Results of Operations

The following is a discussion of the results of operations for the year ended December 31, 2018 compared to the year ended December 31, 2017.





Revenues:

Revenues decreased to $703,833 for the year ended December 31, 2018 from $722,948 for the year ended December 31, 2017.

Our licenses are structured such that we receive a percentage of revenues from our licensees, the foregoing decrease is a direct result of revenues at the licensee level or structured with a flat monthly rate. This marginal decrease was primarily due to the recognition of royalty income. In addition, the adoption of ASC 606 resulted in $171,500 of decreased revenue reported for the year ended December 31, 2018. This was due to the change in recognizing revenue only for probable collection and deferring revenue for cash collections from customers where the collection is probable. Since we elected to adopt ASC 606 using the modified retrospective approach, no changes were made to our previously issued financial statements, including the statement of income for the year ended December 31, 2017.





Other Income/(Expense)

Total other expense increased to $619,052 for the year ended December 31, 2018 from other income of $223,724 for the year ended December 31, 2017. Other income for the year ended December 31, 2018 included $258,744 of recovery of royalty revenue previously written off as bad debt and $10,076 of miscellaneous income and for the year ended December 31, 2017, the $221,654 represents a recovery of royalty revenue previously written off as bad debt. Other expense of $894,340 for the year ended December 31, 2018 represents the net amount of the $1,310,000 Litigation Settlement payment and the $415,660 recovery of the $1,310,000 Litigation Settlement payment paid to us by various Licensees. Other income also included interest income of $20,310 and $2,070 for the year ended December 31, 2018 and 2017, respectively.

General and Administrative Expenses:

General and administrative expenses for the years ended December 31, 2018 and 2017 were $755,576 and $1,175,917, respectively. These expenses were directly related to the maintenance of the corporate entity and regulatory filing of periodic reports under the Securities Exchange Act of 1934 (the "Exchange Act"). To comply with the requirements of the Sarbanes Oxley Act, we expect these regulatory costs to increase in future years. Virtually all of the 36% decrease in operating expenses can be attributed to our business development, legal costs, write offs of bad debt and other executive administrative costs that changed during the year ended December 31, 2018 as compared with 2017, and are expected to increase in future periods due to the expansion of our brand into emerging markets.





Provision for Income Taxes

The provision for income taxes relates primarily to the greater of average assets and capital taxable income. The average assets and capital are not impacted by net operating losses.





Net Loss per share:

Our net loss was $670,795 or ($.00) per share for the year ended December 31, 2018 as compared to net loss of $229,245 or ($.00) per share for the year ended December 31, 2017. The increase in net loss for the year ended December 31, 2018 was primarily due to the litigation settlement. For an explanation of this change, refer to the above discussion of revenues, other income and general and administrative expenses.





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Net loss per share data for both the years ended 2018 and 2017 is based on net loss available to common shareholders divided by the weighted average of the number of common shares outstanding.

Liquidity and Capital Resources

At December 31, 2018, we had $7,662 in cash and cash equivalents compared to $33,457 in cash and cash equivalents at December 31, 2017.

Various conditions such as the decrease in revenue, accumulated losses, significant debt, and the results of litigation raise substantial doubt about the Company's ability to continue as a going concern. The Company intends to raise additional working capital through the continued licensing of its brand with its current and new operators. There are no assurances that the Company will be able to achieve the level of revenues adequate to generate sufficient cash flow from operations to support the Company's working capital requirements. To the extent that funds generated from any future use of licensing are insufficient, the Company will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company. If adequate working capital is not available, the Company may not continue its operations. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.





Cash:

At December 31, 2018, we had $7,662 in cash and cash equivalents compared to $33,457 in cash and cash equivalents at December 31, 2017.





Operating Activities:

Net cash used in operating activities for the 2018 year was $471,265 and net cash used in operating activities for the 2017 year was $195,385. The increase in cash used in operating activities is related to the recognition of ASC 606 revenue, increase in accrued expenses, deferred revenue and payment of the litigation settlement.





Financing Activities:

Net cash provided by financing activities for the 2018 year was $445,470 and net cash provided by financing activities for the 2017 year was $0. The increase in cash provided by financing activities is related to $400,470 owed to Metropolitan Lumber Hardware and Building Supplies affiliate under the Offset Agreement and the increase of $45,000 of rent payments owed to our Westside Realty affiliate and Metropolitan Lumber Hardware and Building Supplies, Inc.

As of December 31, 2018, we owed $7,500 in rent to our Westside Realty affiliate and $67,500 to our Metropolitan Lumber Hardware and Building Supplies, Inc. affiliate. We also owed Metropolitan Lumber Hardware and Building Supplies, Inc. affiliate $400,470 under the Offset Agreement.





Future Capital Requirements:

We have incurred significant losses since the inception of our business. Since our inception, we have been dependent on funding from private lenders and investors to conduct operations. As of December 31, 2018, we had an accumulated deficit of $(6,894,193). As of December 31, 2018, we had total current assets of $73,576 and total current liabilities of $231,496 or negative working capital of $157,920. As of December 31, 2017, we had total current assets of $119,947 and total current liabilities of $155,292 or negative working capital of $35,345. The decrease in the amount of working capital has been primarily attributable to the increase in payables and decrease in cash from non-paying clubs.

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