MAKAMER HOLDINGS, INC. - Quarter Report: 2021 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the Quarterly Period Ended: September 30, 2021

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

Commission File Number: 333-207488

HOMETOWN INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

500 W. 5th Street, Suite 800

PMB # 57

Winston Salem, NC 27101 

(Address of principal executive offices) (Zip Code)

+853 6666 8542

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

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 preceding 12 months (or for such shorter periods 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 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 filer, or an emerging growth company filer, See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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 15, 2021, the registrant had 7,797,004 shares of its common stock issued and outstanding.

HOMETOWN INTERNATIONAL INC.

QUARTERLY REPORT ON FORM 10-Q

SEPTEMBER 30, 2021

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

The following unaudited interim financial statements of Hometown International, Inc. (referred to herein as the “Company,” “we,” “us” or “our”) are included in this quarterly report on Form 10-Q:

Hometown International, Inc.

Financial Statements for the Three and Nine Months Ended September 30, 2021

Index to the Condensed Consolidated Financial Statements

HOMETOWN INTERNATIONAL, INC. AND SUBSIDIARY

Condensed Consolidated Balance Sheets

See accompanying notes to condensed consolidated unaudited financial statements

HOMETOWN INTERNATIONAL, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Operations

(Unaudited)

See accompanying notes to condensed consolidated unaudited financial statements 

HOMETOWN INTERNATIONAL, INC. AND SUBSIDIARY

Condensed Consolidated Statement of Stockholders’ Equity (Deficit)

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

(Unaudited)

See accompanying notes to condensed consolidated unaudited financial statements 

HOMETOWN INTERNATIONAL, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Cash Flows

(Unaudited)

See accompanying notes to condensed consolidated unaudited financial statements 

HOMETOWN INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2021

(UNAUDITED)

The accompanying condensed consolidated unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all the information necessary for a comprehensive presentation of financial position and results of operations.

These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 26, 2021.

It is management’s opinion that all material adjustments (consisting of normal recurring adjustments) have been made, which are necessary for a fair financial statement presentation. The results for the interim period are not necessarily indicative of the results to be expected for the year.

Hometown International, Inc. (the “Company”) was incorporated under the laws of the State of Nevada on May 19, 2014. Through its wholly owned subsidiary, Your Hometown Deli, LLC, the Company is the originator of a new “Delicatessen” concept (“Your Hometown Deli”). The Company intends that its delicatessens will feature “home-style” sandwiches and other entrees in a casual friendly atmosphere, designed to be comfortable community gathering places for guests of all ages. Targeted towards smaller towns and communities, the Company’s first and only store is located in Paulsboro, New Jersey.

On January 18, 2014, Your Hometown Deli, LLC was formed under the laws of the State of New Jersey. On May 29, 2014, Your Hometown Deli, LLC, entered into a Membership Interest Purchase Agreement with Hometown International, Inc. For accounting purposes, this transaction is being accounted for as a merger of entities under common control and has been treated as a recapitalization of Hometown International, Inc. with Your Hometown Deli, LLC, as the accounting acquirer. The historical financial statements of the accounting acquirer became the financial statements of the registrant. The Company did not recognize goodwill or any intangible assets in connection with the transaction. The 5,000,000 shares issued to the shareholder of Your Hometown Deli, LLC, in conjunction with the share exchange transaction has been presented as outstanding for all periods.

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 its shareholders

HOMETOWN INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2021

(UNAUDITED)

The Company was 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 temporary closure and other effects of COVID-19 had a material impact on the Company’s business during 2020. It is anticipated that the COVID-19 pandemic will continue to impact the Company’s business in 2021.

Going forward, the Company intends 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. The Company has no particular business combination in mind and has not entered into any negotiations regarding such a combination.

The Company’s accounting year end is December 31, which is the year end of Your Hometown Deli, LLC.

(B) Principles of Consolidation

The accompanying September 30, 2021 and 2020 unaudited condensed consolidated financial statements include the accounts of Hometown International, Inc. and its wholly owned subsidiary, Your Hometown Deli, LLC. All intercompany accounts have been eliminated upon consolidation.

