The information set forth in this Management's Discussion and Analysis of
Financial Condition and Results of Operations ("MD&A") contains certain
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as
amended, and the Private Securities Litigation Reform Act of 1995, including,
among others (i) expected changes in our revenue and profitability, (ii)
prospective business opportunities and (iii) our strategy for financing our
business. Forward-looking statements are statements other than historical
information or statements of current condition. Some forward-looking statements
may be identified by use of terms such as "believes", "anticipates", "intends"
or "expects". These forward-looking statements relate to our plans, liquidity,
ability to complete financing and purchase capital expenditures, growth of our
business including entering into future agreements with companies, and plans to
successfully develop and obtain approval to market our product. We have based
these forward-looking statements largely on our current expectations and
projections about future events and financial trends that we believe may affect
our financial condition, results of operations, business strategy and financial
needs.
Although we believe that our expectations with respect to the forward-looking
statements are based upon reasonable assumptions within the bounds of our
knowledge of our business and operations, in light of the risks and
uncertainties inherent in all future projections, the inclusion of
forward-looking statements in this Quarterly Report should not be regarded as a
representation by us or any other person that our objectives or plans will be
achieved.
We assume no obligation to update these forward-looking statements to reflect
actual results or changes in factors or assumptions affecting forward-looking
statements.
Our revenues and results of operations could differ materially from those
projected in the forward-looking statements as a result of numerous factors,
including, but not limited to, the following: the risk of significant natural
disaster, the inability of our company to insure against certain risks,
inflationary and deflationary conditions and cycles, currency exchange rates,
and changing government regulations domestically and internationally affecting
our products and businesses.
You should read the following discussion and analysis in conjunction with the
Financial Statements and Notes attached hereto, and the other financial data
appearing elsewhere in this Quarterly Report.
US Dollars are denoted herein by "USD", "$" and "dollars".
Overview
Hometown International, Inc. (the "Company") was incorporated under the laws of
the State of Nevada on May 19, 2014. The Company is the originator of a new
Delicatessen concept. Through our wholly-owned subsidiary, Your Hometown Deli
Limited Liability Company ("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 place. Targeted towards smaller towns and
communities, the Company's first and only store is located in Paulsboro, New
Jersey.
We were forced to temporarily close the delicatessen 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 temporarily closure and other effects of
COVID-19 had a material impact on our business during 2020. It is anticipated
that the COVID-19 pandemic will continue to impact our business in 2021.
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 have no particular business combination in
mind and have not entered into any negotiations regarding such a combination.
Neither our officers nor any of our affiliates has engaged in any negotiations
with any representative of any company regarding the possibility of an
acquisition or combination between our company and such other company. We have
not yet entered into any agreement, nor do we have any commitment or
understanding to enter into or become engaged in a transaction.
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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.
Recent Developments
On April 22, 2021, OTC Markets moved the Company's common stock from the OTCQB
Market to the OTC Pink Market.
On April 26, 2021, the Company terminated its consulting agreement with Tryon
Capital, LLC, a related party.
As of April 30, 2021, the Company's Consulting Agreement with VCH Limited, a
related party, expired and was not renewed.
On May 12, 2021, shareholder's holding 77% of the Company's voting power removed
Paul Morina and Christine Lindenmuth as members of the Company's board of
directors, by written consent. On May 13, 2021, the Company's board of
directors, removed Paul Morina from all officer positions he held with the
Company, including Chief Executive Officer, Chief Financial Officer and
Treasurer, and removed Christine Lindenmuth from all officer positions she held
with the Company, including Vice President and Secretary. In connection with Mr.
Morina's removal, he was removed from his roles as the Company's "Principal
Executive Officer" and "Principal Financial and Accounting Officer" for
Securities and Exchange Commission ("SEC") reporting purposes. Effective
immediately upon the removals of Mr. Morina and Ms. Lindenmuth, Peter Coker Jr.,
the Company's Chairman of the Company's board of directors, was appointed as the
Company's Chief Executive Officer, Chief Financial Officer, President, Secretary
and Treasurer. In connection with his appointments, Mr. Coker was designated as
the "Principal Executive Officer" and "Principal Financial and Accounting
Officer" of the Company for SEC reporting purposes. Mr. Morina and Ms.
Lindenmuth remain principals of the Company's operating subsidiary, Your
Hometown Deli, LLC, and the Company's delicatessen in Paulsboro, New Jersey
remains open. The Company continues to seek and investigate and, if such
investigation warrants, will engage in, a business combination with a private
entity whose business presents an opportunity for our shareholders.
Results of Operations - Three Months Ended June 30, 2021 Compared to Three
Months Ended June 30, 2020
We generated revenue of $6,288 and $0 for the three months ended June 30, 2021
and 2020, respectively. 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 $117,755 for the three months ended June 30,
2021, compared to $176,444 for the three months ended June 30, 2020. The total
cost and expenses decreased by approximately 33% primarily as a result of a
decrease of $40,000 of consulting fees paid to related parties during the three
months ended June 30, 2021 resulting from a termination of a consulting
agreement - related party, and a decrease of $30,867 in professional fees
related to the preparation and filing of a registration statement by the Company
during the three months ended June 30, 2020.
We incurred a loss from operations of $111,467 and $176,444 for the three months
ended June 30, 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 three months ended June 30, 2021,
as compared to the same period ended June 30, 2020.
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Interest income - related parties increased by $1,276 to $1,467 for the three
months ended June 30, 2021, from $191 for the three months ended June 30, 2020.
The increase was primarily due to interest on notes receivable - related parties
as a result of increased note receivable.
Interest expense was $0 for the three months ended June 30, 2021, compared to
$1,762 for the three months ended June 30, 2020. This decrease was due to a
lower interest expense on loans as a result of a decrease in debt outstanding.
Due to the described factors above, we had a net loss of $110,000 and $178,015
for the three months ended June 30, 2021 and 2020, respectively.
Results of Operations - Six Months Ended June 30, 2021 Compared to Six Months
Ended June 30, 2020
We generated revenue of $11,593 and $3,577 for the six months ended June 30,
2021 and 2020, respectively. 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 $296,718 for the six months ended June 30,
2021, compared to $ 257,383 for the six months ended June 30, 2020. The total
cost and expenses increased by approximately 15% primarily as a result of an
increase of $80,000 in consulting fees paid to related parties during the six
months ended June 30, 2021, a decrease of $65,242 in professional fees related
to the preparation and filing of a registration statement by the Company during
the six months ended June 30, 2020, and an increase of $14,058 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 $285,125 and $253,806 for the six months
ended June 30, 2021 and 2020, respectively. The increase in loss from operations
is mainly attributable to an increase in total costs and expenses and slightly
offset by our increase in revenue during the six months ended June 30, 2021, as
compared to the same period ended June 30, 2020.
Interest income - related parties increased by $4,680 to $4,871 for the six
months ended June 30, 2021, from $191 for the six months ended June 30, 2020.
The increase was primarily due to interest on notes receivable - related parties
as a result of increased note receivable.
Interest expense was $0 for the six months ended June 30, 2021, compared to
$9,091 for the six months ended June 30, 2020. This decrease was due to a lower
interest expense on loans as a result of a decrease in debt outstanding.
Due to the described factors above, we had a net loss of $280,254 and $262,706
for the six months ended June 30, 2021 and 2020, respectively.
Liquidity and Capital Resources
As of June 30, 2021, we had current assets of $1,302,828, consisting of
$1,301,737 in cash, and $1,091 in inventory. Our current liabilities as of June
30, 2021, were $75,219, which is comprised of $62,297 due to certain former
officers, $7,774 in accounts payable and accrued expenses, and $5,148 in current
operating lease liability. Our long-term liabilities as of June 30, 2021, were
$5,687, which is comprised of long-term operating lease liability.
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The following is a summary of our cash flows provided by (used in) operating,
investing, and financing activities for the six months ended June 30, 2021 and
2020:
For the For the
six months six months
ended ended
June 30, June 30,
2021 2020
(Unaudited)
Net Cash Used in Operating Activities $ (243,817 ) $ (300,421 )
Net Cash Provided by Investing Activities $ 150,000 $ -
Net Cash (Used in) Provided by Financing Activities $ (2,452 ) $ 2,206,756
Net (Decrease) Increase in Cash and Cash Equivalents $ (96,269 ) $ 1,906,335
For the six months ended June 30, 2021, net cash used in operations of $243,817
was the result of a net loss of $280,254, offset by in-kind contribution of
services by $23,571, depreciation expense of $151, a decrease in prepaid
expenses and other current assets of $6,594, an increase in inventory of $137, a
decrease in interest receivable of $872, and an increase in accounts payable and
accrued expense of $5,386. For the six months ended June 30, 2020, net cash used
in operations of $300,421 was the result of a net loss of $262,706 offset by
offset by in-kind contribution of services of $15,428, depreciation expense of
$3,623, a decrease of inventory of $738, and a decrease of accounts payable and
accrued expenses of $57,504.
Net cash provided by our investing activities were $150,000 and $0 for the six
months ended June 30, 2021 and June 30, 2020, respectively. 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 six months
ended June 30, 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 $2,206,756 for the six months
ended June 30, 2020, which is represented by $2,500,000 proceeds from issuance
of common stock, $7,196 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 condensed consolidated unaudited financial
statements, the Company used cash in operations of $243,817, has an accumulated
deficit of $1,718,530, and has a net loss of $280,254 for the six months ended
June 30, 2021.
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.
Critical Accounting Policies and Estimates
Use of Estimates in Financial Statements
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.
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Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards
Codification ("ASC") Topic 606, "Revenue from Contracts with Customers". 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.
Leases
The Company accounts for lease in accordance with ASC Topic 842, "Leases".
Operating lease assets and operating lease liabilities are recognized based on
the present value of the future minimum lease payments over the lease term at
the commencement date. The operating lease right-of-use (ROU) asset also
includes any lease payments made and excludes lease incentives and initial
direct costs incurred, if any.
The lease expense is recognized over the expected term on a straight-line basis.
Operating leases are recognized on the balance sheet as operating lease assets,
current operating lease liabilities and non-current operating lease liabilities.
Off Balance Sheet Arrangements
We do not have any 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, sales or expenses, results of operations, liquidity or
capital expenditures, or capital resources that are material to an investment in
our securities.
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