UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
For the transition period from ________ to ________
Commission
File Number:
(Exact name of Registrant as specified in its charter)
| (State of incorporation) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) (zip code)
(Registrant’s telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 | ☐ |
| ☐ | Smaller reporting company | ||
| 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 ☐
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | N/A | N/A |
As of April 11, 2022, shares of common stock, par value $0.001 per share, were issued and outstanding.
HESTIA INSIGHT INC.
FORM 10-Q
February 28, 2022
TABLE OF CONTENTS
i
FORWARD LOOKING STATEMENTS
This report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this report. Additionally, statements concerning future matters are forward-looking statements.
Although forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings “Risks Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q and information contained in other reports that we file with the SEC. You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.
We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. You can also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-033.
We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
Unless otherwise indicated, references in this report to “we,” “us” or the “Company” refer to Hestia Insight Inc. and its subsidiaries.
ii
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements.
HESTIA INSIGHT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
As of February 28, 2022 (Unaudited) and November 30, 2021
| February 28, 2022 | November 30, 2021 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Investments in equities | ||||||||
| Note receivable; net of allowance for doubtful accounts of $ | ||||||||
| Lease contract receivable – short term | ||||||||
| Total current assets | ||||||||
| FIXED ASSETS: | ||||||||
| Right-of-Use auto lease | ||||||||
| OTHER ASSETS: | ||||||||
| Lease contract receivable – long term | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Right-of-Use current liability | ||||||||
| Unearned income on lease contract receivable | ||||||||
| Total current liabilities | ||||||||
| LONG TERM LIABILITIES: | ||||||||
| Right-of-Use long term liability | ||||||||
| TOTAL LIABILITIES | ||||||||
| STOCKHOLDERS’ EQUITY: | ||||||||
| Common stock, par value $ per share; shares authorized; and shares issued and outstanding as of February 28, 2022 and November 30, 2021, respectively. | ||||||||
| Series B common stock, par value $ per share; shares authorized; --- and -- issued and outstanding as of February 28, 2022 and November 30, 2021, respectively. | ||||||||
| Treasury Stock, and shares as of February 28, 2022 and November 30, 2021, respectively. | ||||||||
| Additional paid in capital | ||||||||
| Accumulated earnings/(deficits) | ( | ) | ||||||
| Total stockholders’ equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
1
HESTIA INSIGHT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
for the three months ended February 28, 2022 and February 28, 2021 (Unaudited)
| For the Three Months Ended February 28, | ||||||||
| 2022 | 2021 | |||||||
| REVENUE: | ||||||||
| Consulting revenue | $ | $ | ||||||
| Consulting revenue – related party | ||||||||
| Origination fees | ||||||||
| Total revenue | ||||||||
| COST OF REVENUE: | ||||||||
| Cost of revenue | ||||||||
| Cost of revenue – related party | ||||||||
| Total cost of revenue | ||||||||
| GROSS PROFIT | ||||||||
| OPERATING EXPENSE: | ||||||||
| Selling, general and administrative expense | ||||||||
| Total operating expense | ||||||||
| OPERATING INCOME/(LOSS) | ( | ) | ( | ) | ||||
| OTHER INCOME/(EXPENSE): | ||||||||
| Interest dividend income | ||||||||
| Interest income on lease receivable | ||||||||
| Realized gain/(loss) on equity investments | ||||||||
| Unrealized gain/(loss) on equity investments | ( | ) | ||||||
| Interest expense | ||||||||
| Bad debt expense | ||||||||
| Total other income/(expense) | ( | ) | ||||||
| INCOME /(LOSS) BEFORE TAXES | ( | ) | ||||||
| Tax expense | ||||||||
| NET INCOME/(LOSS) | $ | ( | ) | $ | ||||
| Basic net income/(loss) per common share | $ | ( | ) | $ | ||||
| Diluted net income/(loss) per common share | $ | ( | ) | $ | ||||
| Ave. common shares outstanding – Basic | ||||||||
| Ave. common shares outstanding – Diluted | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
2
HESTIA INSIGHT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
For the three months ended February 28, 2022 (Unaudited)
| Common
Stock par value $0.001 | Series
B Common Stock par value $0.001 | Preferred
Stock par value $0.00001 | Treasury Stock | Additional Paid In | Accum. Earnings/ | Total Stockholders’ | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | $ | Shares | $ | $ | Capital | (Deficit) | Equity | |||||||||||||||||||||||||||||||
| Balance, November 30, 2018 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
| Issuance of Hestia Investments, Inc. stock for cash. | ||||||||||||||||||||||||||||||||||||||||
| Issuance of Hestia Investments, Inc. stock for services. | ||||||||||||||||||||||||||||||||||||||||
| Issuance of Hestia Insight Inc. Series B common stock for cash and services. | ||||||||||||||||||||||||||||||||||||||||
| Issuance of Hestia Insight Inc. Series A preferred stock for services. | ||||||||||||||||||||||||||||||||||||||||
| Cancellation of Hestia Insight Inc. Series B common stock. | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Cancellation of Hestia Insight Inc. Series A preferred stock. | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Reverse common stock split of 1 for 500 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Issuance of Hestia Insight Inc. common stock to Hestia Investments, Inc. shareholders in share exchange. | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Consolidation of Hestia Insight Inc. with Hestia Investments, Inc. | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net Loss for 12-month period | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance, November 30, 2019 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
| Issuance
of Hestia Insight Inc. common stock for services valued at $ | - | - | - | |||||||||||||||||||||||||||||||||||||
| Net Profit for 12-month period | ||||||||||||||||||||||||||||||||||||||||
| Balance November 30, 2020 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
| Issuance
of Hestia Insight Inc. common stock for services valued at $ | ||||||||||||||||||||||||||||||||||||||||
| Cancellation of Hestia Insight Inc. Series B common stock. | ( | ) | ( | ) | - | - | ||||||||||||||||||||||||||||||||||
| Net Loss for 12-month period | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance November 30, 2021 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
| Issuance
of Hestia Insight Inc. common stock for services valued at $ | - | |||||||||||||||||||||||||||||||||||||||
| Issuance of Hestia Insight Inc. common stock for cash | - | - | - | |||||||||||||||||||||||||||||||||||||
| Net Loss for 3-month period | - | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Balance February 28, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
HESTIA INSIGHT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended February 28, 2022, and February 28, 2021 (Unaudited)