(C) Use of Estimates

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, valuation of deferred tax assets and operating lease assets and liabilities. Actual results could differ from those estimates.

(D) Cash and Cash Equivalents

The Company considers all highly liquid temporary cash investments with an original maturity of 90 days or less to be cash equivalents. At September 30, 2021 and December 31, 2020, the Company had no cash equivalents.

(E) Loss Per Share

Basic and diluted net loss per common share is computed based upon the weighted average common shares outstanding as defined by FASB ASC No. 260, “Earnings Per Share.” Diluted loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period”. For September 30, 2021 and 2020, warrants were not included in the computation of income/ (loss) per share because their inclusion is anti-dilutive.

The computation of basic and diluted loss per share for September 30, 2021 and September 30, 2020 excludes the common stock equivalents of the following potentially dilutive securities because their inclusion would be anti-dilutive:

HOMETOWN INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2021

(UNAUDITED)

(F) Income Taxes

The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

(G) Property and Equipment

Property and equipment is recorded at cost and depreciated or amortized using the straight-line method over the estimated useful life of the asset or the underlying lease term for leasehold improvements, whichever is shorter onset the property and equipment is put into service.

(H) 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.

(I) Fair Value of Financial Instruments

The Company measures its financial assets and liabilities in accordance with GAAP. For certain of our financial instruments, including cash, accounts payable, and the short-term portion of long-term debt, the carrying amounts approximate fair value due to their short maturities.

We adopted accounting guidance for financial and non-financial assets and liabilities (ASC 820). The adoption did not have a material impact on our results of operations, financial position or liquidity. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

HOMETOWN INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2021

(UNAUDITED)

(J) Concentrations

The Company maintains various bank accounts at one bank, which, at times, may have balances that exceed federally insured limits. The Company believes it is not exposed to any significant credit risk on its cash balances and has not experienced any losses in such accounts. At September 30, 2021 and December 31, 2020, the Company had cash balances in excess of FDIC limits of $970,393 and $1,147,290, respectively.  

(K) Recent Accounting Pronouncements

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

(L) Business Segments

The Company operates in one segment and therefore segment information is not presented.

(M) Inventories

Inventories consist of food and beverages, and are stated at cost. 

(N) Advertising

Advertising costs are expensed as incurred. These costs are included in direct operating & occupancy expenses and totaled $1,956 and $96 for the nine months ended September 30, 2021 and 2020, respectively.

Advertising costs are expensed as incurred. These costs are included in direct operating & occupancy expenses and totaled $1,080 and $96 for the three months ended September 30, 2021 and 2020, respectively.

Leasehold improvement and equipment consist of the following at September 30, 2021 and December 31, 2020:

Depreciation expense was $54 and $1,805 for the three months ended September 30, 2021 and 2020, respectively.

Depreciation expense was $205 and $5,428 for the nine months ended September 30, 2021 and 2020, respectively.

On February 12, 2021, the Company received an unsecured promissory note from Med Spa Vacations, Inc., a related party, in exchange for $150,000. Pursuant to the terms of the note, the note is bearing interest at the rate of 6%, unsecured, and due on or before February 11, 2022. As of May 12, 2021, the Company has an interest receivable balance of $2,250. On May 12, 2021, the full principal of the note receivable and $2,250 of related accrued interest receivable were fully paid by the noteholder (See Note 9).

On November 25, 2020, the Company received an unsecured promissory note from E-Waste Corp., a related party, in exchange for $150,000. Pursuant to the terms of the note, the note is bearing interest at the rate of 6%, unsecured, and due on or before November 25, 2021. On March 1, 2021, the Company collected $2,250 of interest receivable. As of April 14, 2021, the Company has an interest receivable balance of $1,184. On April 14, 2021, the full principal of the note receivable and $1,184 of related accrued interest receivable were fully paid by the noteholder (See Note 9).

HOMETOWN INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2021

(UNAUDITED)

On March 18, 2020, the Company entered into an unsecured promissory note with Peter L. Coker, Jr., the Company’s Chairman of the Board, in the amount of $50,000. Pursuant to the terms of the note, the note is bearing 8% interest, unsecured, and due on March 31, 2021. As of April 24, 2020, the Company accrued $406 in interest expense. On April 24, 2020, the note principal and accrued interest were repaid in full (See Note 9).

