Hestia Insight Inc 10-Q for FY2022 Q1
Hestia Insight Inc. (HSTA)
About this 10-Q
Hestia Insight Inc filed this 10-Q on April 13, 2022, covering the quarter ended February 28, 2022 (FY2022 Q1).
Headline figures
Quarter ended February 28, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $1.6M
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.
| Schedule of investment in equities | ||||||||||||||||||||||
| 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:
| Schedule of provision for income taxes | ||||||||
| 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
| Schedule of reconciliation between provision for income taxes and income taxes at statutory U.S. federal income tax rate | ||||||||
| 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.
23
| * | 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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Exhibit 4.4
NONQUALIFIED STOCK OPTION GRANT AGREEMENT
HESTIA INSIGHT INC. 2021 STOCK INCENTIVE PLAN
This Stock Option Grant Agreement (the “Grant Agreement”) is made and entered into effective on the Date of Grant set forth in Exhibit A (the “Date of Grant”) by and between Hestia Insight Inc., a Nevada corporation (the “Company”), and the individual named in Exhibit A hereto (the “Optionee”).
WHEREAS, the Company desires to provide the Optionee an incentive to participate in the success and growth of the Company through the opportunity to earn a proprietary interest in the Company; and
WHEREAS, to give effect to the foregoing intention, the Company desires to grant the Optionee an option pursuant to the Hestia Insight Inc. 2021 Stock Incentive Plan (the “Plan”) to acquire the Company’s common stock, par value $0.001 per share (the “Common Stock”);
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for good and valuable consideration, the parties hereto agree as follows:
1. Grant. The Company hereby grants the Optionee a Nonqualified Stock Option (the “Option”) to purchase up to the number of shares of Common Stock (the “Shares”) set forth in Exhibit A hereto at the exercise price per Share (the “Exercise Price”) set forth in Exhibit A, and on the vesting schedule set forth in Exhibit A, subject to the terms and conditions set forth herein and the provisions of the Plan, the terms of which are incorporated herein by reference. Capitalized terms used but not otherwise defined in this Grant Agreement shall have the meanings as set forth in the Plan.
2. Exercise Period Following Termination of Service. This Option shall terminate and be canceled to the extent not exercised within ninety (90) days after the Optionee’s Service terminates; provided that if such termination is due to the death or Disability of the Optionee, this Option shall terminate and be canceled twelve (12) months from the date of termination of the Optionee’s Service; and provided, further, that if Optionee’s Service terminates (other than for Cause) on or after a Change in Control, then the Option shall remain exercisable until the Expiration Date. Notwithstanding the foregoing, in the event that the Optionee’s Service is terminated for Cause, then the Option shall immediately terminate on the date of such termination of Service and shall not be exercisable for any period following such date. In no event, however, shall this Option be exercised later than the Expiration Date set forth in Exhibit A and in no event shall this Option be exercised for more Shares than the Shares which otherwise have become exercisable as of the date of termination.
3. Method of Exercise. This Option is exercisable by delivery to the Company of an exercise notice (the “Exercise Notice”) in a form satisfactory to the Committee or by such other form or means as the Committee may permit or require. Any Exercise Notice shall state or provide the number of Shares with respect to which the Option is being exercised (the “Exercised Shares”), and include such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Optionee may elect to make payment of the exercise price in cash or by check or by delivery to the Company of certificates representing shares of outstanding Common Stock already owned by the Optionee that are owned free and clear of any liens, claims, encumbrances or security interests together with stock powers duly executed and with signature guaranteed. In addition, the Optionee may make payment through a “cashless exercise” such that without the payment of any funds, the undersigned may exercise the Option and receive the net number of Shares equal to (x) the number of Shares as to which the Option is being exercised, multiplied by (y) a fraction, the numerator of which is the Fair Market Value per share (on such date as is determined by the Committee) less the Exercise Price per Share, and the denominator of which is such Fair Market Value per Share (the number of net Shares to be received shall be rounded down to the nearest whole number). In the event payment is made by delivery of such Shares, said Shares shall be deemed to have a per Share value equal to the Fair Market Value per Share on the date of exercise. Upon exercise of the Option by the Optionee and prior to the delivery of such Exercised Shares, the Company shall have the right to require the Optionee to satisfy applicable Federal and state tax income tax withholding requirements and the Optionee’s share of applicable employment withholding taxes in a method satisfactory to the Company. Notwithstanding the foregoing, the Optionee may not exercise the Option by tender to the Company of Common Stock to the extent such tender would violate the provisions of any law, regulation or agreement restricting the redemption of the Company’s Common Stock. Further, no Exercised Shares shall be issued unless such exercise and issuance complies with the requirements relating to the administration of stock option plans and other applicable equity plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted, and the applicable laws of any foreign country or jurisdiction where stock grants or other applicable equity grants are made under the Plan; assuming such compliance, for income tax purposes the Exercised Shares shall be considered transferred to the Optionee on the date the Option is exercised with respect to such Shares.