| For the Three Months Ended February 28, | ||||||||
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net Income/(Loss) | $ | ( | ) | $ | ||||
| Adjustments to reconcile net income/(loss) to operating cash flows: | ||||||||
| Fair Value of stock received as other income | ||||||||
| Issuance of common stock for services | ||||||||
| Realized loss (gain) on investment equities | ( | ) | ||||||
| Unrealized loss (gain) on investment equities | ( | ) | ||||||
| Changes in operating asset and liability account balances: | ||||||||
| Accounts receivable and lease interest receivable | ||||||||
| Accounts payable and accrued interest payable | ( | ) | ||||||
| NET ADJUSTMENTS | ( | ) | ||||||
| NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES | $ | ( | ) | $ | ( | ) | ||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Proceeds (used in) purchase of investment equities | ||||||||
| Proceeds provided by investment equities | ||||||||
| NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES | $ | $ | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds provided by (used in) purchase of equipment leased to others | ( | ) | ||||||
| Proceeds provided by (used in) issuance of common stock | ||||||||
| NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES | $ | ( | ) | $ | ||||
| NET INCREASE (DECREASE) IN CASH | ( | ) | ( | ) | ||||
| CASH – BEGINNING OF PERIOD | ||||||||
| CASH – END OF PERIOD | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
HESTIA INSIGHT INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
February 28, 2022
Note 1 – Organization and basis of accounting
Nature of Organization
Hestia Insight Inc., (“Hestia” or the “Company”) was incorporated in the State of Nevada on November 19, 2003 and was formerly known as Luxshmi Investments, Inc. until it changed its name on March 27, 2019. The Company, through its wholly owned subsidiary, Hestia Investments Inc., provides strategic consulting and capital market advisory services for selective micro, small and medium sized companies in the healthcare, biotech and fintech sectors.
Basis of Presentation
The accompanying consolidated financial statements include the accounts of Hestia Insight Inc. (“Hestia” or the “Company”) consolidated with the accounts of its wholly owned subsidiaries Hestia Investments, Inc., a Wyoming corporation and HSTA Health, Inc., a Nevada corporation. In these notes, the terms “us,” “we” or “our” refer to Hestia Insight Inc. and its consolidated subsidiary.
The accompanying financial statements are prepared on the basis of accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company is a development stage enterprise devoting substantial efforts to establishing its new business, financial planning, raising capital, and research into investments and services which may become part of the Company’s investment and services portfolios. The Company has not realized significant revenues from inception through the date of these financial statements. A development stage company is defined as one in which all efforts are devoted substantially to establishing a new business and, even if planned principal operations have commenced, revenues are insignificant.
Presented as a Going Concern
The accompanying financial statements have been prepared assuming the continuation of the Company as a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and is dependent on debt and equity financing to fund its operations. Management of the Company is making efforts to raise additional funding until a registration statement relating to an equity funding facility is in effect. While management of the Company believes that it will be successful in its capital formation and planned operating activities, there can be no assurance that we will be able to raise additional equity capital or be successful in the development and commercialization of the investments and services it develops or enters into collaboration agreements thereon. Ultimately, the Company will need to achieve profitable operations in order to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the reclassification or the amounts that can be recovered from receivables or other assets, or the reclassification or the amounts of liabilities that may result from the possible inability of the Company to continue as a going concern.
5
Note 2 – Summary of significant accounting policies
Cash and Cash Equivalents
For purposes of reporting within the balance sheets and the statements of cash flows, the Company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, cash on deposit in attorney trust accounts, and all highly liquid debt instruments purchased with a maturity of three months or less to be cash and cash equivalents.
Prepaid Expenses
The
Company records amounts which have been paid in advance of receiving future economic benefits anticipated by the payment as prepaid expenses.
Prepaid expenses are recorded as assets and expensed over the period that the benefits are received from the payment. The Company recorded
as prepaid expenses of $
Right-of-Use Assets
The Company recognizes operating lease assets and lease liabilities in accordance with ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases and makes certain changes to the accounting for lease expenses. The Company has adopted this standard starting for the year ending November 30, 2020, the first year the Company had any leased assets. This standard requires us to increase our assets and liabilities by equal amounts through the recognition of right-of-use assets and lease liabilities for our operating leases and to recognize the initial and the monthly payments as operating expenses when paid or accrued on our Consolidated Statements of Operations and Consolidated Statements of Cash Flows.
On
November 2, 2020, the Company entered into an operating lease to lease an automobile for a net initial payment of $
Lease Contracts Receivable
The Company recognizes its participation as a lessor in direct financing leases in accordance with ASU 2016-02, “Leases (Topic 842).” Topic 842 is now recognized as ASC 842 and the Company has adopted this new standard effective for all fiscal years starting on and after December 1, 2021.
In accordance with ASC 842 the Company does not recognize the ownership of assets as a lessor in direct financing lease arrangements. Instead, when the Company originates the lease, it records a net investment in the lease on the balance sheet. The asset amount is a lease contract receivable equal to the present value of all the lease payments to be received and listed as both short term and long-term receivables on the balance sheet. The liability amount is equal to the difference between the present value of the lease contract receivable and the cost of leased equipment. The liability amount represents the unearned interest income that will be earned by the lessor over the term of the lease, and it is listed as unearned income on lease contract receivable, a current liability. When the Company receives a lease payment from a direct financing lease, the lease contract receivable is reduced by the entire payment and a portion of the payment that represents the interest income is recognized as both interest income on lease receivable and as an equal reduction of the unearned income on lease receivable.