On February 13, 2020, the Company entered into an unsecured promissory note with Peter L. Coker, Jr., the Company’s Chairman of the Board, in the amount of $20,000. Pursuant to the terms of the note, the note is bearing 8% interest, unsecured and due on February 13, 2021. As of April 24, 2020, the Company accrued $315 in interest expense. On April 24, 2020, the note principal and accrued interest were repaid in full (See Note 9).

On December 31, 2019, the Company entered into an unsecured promissory note with Peter L. Coker, Jr., the Company’s Chairman of the Board, in the amount of $10,000. Pursuant to the terms of the note, the note is bearing 8% interest, unsecured and due on December 31, 2020. As of April 24, 2020, the Company accrued $255 in interest expense. On April 24, 2020, the note principal and accrued interest were repaid in full (See Note 9).

On December 31, 2019, the Company entered into an unsecured promissory note with Peter L. Coker, Jr., the Company’s Chairman of the Board, in the amount of $175,000. Pursuant to the terms of the note, the note is bearing 8% interest, unsecured and due on September 30, 2020. As of April 24, 2020, the Company accrued $4,462 in interest expense. On April 24, 2020, the note principal and accrued interest were repaid in full (See Note 9).

On December 31, 2019, the Company and a related party note holder agreed to combine the principal and accrued interest of multiple notes, and issued a new unsecured promissory note in the amount of $144,979. The note is bearing 8% interest, unsecured and due on December 31, 2020.

On March 18, 2020, the Company, entered into a Debt Exchange Agreement with a related party pursuant to which $100,000 of the principal amount of debt owed by the Company was converted to 100,000 shares of the Company’s common stock. The remaining principal balance owed to such party in the amount of $44,979, plus any accrued and unpaid interest, is due and payable on December 31, 2020. As of April 24, 2020, the Company accrued $2,885 in interest expense. On April 24, 2020, the remaining note principal and accrued interest were repaid in full (See Notes 7 (E) and 9).

On December 31, 2019, the Company and Peter L. Coker, Jr., the Company’s Chairman of the Board, agreed to combine the principal and accrued interest of a note and issued a new unsecured promissory note in the amount of $30,126. The note is bearing 8% interest, unsecured and due on December 31, 2020. As of April 24, 2020, the Company accrued $768 in interest expense. On April 24, 2020, the note principal and accrued interest were repaid in full (See Note 9).

On October 16, 2014, the Company entered into an unsecured promissory note with a related party in the amount of $2,000. Pursuant to the terms of the note, the note is non-interest bearing, unsecured and is due on demand. On January 25, 2020, the note principal was repaid in full (See Note 9).

During the nine months ended September 30, 2021, certain former officers paid a net aggregate $1,000 in expenses on the Company’s behalf as an advance. Pursuant to the terms of the note, the note is non-interest bearing, unsecured and due on demand. As of September 30, 2021, the balance due to former officers was $62,297 (See Note 9).

As of March 31, 2021, the Company owed to its Chairman $4,993 for corporate expense reimbursement. The amount was repaid on April 12, 2021 (See Note 9).

As of December 31, 2020, the Company owed to its Chairman $3,452 for corporate expense reimbursements. The amount was repaid on January 20, 2021 (See Note 9).

HOMETOWN INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2021

(UNAUDITED)

(A) Increase in Authorized Shares

On March 23, 2020, the Company filed a Certificate of Amendment to the Company’s Articles of Incorporation with the Secretary of State of the State of Nevada, increasing the number of shares of common stock the Company is authorized to issue from 100,000,000 to 250,000,000, with a par value of $0.0001 per share.

(B) In-kind Contribution of Services

For the three months ended September 30, 2021 and 2020, the Company recorded $0 and $7,714, respectively, as in-kind contribution of services provided by the former President and former Vice President of the Company (See Note 9).

For the nine months ended September 30, 2021 and 2020, the Company recorded $11,571 and $23,142, respectively, as in-kind contribution of services provided by the former President and former Vice President of the Company (See Note 9).

