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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2023

 

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 

For the transition period from ___________ to _____________

 

Commission File Number 000-54584

 

PACIFIC VENTURES GROUP, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   75-2100622

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

117 West 9th Street Suite 316 Los Angeles California   90015
(Address of principal executive offices)   (Zip Code)

 

310-392-5606

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or, an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company”, in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer Smaller reporting company
  Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

 

As of November 17, 2023, there were 906,521,624 shares of the registrant’s common stock, $.001 par value per share, issued and outstanding.

 

 

 

   
 

 

PACIFIC VENTURES GROUP, INC.

 

TABLE OF CONTENTS

 

PART I. – FINANCIAL INFORMATION 1
   
Item 1. Financial Statements 1
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 15
   
Item 3. Quantitative and Qualitative Disclosures about Market Risk 20
   
Item 4. Controls and Procedures 20
   
PART II. – OTHER INFORMATION  
   
Item 1. Legal Proceedings 21
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 22
   
Item 3. Defaults Upon Senior Securities 22
   
Item 4. Mine Safety Disclosures 22
   
Item 5. Other Information 22
   
Item 6. Exhibits 23
   
Signatures 25

 

   
 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022 (audited) 2
   
Condensed Consolidated Statements of Operations for the nine months ended September 30, 2023 and 2022 (unaudited) 3
   
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 (unaudited) 4
   
Notes to the condensed consolidated financial statements (unaudited) 5

 

 1 

 

 

PACIFIC VENTURES GROUP, INC.

Consolidated Balance Sheets

 

   For the nine months   December 31, 
   ended Sept 30, 2023   2022 
   (unaudited)   (audited) 
ASSETS        
Current Assets:          
Cash and cash equivalents  $151,555  $259,938 
Accounts receivable   992,519    1,129,670 
Inventory Asset   1,360,163    898,995 
Other Current Asset   34,579    34,379 
Right to Use Asset   153,000    267,000 
Deposits   16,845    16,845 
Total Current Assets   2,708,660    2,606,826 
Fixed Assets          
Fixed assets, net  $435,522   $591,638 
Total Fixed Assets   435,522    591,638 
Other Assets          
Intangible Assets  $2,705,400   $2,864,508 
Right to Use Asset   185,002    125,002 
Rent & Utilities Deposit   4,720    5,520 
Total Other Assets   2,895,122    2,995,030 
TOTAL ASSETS  $6,039,304   $6,193,494 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current Liabilities:          
Accounts payable  $5,285,315   $3,779,490 
Accrued expenses   1,732,352    1,639,049 
Lease Liability   153,000    267,000 
Current portion, notes payable   4,167,463    5,339,639 
Current portion, notes payable – related party   -    - 
Current portion, leases payable   12,053    23,611 
Total Current Liabilities  $11,350,182   $11,048,789 
           
Long-Term Liabilities:          
Notes payable  $16,308,060   $14,879,353 
Notes payable – related party   -    - 
Lease Liability   174,250    114,250 
Total Long-Term Liabilities   16,482,310    14,993,603 
           
Total Liabilities  $27,832,492   $26,042,392 
           
STOCKHOLDERS’ EQUITY (DEFICIT)          
Preferred stock, $.001 par value, 10,000,000 shares authorized, 4,000,000 Series E, issued and outstanding  $4,000   $4,000 
10,000 Series F, issued and outstanding   10    10 
Common stock, $0.001 par value, 5,000,000,000 shares authorized, and 824,861,624 issued and outstanding at September 30, 2023,   1,393,752    1,037,509 
Additional paid in capital   7,942,903    8,080,996 
Accumulated deficit   (31,133,851)   (28,971,411)
           
Total Stockholders’ Equity (Deficit)  $(21,793,187)  $(19,848,897)
           
Total Liabilities and Stockholders’ Equity (Deficit)  $6,039,304   $6,193,494 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

2
 

 

PACIFIC VENTURES GROUP, INC.

Consolidated Statements of Operations

 

   2023   2022   2023   2022 
   For the three months ended   For the nine months ended 
   Sept 30   Sept 30 
   2023   2022   2023   2022 
                 
Sales, net of discounts  $7,497,139   $9,918,873   $22,565,760   $30,837,691 
Cost of Goods Sold   6,574,517    8,747,961    19,468,917    26,504,179 
Gross Profit   922,621    1,170,912    3,096,842    4,333,512 
Operating Expenses                    
Selling, general and administrative   887,621    1,629,870    3,178,706    4,867,302 
Marketing and Advertising   32,888    14,735    63,779    80,667 
Amortization and Depreciation expense   104,978    124,682    315,443    374,045 
Professional fees   262,881    145,351    574,958    684,801 
Officer Compensation   75,000    75,000    225,000    242,500 
Operating Expenses/(Loss)   1,363,368    1,989,638    4,357,886    6,249,315 
Income/ (Loss) from Operations   (440,747)   (818,727)   (1,261,043)   (1,915,803)
Other Non-Operating Income and Expenses                    
Interest expense   (688,269)   (952,049)   (2,247,395)   (3,358,087)
Net Income/(Loss) before Income Taxes   (1,129,016)   (1,770,776)   (3,508,438)   (5,273,889)
Provision for income taxes   -                 
Net Ordinary Income/(Loss)   (1,129,016)   (1,770,776)   (3,508,438)   (5,273,889)
Other Income / Expense                    
Other Income – Other   1,176,907    158,166    1,339,346    236,221 
Net Income/(Loss)  $47,891   (1,612,610)  $(2,169,092)   (5,037,668)
Basic and Diluted Loss per Share – Common Stock  $0.00006   $(0.00487)  $(0.00263)  $(0.01522)
                     
Weighted Average Number of Shares Outstanding:                    
Basic and Diluted Class A Common Stock   824,861,624    330,951,025    824,861,624    330,951,025 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3
 

 

PACIFIC VENTURES GROUP, INC.

