HOMETOWN
INTERNATIONAL, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
For the
Six Months
Ended
|
|
|
For the
Six Months
Ended
|
|
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(280,254
|
)
|
|
$
|
(262,706
|
)
|
|
Adjustments to reconcile net loss to net cash used in operations
|
|
|
|
|
|
|
|
|
|
In-kind contribution of services
|
|
|
23,571
|
|
|
|
15,428
|
|
|
Depreciation expense
|
|
|
151
|
|
|
|
3,623
|
|
|
Amortization of operating lease assets
|
|
|
2,648
|
|
|
|
2,637
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Decrease in prepaid expenses and other current assets
|
|
|
6,594
|
|
|
|
-
|
|
|
(Increase)Decrease in inventory
|
|
|
(137
|
)
|
|
|
738
|
|
|
Decrease in interest receivable - related parties
|
|
|
872
|
|
|
|
-
|
|
|
Increase (Decrease) in accounts payable and accrued expenses
|
|
|
5,386
|
|
|
|
(57,504
|
)
|
|
Decrease in operating lease liability
|
|
|
(2,648
|
)
|
|
|
(2,637
|
)
|
|
Net Cash Used In Operating Activities
|
|
|
(243,817
|
)
|
|
|
(300,421
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
|
Note receivable - related parties
|
|
|
(150,000
|
)
|
|
|
-
|
|
|
Repayment of note receivable - related parties
|
|
|
300,000
|
|
|
|
-
|
|
|
Net Cash Provided By Investing Activities
|
|
|
150,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from common stock issuance for cash
|
|
|
-
|
|
|
|
2,500,000
|
|
|
Proceeds from/due to former officers
|
|
|
1,000
|
|
|
|
7,196
|
|
|
Proceeds from/due to related party
|
|
|
4,993
|
|
|
|
-
|
|
|
Repayment of due to related party
|
|
|
(8,445
|
)
|
|
|
-
|
|
|
Repayment of note payable - related party
|
|
|
-
|
|
|
|
(332,104
|
)
|
|
Proceeds from note payable - related party
|
|
|
-
|
|
|
|
70,000
|
|
|
Purchase of treasury stock
|
|
|
-
|
|
|
|
(38,336
|
)
|
|
Net Cash (Used in) Provided by Financing
Activities
|
|
|
(2,452
|
)
|
|
|
2,206,756
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Decrease) Increase in Cash
|
|
|
(96,269
|
)
|
|
|
1,906,335
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at Beginning of Period
|
|
|
1,398,006
|
|
|
|
5,382
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at End of Period
|
|
$
|
1,301,737
|
|
|
$
|
1,911,717
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
-
|
|
|
$
|
9,091
|
|
|
Cash paid for taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
Operating lease asset obtained for operating lease liability upon remeasurement
|
|
$
|
10,569
|
|
|
$
|
-
|
|
|
Note payable - related party, converted into 100,000 shares of common stock
|
|
$
|
-
|
|
|
$
|
100,000
|
|
See
accompanying notes to unaudited condensed consolidated financial statements.
HOMETOWN
INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2021
(UNAUDITED)
|
NOTE
1
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
|
|
|
(A)
|
Organization and Basis of Presentation
|
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 JUNE 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 June 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
June 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 June 30, 2021
and 2020, warrants were not included in the computation of income/ (loss) per share because their inclusion is anti-dilutive.
HOMETOWN
INTERNATIONAL, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS
OF JUNE 30, 2021
(UNAUDITED)
The
computation of basic and diluted loss per share for June 30, 2021 and June 30, 2020 excludes the common stock equivalents of the following
potentially dilutive securities because their inclusion would be anti-dilutive:
|
|
|
June
30,
2021
|
|
|
June
30,
2020
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Class A Warrants (Exercise price - $1.25/share)
|
|
|
38,985,020
|
|
|
|
38,985,020
|
|
|
Class B Warrants (Exercise price - $1.50/share)
|
|
|
38,985,020
|
|
|
|
38,985,020
|
|
|
Class C Warrants (Exercise price - $1.75/share)
|
|
|
38,985,020
|
|
|
|
38,985,020
|
|
|
Class D Warrants (Exercise price - $2.00/share)
|
|
|
38,985,020
|
|
|
|
38,985,020
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
155,940,080
|
|
|
|
155,940,080
|
|
(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.
