You should read the following discussion together with our financial statements and the related notes included elsewhere in this annual report on Form 10-K. This discussion contains forward-looking statements that are based on our current expectations, estimates and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements.





Overview

Hometown International, Inc. (the "Company," "we," "us," or "our") was incorporated on May 19, 2014 under the laws of the State of Nevada. The Company is the originator of a new Delicatessen concept. Through our wholly-owned subsidiary, Your Hometown Deli, LLC ("Your Hometown Deli"), we operate a delicatessen store that features "home-style" sandwiches and other entrees in a casual and friendly atmosphere. The store is designed to offer local patrons of all ages with a comfortable community gathering places. Targeted towards smaller towns and communities, the Company's first unit was built in Paulsboro, New Jersey.

On January 18, 2014, Your Hometown Deli was formed under the laws of State of New Jersey. On May 29, 2014, Your Hometown Deli entered into a Membership Interest Purchase Agreement with the Company and, as a result, is a wholly-owned subsidiary of ours.

We introduced our delicatessen concept under the Your Hometown Deli brand name. The Your Hometown Deli model features "home-style" sandwiches, food items, and groceries, in a casual and friendly atmosphere. The plan is for all Your Hometown Delis are designed to be comfortable community gathering places for customers of all ages. The Company seeks to create an establishment that will appeal to local residents and commuting workers, conveniently offering high-quality products at fair prices. To date, the Company's first and only location was opened in Paulsboro, New Jersey on October 14, 2015. We began generating revenue from the sales of our food and beverage since our soft opening in mid-October 2015.

During the year ended December 31, 2021, we continued to refine our menu and operating hours. We have limited our advertising, mainly using social media and direct mailing to residents in towns around our store. We have incurred losses in the development of our business and expect our losses to continue during 2022.

Going forward, we intend to seek, investigate and, if such investigation warrants, engage in a business combination with a private entity whose business presents an opportunity for our shareholders. Our objectives discussed below are extremely general and are not intended to restrict discretion of our board of directors to search for and enter into potential business opportunities or to reject any such opportunities.

We will not restrict our potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business. Further, we may acquire or combine with a venture that is in its preliminary or early stages of development, one that is already in operation or one that is in a more mature stage of its corporate existence. Accordingly, business opportunities may be available in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities difficult and complex.

The analysis of new business opportunities will be undertaken by or under the supervision of our executive officers and directors, none of whom is a business analyst. Therefore, it is anticipated that outside consultants or advisors may be utilized to assist us in the search for and analysis of qualified target companies.

The Company has identified a potential target company and is currently engaged in discussions regarding a possible business combination. The consummation of the transaction is contingent upon the parties entering into definitive agreements and satisfaction of the closing conditions set forth in those agreements, and other conditions, including, but not limited to, satisfactory completion by the Company and the target of all necessary business and legal due diligence. There is no assurance that the Company will consummate a transaction with this potential target company, or successfully identify and evaluate other suitable business opportunities, or that the Company will conclude a business combination at all.

Following any business combination we consummate our management will continue to evaluate and determine the viability of our existing delicatessen business currently operated through Your Hometown Deli.

As reflected in the financial statements include with this Annual Report on Form 10-K, the Company used cash in operations of $396,185 and has a net loss from operations of $481,287 and an accumulated deficit of $1,919,563 for the fiscal year ended December 31, 2021.





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Recent Developments

Impact of Current Coronavirus (COVID-19) Pandemic on the Company

We were forced to temporarily close our delicatessen located in Paulsboro, New Jersey, due to the stay-at-home order issued by the Governor of New Jersey on March 9, 2020, resulting from the outbreak of COVID-19. The delicatessen was re-opened on September 8, 2020, with a "soft opening" to a limited audience, prior to its "Grand Re-Opening" to the public on September 22, 2020. The effects of COVID-19 continued to have a material impact on our business during 2021 by hindering staff availability, limiting the flow of customers into our delicatessen, and restricting our supply chain. Although we are unable to estimate the ultimate impact, it is anticipated that the COVID-19 pandemic will continue to impact our business in 2022.





Corporate Developments

The delicatessen was temporarily closed, beginning on August 1, 2021, while we changed management of Your Hometown Deli and hired a new operations manager for the store in Paulsboro, New Jersey. The delicatessen reopened on September 11, 2021, with increased staff and expanded hours.

Critical Accounting Policies and Estimates





Use of Estimate

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Significant estimates include valuation of in-kind contribution of service and valuation of deferred tax assets. Actual results could differ from those estimates.





Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification, Revenue from Contracts with Customers (Topic 606). The standard states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

The Company generates revenue operating a delicatessen. Revenues from the operations of Company-owned delicatessen are recognized when sales occur.

Recent Accounting Pronouncements

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





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Results of Operations

Comparison for the Fiscal Year Ended December 31, 2021 and 2020

We generated revenue of $25,004 and $13,976 for the years ended December 31, 2021 and 2020, respectively. The increase in revenue is attributed to the easing of COVID-19 restriction in 2021, as compared to 2020. We had been forced to temporarily close our delicatessen located in Paulsboro, New Jersey, in 2020 due to the stay-at-home order issued by the Governor of New Jersey on March 9, 2020, resulting from the outbreak of COVID-19. The increase in revenue is mainly attributed to an increase in customer's visits following the re-opening of our delicatessen as a result of the easing of restrictions related to the COVID-19 pandemic.

Our total cost and expenses were $511,223 for the year ended December 31, 2021, compared to $638,414 for the year ended December 31, 2020. The total cost and expenses decreased by approximately 20% primarily as a result of a decrease of $160,000 in consulting fees paid to related parties and a decrease of $50,693 in professional fees related to the preparation and filing of a registration statement by the Company during the year ended December 31, 2020, offset by an increase in food costs of $11,080, an increase in labor costs of $15,176, an increase of $52,500 in consulting fees paid during year ended December 31, 2021, and an increase of $8,706 in general and administrative expenses. The increase in general and administrative fees was attributable to fees required in connection with filings with the SEC and an increase in general business expenses.

We incurred a loss from operations of $486,219 and $624,438 for the years ended December 31, 2021 and 2020, respectively. The decrease in loss from operations is mainly attributable to a decrease in total costs and expenses slightly offset by our increase in revenue during the year ended December 31, 2021, as compared to the same period ended December 31, 2020.

Other income for the year ended December 31, 2021 was $0 as compared to $1,000 in 2020, resulting from the New Jersey Economic Development Authority grant we received in 2020 from the NJEDA Small Business Emergency Assistance Phase 2 Grant assistance program in light of the impact of the coronavirus pandemic.

Interest income - related parties increased by $3,936 to $4,809 for the year ended December 31, 2021 from $873 for the year ended December 31, 2020. The increase was primarily due to increased interest on note receivable - related party as a result of an increase in the amount of a note receivable.

Interest expense was $0 for the year ended December 31, 2021, as compared to $9,091 for the year ended December 31, 2020. This decrease was due to a lower interest expense on the loans as a result of a decrease in debt outstanding.

Due to the described factors above, we had a net loss of $481,287 and $631,356 for the years ended December 31, 2021 and 2020, respectively.

Liquidity and Capital Resources

As of December 31, 2021, we had current assets of $1,152,746, consisting of $1,149,369 in cash and $3,377 in inventory. Our current liabilities as of December 31, 2021, were $72,351, which is comprised of $62,297 due to certain former officers, $4,643 in accounts payable and accrued expenses, and $5,411 in current operating lease liability.





The following is a summary of our cash flows provided by (used in) operating,
investing, and financing activities for the years ended December 31, 2021 and
2020:



                                                                For the year       For the year
                                                                   ended               ended
                                                                December 31,       December 31,
                                                                    2021               2021
Net Cash Used in Operating Activities                          $     (396,185 )   $      (668,668 )
Net Cash Provided by (Used in) Investing Activities            $      150,000     $      (150,000 )
Net Cash (Used in) Provided by Financing Activities            $       (2,452 )   $     2,211,292
Net (Decrease) Increase in Cash and Cash Equivalents           $     (248,637 )   $     1,392,624




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For the year ended December 31, 2021, net cash used in operations of $396,185 was the result of a net loss of $481,287 offset by in-kind contribution of services by $77,571, depreciation expense of $233, a decrease in prepaid expenses and other current assets of $6,594, an increase in inventory of $2,423, a decrease in interest receivable of $872, and an increase in accounts payable and accrued expense of $2,255.

For the year ended December 31, 2020, net cash used in operations of $668,668 was the result of a net loss of $631,356 offset by in-kind contribution of services of $30,856, depreciation expense of $5,801, an increase in prepaid expenses and other current assets of $6,594, a decrease in inventory of $90, an increase in interest receivable of $872, and a decrease in accounts payable and accrued expense of $66,593.

Net cash provided by our investing activities was $150,000 for the year ended December 31, 2021 and net cash used by our investing activities was $150,000 for the year ended December 31, 2020. The increase was attributable to issuance of note receivable - related party of $150,000 and a repayment of note receivable - related party of $300,000.

Our financing activities resulted in a cash outflow of $2,452 for the year ended December 31, 2021, which is represented by $1,000 in proceeds from due to former officers, $4,993 due to President - related party for corporate expense reimbursement and a $8,445 repayment of due to President - related party.

Our financing activities resulted in a cash inflow of $2,211,292 for the year ended December 31, 2020, which is represented by $2,500,000 proceeds from issuance of common stock, $11,732 in proceeds from due to former officers, $332,104 loan repayment to related party, $70,000 proceeds from note payable- related party and $38,336 purchase of treasury stock.

As reflected in the accompanying consolidated financial statements, the Company used cash in operations of $396,185, has an accumulated deficit of $1,919,563 and has a net loss of $481,287 for the year ended December 31, 2021.

The delicatessen was temporarily closed, beginning on August 1, 2021, while we changed management of Your Hometown Deli and hired a new operations manager for the store in Paulsboro, New Jersey. The delicatessen reopened on September 11, 2021, with increased staff and expanded hours.

The Company is slowly regaining its customer base since re-opening. However, even though the delicatessen has been re-opened, the Company may have a slowdown in customer visits due to the current economic condition. There can be no assurance that we will generate sufficient revenues to continue our operations. The Company expects the growth rate and sales to be volatile in the near term.

On April 14, 2020, the Company consummated a private offer and sale of an aggregate of 2,500,000 shares of common stock for gross cash proceeds to us of $2,500,000. The Company plans to utilize the remainder of the proceeds to explore and evaluate potential merger candidates for the Company and to fund general corporate purposes. As of December 31, 2021, we had $1,149,369 of cash on hand, and a cash burn rate of approximately $25,000 per month. Management believes that the current working capital are sufficient to sustain its current operations for the next 12 months. Management believes that the actions taken in respect of the COVID-19 pandemic and current working capital are sufficient to sustain its current operations at its current spending levels for the next 12 months. However, we are unable to estimate the ultimate impact of the COVID-19 pandemic on our financial condition and future results of operations.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

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