This discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. The words "believe," "expect," "anticipate," "intend," "estimate," "may," "should," "could," "will," "plan," "future," "continue," and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. These forward-looking statements are based largely on our expectations or forecasts of future events, can be affected by inaccurate assumptions, and are subject to various business risks and known and unknown uncertainties, a number of which are beyond our control. Therefore, actual results could differ materially from the forward-looking statements contained in this document, and readers are cautioned not to place undue reliance on such forward-looking statements.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. A wide variety of factors could cause or contribute to such differences and could adversely impact revenues, profitability, cash flows and capital needs. There can be no assurance that the forward-looking statements contained in this document will, in fact, transpire or prove to be accurate.

Summary of Critical Accounting Policies and Estimates

The following summary of our critical accounting policies is presented to assist in understanding our consolidated financial statements. The consolidated financial statements and notes are representations of our management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the consolidated financial statements. Additional information about our accounting policies and estimates may be found in Note 2 to our consolidated financial statements included in this report.

We make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses. The accounting policies described below are those we consider critical in preparing our financial statements. Some of these policies include significant estimates made by management using information available at the time the estimates were made. However, these estimates could change materially if different information or assumptions were used.





Revenue Recognition

Under ASC 606, revenue from the initiation fees are recognizable when at a point in time (first month of the contract) and royalty revenues are recognized over time for those contracts with probable collections.

The Company's license fee revenue is generated from royalties earned through intellectual property licensing agreements which permit the licensee to use the recognition and status of the Scores brand in order to promote their businesses. Under ASC 606, revenue is recognized throughout the life of the executed licensing agreement. The Company measures revenue based on consideration specified in a contract with a customer. Furthermore, the Company recognizes revenue when it satisfies a performance obligation by transferring control over the service to its customer.

A performance obligation is a promise in a contract to transfer a distinct service to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation. The Company's customers typically receive the benefit of its services as they are performed. Substantially all customer contracts provide that the Company is compensated for services performed to date. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.





Nature of goods and services

The following is a description of the Company's products and services from which it generates revenue, as well as the nature, timing of satisfaction of performance obligations, and significant payment terms for each:





i. Licensing Revenue

Licensing fees represent the fees the Company receives from the licensing of the Company's Scores trademark. The terms of the royalties earned under these license agreements vary from a flat monthly fee to a percentage of the revenues of the licensee on a monthly basis. The licensing rights are transferred to the Company's customers over time, and the Company recognizes licensing revenue over time because the customer will simultaneously receive and consume the benefit from the license as the performance occurs.

ii. Stand-Ready for Consulting and Club Set-up Services

The Company offers an initial set-up and consultation to new clubs in order to aid in the opening and operation. The services are provided within the first month of any licensing agreements, and sometimes are not requested by the licensee and therefore never provided at all.







Inflation

Although the effects of inflation vary by company the company believes there are two issues wherein inflationary trends may affect their accounting and financial reporting.

Because inflation is most likely driving up the costs of acquiring goods and services, as well as employee wages, the Company is looking for ways it can absorb or pass along those increased costs to its' licensees.

In addition, Inflation may result in renegotiating long-term contracts, such as leases or long-term licensing agreements, which in turn may have potential accounting implications. For example, depending on the terms, a modification to a licensing agreement may be necessary for the Company to continue to honor the agreement. All the licensing agreements have "good guy" termination provisions that can be exercised as part of the renegotiating process.





Seasonality

Seasonality can be defined as periodic fluctuations and cycles in specific areas of a business following some pattern. It can be a calendar one like summer and spring or an economic one like the Christmas season.





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You can use the concept of seasonality in the analysis of stock prices and market trends, or a company can use it to improve working capital management.

As an example, if a company usually has lower sales in the second quarter of the year, it can decrease inventory purchases to avoid overstocking.

Upon reviewing the Company's past financial performance there does not seem to be any seasonality to the licensing of their intellectual property rights and trademarks. Although its' licensees may experience some seasonal fluctuations in their business due to fluctuations in the local climate where they are located the Company's revenue stream is unaffected by it.





Impact of COVID-19

As a result of the COVID-19 virus, during the first and second quarter of 2020, state and local governments have required all but certain essential businesses to close, including all eight clubs operating under the Scores name. The impact on such clubs' revenue was material in 2020 and resulted in a significant decline in our royalty revenues.