4. Covenants Agreement. This Option shall be subject to forfeiture at the election of the Company in the event that the Optionee breaches any agreement between the Optionee and the Company with respect to noncompetition, nonsolicitation, assignment of inventions and contributions and/or nondisclosure obligations of the Optionee.
5. Taxes.
(a) By executing this Grant Agreement, Optionee acknowledges and agrees that Optionee is solely responsible for the satisfaction of any applicable taxes that may be imposed on Optionee that arise as a result of the grant, vesting or exercise of the Option, including without limitation any taxes arising under Section 409A of the Code (regarding deferred compensation) or Section 4999 of the Code (regarding golden parachute excise taxes), and that neither the Company nor the Committee shall have any obligation whatsoever to pay such taxes or otherwise indemnify or hold Optionee harmless from any or all of such taxes.
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(b) Notwithstanding paragraph (a) above, if any amounts or benefits provided for in this Grant Agreement, when aggregated with any other payments or benefits payable or provided to the Optionee (the “Total Payments”) would (i) constitute “parachute payments” within the meaning of Section 280G of the Code (which will not include any portion of payments classified as payments of reasonable compensation for purposes of Section 280G of the Code, including without limitation amounts allocated to any restrictive covenants), and (ii) but for this Section 5(b), would be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Total Payments will be either: (a) provided in full, or (b) provided as to such lesser extent as would result in no portion of such Total Payments being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state and local income and employment taxes and the Excise Tax, results in the Optionee’s receipt on an after-tax basis of the greatest amount of the Total Payments, notwithstanding that all or some portion of the Total Payments may be subject to the Excise Tax. To the extent any reduction in Total Payments is required by this Section 5(b), such reduction shall occur to the payments and benefits in the order that results in the greatest economic present value of all payments and benefits actually made to Optionee. Subject to Section 409A of the Code, such order of reductions shall be determined by the Optionee. Unless the Company and the Optionee otherwise agree in writing, any determination required under this Section 5(b) shall be made in writing by an independent public accounting firm mutually acceptable to the Company and the Optionee (the “Accountants”) whose determination shall be conclusive and binding upon the Optionee and the Company for all purposes. For purposes of making the calculations required by this Section 5(b), the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and the Optionee shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section 5(b). The Company shall pay all fees and expenses of the Accountants.
6. Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of the Optionee only by the Optionee. The terms of the Plan and this Grant Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.
7. Securities Matters. All Shares and Exercised Shares shall be subject to the restrictions on sale, encumbrance and other disposition provided by Federal or state law. The Company shall not be obligated to sell or issue any Shares or Exercised Shares pursuant to this Grant Agreement unless, on the date of sale and issuance thereof, such Shares are either registered under the Securities Act of 1933, as amended (the “Securities Act”), and all applicable state securities laws, or are exempt from registration thereunder. Regardless of whether the offering and sale of Shares under the Plan have been registered under the Securities Act, or have been registered or qualified under the securities laws of any state, the Company at its discretion may impose restrictions upon the sale, pledge or other transfer of such Shares (including the placement of appropriate legends on stock certificates or the imposition of stop-transfer instructions) if, in the judgment of the Company, such restrictions are necessary in order to achieve compliance with the Securities Act or the securities laws of any state or any other law.
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8. Investment Purpose. The Optionee represents and warrants that unless the Shares are registered under the Securities Act, any and all Shares acquired by the Optionee under this Grant Agreement will be acquired for investment for the Optionee’s own account and not with a view to, for resale in connection with, or with an intent of participating directly or indirectly in, any distribution of such Shares within the meaning of the Securities Act. The Optionee agrees not to sell, transfer or otherwise dispose of such Shares unless they are either (1) registered under the Securities Act and all applicable state securities laws, or (2) exempt from such registration in the opinion of Company counsel.
