HWIN Hometown International Inc (CE)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2022

(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, 2021, filed with the SEC on March 18, 2022.

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.

Makamer Holdings, Inc. (f/k/a 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 (“Your Hometown Deli”), the Company is the originator of a new delicatessen concept, featuring “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 was formed under the laws of the State of New Jersey. On May 29, 2014, Your Hometown Deli entered into a Membership Interest Purchase Agreement with the Company. For accounting purposes, this transaction was accounted for as a merger of entities under common control and has been treated as a recapitalization of the Company with Your Hometown Deli 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 in conjunction with the share exchange transaction has been presented as outstanding for all periods.

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, and continued to have a material impact on the Company’s business during 2021 by hindering staff availability, limiting the flow of customers into our delicatessen, and restricting our supply chain. Although the Company is unable to estimate the ultimate impact, it is anticipated that the COVID-19 pandemic will continue to impact our business in 2022. The Company is slowly regaining its customer base since reopening.

On March 29, 2022, the Company filed a Certificate of Amendment with the Secretary of State of the State of Nevada in order to effectuate a name change from “Hometown International, Inc.” to “Makamer Holdings, Inc.,” which became effective as of such date.

On April 1, 2022, Makamer Holdings, Inc. (f/k/a Hometown International, Inc.), a Nevada corporation (the “Company”), completed its acquisition of Makamer, Inc., a Delaware corporation (“Makamer”), which was organized on September 3, 2021, to develop and market biodegradable resins with the goal of replacing traditional plastics with renewable and compostable materials to help reduce worldwide toxic plastic waste pollution. Pursuant to the terms of the Agreement and Plan of Merger and Reorganization, dated March 25, 2022 (the “Merger Agreement”), by and among the Company, Makamer Acquisition Corp., a Delaware corporation and wholly owned subsidiary of the Company (the “Merger Sub”), and Makamer, at the effective time of the Merger (the “Effective Time”), Merger Sub merged with and into Makamer, with Makamer continuing as the surviving entity and a wholly-owned subsidiary of the Company (the “Merger”). The Merger became effective upon the filing of a Certificate of Merger with the Secretary of State of the State of Delaware on April 1, 2022.

MAKAMER HOLDINGS, INC. AND SUBSIDIARY

(F/K/A HOMETOWN INTERNATIONAL, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2022

(UNAUDITED)

At the Effective Time of the Merger, the stockholders of Makamer exchanged a total of 19,986,667 shares of Makamer common stock (representing 100% of Makamer’s outstanding shares) for an aggregate of 30,000,000 shares of common stock of the Company (the “Merger Shares”), with each Makamer stockholder receiving a pro rata portion of the Merger Shares based upon the total number of shares of Makamer common stock held by such Makamer stockholder immediately prior to the Effective Time.

In connection with the Merger, Makamer assigned its U.S. Provisional Patent Application No. 63/271,978, filed October 26, 2021, having the title “Biodegradable Plastic Composite Containing Fibers,” to the Company.

The Company agreed that $1,000,000 of the Company’s cash will be used to expand Makamer’s business, including for sales and marketing, research and development, evaluating other synergistic acquisitions, and working capital and general corporate purposes.

In connection with the Merger, certain pre-Merger stockholders of the Company agreed to return 1,450,000 shares of the Company’s common stock to the Company for cancellation within 30 days of the closing (the “Share Cancellation”). The Share Cancellation has not yet occurred.

Following the issuance of the Merger Shares and the Share Cancelation, the Company will have an aggregate of 36,347,004 shares of common stock issued and outstanding.

The delicatessen is still open and operating following the Merger and the Company’s new management is evaluating future plans.

The Company’s accounting year end is December 31, which coincides with the fiscal year ends of each of our wholly-owned subsidiaries, Your Hometown Deli, LLC and Makamer, Inc.

(B) Principles of Consolidation

The accompanying March 31, 2022 and 2021 unaudited condensed consolidated financial statements include the accounts of Makamer Holdings, Inc. (f/k/a 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.

MAKAMER HOLDINGS, INC. AND SUBSIDIARY

(F/K/A HOMETOWN INTERNATIONAL, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2022

(UNAUDITED)

(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 March 31, 2022 and December 31, 2021, 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 March 31, 2022 and 2021, 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 March 31, 2022 and 2021 excludes the common stock equivalents of the following potentially dilutive securities because their inclusion would be anti-dilutive:

(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.

MAKAMER HOLDINGS, INC. AND SUBSIDIARY

(F/K/A HOMETOWN INTERNATIONAL, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2022

(UNAUDITED)

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:

(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 March 31, 2022 and December 31, 2021, the Company had cash balances in excess of FDIC limits of $757,421 and $898,523, 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. 

MAKAMER HOLDINGS, INC. AND SUBSIDIARY

(F/K/A HOMETOWN INTERNATIONAL, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2022

(UNAUDITED)

(N) Advertising

Advertising costs are expensed as incurred. These costs are included in direct operating & occupancy expenses and totaled $0 and $876 for the three months ended March 31, 2022 and 2021, respectively.