For the three months ended September 30, 2021 and 2020, the Company recorded $28,000 and $0, respectively, as in-kind contribution of services provided by the current President of the Company (See Note 9).

For the nine months ended September 30, 2021 and 2020, the Company recorded $40,000 and $0, respectively, as in-kind contribution of services provided by the current President of the Company (See Note 9).

(C) Common Stock Repurchase

On March 18, 2020, the Company repurchased an aggregate of 38,336 shares of the Company’s common stock from a total of 11 shareholders, at a purchase price of $1.00 per share.

(D) Warrant Issuance

On March 18, 2020, the Board of Directors of the Company authorized the issuance of warrants to the shareholders of record as of the issuance date. As of such date, the Company was to issue each shareholder of record (i) five Class A Warrants entitling the holder thereof to purchase five shares of common stock at an exercise price of $1.25 per share, (ii) five Class B Warrants entitling the holder thereof to purchase five shares of common stock at an exercise price of $1.50 per share, (iii) five Class C Warrants entitling the holder thereof to purchase five shares of common stock at an exercise price of $1.75 per share and (iv) five Class D Warrants entitling the holder thereof to purchase five shares of common stock at an exercise price of $2.00 per share, with each warrant expiring on March 31, 2035. On March 31, 2020, the record date for the issuance of the warrants as extended to April 15, 2020.

On April 15, 2020, the Company issued twenty warrants for every one share of common stock held to shareholders of record as of April 15, 2020. The warrants were issued to the shareholders of record on a pro-rata basis on the issuance date. There was no consideration in exchange for the issuance of these warrants and, therefore, these warrants are treated as a shareholder’s distribution with a net effect of zero on the stockholder’s equity.

The Company issued the following warrants:

HOMETOWN INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2021

(UNAUDITED)

As of the date of this report, no warrants have been exercised.

For the nine months ended September 30, 2021, the following warrants were outstanding:

For the year ended December 31, 2020, the following warrants were outstanding:

(E) Common Stock Issued on Debt Conversion

On March 18, 2020, the Company entered into a Debt Exchange Agreement with a related party pursuant to which $100,000 of the principal amount of debt owed by the Company was converted to 100,000 shares of the Company’s common stock (See Notes 4 and 9).

(F) Common Stock Issued for Cash

In April 2020, the Company sold 663,750 shares of common stock to an unrelated party for $663,750 in cash. The funds were received by the Company on April 14, 2020.

In April 2020, the Company sold 1,380,000 shares of common stock to an unrelated party for $1,380,000 in cash. The funds were received by the Company on April 15, 2020.

In April 2020, the Company sold 456,250 shares of common stock to an unrelated party for $456,250 in cash. The funds were received by the Company on April 14, 2020.

HOMETOWN INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2021

(UNAUDITED)

Consulting Agreements

Effective as of April 26, 2021, the Company also entered into a Consulting Agreement with Benchmark Capital, LLC Limited, a company formed under the laws of New Jersey (“Benchmark”). Pursuant to this agreement, Benchmark was engaged as a consultant to the Company, to assist with all filings requirements with the SEC. The term of the agreement is month-to-month; provided, however, that each party has the right to terminate the agreement upon 30 days’ prior written notice to the other. Pursuant to the agreement, Benchmark shall receive $7,500 per month, during the term of the agreement, starting on June 1, 2021, in addition to reimbursement of expenses approved in advance by the Company.

Effective as of May 1, 2020, the Company entered into a Consulting Agreement with Tryon Capital Ventures LLC, a North Carolina limited liability company (“Tryon”), which is 50% owned by the father of Peter L. Coker, Jr., our Chairman of the Board. Pursuant to this agreement, Tryon was engaged as a consultant to the Company, to, among other things, support in the research, development, and analysis of product, financial and strategic matters. The term of the Tryon Consulting Agreement was one year; provided, however, that each party had the right to terminate the agreement upon 30 days’ prior written notice to the other. Pursuant to the agreement, Tryon was to receive $15,000 per month during the term of the agreement, in addition to reimbursement of expenses approved in advance by the Company. On April 26, 2021, the Company terminated the consulting agreement with Tryon (See Note 9). 