9. Lock-Up Agreement. The Optionee hereby agrees that in the event that the Optionee exercises this Option during a period in which any directors or officers of the Company have agreed with one or more underwriters not to sell securities of the Company, then, as a condition to such exercise, the Optionee shall enter into an agreement, in form and substance satisfactory to the Company, pursuant to which the Optionee shall agree to restrictions on transferability of the Shares comparable to the restrictions agreed upon by such directors or officers of the Company.
10. Other Plans. No amounts of income received by the Optionee pursuant to this Grant Agreement shall be considered compensation for purposes of any pension or retirement plan, insurance plan or any other employee benefit plan of the Company or its subsidiaries, unless otherwise expressly provided in such plan.
11. No Guarantee of Continued Service. The Optionee acknowledges and agrees that the right to exercise the Option pursuant to the exercise schedule hereof is earned only through continuous Service and such other requirements, if any, as are set forth in Exhibit A (and not through the act of being hired, being granted an option or purchasing shares hereunder). The Optionee further acknowledges and agrees that (i) this Grant Agreement, the transactions contemplated hereunder and the exercise schedule set forth herein do not constitute an express or implied promise of continued employment or service for the exercise period or for any other period, and shall not interfere with the Optionee’s right or the right of the Company or its Subsidiaries to terminate the employment or service relationship at any time, with or without cause, subject to the terms of any written employment agreement that the Optionee may have entered into with the Company or any of its Subsidiaries; and (ii) the Company would not have granted this Option to the Optionee but for these acknowledgements and agreements.
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12. Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan and this Grant Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Optionee with respect to the subject matter hereof, and may not be amended to materially impair the rights of the Optionee without the Optionee’s consent; provided, however, that no action of the Board or the Committee that alters or affects the tax treatment of the Option shall be considered to materially impair any rights of the Optionee. In the event of any conflict between this Grant Agreement and the Plan, the Plan shall be controlling, except as otherwise specifically provided in the Plan. This Grant Agreement shall be construed under the laws of the State of Nevada, without regard to conflict of laws principles.
13. Opportunity for Review. Optionee and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan and this Grant Agreement. The Optionee has reviewed the Plan and this Grant Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Agreement and fully understands all provisions of the Plan and this Grant Agreement. The Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan and this Grant Agreement. The Optionee further agrees to notify the Company upon any change in the residence address indicated herein.
14. Section 409A. This Option is intended to be excepted from coverage under Section 409A and shall be administered, interpreted and construed accordingly. The Company may, in its sole discretion and without the Optionee’s consent, modify or amend the terms of this Grant Agreement, impose conditions on the timing and effectiveness of the exercise of the Option by Optionee, or take any other action it deems necessary or advisable, to cause the Option to be excepted from Section 409A (or to comply therewith to the extent the Company determines it is not excepted).
15. Recoupment. In the event the Company restates its financial statements due to material noncompliance with any financial reporting requirements under applicable securities laws, any shares issued pursuant to this Agreement for or in respect of the year that is restated, or the prior three years, may be recovered to the extent the shares issued exceed the number that would have been issued based on the restatement. In addition and without limitation of the foregoing, any amounts paid hereunder shall be subject to recoupment in accordance with The Dodd–Frank Wall Street Reform and Consumer Protection Act and any implementing regulations thereunder, any clawback policy adopted by the Company or as is otherwise required by applicable law or stock exchange listing conditions.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Grant Agreement as of the date set forth in Exhibit A.