HOMETOWN
INTERNATIONAL, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS
OF JUNE 30, 2021
(UNAUDITED)
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:
|
|
●
|
Level
1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
|
|
|
|
|
|
|
●
|
Level
2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets
or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
|
|
|
|
|
|
|
●
|
Level
3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by
us, which reflect those that a market participant would use.
|
(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
June 30, 2021 and December 31, 2020, the Company had cash balances in excess of FDIC limits of $1,051,044 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 $876 and $0 for the six months ended June 30, 2021 and
2020, respectively. The Company had no advertising expense for the three months ended June 30, 2021 and 2020, respectively.
HOMETOWN
INTERNATIONAL, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS
OF JUNE 30, 2021
(UNAUDITED)
|
NOTE
2
|
LEASEHOLD
IMPROVEMENT AND EQUIPMENT
|
Leasehold
improvement and equipment consist of the following at June 30, 2021 and December 31, 2020:
|
|
|
June
30,
|
|
|
December 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Leasehold
Improvements
|
|
|
33,455
|
|
|
|
33,455
|
|
|
Equipment
|
|
|
3,120
|
|
|
|
3,120
|
|
|
Leasehold
Improvements and Equipment
|
|
|
36,575
|
|
|
|
36,575
|
|
|
Less:
Accumulated Depreciation
|
|
|
(36,489
|
)
|
|
|
(36,338
|
)
|
|
Leasehold
Improvements and Equipment, Net
|
|
$
|
86
|
|
|
$
|
237
|
|
Depreciation
expense was $53 and $1,812 for the three months ended June 30, 2021 and 2020, respectively.
Depreciation
expense was $151 and $3,623 for the six months ended June 30, 2021 and 2020, respectively.
|
NOTE
3
|
NOTES
RECEIVABLE – RELATED PARTIES
|
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 had 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 had 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).
|
NOTE
4
|
NOTE
PAYABLE – RELATED PARTY
|
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).
HOMETOWN
INTERNATIONAL, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS
OF JUNE 30, 2021
(UNAUDITED)
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 June 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).
|
NOTE
5
|
DUE
TO FORMER OFFICERS
|
During
the six months ended June 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 June 30, 2021, the
balance due to former officers was $62,297 (See Note 9).
|
NOTE
6
|
DUE
TO RELATED PARTY
|
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).
|
NOTE
7
|
STOCKHOLDERS’
EQUITY
|
(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.
HOMETOWN
INTERNATIONAL, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS
OF JUNE 30, 2021
(UNAUDITED)
(B)
In-kind Contribution of Services
For
the three months ended June 30, 2021 and 2020, the Company recorded $3,857 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 six months ended June 30, 2021 and 2020, the Company recorded $11,571 and $15,428, 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 June 30, 2021 and 2020, the Company recorded $12,000 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:
|
|
●
|
38,985,020 Class A Warrants
|
|
|
|
|
|
|
●
|
38,985,020 Class B Warrants
|
|
|
|
|
|
|
●
|
38,985,020 Class C Warrants
|
|
|
|
|
|
|
●
|
38,985,020 Class D Warrants
|
HOMETOWN
INTERNATIONAL, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS
OF JUNE 30, 2021
(UNAUDITED)
As
of the date of this report, no warrants have been exercised.
