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EX-32.2 - EXHIBIT 32.2 - HOMETOWN INTERNATIONAL, INC.s106207_ex32-2.htm
EX-32.1 - EXHIBIT 32.1 - HOMETOWN INTERNATIONAL, INC.s106207_ex32-1.htm
EX-31.1 - EXHIBIT 31.1 - HOMETOWN INTERNATIONAL, INC.s106207_ex31-1.htm

  

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_____________________

 

FORM 10-Q

_____________________

 

(Mark One)

 

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

 

For the Quarterly Period Ended March 31, 2017

 

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)

 

Nevada   46-5705488

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

25 E. Grant Street

Woodstown, NJ, 08098 

(Address of principal executive offices) (Zip Code)

 

(856) 759-9034

(Registrant’s telephone number, including area code)

 

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  x    No  ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

 

Yes  ¨    No  x

 

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.

 

Large accelerated filer     ¨ Accelerated filer ¨
Non-accelerated filer ¨ Smaller reporting company     ¨
(Do not check if a smaller reporting company) Emerging growth company  x

 

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  x

 

As of May 15, 2017, the registrant had 5,242,340 shares of its common stock issued and outstanding.

 

 

 

 

HOMETOWN INTERNATIONAL INC.

 

QUARTERLY REPORT ON FORM 10-Q

 

March 31, 2017

 

TABLE OF CONTENTS

 

  PAGE
PART I - FINANCIAL INFORMATION 2  
Item 1. Financial Statements 2  
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 15  
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18  
Item 4. Controls and Procedures 18  
PART II - OTHER INFORMATION 19  
Item 1. Legal Proceedings 19  
Item 1A. Risk Factors 19  
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 19  
Item 3. Defaults Upon Senior Securities 19  
Item 4. Mine Safety Disclosure 19  
Item 5. Other Information 19  
Item 6. Exhibits 19  
SIGNATURES 20  

 

 

 

 

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 Months Ended March 31, 2017 and 2016

 

Index to the Consolidated Financial Statements

 

Condensed Consolidated Balance Sheets at March 31, 2017 (Unaudited) and December 31, 2016 3
   
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2017 and 2016 (Unaudited) 4
   
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 and 2016 (Unaudited) 6
   
Notes to the Condensed Consolidated Financial Statements (Unaudited) 7

 

 2 

 

 

HOMETOWN INTERNATIONAL, INC. AND SUBSIDIARY

Condensed Consolidated Balance Sheets

 

   March 31, 2017   December 31, 2016 
   (Unaudited)     
ASSETS          
           
Current Assets          
Cash  $12,624   $3,845 
Inventory   1,081    1,038 
Total Current Assets   13,705    4,883 
           
Leasehold improvements and equipment, net   26,175    27,979 
           
Total  Assets  $39,880   $32,862 
           
LIABILITIES AND STOCKHOLDERS' DEFICIT          
           
Current Liabilities          
Loans payable - related party Accounts payable and accrued expenses  $107,317   $102,775 
Due to Officers - related parties   14,281    13,263 
Note payable - related party   2,000    2,000 
Note payable   136,000    111,000 
    -      
Total  Liabilities   259,598    229,038 
           
Commitments and Contingencies (See Note 7)          
           
Stockholders' Deficit          
Common stock, $0.0001 par value; 100,000,000 shares authorized, 5,242,340  and 5,242,340 issued and outstanding, respectively   524    524 
Additional paid-in capital   255,155    247,441 
Accumulated deficit   (475,397)   (444,141)
           
Total Stockholders' Deficit   (219,718)   (196,176)
           
Total Liabilities and Stockholders' Deficit  $39,880   $32,862 

 

See accompanying notes to condensed consolidated unaudited financial statement

 

 3 

 

 

HOMETOWN INTERNATIONAL, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Operations

(Unaudited)

 

   For the Three Months
Ended
   For the Three Months
Ended
 
   March 31, 2017   March 31, 2016 
         
Sales  $16,115   $20,810 
         - 
Costs and Expenses          
Food, beverage and supplies   10,427    13,391 
Labor   1,899    4,647 
Direct operating and occupancy   2,542    2,469 
Depreciation   1,804    1,811 
Consulting   -    24,000 
Professional fees   16,033    8,398 
General and administrative   11,102    12,590 
           
Total cost and expenses   43,807    67,306 
           
Loss from Operations   (27,692)   (46,496)
           