HESTIA INSIGHT INC. | |||
| By: | /s/ Edward Lee | ||
| Name: | Edward Lee | ||
| Title: | CEO | ||
| OPTIONEE | ||
| /s/ Peter Liu | ||
| Name: | Peter Liu | |
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EXHIBIT A
NONQUALIFIED STOCK OPTION GRANT AGREEMENT
HESTIA INSIGHT INC.
| (a) | Optionee’s Name: Peter Liu |
| (b) | Date of Grant: April 1, 2022 |
| (c) | Number of Shares Subject to the Option: 36,000 |
| (d) | Exercise Price: $3.00 per Share |
| (e) | Expiration Date: April 1, 2027 |
(f) |
Vesting Schedule: The Option shall vest in equal amounts over a period of one (1) year at the rate of three thousand (3,000) Shares per month, and shall be issuable on a quarterly basis at the rate of nine thousand (9,000) Shares per fiscal quarter at the end of such quarter, commencing in the quarter in which the Optionee enters into this Grant Agreement, and pro-rated for the number of days the Optionee serves as Vice President of Asia Operations of the Company during the fiscal quarter. Notwithstanding the foregoing, if the Optionee ceases serve as Vice President of Asia Operations of the Company at any time during the one (1) year vesting period for any reason (such as resignation, withdrawal, death, disability or any other reason), then any un-vested Options shall be irrefutably forfeited. |
| Notwithstanding anything contained herein to the contrary, if a “Change in Control” (as defined in the Plan) occurs prior to the cessation of the Optionee’s “Service” (as defined in the Plan), then the Option, to the extent not then vested, shall become fully (100%) vested immediately prior to the date of such Change in Control. |
| /s/ PL (Initials) | |
| Optionee | |
| /s/ EL (Initials) | |
| Company Signatory |
A-1
Exhibit 10.7
EXECUTION COPY
EMPLOYMENT AGREEMENT
This Agreement (the “Agreement”), dated as of April 1, 2022 (the “Effective Date”), is by and between HESTIA INSIGHT INC., a Nevada corporation (the “Company”) and CHIN-TE LIU a/k/a PETER LIU (hereinafter referred to as the “Executive”).
Introduction
The Company desires to employ Executive, and Executive desires to be employed by the Company, pursuant to the terms and conditions set forth herein. The Executive will have significant access to information concerning the Company and its business. The disclosure of such information or the engaging in competitive activities would cause substantial harm to the Company.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Purpose; Duties; Information. The Executive will serve as the Vice President of Asia Operations of the Company and shall have duties of an executive nature that are attendant to his position as described in the by-laws of the Company and as may be reasonably assigned to him by the Chief Executive Officer (“CEO”) of the Company. The Executive will report to the CEO and nothing herein shall interfere with or limit the oversight responsibilities of the CEO. As more fully set forth below, Executive shall (i) devote a significant portion of his working time, attention, and energy, using his best efforts, to perform his duties and provide his services under the Agreement; (ii) faithfully and competently serve and further the interests of the Company in every lawful way, giving honest, diligent, loyal, and cooperative service to the Company; (iii) discharge all such duties and perform all such services as aforesaid in a timely manner; and (iv) comply with all lawful policies which from time to time may be in effect at the Company or that the Company adopts. Except for business travel by the Executive that may from time to time be necessary or advisable on behalf of the Company, and unless otherwise agreed to by the Executive and the CEO, the Executive will provide his services in a virtual manner and all parties understand that Executive’s principal base of operation will be located in Taiwan. Executive shall use his commercially reasonable best efforts to preserve the confidentiality of confidential information designated as confidential by Company or that may be assumed to be confidential. Executive understands that the Company is a publicly traded company trading on the OTCQB under the symbol HSTA. Executive understands that he may come in possession of material non-public information. Executive agrees that he will protect such information and not buy or sell the Company’s securities when in possession of such information. Executive represents that he is an accredited investor as that term is defined by Regulation D as promulgated under the Securities Act of 1933, as amended (the “Act”), and all compensation in the form of securities of the Company issued to Executive under Section 2 of this Agreement shall be issued under Section 4(a)(2) of the Act and shall contain the appropriate restrictive legend under the Act.
2. Compensation and Benefits. During the Term (as defined below), the Executive will receive the following compensation and benefits:
(a) Base Salary. The Executive will receive salary at the rate of USD $10,000 annually (the “Base Salary”), payable in equal increments not less often than quarterly in arrears at the rate of USD $2,500 per quarter, and in any event consistent with the Company’s payroll policy and practices. In addition, the Base Salary of the Executive may from time to time be increased, but not decreased, by the Company’s Board of Directors (the “Board”), in its absolute discretion.