Upon management's evaluation of relevant hospitality industry conditions and events known as of the date that these financial statements are issued it is their belief the financial effects of the Covid 19 pandemic will not have a substantial or long term effect on the financial viability of the adult entertainment industry. There will be operational changes to be certain but not a consequentially detrimental impact on the industry.

That said it should be noted all royalty paying licensees have reopened and are current. In addition, cash collections increased from $235,000 during 2020 to $249,000 and $794,000 during 2021 and 2022 respectively.

Although there are fewer licensees and some of the licensing fees have been re-negotiated management believes the worst of the effects the Covid 19 pandemic are over. The lifting of many, if not all, gathering restrictions imposed by local government has vastly improved the appeal of adult entertainment oriented establishments. Consequently, the Company has seen a recent increase in the number of such establishments interested in utilizing the SCORES brand trademarks.





Results of Operations

The following is a discussion of the results of operations for the year ended December 31, 2020 compared to the year ended December 31, 2019.





Revenues:

Revenues decreased to $263,142 for the year ended December 31, 2020 from $583,530 for the year ended December 31, 2019.

Our licenses are structured such that we receive royalty payments representing a percentage of revenues of the licensee, or structured with a flat monthly rate. The foregoing decrease is a direct result of a decline in royalty revenues and COVID-19. As a result of the COVID-19 virus, during the first and second quarter of 2020, state and local governments have required all but certain essential businesses to close, including all eight clubs operating under the Scores name.





Other Income/(Expense)

Total other income decreased to $32,447 for the year ended December 31, 2020 from total other income of $73,559 for the year ended December 31, 2019. Total other income for the year ended December 31, 2020 was comprised of interest expense of $15,778 and other income of $48,225. Total other income for the year ended December 31, 2019 included a $90,000 recovery of the $1,300,000 Litigation Settlement payment paid to us by various licensees, and interest expense of $16,441.

General and Administrative Expenses:

General and administrative expenses for the years ended December 31, 2020 and 2019 were $387,254 and $662,891, respectively. Virtually all the decrease in operating expenses can be attributed to the decrease in salary, legal and other expenses. Legal expenses, which are reflected in general and administrative expenses, attributable to ongoing litigation amounted to $25,918 for 2020 and $111,609 for 2019.





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 $91,665 or ($.00) per share for the year ended December 31, 2020 as compared to our net loss was $5,802 or ($.00) per share for the year ended December 31, 2019. The increase in net loss for the year ended December 31, 2019, was primarily due to COVID-19.

Net loss per share data for both the years ended 2020 and 2019 is based on net loss available to common shareholders divided by the weighted average of the number of common shares outstanding.





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Liquidity and Capital Resources

At December 31, 2020, we had $21,143 in cash and cash equivalents compared to $9,331 in cash and cash equivalents at December 31, 2019.

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 for a period of one year from the issuance of these consolidated financial statements. The Company raised and 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 consolidated 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, 2020, we had $21,143 in cash and cash equivalents compared to $9,331 in cash and cash equivalents at December 31, 2019.





Operating Activities:

Net cash provided by operating activities for the years ended 2020 and 2019 was $11,812 and $56,528, respectively. The decrease in cash provided by operating activities is related to the increase in net loss and decrease in accrued expenses, directly related to COVID-19.





Financing Activities:

Net cash used in financing activities for the 2020 year was $-0- and net cash used by financing activities for the 2019 year was $70,000.





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, 2020, we had an accumulated deficit of $(6,991,660).As of December 31, 2020, we had total current assets of $99,981 and total current liabilities of $273,646 or negative working capital of $173,665. As of December 31, 2019, we had an accumulated deficit of $(6,899,995). As of December 31, 2019, we had total current assets of $70,763 and total current liabilities of $221,644 or negative working capital of $150,881. The increase in the amount of negative working capital has been primarily attributable to the increase in payables.

We continued to collect licensing fees furing 2020 to 2022 to fund current operations.

As of December 31, 2020, we owed $30,000 in rent to our Westside Realty affiliate and $67,500 to our Metropolitan Lumber Hardware and Building Supplies, Inc. affiliate. As of December 31, 2019, we owed $7,500 in rent to our Westside Realty affiliate and $37,500 to our Metropolitan Lumber Hardware and Building Supplies, Inc. affiliate.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet debt, nor did we have any transactions, arrangements, obligations (including contingent obligations) or other relationships with any unconsolidated entities or other persons that may have a material current or future effect on financial conditions, changes in the financial conditions, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenue or expenses.

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