping

and storage costs totaled $ 335,414 and $ 126,737 , respectively.

For the nine months ending September 30, 2021 and 2020, shipping and storage

costs totaled $ 716,552 and $ 356,270 , respectively.

determine if an arrangement is a lease upon inception.

A contract is or contains a lease if the contract conveys the right to control

the use of an identified asset for a period of time in exchange for consideration.

The right to control the use of an asset includes

the right to obtain substantially all of the economic benefits of the underlying asset and the right to direct how and for what purpose

the asset is used.

adoption of ASU 2016-02 and related standards, operating lease right-of-use assets and liabilities are recognized at commencement date

based on the present value of lease payments over the lease term.

Lease expense is recognized on a straight-line basis over the lease

As a lessee, the Company leases office space.

provision for income taxes is determined in accordance with the provisions of ASC Topic 740, Accounting for Income Taxes (“ASC

Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences

between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.

Deferred tax assets

and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary

differences are expected to be recovered or settled.

Any effect on deferred tax assets and liabilities of a change in tax rates is recognized

in income in the period that includes the enactment date.

ASC 740 prescribes a comprehensive model for how companies should recognize,

measure, present, and disclose in their financial statements, uncertain tax positions taken or expected to be taken on a tax return.

Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will

be sustained upon examination by the tax authorities.

Such tax positions must initially and subsequently be measured as the largest amount

of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full

knowledge of the position and relevant facts.

ASC 740 requires a valuation allowance to reduce the deferred tax assets reported if, based

on the weight of evidence, it is more than likely than not that some portion or all of the deferred tax assets will not be recognized.

Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components

of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.”

The result of this accounting treatment is that the fair value of any derivative is marked-to-market each balance sheet date and recorded

as a liability.

In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of

operations as gain/loss from derivative liability.

Upon conversion or exercise of a derivative instrument, the instrument is marked to

fair value at the conversion date and then that fair value is reclassified to equity.

We analyzed the derivative financial instruments

in accordance with ASC 815.

The objective is to provide guidance for determining whether an equity-linked financial instrument is indexed

to an entity’s own stock.

This determination is needed for a scope exception which would enable a derivative instrument to be accounted

for under the accrual method.

The classification of a non-derivative instrument that falls within the scope of ASC 815-40-05 “Accounting

for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” also hinges on whether

the instrument is indexed to an entity’s own stock.

A non-derivative instrument that is not indexed to an entity’s own stock

cannot be classified as equity and must be accounted for as a liability.

There is a two-step approach in determining whether an instrument

or embedded feature is indexed to an entity’s own stock.

First, the instrument’s contingent exercise provisions, if any,

must be evaluated, followed by an evaluation of the instrument’s settlement provisions.

The Company utilized the fair value standard

set forth by the Financial Accounting Standards Board, defined as the amount at which the assets (or liability) could be bought (or incurred)

or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale.

Food Group Inc.

to Condensed Consolidated Financial Statements

Extinguishment

Company evaluates its convertible instruments in accordance with ASC 470-50, “Debt Modifications and Extinguishments.” For

all extinguishments of debt, ASC 470-50 requires the difference between the reacquisition price (including any premium) and the net carrying

amount of the debt being extinguished (including any deferred debt issuance costs) to be recognized as a gain or loss when the debt is

extinguished.

Accordingly, the Company recorded a net loss of $ 193,562

and net gain of $ 379,200 ,

respectively, non-cash gain/loss on extinguishment of debt in its statements of operations for the nine months ended September 30, 2021

and 2020, and zero net loss for the three months ended September 30, 2021 and 2020 respectively.

calculate net loss per share in accordance with ASC Topic 260.

Basic net loss per share is computed by dividing net loss by the weighted

average number of shares of common stock outstanding for the period, and diluted earnings per share is computed by including common stock

equivalents outstanding for the period in the denominator.

At September 30, 2021 and 2020 any equivalents would have been anti-dilutive

as we had losses for the periods then ended.

