UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30,~~March ~~2018~~31, 2019

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 33-~~13110~~131110-NY

Regional Brands Inc.

(Exact name of registrant as specified in its charter)

DELAWARE	11-2831380
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

6060 Parkland Boulevard Cleveland, Ohio	44124
(Address of principal executive offices)	(Zip Code)

(216) 825-4000

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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 period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (Note: The registrant is a voluntary filer and not subject to the filing requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934. Although not subject to these filing requirements, the registrant has filed all reports that would have been required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months had the registrant been subject to such requirements.) Yes ¨ No x

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions 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 x Smaller Reporting Company x

Emerging Growth Company ¨

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

~~The~~Securities ~~number~~registered ofpursuant ~~shares~~to ~~outstanding~~Section 12(b) of the ~~registrant’s~~ ~~Common~~Exchange ~~Stock,~~Act: $0None.~~00001 par value per share, was 1,274,603 as of November 14, 2018.~~

The number of shares outstanding of the registrant’s Common Stock, $0.00001 par value per share, was 1,274,603 as of May 6, 2019.

Regional Brands Inc.

INDEX

		Page
PART I - FINANCIAL INFORMATION:
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets	32
	Condensed Consolidated Statements of Income	4
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Cash Flows	5
	Condensed Consolidated Statements of Changes in Stockholders Equity	4
	Notes to The Condensed Consolidated Financial Statements	6
	Condensed Consolidated Statements of Cash Flows	5-6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
	Notes to Interim Condensed Consolidated Financial Statements	7
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 4.	Controls and Procedures	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	17
Item 4.	Controls and Procedures	17
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 Disclosures	19
Item 5.	Other Information	19
Item 6.	Exhibits	19
SIGNATURES		20

REGIONAL BRANDS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	As of
	September 30,			December 31,
	March 31,			December 31,
	2018			2017
	2019			2018
	(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	45,~~553~~342,~~157~~719		$	45,~~353~~207,~~567~~517
Short-term investments		2,~~264~~228,~~511~~201			12,~~967~~194,~~145~~216
Accounts receivable, net of allowance for doubtful accounts		75,~~959~~494,~~435~~343			67,~~557~~773,~~158~~564
Inventories, net		1,~~568~~405,~~169~~140			1,~~242~~163,~~723~~866
Costs and estimated earnings in excess of billings on uncompleted contracts		2,~~485~~813,~~257~~456			1,~~087~~329,~~218~~640
Prepaid expenses and other current assets		~~657~~270,~~605~~167			~~447~~478,~~539~~859
Total current assets		1917,~~488~~554,~~134~~026			1518,~~655~~147,~~350~~662
Equipment, net		~~928~~1,~~534~~108,675			~~572~~1,~~568~~027,812
Intangibles, net		3,707,943			4,600,000
Right-of-use assets-leases		1,425,137			-
Goodwill		3,045,481			3,013,287
Intangible assets, net		3,100,000			3,400,000
Deferred income taxes		343,741			288,791
Goodwill		3,045,481			3,045,481
Other assets		197,173			144,729
Deferred income taxes		393,070			349,339
Total assets	$	27,711,006		$	24,274,725
Other assets		297,175			297,174
Total assets	$	26,923,564		$	26,267,468
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	21,~~086~~626,~~273~~329		$	1,~~357~~495,~~647~~549
Accrued expenses and other current liabilities		~~910~~447,~~222~~510			1806,~~081,868~~281
Line of credit		2,~~846~~502,~~334~~036			12,~~812~~691,~~454~~376
Current portion of senior subordinated note		23,900			23,900
Current portion of lease liability		419,113			-
Current portion of subordinated term note		250,000			62,500
Current portion of senior subordinated note		28,680			28,680
Billings in excess of costs and estimated earnings on uncompleted contracts		1,354,339			192,710
Current portion of subordinated term note		250,000			250,000
Total current liabilities		7,471,068			4,531,079
Billings in excess of costs and estimated earnings on uncompleted contracts		506,334			515,242
Senior subordinated note, net		242,922			224,063
Total current liabilities		5,780,002			5,787,128
Subordinated term note		2,250,000			2,437,500
Lease liability		1,006,024			-
Total liabilities		9,963,990			7,192,642
Senior subordinated note, net		226,815			220,529
Subordinated term note		2,125,000			2,187,500
Total liabilities		9,137,841			8,195,157
Stockholders' equity:
Preferred stock $.01 par value, authorized 50,000, issued and outstanding -none		-			-
Preferred stock, issued and outstanding -none		-			-
Common stock $.00001 par value, 3,000,000 authorized and 1,274,603 shares issued and outstanding		13			13
Common stock, issued & outstanding-1,274,603 shares		13			13
Additional paid-in capital		20,~~415~~442,~~055~~811			20,~~373~~428,~~257~~933
Accumulated deficit		(2,~~534~~458,~~560~~260	)		(32,~~203~~183,~~781~~276	)
Total Regional Brands, Inc. stockholders' equity		17,~~880~~984,~~508~~564			1718,~~169~~245,~~489~~670
Noncontrolling interest in consolidated subsidiary		(133,492	)		(87,406	)
Noncontrolling interests in consolidated subsidiary		(198,841	)		(173,359	)
Total stockholders’ equity		17,~~747~~785,~~016~~723			1718,~~082~~072,~~083~~311
Total liabilities and stockholders' equity	$	2726,~~711~~923,~~006~~564		$	2426,~~274~~267,~~725~~468

~~See~~The ~~Accompanying~~accompanying ~~Notes~~notes toare ~~Condensed~~an ~~Consolidated~~integral part ~~Financial~~of ~~Statements~~the condensed consolidated financial statements.

REGIONAL BRANDS INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME~~ OPERATIONS

(unaudited)

	For the three months ended						~~For the nine months ended~~
	September 30,			September 30,			September 30,			September 30,
	March 31,			March 31,
	2018			2017			2018			2017
	2019			2018
Net Sales	$	107,~~317~~114,~~136~~969		$	8,~~607~~162,~~302~~784		$	~~30,400,766~~		$	~~28,505,603~~
Cost of sales		75,~~700~~059,~~107~~042			5,~~800~~903,~~256~~742			~~22,170,043~~			~~19,774,595~~
Gross profit		2,~~617~~055,~~029~~927			2,~~807~~259,~~046~~042			~~8,230,723~~			~~8,731,008~~
Operating expenses:
Selling		1,~~082~~106,~~977~~181			1,~~170~~065,~~035~~713			~~3,347,164~~			~~3,491,780~~
General and administrative		1,~~032~~066,~~462~~386			~~932~~951,~~517~~712			~~3,023,524~~			~~2,901,843~~
Amortization of intangible assets		~~331~~300,~~344~~000			300,000			~~943,079~~			~~1,416,667~~
Total operating expenses		2,~~446~~472,~~783~~567			2,~~402~~317,~~552~~425			~~7,313,767~~			~~7,810,290~~
Operating income		170,246			404,494			916,956			920,718
Operating loss		(416,640	)		(58,383	)
Other income (expense):
Other income		3268,~~064~~222			2933,~~239~~679			~~151,643~~			~~68,396~~
Interest expense		(7859,~~530~~877	)		(4950,~~328~~649	)		~~(193,227~~	)		~~(168,761~~	)
Interest income		6,345			56,~~332~~141			~~18,831~~			~~9,697~~
		(40,121	)		(14,757	)		(22,753	)		(90,668	)
		14,690			(10,829	)
Income before income taxes		130,125			389,737			894,203			830,050
Loss before income taxes		(401,950	)		(69,212	)
Income tax (expense) benefit		(19,235	)		337,000			(193,147	)		(77,000	)
Income tax benefit		105,124			17,721
Net income		110,890			726,737			701,056			753,050
Net loss		(296,826	)		(51,491	)
Less income to noncontrolling interest		3,586			15,922			31,835			34,619
Less loss allocated to noncontrolling interest		21,842			6,685
Income attributable to common shareholders		107,304			710,815			669,221			718,431
Loss attributable to common stockholders		(274,984	)		(44,806	)
Distributions to certain noncontrolling interests		(16,729	)		(72,118	)		(63,664	)		(99,346	)
Loss per common share - basic and diluted	$	(0.22	)	$	(0.04	)
Income available to common shareholders	$	90,575		$	638,697		$	605,557		$	619,085
Weighted average number of common shares outstanding - basic and diluted		1,274,603			1,274,603
Income per common share- basic and diluted	$	0.07		$	0.50		$	0.48		$	0.49
Weighted average common shares outstanding - basic and diluted		1,274,603			1,274,603			1,274,603			1,274,603

~~See~~The ~~Accompanying~~accompanying ~~Notes~~notes toare ~~Condensed~~an ~~Consolidated~~integral part ~~Financial~~of ~~Statements~~the condensed consolidated financial statements.

REGIONAL BRANDS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(unaudited)

	Common Stock				Additional		Accumulated			Noncontrolling			Stockholders'
	Shares		Amount		Paid-in Capital		Deficit			Interest			Equity

Balance at January 1, 2019		1,274,603	$	13	$	20,428,933	$	(2,183,276	)	$	(173,359	)	$	18,072,311
Stock based compensation		-		-		13,878		-			-			13,878
Net loss for period		-		-		-		(274,984	)		(21,842	)		(296,826	)
Noncontrolling interest distribution		-		-		-		-			(3,640	)		(3,640	)
Balance at March 31, 2019		1,274,603	$	13	$	20,442,811	$	(2,458,260	)	$	(198,841	)	$	17,785,723


Balance January 1, 2018		1,274,603	$	13	$	20,373,257	$	(3,203,781	)	$	(87,406	)	$	17,082,083
Stock based compensation		-		-		14,042		-			-			14,042
Net loss for period		-		-		-		(44,806	)		(6,685	)		(51,491	)
Balance at March 31, 2018		1,274,603	$	13	$	20,387,299	$	(3,248,587	)	$	(94,091	)	$	17,044,634

The accompanying notes are an integral part of the condensed consolidated financial statements.