Effective as of May 1, 2020, the Company also entered into a Consulting Agreement with VCH Limited, a company formed under the laws of Macau (“VCH”), which owns in excess of 10% of the Company’s common stock. Pursuant to this agreement, VCH was engaged as a consultant to the Company, to, among other things, create and build a presence with high net worth and institutional investors. The term of the agreement is one year; provided, however, that each party has the right to terminate the agreement upon 30 days’ prior written notice to the other. Pursuant to the agreement, VCH shall receive $25,000 per month during the term of the agreement, in addition to reimbursement of expenses approved in advance by the Company. Upon expiration, the agreement was not renewed. (See Note 9). 

Operating Lease Agreement

On July 1, 2014, the Company entered into a five-year non-cancelable operating lease with a related party for its store space at a monthly rate of $500. On September 21, 2015, the Company executed the lease and opened the delicatessen on October 14, 2015. On December 29, 2015, the Company signed an addendum to the lease for the lease agreement to start 30 days after the opening of the delicatessen. The delicatessen opened on October 14, 2015, and the first payments would have been due on November 15, 2015, however, since the delicatessen was not fully functioning, the first monthly rent payment was due January 1, 2016. On August 12, 2019, the Company was granted a two-year extension of non-cancelable operating lease with a related party for its store space at a monthly rate of $500. On March 22, 2021, the Company was granted an additional two-year extension of non-cancelable operating lease with a related party for its store space at a monthly rate of $500 (See Note 9). The Company accounts for lease in accordance with ASC Topic 842, “Leases”. For the nine months ended September 30, 2021 and 2020, the Company had a rent expense of $4,500 and $4,500, respectively.

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. In calculating the present value of the revised lease payments, the Company elected to utilize its incremental borrowing rate based on the revised lease terms as of the March 22, 2021, re-measurement date. This rate was determined to be 10%, and the Company determined the initial present value, at inception, of $10,569.

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.

HOMETOWN INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2021

(UNAUDITED)

Supplemental consolidated balance sheet information related to leases was as follows:

Supplemental disclosures of cash flow information related to leases were as follows:

For the three months ended September 30, 2021 and 2020, the total lease costs were $1,500 and $1,500, respectively. The Company did not incur any variable lease cost for both periods.

For the nine months ended September 30, 2021 and 2020, the total lease costs were $4,500 and $4,500, respectively. The Company did not incur any variable lease cost for both periods.

On July 1, 2014, the Company entered into a five-year non-cancelable operating lease with a related party for its store space at a monthly rate of $500. On September 21, 2015, the Company executed the lease and opened the delicatessen on October 14, 2015. On December 29, 2015, the Company signed an addendum to the lease for the lease agreement to start 30 days after the opening of the delicatessen. The delicatessen opened on October 14, 2015, and the first payment would have been due on November 15, 2015, however, since the delicatessen was not fully functioning, the first monthly rent payment was due January 1, 2016. On August 12, 2019, the Company was granted a two-year extension of non-cancelable operating lease with a former related party for its store space at a monthly rate of $500. On March 22, 2021, the Company was granted an additional two-year extension of non-cancelable operating lease with a former related party for its store space at a monthly rate of $500. For the nine months ended September 30, 2021 and 2020, the Company had a rent expense of $4,500 and $4,500, respectively (See Note 8). 

HOMETOWN INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2021

(UNAUDITED)

On October 16, 2014, the Company entered into an unsecured promissory note with a former related party in the amount of $2,000. Pursuant to the terms of the note, the note is non-interest bearing, unsecured and due on demand. On January 25, 2020, the note principal was repaid in full (See Note 4).

For the three months ended September 30, 2021 and 2020, the Company recorded $0 and $7,714, respectively, as in-kind contribution of services provided by the former President and former Vice President of the Company (See Note 7 (B)).

For the nine months ended September 30, 2021 and 2020, the Company recorded $11,571 and $23,142, respectively, as in-kind contribution of services provided by the former President and former Vice President of the Company (See Note 7 (B)).