(b) Benefits. In addition to the Base Salary, the Executive will be entitled to receive health, welfare and fringe benefits that are generally available to the Company’s management employees in accordance with the then existing terms and conditions of the Company’s policies. The Executive will be entitled to reimbursement of all reasonable expenses incurred by him in his performance of services on behalf of the Company hereunder, subject to the presentation of appropriate documentation and other reimbursement policies generally applicable to the Company’s management employees. All expenses in excess of $500 must be preapproved in writing by the CEO.
(c) Withholding. The Company will withhold from compensation payable hereunder all applicable federal, state and local withholding taxes.
(d) Equity Awards. As additional compensation to the Executive hereunder, the Company shall issue to Executive:
(i) 5,000 shares of restricted common stock of the Company per month, to be issued to Executive on a quarterly basis at the rate of 15,000 shares per quarter; and
(ii) a stock option (the “Option”) to acquire an aggregate of 36,000 shares of the common stock of the Company, exercisable for five (5) years at an exercise price equal to the closing per share price of the Company’s common stock on the Effective Date, subject to vesting. The 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 to Executive on a quarterly basis at the rate of 9,000 Options per quarter, commencing in the quarter in which the Executive enters into this Agreement. Notwithstanding the foregoing, if the Executive ceases to be employed by the Company at any time during the one (1) year vesting period for any reason (such as resignation, withdrawal, death, disability or any other reason), then any un-vested Options shall be irrefutably forfeited.
(e) Bonuses. In addition to the Executive’s annual Base Salary, during the term of the Executive’s employment hereunder, the Executive shall be entitled only to such bonuses or additional compensation as may be granted to the Executive by the Board, in its sole discretion. In addition, the Executive will be eligible for annual performance bonuses based on the achievement of predetermined corporate and individual objectives as defined by the Board on an annual basis, in its absolute discretion. Objectives must be both reasonable and achievable based on the combined authority of the Executive and available resources of the Company.
3. Full Time; Best Efforts. The Executive shall use his best efforts to promote the interests of the Company and shall devote his normal business time and efforts to its business and affairs and shall not provide management services to any other company or otherwise engage in business activities that would reasonably be expected to materially interfere with the performance of the Executive’s duties, services and responsibilities hereunder.
4. Term. The Term of this Agreement shall be for a period of one (1) year (the “Term”); provided, however, the Company may terminate this Agreement upon providing Executive with five (5) days written notice. Further, the Company may extend the Term for six (6) month intervals by providing the Executive written notice of its intent to extend the Term prior to the expiration of the Term.
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5. Trade Secrets as Property of the Company.
(a) The Executive understands and agrees that all confidential information of any kind, nature, or description concerning any matters affecting or relating to the Company, its manner of operation, customers, products, formulas, copyrights, source code, processes, inventions, test methods, marketing and business plans and all other confidential data of any kind, nature, or description (collectively referred to as “Trade Secrets”) are the sole property of the Company, notwithstanding the Executive’s preparation, use, construction, observation, possession, or control of any or all of said Trade Secrets. The parties agree that such Trade Secrets are important, material, and confidential trade secrets, and to the degree they take written or other physical form, whether or not integrated with non-confidential materials, may not be disclosed by the Executive to third parties without the Company’s advance written consent. Such Trade Secret materials shall include, without limitation: sample materials, charts, notebooks, documents, correspondence, memoranda, reports, files, lists, computer disks, software, source code, programs, printouts, and all other written and graphic records (collectively referred to as “Trade Secret Materials”). Any such Trade Secret Materials in the Executive’s possession upon termination of this Agreement must be returned to the Company immediately. The parties agree that all such Trade Secrets and Trade Secret Materials may not be used by the Executive during the term of this Agreement beyond the scope of the Executive’s normal conduct of its business or following termination of this Agreement for any reason whatsoever without the advance written consent of the Company.
(b) During the term of this Agreement and for a period of five (5) years after the termination of this Agreement, the Executive agrees that it will not, either directly or indirectly, make known or divulge any Trade Secrets or Trade Secret Materials without the express and advance written consent of the Company; such prohibited disclosure to include, without limitation, the disclosure of names or addresses of any of the Company’s customers or employees at the time the Executive entered into this Agreement or with whom the Executive became acquainted after entering into this Agreement to any person, firm, company, partnership or corporation.