REGIONAL BRANDS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	For the			For the
	For the three months ended
	nine months			nine months
	March 31, 2019			March 31, 2018
	ended			ended
	September 30, 2018			September 30, 2017
Cash flows from operating activities:
Net income	$	701,056		$	753,050
Net loss	$	(296,826	)	$	(51,491	)
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net loss to net cash provided (used) by operating activities:
Stock based compensation		4113,~~798~~878			4614,~~181~~042
Depreciation and amortization		~~126~~50,~~728~~671			6836,~~755~~951
Amortization of debt issuance costs		186,~~859~~286			186,~~859~~286
Amortization of intangibles		~~943~~300,~~079~~000			1300,~~416,667~~000
Deferred income taxes		(54,950	)		(535,000	)
Unrealized gain on investments		(33,985	)		(11,738	)
Unrealized (gain) loss on investments		(63,064	)		1,576
Deferred income taxes		(43,731	)		(43,936	)
Change in allowance for doubtful accounts		-			(50,000	)
Change in inventory obsolescence reserve		12,000			25,500
Change in inventory obsolescence reserve		6,500			43,000
Changes in operating assets and liabilities
Accounts receivable		(12,~~402~~279,~~277~~221	)		(~~541~~107,~~780~~383	)
Inventories		(~~331~~253,~~946~~274	)		~~165~~(300,~~982~~989	)
Costs and estimated earnings in excess of billings on uncompleted contracts		(1,~~398~~483,~~039~~816	)		(73403,~~338~~603	)
Prepaid expenses and other assets		~~(262~~208,~~685~~691	)		~~(60~~23,~~412~~078	)
Accounts payable		~~728~~130,~~626~~780			~~645~~756,~~902~~108
Accrued expenses and other current liabilities		(~~193~~351,~~706~~944	)		~~378~~(432,~~960~~856	)
Billings in excess of costs and estimated earnings on uncompleted contracts		1(8,~~161,629~~908	)		~~(126~~177,~~727~~968	)
Net cash provided by operating activities		21,608			2,151,675
Net cash provided (used) by operating activities		529,043			(12,063	)
Cash flows from investment activities:
Cash flows from investing activities:
Purchase of equipment		(~~387~~131,~~519~~534	)		(~~123~~133,~~765~~238	)
Business acquisitions		(203,216	)		(1,107,872	)
Equipment sales proceeds		-			25,000
Equipment sales proceeds		25,000			-
Purchase of short- term investments		-			(210,177	)
Purchase of short- term investments		(234,302	)		(843,781	)
Net cash used by investing activities		(131,534	)		(318,415	)
Net cash used by investment activities		(800,037	)		(2,075,418	)
Cash flows from financing activities:
Distribution to noncontrolling shareholder		(55,861	)		(126,324	)
(Payments) borrowings under line of credit		(189,340	)		203,809
Borrowings from (repayments of) line of credit		1,033,880			(679,953	)
Payments under subordinated term note		(62,500	)		-
Net cash provided (used) by financing activities		978,019			(806,277	)
Distribution to noncontrolling interests		(10,467	)		-
Net increase (decrease) in cash		199,590			(730,020	)
Net cash (used) provided by financing activities		(262,307	)		203,809
Cash at beginning of period		4,353,567			4,752,462
Net increase (decrease) in cash and cash equivalents		135,202			(126,669	)
Cash at end of period	$	4,553,157		$	4,022,442
Cash and cash equivalents at beginning of period		5,207,517			4,353,567
Cash paid for:
Cash and cash equivalents at end of period	$	5,342,719		$	4,226,898
Income taxes	$	91,000		$	169,000
Interest	$	179,000		$	107,000
Non-cash investing and financing activities:
Accrued distribution to noncontrolling shareholder	$	22,000		$	-

~~See Accompanying Notes to Condensed Consolidated Financial Statements.~~ 4

5REGIONAL BRANDS INC.

~~Regional~~CONDENSED ~~Brands~~CONSOLIDATED STATEMENTS OF ~~Inc.~~CASH FLOWS-CONTINUED

(unaudited)

Supplemental cash flow information:
Cash paid for:
Income taxes	$	-	$	625
Interest	$	57,230	$	88,739

Noncash transactions include the recording of a right-of-use asset and related lease liability of approximately $1.2 million upon the adoption of the new lease accounting standard effective January 1, 2019 and $0.3 million for leases entered into during the three months ended March 31, 2019.

The accompanying notes are an integral part of the condensed consolidated financial statements.

REGIONAL BRANDS INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Regional Brands Inc. (~~formerly 4net Software, Inc.) (~~“~~Regional Brands,”~~ the “Company,” , “we,” ~~“our”~~ and “us”) ~~was incorporated under the laws of the State of Delaware in 1986. Regional Brands~~ is a holding company formed to acquire substantial ownership in regional companies with strong brand recognition, stable revenues and profitability. ~~Regional~~The ~~Brands~~Company has been pursuing a business strategy whereby it ~~seeks~~is seeking to engage in an acquisition, merger or other business combination transaction with undervalued businesses (each, a “Target Company”) with a history of operating revenues in markets that provide opportunities for ~~growth.~~ On November 1, 2016, the Company's majority-owned subsidiary acquired substantially all of the assets (the “Acquisition”) of B.R. Johnson, Inc. (“BRJ Inc.”), a seller and distributor of windows, doors and related hardware as well as specialty products for use in commercial and residential buildings. After the acquisition of the business of BRJ Inc. by our majority-owned subsidiary, B.R. Johnson, LLC (“BRJ LLC”), we are currently focused on considering opportunities for growth ~~of BRJ LLC through utilizing its balance sheet to provide capital for additional acquisitions of companies that would be complementary to BRJ LLC~~. Additionally, we may seek to acquire Target Companies that satisfy the following criteria: (1) established businesses with viable services or products; (2) an experienced and qualified management team; (3) opportunities for growth and/or expansion into other markets; (4) are accretive to earnings; (5) offer the opportunity to achieve and/or enhance profitability; and (6) increase shareholder value.

~~Basis~~On ofNovember ~~Presentation~~1, -2016, ~~The accompanying~~the ~~condensed~~Company's ~~consolidated~~majority-owned subsidiary, ~~financial statements have been prepared in accordance with U~~B.SR. ~~generally~~Johnson, ~~accepted~~LLC ~~accounting principles~~ (“~~U.S.~~BRJ ~~GAAP~~LLC”) ~~for~~acquired ~~interim~~(the ~~financial~~“Acquisition”) ~~information.~~substantially ~~Accordingly,~~all ~~these~~of ~~statements~~the ~~do not include all~~assets of ~~the~~B.R. ~~information~~Johnson, ~~and~~Inc. ~~footnotes~~(“BRJ ~~required by U~~Inc.S.”), ~~GAAP.~~a Inseller ~~the~~and ~~opinion~~distributor of ~~management~~windows, ~~the~~doors ~~accompanying condensed consolidated balance sheets~~ and related ~~condensed~~hardware ~~consolidated~~as ~~statements~~well ofas ~~income and cash flows include all adjustments, consisting only~~specialty ofproducts ~~normal recurring items necessary~~ for ~~their~~use ~~fair presentation~~ in ~~accordance~~commercial ~~with~~and ~~U.S.~~residential ~~GAAP.~~buildings ~~Interim~~(the ~~results are not necessarily indicative of results expected for a full year~~“Business”). ~~For~~Following ~~further information regarding~~ the ~~Company’s accounting policies~~Acquisition, ~~please refer~~BRJ toLLC ~~the audited consolidated financial statements and footnotes for the year ended December 31, 2017 included in the Company’s~~carried ~~annual report~~ on ~~Form 10-K filed with~~ the ~~Securities~~business and ~~Exchange~~operations ~~Commission~~of onBRJ ~~March 30, 2018~~Inc.

Basis of Presentation - The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. Accordingly, these statements do not include all of the information and footnotes required by U.S. GAAP. In the opinion of management, the accompanying condensed consolidated balance sheets and related condensed consolidated statements of operations, changes in stockholders’ equity and cash flows include all adjustments, consisting only of normal recurring items necessary for their fair presentation in accordance with U.S. GAAP. Interim results are not necessarily indicative of results expected for a full year. For further information regarding the Company’s accounting policies, please refer to the audited consolidated financial statements and footnotes for the year ended December 31, 2018 included in the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission on March 14, 2019.

Principles of Consolidation - The consolidated financial statements include the accounts of Regional Brands Inc. and its majority-owned subsidiary, BRJ LLC. All intercompany balances and transactions have been eliminated in consolidation. The Company has a controlling interest in its subsidiary, BRJ LLC. BRJ LLC has preferred and common membership interests that are not controlled by the Company. Earnings and losses of BRJ LLC are attributed to the noncontrolling interests and distributions are made in accordance with the B.R. Johnson LLC Limited Liability Company Agreement.

Use of Estimates - The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates and be based on events different from those assumptions. Future events and their effects cannot be predicted with certainty; estimating, therefore, requires the exercise of judgment. Thus, accounting estimates change as new events occur, as more experience is acquired or as additional information is obtained. We believe the most significant estimates and judgments are associated with revenue recognition for our customer contracts in process, including estimating costs and the recognition of unapproved change orders and claims.

~~Concentration~~Inventories of- ~~Credit~~Inventory ~~Risk~~is –comprised ~~Amounts~~of ~~due~~purchased ~~from~~materials and other materials that have been assigned to a ~~single~~job ~~customer~~deemed ~~represented~~to 15be work-in-process.4% As of ~~Accounts~~March 31, ~~Receivable~~2019 and December 31, 2018, the work-in-process inventory was approximately $672,000 and $414,000, respectively and is included in inventories in the accompanying condensed consolidated balance sheet. We maintain an inventory allowance for slow-moving and unused inventories based on the historical trend and estimates. The allowance was approximately $82,000 and $70,000 at ~~September~~March 3031, 2019 and December 31, 2018, respectively.

~~Inventories~~Revenue - Inventory is comprised of purchased materials and other materials that have been assigned to a job deemed to be work-in-process. As of September 30, 2018 and December 31, 2017, the work-in-process inventory was $911,625 and $ 676,153, respectively and is included in inventories in the accompanying consolidated balance sheet. We maintain an inventory allowance for slow-moving and unused inventories based on the historical trend and estimates. The allowance was approximately $72,000 and $66,000 at September 30, 2018 and December 31, 2017, respectively.Recognition

~~Common~~We ~~Shares~~recognize ~~Issued~~revenue ~~and~~when ~~Earnings Per Share - Common shares issued are recorded based on~~ the ~~value of the shares issued or consideration received, including~~following ~~cash,~~criteria ~~services~~are ~~rendered~~met: or1) ~~other~~Contract ~~non-monetary~~with ~~assets, whichever is more readily determinable. The Company presents basic and diluted earnings per share. Basic earnings per share reflect~~ the ~~actual~~customer ~~weighted~~has ~~average~~been ~~number~~identified; of2) ~~shares~~Performance ~~issued~~obligations ~~and~~in ~~outstanding during~~ the ~~period.~~contract ~~Diluted earnings per share is computed including the number of additional shares that would~~ have been ~~outstanding~~identified; if3) ~~dilutive~~Transaction ~~potential~~price ~~shares~~has ~~had~~ been ~~issued,~~determined; ~~such~~4) asThe ~~those~~transaction ~~issuable~~price ~~upon~~has ~~exercise~~been ofallocated ~~outstanding stock options or conversion of convertible securities. In a loss period, the calculation for basic and diluted loss per share is considered~~ to be the ~~same, as~~performance ~~the~~obligations; ~~impact of the issuance of any potential common shares would be anti-dilutive. During the three~~ and ~~nine~~5) ~~months ended September~~Revenue 30, 2018, since the exercise prices of the outstanding stock options were above the average market price of our common stock during the period, the outstanding stock options were considered anti-dilutive. In calculating income per common share, income attributable to common shareholders is ~~reduced~~recognized bywhen ~~distributions~~(or ~~made~~as) toperformance ~~certain~~obligations ~~noncontrolling~~are ~~interests in the Company’s consolidated subsidiary~~satisfied. A reconciliation of income attributable to common shareholders to the amounts used to calculate income per common share - basic and diluted is included on the face of the consolidated statements of income.