|
|
|
Number
of
Warrants
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Life
(in Years)
|
|
|
Balance,
December 31, 2020
|
|
|
155,940,080
|
|
|
|
1.625
|
|
|
|
14.25
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Cancelled/Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Balance,
June 30, 2021 (Unaudited)
|
|
|
155,940,080
|
|
|
$
|
1.625
|
|
|
|
13.76
|
|
|
Intrinsic
Value
|
|
$
|
1,553,942,897
|
|
|
|
-
|
|
|
|
-
|
|
As of June 30, 2021, the following
warrants were outstanding:
Exercise
Price
Warrants
Outstanding
|
|
|
Warrants
Exercisable
|
|
|
Weighted
Average
Remaining
Contractual Life
|
|
|
Aggregate
Intrinsic Value
|
|
|
$
|
1.25
|
|
|
|
38,985,020
|
|
|
|
13.76
|
|
|
$
|
403,105,107
|
|
|
$
|
1.50
|
|
|
|
38,985,020
|
|
|
|
13.76
|
|
|
$
|
393,358,852
|
|
|
$
|
1.75
|
|
|
|
38,985,020
|
|
|
|
13.76
|
|
|
$
|
383,612,597
|
|
|
$
|
2.00
|
|
|
|
38,985,020
|
|
|
|
13.76
|
|
|
$
|
373,866,342
|
|
As of December 31, 2020, the following
warrants were outstanding:
Exercise
Price
Warrants
Outstanding
|
|
|
Warrants
Exercisable
|
|
|
Weighted
Average
Remaining
Contractual Life
|
|
|
Aggregate
Intrinsic Value
|
|
|
$
|
1.25
|
|
|
|
38,985,020
|
|
|
|
14.25
|
|
|
$
|
467,820,240
|
|
|
$
|
1.50
|
|
|
|
38,985,020
|
|
|
|
14.25
|
|
|
$
|
458,073,985
|
|
|
$
|
1.75
|
|
|
|
38,985,020
|
|
|
|
14.25
|
|
|
$
|
448,327,730
|
|
|
$
|
2.00
|
|
|
|
38,985,020
|
|
|
|
14.25
|
|
|
$
|
438,581,475
|
|
(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 JUNE 30, 2021
(UNAUDITED)
|
NOTE
8
|
COMMITMENTS
AND CONTINGENCIES
|
Consulting
Agreements
Effective
as of April 26, 2021, the Company entered into a Consulting Agreement with Benchmark Capital, LLC, 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. For the six months ended
June 30, 2021 and 2020, the Company had a rent expense of $3,000 and $3,000, respectively. 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”.
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.
HOMETOWN
INTERNATIONAL, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS
OF JUNE 30, 2021
(UNAUDITED)
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.
Supplemental
consolidated balance sheet information related to leases was as follows:
Operating
Leases
|
|
|
June
30,
2021
(Unaudited)
|
|
|
|
|
|
|
|
Operating
lease assets - right of use
|
|
$
|
10,835
|
|
|
|
|
|
|
|
|
Lease
liability is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
Lease
Liability
|
|
$
|
10,835
|
|
|
Less:
operating lease liability, current
|
|
|
(5,148
|
)
|
|
Long
term operating lease liability
|
|
$
|
5,687
|
|
|
|
|
|
|
|
|
Maturities
of lease liabilities at June 30, 2021 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
$
|
3,000
|
|
|
2022
|
|
|
6,000
|
|
|
2023
|
|
|
3,000
|
|
|
Total
lease liability
|
|
|
12,000
|
|
|
Less:
present value discount
|
|
|
(1,165
|
)
|
|
Total
lease liability
|
|
$
|
10,835
|
|
Supplemental
disclosures of cash flow information related to leases were as follows:
|
|
|
For
the
six months
ended
June 30,
2021
|
|
|
For
the
six months
ended
June 30,
2020
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Cash
paid for operating lease liabilities
|
|
$
|
3,000
|
|
|
$
|
3,000
|
|
|
|
|
For
the
six months
ended
June 30,
2021
|
|
|
For
the
six months
ended
June 30,
2020
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Operating
lease asset obtained for operating lease liability upon remeasurement
|
|
$
|
10,569
|
|
|
$
|
-
|
|
HOMETOWN
INTERNATIONAL, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS
OF JUNE 30, 2021
(UNAUDITED)
For
the three months ended June 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 six months ended June 30, 2021 and 2020, the total lease costs were $3,000 and $3,000, respectively. The Company did not incur any
variable lease cost for both periods.
|
NOTE
9
|
RELATED
PARTY TRANSACTIONS
|
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. For the six months
ended June 30, 2021 and 2020, the Company had a rent expense of $3,000 and $3,000, respectively. 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 (See Note 8).
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 June 30, 2021 and 2020, the Company recorded $3,857 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 six months ended June 30, 2021 and 2020, the Company recorded $11,571 and $15,428, 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 June 30, 2021 and 2020, the Company recorded $12,000 and $0, respectively, as in-kind contribution of services
provided by the current President of the Company (See Note 7 (B)).
During
the six months ended June 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 June 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 Note 6).
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)
HOMETOWN
INTERNATIONAL, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS
OF JUNE 30, 2021
(UNAUDITED)
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 June 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).
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 Note 8).
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 8).
HOMETOWN
INTERNATIONAL, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS
OF JUNE 30, 2021
(UNAUDITED)
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 had 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 had 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 $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.
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 June 30, 2021, the Company had approximately $1,301,737 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.