On
December 2, 2021, the Company entered into a direct financing lease as a lessor of $
6
Investments in Equities
ASC Topic 820, Fair Value Measurements and Disclosures (“ASC Topic 820”) provides a framework for measuring fair value in accordance with generally accepted accounting principles.
ASC Topic 820 defines fair value 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. ASC Topic 820 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs).
The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC Topic 820 are described as follows:
| ● | Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date. |
| ● | Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
| ● | Level 3 – Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. |
For those investments in equities, including equity securities and partnership interests, that have a “readily determinable fair value,” as defined in ASC Topic 321 and discussed below, or are traded in a verifiable public market and are not restricted for sale in the public market by a restricted stock legend, or can otherwise be reasonably valued using the three levels of the fair value hierarchy under ASC Topic 820 discussed above, we present and carry our investments at their estimate of fair value at net asset value (NAV) as of the balance sheet date. For these equity securities and partnership interests we include the realized and unrealized gains and losses arising from the changes in the fair values during the period as a component of investment gains in the consolidated statements of operations.
For those investments in equities, including equity securities and partnership interests, that do not have a “readily determinable fair value,” or are not traded in a verifiable public market or are restricted for sale in the public market by a restricted stock legend or otherwise, we present and carry our investments using the measurement alternative which is cost minus impairment, if any, plus or minus changes resulting from observable price changes in “orderly transactions,” as defined in ASC 321, for the identical or a similar investment of the same issuer.
Income Taxes
The Company accounts for income taxes pursuant to FASB ASC Topic 740, Income Taxes. Under FASB ASC Topic 740, deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.
The Company maintains a valuation allowance with respect to deferred tax assets. The Company establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carry-forward period under the federal tax laws.
Changes in circumstances, including the Company generating significant taxable income, could cause a change in judgment about the reliability of the related deferred tax asset. Any change in the valuation allowance will be included in income in the year of the change in estimate.
7
Estimates
The financial statements are prepared on the basis of accounting principles generally accepted in the United States of America, also referred to as U.S. GAAP. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the balance sheets and the income and expenses for the periods ended as stated in the statements of operations.
Revenue Recognition
The Company recognizes consulting income in accordance with ASC 606. This standard’s stated core principle is that an entity should recognize revenue to depict the transfer of promised services or goods to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, ASC 606 includes provisions within a five-step model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when, or as, an entity satisfies a performance obligation.
Our consulting revenues currently consist of consulting contracts for professional services that are performed over a stated period of time. We recognize income for each contract on a pro-rata basis over the stated period of time as we satisfy a performance obligation.
The Company recognizes loan origination fees in accordance with ASC Topic 310-20, “Receivables Nonrefundable Fees and Other Costs” and records these fees as “Other Income.” Accordingly, revenue from loan origination fees, net of their direct costs, are deferred and amortized over the life of the loan to which they relate. Loan origination fees include fees for services and costs to originate, renew or restructure a loan, including costs directly related to evaluating the financial performance of the potential borrower and preparing loan documentation. Currently, the Company considers the costs of the loan origination fees to be immaterial for financial reporting purposes and therefore does not directly allocate the costs of these services.
Our origination fees currently consist of our debtor’s stock that we have received from originating and renewing certain loans to the debtor. The amount of the origination fee is determined as the value of the stock on the sooner of the first date the Company receives the debtor’s stock without a restricted stock legend, or the first date the Company can otherwise ascertain the readily determinable value of the debtor’s stock.
In accordance with “ASC 321 Investments – Equity Securities,” described below, if stock or other equity securities are received for consulting income or origination fees then the value is measured at the cost of the equity securities minus impairment, if any, plus or minus changes resulting from observable price changes in “orderly transactions,” as defined, for the identical or a similar investment of the same issuer. The Company considers equity securities that have a restricted stock legend that restricts their free trading to have no readily determinable fair value, unless the Company can substantiate that a different value could be received for the identical or similar investment of the same issuer.
Subsequent Events
The Company evaluated subsequent events through the date when these financial statements are issued for disclosure consideration.
Adoption of Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and that management of the Company believes may impact its financial statements, including ASC 842 described above under Right-of-Use Assets and Lease Contracts Receivable. Management does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
8
Recent Accounting Pronouncements
Effective December 1, 2017, the Company adopted Accounting Standards Update (“ASU”) 2016-01 “Financial Instruments—Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 adds a new Topic, “ASC 321 Investments – Equity Securities” to the FASB Accounting Standards Codification, which provides guidance on accounting for all equity investments.
The guidance in ASC 321 allows a measurement exception for those equity investments that do not have a “readily determinable fair value,” as defined therein, and do not qualify to be measured using the practical expedient to estimate fair value at net asset value (NAV) of the investee in accordance with ASC 820-1035-59, Fair Value Measurement and Disclosure. The measurement alternative allows those investments to be measured at their cost minus impairment, if any, plus or minus changes resulting from observable price changes in “orderly transactions,” as defined, for the identical or a similar investment of the same issuer. Hestia has elected to use this measurement exception. See Note 3 below for a detailed listing of the Company’s investment in equities to which the measurement exception applies.