Other Expenses          
Interest Expense   (3,564)   (1,355)
           
LOSS FROM OPERATIONS BEFORE INCOME TAXES   (31,256)   (47,851)
           
Provision for Income Taxes   -    - 
           
NET LOSS  $(31,256)  $(47,851)
           
Net Loss Per Share  - Basic and Diluted  $(0.01)  $(0.01)
           
Weighted average number of shares outstanding during the period - Basic and Diluted   5,242,340    5,242,340 

 

See accompanying notes to condensed consolidated unaudited financial statement

 

 4 

 

 

HOMETOWN INTERNATIONAL, INC. AND SUBSIDIARY

Condensed Consolidated Statement of Stockholders' Deficit

For the three months ended March 31, 2017

(Unaudited)

 

       Additional       Total 
   Common stock   paid-in   Accumulated   Stockholders' 
   Shares   Amount   capital   Deficit   Deficit 
                     
Balance, December 31, 2016   5,242,340   $524   $247,441   $(444,141)  $(196,176)
                          
In kind contribution of services   -    -    7,714    -    7,714 
                          
Net loss for the three months ended March 31, 2017   -    -    -    (31,256)   (31,256)
                          
Balance, March 31, 2017   5,242,340   $524   $255,155   $(475,397)  $(219,718)

 

See accompanying notes to condensed consolidated unaudited financial statement

 

 5 

 

 

HOMETOWN INTERNATIONAL, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

   For the Three Months Ended   For the Three Months Ended 
   March 31, 2017   March 31, 2016 
Cash Flows From Operating Activities:          
Net Loss  $(31,256)  $(47,851)
Adjustments to reconcile net loss to net cash used in operations          
In-kind contribution of services   7,714    7,714 
Depreciation expense   1,804    1,811 
Changes in operating assets and liabilities:          
Decrease in inventory   (43)   156 
Increase in accounts payable and accrued expenses   4,542    4,879 
Net Cash Used In Operating Activities   (17,239)   (33,291)
           
Cash Flows From Investing Activities:          
Net Cash Used In Investing Activities   -    - 
           
Cash Flows From Financing Activities:          
Advances from related parties   1,018    1,520 
Proceeds from note payable   25,000    40,000 
Net Cash Provided by Financing Activities   26,018    41,520 
           
Net Increase in Cash   8,779    8,229 
           
Cash at Beginning of Period   3,845    2,460 
           
Cash at End of Period  $12,624   $10,689 
           
Supplemental disclosure of cash flow information:          
           
Cash paid for interest  $-   $- 
Cash paid for taxes  $-   $- 

 

See accompanying notes to condensed consolidated unaudited financial statement

 

 6 

 

 

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

 

(A) 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 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 interim 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, 2016, filed with the SEC on March 30, 2017.

 

It is management’s opinion that all material adjustments (consisting of normal recurring adjustments) have been made, which are necessary for a fair financial statements 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. 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. Hometown Delis are designed to be comfortable community gathering places for guests of all ages.

 

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.

 

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

 

(B) Principles of Consolidation

 

The accompanying March 31, 2017 and 2016, 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 and valuation of deferred tax assets. 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 three months or less to be cash equivalents. At March 31, 2017 and December 31, 2016, 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. The Company has 484,680 and 484,680 shares issuable upon the exercise of warrants that were not included in the computation of dilutive loss per share because their inclusion is anti-dilutive for the three months ended March 31, 2017 and 2016, respectively.

 

 7 

 

 

(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.

 

The company’s federal income tax returns for the years ended December 31, 2016 and 2015 remain subject to examination by the Internal Revenue Service through 2019.

 

(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 will recognize revenue on arrangements in accordance with FASB ASC No. 605, “Revenue Recognition”.  In all cases, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured. The Company generates revenue operating a delicatessen deli. Revenue from the operations of Company-owned delicatessen delis 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:

 

·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.

 

 8 

 

 

·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) Recent Accounting Pronouncements

 

In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) 2016-01, which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company is currently evaluating the impact of adopting this guidance.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Topic 842 affects any entity that enters into a lease, with some specified scope exemptions. The guidance in this Update supersedes Topic 840, Leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For public companies, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are currently evaluating the impact of adopting ASU No. 2016-02 on our consolidated financial statements.