Consolidated Statements of Cash Flows

 

   2023   2022 
   For the nine months ended  
   Sept 30  
   2023   2022 
         
OPERATING ACTIVITIES          
Net loss  $(2,169,092)  $(5,037,668)
Adjustments to reconcile net loss to net cash used in operating activities:          
Shares issued for services   -       
Depreciation & Amortization Expense   309,331    374,045 
           
Changes in operating assets and liabilities          
Accounts receivable   137,151    309,896 
Inventory   (461,169)   (21,056)
Other Current Assets   

800

    (111)
Other Assets   -      
Accounts payable   1,419,677    395,604 
Accrued expenses   166,096    163,395 
Other Current liabilities   1,797    6,896 
Capitalized interest or penalty fees   1,654,562    1,434,110 
Other Changes in Assets          
Net Cash Provided by / (Used in) Operating Activities   1,059,152    (2,374,889)
INVESTING ACTIVITIES          
Receivable – Related   (200)      
Purchase of equipment, building & improvements & fixed assets   5,893   (70 )
Goodwill and Intangible Assets   -       
Net Cash Provided by / (Used In) Investing Activities   5,693   (70)
           
FINANCING ACTIVITIES          
Proceeds from notes payable   487,656    3,489,263 
Proceeds from notes payable – Related       - 
Repayment of notes payable   (1,589,775)   (1,227,654)
Repayment of notes payable – Related       - 
Proceeds from long-term loans   48,045    325,000 
Repayment of long-term loans   (125,806)   (207,500)
Repayment of debt by Shares   (218,150)   (1,772,353)
Shares Issued for Debt   218,150    1,912,587 
Shares Issued for Services       529,336 
Shares Issued For Cash   -      
Preferred Stocks Issued   -      
Common Stock Issued In Exchange of Preferred shares   -      
Prior period adjustment to retained earnings   6,653      
Net Cash Provided by / (Used in) Financing Activities   (1,173,227)   3,048,680 
           
NET INCREASE (DECREASE) IN CASH   (108,382)   673,720 
CASH AT BEGINNING OF PERIOD   259,938    16,435 
           
CASH AT END OF PERIOD  $151,555  $690,155 
           
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION          
           
CASH PAID FOR:          
Interest fees  $152,700   $103,001 
NON CASH FINANCING ACTIVITIES:          
Issuance of shares for debt conversion  $218,150   $1,626,307 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 4 

 

 

Pacific Ventures Group, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2023

(Unaudited)

 

1. NATURE OF OPERATIONS

 

Pacific Ventures Group, Inc. (the “Company,” “we,” “us” or “our”) was incorporated under the laws of the state of Delaware on October 3, 1986, under the name AOA Corporation. On November 12, 1991, the Company changed its name to American Eagle Group, Inc. On October 22, 2012, the Company changed its name to “Pacific Ventures Group, Inc.”

 

Unless the context requires otherwise or unless otherwise stated, references to “our Company,” “Pacific Ventures,” “PACV,” “we,” “us,” “our” and similar references refer to Pacific Ventures Group, Inc. and its consolidated subsidiaries.

 

Our Company

 

We strive to be one of America’s great meat processors and a leading foodservice distributor in the Southwest. Built through organic growth and acquisitions, we trace our roots back over 30 years to a few heritage companies with long legacies in food innovation and customer service.

 

We strive to inspire and empower chefs and foodservice operators to bring great food experiences to consumers. This mission is supported by our strategy of Best Foods at Best Prices which is centered on providing customers with the innovative products business support they need to operate their businesses profitably.

 

We supply approximately 300 customer locations in the Southwest. These customer locations include independently owned single and multi-unit restaurants, regional restaurant chains, hospitals, nursing homes, hotels and motels, country clubs, government and military organizations, colleges, and universities. We provide more than 1,500 fresh, frozen, and dry food stock-keeping units, or SKUs, as well as non-food items, sourced from multiple suppliers. Our sales associates manage customer relationships at local and regional levels. Our distribution facilities and fleet of approximately 15 trucks allow us to operate efficiently and provide high levels of customer service.

 

Our Industry

 

America’s food distribution industry has many companies competing in the space, including local, regional, and national foodservice distributors. Foodservice distributors typically fall into three categories, representing differences in customer focus, product offering, and supply chain:

 

  Broadline distributors which offer a “broad line” of products and services;
   
  System distributors which carry products specified for large chains; and
   
  Specialized distributors which primarily focus on specific product categories (e.g., meat or produce) or customer types.

 

Our Business Strategy

 

Our Best Foods at Best Prices strategy is built on a differentiation focus in product assortment, customer experience and innovation. Through this strategy, we also serve our customers as consultants and business partners, bringing our customers personalized solutions and tailoring a suite of innovative products and services to fit each customer’s needs.

 

 5 

 

 

The Best Foods Portion of our strategy features more than 500 products that are sustainably sourced or contribute to waste reduction. Our private brand portfolio is guided by a spirit of innovation and a commitment to delivering superior quality products and value to customers. While we offer products under a spectrum of private brands, and at different price points, all are designed to deliver quality, performance, and value to our customers.

 

Best Prices is aimed at providing operators reliability and flexibility in our service model supported by tools and resources to support them in running their businesses. This means on-time and complete orders and customer choice via the multi-channel offering we must serve our customers.

 

Acquisitions have also historically played an important role in supporting the execution of our growth strategy.

 

Products and Brands

 

We have a broad assortment of products and brands designed to meet customers’ needs. In many categories, we offer products under a spectrum of private brands based on price and quality covering a range of values and qualities.

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Principles of Consolidation

 

The consolidated financial statements include the Company, Snöbar Holdings, San Diego Farmers Outlet, Seaport Meat Company, MGD, IPIC and the Trust, which was established to hold IPIC, which in turn holds liquor licenses. All inter-company accounts have been eliminated during consolidation. See the discussion in Note 1 above for variable interest entity treatment of the Trust and IPIC.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Revenue Recognition

 

The Company recognizes revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, which requires that five basic steps be followed to recognize revenue: (1) a legally enforceable contract that meets criteria standards as to composition and substance is identified; (2) performance obligations relating to provision of goods or services to the customer are identified; (3) the transaction price, with consideration given to any variable, noncash, or other relevant consideration, is determined; (4) the transaction price is allocated to the performance obligations; and (5) revenue is recognized when control of goods or services is transferred to the customer with consideration given, whether that control happens over time or not. Determination of criteria (3) and (4) are based on our management’s judgments regarding the fixed nature of the selling prices of the products and services delivered and the collectability of those amounts. The adoption of ASC 606 did not result in a change to the accounting for any of the in-scope revenue streams; as such, no cumulative effect adjustment was recorded.

 

Unearned Revenue

 

Certain amounts are received pursuant to agreements or contracts and may only be used in the conduct of specified transactions, or the related services are yet to be performed. These amounts are recorded as unearned or deferred revenue and are recognized as revenue in the year/period the related expenses are incurred, or services are performed. As of September 30, 2023, the Company has $ 0.0 in deferred revenue. As of December 31, 2022, the Company also had $ 0.0 deferred revenue.