Note 3 – Investment in Equities
The following equity investments that have a readily determinable fair value are measured using ASC Topic 820, discussed above. The following equities without a readily determinable fair value use the measurement alternative of ASC Topic 321 and are measured at their cost minus impairment, if any, plus or minus changes resulting from observable price changes in “orderly transactions,” as defined, for the identical or a similar investment of the same issuer.
| Description | How Acquired | Readily Determinable Fair Value | Cost | Current Changes | Cumulative Impairments | Cumulative Adjust. | Feb 28, 2022 Bal. Sheet Value | |||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||||
| $ | $ | $ | $ | $ | 0 | |||||||||||||||||
| $ | $ | ( | ) | $ | $ | $ | 1,143 | |||||||||||||||
| $ | $ | ( | ) | $ | $ | $ | 278,149 | |||||||||||||||
| $ | $ | $ | $ | $ | 0 | |||||||||||||||||
| Totals | $ | $ | ( | ) | $ | $ | $ | 279,292 | ||||||||||||||
9
Note 4 – Income Taxes
The Tax Cuts and Jobs Act (the “2017 Tax Act”) was enacted on December 22, 2017. The 2017 Tax Act includes a number of changes to existing U.S. income tax laws that affect the Company, most notably a reduction of the top U.S. corporate income tax rate from 35% to 21% for tax years beginning after December 31, 2017. The 2017 Tax Act also provides for the acceleration of depreciation for certain assets placed in service after September 27, 2017 as well as changes beginning in 2018, including additional limitations on the deductibility of executive compensation and interest.
On May 16, 2019, the Company entered into a share exchange agreement which resulted in Hestia Investments, Inc. becoming a wholly owned subsidiary of the Company and the former shareholders Hestia Investments Inc becoming the new majority shareholders of the Company. Prior to this date the Company and Hestia Investments, Inc., have been taxed as separate C-Corporations for federal income tax purposes.
The provision (benefit) for income taxes for three months ended February 28, 2022 and the year ended November 30, 2021 consist of the following:
| Feb. 28, 2022 | Nov. 30, 2021 | |||||||
| Current: | ||||||||
| Federal | $ | $ | ||||||
| State | ||||||||
| Total Current | $ | $ | ||||||
| Deferred: | ||||||||
| Federal | $ | $ | ||||||
| State | ||||||||
| Change in valuation | ||||||||
| Total provision (benefit) | $ | $ | ||||||
The Company, and its subsidiary have net deferred tax assets resulting from net operating loss (“NOL”) carryforwards. These NOL carryforwards are subject to limitations on their use and availability. Under the 2017 Tax Act, NOL carryforwards can offset only 80% of taxable income in any given tax year and are significantly or completely reduced whenever there is a substantial change in the ownership of the Corporation.
The
income tax provision (benefit) differs from the amount computed by applying the U.S. federal statutory tax rate of
| Feb. 28, 2022 | Feb. 28, 2021 | |||||||
| Net income (loss) before taxes | $ | ( | ) | $ | ||||
| US federal income tax rate | % | % | ||||||
| Computed expected tax provision (benefit) | ( | ) | ||||||
| Permanent differences | ||||||||
| Timing differences | ( | ) | ||||||
| Limitations on NOL carryforwards due to change in stock ownership of the Corporation | ||||||||
| Federal income tax provision | $ | $ | ||||||
The Company and its subsidiary file income tax returns in the U.S. federal jurisdiction and, if necessary, in various state and local jurisdictions. All tax years from 2017 to 2021 are subject to examination.
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Note 5 – Related party transactions
ECL Capital Partners Corp.
During
the year ended November 30, 2021, the Company performed $
Note 6 – Note Receivable Patient Access Solutions, Inc.
Effective
October 1, 2019, the Company received a Note Receivable (the “Note”) in the amount of $
On October 29, 2020, the Company exercised its conversion rights on this note and received shares of restricted common stock, the value of which will be recognized as consulting income when the restrictions on the stock are removed or the fair value of the stock becomes readily determinable, whichever comes first.
Note 7 – Common Stock
On January 10, 2021, the Company issued shares to an unrelated independent contractor valued at $ for services valued at $12,360.
On March 1, 2021, Hestia Investments returned to the Company for cancellation its remaining shares of Series B Common Stock and, accordingly, the Company cancelled the remaining outstanding 500,000 shares of Series B Common Stock.
On January 20, 2022, the Company issued shares to an unrelated independent contractor valued at $ for services valued at $48,750.
On February 15, 2022, pursuant to an offering under Regulation A, the Company issued shares to unrelated new shareholders for $ in cash.
Note 8 – Preferred Stock
The Company is authorized to issue up to shares of preferred stock, par value $ per share (the “Preferred Stock”). As of February 28, 2022, shares of Preferred Stock were issued or outstanding.
Note 9 – Subsequent Events
The Company evaluates events that occur after the period end date through the date the financial statements are available to be issued. Accordingly, management has evaluated subsequent events through the date these financial statements are issued and has determined that the following subsequent events require disclosure in these financial statements.
On April 1, 2022, the Company entered into an Employment Agreement (the “Employment Agreement”) with Peter Liu pursuant to which Mr. Liu will serve as the Vice President of Asia Operations of the Company in consideration of cash and (i) an aggregate of shares of restricted common stock of the Company (the “Shares”) to be issued at the rate of 15,000 Shares per quarter, and (ii) a non-qualified stock option to acquire an aggregate of 36,000 shares of common stock of the Company exercisable for a period of five () years at an exercise price of $ per share (the “Option”), which such Option shall vest in equal amounts over a period of one (1) year at the rate of 3,000 shares per month and shall be issuable on a quarterly basis at the rate of 9,000 Options per quarter.
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There are no arrangements or understandings between Mr. Liu and any other person pursuant to which he was selected as an employee of the Company, and there are no transactions with Mr. Liu that would require disclosure under 404(a) of Regulation S-K. There are no family relationships between any director or executive officer of the Company and Mr. Liu.