 

In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) that clarifies how to apply revenue recognition guidance related to whether an entity is a principal or an agent. ASU 2016-08 clarifies that the analysis must focus on whether the entity has control of the goods or services before they are transferred to the customer and provides additional guidance about how to apply the control principle when services are provided and when goods or services are combined with other goods or services. The effective date for ASU 2016-08 is the same as the effective date of ASU 2014-09 as amended by ASU 2015-14, for annual reporting periods beginning after December 15, 2017, including interim periods within those years. The Company has not yet determined the impact of ASU 2016-08 on its consolidated financial statements.

 

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation, or ASU No. 2016-09. The areas for simplification in this Update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public entities, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted in any interim or annual period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value should be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. Amendments related to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement should be applied retrospectively. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term should be applied prospectively. An entity may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective transition method or a retrospective transition method. We are currently evaluating the impact of adopting ASU No. 2016-09 on our consolidated financial statements.

 

 9 

 

 

In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which provides further guidance on identifying performance obligations and improves the operability and understandability of licensing implementation guidance. The effective date for ASU 2016-10 is the same as the effective date of ASU 2014-09 as amended by ASU 2015-14, for annual reporting periods beginning after December 15, 2017, including interim periods within those years.  In May 2016, the FASB issued ASU 2016-12 “Revenue from Contracts with Customers (Topic 606) - Narrow-Scope Improvements and Practical Expedients,” which amends the guidance on transition, collectability, non-cash consideration, and the presentation of sales and other similar taxes. ASU 2016-12 clarifies that, for a contract to be considered completed at transition, all (or substantially all) of the revenue must have been recognized under legacy GAAP. In addition, ASU 2016-12 clarifies how an entity should evaluate the collectability threshold and when an entity can recognize nonrefundable consideration received as revenue if an arrangement does not meet the standard’s contract criteria. The standard allows for both retrospective and modified retrospective methods of adoption. The Company has not yet determined the impact of ASU 2016-10 on its consolidated financial statements.

 

In June 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Statements," which requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2019 (fiscal year 2021 for the Company). The Company has not yet determined the potential effects of the adoption of ASU 2016-13 on its Consolidated Financial Statements.

 

In August 2016, the FASB issued ASU 2016-15, "Classification of Certain Cash Receipts and Cash Payments," which aims to eliminate diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. ASU 2016-15 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2017 (fiscal year 2019 for the Company). The Company has not yet determined the potential effects of the adoption of ASU 2016-15 on its Consolidated Financial Statements.

 

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

 

(K) Business Segments

 

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

 

(L) Inventories

 

Inventories consist of food and beverages, and are stated at cost of $1,081.

 

(M) Advertising

 

Advertising costs are expensed as incurred. These costs are included in consulting and general and administrative expenses and totaled $126 and $75 for the three months ended March 31, 2017 and 2016, respectively.

 

NOTE 2 LEASEHOLD IMPROVEMENT AND EQUIPMENT

 

Leasehold improvement and equipment consist of the following at March 31, 2017 and December 31, 2016:

 

 10 

 

 

   March 31,   December, 31 
   2017   2016 
Leasehold Improvements   33,455    33,455 
Equipment   3,120    3,120 
Leasehold Improvements and Equipment   36,575    36,575 
Less: Accumulated Depreciation   (10,400)   (8,596)
Leasehold Improvements and Equipment, Net  $26,175   $27,979 

 

Depreciation expense was $1,804 and $1,811 for the three months ended March 31, 2017 and 2016, respectively. The store was opened on October 14, 2015.

 

NOTE 3 NOTE PAYABLE – RELATED PARTY

 

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 (See Note 8).

 

NOTE 4 DUE TO OFFICERS  – RELATED PARTY

 

During the three months ended March 31, 2017 certain officers paid an aggregate $1,018 in expenses on Company’s behalf as an advance. Pursuant to the terms of the note, the note was non-interest bearing, unsecured and was due on demand. (See Note 8)

 

During the year ended December 31, 2016, certain officers paid an aggregate $13,263 in expenses on Company’s behalf as an advance. Pursuant to the terms of the note, the note was non-interest bearing, unsecured and was due on demand. (See Note 8)

 

NOTE 5 NOTE PAYABLE

 

On January 19, 2017, the Company entered into an unsecured promissory note in the amount of $5,000. Pursuant to the terms of the note, the note is bearing 10% interest, unsecured and is due on January 19, 2018. As of March 31, 2017 the Company accrued $100 in interest expense.