A portion of our revenue is derived from long-term contracts and is recognized using the percentage of completion (“POC”) method, primarily based on the percentage that actual costs-to-date bear to total estimated costs to complete each contract. We utilize the cost-to-cost approach to estimate POC as we believe this method is less subjective than relying on assessments of physical progress. Under the cost-to-cost approach, the use of estimated costs to complete each contract is a significant variable in the process of determining recognized revenue and is a significant factor in the accounting for contracts. Significant estimates that impact the cost to complete each contract are costs of materials, components, equipment, labor and subcontracts; labor productivity; schedule durations, including subcontractor or supplier progress; liquidated damages; contract disputes, including claims; achievement of contractual performance requirements; and contingency, among others. The portion of the business utilizing the POC method is related to the distribution and installation of commercial windows and specialty products which are supported by specific written contracts which include contract price, scope and payment terms and are signed by both parties. Our contract price is fixed for the scope of work specified and we generally have no variable consideration. We frequently negotiate change orders for additional work to be performed which typically relate to the initial performance obligation. Our customer payment terms are typical for our industry. For most contracts under the POC method, progress payments, less retainage, are made shortly after the contractor receives payments from the owner. For the remainder of our business, standard terms require that amounts due are paid 30 days after invoice date. For the business accounted for using the POC method, we have determined that we have one performance obligation due to the high degree of inter-dependability and highly integrated nature of the work. Performance obligations for the remainder of our business are generally supported by written contracts or purchase orders which require the delivery of goods or services and the revenue is recognized upon shipment of those goods or performance of the services. The majority of our performance obligations are typically completed within one year.

We have elected the practical expedients for not adjusting the promised amount of consideration for the effects of financing components when, at contract inception, the period between the transfer of good or service and when the customer pays is expected to be less than one year and for recognizing incremental costs of obtaining a contract as incurred as they would otherwise have been amortized over one year or less.

We have made an accounting policy election to treat any common carrier shipping and handling activities as a fulfillment cost, rather than a separate obligation or promised service.

Sales and usage taxes are excluded from revenues. Costs incurred on jobs in process include all direct material and labor costs and certain indirect costs. General and administrative and precontract costs are charged to expense as incurred.

Due to the various estimates inherent in our contract accounting, actual results could differ from those estimates. Revisions in estimated profits for contracts accounted for under the POC method are made in the period in which circumstances requiring the revision become known. During the three months ended March 31, 2019, the effect of changes in estimated contract costs decreased gross profit by approximately $124,000, increased net loss by approximately $92,000 and increased loss per common share (net of income taxes) by $0.07. During the three months ended March 31,2018, the effect of changes in estimated contract costs decreased gross profit by approximately $180,000 increased net loss by approximately $133,000 and increased loss per common share (net of income taxes) by $0.10.

Common Shares Issued and Earnings (Loss) Per Share - Common shares issued are recorded based on the value of the shares issued or consideration received, including cash, services rendered or other non-monetary assets, whichever is more readily determinable. The Company presents basic and diluted earnings per share. Basic earnings per share reflect the actual weighted average number of shares issued and outstanding during the period. Diluted earnings per share is computed including the number of additional shares that would have been outstanding if dilutive potential shares had been issued, such as those issuable upon exercise of outstanding stock options or conversion of convertible securities. In a loss period, the calculation for basic and diluted loss per share is considered to be the same, as the impact of the issuance of any potential common shares would be anti-dilutive. During the three months ended March 31, 2019 and 2018, the exercise prices of the outstanding stock options were above the average market price of our common stock during such periods, therefore the outstanding stock options were considered anti-dilutive. In calculating income per common share, income attributable to common stockholders is reduced by distributions made to certain noncontrolling interests in the Company’s consolidated subsidiary. There were no distributions made in the three months ended March 31, 2019 and 2018 that would reduce income attributable to common stockholders.

Fair Value of Financial Instruments - Financial instruments include cash, accounts receivable, accounts payable, accrued expenses, and line of credit. Fair values were assumed to approximate carrying values for these financial instruments because of their immediate or short-term maturity and the fair value of the line of credit approximates the carrying value as the stated interest rate approximates market rates currently available to the Company.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Fair Value Measurement Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:

Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The Company’s valuation techniques used to measure the fair value of money market funds, certificate of deposits, and certain marketable equity securities were derived from quoted prices in active markets for identical assets or liabilities.

In accordance with the fair value accounting requirements, companies may choose to measure eligible financial instruments and certain other items at fair value. The Company has not elected the fair value option for any eligible financial instruments.

7Our short-term investments consist of investments in marketable equity related securities and money market funds. All of these marketable securities are accounted for as available-for-sale securities, which are carried at fair value using quoted market prices in active markets for each marketable security. All of our marketable equity securities and money market funds are carried at fair value and unrealized gains or losses on the securities are recognized as a component of other income included in our condensed consolidated statements of operations.

Our short-term investments consist of investments in marketable equity related securities and money market funds. All of these marketable securities are accounted for as available-for-sale securities, which are carried at fair value using quoted market prices in active markets for each marketable security. Prior to 2018, any unrealized gains or losses on these securities were recognized through other comprehensive income (loss). Beginning on January 1, 2018 with the adoption of Accounting Standards Update ("ASU") 2016-01, all of our marketable equity securities and money market funds will continue to be carried at fair value as noted above, with any unrealized gains or losses on the securities recognized as a component of other income included on our Condensed Consolidated Statements of Income. As a result of the adoption of ASU 2016-01, the accumulated deficit for the year ended December 31, 2017 was increased by $1,504 and the net income for the nine months ended September 30, 2017 was decreased by $1,576.

The tables below present the Company's assets and liabilities measured at fair value on a recurring basis as of September 30, 2018 and December 31, 2017 aggregated by the level in the fair value hierarchy within which those measurements fall.

Assets	Level 1		Level 2		Level 3		Balance at September 30, 2018
Marketable Equity Securities	$	2,264,511	$	—	$	—	$	2,264,511
Money Market Funds	$	4,553,157	$	—	$	—	$	4,553,157

Assets	Level 1		Level 2		Level 3		Balance at December 31, 2017
Marketable Equity Securities	$	1,967,145	$	—	$	—	$	1,967,145
Money Market Funds	$	4,353,567	$	—	$	—	$	4,353,567

Recent Accounting Pronouncements - In May 2014, the FASB issued ASU 2014-9 “Revenue from Contracts with Customers”. The new guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. Subsequently, the FASB has issued the following standards related to ASU 2014-09: ASU No. 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations” (“ASU 2016-08”); ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing” (“ASU 2016-10”); and ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” (“ASU 2016-12”). The Company adopted ASU 2016-08, ASU 2016-10 and ASU 2016-12 with ASU 2014-09 (collectively, the “new revenue standards”) effective January 1, 2018 utilizing the modified retrospective approach and applied the guidance to those contracts which were not completed as of that date. The adoption of Topic 606 did not impact the timing of revenue recognition in our Consolidated Financial Statements for the current or prior interim or annual periods. Accordingly, no adjustments have been made to opening retained earnings or prior period results. See Note 2, “Revenue Recognition,” for further information.

In February 2016, the FASB issued an accounting standard update ASU 2016-02, “Leases" to replace existing lease accounting guidance. This pronouncement is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet for most leases. Expenses associated with leases will continue to be recognized in a manner similar to current accounting guidance. This pronouncement is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The adoption is required to be applied on a modified retrospective basis for each prior reporting period presented. The Company has not yet determined the effect that the adoption of this pronouncement may have on its financial position and/or results of operations.

In August 2016, the FASB issued Accounting Standards Update 2016-15, “Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments”. The standard makes eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The standard is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The new standard requires adoption on a retrospective basis unless it is impracticable to apply, in which case the Company would be required to apply the amendments prospectively as of the earliest date practicable. The Company has adopted this standard effective January 1, 2018. Adoption of this standard did not impact our Consolidated Financial Statements for the current or prior periods presented.

In May 2017, the FASB issued Accounting Standards Update 2017-09, “Compensation – Stock Compensation (Topic 718) – Scope of Modification Accounting”, which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The standard is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. The standard is to be applied on a prospective basis to an award modified on or after the adoption date. The Company has adopted this standard effective January 1, 2018. Adoption of this standard did not impact our Consolidated Financial Statements.

In June 2018, the FASB issued ASU No.2018-07, "Compensation - Stock Compensation (Topic 718) Improvements to Nonemployee Share-Based Payment Accounting." The FASB issued this update as part of its Simplification Initiative. The amendments in this update expand the scope of Topic 718 to include share-based payments for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option model and the attribution of cost. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor's own operations by issuing share-based payment awards. The amendments for this update are effective for public companies for fiscal years beginning after December 15, 2018. Early adoption is permitted but no earlier than the adoption date of Topic 606. An entity should only remeasure liability-classified awards that have not been settled by the date of adoptions and equity classified awards for which a measurement date has not been established through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. Upon transition, the entity is required to measure these nonemployee awards at fair value as of the adoption date. The Company believes the adoption of this standard on our consolidated financial statements and related disclosures will not be material.

In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders' equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule is effective on November 5, 2018. The Company is in the process of evaluating the impact of the final rule on its consolidated financial statements.

NOTE 2. REVENUE RECOGNITION

Effective January 1, 2018, we recognize revenue in accordance with ASC Topic 606 when the following criteria are met: 1) Contract with the customer has been identified; 2) Performance obligations in the contract have been identified; 3) Transaction price has been determined; 4) The transaction price has been allocated to the performance obligations; and 5) Revenue is recognized when (or as) performance obligations are satisfied.

A portion of our revenue is derived from long-term contracts and is recognized using the percentage of completion (“POC”) method, primarily based on the percentage that actual costs-to-date bear to total estimated costs to complete each contract. We utilize the cost-to-cost approach to estimate POC as we believe this method is less subjective than relying on assessments of physical progress. Under the cost-to-cost approach, the use of estimated costs to complete each contract is a significant variable in the process of determining recognized revenue and is a significant factor in the accounting for contracts. Significant estimates that impact the cost to complete each contract are costs of materials, components, equipment, labor and subcontracts; labor productivity; schedule durations, including subcontractor or supplier progress; liquidated damages; contract disputes, including claims; achievement of contractual performance requirements; and contingency, among others. This business is related to the distribution and installation of commercial windows and specialty products which are supported by specific written contracts which include contract price, scope, payments terms and are signed by both parties. Our contract price is fixed for the scope of work specified and we generally have no variable consideration. We frequently negotiate change orders for additional work to be performed which typically relate to the initial performance obligation. Our customer payment terms are typical for our industry. For most contracts under the POC method, progress payments, less retainage, are made shortly after the contractor receives payment from the owner. For the remainder of our business, standard terms are that amounts are due 30 days after invoice date. For this business, we have determined that we have one performance obligation due to the high degree of inter-dependability and highly integrated nature of the work. Performance obligations for the remainder of our business are generally supported by written contracts or purchase orders which require the delivery of goods or services and the revenue is recognized upon shipment of those goods or performance of the services. The majority of our performance obligations are typically completed within one year.