The foregoing summary and description of the Employment Agreement are not and do not purport to be complete and are subject to, and qualified in its entirety by, the full text of the Employment Agreement, a copy of which is filed as exhibit 10.7 is incorporated herein by reference
The offers, sales, and issuances of the securities described above were deemed to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder as transactions by an issuer not involving a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was an accredited or sophisticated person and had adequate access, through employment, business or other relationships, to information about us.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the results of operations and financial condition of Hestia Insight Inc. for the three months ended February 28, 2022, and 2021, should be read in conjunction with the Hestia Insight Inc. unaudited condensed consolidated financial statements and the notes thereto contained elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors, Special Note Regarding Forward-Looking Statements and Business sections in our Form 10-K as filed with the Securities and Exchange Commission on February 25, 2022. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.
Unless otherwise indicated, references to the “Company,” “us” or “we” refer to Hestia Insight Inc. and its subsidiaries.
Overview
Hestia Insight Inc. (“Hestia”, “Hestia Insight”, or the “Company”) was incorporated in the State of Nevada on November 19, 2003, under the name Luxshmi Investments, Inc. (“Luxshmi Investments”), until the Company changed its name to Hestia Insight Inc. on March 27, 2019. On March 12, 2019, the Company filed a Certificate of Amendment to its Articles of Incorporation authorizing 300,000,000 shares of capital stock, comprised of 290,000,000 shares of common stock, par value $0.001 per share (the “Common Stock”) and 10,000,000 shares of preferred stock, par value $0.00001 per share (the “Preferred Stock”). On March 27, 2019, the Company filed a Certificate of Amendment to its Articles of Incorporation (i) effecting a name change from Luxshmi Investments, Inc. to Hestia Insight Inc., and (ii) effecting a 50-to-1 reverse stock split of the Company’s issued and outstanding shares of common stock (the “Reverse Stock Split”). The Reverse Stock Split did not impact the Company’s authorized shares of Common Stock or Preferred Stock, or its par value. On May 16, 2019, the Company entered into a Share Exchange Agreement with Hestia Investments Inc., a Wyoming corporation (“Hestia Investments”), to exchange, on a 1-for-1 basis, 27,614,200 shares of the Company’s Common Stock in exchange for 27,614,200 shares of Hestia Investments which were owned by 100% of the then-shareholders of Hestia Investments (the “Share Exchange Transaction”). As a result of the Share Exchange Transaction, Hestia Investments became a wholly owned subsidiary of the Company.
The Company currently conducts all of its operations through its two wholly owned operating subsidiaries, Hestia Investments, and HSTA HEALTH INC., a Nevada corporation (“HSTA HEALTH”). Hestia Investments provides strategic consulting, medical supply sales support, management, and capital market advisory services for selective companies in the healthcare and biotech sectors. HSTA HEALTH provides healthcare management and patient services and develops new healthcare technologies and analysis for neurological and psychiatric disorders.
Our Markets and Services
The Company’s wholly owned operating subsidiary, Hestia Investments, provides strategic consulting, medical supply sales support, management, and capital market advisory services for select micro, small and medium sized companies in the healthcare and biotech sectors. The Company’s wholly owned operating subsidiary, HSTA HEALTH, provides healthcare management and patient services and develops new healthcare technologies and analysis for neurological and psychiatric disorders. The Company is positioned to make strategic acquisitions of and enter joint ventures with emerging growth companies with unique sciences and technologies. The Company also provides sales and marketing guidance and services and capital markets advisory services to its clients.
Sales and Marketing
We seek to develop new business through relationships driven by our senior management, which have extensive contacts throughout the healthcare system. Our senior management is seeking opportunities for joint ventures, strategic relationships and acquisitions in the healthcare and biotech sectors.
Business Model
The Company intends to pursue the acquisition and development of healthcare related technologies in the healthcare and biotech sectors through acquisition, licensing or joint ventures. We will also consider a third avenue of investing in certain technologies. The Company entered the healthcare sector to explore emerging healthcare technologies, especially growth companies that own and develop unique sciences and technologies.
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Competitive Advantages
The Company focuses on small and micro-cap companies in the healthcare and biotech sectors with limited access to growth capital. We provide specialized consulting services to assist companies with their operations in the public markets. Our management team is experienced in risk management and exit planning. The Company’s competitive advantages include a global business network of healthcare, investment and financial professionals who are integrated into the technology licensing and commercialization departments of universities and institutions. Through our offered services and access to investment, we intend to accelerate the development and commercialization of the healthcare businesses that we engage with.
Strategic Relationships
Noether Sciences and Technologies, Inc. On November 18, 2020, the Company entered into a non-binding Supplemental Agreement of Memorandum of Understanding (the “Noether MOU”) with Noether Science and Technologies, Inc. (“NSAT”) pursuant to which the parties will seek to enter into a definitive agreement to (i) establish an exclusive partnership that will focus on research and treatment of neurological and psychiatric disorders, (ii) commercialize existing NSAT technologies for the healthcare market, (iii) provide the Company with an exclusive license to use and develop the existing and ready to use depression and anxiety therapy protocols in the United States, and (iv) establish a neurotherapy center in the metropolitan New York City area and another 3-4 clinics in other strategic areas yet to be determined.
Immudyne Nutritional. On June 21, 2020, the Company entered into a sales agency agreement with Immudyne Nutritional LLC (“Immudyne”), pursuant to which the Company acts as sales agent for certain of Immudyne’s medical products. Immudyne is located in Jacksonville, Florida.
We are in negotiation in our areas of focus with respect to potential acquisitions and strategic partnerships. There is no guarantee that we will be able to successfully sign a definitive agreement, close or implement such business arrangement.
Intellectual Property
The Company owns no patents. We have not applied for or received patent protection in the US or any other country, and, as a result, there is a distinct risk that we will not be able to adequately protect our intellectual property rights in these countries. We own and control a variety of trade secrets, confidential information, trademarks, and other intellectual property rights that, in the aggregate, are of material importance to our business. We consider our trademarks, service marks, and other intellectual property to be proprietary, and rely on a combination of copyright, trademark, trade secret, non-disclosure, and contractual safeguards to protect our intellectual property rights.