 

On March 21, 2017, the Company entered into an unsecured promissory note in the amount of $20,000. Pursuant to the terms of the note, the note is bearing 10% interest, unsecured and is due on March 21, 2018. As of March 31, 2017 the Company accrued $55 in interest expense.

 

On August 22, 2016, the Company entered into an unsecured promissory note in the amount of $25,000. Pursuant to the terms of the note, the note is bearing 10% interest, unsecured and is due on August 22, 2017. As of March 31, 2017 the Company accrued $1,568 in interest expense.

 

On March 21, 2016, the Company entered into an unsecured promissory note in the amount of $20,000. Pursuant to the terms of the note, the note is bearing 10% interest, unsecured and is due on March 21, 2017. As of March 31, 2017 the Company accrued $2,155 in interest expense. The note is currently in default.

 

On March 17, 2016, the Company entered into an unsecured promissory note in the amount of $12,000. Pursuant to the terms of the note, the note is bearing 10% interest, unsecured and is due on March 17, 2017. As of March 31, 2017 the Company accrued $1,307 in interest expense. The note is currently in default.

 

 11 

 

 

On February 11, 2016, the Company entered into an unsecured promissory note in the amount of $4,000. Pursuant to the terms of the note, the note is bearing 4% interest, unsecured and is due on demand. As of March 31, 2017 the Company accrued $185 in interest expense.

 

On January 11, 2016, the Company entered into an unsecured promissory note in the amount of $10,000. Pursuant to the terms of the note, the note is bearing 6% interest, unsecured and is due on December 31. 2016. Effective, January 1, 2017 the note was amended and is bearing 10% interest on the outstanding balance. If the note is not repaid by November 1, 2017 the interest will increase by an additional 4%. As of March 31, 2017 the Company accrued $866 in interest expense. The note is currently in default. On April 4, 2017, the Company repaid $10,909 in outstanding balance and accrued interest.

 

On November 9, 2015, the Company entered into an unsecured promissory note in the amount of $20,000. Pursuant to the terms of the note, the note is bearing 10% interest, unsecured and is due on November 9, 2016. As of March 31, 2017 Company accrued $2,910 in interest expense. The note is currently in default.

 

On November 12, 2015, the Company entered into an unsecured promissory note in the amount of $20,000. Pursuant to the terms of the note, the note is bearing 10% interest, unsecured and is due on November 12, 2016. As of March 31, 2017 the Company accrued $2,939 in interest expense. The note is currently is in default.

 

NOTE 6STOCKHOLDERS’ DEFICIT

 

(A) Common Stock Issued for Cash

 

The Company is authorized to issue 100,000,000 shares of common stock with a par value of $0.0001 per share.

 

(B) In kind contribution of services

 

For the three months ended March 31, 2017, the Company recorded $7,714 as in kind contribution of services provided by President and Vice President of the Company (See Note 8).

 

For the year ended December 31, 2016, the Company recorded $30,855 as in kind contribution of services provided by President and Vice President of the Company (See Note 8).

 

(C) Warrants

 

The following tables summarize all warrant grants for the three months ended March 31, 2017, respectively, and the related changes during the period are presented below.

 

Balance at December 31, 2016   484,680   $2.50 
Granted   -    - 
Exercised   -    - 
Forfeited   -    - 
Balance at March 31, 2017   484,680   $2.50 
Warrants exercisable at  March 31, 2017   484,680   $2.50 

 

484,680 of the total warrants outstanding are fully vested, exercisable and non-forfeitable.

 

 12 

 

 

NOTE 7 COMMITMENTS AND CONTINGENCIES

 

(A) Consulting Agreement

 

On August 1, 2014, the Company entered into a consulting agreement with an entity related to one of our officers, to receive administrative and other miscellaneous services. The Company is required to pay $8,000 a month. The agreement was terminated on November 4, 2016. During the three months ended March 31, 2017 and 2016 the Company paid $0 and $24,000, respectively, in consulting fees under the agreement (See Note 8).

 

(B) 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 store 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 deli. The store opened on October 14, 2015, the first payments would have been due on November 15, 2015, however since the deli was not fully functioning, the first monthly rent payment is due January 1, 2016. For the three months ended March 31, 2016, the Company had a rent expense of $1,500 (See Note 8).

 

NOTE 8 RELATED PARTY TRANSACTIONS

 

On August 1, 2014, the Company entered into a consulting agreement with an entity related to one of our Officers to receive administrative and other miscellaneous services. The Company is required to pay $8,000 a month. The agreement was terminated on November 4, 2016, (see Note 7(A)). During the three months ended March 31, 2017 and 2016 the Company paid $0 and $24,000, respectively, in consulting fees under the agreement (See Note 7 (A)).