Revisions in estimated profits for contracts accounted for under the POC method are made in the period in which circumstances requiring the revision become known. During the three and nine months ended September 30, 2018, the effect of changes in estimates of contract profit decreased gross profit by approximately $200,000 and $230,000, respectively, decreased net income by approximately $148,000 and $170,000, respectively, and decreased income per common share (net of income taxes) by $0.12 and $0.13, respectively. During the three and nine months ended September 30, 2017, the effect of changes in estimates of contract profits increased (decreased) net income by approximately $80,000 and $(62,000), respectively, and increased (decreased ) income per common share (net of income taxes) by $0.06 and $(0.05), respectively.

The following table presents our revenues disaggregated by contracts accounted for using the percentage of completion method. Sales and usage taxes are excluded from revenues:

	Quarter Ended September 30,
	2018		2017
Contracts under percentage of completion	$	5,383,752	$	4,985,203
All other		4,933,384		3,622,099
Total revenue	$	10,317,136	$	8,607,302

	Nine Months Ended September 30,
	2018		2017
Contracts under percentage of completion	$	16,269,054	$	17,028,822
All other		14,131,712		11,476,781
Total revenue	$	30,400,766	$	28,505,603

~~Remaining~~The ~~performance~~table ~~obligations~~below ~~represent~~ presents the ~~transaction~~Company's assets ~~price~~and ofliabilities ~~firm~~measured ~~orders~~at ~~for~~fair ~~which~~value ~~work~~aggregated ~~has~~by ~~not been performed. As of September 30, 2018,~~ the ~~aggregate~~level ~~amounts~~in of the ~~transaction~~fair ~~prices~~value ~~allocated~~hierarchy towithin ~~the~~which ~~remaining~~those ~~performance obligations, for contracts to be recognized using the percentage~~measurements ~~of completion method, were $14~~fall.~~6 million.~~

Assets	Level 1		Level 2		Level 3		March 31, 2019
Marketable Equity Securities	$	2,228,201	$	—	$	—	$	2,228,201
Money Market Funds	$	5,342,719	$	—	$	—	$	5,342,719

We have made an accounting policy election to treat any common carrier shipping and handling activities as a fulfillment cost, rather than a separate obligation or promised service.

Assets	Level 1		Level 2		Level 3		December 31, 2018
Marketable Equity Securities	$	2,194,216	$	—	$	—	$	2,194,216
Money Market Funds	$	5,207,517	$	—	$	—	$	5,207,517

~~NOTE 3.~~Recently ~~CONTRACT~~Adopted ~~ASSETS~~Accounting ~~AND LIABILITIES~~Pronouncements

~~Cost~~We ofadopted ~~revenue~~Accounting ~~for~~Standard ~~our~~Update ~~long~~(ASU) 2016-~~term~~02 ~~contracts~~(Topic ASC ~~includes~~842), ~~direct~~“Leases”, ~~contract~~as ~~costs~~required, ~~such~~effective asJanuary ~~materials~~1, ~~and labor~~2019, ~~and~~using ~~indirect~~the ~~costs~~modified ~~that~~retrospective ~~are~~approach ~~attributable~~without toadjusting comparative ~~contract activity~~periods. ASC ~~The timing~~842 ofretains ~~when~~the wetwo-model ~~bill~~approach ~~our~~to ~~customers~~classifying isleases ~~generally~~as ~~dependent~~operating ~~upon~~or ~~advance~~finance ~~billing~~leases ~~terms~~(formerly, capital ~~milestone~~leases); ~~billings~~however, ~~based~~most onleases, ~~the~~regardless ~~completion~~ of ~~certain~~classification ~~phases of the work~~type, ~~or when services~~ are ~~provided.~~recorded ~~Projects~~on ~~with~~the ~~costs~~balance ~~and~~sheet. ~~estimated~~When ~~earnings~~a ~~recognized~~lessee ~~to date in~~records ~~excess~~a oflease ~~cumulative billings is reported~~ on the ~~accompanying~~ balance sheet, asit anwill ~~asset~~recognize asa ~~costs~~lease ~~and~~liability ~~estimated~~based ~~earnings~~on inthe ~~excess~~ present value of ~~billings.~~the ~~Projects~~future lease payments, with an ~~cumulative~~offsetting ~~billings~~entry into ~~excess~~recognize a right-of-use ~~costs~~(ROU) ~~and~~asset. ~~estimated~~A ~~earnings~~lessee ~~recognized~~uses toa ~~date~~discount israte ~~reported~~to ondetermine the ~~accompanying~~ ~~balance~~present ~~sheet~~value asbased on athe ~~liability~~rate asimplicit ~~billings~~ in ~~excess~~the oflease, ~~costs~~if ~~and~~readily ~~estimated~~determinable, ~~earnings.~~or ~~The~~the ~~following~~lessee’s isincremental ~~information with~~borrowing ~~respect to uncompleted contracts:~~rate.

	September 30, 2018			December 31, 2017
Costs incurred on uncompleted contracts	$	11,446,610		$	8,404,168
Estimated earnings		3,814,089			3,695,967
		15,260,699			12,100,135
Less billings to date		14,129,781			11,205,627
	$	1,130,918		$	894,508
Included on balance sheet as follows:
Under current assets
Costs and estimated earnings in excess of billings on uncompleted contracts	$	2,485,257		$	1,087,218
Under current liabilities
Billings in excess of costs and estimated earnings on uncompleted contracts	$	(1,354,339	)	$	(192,710	)
	$	1,130,918		$	894,508

We utilized the practical expedients provided by the guidance including the package of practical expedients to not reassess whether contracts contain a lease, lease classification, and direct costs. Since our current lease agreements, which include real estate and vehicles, are operating leases, they will continue to be accounted for as operating leases under the new standard. Accordingly, lease expense is recognized on a straight-line basis over the lease term. We have elected not to record leases with terms of 12 months or less on the balance sheet.

~~The~~We ~~Company~~adopted ~~had~~ASU ~~unbilled~~2018-07, ~~revenues~~"Compensation - ofStock $Compensation (Topic 718) Improvements to Nonemployee Share-Based Payment Accounting" effective January 1,~~097~~ 2019,~~565~~ as ~~and~~required. ~~$1,043,082~~The atFASB ~~the~~issued ~~end~~this update as part of ~~September~~its ~~30,~~simplification ~~2018~~initiative. ~~and~~The ~~December~~amendments ~~31,~~in ~~2017,~~this ~~respectively,~~update ~~which~~expand ~~are~~the ~~included~~scope of inTopic ~~Costs~~718 to include share-based payments for acquiring goods and ~~estimated~~services from nonemployees. Since we have issued a relatively ~~earnings~~small innumber ~~excess~~of stock options to nonemployees, the adoption of ~~billings~~this standard on ~~the~~our ~~balance~~condensed ~~sheet~~consolidated financial statements and related disclosures was not material.

NOTE 4 2. ~~DEBT~~REVENUES AND CONTRACTS IN PROCESS

InThe ~~November~~following ~~2016,~~table ~~BRJ~~presents ~~LLC~~our ~~entered into~~revenues adisaggregated ~~credit~~by ~~agreement~~contracts ~~with~~accounted KeyBank, N.A. Under the credit agreement, BRJ LLC may borrow up to an aggregate amount of $6,000,000 (the “Credit Facility”) under revolving loans and letters of credit, with a sublimit of $500,000 for ~~letters~~using ~~of credit. The Credit Facility is payable upon demand of KeyBank, N.A., or~~ the ~~lenders,~~percentage ~~or upon acceleration as a result~~ of ancompletion event of default. At the closing of the Acquisition, approximately $1,900,000 was drawn under the Credit Facility to pay a portion of the purchase price and costs associated with the Acquisition, with the balance being available for general working capital of BRJ LLC.method:

	Quarter Ended
	March 31, 2019		March 31, 2018
Contracts under percentage of completion	$	3,679,397	$	4,300,565
All other		3,435,572		3,862,219
Total revenue	$	7,114,969	$	8,162,784

Projects with costs and estimated earnings recognized to date in excess of cumulative billings is reported on the accompanying balance sheet as an asset as costs and estimated earnings in excess of billings. Projects with cumulative billings in excess of costs and estimated earnings recognized to date is reported on the accompanying balance sheet as a liability as billings in excess of costs and estimated earnings. The following is information with respect to uncompleted contracts:

	March 31, 2019			December 31, 2018
Costs incurred on uncompleted contracts	$	10,590,750		$	9,619,587
Estimated Earnings		4,086,702			3,499,758
		14,677,452			13,119,345
Less billings to date		(12,370,330	)		(12,304,947	)
	$	2,307,122		$	814,398

Included on balance sheet as follows:
Under current assets
Costs and estimated earnings in excess of billings on uncompleted contracts	$	2,813,456		$	1,329,640
Under current liabilities
Billings in excess of costs and estimated earnings on uncompleted contracts		(506,334	)		(515,242	)
	$	2,307,122		$	814,398

The Company had unbilled revenues of approximately $2,519,000 and $943,000 at the end of March 31, 2019 and December 31, 2018, respectively, which are included in Cost and estimated earnings in excess of billings on the balance sheet.

Remaining performance obligations represent the transaction price of firm orders for which work has not been performed. As of March 31, 2019, the aggregate amounts of the transaction prices allocated to the remaining performance obligations, for contracts to be recognized using the percentage of completion method, were $12.3 million.

NOTE 3. DEBT

Under its credit agreement with KeyBank, N.A., BRJ LLC may borrow up to an aggregate amount of $6,000,000 (the “Credit Facility”) under revolving loans and letters of credit, with a sublimit of $500,000 for letters of credit. The Credit Facility is payable upon demand of KeyBank, N.A., or the lenders, or upon acceleration as a result of an event of default.

Interest under the Credit Facility is payable monthly and accrues pursuant to the “base rate” of interest, which is equal to the highest of (a) KeyBank, N.A.’s prime rate, (b) one-half of one percent (0.50%) in excess of the Federal Funds Effective Rate of the Federal Reserve Bank of New York, and (c) one hundred (100) basis points in excess of the London Interbank Offered Rate for loans in Eurodollars with an interest period of one month, plus any applicable margin. The credit agreement also requires the payment of certain fees, including, but not limited to, letter of credit fees.

The Credit Facility is secured by substantially all of BRJ LLC’s assets. The Credit Facility contains customary financial and other covenant requirements, including, but not limited to, a covenant to not permit BRJ LLC’s consolidated fixed charge coverage ratio to exceed 1.15 to 1.00. The ~~Credit~~ Credit Facility also contains customary events of default. For the ~~nine~~quarter ~~months~~ ended ~~September~~March 3031, ~~2018~~2019, the Company was in compliance with these covenants.

The effective interest rate on borrowings under the Credit Facility at September 30, 2018 was 4.69%. The aggregate borrowings outstanding under the Credit Facility at September 30, 2018 were $2,846,334. In addition, the bank has issued a letter of credit on behalf of the Company in the amount of $250,000 that expires on December 1, 2018.