For the three months ended September 30, 2021 and 2020, the Company recorded $28,000 and $0, respectively, as in-kind contribution of services provided by the current President of the Company (See Note 7 (B)).

For the nine months ended September 30, 2021 and 2020, the Company recorded $40,000 and $0, respectively, as in-kind contribution of services provided by the current President of the Company (See Note 7 (B)).

During the nine months ended September 30, 2021, certain former officers paid a net aggregate $1,000 in expenses on Company’s behalf as an advance. Pursuant to the terms of the note, the note was non-interest bearing, unsecured and due on demand. As of September 30, 2021, the balance due to former officers was $62,297 (See Note 5).

As of March 31, 2021, the Company owed to its Chairman $4,993 for corporate expense reimbursement. The amount was repaid on April 12, 2021 (See Notes 6 and 11).

As of December 31, 2020, the Company owed to its Chairman $3,452 for corporate expense reimbursements. The amount was repaid on January 20, 2021 (See Note 6).

On December 31, 2019, the Company entered into an unsecured promissory note with Peter L. Coker, Jr., the Company’s Chairman of the Board, in the amount of $10,000. Pursuant to the terms of the note, the note is bearing 8% interest, unsecured and due on December 31, 2020. As of April 24, 2020, the Company accrued $255 in interest expense. On April 24, 2020, the note principal and accrued interest were repaid in full (See Note 4)

On December 31, 2019, the Company entered into an unsecured promissory note with Peter L. Coker, Jr., the Company’s Chairman of the Board, in the amount of $175,000. Pursuant to the terms of the note, the note is bearing 8% interest, unsecured and due on September 30, 2020. As of April 24, 2020, the Company accrued $4,462 in interest expense. On April 24, 2020, the note principal and accrued interest were repaid in full (See Note 4).

On December 31, 2019, the Company and a related party note holder agreed to combine the principal and accrued interest of multiple notes, and issued a new unsecured promissory note in the amount of $144,979. The note is bearing 8% interest, unsecured and due on December 31, 2020. On March 18, 2020, the Company entered into a Debt Exchange Agreement with a related party pursuant to which $100,000 of the principal amount of debt owed by the Company was converted to 100,000 shares of the Company’s common stock (See Note 7 (E)). The remaining principal balance owed to such party in the amount of $44,979, plus any accrued and unpaid interest, is due and payable on December 31, 2020. As of April 24, 2020, the Company accrued $2,885 in interest expense. On April 24, 2020, the remaining note principal and accrued interest were repaid in full (See Note 4).

On December 31, 2019, the Company and Peter L. Coker, Jr., the Company’s Chairman of the Board, agreed to combine the principal and accrued interest of a note and issued a new unsecured promissory note in the amount of $30,126. The note is bearing 8% interest, unsecured and due on December 31, 2020. As of April 24, 2020, the Company accrued $768 in interest expense. On April 24, 2020, the note principal and accrued interest were repaid in full (See Note 4).

HOMETOWN INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2021

(UNAUDITED)

On March 18, 2020, the Company entered into an unsecured promissory note with Peter L. Coker, Jr., its Chairman, in the amount of $50,000. Pursuant to the terms of the note, the note is bearing 8% interest, unsecured, and due on March 31, 2021. As of April 24, 2020, the Company accrued $406 in interest expense. On April 24, 2020, the note principal and accrued interest were repaid in full (See Note 4).

On February 13, 2020, the Company entered into an unsecured promissory note with Peter L. Coker, Jr., its Chairman, in the amount of $20,000. Pursuant to the terms of the note, the note is bearing 8% interest, unsecured and due on February 13, 2021. As of April 24, 2020, the Company accrued $315 in interest expense. On April 24, 2020, the note principal and accrued interest were repaid in full (See Note 4). 