 

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 store 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 deli. The store opened on October 14, 2015, the first payments would have been due on November 15, 2015, however since the deli was not fully functioning, the first monthly rent payment is due January 1, 2016. For the three months ended March 31, 2016, the Company had a rent expense of $1,500 (See Note 7(B)).

 

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 (See Note 3).

 

During the three months ended March 31, 2017 certain officers paid an aggregate $1,018 in expenses on Company’s behalf as an advance. Pursuant to the terms of the note, the note was non-interest bearing, unsecured and was due on demand. (See Note 4)

 

During the year ended December 31, 2016 officers paid an aggregate $13,263 in expenses on Company’s behalf as an advance. Pursuant to the terms of the note, the note was non-interest bearing, unsecured and was due on demand (See Note 4).

 

For the three months ended March 31, 2017, the Company recorded $7,714 as in kind contribution of services provided by President and Vice President of the Company (See Note 6(B)).

 

For the year ended December 31, 2016, the Company recorded $30,855 as in kind contribution of services provided by President and Vice President of the Company (See Note 6(B)).

 

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NOTE 9 GOING CONCERN

 

As reflected in the accompanying condensed consolidated financial statements, the Company used cash in operations of $17,239 an accumulated deficit of $475,397 and has a net loss of $31,256 for the three months ended March 31, 2017. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.

 

NOTE 10SUBSEQUENT EVENT

 

On April 4, 2017, the Company repaid $10,909 in outstanding balance and accrued interest on a note dated January 11, 2016. The note was fully repaid and the remaining balance is $0.

 

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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".

 

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Overview

 

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

 

On January 18, 2014, Your Hometown Deli was formed under the laws of State of New Jersey. On May 29, 2014, Your Hometown Deli entered into a Membership Interest Purchase Agreement with the Company and is now a wholly-owned subsidiary of our Company. We introduced the delicatessen concept under the Your Hometown Deli brand name. Based on the Paulsboro unit’s performance, we may consider expanding the concept to other communities throughout the United States.

 

The Company is the originator of a new “Delicatessen” concept called “Your Hometown Deli.” Your Hometown Delis plan to feature “home-style” sandwiches, food items, and groceries in a casual and friendly atmosphere. Your Hometown Delis are designed to be comfortable community gathering places for customers of all ages. The Company seeks to create an establishment that will appeal to local residents and commuting workers, conveniently offering high-quality products at fair prices. Targeted towards smaller towns and communities, the Company's first location was opened in Paulsboro, New Jersey on October 14, 2015.

 

The Your Hometown Deli Concept

 

Your Hometown Deli is a delicatessen concept that will focus on providing high-quality food products not available in local supermarkets or take-out restaurants. The delicatessen concept has a worldwide history with the term first appearing in the English language in 1889. The word “delicatessen” originates in the German language and means "delicacies" or “fine foods.” Delicatessens vary throughout the world, but in the United States a delicatessen (or “deli”) is a small retail store that is a blend of a grocery and a fast-food restaurant.

 

The Company’s Your Hometown Deli concept is patterned after traditional delicatessens, offering a wider and fresher menu than found at fast-food restaurants. Sandwiches and green salads will be made fresh to order. Like many delis, Your Hometown Deli serves some hot foods kept on a steam table, similar to a cafeteria. In addition to ready-to-eat food, the Your Hometown Deli sells cold cuts by weight. A wide variety of beverages are also sold together with potato chips and similar products.

 

In addition to our food offering, newspapers, limited household items and small snack items, such as candy, cookies and chewing gums are planned to be available for purchase. Your Hometown Deli also provides take-out service and limited seating in the store.

 

We have begun generating revenue from the sales of our food and beverage since our soft opening in mid-October, 2015. Besides the equipment, fixtures, and inventories we purchased for our deli store, we have limited assets. We had minimal working capital as of the date of this quarterly report and used cash in operating activities for the reporting period then ended. These factors raise substantial doubt from our auditor about our ability to continue as a going concern.

 

During the quarter ending March 31, 2017, we continued to refine our menu and operating hours. We have limited advertising using social media and direct mailing to residents in towns around our store, however, we recently placed an advertisement in a local high school sports calendar and have attended various local events with food samples and menus.  Events like the Lighthouse Challenge held at Tinicum Rear Range Lighthouse and various political fundraisers throughout Gloucester County. We expect our losses to continue during 2017 as we continue to revise our menu and marketing plan to the local taste.