Competition
In our current consulting business, we compete with a number of advisory firms offering similar service including consulting and strategy firms; market research, data, benchmarking, and forecasting providers; technology vendors and services firms; health care information technology firms; technology advisory firms; outsourcing firms; and specialized providers of advisory services. Other organizations, such as state and national trade associations, group purchasing organizations, non-profit think-tanks, and database companies, also may offer research, consulting, tools, and advisory services to health care organizations.
We believe that the principal competitive factors in our market include quality and timeliness of our services, strength and depth of relationships with our clients, ability to meet the changing needs of current and prospective clients, measurable returns on customer investment, and service and affordability.
As our business develops and we expand through joint ventures, acquisitions and strategic partnerships in the U.S., we will have competition with other direct service providers, emerging technologies and medical communication platforms. The Company will seek to maintain a competitive advantage through intellectual property, superior quality management and cutting-edge technology.
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Government Regulation
The health care industry in the U.S. is highly regulated and subject to changing political, legislative, regulatory, and other influences. Further, the healthcare industry is currently undergoing rapid change. We are uncertain how, when or in what context these new changes will be adopted or implemented. These new regulations could create unexpected liabilities for us, could cause us or our members to incur additional costs and could restrict our or our clients’ operations. Many of the laws are complex and their application to us, our clients, or the specific services and relationships we have are not always clear. Our failure to anticipate accurately the application of these laws and regulations, or our other failure to comply, could create liability for us, result in adverse publicity, and otherwise negatively affect our business.
Employees
The Company has three employees. We otherwise rely on the services of independent contractors.
Our Offices
Our principal executive office is located at 400 S. 4th Street, Suite 500, Las Vegas, NV 89101.
Our Website
www.HestiaInsight.com
Legal Proceedings
From time to time, we are subject to ordinary routine litigation incidental to our normal business operations. We are not currently a party to, and our property is not subject to, any material legal proceedings.
Reports to Security Holders
We intend to furnish our shareholders annual reports containing financial statements audited by our independent registered public accounting firm and to make available quarterly reports containing unaudited financial statements for each of the first three quarters of each year. We file Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and Current Reports on Form 8-K with the SEC in order to meet our timely and continuous disclosure requirements. We may also file additional documents with the SEC if they become necessary in the course of our company’s operations.
Going Concern
We have a limited operating history, and our continued growth is dependent upon the continuation of providing medical consulting services to our clients, generating revenue, and obtaining additional financing to fund future obligations, and pay liabilities arising from normal business operations. We had accumulated deficits of $139,472 at February 28, 2022. The report of our independent registered public accounting firm on our financial statements for the year ended November 30, 2021, contained an explanatory paragraph regarding our ability to continue as a going concern based upon cash used in operating activities and the current cash balance cannot be projected to cover the operating expenses for the next twelve months from the release date of this report. These factors, among others, raised substantial doubt about our ability to continue as a going concern. Our financial statements appearing elsewhere in this report do not include any adjustments that might result from the outcome of this uncertainty. There are no assurances we will be successful in our efforts to generate significant revenues or report profitable operations or to continue as a going concern, in which event investors would lose their entire investment in our company. The financial statements contained herein do not include any adjustments that might result from the outcome of this uncertainty.
Our ability to continue as a going concern is dependent upon our ability to carry out our business plan, achieve profitable operations, obtain additional working capital funds from our significant shareholders, and or through debt and equity financings. However, there can be no assurance that any additional financings will be available to us on satisfactory terms and conditions, if any.
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Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We continually evaluate our estimates, including those related to bad debts, recovery of long-lived assets, income taxes and the valuation of equity transactions.
We base our estimates on historical experience and on various other assumptions that we believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Any future changes to these estimates and assumptions could cause a material change to our reported amounts of revenues, expenses, assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the consolidated financial statements.
Revenue Recognition
We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or products have been sold, the purchase price is fixed or determinable and collectability is reasonably assured.
We provide medical related consulting services to our clients. We are paid fees for our services by our clients under written consulting agreements. Each contract calls for a fixed payment in a fixed period of time. We recognize revenue by providing medical related consulting services under written service contracts with our customers. Revenue related to our service offerings is recognized as the services are performed and amounts are earned, using the straight-line method over the term of the related services agreement. Prepayments, if any, received from customers prior to the services being performed are recorded as advance from customers. In these cases, when the services are performed, the amount recorded as advance from customers is recognized as revenue.
Income Taxes
We are governed by the income tax laws of the United States. Income taxes are accounted for pursuant to ASC 740 “Accounting for Income Taxes,” which is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. The charge for taxes is based on the results for the period as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent that it is probably that taxable profit will be available against which deductible temporary differences can be utilized.
Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity, in which case the deferred tax is changed to equity. Deferred tax assets and liabilities are offset when they related to income taxes levied by the same taxation authority and we intend to settle its current tax assets and liabilities on a net basis.
Stock-based Compensation
Stock based compensation is accounted for based on the requirements of the Share-Based Payment topic of Accounting Standards Codification (“ASC”) 718 which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award. The Accounting Standards Codification also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.
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Pursuant to ASC Topic 505-50, for share-based payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the period of services or the vesting period, whichever is applicable. Until the measurement date is reached, the total amount of compensation expense remains uncertain. We record compensation expense based on the fair value of the award at the reporting date. The awards to consultants and other third-parties are then revalued, or the total compensation is recalculated based on the then current fair value, at each subsequent reporting date.
Recent Accounting Pronouncements
In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This ASU addresses the classification of certain specific cash flow issues including debt prepayment or extinguishment costs, settlement of certain debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of certain insurance claims and distributions received from equity method investees. This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. An entity that elects early adoption must adopt all of the amendments in the same period. We are currently evaluating the impact it may have on our consolidated financial statements.
Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on our consolidated financial statements upon adoption. We do not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to our consolidated financial condition, results of operations, cash flows or disclosures.
RESULTS OF OPERATIONS
Comparison of Results of Operations for the Three months ended February 28, 2022 and February 28, 2021
Revenue
For the three months ended February 28, 2022, total revenues amounted to $-0-, which consisted of $-0- of consulting revenue. For the three months ended February 28, 2021, revenue was $10,000, which consisted of $10,000 of consulting revenue. The decrease of revenue was due to our current emphasis on planning and preparation for our future revenue.
Cost of Revenue
Cost of revenue includes the cost of internal labor and related benefits, travel expenses related to consulting services, subcontractor costs, other related consulting costs, and other overhead costs. These costs are recorded as operating expenses.
Operating Expenses
For the three months ended February 28, 2022, operating expenses were $135,858 representing an increase of $82,951 over the operating expenses of $52,907 for the three months ended February 28, 2021. The increase of cost of revenue was mainly driven by an increase in professional fees related to becoming and being a public company.
For the three months ended February 28, 2022, and February 28, 2021, operating expenses consisted of the following:
| For the Three months ended February 28, 2022 | For the Three months ended February 28, 2021 | |||||||
| Selling expense | $ | 7,013 | $ | 475 | ||||
| Professional fees | 123,007 | 48,936 | ||||||
| Other general and administrative | 5,838 | 3,495 | ||||||
| $ | 135,858 | $ | 52,906 | |||||
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| ● | Our selling expense mainly includes our marketing and sales staff’s salaries and related benefits, and travel and entertainment costs incurred by our sales department. Selling expense totaled $7,013 for the three months ended February 28, 2022, and $475 for the three months ended February 28, 2021. Selling expense as a percentage of revenue for the three months ended February 28, 2022 was not calculable |
| ● | Professional fees primarily consisted of accounting fees, legal service fees, consulting fees, investor relations service charges, OTC markets application and listing fees and other fees incurred for services related to becoming and being a public company. For the three months ended February 28, 2022, and February 28, 2021, professional fees amounted to $123,007 and $48,936, respectively, an increase of $74,071 or 151%. The increase was attributable to an increase in legal services incurred in being a public company of $1,000 combined with an increase in audit fees incurred of approximately $25,000, an increase in the wages and payroll taxes of our employees of $4,279, an increase in professional fees for our contractors in China of $7,000 and an increase in professional fees related to being a public company of approximately $39,860. These increases are offset by a decrease in accounting fees of approximately $3,050 incurred for services performed by our financial consultants. We expect professional fees to increase as we incur significant costs associated with our public company reporting requirements, and costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. |
| ● | Other general and administrative expenses mainly consisted of automobile expenses, office supplies, rent, bank service charges and other miscellaneous items. Other general and administrative expenses totaled $5,838 for the three months ended February 28, 2022, as compared to $3,495 for the three months ended February 28, 2021, an increase of $2,343. The increase was primarily attributable to an increase in other miscellaneous general and administrative expenses. |
Income (Loss) from Operations
As a result of the foregoing, for the three months ended February 28, 2022, loss from operations amounted to $(135,858), as compared to loss from operations of $42,907 for the three months ended February 28, 2021.
Other Income (Expense)
Other income includes interest income from bank deposits and interest income from loans receivable that amounted to $74 and $30, for the three months ended February 28, 2022, and February 28, 2021, respectively.
Other income also includes interest income from lease receivable that amounted to $2,416 and $-0- for the three months ended February 28, 2022, and February 28, 2021.
The Company had realized gains on equity investments of $59,793 for the three months ended February 28, 2022, and $-0- for the three months ended February 28, 2021. The Company had unrealized gains/(losses) on equity investments of $(1,523,695) for the three months ended February 28, 2022 and $8,077,770 for the three months ended February 28, 2021.
The Company had $0 interest expense for the three months ended February 28, 2022, and $0 interest expense for the three months ended February 28, 2021.
Income Taxes
We did not have any income taxes expense for the three months ended February 28, 2022, and February 28, 2021, since we did not have any taxable income in the periods which was not reduced by prior net operating loss carryforwards or reduced by the exclusion of any unrealized gains/(losses) on equity investments, which are excluded from our taxable income until they become realized gains/(losses) on equity investments.
Net Income (Loss)
Net (loss) for the three months ended February 28, 2022, was $(1,597,270) and net income for the three months ended February 28, 2021, was $8,034,893.
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Liquidity and Capital Resources
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing basis. At February 28, 2022 and November 30, 2021, we had cash balances of $473,926 and $524,741, respectively. These funds are kept in financial institutions located in United States. We had total liabilities of $55,562 at February 28, 2022, of which $12,545 is a liability for the future 20 monthly lease payments of $627.24 for the Right-of-Use lease of an automobile; $23,688 for accounts payable and accrued liabilities and $19,329 representing the unearned income on our lease contract receivable. We had total liabilities of $29,560 at November 30, 2021, of which $14,426 is a liability for the future 23 monthly lease payments of $627.24 for the Right-of-Use lease of an automobile; $15,134 for accounts payable and accrued liabilities and $0 for unearned income on our lease contract receivable. As of February 28, 2022, and November 30, 2021, the Company had accumulated earnings/(deficits) of $(139,472) and $1,457,798, respectively.
We currently have no agreements and arrangements with any person to obtain funds through bank loans, lines of credit or any other sources. Since the Company has no such arrangements or plans currently in effect, its inability to raise funds for the above purposes will have a severe negative impact on its ability to remain a viable company.
Covid 19
A novel strain of coronavirus (“Covid-19”) emerged globally in December 2019 and has been declared a pandemic. The extent to which Covid-19 will impact our customers, business, results and financial condition will depend on current and future developments, which are highly uncertain and cannot be predicted at this time. While the Company’s day-to-day operations beginning March 2020 have been impacted, we have suffered less immediate impact as most staff and contractors can work remotely and can continue to develop our product offerings.