Based Compensation

calculate stock compensation in accordance with ASC Topic 718, Compensation-Stock Based Compensation (“ASC 718”).

requires that the cost resulting from all share-based payment transactions be recognized in the financial statements and establishes

fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value

based measurement method in accounting for share-based payment transactions with employees except for equity instruments held by employee

stock ownership plans.

consists of the following at September 30, 2021 and December 31, 2020:

For the three months ending March 31, 2022 and 2021, shipping

and handling costs totaled approximately $ 437,000 and $ 144,000 , respectively.

and Development

for research activities relating to product development and improvement are charged to expense as incurred.

The Company incurred approximately

$ 31,000 and $ 68,000 , in research and development expenses for the three months ending March 31, 2022 and 2021, respectively.

March 31, 2022 and 2021 common stock equivalents have not been included in the calculation of net loss per share as their effect is anti-dilutive

as a result of losses incurred.

Pronouncements

time to time, new accounting pronouncements are issued that we adopt as of the specified effective date.

We have not determined if the

impact of recently issued standards that are not yet effective will have an impact on our results of operations and financial position.

consists of the following:

Raw materials

Finished goods, net of reserve

Finished goods

Inventory, net

Property Plant and Equipment

classes of property and equipment at September 30, 2021 and December 31, 2020:

of Major Classes of Property and Equipment

and equipment, net consist of the following:

of Property and Equipment

Furniture and fixtures

1 unchanged sentence

Leasehold improvements

Property and equipment, gross

accumulated depreciation

1 unchanged sentence

( 2,894,632 )

Property and equipment

Equipment not yet placed in service

Property and equipment, net of depreciation

Food Group Inc.

to Condensed Consolidated Financial Statements

recorded depreciation expense related to these assets of $ 146,346 and $ 122,827 for the three-months ended September 30, 2021 and 2020,

respectively and $ 407,432 and $ 394,670 for the nine months ended September 30, 2021 and 2020, respectively.

Depreciation expense in Cost

of Goods Sold was $ 0 and $ 5,115 for three months ended September 30, 2021 and 2020, respectively, and $ 17,673 and $ 14,717 for the nine

months ended September 30, 2021 and 2020, respectively.

Intangible Assets

of September 30, 2021, intangible assets consist of patent costs of $ 768,138 , trademarks of $ 124,285 and accumulated amortization of

of December 31, 2020, intangible assets consist of patent costs of $ 768,138 , trademarks of $ 119,911 and accumulated amortization of $ 457,833 .

amounts carried on the balance sheet represent cost to acquire, legal fees and similar costs relating to the patents incurred by the

Amortization is calculated through the expiration date of the patents, which is December 2025.

The amount charged to amortization

was $ 16,105 and $ 15,902 for the three months ended September 30, 2021 and 2020, respectively, and $ 48,316 and $ 47,707 for the nine months

ended September 30, 2021 and 2020, respectively.

future amortization expense related to patents as of September 30, 2021, is as follows:

of Estimated Future Amortization Expense Related to Intangible Property

Total Amortization

Years ending December 31,

Intangible asset, net of amortization

Related Parties

disclosed below in Note 7, members of management and directors invested in the Company’s convertible notes;

and in Note 10, members

of management and directors have received shares of stock and options in exchange for services.

Paycheck Protection Program (PPP) loan

On May 7, 2020 the Company was granted a $ 568,131

loan under the PPP administered by a Small Business Administration (SBA) approved partner.

The loan, which was to mature in two

years , was uncollateralized and was fully guaranteed by the Federal government.

The Company was eligible for loan

forgiveness of up to 100 % of the loan, upon meeting certain requirements.

On May 20, 2021 the loan for $ 568,131 was legally released

and forgiven by the SBA.

Forgiveness income of $ 568,131 has been recorded for the nine months ended September 30, 2021.

On January 27, 2021, the Company was granted a second

$ 568,131 loan under the PPP administered by an SBA approved partner.

The loan, which matures in five years , has an interest

rate of 1 %, and is uncollateralized and is fully guaranteed by the Federal government.

The deferral period is 24 weeks plus 10 months

from the loan note date.

The Company is eligible for loan forgiveness of up to 100 % of the loan, upon meeting certain requirements.

Company has recorded a note payable and will record the forgiveness upon being legally released from the loan obligation by the SBA.