 

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Results of Operations - Three Months Ended March 31, 2017 Compared to Three Months Ended March 31, 2016

 

We generated revenue of $16,155 and $20,810 for the three months ended March 31, 2017 and 2016, respectively. The decrease in revenue is mainly attributed to reduced hours of operations. The total cost and expenses was $43,807 for the three months ended March 31, 2017, compared to $67,306 for the three months ended March 31, 2016. The decrease of $23,499 is mainly attributed to the lack of consulting fees.

 

We had a net loss of $31,256 and $47,851 for the three months ended March 31, 2017 and 2016, respectively.

 

Liquidity and Capital Resources

 

As of March 31, 2017, we had a total current asset of $39,880, mainly in leasehold improvements and equipment and cash. Our liabilities as of March 31, 2017 were $259,598, which comprised of $107,317 in accounts payable and accrued expenses, $14,281 due to certain officers, $2,000 in note payable due to a related party and $136,000 in note payable. As of March 31, 2017, we had a working capital deficit of $219,718. As of December 31, 2016, we had a total current asset of $32,862, mainly in leasehold improvements and equipment, inventory and cash. Our liabilities as of December 31, 2016 were $229,038, which comprised of $102,775 in accounts payable and accrued expenses, $13,263 due to certain officers, $2,000 in note payable due to a related party and $111,000 in note payable. As of December 31, 2016, we had a working capital deficit of $196,176.

 

The following is a summary of our cash flows provided by (used in) operating, investing, and financing activities for the three months ended March 31, 2017 and 2016:

 

   For the
three
months
ended
March 31,
2017
  

For the

three
months

ended

March 31,
2016

 
Net Cash (Used in) Operating Activities  $(17,239)  $(33,291)
Net Cash used in Investing Activities  $-   $- 
Net Cash Provided by Financing Activities  $26,018   $41,520 
Net Increase in Cash and Cash Equivalents  $8,779   $8,229 

  

For the three months ended March 31, 2017, we had used cash of $17,239 for operating activities and financing activities provided $26,018. We had a net increase of $8,779 for the three months ended March 31, 2017. For the three months ended March 31, 2016, we had used cash of $33,291 for operating activities and financing activities provided $41,520. We had a net increase of $8,229 for the three months ended March 31, 2016.

 

We are dependent on the sales of product and services and receipt of capital investment or other financing to fund our ongoing operations. If continued funding and capital resources are unavailable at reasonable terms, we may not be able to implement its plan of operations.

 

Going Concern

 

As reflected in the accompanying condensed consolidated financial statements, the Company used cash in operations of $17,239 an accumulated deficit of $475,397 and has a net loss of $31,256 for the three months ended March 31, 2017. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

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Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.

  

Critical Accounting Policies and Estimates

 

Revenue Recognition

 

The Company will recognize revenue on arrangements in accordance with FASB ASC No. 605, “Revenue Recognition”. In all cases, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured. The Company generates revenue operating a delicatessen deli. Revenue from the operations of Company-owned delicatessen delis are recognized when sales occur.

 

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

 

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”) (the Company’s principal financial and accounting officer), 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. 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 upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are not effective as of March 31, 2017 to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure for the reason described below.

 

Because of our limited operations, we have limited number of employees which prohibits a segregation of duties. In addition, we lack a formal audit committee with a financial expert. As we grow and expand our operations we will engage additional employees and experts as needed. However, there can be no assurance that our operations will expand.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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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.

 

Not required for emerging growth companies.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits.

 

Exhibit

Number

  Description
3.1   Articles of Incorporation (1)
3.2   By-Laws (1)
31.1   Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1   Certifications of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2   Certifications of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS   XBRL Instance Document
101.SCH   XBRL Taxonomy Extension Schema Document
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB   XBRL Taxonomy Extension Label Linkbase Document.
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document.

 

(1) Incorporated by reference to the Company’s draft registration statement on Form S-1 filed with the SEC on June 8, 2015.

 

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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.

 

Date: May 15, 2017   
   
HOMETOWN INTERNATIONAL, INC.  
   
/s/ Paul F. Morina  
Name: Paul F. Morina  
Chief Executive Officer & Chief Financial Officer  

(Principal Executive Officer & Principal Financial Officer)

 

 

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