Effective as of May 1, 2020, the Company entered into a Consulting Agreement with Tryon Capital Ventures LLC, a North Carolina limited liability company (“Tryon”), which is 50% owned by the father of Peter L. Coker, Jr., the Company’s Chairman of the Board. Pursuant to this agreement, Tryon was engaged as a consultant to the Company, to, among other things, support in the research, development, and analysis of product, financial and strategic matters. The term of the Tryon Consulting Agreement was one year; provided, however, that each party had the right to terminate the agreement upon 30 days’ prior written notice to the other. Pursuant to the agreement, Tryon was to receive $15,000 per month during the term of the agreement, in addition to reimbursement of expenses approved in advance by the Company. On April 26, 2021, the Company terminated the consulting agreement with Tryon (See Notes 8 and 11). 

Effective as of May 1, 2020, the Company also entered into a Consulting Agreement with VCH Limited, a company formed under the laws of Macau (“VCH”) which owns in excess of 10% of the Company’s common stock. Pursuant to this agreement, VCH was engaged as a consultant to the Company, to, among other things, create and build a presence with high net worth and institutional investors. The term of the agreement is one year; provided, however, that each party has the right to terminate the agreement upon 30 days’ prior written notice to the other. Pursuant to the agreement, VCH shall receive $25,000 per month during the term of the agreement, in addition to reimbursement of expenses approved in advance by the Company. Upon expiration, the agreement was not renewed (See Notes 8 and 11). 

On November 25, 2020, the Company received an unsecured promissory note from E-Waste Corp., a related party, in exchange for $150,000. Pursuant to the terms of the note, the note is bearing interest at the rate of 6%, unsecured, and due on or before November 25, 2021. On March 1, 2021, the Company collected $2,250 of interest receivable. As of April 14, 2021, the Company has interest receivable balance of $1,184. On April 14, 2021, the full principal of the note receivable and $1,184 of related accrued interest receivable were fully paid by the noteholder (See Note 3).

On February 12, 2021, the Company received an unsecured promissory note from Med Spa Vacations, Inc., a related party, in exchange for $150,000. Pursuant to the terms of the note, the note is bearing interest at the rate of 6%, unsecured, and due on or before February 11, 2022. As of May 12, 2021, the Company has interest receivable balance of $2,250 of interest receivable (See Note 3). On May 12, 2021, full principal of the note receivable and $2,250 of related accrued interest receivable were fully paid by the noteholder (See Note 3)

As reflected in the accompanying condensed consolidated unaudited financial statements, the Company used cash in operations of $322,620, has an accumulated deficit of $1,822,844, and has a net loss of $384,568 for the nine months ended September 30, 2021.

On March 23, 2020, the Company temporarily closed the delicatessen due to the stay-at-home order issued by the Governor of New Jersey. Although the Stay at Home at Home Order was lifted, on October 24, 2020, the Governor signed Executive Order No. 191 extending the Public Health Emergency for another 30 days. The deli 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. It is anticipated that the COVID-19 pandemic will continue to impact our business in 2021.

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

As of September 30, 2021, the Company had $1,222,934 of cash on hand. The Company estimates its cash burn rate of approximately $20,000 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, the Company is unable to estimate the ultimate impact of the COVID-19 pandemic on its financial condition and future results of operations.

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

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 and Recent Developments

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.

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.

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.

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.

Results of Operations

Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020

We generated revenue of $2,387 and $1,894 for the three months ended September 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 $106,733 for the three months ended September 30, 2021, compared to $179,872 for the three months ended September 30, 2020. The total cost and expenses decreased by approximately 41% primarily attributable to a decrease of $120,000 in consulting fees paid to related parties during the three months ended September 30, 2020, offset by an increase of $22,500 in consulting fees paid during the three months ended September 30, 2021, an increase of $15,040 in professional fees attributable to fees paid for filings with the Securities and Exchange Commission, an increase in food costs of $3,079, an increase in labor costs of $1,080, and an increase of $5,361 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 $104,346 and $177,978 for the nine months ended September 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 September 30, 2021, as compared to the same period ended September 30, 2020.

Other income for the three months ended September 30, 2020 was $1,000 resulting from the New Jersey Economic Development Authority grant received 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 decreased by $37 to $32 for the three months ended September 30, 2021, from $69 for the three months ended September 30, 2020. The decrease was primarily due to interest on notes receivable – related parties as a result of a decreased note receivable due to repayment. 