NOTE 5. STOCKHOLDERS’ EQUITY

The Company’s authorized capital consists of 3,000,000 shares of common stock, par value $0.00001 per share, and 50,000 shares of preferred stock, par value $0.01 per share.

On March 2, 2017, the Company filed a certificate of amendment (the “Amendment”) to the Company’s Certificate of Incorporation with the Delaware Secretary of State to reduce the number of shares of Common Stock the Company is authorized to issue from 50,000,000 to 3,000,000 shares and to reduce the number of shares of Preferred Stock the Company is authorized to issue from 5,000,000 to 50,000 shares. The Amendment was approved by the Board of Directors of the Company and the holders of a majority of the issued and outstanding shares of Common Stock by written consent in lieu of a meeting.

The Company recorded stock compensation expense for options vesting during the three month periods ended September 30, 2018 and 2017 of $13,878 and $15,181, respectively, and during the nine month periods ended September 30, 2018 and 2017 of $41,798 and $46,181, respectively.

On June 15, 2017, the Company’s stockholders approved and adopted the Company’s Amended and Restated 2016 Equity Incentive Plan (the “Amended and Restated Equity Incentive Plan”). The amendment modified the Company’s 2016 Equity Incentive Plan to, among other things, (1) provide the Board of Directors with the authority to grant awards in the form of restricted stock and restricted stock units, (2) set the maximum number of shares available for issuance under the Amended and Restated Equity Incentive Plan at 130,000 shares of the Company’s common stock, par value $0.00001 per share, and (3) adopt certain other technical amendments.

NOTE 6. RELATED PARTY TRANSACTIONS

On April 8, 2016, the Company entered into a Management Services Agreement (the “MSA”) with Ancora Advisors, LLC, whereby Ancora Advisors, LLC agreed to provide specified services to the Company in exchange for a quarterly management fee in an amount equal to 0.14323% of the Company’s stockholders’ equity (excluding cash and cash equivalents) as shown on the Company’s balance sheet as of the end of each fiscal quarter of the Company. The MSA provides that the management fee with respect to each fiscal quarter of the Company is to be paid no later than 10 days following the issuance of the Company’s financial statements for such fiscal quarter, and in any event no later than 60 days following the end of each fiscal quarter. For the nine months ended September 30, 2018 and 2017, Ancora Advisors, LLC agreed to waive payment of the management fee, but reserves the right to institute payment of the management fee at its discretion.

On November 1, 2016, in connection with the Acquisition, BRJ LLC entered into a Management Services Agreement (the “BRJ MSA”) with Lorraine Capital, LLC (“Lorraine”), a member of BRJ LLC, whereby Lorraine agreed to provide specified management, financial and reporting services to us in exchange for an annual management fee in an amount equal to the greater of (i) $75,000 or (ii) five percent (5%) of the annual EBITDA (as defined in the BRJ MSA) of BRJ LLC, payable quarterly in arrears and subject to certain adjustments and offsets set forth in the BRJ MSA. The BRJ MSA may be terminated by BRJ LLC, Lorraine or Regional Brands at any time upon 60 days’ prior written notice and also terminates upon the consummation of a sale of BRJ LLC. For the nine months ended September 30, 2018 and 2017, amounts included in expense for fees payable to Lorraine under the BRJ MSA were $55,000 and $79,000, respectively, and fees payable were approximate $0 and $36,000 at September 30, 2018 and December 31, 2017, respectively.

BRJ LLC has a relationship with a union qualified commercial window subcontractor, Airways Door Service, Inc. (“ADSI”), which is advantageous to us in situations that require union installation and repair services. Individuals affiliated with Lorraine Capital, LLC acquired 57% of ADSI’s common stock; the remaining common stock is owned by three of BRJ LLC’s employees. BRJ LLC paid ADSI approximately $1,370,000 and $1,298,000 for its services during the nine months ended September 30, 2018 and 2017, respectively. In addition, we provide ADSI services utilizing an agreed-upon fee schedule. These services include accounting, warehousing, equipment use, employee benefit administration, risk management coordination and clerical functions. The fee for these services was $45,000 and $35,000 during the nine months ended September 30, 2018 and 2017, respectively.

~~NOTE~~The 7effective interest rate on borrowings under the Credit Facility at March 31, 2019 was 4.97%. ~~INCOME~~The ~~TAX~~aggregate borrowings outstanding under the Credit Facility at March 31, 2019 were $2,502,036 and, in addition, the bank has issued a letter of credit on behalf of the Company in the amount of $250,000 that expires on December 1, 2019.

WeNOTE ~~account for income taxes using the asset and liability method~~4. ~~Under~~STOCKHOLDERS’ this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that may be in effect when the differences are expected to reverse. The Company periodically evaluates the likelihood of realization of deferred tax assets, and provides for a valuation allowance when necessary. The Company currently maintains a full valuation allowance on the deferred tax assets associated with certain pre-acquisition losses that are subject to limitations under Internal Revenue Code Section 382.EQUITY

OnThe ~~December~~Company’s ~~22,~~authorized ~~2017, the U.S. Tax Cuts~~capital ~~and~~consists ~~Jobs~~of ~~Act~~3,000,000 ~~(the~~shares ~~“Tax~~of ~~Act”)~~common ~~was~~stock, ~~passed~~par ~~into~~value ~~law~~$0.00001 ~~The~~per ~~Act~~share, ~~reduced~~and ~~the~~50,000 USshares ~~federal corporate income tax rate from a top marginal rate~~ of ~~35% in~~preferred ~~2017~~stock, ~~and~~par ~~prior~~value ~~years to 21% in 2018~~$0. ~~The Company’s marginal tax rate in 2017 and prior~~01 ~~years~~per ~~was 34%~~share.

The Company ~~had~~recorded anstock ~~effective income tax~~compensation ~~rate~~expense ~~of 14.8%~~for ~~and~~options ~~21.6%~~vesting ~~for~~during the three ~~and~~month ~~nine~~period ~~months~~ ended ~~September~~March 3031, ~~2018,~~2019 ~~respectively,~~ and ~~(86.5)% and 9.3% for the three and nine months ended September 30, 2017, respectively. The effective income tax rate for the three months ended September 30,~~ 2018 ~~is lower than the 2018 federal statutory rate~~ of ~~21% due primarily to adjustments resulting from the filing of the 2017 federal income tax return. The effective income tax rate for the nine months ended September 30~~$13,878 ~~2018 approximates the 2018 federal statutory rate of 21%. The effective income tax rate for the three~~ and ~~nine months ended September 30~~$14, ~~2017 differs from the 2017 federal statutory rate of 34% primarily due to the reversal of a portion of the deferred tax valuation allowance during the three months ended September 30~~042, ~~2017~~respectively.

NOTE 85. ~~BUSINESS~~RELATED ~~ACQUISITIONS~~PARTY TRANSACTIONS

~~Effective~~The ~~June~~Company 1,has ~~2018,~~a ~~the~~Management ~~Company~~Services ~~acquired~~Agreement ~~certain~~(the ~~assets~~“MSA”) ofwith ~~R&D~~Ancora ~~Fabricators~~Advisors, ~~Inc.~~LLC, ~~(R&D)~~whereby ~~for~~Ancora aAdvisors, ~~purchase~~LLC ~~price~~provides ofspecified ~~approximately~~services ~~$203,000.~~to ~~R&D~~the isCompany ~~engaged~~ in ~~the~~exchange ~~business~~for ofa ~~the~~quarterly ~~fabrication~~management offee ~~aluminum~~in ~~curtain~~an ~~walls,~~amount ~~store~~equal ~~fronts,~~to ~~doors~~0.14323% ~~and~~of ~~frames. The~~the ~~fair~~Company’s ~~value~~stockholders’ ofequity ~~assets~~(excluding ~~acquired~~cash ~~include~~and ~~$120,000~~cash ofequivalents) ~~equipment~~as ~~and~~shown ~~$51,000~~on the Company’s balance sheet as of ~~acquired~~the ~~backlog,~~end ~~resulting~~of ineach ~~goodwill~~fiscal quarter of ~~approximately~~the ~~$32,000~~Company. The ~~operating results~~management offee ~~R&D~~with ~~are~~respect ~~included~~to ineach fiscal quarter of the ~~accompanying~~Company ~~statement~~is ofpaid ~~income~~no ~~from~~later ~~the~~than ~~date~~10 ofdays ~~acquisition.~~following Inthe ~~light~~issuance of the ~~size~~Company’s financial statements for such fiscal quarter, and ~~value~~in any event no later than 60 days following the end of each fiscal quarter. For the ~~acquisition~~three months ended March 31, 2019 and ~~its~~2018, ~~relative~~Ancora ~~significance~~Advisors, LLC agreed to waive payment of the ~~Company~~management fee, ~~pro~~but ~~forma~~reserves the ~~disclosures~~right ofto ~~revenue~~institute ~~and~~payment ~~earnings~~of ~~are~~the ~~not~~management ~~included~~fee ~~herein~~at its discretion.

~~During~~ BRJ ~~the~~LLC ~~nine~~has ~~months~~a ~~ended~~Management ~~September~~Services 30Agreement (the “BRJ MSA”) with Lorraine Capital, ~~2017~~LLC (“Lorraine”), a ~~payment~~member of $1BRJ LLC,~~107~~ whereby Lorraine provides specified management,~~872~~ ~~was~~financial ~~made~~and reporting services to us in exchange for an annual management fee in an amount equal to the ~~seller~~greater of (i) $75,000 or (ii) five percent (5%) of the annual EBITDA (as defined in the BRJ ~~Inc~~MSA) of BRJ LLC, payable quarterly in arrears and subject to certain adjustments and offsets set forth in the BRJ MSA. ~~acquisition~~The BRJ MSA may be terminated by BRJ LLC, Lorraine or Regional Brands at any time upon 60 days’ prior written notice and also terminates upon the consummation of a sale of BRJ LLC. For the three months ended March 31,2018, BRJ LLC recorded expenses for Lorraine management fees in the amount of approximately $3,300. There were no expenses for such fees during the three months ended March 31, 2019. As of March 31, 2019 there were no amounts payable and at and December 31, 2018 there was $39,000 payable to ~~satisfy~~Lorraine ~~our~~under ~~working~~the ~~capital~~BRJ ~~liability~~MSA.

BRJ LLC has a relationship with a union qualified commercial window subcontractor, Airways Door Service, Inc. (“ADSI”), which is advantageous to us in situations that require union installation and repair services. Individuals affiliated with Lorraine acquired 57% of ADSI’s common stock; the remaining common stock is owned by three of BRJ LLC’s employees. BRJ LLC paid ADSI approximately $524,000 and $421,000 for its services during the three months ended March 31, 2019 and 2018, respectively. In addition, we provide ADSI services utilizing an agreed-upon fee schedule. These services include accounting, warehousing, equipment use, employee benefit administration, risk management coordination and clerical functions. The fee for these services was approximately $15,000 during each of the three months ended March 31, 2019 and 2018.

NOTE 6. INCOME TAXES

We account for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that may be in effect when the differences are expected to reverse. The Company periodically evaluates the likelihood of realization of deferred tax assets, and provides for a valuation allowance when necessary.