(c) The provisions of this Section 5 do not apply to any information that: (i) is or becomes publicly known through no fault of the Executive, or (ii) the Executive either acquired prior to entering into this Agreement or acquired from parties other than the Company who are not obligated to the Company.
6. Ownership of Intellectual Property. All intellectual property created by the Executive pursuant to the Executive’s engagement and specific to the Company’s business, including without limitation all ideas, concepts, prototypes, inventions, formulations and drawings, shall be “work for hire.” The Executive hereby assigns to the Company all of such intellectual property rights. The Executive agrees not to use such inventions for the Executive’s own account or to disclose any such inventions to third persons without the express prior written consent of the Company. The Executive shall upon request sign patent applications, copyright applications and assign any patent rights and copyrights to such inventions to the Company.
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7. Equitable Relief; Severability. The Executive acknowledges and agrees that the Company’s remedies at law for a breach or threatened breach of the provisions of Sections 5 and/or 6 of this Agreement would be inadequate, and in recognition of this fact, agrees that, in the event of a breach or threatened breach by the Executive of any of the Executive’s obligations set forth in such Sections, the Company shall be entitled to, and the Executive agrees not to oppose, the Company’s request for, equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction, or any other equitable remedy which may then be available, without posting bond or other security. Notwithstanding the foregoing, the Company’s decision to seek injunctive relief shall not diminish the right of the Company to claim and recover damages in addition to injunctive relief. It is expressly understood and agreed that although the Executive and the Company consider the restrictive covenants contained in this Agreement to be reasonable, if a court determines that the time, territory, scope or any other restriction contained in this Agreement is an unenforceable restriction on the activities of either Party hereto, no such provision of this Agreement shall be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such extent as such court may judicially determine or indicate to be reasonable. If any Section, subsection, or provision or the application of such Section, subsection, or provision of this Agreement is held invalid, illegal, or unenforceable, the remainder of this Agreement and the obligation of such Section, subsection, or provision to persons or circumstances other than those to which it is held invalid, illegal, or unenforceable shall not be affected by such invalidity, illegality or unenforceability.
8. Noncompetition; Non-Solicitation. The Executive acknowledges and agrees that in the performance of this Agreement, he will be brought into frequent contact, either in person, by telephone, through electronic means or through the mails, with existing and potential customers of the Company. The Executive also acknowledges that any Confidential Information gained by his during the Term has been developed by the Company through substantial expenditures of time and money and constitutes valuable and unique property of the Company. The Executive further understands and agrees that the foregoing makes it necessary for the protection of the Company’s business that the Executive not compete with the Company during the Term and not compete with the Company for a reasonable period after the Term, as further provided in the following provisions. Accordingly, the Executive agrees that so long as he is an employee of the Company and for 24 months thereafter:
(a) The Executive will not, directly or indirectly, individually or as a consultant to, or employee, officer, director, manager, stockholder, partner, member or other owner or participant in any business entity, other than the Company or any of its subsidiaries, engage in or assist any other person or entity to engage in any business which directly or indirectly competes with any business in which the Company or any of its subsidiaries is engaging or in which the Company or any of its subsidiaries plans to engage or is actively evaluating engaging, during or at the time of the termination of the Executive’s engagement hereunder, anywhere in the United States or anywhere else in the world where the Company or any of its subsidiaries does business, or plans to do business or is actively evaluating doing business; provided that nothing contained herein shall prohibit the Executive from being a passive owner of less than one percent (1%) of the outstanding stock or any class of securities of any corporation or other entity which is publicly traded or privately held; and
(b) The Executive will not, directly or indirectly, individually or as a consultant to, or employee, officer, director, manager, stockholder, partner, member or other owner or participant in any business entity solicit or endeavor to entice away from the Company or any of its subsidiaries, or offer employment or any consulting arrangement to, or otherwise materially interfere with the business relationship of the Company or any of its subsidiaries with, any person or entity who is, or was within the one year period immediately prior to the termination of the Executive’s engagement hereunder, (i) employed by or a consultant to the Company or any of its subsidiaries or (ii) a customer or client of, supplier to or other party having material business relations with the Company or any of its subsidiaries.
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The Company herby agrees and acknowledges that the Executive serves on the Board of Directors and as a Consultant of YoWealthLi Venture Capital Company and its related entities during the Term of this Agreement.
9. Notice. Any notice required under this Agreement shall be deemed duly delivered (and shall be deemed to have been duly received if so given), if personally delivered, sent by a reputable courier service, or mailed by registered or certified mail, postage prepaid, return receipt requested, addressed to the parties at the addresses set forth above or to such other address as any party may have furnished to the other in writing in accordance with this Section.
10. Law and Jurisdiction; Arbitration. This Agreement shall be governed by and construed under the laws of the State of Nevada without regard to principals of conflicts of laws provisions. In the event of any dispute between Company and Executive arising under or pursuant to the terms of this Agreement, or any matters arising under the terms of this Agreement, the same shall be settled only by arbitration through American Arbitration Association located in New York, New York in accordance with the Code of Arbitration Procedure published by the American Arbitration Association. The determination of the arbitrators shall be final and binding upon Company and Executive and may be enforced in any court of appropriate jurisdiction. The venue shall be in the City of New York, New York.
11. Severability. If the law does not allow a provision of this Agreement to be enforced, such unenforceable provision shall be amended to become enforceable and reflect the intent of the parties, and the rest of the provisions of this Agreement shall remain in effect.
12. Waiver. The failure of any party, in any instance, to insist upon strict enforcement of the provisions of this Agreement shall not be construed to be a waiver or relinquishment of enforcement in the future, and the terms of this Agreement shall continue to remain in full force and effect.
13. Assignability. This Agreement shall not be assignable by either party.
14. Amendment. This Agreement may only be amended or modified in a writing signed by both of the parties and referring to this Agreement.
15. Entire Agreement. This Agreement constitutes the entire agreement and final understanding of the parties with respect to the subject matter of this Agreement and supersedes and terminates all prior and/or contemporaneous understandings and/or discussions between the parties, whether written or verbal, express or implied, relating in any way to the subject matter of this Agreement.
16. Indemnification. The Company shall provide the Executive with the most favorable indemnification that the Company from time to time extends to any of its officers or directors, whether under the Company’s by-laws, Certificate of Incorporation, by contract or otherwise.
17. Representations and Warranties of the Executive. The Executive represents and warrants to the Company that, as of the date hereof, neither his execution and delivery of this Agreement nor the performance of his obligations hereunder will conflict with, violate or result in a breach of any agreement or obligation to which he is a party or by which he is bound.
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18. Notification of New Employer. In the event that the Executive is no longer providing services to the Company under this Agreement, the Executive consents to notification by the Company to the Executive’s new employer or its agents regarding the Executive’s rights and obligations under this Agreement.
19. Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one in the same instrument. Confirmation of execution by electronic transmission of a facsimile signature shall be binding on the confirming party.
SIGNING THIS AGREEMENT INDICATES ACCEPTANCE OF THE TERMS OF THIS AGREEMENT.
HESTIA INSIGHT INC.
| By: | /s/ Edward Lee | |
| Name: | Edward Lee | |
| Title: | CEO |
| /s/ Peter Liu | |
| Chin-Te Liu, a/k/a Peter Liu |
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Exhibit 31.1
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Edward Lee, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q (the “report”) of Hestia Insight Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15 (f) and 15d-15 (f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: April 13, 2022 | By: | /s/ Edward Lee |
| Edward Lee | ||
| Chief
Executive Officer, President and Director (Principal Executive Officer) |
Exhibit 31.2
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Edward Lee, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q (the “report”) of Hestia Insight Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15 (f) and 15d-15 (f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: April 13, 2022 | By: | /s/ Edward Lee |
| Edward Lee | ||
| Chief
Financial Officer (Principal Financial and Accounting Officer) |
Exhibit 32
Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350
The undersigned, Edward Lee, in his capacities as Chief Executive Officer and Chief Financial Officer, respectively, of Hestia Insight Inc. (the “Registrant”) does hereby certify with respect to the Quarterly Report on Form 10-Q of the Registrant for the period ended February 28, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), that, to the best of his knowledge:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant as of, and for, the periods presented in this Report. |
| Date: April 13, 2022 | /s/ Edward Lee |
| Edward Lee | |
| Chief
Executive Officer, President and Director (Principal Executive Officer) |
| Date: April 13, 2022 | /s/ Edward Lee |
| Edward Lee | |
| Chief
Financial Officer (Principal Financial and Accounting Officer) |