Interest expense was $0 for the three months ended September 30, 2021, compared to $0 for the three months ended September 30, 2020.

Due to the described factors above, we had a net loss of $104,314 and $176,909 for the three months ended September 30, 2021 and 2020, respectively.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

We generated revenue of $13,980 and $5,471 for the nine months ended September 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 $403,451 for the nine months ended September 30, 2021, compared to $437,255 for the nine months ended September 30, 2020. The total cost and expenses decreased by approximately 8% primarily as a result of a decrease of $40,000 in consulting fees paid to related parties and a decrease of $50,202 in professional fees related to the preparation and filing of a registration statement by the Company during the nine months ended September 30, 2020, offset by an increase in food costs of $10,246 and labor costs of $1,499, an increase of $30,000 in consulting fees paid during the nine months ended September 30, 2021, and an increase of $19,419 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 $389,471 and $431,784 for the nine months ended September 30, 2021 and 2020, respectively. The decrease 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 nine months ended September 30, 2021, as compared to the same period ended September 30, 2020.

Other income for the nine months ended September 30, 2020 was $1,000 resulting from the New Jersey Economic Development Authority grant received 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 $4,643 to $4,903 for the nine months ended September 30, 2021, from $260 for the nine months ended September 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 nine months ended September 30, 2021, compared to $9,091 for the nine months ended September 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 $384,568 and $439,615 for the nine months ended September 30, 2021 and 2020, respectively.

Liquidity and Capital Resources

As of September 30, 2021, we had current assets of $1,225,582, consisting of $1,222,934 in cash and $2,648 in inventory. Our current liabilities as of September 30, 2021, were $74,363, which is comprised of $62,297 due to certain former officers, $6,788 in accounts payable and accrued expenses, and $5,278 in current operating lease liability. Our long-term liabilities as of September 30, 2021, were $4,318, which is comprised of long-term operating lease liability.

The following is a summary of our cash flows provided by (used in) operating, investing, and financing activities for the nine months ended September 30, 2021 and 2020:

For the nine months ended September 30, 2021, net cash used in operations of $322,620 was the result of a net loss of $384,568, offset by in-kind contribution of services by $51,571, depreciation expense of $205, a decrease in prepaid expenses and other current assets of $6,594, an increase in inventory of $1,694, a decrease in interest receivable of $872, and an increase in accounts payable and accrued expense of $4,400.

For the nine months ended September 30, 2020, net cash used in operations of $465,381 was the result of a net loss of $439,615, offset by in-kind contribution of services of $23,142, depreciation expense of $5,428, a decrease in operating lease right of use of $4,006, an increase of inventory of $109, a decrease of accounts payable and accrued expenses of $54,227, and a decrease in operating lease liability of $4,006.

Net cash provided by our investing activities were $150,000 and $0 for the nine months ended September 30, 2021 and September 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 nine months ended September 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 $2,207,650 for the nine months ended September 30, 2020, which is represented by $2,500,000 proceeds from issuance of common stock, $8,090 proceeds from a shareholder loan payable, $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 $322,620, has an accumulated deficit of $1,822,844 and has a net loss of $384,568 for the nine months ended September 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.

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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable because we are an emerging growth company.

ITEM 4. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that our disclosure controls and procedures were not effective as of September 30, 2021 for the material weakness described below.

Management’s Report on Internal Control over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Our internal control system was designed to, in general, provide reasonable assurance to the Company’s management and board regarding the preparation and fair presentation of published financial statements, but because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2021. The framework used by management in making that assessment was the criteria set forth in the document entitled “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this assessment, our management has concluded that our internal controls were not effective as of September 30, 2021 for the material weaknesses describe as follows: (i) lack of an independent board of directors, (ii) our accounting personnel lack U.S. GAAP expertise and (iii) lack of segregated duties.

Changes in Internal Controls over Financial Reporting

No change in our internal control over financial reporting occurred during the third fiscal quarter ended September 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

From time to time, we 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 arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

ITEM 1A. RISK FACTORS.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None, other than as previously disclosed in a Current Report on Form 8-K.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None. 

ITEM 6. EXHIBITS.

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.

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