The Company had an effective income tax rate of 26.2% and 25.6% for the three months ended March 31,2019 and 2018, respectively. The effective tax rate was greater than the federal statutory rate of 21% due primarily to state income taxes.

NOTE 7. LEASES

Lease expense for the three months ended March 31, 2019 and 2018 was $114,000 and $95,100, respectively. The right-of-use asset and related lease liability was approximately $1.2 million as of January 1, 2019. The lease terms range in length from 36 to 72 months. Certain leases contain renewal options that we are not reasonably certain to exercise and therefore we have excluded them from the future minimum lease payments. The weighted-average remaining lease term as of January 1, 2019 and March 31, 2019 was 3.9 years. The weighted-average discount rate used to determine the present value of future lease payments is 4.9%. Because the implicit rate in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of lease payments.

The future minimum lease payments under the lease agreements for the rest of 2019 and yearly thereafter and a reconciliation to the amount of the net present value of such payments at March 31, 2019 is as follows:

2019	$	360,081
2020		480,108
2021		434,108
2022		123,492
2023		108,592
2024		51,956
Total		1,558,337
Discount on future lease payments		(133,200	)
Lease Liability at March 31, 2019		1,425,137
Less amount classified as current		(419,113	)
Non-current	$	1,006,024

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

Certain statements contained herein constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “1995 Reform Act”). The Company desires to avail itself of certain “safe harbor” provisions of the 1995 Reform Act and is therefore including this note to enable it to do so. Except for the historical information contained herein, this report contains forward-looking statements (identified by the words “estimate,” “project,” “anticipate,” “plan,” “expect,” “intend,” “believe,” “hope,” “strategy” and similar expressions), which are based on our current expectations and speak only as of the date made. These forward-looking statements are subject to various risks, uncertainties and factors that could cause actual results to differ materially from the results anticipated in the forward-looking statements, including, without limitation, those discussed under Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018, as they may be updated or supplemented from time to time under Part II, Item 1A “Risk Factors” in our Quarterly Reports on Form 10-Q, and those described herein.

The following discussion and analysis provides information that our management believes is relevant to an assessment and understanding of our results of operations and financial condition and should be read in conjunction with the financial statements and footnotes that appear elsewhere in this report.

General

Regional Brands Inc. (formerly 4net Software, Inc.) (“Regional Brands,” the “Company,” “we,” “our” and “us”) was incorporated under the laws of the State of Delaware in 1986 and subsequently became a holding company. In April 2016, in connection with a change in control of the Company, we changed our name to Regional Brands Inc.

Nature of Business

Regional Brands Inc. (“the Company”, “we” and “us”) is a holding company formed to acquire substantial ownership in regional companies with strong brand recognition, stable revenues and profitability. InThe April 2016, we sold an aggregate of 370,441 shares of common stock for the aggregate purchase price of $5,000,000 (including the cancellation of certain indebtedness) and the transactions resulted in a change of control of the Company. ~~Subsequent~~has ~~to the change in control, we have~~ been pursuing a business strategy whereby weit ~~have~~is ~~been~~ seeking to engage in an acquisition, merger or other business combination transaction with undervalued businesses (each, a “Target Company”) with a history of operating revenues in markets that provide opportunities for growth. Since the acquisition of the business of BRJ Inc. by Regional Brands’ majority-owned subsidiary, BRJ LLC, Regional Brands has focused on considering opportunities for growth of BRJ LLC through utilizing its balance sheet to provide capital for additional acquisitions of companies that would be complementary to BRJ LLC. Additionally, Regional Brands may seek to acquire Target Companies that satisfy the following criteria: (1) established businesses with viable services or products; (2) an experienced and qualified management team; (3) opportunities for growth and/or expansion into other markets; (4) are accretive to earnings; (5) offer the opportunity to achieve and/or enhance profitability; and (6) increase shareholder value.

On November 1, 2016, wethe ~~acquired~~Company's a majority-owned ~~interest~~subsidiary, inB.R. ~~BRJ~~Johnson, LLC by(“BRJ ~~contributing~~LLC”) ~~$3,808,696~~acquired in(the ~~exchange~~“Acquisition”) ~~for~~substantially ~~95.22%~~all of ~~BRJ~~the ~~LLC’s preferred membership interest and 76.17%~~assets of ~~its common membership interest~~B.R. ~~In addition~~Johnson, weInc. ~~loaned to~~ (“BRJ ~~LLC $7~~Inc.”),~~141,304~~ ~~under~~ a ~~senior~~seller ~~subordinated~~and ~~term~~distributor ~~note~~of ~~which~~windows, ~~bears interest~~doors ~~at 6% per annum~~ and ~~has~~related ~~scheduled~~hardware ~~annual~~as ~~principal~~well ~~payments~~as ~~with~~specialty products ~~the~~for ~~balance~~use ~~due at maturity~~ in ~~November~~commercial ~~2021.~~and ~~The~~residential ~~senior subordinated~~buildings ~~term~~(the ~~note is secured by substantially all of BRJ LLC’s assets~~“Business”). ~~BRJ~~Following ~~LLC’s~~the ~~minority members contributed $191~~Acquisition,~~304~~ ~~for the remaining preferred and common membership interests and loaned to~~ BRJ LLC ~~$358,696~~ carried on the ~~same~~business ~~terms~~and asoperations ~~the~~of ~~Regional Brands senior subordinated loan pursuant to a participation agreement. The senior subordinated loan is subordinated to~~ BRJ ~~LLC’s Credit Facility~~Inc.

~~BRJ~~All ~~LLC,~~of onour ~~November 1, 2016, acquired the~~ business ofoperations ~~BRJ~~are ~~Inc. in an asset purchase transaction in exchange for $14,000,000 in cash (including working capital adjustments~~being ofconducted ~~approximately~~through ~~$1,100,000)~~our ~~and~~consolidated asubsidiary ~~subordinated note of $2,500,000.~~ BRJ LLC ~~has continued to operate the business of BRJ Inc~~. ~~as a consolidated subsidiary of Regional Brands.~~

~~The~~Items ~~acquisition~~Affecting ~~by BRJ LLC of~~ the ~~business of~~Comparability ~~BRJ Inc. is being accounted for under the acquisition method~~ of ~~accounting.~~Our ~~This~~Financial ~~results in BRJ LLC allocating the total consideration~~Results ~~issued in the acquisition to the fair value of the assets acquired and liabilities assumed as of the acquisition date.~~

Following the acquisition of the business of BRJ Inc., all of our business operations are being conducted through our consolidated subsidiary BRJ LLC.

Effective June 1, 2018, we acquired certain assets of R&D Fabricators, Inc. (“R&D”) for a purchase price of approximately $203,000. R&D is engaged in the business of the fabrication of aluminum curtain walls, store fronts, doors and frames.

Comparisons presented in the Results of Operations sections discussed below are with respect to the same period of the prior year, unless otherwise noted. The industry we operate in is highly competitive and accordingly our pricing and margins, especially on larger projects, can vary depending on multiple factors including the customer or general contractor relationship. In the gross margin discussions below, we refer to these variances as “project mix”.

13Results of Operations for the three months ended March 31, 2019 and 2018

~~Results~~Net ofSales: ~~Operations~~Net sales for the three months ended ~~September 30~~March 31, 2019 of $7,114,969 were $1,047,815, or 12.8%, lower than net sales of $8,162,784 for 2018. The decrease is primarily related to the timing of contracts and ~~2017~~related deliveries relative to the same period in 2018. We have strong backlog going into the second quarter.

~~Net~~Cost ~~Sales~~of sales: ~~Net~~Cost of sales for the three months ended ~~September~~March 3031, ~~2018~~2019 of $105,~~317~~059,~~136~~042 were $1844,~~709~~700,~~834,~~ or 1914.93%, ~~higher~~lower than ~~net~~cost of sales of $85,~~607~~903,~~302~~742 for ~~2017~~2018. The ~~increase~~ ~~was~~decrease ~~the~~in ~~result~~cost of ansales ~~increased~~is ~~volume~~primarily ~~of business~~ due to ~~robust~~lower ~~construction~~net ~~activity~~sales inwhen ~~the~~compared ~~geographic area that we serve and our ability~~ to ~~be flexible with our capacity to meet increased demand~~2018.

Cost of sales: Cost of sales for the three months ended September 30, 2018 of $7,700,107 were $1,899,851 or 32.8% higher than cost of sales of $5,800,256 in 2017. The increase is primarily due to the increase in net sales and higher costs on several projects in 2018 when compared to 2017. Additionally, new tariffs have led to higher raw material costs, which in turn have resulted in cost increases by many of our suppliers in 2018.

Gross profit: Gross profit was $2,617,029 or 25.4% of net sales for the three months ended September 30, 2018 compared to $2,807,046 or 32.6% of net sales for 2017.Gross profit as a percentage of net sales and gross profit dollars were lower in 2018 compared to 2017 because our project mix in 2017 had higher than average margins and several projects in 2018 were negatively impacted by additional costs.

During the three months ended September 30, 2017 we had more large projects that had above average gross margins compared to 2018. Additionally, we experienced cost overruns and back charges in 2018 due to numerous factors, including inefficiencies in the procurement process. The effect of changes in estimates of contract profit decreased gross profit by approximately $200,000 for the three months ended September 30, 2018 and increased gross profit by approximately $129,000 for the three months ended September 30, 2017.

We continue to work to mitigate the impact of these charges and in some instances, have been able to reduce the cost of certain charges from suppliers. Management is taking steps intended to improve gross margin performance for the remainder of 2018, including upgrading project management capabilities, improving review and approval procedures and training.

Selling expenses: Selling expenses for the three months ended September 30, 2018 of $1,082,977 were $87,058, or 7.4% lower than selling expenses of $1,170,035 for 2017. The decrease is primarily due to lower commissions from lower sales in our specialty product line and overall lower incentive compensation costs.

General and administrative expenses: General and administrative expenses for the three months ended September 30, 2018 of $1,032,462 were $99,945, or 10.7% higher than general and administrative expenses of $932,517 for 2017. The primary reason for the increase is due to compensation costs related to the additional employees resulting from the R&D acquisition on June 1, 2018.

Amortization of intangible assets: Amortization of intangible assets was $331,344 for the three months ended September 30, 2018 compared to $300,000 for 2017. The increase is primarily due to the amortization of intangible assets related to the June 1, 2018 acquisition of certain assets of R&D.

Other income: Other income remained relatively flat at $32,064 for the three months ended September 30, 2018 compared to $29,239 for 2017.

Interest Expense: Interest expense during the three months ended September 30, 2018 was $78,530 compared to $49,328 for 2017. The increase in interest expense was due primarily to increased debt levels to fund working capital needs for operations and interest rates as compared to the same period in the prior year.

Income tax expense: Income tax expense for the three months ended September 30, 2018 was $19,235 compared to a benefit of $337,000 for 2017. The effective income tax rate was 14.8% for the three months ended September 30, 2018 compared to (86.5)% for 2017. The 2018 effective income tax rate is lower than the 2018 federal statutory rate of 21% due primarily to adjustments resulting from the filing of the 2017 federal income tax return. The 2017 effective income tax rate differs from the 2017 federal statutory rate of 34% primarily due to the reversal of a portion of the deferred tax valuation allowance during the three months ended September 30, 2017.