That said, we have seen our business opportunities develop more slowly as business partners and potential customers are dealing with Covid-19 issues, working remotely and these issues are causing delays in decision making and finalization of negotiations and agreements.
Cash flows from Operating Activities
Operating activities used $68,548 in cash during the three months ended February 28, 2022, as compared with using $41,542 for the three months ended February 28, 2021. The increase in cash used in operating activities during the three months ended February 28, 2022 is primarily due to the payment of increased professional fees.
Cash flows from Investing Activities
For the three months ended February 28, 2022, the Company’s cash flow in investing activities provided $59,793, and for the three months ended February 28, 2021, the cash flow in investing activities provided $0 of cash flow.
Cash flows from Financing Activities
For the three months ended February 28, 2022, the Company used $42,060 in cash flows in financing activities, of which $68,255 was used to purchase computer equipment that was leased to others and $26,195 was provided by the proceeds of the issuance of common stock. For the three months ended February 28, 2021, the Company’s financing activities neither used nor provided any cash flows.
Our capital requirements for the next twelve months primarily relate to cash to pay salaries, consulting fees and fees related to third parties’ professional services. All funds received have been primarily expended in the furtherance of growing the business. The following trends are reasonably likely to result in a material decrease in our liquidity over the near to long term:
| ● | An increase in working capital requirements to finance our current business; |
| ● | Addition of administrative and sales personnel as the business grows; and |
| ● | The cost of being a public company. |
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We will need to raise additional funds, particularly if we are unable to generate positive cash flow as a result of our operations. We estimate that based on current plans and assumptions, that our available cash will be insufficient to satisfy our cash requirements under our present operating expectations. Other than working capital and advance received from related parties and funds received pursuant to securities purchase agreements, we presently have no other significant alternative source of working capital. We have used these funds to fund our operating expenses, pay our obligations and grow our company. We will need to raise significant additional capital to fund our operations and to provide working capital for our ongoing operations and obligations. Therefore, our future operation is dependent on our ability to secure additional financing. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and a downturn in the U.S. equity and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. The inability to obtain additional capital may restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we will be required to cease our operations. To date, we have not considered this alternative, nor do we view it as a likely occurrence.
Going Concern.
The Company’s financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business. The Company incurred a net loss of $(1,597,270), of which $(1,523,695) is from unrealized gain/(loss) on equity investments, and $59,793 in realized gains on equity investments for the three months ended February 28, 2022. The Company realized a net profit of $8,034,893, of which $0 is from realized gains/(losses) and $8,077,770 is from unrealized gains on equity investments, for the three months ended February 28, 2022. The Company had accumulated earnings/(deficits) of $(139,472), as of February 28, 2022, and accumulated earnings of $1,457,798 as of November 30, 2021. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.
Contractual Obligations and Off-Balance Sheet Arrangements
Contractual Obligations
We presently do not have any contractual obligations.
Off-balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Since inception, our principal sources of operating funds have been proceeds from equity financing including the sale of our Common Stock to initial investors known to management and principal shareholders of the Company. We do not expect that our current cash on hand will fund our existing operations. We will need to raise additional capital in order execute our business plan and growth goals for at least the next twelve-month period thereafter. If the Company is unable to raise sufficient additional funds, it will have to execute a slower than planned growth path, reduce overhead and scale back its business plan until sufficient additional capital is raised to support further operational expansion and growth. There can be no assurance that such a plan will be successful.
Inflation
The effect of inflation on our revenue and operating results was not significant.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed in our periodic reports filed under the Securities Exchange Act of 1934, as amended, or 1934 Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our management, including the principal executive officer and the principal financial officer (principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13(a)-15(e) under the 1934 Act, as of the end of the period covered by this report. Based on this evaluation, because of the Company’s limited resources and limited number of employees, management concluded that our disclosure controls and procedures were ineffective as of February 28, 2022.
Changes in Internal Controls over Financial Reporting
There were no changes (including corrective actions with regard to material weakness) in our internal controls over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we are subject to ordinary routine litigation incidental to our normal business operations. We are not currently a party to any litigation the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business, operating results, cash flows or financial condition.
ITEM 1A. RISK FACTORS
Risk factors describing the major risks to our business can be found under Item 1A, “Risk Factors”, in our Annual Report on Form 10-K for the year ended November 30, 2021. There has been no material change in our risk factors from those previously discussed in the Annual Report on Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On January 4, 2022, Eugene Cha entered into a director agreement with the Company pursuant to which he will serve as a director of the Company. The director agreement provides that Mr. Cha will receive options to purchase up to 60,000 shares of the Company’s common stock at $3.50 per share for a period of five years. The options will vest in equal amounts over a period of one year at the rate of 15,000 shares per fiscal quarter at the end of such quarter, commencing in the quarter in which Mr. Cha was appointed as a director, for a total of 60,000 shares.
On January 20, 2022, the Company issued 15,000 shares to an unrelated independent contractor valued at $48,750 for services valued at $48,750.
On February 15, 2022, pursuant to an offering under Regulation A, the Company issued 8,060 shares to unrelated new shareholders for $26,195 in cash.
The offers, sales, and issuances of the securities described above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder as transactions by an issuer not involving a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was an accredited or sophisticated person and had adequate access, through employment, business or other relationships, to information about us.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
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| * | Filed herewith |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| HESTIA INSIGHT INC. | ||
| (Registrant) | ||
| Date: April 13, 2022 | By: | /s/ Edward Lee |
| Edward Lee | ||
| Chief
Executive Officer, President and Director (Principal Executive Officer) | ||
| Date: April 13, 2022 | By: | /s/ Edward Lee |
| Edward Lee | ||
| Chief
Financial Officer (Principal Financial and Accounting Officer) | ||
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