The Company will be required to repay any remaining balance, plus interest accrued at 1 percent, in monthly payments commencing upon

notification that the loan will not be forgiven or only partially forgiven.

Food Group Inc.

to Condensed Consolidated Financial Statements

repayment for the PPP loan as of September 30, 2021, are as follows:

of Repayment of Paycheck Protection Program (PPP) Loan

ending December 31,

(three months remaining)

Convertible Notes (Related and Unrelated Party)

of September 30, 2021, the Company settled all outstanding convertible note which included the $ 1,071,000 Series CN Note 1 noteholders.

The debt settlement consisted of debt converted to company stock of $ 231,000 ($ 30,000 related party) in principal and $ 192,663 ($ 37,689

related party) in interest into 1,159,243 shares of common stock, and debt in the amount of $ 840,000 ($ 180,000 related party) was repaid.

convertible notes consist of the following components as of September 30, 2021 and December 31, 2020:

Schedule of Convertible Notes

September 30,

Convertible notes

Debt discount (warrant value)

Debt discount (derivative value) (Note 8)

Debt discount (issuance costs paid)

Note conversion/settlements

( 1,181,167 )

Debt discount amortization

Total convertible notes

of September 30, 2021, the Company settled all outstanding convertible note holders which included the $ 168,000 Series CN Note 2 noteholders.

The debt settlement consisted of debt converted to company stock of $ 168,000 in principal and $ 41,747 in interest into 582,630 shares

of common stock.

convertible notes consist of the following components as of September 30, 2021 and December 31, 2020:

of Convertible Notes

September 30,

Convertible notes

Debt discount (warrant value)

Debt discount (derivative value) (Note 8)

Debt discount (issuance costs paid)

Note conversion/settlements

Debt discount amortization

Total convertible notes

total of $ 1,167,042 shown in the two tables above at December 31, 2020, are presented in the balance sheet as Current Liabilities:

Convertible Note-Net of Discount and Long-Term Liabilities:

Convertible Note – related party net of Discount of $ 197,804 , and Convertible

Note – net of Discount $ 810,995 .

Food Group Inc.

to Condensed Consolidated Financial Statements

Derivative Liabilities

discussed in Note 7, Convertible Notes, the Company had $ 168,000 of principal outstanding in CN Notes 2 that contained variable conversion

The conversion terms of the convertible notes were variable based on certain factors, such as the future price of

the Company’s common stock.

The number of shares of common stock to be issued was based on the future price of the Company’s

common stock;

therefore the number of shares of common stock issuable upon conversion of the promissory note was indeterminate.

The Company fair valued the variable conversion provisions each reporting period.

The fair value was reported as a derivative liability

in the accompanying consolidated balance sheets and the change in value was recorded as a gain or loss in the accompanying consolidated

statements of operations.

fair values of the Company’s derivative liabilities are estimated at the issuance date and are revalued at each subsequent reporting

As of September 30, 2021, the Convertible Noteholders discussed in Note 7 were settled.

Upon debt extinguishment the Company’s

derivative liability was revalued at May 26, 2021 with value of $ 25,170 , which resulted in a gain of $ 16,305 for the nine months ended

September 30, 2021.

fair value of the derivative liabilities for CN Notes 2 was calculated using the Black-Scholes model using the following assumptions.

of Fair Value of the Derivative Liability

Expected life

Volatility (based on comparable company)

Risk Free interest rate

Dividend yield (on common stock)

Reconciliation

of the derivative liability measured at fair value on a recurring basis with the use of significant unobservable inputs (level 3) from

December 31, 2020 to September 30, 2021:

of Derivative Liability Measured at Fair Value on a Recurring Basis

December 31, 2020

Net gain from change in value

Extinguishment change in derivative from debt settlement

September 30, 2021

following table presents the Company’s fair value hierarchy for applicable assets and liabilities measured at fair value as of

December 31, 2020 and September 30, 2021:

of Fair Value Hierarchy of Assets and Liabilities

Derivative Liability December 31, 2020

Derivative Liability September 30, 2021

expense related to these assets was approximately $ 145,000 and $ 131,000 for the three months

ended March 31, 2022 and 2021, respectively.

Depreciation expense in cost of revenue was approximately $ 6,000 for three months ended

March 31, 2021.