Net income: As a result of the foregoing, net income for the three months ended September 30, 2018 was $110,890 compared to $726,737 for 2017.

~~Results~~Gross profit: Gross profit was $2,055,927, or 28.9% of ~~Operations~~net sales for the ~~nine~~three months ended ~~September~~March, 31, 2019 compared to $2,259,042, or 27.7% of net sales for 2018. Gross 30profit decreased by $203,115 in 2019. Gross profit as a percentage of net sales was higher in 2019 compared to 2018 due primarily to improved project mix and ~~2017~~because several projects in 2018 were negatively impacted by additional costs. Gross margin dollars were less in 2019 compared to 2018 as a result of the decreased sales in 2019. Revisions in estimated profits for contracts accounted for under the percentage of completion method are made in the period in which circumstances requiring the revision become known. The effect of changes in estimated contract costs decreased gross profit by approximately $124,000 and $180,000 during the three months ended March 31, 2019 and 2018, respectively.

~~Net Sales~~Selling: ~~Net~~Selling ~~sales~~expenses for the ~~nine~~ three months ended ~~September~~March 3031, ~~2018~~2019 of $301,~~400~~106,~~766~~181 were $140,~~895~~468,~~163,~~ or 63.68%, higher than ~~net~~selling ~~sales~~expenses of $281,~~505~~065,~~603~~713 for ~~2017~~2018. The ~~increase~~ ~~was~~increase ~~the~~is ~~result~~primarily ~~of an increased volume of business~~ due to ~~increased~~higher ~~construction~~compensation ~~activity~~costs ~~in the geographic area that we serve and our ability~~ to besupport ~~flexible~~expected ~~with~~sales ~~our capacity to meet increased demand~~growth.

~~Cost~~General ofand ~~sales~~administrative: ~~Cost~~General and ofadministrative ~~sales~~expenses for the ~~nine~~three months ended ~~September~~March 3031, ~~2018~~2019 of $221,~~170~~066,~~043~~386 were $2114,~~395~~674,~~448~~ or 12.10%, higher than ~~cost~~general and ofadministrative ~~sales~~expenses of $19951,~~774,595~~712 infor ~~2017~~2018. The increase is primarily due to ~~the~~increased ~~increase~~compensation ~~in net sales when compared to 2017~~ and ~~higher~~occupancy ~~costs on several projects~~ expenses in ~~2018 when~~2019 ~~compared~~associated towith ~~2017.~~our ~~Additionally,~~acquisition ~~new~~of ~~tariffs~~R&D ~~have~~in ~~led~~June toof ~~higher raw material costs~~2018, ~~which~~partially inoffset ~~turn have resulted in cost increases~~ by ~~many~~lower ofprofessional ~~our suppliers in 2018~~fees.

~~Gross~~Amortization ~~profit:~~of ~~Gross~~intangible ~~profit~~assets: ~~was~~Amortization ~~$8,230,723 or 27.1%~~ of ~~net~~intangible ~~sales~~assets, ~~for~~primarily ~~the~~related ~~nine~~non-compete ~~months ended September 30~~agreements, ~~2018~~was ~~compared to~~ $8300,~~731,008~~000 orfor ~~30.6%~~each of ~~net~~the ~~sales~~three ~~for 2017.~~months ~~Gross~~ended ~~profit~~March ~~decreased by $500~~31,~~285~~ ~~in 2018.Gross profit as a percentage of net sales and gross profit dollars were lower~~2019 ~~in 2018 compared to 2017 because our project mix in 2017 had higher than average margins~~ and ~~several projects in~~ 2018 ~~were negatively impacted by additional costs~~.

~~During~~Other ~~the~~income: ~~nine~~Other ~~months~~income ~~ended~~was ~~September 30~~$68,222 for ~~2017~~the wethree ~~had~~months ~~more~~ended ~~large~~March ~~projects~~31, ~~that~~2019 ~~had above average gross margins~~ compared to ~~2018. Additionally~~$33,679 wefor ~~experienced cost overruns and back charges in~~ 2018 ~~due to numerous factors, including inefficiencies in the procurement process~~. The ~~effect~~ ofprimary ~~changes~~reason infor ~~estimates~~this ofincrease ~~contract~~is ~~profit~~related ~~decreased~~to ~~gross profit by approximately~~unrealized ~~$230,000~~gains ~~and~~associated ~~$101,000~~with ~~for~~our ~~the~~short-term ~~nine~~investments ~~months~~in ~~ended~~2019 ~~September~~due ~~30,~~to ~~2018~~favorable ~~and~~market ~~2017, respectively~~conditions.

WeInterest ~~continue~~expense: toInterest ~~work~~expense was to$59,877 ~~mitigate~~for the ~~impact of~~three ~~these~~months ~~charges~~ended ~~and~~March ~~in some instances~~31, ~~have~~2019 ~~been~~compared ~~able~~ to ~~reduce~~$50,649 ~~the~~for ~~cost~~2018. ofThe ~~certain~~increase ~~charges~~in ~~from~~interest ~~suppliers. Management is~~expense ~~taking~~was ~~steps~~due ~~intended~~ to higher ~~improve~~average ~~gross~~borrowings ~~margin~~and ~~performance~~interest ~~for~~rates ~~the~~in ~~remainder~~2019 ofwhen ~~2018,~~compared ~~including~~to ~~upgrading~~the ~~project~~comparable ~~management capabilities,~~period ~~improving~~of ~~review and approval procedures and training~~2018.

~~Selling~~Income ~~expenses~~tax benefit: ~~Selling~~The ~~expenses~~income tax benefit for the ~~nine~~three months ended ~~September~~March 3031, ~~2018~~2019 ofwas $3105,~~347,164~~124 ~~were~~compared to a benefit of $~~144~~17,~~616,~~721 orfor 42018.1 The effective income tax rate was 26.2% ~~lower~~and ~~than~~25.6% ~~selling~~for ~~expenses~~the ofthree $3months ended March 31,~~491~~ 2019 and 2018,~~780~~ ~~for 2017~~respectively. The ~~decrease~~effective isincome ~~primarily~~tax ~~due~~rate todiffered from ~~lower~~the ~~commissions~~federal ~~from~~statutory ~~lower~~rate ~~sales~~of 21% in ~~our~~both ~~specialty~~periods ~~product~~due ~~line~~primarily ~~and~~to ~~overall~~state ~~lower~~income ~~incentive compensation costs~~taxes.

~~General~~Net ~~and~~loss: ~~administrative~~As ~~expenses: General~~a ~~and~~result ~~administrative~~of ~~expenses~~the foregoing, the net loss for the ~~nine~~three months ended ~~September~~March 3031, ~~2018~~2019 ofincreased by $3245,~~023,524~~335 ~~were~~to $~~121~~296,~~681,~~826 orcompared ~~4.2%~~to ~~higher than~~a ~~general~~net ~~and~~loss ~~administrative expenses~~ of $251,~~901,843~~491for ~~for 2017. The primary reason for the increase is due to compensation costs related to the additional employees resulting from the R&D acquisition on June 1,~~ 2018.

Amortization of intangible assets: Amortization of intangible assets was $943,079 for the nine months ended September 30, 2018 compared to $1,416,667 for 2017. Certain intangible assets arising from the BRJ Inc. acquisition were fully amortized in 2017, which is the primary reason for less amortization expense in 2018.

Other income: Other income was $151,643 for the nine months ended September 30, 2018 compared to $68,396 for 2017. The increase was primarily related to unrealized appreciation in the market value of our investments in marketable equity securities in 2018.

Interest Expense: Interest expense for the nine months ended September 30, 2018 was $193,227 compared to $168,761 for 2017. The increase in interest expense was due primarily to increased debt levels to fund working capital needs for operations and interest rates as compared to the same period in the prior year.

Income tax expense: Income tax expense for the nine months ended September 30, 2018 was $193,147 compared to $77,000 for 2017. The effective income tax rate was 21.6% for the nine months ended September 30, 2018, which approximates the 2018 federal statutory rate of 21%. The 2017 effective income tax rate of 9.3% is lower than the 2017 federal statutory rate of 34% primarily due to the reversal of a portion of the deferred tax valuation allowance during the three months ended September 30, 2017.

Net income: As a result of the foregoing, net income for the nine months ended September 30, 2018 was $701,056 compared to $753,050 for 2017.

Liquidity and Capital Resources

At ~~September~~March 3031, ~~2018~~2019, we had working ~~capital~~ capital of $1211,~~017~~774,~~066~~024 compared to working capital of $1112,~~124~~360,~~271~~534 at December 31, ~~2017~~2018. ~~During~~We ~~the~~adopted ~~nine~~ASC ~~months~~842, ~~ended~~“Leases”, ~~September~~effective 30January 1, ~~2018~~2019, ~~and~~which ~~2017,~~caused a decrease in our working capital in the amount of $419,113 as of March 31, 2019. Our operating activities provided cash of $21529,~~608~~043 ~~and~~during $2the three months ended March 31,~~151~~ 2019,~~675,~~ ~~respectively.~~and ~~The~~used ~~reason~~cash ~~for~~of $12,063 during the ~~decrease~~comparable period of 2018. The increase in cash ~~provided~~from by operating activities ~~from~~is ~~2017 to 2018 was~~ primarily due to the ~~increase~~reduction in ~~our~~ net operating ~~assets~~working capital in ~~2018 by approximately $1~~2019.~~7 million.~~

Cash used in ~~investment~~investing activities was $~~800~~131,~~037~~534 for the ~~nine~~three months ended ~~September~~March 3031, ~~2018~~2019 ~~compared~~and to $2318,~~075,418~~415 for the comparable period in ~~2017~~2018. ~~The~~Cash ~~primary~~used ~~uses of~~in ~~cash from investment~~ investing activities was for the purchase of equipment, ~~certain assets of R&D Fabricators, Inc. and short-term investments~~ in ~~2018~~2019 and primarily the purchase of equipment and short-term investments ~~and the payment of the working capital liability~~ in ~~connection with the BRJ Inc~~ 2018. ~~acquisition in 2017.~~ The primary reason for the ~~increase in~~ purchases of equipment in 2019 and 2018 relates to the implementation of an enterprise resource planning system that ~~remains~~will be placed in ~~process~~service in the second quarter of 2019.

Cash ~~provided~~used by financing activities was $~~978~~262,~~019~~ 307 for the ~~nine~~three months ended ~~September~~March 3031, ~~2018~~2019 ~~compared~~and to$203,809 of cash ~~used~~was ofprovided ~~$806,277~~by ~~for~~financing ~~2017.~~activities ~~Line~~during ofthe ~~credit~~comparable ~~borrowings~~period of 2018. Cash provided ~~cash~~from inoperating ~~2018~~activities ~~and~~was ~~repayments~~used ~~and~~for ~~distributions~~line toof ~~noncontrolling~~credit ~~interests~~and ~~used~~subordinated ~~cash~~term note repayments in ~~2017.~~2019 ~~Line~~and line of credit borrowings in ~~2018~~ were used primarily to fund ~~increased~~investing ~~net~~activities ~~operating assets that are included~~ in ~~working capital~~2018.

In November 2016, BRJ LLC entered into a credit agreement with KeyBank, N.A. (the “Credit Facility”). Under the Credit Facility, BRJ LLC may borrow up to an aggregate amount of $6,000,000 under revolving loans and letters of credit, with a sublimit of $500,000 for letters of credit. The Credit Facility is payable upon demand of KeyBank, N.A., or the lenders, or upon acceleration as a result of an event of default. At the closing of the Acquisition, approximately $1,900,000 was drawn under the Credit Facility to pay a portion of the purchase price and costs associated with the Acquisition, with the balance being available for general working capital of BRJ LLC.

BRJ LLC has a credit agreement with KeyBank, N.A. (the “Credit Facility”) and may borrow up to an aggregate amount of $6,000,000 under revolving loans and letters of credit, with a sublimit of $500,000 for letters of credit. The Credit Facility is payable upon demand of KeyBank, N.A., or the lenders, or upon acceleration as a result of an event of default.

Interest under the Credit Facility is payable monthly and accrues pursuant to the “base rate” of interest, which is equal to the highest of (a) KeyBank, N.A.’s prime rate, (b) one-half of one percent (0.50%) in excess of the Federal Funds Effective Rate of the Federal Reserve Bank of New York, and (c) one hundred (100) basis points in excess of the London Interbank Offered Rate for loans in Eurodollars with an interest period of one month, plus any applicable margin. The Credit Facility also requires the payment of certain fees, including, but not limited to, letter of credit fees.

The effective interest rate on outstanding borrowings under the Credit Facility at ~~September~~March 3031, ~~2018~~2019 was 4.6997%. The aggregate borrowings outstanding under the Credit Facility at ~~September~~March 3031, ~~2018~~2019 were $2,~~846~~502,~~334~~036 ~~compared~~and, toin $1addition,~~812,454~~ ~~at December 31~~KeyBank, ~~2017~~N.A. ~~In addition, the bank~~ has issued a letter of credit on behalf of ~~the~~BRJ ~~Company~~LLC in the amount of $250,000 that expires on December 1, ~~2018~~2019.

Based on current plans, management anticipates that the cash on hand, ~~short-term investments and~~ the expected cash flows from our majority-owned subsidiary BRJ LLC, ~~together with~~and the ~~remaining borrowing~~ availability under the Credit Facility will satisfy our capital requirements and fund our operations for at least the next 12 months.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, an effect on our financial condition, financial statements, revenues or expenses.

Inflation

Although our operations are influenced by general economic conditions, we do not believe that inflation had a material effect on our results of operations during the last two years.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make judgments, assumptions and estimates that affect the amounts reported in our financial statements and accompanying notes. The financial statements as of December 31, ~~2017~~ 2018 describe the significant accounting policies and methods used in the preparation of the financial statements. ~~Actual~~Additionally, we adopted Accounting ~~results~~Standard Update (ASU) 2016-02 (Topic ASC 842), “Leases”, as required, effective January 1, 2019, using the modified retrospective approach without adjusting comparative periods. ASC 842 retains the two-model approach to classifying leases as operating or finance leases (formerly, capital leases); however, most leases, regardless of classification type, are recorded on the balance sheet. When a lease is recorded on our balance sheet, we recognize a lease liability based on the present value of the future lease payments, with an offsetting entry to recognize a right-of-use (ROU) asset. We use a discount rate to determine the present value based on the rate implicit in the lease, if readily determinable, or our incremental borrowing rate. Actual results could differ materially from those estimates and be based on events different from those assumptions. Future ~~events~~ events and their effects cannot be predicted with certainty; estimating, therefore, requires the exercise of judgment. Thus, accounting estimates change as new events occur, as more experience is acquired or as additional information is obtained. Critical accounting policies are impacted significantly by judgments, assumptions and estimates used in the preparation of our financial statements. A discussion of such critical accounting policies can be found in our Annual Report on Form 10-K for the ~~period~~year ended December 31, ~~2017~~2018. ~~Refer~~Other tothan ~~Note~~the 2adoption of ~~the~~Topic ~~Notes~~ASC to842, ~~the~~there ~~Consolidated~~have ~~Financial~~been ~~Statements~~no ~~included~~material inchanges ~~this~~to ~~report~~such ~~for the Company’s~~ critical accounting policies as ~~with~~of ~~respect~~the toQuarterly ~~revenue~~Report ~~recognition~~on Form 10-Q for the quarter ended March 31, 2019.

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4 - CONTROLS AND PROCEDURES

WeEvaluation ~~maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act~~ of ~~1934, as~~Disclosure ~~amended~~Controls ~~(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 our management, including our principal executive and financial officer, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.Procedures

~~Our~~The Company has established disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and, as such, is accumulated and communicated to the Company’s management, including our principal executive and financial officer, ~~after~~to ~~evaluating~~allow timely decisions regarding required disclosure. Management, together with our principal executive and financial officer, evaluated the effectiveness of the Company’s “disclosure controls and procedures”, (as defined in ~~Exchange~~Rule ~~Act Rules~~ 13a-15(e) orof ~~15d-15(e))~~the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q,. ~~concluded that~~Based ~~our~~on ~~disclosure~~the ~~controls~~evaluation ~~and~~of ~~procedures~~management, ~~were~~including ~~not~~the ~~effective~~principal asexecutive and offinancial ~~September 30~~officer, ~~2018~~ due to material weaknesses in our internal control over financial reporting related to an insufficient compliment of qualified accounting personnel and ineffective controls associated with segregation of duties., ~~Our~~our disclosure controls ~~Management~~and ~~evaluated~~procedures ~~the~~were ~~effectiveness~~not effective as of ~~our~~March 31, 2019. In light of the material weaknesses in internal control over financial reporting, aswe ofperformed ~~December~~additional ~~31,~~analyses ~~2017~~and asother ~~required~~post-closing ~~by paragraph~~procedures ~~(b)~~and ofutilized ~~Exchange~~more ~~Act~~resources ~~Rules~~to ~~13a-15~~ensure orthat ~~15d-15,~~our ~~and~~financial statements ~~determined~~were ~~our~~prepared ~~internal~~in ~~controls~~accordance ~~over~~with ~~financial~~accounting ~~reporting~~principles ~~were~~generally ~~not~~accepted ~~effective due~~in tothe ~~material~~United ~~weaknesses~~States ~~that~~of ~~exist~~America (U.S. ~~The~~GAAP). Notwithstanding these material weaknesses, ~~consist~~management ofbelieves anthat ~~insufficient~~the ~~complement~~financial ofstatements ~~qualified~~included ~~accounting~~in ~~personnel~~this Quarterly Report on Form 10-Q fairly ~~and~~present, ~~controls~~in ~~associated~~all ~~with~~material ~~segregation~~respects, our financial condition, result of ~~duties~~operations and cash flows for the periods presented.

ToRemediation address the material weaknesses we performed additional analyses and other post-closing procedures and utilized more resources to ensure that our financial statements were prepared in accordance with accounting principles generally accepted in the United States of ~~America (U.S. GAAP). Notwithstanding these material weaknesses, management believes that~~ the ~~financial~~Material ~~statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial condition, result of operations and cash flows for the periods presented.~~Weaknesses

The Company is in the process of remediating the material weaknesses in order to strengthen our overall internal controls. Such remediation plan includes the following:

A consultant with specific accounting and financial reporting expertise was hired during the second quarter of 2018, which provides the Company with additional resources.

Enhancing the timeliness, formality and rigor of our financial statement preparation, review and reporting process.

Enhancing our review process for significant accounts, transactions and reconciliations to provide controls to mitigate segregation of duties issues.

Implementing, in the second quarter of 2019, a new accounting system at our operating subsidiary, B.R. Johnson, LLC, that has certain built in internal controls.

The Company is committed to maintaining a strong internal control environment and believes that these remediation efforts will represent significant improvements in our controls. The Company is in the process of implementing these steps, however, some of these steps will take time to be fully integrated and confirmed to be effective and sustainable. Additional controls may also be required over time. Until the remediation steps set forth above are fully implemented and tested, the material weaknesses described above will continue to exist.

Changes in Internal Control Over Financial Reporting

AsWhile ~~discussed~~changes ~~above~~ in ~~this~~the ~~Item~~Company’s ~~4, our~~ internal control ~~controls~~ over financial reporting ~~were~~occurred ~~not~~during ~~effective~~the asquarter ofended ~~September~~March 3031, ~~2018,~~2019 as athe ~~result~~Company ofis ~~material~~in ~~weaknesses~~the ~~related~~process of implementing tothe anremediation ~~insufficient~~steps ~~complement~~described ofabove, ~~qualified~~we ~~accounting~~believe ~~personnel~~that ~~and~~there ~~controls~~were ~~associated~~no ~~with~~changes ~~segregation~~in ofthe ~~duties.~~Company’s ~~These~~internal ~~material~~control over financial ~~weaknesses~~reporting ~~existed~~during asthe ofquarter ~~December~~ended March 31, ~~2017~~2019, ~~and~~that ~~continued~~have tomaterially ~~exist~~affected, asor ofare ~~September~~reasonably 30likely to materially affect, the ~~2018~~Company’s internal control over financial reporting.

In response to the material weaknesses identified above, our Management, with assistance of an outside consultant and oversight from the Company’s audit committee, has continued to monitor and review our control environment and evaluate potential solutions intended to remedy the identified material weaknesses. In that regard, a new outside consultant was engaged and commenced service to the Company during the second quarter of 2018.

Inherent Limitations on Effectiveness of Controls

The Company’s management, including the principal executive and financial officer, does not expect that the Company’s disclosure controls and procedures or the Company’s internal control over financial reporting will prevent or detect all errors and all fraud. A control system, regardless of how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be met. These inherent limitations include the following:

	·	Judgments in decision-making can be faulty, and control and process breakdowns can occur because of simple errors or mistakes.

	·	Controls can be circumvented by individuals, acting alone or in collusion with each other, or by management override.

	·	The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

	·	Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

There are currently no pending or threatened material legal proceedings against us.

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in Part 1, Item 1A, of our Annual Report on Form 10-K for the ~~year~~period ended December 31, ~~2017, except for the addition of the following which supplements our previously disclosed risk factors~~2018.

Costs associated with new tariffs could adversely impact our profitability or financial condition.

New tariffs have led to higher raw material costs, which in turn have resulted in cost increases by many of our suppliers in 2018. If this continues, our margin may be negatively impacted, particularly if we are unable to incorporate the cost increases into our contract bids or if construction activity generally slows as a result of higher costs. This, in turn, could adversely impact our profitability or financial condition.

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

31.1	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2	Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*	Certification of Principal Executive and 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.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

* This certification is deemed not filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

1819

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.

		REGIONAL BRANDS INC.
November 14, 2018	By:	/s/ Fred DiSanto
May 9, 2019	By:	/s/ Fred DiSanto
		Fred DiSanto
		Chief Executive Officer
		(Principal Executive, Financial and Accounting Officer)

1920

Filing Compare · Regional Brands Inc.