 

 6 

 

 

Leases

 

ASC 842, Leases, was required to be adopted for all financial years beginning after December 15, 2018, and requires long term leases (longer than 12 month) to be capitalized with a corresponding liability for the term of the lease and expensed over that term. Currently the Company has 1 long-term lease Seaport Meat Company.

 

Shipping and Handling Costs

 

The Company’s shipping costs are all recorded as operating expenses for all periods presented.

 

Disputed Liabilities

 

The Company may from time to time be involved in a variety of disputes, claims, and proceedings concerning its business operations and certain liabilities. We determine whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. We assess our potential liability by analyzing our litigation and regulatory matters using available information. We develop our views on estimated losses in consultation with outside counsel handling our defense in these matters, which involves an analysis of potential results, assuming a combination of litigation and settlement strategies. Should developments in any of these matters cause a change in our determination as to an unfavorable outcome and result in the need to recognize a material accrual or should any of these matters result in a final adverse judgment or be settled for significant amounts, they could have a material adverse effect on our results of operations, cash flows and financial position in the period or periods in which such change in determination, judgment or settlement occurs. As of September 30, 2023, the Company has $0 in disputed liabilities on its balance sheet.

 

Cash Equivalents

 

The Company considers highly liquid instruments with original maturity of three months or less to be cash equivalents. As of September 30, 2023, the Company has a cash balance of $151,555 in cash and cash equivalents, compared to $259,938 on December 31, 2022.

 

Accounts Receivable

 

As of September 30, 2023, Accounts Receivable are stated at net realizable value of $992,519. This value includes an appropriate allowance for estimated uncollectible accounts. As of September 30, 2023, the Company wrote off $0 of bad debt expense. The Company wrote off $ 0 bad debts during the three (3) months ended September 30, 2023, and Seaport has set an allowance for doubtful accounts of $86,914.

 

Inventories

 

Inventories are stated at the lower of cost or market value. Cost has been determined using the first-in, first-out method. Inventory quantities on-hand are regularly reviewed, and where necessary, reserves for excess and unusable inventories are recorded. Inventory consists of finished goods beef, pork, chicken, seafood, all other restaurant related goods, and the related packaging materials. As of September 30, 2023, the Company had total inventory assets of $1,360,163 consisting of all of Seaport Meat Company’s inventory assets of fresh and frozen proteins and seafood and all other restaurants supply items.

 

Income Taxes

 

Deferred taxes are provided on an asset and liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the difference between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

 7 

 

 

Net Income/(Loss) Per Common Share

 

Income/(loss) per share of common stock is calculated by dividing the net income/(loss) by the weighted average number of shares of common stock outstanding during the period. The Company has no potentially dilutive securities. Accordingly, basic and dilutive income/(loss) per common share are the same.

 

Property and Equipment

 

Property and equipment are carried at cost less accumulated depreciation and includes expenditures that substantially increase the useful lives of existing property and equipment. Maintenance, repairs, and minor renovations are expensed as incurred. Upon sale or retirement of property and equipment, the cost and related accumulated depreciation are eliminated from the respective accounts and the resulting gain or loss is included in the results of operations. The Company provides for depreciation of property and equipment using the straight-line method over the estimated useful lives or the term of the lease, as appropriate. The estimated useful lives are as follows: vehicles, five years; office furniture and equipment, three to fifteen years; equipment, three years.

 

Identifiable Intangible Assets

 

As of September 30, 2023, the Company’s Identifiable Intangible Assets are as follows:

 

Intangible Assets

 

Identifiable Intangible Assets

 

Trade Name (San Diego Farmers Outlet)  $141,000 
Trade Name (Seaport Meat)  $449,000 
Wholesale Customer Relationships (San Diego Farmers Outlet)  $266,000 
Wholesale Customer Relationships (Seaport Meat)  $2,334,239 
      
Total Identifiable Intangible Assets  $3,190,239 

 

Goodwill

 

Total Goodwill  $370,234 
      
Total Intangible Assets and Goodwill  $3,560,473 
      
Total Accumulated Amortization  $(855,073)
      
Total Intangible Assets & Goodwill (net)  $2,705,400 

 

Fair Value of Financial Instruments

 

The carrying amounts of the Company’s financial instruments, which include cash, accounts receivable, accounts payable, and accrued expenses are representative of their fair values due to the short-term maturity of these instruments.

 

Concentration of Credit Risk

 

Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash and accounts receivable. The Company maintains cash balances at financial institutions within the United States which are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to limits of approximately $250,000. The Company has not experienced any losses regarding its bank accounts and believes it is not exposed to any risk of loss on its cash bank accounts.

 

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Critical Accounting Policies

 

The Company considers revenue recognition and the valuation of accounts receivable, allowance for doubtful accounts, and inventory and reserves as its significant accounting policies. Some of these policies require management to make estimates and assumptions that may affect the reported amounts in the Company’s financial statements.

 

Recent Accounting Pronouncements

 

In September 2009, the FASB established the Accounting Standards Codification (“Codification” or “ASC”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). Rules and interpretive releases of the Securities and Exchange Commission (the “SEC”) issued under authority of federal securities laws are also sources of GAAP for SEC registrants. Existing GAAP was not intended to be changed because of the Codification, and accordingly the change did not impact our financial statements. The ASC does change the way the guidance is organized and presented.

 

In April 2015, FASB issued Accounting Standards Update (“ASU”) No. 2015-03, “Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs”, to simplify presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The ASU does not affect the recognition and measurement guidance for debt issuance costs. For public companies, the ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early application is permitted.

 

In April 2015, FASB issued ASU No. 2015-04, “Compensation – Retirement Benefits (Topic 715): Practical Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets”, which permits the entity to measure defined benefit plan assets and obligations using the month-end that is closest to the entity’s fiscal year-end and apply that practical expedient consistently from year to year. The ASU is effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early application is permitted.

 

In April 2015, FASB issued ASU No. 2015-05, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement”, which provides guidance to customers about whether a cloud computing arrangement includes a software license. If such includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If the arrangement does not include a software license, the customer should account for it as a service contract. For public business entities, the ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. Early application is permitted. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

 

In April 2015, FASB issued ASU No. 2015-06, “Earnings Per Share (Topic 260): Effects on Historical Earnings per Unit of Master Limited Partnership Dropdown Transactions”, which specifies that, for purposes of calculating historical earnings per unit under the two-class method, the earnings (losses) of a transferred business before the date of a drop-down transaction should be allocated entirely to the general partner. In that circumstance, the previously reported earnings per unit of the limited partners (which is typically the earnings per unit measure presented in the financial statements) would not change as a result of the dropdown transaction. Qualitative disclosures about how the rights to the earnings (losses) differ before and after the dropdown transaction occurs for purposes of computing earnings per unit under the two-class method also are required. The ASU is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Earlier application is permitted.

 

In September 2014, FASB issued ASU No. 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation”. The update removes all incremental financial reporting requirements from GAAP for development stage entities, including the removal of Topic 915 from the FASB Accounting Standards Codification. In addition, the update adds an example disclosure in Risks and Uncertainties (Topic 275) to illustrate one way that an entity that has not begun planned principal operations could provide information about the risks and uncertainties related to the company’s current activities. Furthermore, the update removes an exception provided to development stage entities in Consolidations (Topic 810) for determining whether an entity is a variable interest entity-which may change the consolidation analysis, consolidation decision, and disclosure requirements for a company that has an interest in a company in the development stage. The update is effective for the annual reporting periods beginning after December 15, 2014, including interim periods therein. Early application is permitted with the first annual reporting period or interim period for which the entity’s financial statements have not yet been issued (Public business entities) or made available for issuance (other entities). Our company adopted this pronouncement.

 

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In September 2014, FASB issued ASU No. 2014-12, “Compensation – Stock Compensation (Topic 718); Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”. The amendments in this ASU apply to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. For all entities, the amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. Entities may apply the amendments in this ASU either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. If retrospective transition is adopted, the cumulative effect of applying this Update as of the beginning of the earliest annual period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at that date. Additionally, if retrospective transition is adopted, an entity may use hindsight in measuring and recognizing the compensation cost. This updated guidance is not expected to have a material impact on our results of operations, cash flows or financial condition.

 

In August 2014, the FASB issued ASU 2014-15 on “Presentation of Financial Statements Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently, there is no guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this Update provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued).

 

All other newly issued accounting pronouncements which are not yet effective have been deemed either immaterial or not applicable.

 

We reviewed all other recently issued accounting pronouncements and determined these have no current applicability to the Company or their effect on the financial statements would not have been significant.

 

3. GOING CONCERN

 

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As shown in the accompanying consolidated financial statements, the Company has incurred a net loss of $2,169,092 for the nine (9) months ended September 30, 2023, and has an accumulated deficit of $31,133,851 as of September 30, 2023.

 

To continue as a going concern, the Company will need, among other things, additional capital resources. The Company is significantly dependent upon its ability, and will continue to attempt, to secure equity and/or additional debt financing. There are no assurances that the Company will be successful and without sufficient financing it would be unlikely for the Company to continue as a going concern.

 

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The unaudited consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These unaudited consolidated financial statements do not include any adjustments that might arise from this uncertainty.

 

4. INVENTORIES

 

As of September 30, 2023, the Company had inventory assets for a total of $1,360,163. The Company had inventory assets of $898,995 as of December 31, 2022.

 

5. PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment on September 30, 2023, and December 31, 2022, consisted of:

 

   September 30, 2023   December 31,
2022
 
Computers   5,895   $11,788 
Office Furniture   23,908    23,908 
Building & Improvement   29,673    29,673 
Forklift 1   4,533    4,533 
Forklift 2   2,871    2,871 
Truck 2019 Hino 155 3710   24,865    24,865 
Truck 2019 Hino 155 7445   34,213    34,213 
Truck 2018 Hino 155 5647   30,181    30,181 
Machinery & Equipment   1,109,811    1,109,811 
Leasehold Improvements   66,932    66,932 
Office Equipment   62,400    62,400 
Vehicles   409,108    409,108 
Accumulated Depreciation   (1,368,867)   (932,054)
           
Property, plant and equipment  $435,522   $878,229 

 

Depreciation and Amortization expenses for the nine (9) months ended September 30, 2023, was $315,443 compared to $374,045 for the same period of September 30, 2022.

 

6. ACCRUED EXPENSE

 

As of September 30, 2023, the Company had accrued expenses of $1,732,352 compared to $1,639,049 for the year-end December 31, 2022.

 

7. INCOME TAX

 

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

 

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8. NOTES PAYABLE

 

The following table presents a summary of the Company’s promissory notes issued to unrelated third parties as of September 30, 2023:

 

   Note Amount   Issuance Date   Balance 
Henry Mahgerefteh  $144,000    2/15/15   $110,834 
Mr. Advance   132,434    6/1/23    22,557 
1800 Diagonal Lending        7/12/17    104,250 
Clear Think Capital   1,405,000    3 loans    1,227,600 
LGH Investments   850,000    2 loans    443,600 
Jefferson Capital   330,000    12/1/22    182,000 
SBA Loan   309,900    4/1/20    299,194 
EIN Cap Inc   48,045    7/2023   48,045 
Dicer   64,678    7/20/20    54,277 
TCA Global fund   2,150,000    5/1/18    4,520,229 
TCA Global fund 2   3,000,000    12/17/19    9,715,045 
   $8,797,169        $16,727,700 

 

Purchase Receivables

 

   Amount   Issuance Date  Balance 
Cap Call  $1,000,000   3 loans-2020  $1,334,013 
NewCo Capital Group   506,000   March 2023   206,600 
Lends Park Corp   3,119,163   6/30/22   2,218,710 
   $4,625,163      $3,759,323 

 

On Feb 23, 2023, the Company entered into a financing arrangement with 1800 Diagonal Lending pursuant to which the Company borrowed a total principal of $258,449. As of September 30, 2023 the balance of the note is $104,250.

 

On May 1, 2018, Pacific Ventures Group entered into a secured promissory note with TCA Global Master Fund. The note was secured by interests in tangible and intangible property of Pacific Ventures Group. The effective interest rate on the note is 16%. The outstanding balance of the notes with TCA Global Fund for San Diego Farmers Outlet is $4,520,299 as of September 30, 2023, which includes capitalized interests.

 

On December 17, 2019, Pacific Ventures Group entered into a secured promissory note with TCA Special Situations Credit Strategies ICAV. The note was secured by interests in tangible and intangible property of Pacific Ventures Group. The effective interest rate is 16%. The outstanding balance of the notes for Seaport Meat is $9,715,045 as of September 30, 2023, which includes capitalized interests.

 

On July 20, 2020, Seaport Group Enterprises LLC entered a note in the amount of $150,000.00 for a new piece of machinery in order to upgrade the processing line. The note is payable monthly in installment payments of $2,500.00. As of September 30, 2023, the note is current.

 

In September 2020, Seaport Group Enterprises LLC entered into a revenue-based factoring agreement with Cap Call and received an aggregate of $1,000,000 CAP Call in exchange for $1,300,000.00 of future receipts relating to monies collected from customers or other third-party payors. Under the terms of the agreement, the Company is required to make weekly payments for 40 weeks.

 

In September of 2022, Seaport Group Enterprises LLC entered into a revenue-based factoring agreement with Lendspark Capital and received an aggregate of $ 2,637,600.00 Lendspark in exchange for 3,250,000.00 of future receipts to monies collected from customers or other third-party payors. Under the terms of the agreement, the Company is required to make daily payments for 46 weeks.

 

In September of 2023, Seaport Group Enterprises LLC entered into a settlement agreement on an original revenue-based factoring agreement with NewCo in the amount of $271,895. NewCo amended their original agreement and lowered payments in exchange for future receipts to monies collected from customers or other third-party payors. Under the terms of the agreement, the Company is required to make daily payments for 1 year.

 

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In the first and second quarter 2021, the Company entered into a note agreement with ClearThink Capital Partners with a total amount of $1,405,000. In the first quarter of 2021, the Company entered into a note agreement of $325,000. The notes can be repaid in cash or converted common stock or a combination of both. Balance of all the notes is $1,227,600. As of September 30, 2023, the notes are current.

 

In the second quarter of 2021, the Company entered into note agreements with LGH Financial in the total amount of $443,600. The note can be repaid in cash or converted common stock or a combination of both. As of September 30, 2023, the note is current.

 

In December of 2022, the Company entered into a note agreement with Jefferson Street Capital in the amount of $330,000. The note can be repaid or convertible into common stock or a combination of both. As of September 30, 2023, the balance of the note is $182,000 and the note is current.

 

As of September 30, 2023, the Company had short-term notes payable of $408,140 and long-term notes payable of $16,308,060. The Company had purchase receivables of $3,759,323.

 

9. STOCKHOLDERS’ EQUITY

 

Common Stock and Preferred Stock

 

The Company is authorized to issue up to 10,000,000 shares of its preferred stock, $0.001 par value per share. The Company designated 4,000,000 shares of preferred stock as Series E Preferred Stock (the “Series E Preferred Stock”). Under the rights, preferences, and privileges of the Series E Preferred Stock, for every share of Series E Preferred Stock held, the holder thereof has the voting rights equal to 10 shares of common stock. As of September 30, 2023, there were 4,000,000 shares of Series E Preferred Stock issued and outstanding. Additionally, Company has designated 10,000 shares of Series F Preferred Stock and 10,000 shares of the Series F Preferred Stock are issued and outstanding. Each share of Series F Preferred Stock is convertible into 0.1% of the issued and outstanding stock at the time of conversion.

 

From January 1, 2023, through September 30, 2023, the Company issued 356,242,982 shares of its common stock.

 

The Company is authorized to issue up to 5,000,000,000 shares of its common stock, $0.001 par value per share. Holders of common stock have one vote per share. As of September 30, 2023, and the same period in 2022, there were 824,861,624 and 330,951,025 shares of the Company’s common stock issued and outstanding, respectively.

 

10. COMMITMENTS, CONTINGENCIES AND UNCERTAINTIES

 

Operating Lease

 

The Company is currently obligated under two operating leases for office spaces and associated building expenses. Both leases are on a month-to-month basis at a monthly rate of $525 and 650, respectively.

 

 

Seaport Group Enterprise LLC is located at 2533 Folex Way, Spring Valley CA 91978, where they occupy an aggregate of approximately 12,000 square feet pursuant to the lease. The 5-year leases are on an annual basis starting at a monthly rate of $15,345.00 per month.

 

 

The Company on December 1, 2019, entered into a lease agreement for a facility site for office space for Seaport Meat Company. The lease has a term of five years expiring on November 30, 2029.

 

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Future minimum lease payments, as set forth in the lease, are below:

 

YEAR  AMOUNT 
2023  $177,000 
2024  $177,000 
2025  $177,000 
2026  $177,000 
2027  $162,250 

 

Concentration Risk

 

The Company is potentially subject to concentration risk in its sales revenue and from a major supplier of goods for sale.

 

Major Customer

 

The Company has one major customer that accounted for approximately 52% and $14,157,385 of sales for the nine months ended September 30, 2023. The Company expects to maintain this relationship with the customer.

 

Major Vendor

 

The Company has one major vendor that accounted for approximately 66% and $11,625,590 of cost of sales for the nine months ended September 30, 2023. The Company expects to maintain this relationship with the vendor.

 

11. SETTLEMENT AGREMENT

 

On September 6, 2023, the Company entered into a settlement agreement and stipulation (“Settlement Agreement”) with Trillium Partners, LP (“Trillium”) in connection with the settlement of $6,033,474.16 of bona fide obligations the Company owed to certain of its creditors. The Settlement Agreement was subject to a fairness hearing and, following such fairness hearing, on October 10, 2023, the Superior Court of the State of California, County of Los Angeles, Central District (the “Court”), entered an order approving the Settlement Agreement.

 

If the Settlement Agreement is satisfied in full, the Company shall reduce the Company’s debt obligations in the aggregate amount of $6,033,474.16, in exchange for the issuance of shares of Company’s common stock (the “Settlement Shares”) pursuant to the provisions of Section 3(a)(10) of the Securities Act of 1933, as amended, in multiple tranches. It is estimated that the Company will, pursuant to the terms of the Settlement Agreement, issue to Trillium approximately $9,282,267.93 of Settlement Shares, if the Settlement Agreement is satisfied in full, which represents a 35% discount to the market price of the Company’s common stock. At no time may Trillium beneficially own more than 9.99% of the Company’s outstanding common stock.

 

12. AMENDMENT OF CERTIFICATE OF INCORPORATION

 

On August 25, 2023, the Company amended its Certificate of Incorporation to implement a 250-for-1 reverse split of the Company’s common stock. The Company has filed an appropriate Corporate Action with FINRA, to obtain approval of such reverse split. The Company is unable to predict when FINRA approval will be obtained.

 

13. SUBSEQUENT EVENTS

 

Management has evaluated subsequent events, in accordance with FASB ASC Topic 855, “Subsequent Events,” through the date which the financial statements were available to be issued, and there are no material subsequent events requiring disclosure.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Forward-Looking Statements

 

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 several 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.

 

We caution that the factors described herein, and other factors could cause our actual results of operations and financial condition to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

 

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Basis of Presentation

 

The unaudited financial statements for the nine months ended September 30, 2023, and 2022, 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.

 

The following discussion and analysis is intended to help the reader understand the Company, our financial condition and results of operations and our present business environment. It should be read together with our consolidated financial statements and related notes contained elsewhere in this Quarterly Report. The following discussion and analysis contain certain financial measures that are not required by, or presented in accordance with, accounting principles generally accepted in the U.S. (“GAAP”). We believe these non- GAAP financial measures provide meaningful supplemental information about our operating performance and liquidity.

 

COVID-19

 

Should the negative economic impact caused by the COVID-19 pandemic, including the response thereto, result in continuing long-term economic weakness in the United States and/or globally, our ability to maintain or expand our business could be negatively impacted. However, we are unable to make any prediction in this regard.

 

Inflation

 

During 2022, inflation became a significant negative factor in our operations, and it continues to be a significant pressure on our ability to operate at a profit. Since Spring 2022, food costs have increased dramatically, and our margins have been reduced. These inflationary pressures continue to impact our operations. However, given the current economic volatility, we are unable to predict with certainty how our operating results will be impacted by inflation during the remainder of 2023 and the first half of 2024.

 

Operating Metrics

 

Case growth—Case growth, by customer type (e.g., independent restaurants) is reported as of a point in time. Customers periodically are reclassified, based on changes in size or other characteristics, and when those changes occur, the respective customer’s historical volume follows its new classification.

 

Organic growth—Organic growth includes growth from operating business that has been reflected in our results of operations for at least 12 months.

 

Strategy

 

During the first nine months of 2023, the Company’s strategy has been focused on:

 

  incrementally increase sales and profitability of San Diego Farmers Outlet (SDFO) and Seaport Meat Company.
  Reduce expenditures for San Diego Farmers Outlet by consolidating operations with Seaport Meat Company
  acquisition of food production or distribution companies that are synergistic with SDFO and Seaport Meat Company.

 

Seaport is looking to improve the current processing line and add and upgrade to a more efficient and automated processing line. This will allow Seaport to operate more efficiently and reduce the amount of overtime hours on the production line. Seaport plans to increase its customer base.

 

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We plan to grow SDFO’s wholesale business by expanding its delivery territory from 40 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 grow through acquisitions of similar meat and food processing/distributing companies located within the Southwest. Our company has identified and are currently speaking with a few key opportunities.

 

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.

 

Going Concern

 

The accompanying consolidated financial statements have been prepared assuming we will continue as a going concern. As discussed in this Quarterly Report and in the notes to the Company’s consolidated financial statements included elsewhere herein, we have incurred operating losses, and as of September 30, 2023, and December 31, 2022, we have accumulated deficit of $31,133,851 and $28,971,411, respectively. As of September 30, 2023, we had a positive cash position and a working capital deficiency of $8,641,552. These factors raise substantial doubt 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. 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 Operation 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 to satisfy our working capital and other cash requirements.

 

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Results of Operations

 

Nine Months Ended September 30, 2023, as Compared to Nine Months Ended September 30, 2022

 

Revenues — The Company recorded $22,565,760 sales revenue for the nine months ended September 30, 2023, as compared to $30,837,691 for the same period of September 30, 2022. The Company had $1,360,163 inventory of saleable merchandise as of September 30, 2023, as compared to $1,414,271 for the same period ending September 30, 2022.

 

Operating Expenses — Total cash provided in operating expenses for the nine months ended September 30, 2023, was $1,059,152 as compared to $2,374,889 of cash used in the same period in 2022.

 

Selling, General and Administrative Expenses — Selling, general and administrative expenses for the nine months ended September 30, 2023, decreased to $3,178,706 from $4,867,302 in the same period in 2022, which was due to an decrease in various business expenses.

 

Marketing and Advertising Expenses – Marketing and advertising expenses for the nine months ended September 30, 2023, was $63,779 compared to $80,667 on September 30, 2022.

 

Professional fees – Professional fees expense for the nine months ended September 30, 2023, was $574,958, which includes accounting, legal fees and consulting services compared to $684,801 during the same period in 2022.

 

Depreciation and Amortization Expenses — Depreciation and Amortization expenses for the nine months ended September 30, 2023, and the same period in 2022 were $315,443 and $374,045, respectively.

 

Salaries and Wages — Salaries and wages expense, in the form of payroll expenses, which is included under selling & general expenses for the nine months ended September 30, 2023, was $1,596,420 as compared to $2,315,935 for the prior same period in 2022.

 

Other Non-Operating Income and Expenses — For the nine months period ended September 30, 2023, the Company recorded interest and penalty expenses in the amount of $2,247,395 for a non-operating loss in the same amount. In the nine months ended September 30, 2022, the Company recorded other non-operating expenses of $3,358,087 in interest expense for a non-operating loss in the same amount.

 

Net Loss — Net loss for nine months ended September 30, 2023, was $2,169,092, as compared to net loss of $5,037,668 for the nine months in the same period ended September 30, 2022.

 

Financial Condition, Liquidity and Capital Resources

 

As of September 30, 2023, the Company had a working capital deficit of $8,641,552 consisting of $151,555 in cash or cash equivalents overdraft, $992,519 in accounts receivable, $1,360,163 in inventory, $187,579 in other assets and $16,845 in deposits, offset by accounts payable of $5,285,315, accrued expenses of $1,732,352, equipment of $12,053, current portion of notes payable of $4,167,463 and $153,000 in other current liabilities.

 

For the nine months period ended September 30, 2023, the Company provided $1,059,152 of cash in operating activities, had provided $5,693 in cash for investing activities and used $1,173,227 cash from financing activities, resulting in a decrease in total cash of $108,382, and a cash balance of $151,555 for the period. For the nine months period ended September 30, 2022, the Company used cash of $2,374,889 in operating activities, had used $70 in cash for investing activities and provided cash of $3,048,680 from financing activities, resulting an increase in cash of $673,720 and a cash balance of $690,155 at the end of such period.

 

Total current assets as of September 30, 2023, was $2,708,660, while current liabilities were $11,350,182. The Company has incurred a net loss of $2,169,092 for the nine months period ended September 30, 2023, largely due the increase in operating expenses, and increase in interest. During the nine months period ended September 30, 2023, the Company had an accumulated deficit of $31,133,851. These factors raise substantial doubt about our ability to continue as a going concern.

 

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Changes in the composition of our Notes Payable and Notes Payable-Related Parties are presented in the table below:

 

   As of September 30, 2023   As of Dec 31, 2022 
   $ Current   $ Long-Term   $ Current   $ Long Term 
Notes Payable   408,140    16,308,060    469,176    14,879,353 
                     
Notes Payable – Related   -    -           
   $408,140   $16,308,060   $469,176   $14,879,353 

 

Total Notes Payable for related and unrelated parties increased by $1,367,671 from the fiscal year ended December 31, 2022, from $15,348,529 to $16,716,200 in the nine months period ended September 30, 2023.

 

As of September 30, 2023, total stockholders’ equity deficit increased to $21,793,187 from $19,848,897 as of December 31, 2022. Accumulated deficit increased from $28,971,411 in the fiscal year ended December 31, 2022, to $31,133,851 for the nine months period ended September 30, 2023.

 

As of September 30, 2023, the Company had a cash balance of $151,555 (i.e. cash is used to fund operations). The Company does not believe our current balances will be sufficient to allow us to fund our operating plan for the next twelve months. Our ability to continue as a going concern is dependent on us obtaining adequate capital to fund operating losses until we become profitable. If we are unable to obtain adequate capital, we could be forced to cease operations or substantially curtail its drug development activities. These conditions raise substantial doubt as to our ability to continue as a going concern. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities should we be unable to continue as a going concern.

 

Our principal sources of liquidity in the past have been cash generated by issuing new shares of the Company’s common stock and cash generated from loans to us. To be able to achieve our strategic goals, we need to further expand our business and financing activities. To continue to develop our product offerings and generate sales, significant capital has been and will continue to be required. Management intends to fund future operations through additional private or public equity and/or debt offerings. We continue to engage in preliminary discussions with potential investors and broker-dealers, but no terms have been agreed upon. There can be no assurances, however, that additional funding will be available on terms acceptable to us, or at all. Any equity financing may be dilutive to existing shareholders. 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.

 

Settlement Agreement

 

On September 6, 2023, the Company entered into a settlement agreement and stipulation (“Settlement Agreement”) with Trillium Partners, LP (“Trillium”) in connection with the settlement of $6,033,474.16 of bona fide obligations the Company owed to certain of its creditors. The Settlement Agreement was subject to a fairness hearing and, following such fairness hearing, on October 10, 2023, the Superior Court of the State of California, County of Los Angeles, Central District (the “Court”), entered an order approving the Settlement Agreement.

 

If the Settlement Agreement is satisfied in full, the Company shall reduce the Company’s debt obligations in the aggregate amount of $6,033,474.16, in exchange for the issuance of shares of Company’s common stock (the “Settlement Shares”) pursuant to the provisions of Section 3(a)(10) of the Securities Act of 1933, as amended, in multiple tranches. It is estimated that the Company will, pursuant to the terms of the Settlement Agreement, issue to Trillium approximately $9,282,267.93 of Settlement Shares, if the Settlement Agreement is satisfied in full, which represents a 35% discount to the market price of the Company’s common stock. At no time may Trillium beneficially own more than 9.99% of the Company’s outstanding common stock.

 

Off-Balance Sheet Arrangements

 

There are no other 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.

 

Critical Accounting Policies and Estimates

 

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.

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Based on this definition, we have identified the critical accounting policies and judgments addressed which are described in Note 2 to our condensed consolidated financial statements included elsewhere in this Quarterly Report. 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.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

Not required for smaller reporting companies.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

As required by Securities Exchange Act of 1934, as amended (the “Exchange Act”), Rule 13a-15(b), we have carried out an evaluation (the “Evaluation”), under the supervision and with the participation of our management, including our Chief Executive Officer and Interim Chief Financial Officer, of the effectiveness of the design and operation of our management, and the design and operation of our disclosure controls and procedures as of September 30, 2023. Based upon an evaluation of the effectiveness of disclosure controls and procedures, our Chief Executive Officer and Interim Chief Financial Officer has concluded that as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) were not effective because of the material weaknesses described below, in order to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the SEC and is accumulated and communicated to management, including the Chief Executive Officer and Interim Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure (see below for further discussion).We had neither the resources, nor the personnel, to provide an adequate control environment.

 

Due to our limited resources, the following material weaknesses in our internal control over financial reporting continued to exist on September 30, 2023:

 

  we do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”);
     
  we do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our limited size and early-stage nature of operations, segregation of all conflicting duties may not always be possible and may not be economically feasible; however, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals;
     
  we do not have an independent audit committee of our Board of Directors;
     
  insufficient monitoring and review controls over the financial reporting closing process, including the lack of individuals with current knowledge of GAAP that led to the restatement of our previously issued financial statements; and

 

We believe that these material weaknesses primarily related, in part, to our lack of sufficient staff with appropriate training in GAAP and SEC rules and regulations with respect to financial reporting functions, and the lack of robust accounting systems, as well as the lack of sufficient resources to hire such staff and implement these accounting systems.

 

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If and when our financial resources allow, we plan to take a number of actions to correct these material weaknesses including, but not limited to, establishing an audit committee of our Board of Directors comprised of three independent directors, hiring a full-time Chief Financial Officer, adding experienced accounting and financial personnel and retaining third-party consultants to review our internal controls and recommend improvements.

 

It should be noted that any system of controls, however well designed and operated, can provide only reasonable and not absolute assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of certain events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

 

Changes in Internal Control Over Financial Reporting

 

There were no material changes in our internal control over financial reporting (as defined in Rule 13a- 15(f) under the Exchange Act) that occurred as of September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

CEO and CFO Certifications

 

Exhibits 31.1 and 31.2 to this Quarterly Report are the Certifications of the Chief Executive Officer and the Interim Chief Financial Officer, respectively. These Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act (the “Section 302 Certifications”). This Item 4 of this Quarterly Report, which you are currently reading, is the information concerning the Evaluation referred to above and in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.

 

PART II - OTHER INFORMATION

 

ITEM 1. Legal Proceedings

 

From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results. The Company is currently not aware of any pending legal proceedings, other than as set forth below.

 

Mountain Meadow Mushroom Farms, Inc. v. Pacific Ventures Group, Inc., Royalty Foods Partners, LLC, et al. In this case filed on November 23, 2020, in San Diego Superior Court (Case No. 37-2020-00042757-CU-CL-CTL), the plaintiff sought an award of damages in the sum of $41,168. The parties entered into a settlement agreement, wherein the Company agreed to pay the sum of $29,000 over a period of approximately 30 months. The Company is current in its payment obligations.

 

Seaport Group Enterprises, Inc. v. Mousa Rahib dba Canada Steak. In this case filed on May 26, 2022, in San Diego Superior Court (Case No. 37-2022-00020174-CL-BC-CTL), the Company seeks damages of $2,700 in connection with the defendant’s failure to pay invoices for products delivered. The Company has filed a Request for Entry of Default against the defendant, which pleading remains under consideration by the court. The Company was successful in obtaining an Judgement against the defendant and intends to collect in full.

 

TraDigital Marketing Group, Inc. -vs- Pacific Ventures Group, Inc. In this arbitration case filed on September 10, 2022. The arbitrator entered an award in favor of TraDigital Marketing in the amount of $54,864.40, which is to be paid by the Company over ten months. The Company is current in its payment obligations.

 

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ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

Recent Sales of Unregistered Securities

 

During the nine months ended September 30, 2023, the Company issued 356,242,982 shares of its common stock for conversion of notes in transaction exempt from registration under Section 4(a)(2) of the Securities Act of 1933.

 

ITEM 3. Defaults Upon Senior Securities

 

None

 

ITEM 4. Mine Safety Disclosures

 

Not applicable.

 

ITEM 5. Other Information.

 

Amendment of Certificate of Amendment

 

None.

 

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ITEM 6. Exhibits

 

Exhibit

Number

  Description
     
2.1   Share Exchange Agreement, dated August 14, 2015, by and among the Company, Snöbar Holdings, Inc., and certain shareholders of Snöbar Holdings, Inc. (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, filed with the SEC on August 14, 2015).
     
2.2   Amendment No. 1 to Share Exchange Agreement, dated August 21, 2015, by and among the Company, Snöbar Holdings, Inc., and certain shareholders of Snöbar Holdings, Inc. (Incorporated by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K, as filed with the SEC on September 25, 2015).
     
3.1   Fourth Amended and Restated Certificate of Incorporation of the Company (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, as filed with the SEC on November 16, 2017).
     
3.2   Bylaws of the Company (Incorporated by reference to Exhibit 3.2 of the Company’s Registration Statement on Form S-1/A, as filed with the SEC on June 14, 2017.
     
3.3   Amendment No. 1. To the the Bylaws of the Company (Incorporated by reference to Exhibit 3.3 of the Company’s Registration Statement on Form S-1/A, as filed with the SEC on June 14, 2017.
     
3.4   Certificate of Amendment to the Certificate of Incorporation of the Company filed on August 25, 2023.
     
10.1   Co-Packaging Letter Agreement dated April 24, 2013, by and between International Production Impex Corporation and Brothers International Desserts, Inc. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed with the SEC on September 25, 2015).
     
10.2   Distribution Agreement, dated March 16, 2015, between International Production Impex Corporation and Spectrum Entertainment & Events LLC (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, as filed with the SEC on September 25, 2015).
     
10.3   Distribution Agreement, dated September 5, 2015, between International Production Impex Corporation and Eddie Holman (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, as filed with the SEC on September 25, 2015).
     

10.4

 

  Exclusive Distribution Agreement, dated February 3, 2015, between International Production Impex Corporation and Yes Consolidated, LLC (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, as filed with the SEC on September 25, 2015).
     
10.5   Distribution Agreement, dated May 1, 2015, between International Production Impex Corporation and Dejako Trading Company (Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K, as filed with the SEC on September 25, 2015).
     
10.6   Form of Lock-Up/Leak-Out Agreement between the Company and certain Snöbar Shareholders party thereto (Incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K, as filed with the SEC on September 25, 2015).
     
10.7   Anti-Dilution Agreement, dated September 25, 2015, among the Company and Brett Bertolami and Danzig Ltd. (Incorporated by reference to Exhibit 10.7 to the Company’s Current Report Form on Form 8-K, as filed with the SEC on September 25, 2015).

 

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10.8

 

  Piggyback Registration Rights Agreement, dated September 25, 2015, by and among the Company, Snöbar Shareholders and other persons thereto (Incorporated by reference to Exhibit 10.8 to the Company’s Annual Report on Form 10-K, Amendment No. 1, as filed with the SEC on October 16, 2017).
 

10.9   Trust Agreement, dated September 1, 2013 by and between Snobar Holding, Inc. and Azizollah Masjedi(Incorporated by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K, Amendment No. 1, as filed with the SEC on October 16, 2017).
     
10.10   Form of Promissory Note by and between the Company and certain related parties (Incorporated by reference to Exhibit 10.10 to the Company’s Annual Report on Form 10-K/A, as filed with the SEC on October 16, 2017).
     
10.11   SEAPORT amended APA (Incorporated by reference to Exhibit 10 to the Company’s Current Report on Form 8-K as filed with the SEC on December 20, 2019).
     
10.12   SEAPORT Asset Purchase Agreement (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on December 20, 2019).
     
10.13   Exchange IB Obligations Membership Interests in Seaport (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K as filed with the SEC on December 20, 2019).
     
10.14   Pledge Irrevocable Proxy (TCA Royalty Foods I, LLC) (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K as filed with the SEC on December 20, 2019).
     
10.15   Pledge Irrevocable Proxy (Seaport Group Enterprises LLC) (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K as filed with the SEC on December 20, 2019).
     
10.16   Pledge and Escrow Agreement (Pacific - TCA) (Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K as filed with the SEC on December 20, 2019).
     
10.17   Pledge and Escrow Agreement (Pacific - Seaport) (Incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K as filed with the SEC on December 20, 2019).
     
10.18   Pacific Ventures Group - Security Agreement (Issuer) (Incorporated by reference to Exhibit 10 .7 to the Company’s Current Report on Form 8-K as filed with the SEC on December 20, 2019).
     
10.19   Pacific Ventures Group - Security Agreement (Guarantors) (Incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K as filed with the SEC on December 20, 2019).
     
10.20   Pacific Ventures Group - Corporate Guaranty (Masjedi) (Incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K as filed with the SEC on December 20, 2019).
     
10.21   Pacific Ventures Group - Corporate Guaranty (Guarantors) (Incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K as filed with the SEC on December 20, 2019).
     
10.22   Debenture (Working Capital) TCA ICAV Pacific Venture Group (Incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K as filed with the SEC on December 20, 2019).
     
10.23   Debenture (Purchase Price) TCA ICAV Pacific Venture Group (Incorporated by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K as filed with the SEC on December 20, 2019).
     
10.24   Securities Purchase Agreement TCA special Situations Pacific Ventures (Incorporated by reference to Exhibit 10.13 to the Company’s Current Report on Form 8-K as filed with the SEC on December 20, 2019).
     
31.1*   Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
     
31.2*   Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
     
32.1**   Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
101.INS*   Inline XBRL Instance Document
101.SCH*   Inline XBRL Taxonomy Extension Schema Document
101.CAL*   Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*   Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*   Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*   Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*   Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

*   Filed herewith.
**   Furnished herewith.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  PACIFIC VENTURES GROUP, INC.
     
Date: November 20, 2023 By: /s/ Shannon Masjedi
    Shannon Masjedi
    President, Chief Executive Officer and Interim Chief Financial Officer (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

 

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