There was no depreciation expense in cost of revenue for the three months ended March 31, 2022.

Convertible Notes and Derivative Liability (Related and Unrelated Party)

2018, the Company issued Milestone I and Milestone II Convertible Notes, which were repaid and converted in the second quarter of 2021.

Milestone II Convertible Notes contained variable conversion provisions based on the future price of the Company’s common stock,

resulting in the potential issuance of an indeterminate number of shares of common stock upon conversion.

The Company measured the fair

value of the derivative resulting from the variable conversion provisions each reporting period.

The fair value was reported as a derivative

liability and the change in value of $ 16,787

was recorded as a gain in the accompanying

condensed consolidated statement of operations for the three months ended March 31, 2021.

Commitments and Contingencies

lease office space under a non-cancelable operating lease which expires on March 31, 2023 .

Our periodic lease cost and operating

cash flows were $ 19,818 and $ 19,813 for the three months ended September 30, 2021 and 2020, respectively.

Our periodic lease cost

and operating cash flow were $ 59,489 and $ 59,657 for the nine months ended September 30, 2021 and 2020, respectively.

As of September

30, 2021, our right of use asset and related liability was $ 102,525 and $ 111,180 .

Food Group Inc.

to Condensed Consolidated Financial Statements

determining the present value of our operating lease right-of-use asset and liability, we used a 10 % discount rate (which approximated

our borrowing rate).

The remaining term on the lease is 3 years.

following table presents the future operating lease payment as of September 30, 2021:

of Estimate Future Maturities of Lease Liabilities

2021 (three months remaining)

Company leases office space under a non-cancelable operating lease which expires on March

Our periodic lease cost was approximately

each of the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, our right of use asset was $ 70,176 .

following table presents the future operating lease payment as of March 31, 2022.

Schedule of Estimate Future Maturities of Lease Liabilities

2022 (nine months remaining)

Total lease payments

4 unchanged sentences

inherent uncertainties and an adverse result in these, or other matters may arise from time to time that may harm our business.

currently the defendant in one legal proceeding for an amount less than $ 100,000 .

is currently the defendant in one legal proceeding for an amount less than $ 100,000 .

Our legal counsel and management believe a material

1 unchanged sentence

Stockholders’ Equity

the nine months ended September 30, 2021, we issued 539,998 options to purchase our common stock to employees.

The exercise price of

the options were $ 0.38 -$ 0.59 per share, with a combination of both cliff and graded vesting over 3 years and are exercisable for a period

fair value of the options issued ($ 177,751 , in the aggregate) was calculated using the Black-Scholes option pricing model, based

on the criteria shown below.

of Fair Value of Options Using Black-Sholes Option Pricing Model

Expected life (in years)

Volatility (based on a comparable company)

85.05 %- 89.37 %

Risk Free interest rate

.725 %- 1.32 %

Dividend yield (on common stock)

the nine months ended September 30, 2021, the Company issued 148,810 options for board director compensation, and 460,000 options were

The total amount of equity-based compensation included in additional paid in capital was $ 41,574

and $ 45,692 for the three months ended September 30, 2021 and 2020, respectively.

The total amount of equity-based compensation included

in additional paid in capital was $ 51,857 and $ 240,216 for the nine months ended September 30, 2021 and 2020, respectively.

following is a summary of outstanding stock options issued to employees and directors as of September 30, 2021:

of Outstanding Stock Options Issued to Employees and Directors

price per share $

remaining term

intrinsic value

Outstanding January 1, 2021

Issued - Employees

Issued - Directors

Cancelled/Expired

Outstanding September 30 2021

Exercisable, September 30, 2021

Food Group Inc.

to Condensed Consolidated Financial Statements

of September 30, 2021, the Company has $ 192,500 of total unrecognized share-based compensation expense related to unvested options, which

is expected to be amortized over the remaining weighted average period of 3.21 years .

following is Changes in Stockholders’ Equity as of September 30, 2020 and September 30, 2021:

of Changes in Stockholders' Equity

Balance January 1, 2020

following are changes in stockholders’ equity for the three months ended March 31, 2021 and March 31, 2022:

Schedule of Changes in Stockholders' Equity

Balance December 31, 2020

$ ( 50,899,629 )

Issuance of stock for capital raise, net of offering costs of $ 27,200

Conversion of debt

Interest paid in shares

Issuance of stock for services

Shares issued for warrant exercise

Equity based compensation

Warrants issued to management

Warrant Modification

Warrant issued for note extension

Restricted stock issuance

Net (loss) for the year

( 2,800,843 )

Balance September 30, 2020

( 49,547,965 )

Food Group Inc.

to Condensed Consolidated Financial Statements

Balance January 1, 2021

( 50,899,628 )

Issuance of stock for capital raise,

Conversion of debt and accrued interest

Interest paid in shares

Issuance of stock for services

Equity based compensation

Net (loss) for the year

( 1,395,419 )

Balance September 30, 2021

Balance March 31, 2021

$ ( 51,491,148 )

June 1, 2021, the Company completed a private placement of 16,666,666 shares of its common stock at $ 0.36 per share, resulting in gross

proceeds of $ 6,000,000 .

In addition, holders of debt converted a total of $ 399,000 in principal and $ 234,410 in interest into 1,741,873

shares of common stock, and debt in the amount of $ 840,000 was retired.

Outstanding Warrants

following is a summary of all outstanding warrants as of September 30, 2021:

of Outstanding Warrants

Remaining term

Intrinsic value

at date of grant

Warrants issued in connection with private placements of common stock

Balance December 31, 2021

$ ( 52,164,775 )

Warrants issued in connection with private placement of notes

Warrants issued in connection with settlement of deferred compensation

Shares issued for warrant exercise

Equity based compensation

Issuance of stock for services

Balance March 31, 2022

$ ( 53,059,284 )

Warrants issued in connection with Settlement of services

the three months ended March 31, 2022, 96,664 warrants at an exercise price of $ 9.10 per share expired, and 986 warrants at an exercise

price of $ 5.07 per share were exercised for proceeds of approximately $ 5,000 .

Incentive Plan

following is a summary of stock option activity for the three months ended March 31, 2022:

Summary of Stock Options Activity

Number of Options

Weighted average exercise price per share

Remaining term in years

Outstanding on December 31, 2021

Cancelled/expired

Outstanding on March 31, 2022

Exercisable, March 31, 2022

fair value of the options issued (approximately $105,000, in the aggregate) was calculated using the Black-Sholes option pricing model,

based on the following:

Summary of Fair Value of Options Using Black-Sholes Option Pricing Model

Expected term (in years)

Expected volatility

Risk-free interest rate

Expected dividends

Weighted average grant date fair value per share

of March 31, 2022, the Company has approximately $ 189,000 of unrecognized share-based compensation expense related to unvested options,

which is expected to be recognized over the remaining weighted average period of 2.2 years.

following is a summary of restricted stock award and restricted stock unit activity for the three months ended March 31, 2022:

of Restricted Stock Award and Restricted Stock Unit Activity

Number of shares

Weighted average grant date fair value

Unvested at January 1, 2022

Unvested at March 31, 2022

of March 31, 2022, the Company has approximately $ 202,000 of unrecognized share-based compensation expense related to restricted stock

awards and restricted stock units, which is expected to be recognized over the remaining weighted average period of 2.6 years.

740 requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of evidence, it is more than likely

than not that some portion or all of the deferred tax assets will not be recognized.

Accordingly, at this time the Company has placed

a valuation allowance on all tax assets.

As of September 30, 2021, the estimated effective tax rate for the year will be zero .

is to account for income tax related interest and penalties in income tax expense in the statement of operations.

than not that some portion or all the deferred tax assets will not be recognized.

Accordingly, at this time the Company has placed a

valuation allowance on all tax assets.

As of March 31, 2022, the estimated effective tax rate for the year was zero .

are open statutes of limitations for taxing authorities in federal and state jurisdictions to audit our tax returns from 2017 through

the current period.

Our policy is to account for income tax related interest and penalties in income tax expense in the statement of

the three months ended March 31, 2022 and 2021, the Company did not incur any interest and penalties associated with tax positions.

of March 31, 2022, the Company did not have any significant unrecognized uncertain tax positions.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements