HOME BISTRO INC. Except for the historical information, the following discussion contains forward-looking statements that are subject to risks and uncertainties. We caution you not to put undue reliance on any forward-looking statements, which speak only as of the date of this Report. Our actual results or actions may differ materially from these forward-looking statements for many reasons. Our discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes and with the understanding that our actual future results may be materially different from what we currently expect. See "CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION" above. As used herein, the terms "we," "us," "our" and the "Company" refers toHome Bistro, Inc. , aNevada corporation and its subsidiaries unless otherwise stated. OverviewHome Bistro, Inc. (formerly known asGratitude Health, Inc. ) (the "Company") was incorporated in theState of Nevada onDecember 17, 2009 . EffectiveMarch 23, 2018 , the Company changed its name fromVapir Enterprises Inc. toGratitude Health, Inc. OnSeptember 14, 2020 , the Company changed its name fromGratitude Health, Inc. toHome Bistro, Inc. The Company is in the business of providing pre-packaged and prepared meals to consumers focused on offering a broad array of the highest quality meal delivery, and preparation services. The Company's primary former operations were in the business of manufacturing, selling, and marketing functional RTD (Ready to Drink) beverages sold under the Company's trademark (the "RTD Business"). The RTD Business was disposed on September
25, 2020 as discussed below. The ongoing COVID-19 global and national health emergency has caused significant disruption in the international andUnited States economies and financial markets. InMarch 2020 , theWorld Health Organization declared the COVID-19 outbreak a pandemic. The spread of COVID-19 has caused illness, quarantines, cancellation of events and travel, business and school shutdowns, reduction in business activity and financial transactions, labor shortages, supply chain interruptions and overall economic and financial market instability. The COVID-19 pandemic has the potential to significantly impact the Company's supply chain, food manufacturers, distribution centers, or logistics and other service providers. Additionally, the Company's service providers and their operations may be disrupted, temporarily closed or experience worker or meat or other food shortages, which could result in additional disruptions or delays in shipments ofHome Bistro's products. To date, the Company has been able to avoid layoffs and furloughs of employees. The Company is not able to estimate the duration of the pandemic and potential impact on the business if disruptions or delays in shipments of product occur. To date, the Company is not aware of any such disruptions. In addition, a severe prolonged economic downturn could result in a variety of risks to the business, including weakened demand for product and a decreased ability to raise additional capital when needed on acceptable terms, if at all. As the situation continues to evolve, the Company will continue to closely monitor market conditions and respond accordingly. The Company has applied for and received certain financial assistance under the Coronavirus, Aid, Relief, and Economic Security Act ("CARES Act") enacted inMarch 2020 by theU.S. Government in response to COVID-19. OnJuly 6, 2021 , the Company entered and closed on an Agreement and Plan of Merger with the members ofModel Meals, LLC ("Model Meals"), acquiring Model Meals through a reverse triangular merger, whereby Model Meals merged withModel Meals Acquisition Corp. , a wholly owned subsidiary of the Company, with Model Meals being the surviving entity (the "Acquisition"). As a result, Model Meals became a wholly owned subsidiary of the Company, and the members of Model Meals received and aggregate of 2,008,310 shares of common stock and were paid$60,000 in cash. Pursuant to the Acquisition, the Company issued 2,008,310 shares of common stock with grant date fair value of$ 2,028,393 .
In
Recent Developments OnJanuary 19, 2021 ("Effective Date"), the Company andSpicy Mango Foodies LLC (f/s/o ChefPriyanka Naik ("CPN")) (collectively as "Parties"), entered into a Joint Product Development and Distribution Agreement (the "Development Agreement"). Pursuant to the Development Agreement, the Parties shall collaboratively develop a brand of meals, marketed and sold utilizing the Property ("CPN Meals") jointly with theHome Bistro label, under the terms and conditions of the Development Agreement. The Development Agreement shall remain in effect from the Effective Date until the last day of the month that is two-year from the Effective Date ("Term"). The first twelve-month anniversary of the Development Agreement shall be deemed "Year One". The Company shall only distribute the CPN Meals within the Term and any Renewal Term (defined below), as mutually agreed. The Company agrees that following the Term, the Company shall use best efforts to cease the distribution of all CPN Meals. For the use ofSpicy Mango Foodies, LLC ("SMF") and all associated intellectual property for the benefit of the CPN Meals, the Company shall pay to SMF the following: (i) 10% of all Net Revenue generated from the sale of CPN Meals ("SMF Royalty"). For the purpose of this agreement "Net Revenue" shall be defined as gross sales generated on CPN Meals less discounts and returns. The SMF Royalty generated during each calendar month in which an agreement is in effect shall be due and payable by the 10th business day of the following month in which the SMF Royalty was earned and; (ii) 10% of all Net Revenue generated from the sale ofHome Bistro and Prime Chop brand orders in which a SMF Dedicated Code was used at the time of purchase ("SMF Commission ") and all sales derived from that account thereafter.The SMF Commission generated during each calendar month in which an agreement is in effect shall be due and payable by the 10th business day of the following month in which theSMF Commission was earned. 38
OnFebruary 22, 2022 ("Effective Date"), the Company andMini Melanie, LLC (f/s/oChef Melanie Moss ("MM")) (collectively as "Parties"), entered into a Joint Product Development and Distribution Agreement ("Development Agreement"). Pursuant to the Development Agreement, the Parties shall collaboratively develop a brand of desserts ("Moss Deserts") jointly with theHome Bistro label, under the terms and conditions of the Development Agreement. The Development Agreement shall remain in effect from the Effective Date until the last day of the month that is one-year from the Effective Date. For the use of MM and all associated intellectual property for the benefit of the Moss Deserts, the Company shall pay to MM 5% of all Net Revenue generated from the sale of Moss Deserts ("MM Royalty"). For the purpose of this agreement "Net Revenue" shall be defined as gross sales generated on Moss Deserts less discounts and returns. The MM Royalty generated during each calendar month in which an agreement is in effect shall be due and payable by the 10th business day of the following month in which the MM Royalty was earned. OnMarch 25, 2022 , the Company's Board of Directors ("Board"), appointedCamille May as Chief Financial Officer of the Company.Ms. May , 34, joined the Company inOctober 2021 in connection with the acquisition ofModel Meals LLC . She was a co-founder and chief financial officer of Model Meals sinceJanuary 2015 . In connection with the appointment, the Board approved an employment agreement withMs. May , which provides for an annual salary of$120,000 , a grant of five year warrants to purchase 250,000 shares of common stock of the Company at an exercise price of$0.001 per share, a performance-based bonus of up to$45,000 in cash and up to 100,000 shares of common stock upon attainment of certain performance targets specified therein, and weekly meal packages of up to 16 meals at no cost. The employment agreement has a two-year initial term and provides that her employment may only be terminated by the Company for cause. Results of Operations
For the Three and Six Months Ended
Product Sales
During the three months ended
During the six months ended
Cost of Sales
Since the Company implemented its own kitchen operations inJuly 2020 , its primary components of cost of sales are raw materials and direct kitchen labor and, with the introduction of the Company's celebrity chef program in the fourth quarter of 2020, it now incurs associated royalty fees. During the three months endedApril 30, 2022 and 2021, the Company had total cost of sales of$746,603 and$291,693 , respectively, an increase of$454,910 or 156%. The increase was due to an increase in direct kitchen labor, royalty
fees and packaging expenses.
During the six months endedApril 30, 2022 and 2021, the Company had total cost of sales of$615,994 and$288,629 , respectively, an increase of$327,365 or 113%. The increase was due to an increase in direct kitchen labor, royalty
fees and packaging expenses. Operating Expenses
For the Three and Six Months Ended
Three Months Ended Six Months Ended
April 30, April 30,
2022 2021 2022 2021Compensation and related expenses$ 704,098 $ 97,785 $ 991,677 $ 165,822 Professional and consulting expenses 1,415,748 453,876 3,067,802 522,723 Professional and consulting expenses - related party 30,000 - 60,000 - Product development expense 125,000 - 271,614 - Selling and marketing expenses 223,485 135,308 588,069 211,248 General and administrative expenses 386,643
92,615 835,044 153,744 Total$ 2,884,974 $ 779,584 $ 5,814,206 $ 1,053,537 39
Compensation and Related Expenses
? During the three months ended
related expenses amounted to
of
? During the six months ended
expenses amounted to
Professional and Consulting Expenses:
? During the three months ended
consulting expenses amounted to
increase of
stock-based compensation of
up and leak out agreements and common stock issued for services and prepaid
services, an increase in consulting fees of
fees of
legal fees of $42,254 offset by a decrease in investor relations fee of
$66,242 .
? During the six months ended April 30, 2022 and 2021, professional and
consulting expenses amounted to
increase of
stock-based compensation of
lock up and leak out agreements and common stock issued for services and
prepaid services, an increase in investor relations fee of
increase in consulting fees of
fees of $14,536 .
Professional and Consulting Expenses -
? During the three months ended
consulting expenses - related party amounted to
an increase of
agreement with a related party, dated
$10,000 monthly consulting fee. ? During the six months endedApril 30, 2022 and 2021, professional and
consulting expenses - related party amounted to 60,000 and
an increase of
agreement with a related party, dated
$10,000 monthly consulting fee. Product Development Expenses
? During the three months ended
expenses amounted to
or 100%. The product development expense in the 2022 period was primarily due
to the amortization of the deferred compensation resulting from common stock
issued in connection with the product development agreements.
? During the six months ended
expenses amounted to
or 100%. The product development expense in the 2022 period was primarily due
to the amortization of the deferred compensation resulting from common stock
issued in connection with the product development agreements.
Selling and Marketing Expenses
? During the three months ended
expenses amounted to
multi-channel digital marketing strategy to further promote our celebrity chef
program in and acquisition of Model Meals in July 2021 .
? During the six months ended
expenses amounted to
multi-channel digital marketing strategy to further promote our celebrity chef
program in and acquisition of Model Meals in July 2021 .
40
General and Administrative Expenses
? During the three months ended
administrative expenses amounted to
increase of
depreciation and amortization expense of
related expenses of $30,134 .
? During the six months ended April 30, 2022 and 2021, general and
administrative expenses amounted to
increase of
depreciation and amortization expense of
agent fees of
increase in utilities of
and increase from the acquisition of Model Meals in July 2021 .
Loss from Operations
? During the three months ended
amounted to
or 289%. The increase was due to the changes discussed above.
? During the six months ended
amounted to
or 521%. The increase was due to the changes discussed above.
Other Income (Expense), net
? During the three months ended
amounted to
40%. The change was primarily due to a decrease in interest expense of
gain from change in fair value of derivative liabilities of
offset by a decrease in gain on extinguishment of debt of $26,629 .
? During the six months ended April 30, 2022 and 2021, other expense, net
amounted to
The change was primarily due to decrease in interest expense of
resulting from a decrease in convertible notes in 2022, a decrease in gain
from change in fair value of derivative liabilities of
gain on extinguishment of accounts payable of
extinguishment of debt of $26,629 .
Net Loss
? During the three months ended
? During the six months ended
Liquidity and Capital Resources
Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. We had a working capital deficit of$1,446,778 and cash of$361,636 as ofApril 30, 2022 and a working capital deficit of$318,797 and cash of$2,275,397 as ofOctober 31, 2021 . April 30, October 31, Percentage 2022 2021 Change Change Working capital deficit: Total current assets$ 752,027 $ 2,372,058 $ (1,620,031 ) 68 % Total current liabilities (2,198,805 ) (2,690,855 ) 492,050 18 % Working capital deficit:$ (1,446,778 ) $ (318,797 ) $ (1,127,981 ) 354 % The increase in working capital deficit was primarily attributable to a decrease in current assets of$1,620,031 and a decrease in current liabilities of$492,050 , due to the repayment of convertible notes, reduction in derivative liabilities, repayment advances payable and reduction in lease liabilities.
41
Cash Flows
The following table provides detailed information about our net cash flows:
Six Months Ended
April 30,
2022 2021
Net cash used in operating activities
(11,750 ) (113,755 )
Net cash provided by financing activities 555,535 1,173,048 Net change in cash
$ (1,913,761 ) $ 291,166
Net cash used in operating activities for the six months endedApril 30, 2022 and 2021, were$2,457,546 and$768,127 , respectively, an increase of$1,689,419 or 220%.
? Net cash used in operating activities for the six months ended
primarily reflected our net loss of
non-cash items such as depreciation and amortization expense of
total stock-based compensation for services of $2,919,642 , amortization of
debt discount of $284,183 , gain on change in fair value of derivative
liability of $67,408 and changes in operating assets and liabilities
consisting of an increase of inventory of
expenses and other current assets of
of
decrease in accrued expense and other liabilities of
? Net cash used in operating activities for the six months ended
primarily reflected our net loss of
non-cash items such as depreciation expense of
for services of
discount of
of an increase in prepaid expenses and other current assets of
increase in accounts payable of
cards of
of $102,043 .
Net cash used in investing activities the six months ended
? Net cash used by investing activities for the six months ended
consisted of purchase of property and equipment in the amount of
? Net cash used by investing activities for the six months ended
consisted of purchase of property and equipment in the amount of
Net Cash Provided by Financing Activities
Net cash provided by financing activities the six months endedApril 30, 2022 and 2021, were$555,535 and$1,173,048 , respectively, a decrease of$617,513 or 53%.
? Net cash provided by financing activities for the six months ended
2022 consisted of net proceeds from sale of common stock of
proceeds from advances payable of
notes payable of
repayment of convertible note - related party of $63,069 .
? Net cash provided by financing activities for the six months ended
2021 consisted of net proceeds from note payable of
convertible note payable of
convertible note payable of
$177,200 offset by repayments convertible notes payable of$295 ,979and repayments of advances payable of$100,773 . Cash Requirements We are dependent on our product sales to fund our operations and may require the sale of additional common stock to maintain operations. Our officers and directors have made no written commitments with respect to providing a source of liquidity in the form of cash advances, loans, and/or financial guarantees.
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Going Concern
The financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying unaudited consolidated financial statements, for the six months endedApril 30, 2022 , the Company had a net loss and cash used in operations of$5,949,819 and$2,457,546 , respectively. AtApril 30, 2022 , the Company had an accumulated deficit, stockholders' equity, and working capital deficit of$(25,085,483) ,$3,109,927 and$(1,446,778) , respectively. These factors raise substantial doubt about the Company's ability to continue as a going concern for a period of twelve months from the issuance date of this report. The Company's primary source of operating funds has primarily from the sale of common stock and the issuance of convertible debt notes. The Company has experienced net losses from operations since inception but expects these conditions to improve in the near term and beyond as it develops its business model. Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive or raise additional debt and/or equity capital. Management believes that the Company's capital resources are not currently adequate to continue operating and maintaining its business strategy for a period of twelve months from the issuance date of this report. If the Company is unable to raise additional capital or secure additional lending in the near future, management expects that the Company will need to curtail or cease operations. These consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Inflation and Changing Prices
Neither inflation nor changing prices for the six months ended
Off-Balance Sheet Arrangements
None.
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