Depreciation expense was $4 and $98 for the three months ended March 31, 2022 and 2021, respectively.

During prior years, certain former officers paid expenses on the Company’s behalf as an advance. Pursuant to the terms of the advance, the loan is non-interest bearing, is unsecured, and is due on demand.

As of March 31, 2022, the balance due to former officers was $62,297 (See Note 6).

(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 March 31, 2022 and 2021, the Company recorded $26,000 and $0, respectively, as in-kind contribution of services provided by a former President of the Company (See Note 6).

For the three months ended March 31, 2022 and 2021, the Company recorded $0 and $7,714, respectively, as in-kind contribution of services provided by a former President and Vice President of the Company (See Note 6).

MAKAMER HOLDINGS, INC. AND SUBSIDIARY

(F/K/A HOMETOWN INTERNATIONAL, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2022

(UNAUDITED)

(C) Warrant Issuance

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

For the three months ended March 31, 2022 and 2021, the intrinsic value for the warrants were $1,929,758,490 and $1,851,788,450, respectively.

For the three months ended March 31, 2022, the following warrants were outstanding:

For the year ended December 31, 2021, the following warrants were outstanding:

MAKAMER HOLDINGS, INC. AND SUBSIDIARY

(F/K/A HOMETOWN INTERNATIONAL, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2022

(UNAUDITED)

Consulting Agreements

Effective as of April 26, 2021, the Company entered into a Consulting Agreement with Benchmark Capital, LLC, a limited liability 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 filing 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 receives $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.

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 in Paulsboro, NJ, 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, which provided that the lease agreement would commence 30 days after the opening of the delicatessen. Since the delicatessen opened on October 14, 2015, the first payment should have been due on November 15, 2015. However, since the delicatessen was not fully functioning, the first monthly rent payment was not required to be made until January 1, 2016. On August 12, 2019, the Company was granted a two-year extension of the lease. On March 22, 2021, the Company was granted an additional two-year extension of the lease (See Note 6). The Company accounts for the lease in accordance with ASC Topic 842, “Leases”. For the three months ended March 31, 2022 and 2021, the Company had a rent expense of $1,500 and $1,500, 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.

On January 1, 2022, the Company entered into a six-month non-cancelable operating lease with an unrelated party for its office space at a monthly rate of $350 per month. Pursuant to the terms of this lease, at the end of six months, the Company would have had an option to renew for an additional six months at a monthly rate of $375. However, effective April 1, 2022, the lease was terminated (See Note 8).

MAKAMER HOLDINGS, INC. AND SUBSIDIARY

(F/K/A HOMETOWN INTERNATIONAL, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2022

(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 March 31, 2022 and 2021, the total lease costs were $1,500 and $1,500, respectively. The Company did not incur any variable lease cost for either period.

On July 1, 2014, the Company entered into a five-year non-cancelable operating lease with a related party for its store space in Paulsboro, NJ 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, which provided that the lease agreement would commence 30 days after the opening of the delicatessen. Since the delicatessen opened on October 14, 2015, the first payment should have been due on November 15, 2015. However, since the delicatessen was not fully functioning, the first monthly rent payment was not required to be made until January 1, 2016. On August 12, 2019, the Company was granted a two-year extension of the lease. On March 22, 2021, the Company was granted an additional two-year extension of the lease. For the three months ended March 31, 2022 and 2021, the Company had a rent expense of $1,500 and $1,500, respectively (See Note 5). 

MAKAMER HOLDINGS, INC. AND SUBSIDIARY

(F/K/A HOMETOWN INTERNATIONAL, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2022

(UNAUDITED)

For the three months ended March 31, 2022 and 2021, the Company recorded $26,000 and $0, respectively, as in-kind contribution of services provided by a former President (See Note 4 (B)).

For the three months ended March 31, 2022 and 2021, the Company recorded $0 and $7,714, respectively, as in-kind contribution of services provided by a former President and Vice President of the Company (See Note 4 (B)).

During the year ended December 31, 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 advance, the loan is non-interest bearing, unsecured and due on demand. As of March 31, 2022, the balance due to former officers was $62,297 (See Note 3). 

As reflected in the accompanying unaudited condensed consolidated financial statements, the Company used cash in operations of $140,295, has an accumulated deficit of $2,081,313, and had a net loss of $161,750 for the three months ended March 31, 2022.

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.

The Company is slowly regaining its customer base since reopening. Even though the delicatessen has been re-opened, the Company has experienced 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 March 31, 2022, the Company had $1,009,074 of cash on hand. The Company estimates its cash burn rate to be approximately $25,000 per month. Management believes that the actions taken with respect to 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.

MAKAMER HOLDINGS, INC. AND SUBSIDIARY

(F/K/A HOMETOWN INTERNATIONAL, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2022

(UNAUDITED)