UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-K
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
| For the fiscal year ended July 31, | ||
| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
| For the transition period from _____ to _____ | ||
Commission file number 333-164633 333-164633
Hartford Great Health Corp.
(Exact name of registrant as specified in its charter)
| California | ||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| 8832 Glendon Way, Rosemead, California | 91770 | |
| (Address of principal executive offices) | (Zip Code) |
(626) 321-1915
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| None | N/A | |
| Title of each class | Name of each exchange on which registered |
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par value $0.001
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐[_] No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☒[X] No ☐
Indicate by check mark whether the issuer (1) filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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. Yes ☒[X] No ☐
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒
January 31, 2018,2019, the last business day of the Registrant’s most recently completed second fiscal quarter, the aggregate market value of the voting common stock held by non-affiliates of the Registrant (without admitting that any person whose shares are not included in such calculation is an affiliate) was $-0-.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐[_] Accelerated filer ☐
Non-accelerated filer ☐[_] Smaller reporting company ý
Emerging growth company ý
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐Yes ☒[_] No
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common stock, par value $0.001 par value | HFUS | OTC Markets Group |
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 3,018,00099,108,000 shares of common stock outstanding as
TABLE OF CONTENTS
| PART I | |||||
| ITEM 1: | BUSINESS | 4 | |||
| ITEM 1A: | RISK FACTORS | 6 | |||
| ITEM 1B: | UNRESOLVED STAFF COMMENTS | 6 | |||
| ITEM 2: | PROPERTIES | 6 | |||
| ITEM 3: | LEGAL PROCEEDINGS | 6 | |||
| ITEM 4: | MINE SAFETY DISCLOSURES | 6 | |||
| PART II | |||||
| ITEM 5: | MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND PURCHASES OF EQUITY SECURITIES | 7 | |||
| ITEM 6: | SELECTED FINANCIAL DATA | 7 | |||
| ITEM 7: | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION | 8 | |||
| ITEM 7A. | QUANTATIVE AND QUALATATIVE DISCLOSURES ABOUT MARKET RISK | ||||
| ITEM 8: | FINANCIAL STATEMENTS | ||||
| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANS ON ACCOUNTING AND FINANCIAL DISCLOSURE | ||||
| ITEM 9A. | CONTROLS AND PROCEDURES | ||||
| ITEM 9B: | OTHER INFORMATION | ||||
| PART III | |||||
| ITEM 10: | DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE | ||||
| ITEM 11: | EXECUTIVE COMPENSATION | ||||
| ITEM 12: | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | ||||
| ITEM 13: | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE | ||||
| ITEM 14: | PRINCIPAL ACCOUNTING FEES AND SERVICES | ||||
| PART IV | |||||
| ITEM 15: | EXHIBITS | ||||
| SIGNATURES | |||||
ADDITIONAL INFORMATION
Descriptions of agreements or other documents contained in this report are intended as summaries and are not necessarily complete. Please refer to the agreements or other documents filed or incorporated herein by reference as exhibits. Please see the exhibit index at the end of this report for a complete list of those exhibits.
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This report contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of management and information currently available to management. The use of words such as "believes", "expects", "anticipates", "intends", "plans", "estimates", "should", "likely" or similar expressions, indicates a forward-looking statement.
The identification in this report of factors that may affect future performance and the accuracy of forward-looking statements is meant to be illustrative and by no means exhaustive. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty.
Factors that could cause actual results to differ materially from those expressed or implied by forward-looking statements include, but are not limited to:
| ● | The worldwide economic situation; | |
| ● | Any change in interest rates or inflation; | |
| ● | The willingness and ability of third parties to honor their contractual commitments; | |
| ● | The Company's ability to raise additional capital, as it may be affected by current conditions in the stock market and competition for risk capital; | |
| ● | The Company's capital costs, as they may be affected by delays or cost overruns; | |
| ● | The Company's costs of production; | |
| ● | Environmental and other regulations, as the same presently exist or may later be amended; | |
| ● | The Company's ability to identify, finance and integrate any future acquisitions; and | |
| ● | The volatility of the Company's stock price. |
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ITEM 1. BUSINESS.
General
Hartford Great Health Corp. ("the Company", “Hartford” "we", "us" or our") was incorporated in the State of Nevada on April 2, 2008 ("Inception) under the name PhotoAmigo, Inc. It changed its name to Hartford Great Health Corp. on August 20, 2018 and since then we have been engaged in activities to formulate and implement our business plan as set forth below.
Overview
Up until August 2018, we provided social networking and photo sharing from the website PhotoAmigo.com. We also maintained the domain names PhotoAmigo.net, fotoamigo.com and fotoamigo.net. These domain names all redirect incoming traffic to our main website, PhotoAmigo.com.
In August 2018, the Company changed its future plans of operations. On December 28, 2018, the Company acquired Hangzhou Hartford Comprehensive Health Management, Ltd (“HZHF”). On March 22, 2019, the Company acquired 60 percent of Hangzhou Longjing Qiao Fu Vacation Hotel Co., Ltd. (“HZLJ”). On March 20, 2019, the Company acquired Shanghai Hartford Comprehensive Health Management, Ltd. (“HFSH”) with 90 percent of Shanghai Qiao Garden International Travel Agency (“Qiao Garden Int’l Travel”), and formed a joint venture entity, Hartford International Education Technology Co., Ltd (“HF Int’l Education”).
The following business plan is based on research and discussions between the board and third party suppliers and experts. Only preliminary activities relating to the following objectives have been undertaken and therefore, there is no assurance that any of the proposed activities set forth below will be started by the Company or if started will be successful.
Strategy
The plan focuses on the development of the Sino-U.S. health industry in the following four areas:
A. Membership based program:
The company will develop an international membership-based program (International Anti-Aging Program) for middle to high-income Chinese members. Enrollment into the program will allow members to travel to the United States on a yearly basis for state-of-the-art stem cell treatments including stem cell extraction, storage, and injection from a collaborative of American biomedical stem cell experts. Members will receive stem cell treatments in the United States with a larger goal of enhancing immunity, youthfulness, and longevity. The initial estimated number of annual members is approximately 1800-2000 members.
B. Artificial Intelligence and Medical Equipment Sales:
The company will broker sales of cutting-edge artificial intelligence equipment (particularly robotics) to the United States to enhance the overall standard of personal health and the healthcare experience in the U.S. The company will also sell general health and wellness equipment to individual consumers in the United States with the overall goal of improving the personal healthcare experience of customers in the United States.
C. Mobile Lifestyle Management Platform:
The company
will create an internet-based health consultation platform for Chinese and Chinese-American individuals. This online platform is designed to connect customers with health and wellness information curated by experts in the health consultation and wellness management fields. The online platform will keep customers informed about new wellness-related technologies and advances available to them through the company as well as about general health and wellness lifestyle advice catered towards Chinese-American audiences.D. Integrated management of metabolic diseases:
The company plans to target three high-risk populations, individuals with: 1) hyperglycemia, 2) hypertension, and 3) hyperlipidemia. These three conditions are incredibly common amongst both Chinese and American populations; thus, the company plans to introduce an integrated approach to management and overall reduction of these three conditions using a unique combination of Western style supplements and over-the-counter products as well as traditional Chinese Meridian Acupoint Massage.
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The Company has also expanded its strategy over the past year into the hospitality industry, focusing on hotels, restaurants, and travel arrangements. The Company plans to integrate hospitality with health management through its membership-based program by arranging travel accommodations for Chinese citizen members to the United States to obtain stem cell beauty treatments.
This year, the Company has found another opportunity to expand its market reach in the Chinese childhood education industry. The Company plans to formulate a proprietary early childhood education center management model beginning with the opening of several early childhood education centers in the greater Shanghai area with the goal of demonstrating the management model in action in order to attract interest from potential franchisees.
There can be no assurance following consummation of any of the business ventures will develop into a going concern or,
if the business is already operating, that it will continue to operate successfully. Many of the potential business opportunities available to the Company may involve new and untested products, processes or market strategies which may not ultimately prove successful.
The Company's independent auditors have issued a report raising substantial doubt about the Company's ability to continue as a going concern. At present, the Company has nolimited operations and the continuation of the Company as a going concern is dependent upon financial support from its stockholders, its ability to obtain necessary equity financing to continue operations and/or to successfully locate and negotiate with a business entity for the combination of that target company with the Company.
Competition
We believe there are only limited barriers to entry in our business. Current and future competitors may have more resources than we have.
Health development is a highly competitive business. We
will| ● | Ensure that investments in our projects are affordable; | |
| ● | That our investment strategy is simple to understand; and | |
| ● | That we provide outstanding customer service and rigid integrity in our business dealings. |
However, there can be no assurance that even if we do these things we will be able to compete effectively with the other companies in our industry. We believe that we have the required management expertise in sourcing properties with good development potential and affordable price. We are committed to work and communicate with our investors and sales consultants to identify their goals and needs which will make it easier to continually provide them with the best products and services.
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5Employees
At September 30, 2018,2019, we had -0- employees, as our Chief Executive Officer no longer receives compensation for his services.
ITEM 1A. RISK FACTORS
As a "smaller reporting company" as defined by Item 8 of Regulation S-K, the Company is not required to provide information required by this Item.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Hartford Great Health Corp. uses the offices of its Chief Executive Officer, at 8832 Glendon Way, Rosemead, CA 91770, for its minimal office facility needs for no consideration.
Each newly acquired or formed entity maintains its own leased office building and property. We lease space in Shanghai, Hangzhou, China under leases that expire at various times between 2020 and 2051 with various term extensions available.
We lease all of our facilities and do not own any real property.
ITEM 3. LEGAL PROCEEDINGS
We were not subject to any legal proceedings during the twelve months ended July 31, 20182019 and 20172018 and are not currently subject to any legal proceedings, and to the best of our knowledge, no such proceeding is threatened, the results of which would have a material impact on our results of operation or financial condition. Nor, to the best of our knowledge, are any of our officers or directors involved in any legal proceedings in which we are an adverse party.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable to our Company.
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ITEM 5.5 – MARKET FOR COMMON EQUITY.EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
The Company’s common stock, and there can be no assurance that a market will develop in the future. The Company has submitted a 15c211 application to the OTC Bulletin Board to have the Company's common stock quotedpar value, $0.001 per share (“Common Stock”) began trading on the OTC Bulletin Board.Markets (“OTC:PINK”) under the symbol “HFUS” beginning in September 13, 2018. Since that time there has been only limited trading. The following table sets forth, for the period indicated, the range of high and low closing “Bid” prices reported by the OTC Markets. Such application is currently pending.
Stock Quotations
| Quarter ended | High | Low | ||||||
| October 31,2018 | $ | 1.50 | $ | 1.50 | ||||
| January 31, 2019 | $ | 1.50 | $ | 1.50 | ||||
| April 30, 2019 | $ | 1.50 | $ | 1.00 | ||||
| July 31, 2019 | $ | 1.50 | $ | 1.40 | ||||
| October 31, 2019 | $ | 2.30 | $ | 0.41 | ||||
| November 1 thru November 13, 2019 | $ | 1.50 | $ | 1.50 | ||||
Holders
As of November 13, 2018, 14, 2019, a total of 3,018,00099,108,000 shares of our common stock were outstanding and there were approximately 3347 holders of record.
Penny Stock Rules
Due to the price of our common stock, as well as the fact that we are not listed on Nasdaq or a national securities exchange, our stock is characterized as "penny stocks" under applicable securities regulations. Our stock will therefore be subject to rules adopted by the Securities and Exchange Commission ("SEC") regulating broker-dealer practices in connection with transactions in penny stocks. The broker or dealer proposing to effect a transaction in a penny stock must furnish his customer a document containing information prescribed by the SEC and obtain from the customer an executed acknowledgment of receipt of that document. The broker or dealer must also provide the customer with pricing information regarding the security prior to the transaction and with the written confirmation of the transaction. The broker or dealer must also disclose the aggregate amount of any compensation received or receivable by him in connection with such transaction prior to consummating the transaction and with the written confirmation of the trade. The broker or dealer must also send an account statement to each customer for which he has executed a transaction in a penny stock each month in which such security is held for the customer's account. The existence of these rules may have an effect on the price of our stock, and the willingness of certain brokers to effect transactions in our stock.
Transfer Agent
We have appointed Corporate Stock Transfer, Inc. ("CST") as the transfer agent for our common stock. The principal office of CST is located at 3200 Cherry Creek Drive South, Suite 430, Denver, CO 80209 and its telephone number is (303) 282-4800.
Dividend Policy
We have never declared or paid dividends on our common stock. Payment of future dividends, if any, will be at the discretion of our Board of Directors after taking into account various factors, including the terms of any credit arrangements, our financial condition, operating results, current and anticipated cash needs and plans for expansion. At the present time, we intend to retain any earning in our business, and therefore do not anticipate paying dividends in the foreseeable future.
Recent Sales of Unregistered Securities; Use of Proceeds from Unregistered Securities
No unregistered securities were sold during the twelve months ended July 31, 2018,, 2017, or 2016.
On December 11, 2018, the Company sold 96,090,000 shares of its common stock (the "Shares") to 15 individuals. The selling price was $0.02 per share for an aggregate of $1,921,800. All 15 investors executed subscription agreements and all proceeds have been collected. Twelve of the 15 investors are Chinese citizens and purchased the shares in China. Due to the strict monitoring of China’s foreign exchange investment policy, funds are not able to be transferred directly to HFUS. As a result, amount of $657,000 were collected in RMB from the Chinese investors. The Shares were sold in a private placement pursuant to an exemption from registration in accordance with Section 4(2) and/or Regulation S under the Securities Act of 1933, as amended. The Shares are all restricted shares and accordingly all stock certificates evidencing the Shares have been affixed with the appropriate legend restricting sales and transfers. The proceeds from the sales of securities have been used in operating activities and acquisition of new entities.
ITEM 6. SELECTED FINANCIAL DATA
As a "smaller reporting company" as defined by Item 8 of Regulation S-K, the Company is not required to provide information required by this Item.
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ITEM 7. MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion and analysis waswere prepared to supplement information contained in the accompanying financial statements and is intended to explain certain items regarding the financial condition as of July 31, 2018,2019, and the results of operations for the years ended July 31, 2018,2019, and 2017.2018. It should be read in conjunction with the audited financial statements and notes thereto contained in this report.
Overview of the Business
Hartford Great Health Corp. was originally incorporated in the State of Nevada on April 2, 2008. Since inception,2008 under the name PhotoAmigo, Inc. It changed its name to Hartford Great Health Corp. on August 22, 2018 and since then we have been engaged in activities to formulate and implement our various business plans.
Ability to continue as a "going concern".
The independent registered public accounting firms' reports on our financial statements as of July 31, 20182019 and 2017,2018, includes a "going concern" explanatory paragraph that describes substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to the factors prompting the explanatory paragraph are discussed in the financial statements, including footnotes thereto.
Plan of Operation
As of July 31, 2019, the company has issued a total of 99,108,000 shares of common stock. On December 11th, 2018, 96,090,000 shares of common stock were issued at the price of $0.02 per share to raise an additional $1,921,800 in capital.
On December 28, 2018, the Company acquired Hangzhou Hartford Comprehensive Health Management, Ltd (“HZHF”). On March 22, 2019, the Company acquired 60 percent of Hangzhou Longjing Qiao Fu Vacation Hotel Co., Ltd. (“HZLJ”). On March 20, 2019, the Company acquired Shanghai Hartford Comprehensive Health Management, Ltd. (“HFSH”) with 90 percent of Shanghai Qiao Garden International Travel Agency (“Qiao Garden Int’l Travel”), and formed a joint venture entity, Hartford International Education Technology Co., Ltd (“HF Int’l Education”).
HZHF subsidiary has also begun working with high-income Chinese clientele to facilitate their travel to the US for stem cell beauty treatments. However, due to the unresolved tensions between China and the United States, particularly with regards to trade and travel, HZHF has had an increasingly difficult time carrying out its original plans. HZHF is hoping that relations between the two countries will improve and that they will be able to realize the original plan. HZLJ operates a vacation hotel in Hangzhou, China.Hangzhou Longjing Qiao Fu Vacation Hotel will have limited operations in the last quarter of 2019 in order to complete major renovations. The hotel will adjust its business strategy and plans to resume normal operations after completing the renovation in February 2020.
HFSH subsidiary is also in the process of facilitating the membership-based stem cell beauty treatment program. Both the marketing teams of HZHF and HFSH hosted informational seminars for potential clients in China and both teams have garnered a small amount of interest from potential members. As mentioned previously, due to the nature of Chinese American relations and resulting trade and travel restrictions, the original expected date to achieve sales has been deferred until relations improve.
Qiao Garden Int’l Travel is engaged in a travel agency business which aids clients in planning travel between China and the United States of America on top of its current operations. Due to the mounting restrictions on US-China trade and travel, many Chinese citizens are unable to obtain visitor VISAs to travel to the US, and Qiao Garden Int’l Travel has not yet been able to obtain a business license for outbound travel from China to the US. As a result, the company has yet to generate any revenue since acquisition. To prevent further HFUS investment losses in operating Qiao Garden Int’l Travel Agency, HFUS has decided to halt operations of the travel agency until US-China tension lifts the restrictions on US visitor VISA issuance.
The subsidiary of HFUS in Shanghai (HFSH) plans to borrow operating funds from two related party entities, SH Qiao Hong and Oversea Chinese Culture Media Ltd. The purpose of the loan is to invest in Hartford International Education Technology (Shanghai) Co., Ltd. (HF Int’l Education). HFUS holds 58.5% ownership of HF Int’l Education and have control over HF Int’l Education.
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Considering China's strict foreign investment policy and the ongoing US-China trade negotiation, there is no assurance that this will be a successful venture.
Previously, the Company intended to raise 6 million US dollars by end of 2019, and the funds were to be used to invest and acquire 45% ownership of the Hartford Hotel to launch second phase construction of the hotel.Due to the US-China trade war and the Chinese government's control over foreign exchange and foreign investment and financing, the original company plan may not achieve financing as scheduled. We are unable to give an accurate schedule of when we will achieve this financing as we must continue to wait until US-China relations improve and Chinese investor confidence rises.
Liquidity and Capital Resources
As of July 31, 2019, we had negative working capital of $612$ (25,815) comprised of current assets of $1,444$1,477,600 and current liabilities of $832.$ 1,503,415. This represents an increasea decrease of $ 1,11226,427 in the working capital balance from the July 31, 20172018 amount of $(500).$ 612. During the year-ended July 31, 20182019, our working capital increased because we received more in financing activities than we used in operating and investing activities.
We believe that our funding requirements for the next twelve months will be in excess of $25,000, and we plan to have our principle shareholder invest $30,000 to cover these requirements.$800,000, this amount is covered with the proceeds from stock issuance on December 11, 2018. We also intend to try and further raise capital through the sale of stock.
On December 11, 2018, the Company sold 96,090,000 shares of its common stock (the "Shares") to 15 individuals. The selling price was $0.02 per share for an aggregate of $1,921,800. All 15 investors executed subscription agreements. As of April 30, 2019, all proceeds have collected. Twelve of the 15 investors are Chinese citizens and purchased the shares in China. Due to the strict monitoring of China’s foreign exchange investment policy, funds are not able to be transferred directly to HFUS. As a result, amount of $657,000 were collected in RMB from the Chinese investors. The Shares were sold in a private placement pursuant to an exemption from registration in accordance with Section 4(2) and/or Regulation S under the Securities Act of 1933, as amended. The Shares are all restricted shares and accordingly all stock certificates evidencing the Shares have been affixed with the appropriate legend restricting sales and transfers.
We will seek additional financing in the form of debt or equity. There is no assurance that we will be able to obtain any needed financing on favorable terms, or at all, or that we will find qualified purchasers for the sale of our stock. Any sales of our securities would dilute the ownership of our existing investors.
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Cash Flows – Year Ended July 31, 2019 Compared to Year Ended July 31, 2018
Operating Activities
During the year ended July 31, 2019, $1,259,862 used in operating activities compared to $26,432 used in the operations during the year ended July 31, 2018. During the year ended July 31, 2019, we recorded losses including noncontrolling interests of $659,994 , incurred non-cash depreciation of $13,721 , prepaid and other current receivable increased by $230,669 , related party receivable decreased by $87,451 , inventory increased by $24,760, other assets decreased by $100,722, Other current payable increased by $9,533, related party payable decreased by $579,870 , and other liabilities increased by $28,196. The increase of prepaid and other current receivable was mainly resulted from the property rental and property associate fee prepayments, deposits, and employee operating advances occurred in these new subsidiaries. The decrease of other assets was mainly resulted from the accelerated amortization of deferred start-up cost which was acquired through HZHF asset acquisition, and the amortization of deferred cost of finance lease which was acquired through HZLJ acquisition. The decrease of related party payable was resulted from the payment made to SH Qiaohong, the amount borrowed from SH Qiaohong by the original owner of SHHF was used for start-up expense and 90 percent of Qiao Garden Intl Travel acquisition and the liability was assumed by the company through SHHF acquisition. The increase of other liabilities was mainly due to the increase of the finance lease liabilities under HZLJ.
By comparison, during the year ended July 31, 2018, we recorded losses of $25,366, incurred noncash depreciation expense of $530 and current payable decreased by $1,596.
Investing activities
Cash used in investing activities was $ 483,252 for the year ended July 31, 2019 as compared to $0 for the corresponding period in 2018. During the year ended July 31, 2019, we acquired multiple entities in Shanghai and Hangzhou, China, total consideration for $606,262, cash paid for $230,161, noncash payable waived for $235,553 and the unpaid balance for $140,548 which is included in Other current payable as of July 31, 2019. The cash proceeds from the acquisitions of $50,470 (see note 4 “Acquisitions and Joint Ventures”). During the year ended July 31, 2019, we loaned $599,870 to two third parties with annual interest rate of six percent, $300,000 of the loaned amount has been paid back (see note 6 “Loan Receivable”).
During the year ended July 31, 2018, we did not purchase any capital assets, we neither used, nor generated funds from investing activities.
Financing activities
Cash provided by financing activities was $2,068,779 for the year ended July 31, 2019 as compared to $25,948 for the year ended July 31, 2018. The cash flows provided by financing activities for the year ended July 31, 2019 was primarily attributable to sales of stock shares with proceeds of $1,921,800 received and $168,148 contribution received from noncontrolling interest owners to form the joint venture entity HF Int’l Education (see note 4 “Acquisitions and Joint Ventures”). During the year ended July 31, 2019, the company refunded to the former CFO for $1,430 and paid $19,739 finance lease principal amount. During year ended July 31, 2018, four shareholders loaned the Company $25,948 to finance the Company's ongoing activities. The shareholders did not receive any equity for these loans and they are repayable by, the company. Accordingly, these funds have no written or firm agreement regarding future funding requirements, and we may curtail our efforts or cease activities entirely.
Equity and Capital Resources
We have incurred losses since inception of our business and, as of July 31, 2018,2019, we had an accumulated deficit of $332,647$916,816 compared to $307,281$332,647 for the previous year end. To date, we have funded our operations through short-term debt and equity financing. During the year ended July 31, 2018 the Company received $47,128 of additional paid in capital from related parties.
We expect our expenses might increase during the foreseeable future as a result of increased operational expenses and the development of our business. However,As our Chinese subsidiaries start operations and marketing plans, we do not expect to start generatinggenerate certain revenues fromstarting September 2019. However, as we are in developing stage, the generated revenue is not expected to be sufficient to cover our operations for another six months.development needs. Consequently, we are dependent on the proceeds from future debt or equity investments to sustain our operations and implement our business plan. If we are unable to raise sufficient capital, we will be required to delay or forego some portion of our business plan, which would have a material adverse affecteffect on our anticipated results from operations and financial condition. There is no assurance that we will be able to obtain necessary amounts of additional capital or that our estimates of our capital requirements will prove to be accurate.
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Future Capital Expenditures
On January 27, 2019, HFSH entered an agreement with Shanghai Qiao Garden Property Management Group to acquire 85 percent ownership of Shanghai Senior Health Consulting Ltd. (“SH Senior”). On January 28, 2019, HFUS entered an agreement to acquire 100 percent equity interest of Shanghai Luo Sheng International Trade Ltd. (“SH Luosheng”). On February 24, 2019, HFSH entered an agreement to acquire 55 percent ownership of Shanghai Pasadena Ltd. (“SH Pasadena”). During the months of May and June in 2019, the Company entered an agreement and a supplemental agreement to acquire 60 percent equity interest of Shanghai Ren Lai Ren Wang Restaurant Co., Ltd. (“SH RLRW”). As of July 31, 2019, these acquisition agreements have not yet taken effective. These agreements will be executed when the dateCompany is financially ready to move on, and the purchase price will be calculated based on the net assets of this Report we did not have any commitments from any sourceeach entity on the execute date.
Based on the Company’s business plan, four early childhood education centers will be opened by June 2020. Approximately RMB3.9 million is expected to provide such additional capital. Even if we are able to secure outside financing, it may not be available in the amounts or the times when we require. Furthermore, such financing would likely take the form of bank loans, private placement of debt or equity securities or some combination of these. The issuance of additional equity securities would dilute the stock ownership of current investors while incurring loans, leases or debt would increase our capital requirements and possible loss of valuable assets if such obligations were not repaid in accordance with their terms.
Off-Balance Sheet Arrangements
As of and subsequent to July 31, 2018, we plan to establish a subsidiary company in Shanghai by end of 2018 and raise 6 million US Dollars to invest and acquire 45% ownership of Hartford Hotel to launch second phase construction of the hotel.
Contractual Commitments
As of July 31, 2018,2019, we have no other material contractual commitments.
Results of Operations-Operations - Year Ended July 31, 20182019 Compared to Year Ended July 31, 2017
Revenue:We didrecognized $56,174 and $0 revenue in the year ended July 31, 2019 or 2018. The revenue in 2019 was mainly generated from HZLJ hotel business. The other business lines with limited operations have not reportgenerated revenue yet. In 2018, we didn’t have any revenuesrevenue generated.
Operating Expenses:Operating expenses increased to $ 738,692 for the year ended July 31, 2019, compared to $25,603 during the comparable period of 2018. During the year ended July 31, 2019, legal and accounting fees increased by $ 61,861, general and administrative expenses increased by $ 635,857, investor relations increased by $ 2,180, and depreciation expenses increased by $ 13,191. The increase of general and administrative expenses was mainly resulted from sales or services eitherthe expenses incurred in the new subsidiaries in China for business development.
Other Income (Expense):Other income increased to $ 22,524 for the year ended July 31, 2019, compared to $ 237 of other income for the corresponding period of 2018. The increase of other income was mainly resulted from interest income of loan receivables and gain from assets disposal.
Net Loss Attributable to Noncontrolling Interest:For the year ended July 31, 2019, we recorded a net loss attributable to Noncontrolling interest of $ 75,825 compared to $0 for the corresponding period of 2018. The loss was allocated based on the ownership percentage of Noncontrolling interest, which was acquired through the new acquisitions during the year ended July 31, 20182019.
Net Loss Attributable to Hartford Great Health Corp:We recorded a net loss of $584,169 or 2017 as we have not commenced revenue generating activities.
| 11 |
CRITICAL ACCOUNTING POLICIES
Use of Estimates
Foreign Currency: The accounts of the Company’s foreign subsidiaries are translated in accordance with FASB ASC 830. Foreign currency transaction gains and has not yet generated revenues from operations. Revenues is expected to be derived principallylosses are recognized in other expense, net, at the time they occur. Net foreign currency exchange gains or losses resulting from the salestranslation of US health products as well as artificial intelligence products related to healthassets and wellness industry in China. In accordance with established guidance, Hartford Great Health Corp. plans to recognize revenue whenliabilities of foreign subsidiaries whose functional currency is not the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the amount is reasonably assured. Certain insignificant amounts collected during the development, testing, and implementation phasesU.S. dollar are recorded as a recoverypart of development expense.
Comprehensive Income (loss):For the year ended July 31, 2019, the Company included its foreign currency translation gain or loss as part of its comprehensive income (loss).
Fair value measurement: Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Accounting Standard Codification (“ASC”) 820, Fair Value Measurements and Disclosures (“ASC 820”), describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:
Level 1 - Quoted prices in active markets for identical assets or liabilities or funds.
Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, current loan receivable, related party receivable, prepaid and other current receivable, accounts payable, related party payable and other current payable. The carrying amounts of afore-mentioned accounts approximate fair value because of their short-term nature.
Cash and Cash Equivalents
Loans and cash equivalents.
Goodwill:Goodwill, which represents the excess of the purchase price over the fair value of identifiable net assets acquired, is not aware of any mattersamortized, in accordance with Accounting Standards Codification (ASC) 350, Intangibles—Goodwill and Other. ASC 350 requires that goodwill be tested for impairment at the reporting unit level on an annual basis and between annual tests, if an event occurs or circumstances change that would havemore likely than not reduce the fair value of a material adverse effect on our financial condition, results of operationsreporting unit below its carrying value. These events or cash flows.
Business Combinations:If an acquired set of activities and those reportedassets is capable of being operated as a business consisting of inputs and processes from the viewpoint of a market participant, the assets acquired and liabilities assumed are a business. Business combinations are accounted for income tax purposes using the asset/liabilityacquisition method of accounting, which requires an acquirer to recognize the assets acquired and the liabilities assumed at the acquisition date measured at their fair values as of that date. Fair value determinations are based on discounted cash flow analyses or other valuation techniques. In determining the fair value of the assets acquired and liabilities assumed in a material acquisition, the Company may utilize appraisals from third party valuation firms to determine fair values of some or all of the assets acquired and liabilities assumed, or may complete some or all of the valuations internally. In either case, the Company takes full responsibility for the determination of the fair value of the assets acquired and liabilities assumed. The value of goodwill reflects the excess of the fair value of the consideration conveyed to the seller over the fair value of the net assets received. Acquisition-related costs that the Company incurs to affect a business combination are expensed in the periods in which the costs are incurred.
Noncontrolling interest: The Company adopted ASC 810, Noncontrolling Interests in Consolidated Financial Statements—an Amendment of Accounting Research Bulletin No. 51, as of January 1, 2009. ASC 810 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. ASC 810 also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interest of the parent and the interests of the noncontrolling owner.
| 12 |
Income Taxes:The Company accounts for income taxes. Deferred income taxes using the asset and liability method in accordance with ASC 740, Accounting for Income Taxes. The asset and liability method provides that deferred tax benefitsassets and liabilities are recognized for the expected future tax consequences attributable toof temporary differences between the financial statement carrying amountsreporting and tax bases of existing assets and liabilities, and their respective tax bases, and for taxoperating loss and tax credit carry-forwards.carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates expected to apply to taxable incomeand laws that will be in effect when the years in which those temporary differences are expected to be recovered or settled. Hartford Great Health Corp. provides forreverse. The Company records a valuation allowance to reduce deferred taxes fortax assets to the estimated future tax effects attributable to temporary differences and carry-forwards when realizationamount that is believed more likely than not.
10Revenue Recognition: As the Company is still under structuring and developing, limited operations occurred during the year ended July 31, 2019 and 2018. The revenue in 2019 was solely generated from HZLJ. HZLJ generates revenue primarily from the room rentals, sale of food and beverage and other miscellaneous operating income. HZLJ recognizes service revenue when the following conditions are met: 1) services are provided; 2) evidence of an arrangement exists; 3) fees are fixed or determinable; and 4) collection is reasonably assured. Billings to customers for which services are not rendered are considered deferred revenue. As a result, the adoption of ASC 606 has no material impacts on the Company’s financial positions. The Company’s revenue is recognized when it satisfies a single performance obligation by transferring control of its products or services to a customer. Control is generally transferred when the Company’s products are either shipped or delivered based on the terms contained within the underlying contracts or agreements. The Company’s general payment terms are short-term in duration. The Company does not have significant financing components or payment terms. The Company did not have any material unsatisfied performance obligations and contract liabilities as of July 31, 2019 or 2018.
Income (Loss) Per Share
Recent Accounting Pronouncements.
In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to determine whether current events or changes in circumstances warrant adjustmentsthe Disclosure Requirements for Fair Value Measurement.” ASU No. 2018-13 removes certain disclosure requirements related to such carrying amounts. If an impairment adjustment is deemed necessary, such loss is measured by the amount that the carrying value of such assets exceeds their fair value. Considerable management judgment is necessary to estimate the fair value hierarchy, modifies existing disclosure requirements related to measurement uncertainty and adds new disclosure requirements. ASU No. 2018-13 disclosure requirements include disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of assets; accordingly, actual results could vary significantly from such estimates. Assetsthe reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU No. 2018-13 is effective for the Company within those fiscal years beginning on December 15, 2019, with early adoption permitted. Certain disclosures in the new guidance will need to be disposed of are carried at the lower of their financial statement carrying amount or fair value less costs to sell.
In February 2018, the FASB issued ASU No. 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220)”, which amends the previous guidance to allow for certain tax effects “stranded” in accumulated other thancomprehensive income, which are impacted by the Tax Cuts and Jobs Act (the “Tax Reform Act”) , to be reclassified from accumulated other comprehensive income into retained earnings. This amendment pertains only to those items impacted by the new tax law and will not apply to any future tax effects stranded in respect of our status as a Development Stage Entity as discussed above.
In January 2017, the standard. Entities are permittedFASB issued ASU No. 2017-04, “Intangibles and Other (Topic 350): Simplifying the Test for Goodwill Impairment”, which eliminates the requirement to applycalculate the new standard under the full retrospective method, subjectimplied fair value of goodwill, but rather requires an entity to certain practical expedients, or the modified retrospective method that requires the application of the guidance only to contracts that are uncompletedrecord an impairment charge based on the dateexcess of initial application.a reporting unit’s carrying value over its fair value. This amendment is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company has not yet determinedis currently evaluating the impact of the adoption of this guidanceASU No. 2017-04 on its consolidated financial statements.position and results of operations.
| 13 |
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The accounting standard changes the methodology for measuring credit losses on financial instruments and the timing when such losses are recorded. ASU No. 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company is currently evaluating the impact this standard will have on its financial position, results of operations and liquidity.
In February 2016, the FASB issued ASU No. 2016-02,, Leases “Leases (Topic 842)as updated.”. This new standard introduces a new lease model that requires the recognition ofupdate is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and the disclosure ofdisclosing key information about leasing arrangements. While this new standard retains most of the principles of the existing lessor model under U.S. GAAP, it aligns many of those principles with ASC 606: Revenue from Contracts with Customers. The new guidance will beThis update is effective for annual and interim reporting periods beginning after December 31, 2018. Early adoption15, 2018, including interim periods within those fiscal years. In July 2018, the FASB further amended ASU No. 2016-02 and the Company will be permitted for all entities.elect the transition provision permitting it to record existing operating leases on the Consolidated Balance Sheet without adjusting comparative periods. The Company hasintends to elect the package of practical expedients allowing it to not yet determinedreassess prior conclusions related to expired or existing contracts that are or that contain leases, lease classification and the accounting for initial direct costs. These practical expedients must be elected as a package and applied consistently. Operating leases with a term of 12 months or less will not be recorded on the Consolidated Balance Sheet. The Company is currently evaluating the impact of the adoption of this guidancestandard will have on its consolidated financial statements.
Item 7A. QuantativeQuantitative and QualatativeQualitative Disclosures About Market Risk
As a "smaller reporting Company" as defined by Item 8 of Regulation S-K, the Company is not required to provide information required by this Item.
| 14 |
ITEM 8. FINANCIAL STATEMENTS
| 3230 Fallow Field Drive Diamond Bar, CA 91765 Tel: +1 (909) 839-0188 Fax: +1 (909) 839-1128 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and shareholders of Hartford Great Health Corp.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of Hartford Great Health Corp. and subsidiaries (the “Company”) as of July 31, 2019, and the related consolidatedstatement of operations and comprehensive loss, changes in stockholders’ deficit and cash flows for the year in the period ended July 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of July 31, 2019, and the results of its operations and its cash flows for the year in the period ended July 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Uncertainty
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations, accumulated deficit and generated negative cash flows from operating activities that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Simon & Edward, LLP
Los Angeles, California
November 14, 2019
We have served as the Company's auditor since 2019.
| 15 |
Haynie & Company
50 West Broadway, Ste. 600
Salt Lake City, Utah 84101
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Hartford Great Health Corp.
Opinion on the Financial Statements
We have audited the accompanying balance sheet of Hartford Great Health Corp. (the Company) as of July 31, 2018, and the related statements of operations, stockholders’ equity, and cash flows for the year ended July 31, 2018, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of July 31, 2018, and the results of its operations and its cash flows for the period ended July 31, 2018, in conformity with accounting principles generally accepted in the United States of America.
Consideration of the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1 to the financial statements, the Company has a net loss, negative cash flow from operations, and accumulated deficit. The factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. If the Company is unable to obtain financing, there could be a material adverse effect on the Company.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Haynie & Company
Salt Lake City, Utah
November 14, 2018
We have served as the Company’s auditor since 2018.
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12
CONSOLIDATED BALANCE SHEETS
| July 31, 2019 | July 31, 2018 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 269,672 | $ | 1,444 | ||||
| Current Loan receivable | 107,616 | — | ||||||
| Prepaid and Other current receivables | 362,102 | |||||||
| Related party receivables | 713,612 | — | ||||||
| Inventories | 24,598 | — | ||||||
| Total Current Assets | 1,477,600 | 1,444 | ||||||
| Non-Current Assets | ||||||||
| Restricted cash, noncurrent | 29,052 | — | ||||||
| Property, plant and equipment - net | 253,584 | — | ||||||
| Loan receivable, noncurrent | 200,000 | — | ||||||
| Goodwill | 1,040,017 | — | ||||||
| Other assets | 673,634 | — | ||||||
| Total Non-Current Assets | 2,196,287 | — | ||||||
| TOTAL ASSETS | $ | 3,673,887 | $ | 1,444 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current Liabilities | ||||||||
| Related party payables | $ | 1,327,559 | $ | — | ||||
| Other current payables | 175,856 | 832 | ||||||
| Total Current Liabilities | 1,503,415 | 832 | ||||||
| Long-term loan from related parties | 585,146 | — | ||||||
| Other liabilities | 336,046 | — | ||||||
| TOTAL LIABILITIES | 2,424,607 | 832 | ||||||
| Stockholders' Equity | ||||||||
| Preferred stock - $0.001 par value, 5,000,000 shares authorized, | ||||||||
| No shares issued and outstanding | — | — | ||||||
| Common stock - $0.001 par value, 300,000,000 shares authorized, | ||||||||
| 99,108,000 and 3,018,000 shares issued and outstanding | ||||||||
| as of July 31, 2019 and July 31, 2018, respectively | 99,108 | 3,018 | ||||||
| Additional paid-in capital | 2,154,521 | 330,241 | ||||||
| Accumulated deficit | (916,816 | ) | (332,647 | ) | ||||
| Accumulated other comprehensive loss | (6,392 | ) | — | |||||
| Noncontrolling interest | (81,141 | ) | — | |||||
| Total Stockholders' Equity | 1,249,280 | 612 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 3,673,887 | $ | 1,444 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
| 17 |
HARTFORD GREAT HEALTH CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
| Years ended | ||||||||
| July 31, | ||||||||
| 2019 | 2018 | |||||||
| Room revenues | $ | 56,174 | $ | — | ||||
| Operating expenses | ||||||||
| Cost of food & beverage | 11,445 | — | ||||||
| Depreciation and amortization | 13,721 | 530 | ||||||
| General and administrative | 691,260 | 25,073 | ||||||
| Selling expenses | 22,266 | — | ||||||
| Total Operating Expenses | 738,692 | 25,603 | ||||||
| Operating Loss | (682,518 | ) | (25,603 | ) | ||||
| Other Income (Expense) | ||||||||
| Interest income, net | 11,341 | 237 | ||||||
| Other Income | 11,183 | — | ||||||
| Other Income, net | 22,524 | 237 | ||||||
| Loss Before Income Taxes | (659,994 | ) | (25,366 | ) | ||||
| Income tax expense | — | — | ||||||
| Net Loss | (659,994 | ) | (25,366 | ) | ||||
| Less: Net Loss Attributable to | ||||||||
| Noncontrolling Interest | (75,825 | ) | — | |||||
| Net Loss Attributable to | ||||||||
| Hartford Great Health Corp | $ | (584,169 | ) | $ | (25,366 | ) | ||
| Net loss per common share: | ||||||||
| Basic and Diluted | $ | (0.01 | ) | $ | (0.01 | ) | ||
| Weighted average shares outstanding: | ||||||||
| Basic and diluted | 61,461,781 | 3,018,000 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 18 |
| July 31,2018 | July 31, 2017 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 1,444 | $ | 1,928 | ||||
| Total current assets | 1,444 | 1,928 | ||||||
| Fixed Assets | ||||||||
| Computer equipment | 2,792 | 2,792 | ||||||
| Accumulated depreciation | (2,792 | ) | (2,262 | ) | ||||
| Net book value | 0 | 530 | ||||||
| Total assets | $ | 1,444 | $ | 2,458 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 832 | $ | 2,191 | ||||
| Accrued Interest to stockholders | 0 | 237 | ||||||
| Advances from stockholders | 0 | 21,180 | ||||||
| Total current liabilities | 832 | 23,608 | ||||||
| Total liabilities | 832 | 23,608 | ||||||
| Commitments and contingencies (Notes 2 and 4) | ||||||||
| Stockholders' equity (deficit): | ||||||||
| Preferred stock - $0.001 par value, 5,000,000 shares authorized: | ||||||||
| No shares issued or outstanding | - | - | ||||||
| Common stock - $0.001 par value, 100,000,000 shares authorized: | ||||||||
| 3,018,000 shares issued and outstanding | 3,018 | 3,018 | ||||||
| Additional paid-in capital | 330,241 | 283,113 | ||||||
| Accumulated (deficit) | (332,647 | ) | (307,281 | ) | ||||
| Total stockholders' equity (deficit) | 612 | (21,150 | ) | |||||
| Total liabilities and stockholders' equity (deficit) | $ | 1,444 | $ | 2,458 | ||||
HARTFORD GREAT HEALTH CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
| Years ended | ||||||||
| July 31, | ||||||||
| 2019 | 2018 | |||||||
| Net Loss | $ | (584,169 | ) | $ | (25,366 | ) | ||
| Other Comprehensive income, net of income tax | ||||||||
| Foreign currency translation adjustments | (6,392 | ) | — | |||||
| Total other comprehensive loss | (6,392 | ) | — | |||||
| Less: Total other comprehensive loss attributable to noncontrolling interest | — | — | ||||||
| Total Other Comprehensive Loss Attributable to Hartford Great Health Corp | (6,392 | ) | — | |||||
| Total Comprehensive loss | $ | (590,561 | ) | $ | (25,366 | ) | ||
The accompanying notes are an integral part of these consolidated financial statements.
| 19 |
HARTFORD GREAT HEALTH CORP.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
for the years ended July 31, 2019 and 2018
| Accumulated | ||||||||||||||||||||||||||||
| Common Stock | Paid - in | Additional Accumulated | Comprehensive | Other Noncontrolling | Stockholders' | Total Equity | ||||||||||||||||||||||
| Shares | Amount | Capital | (Deficit) | loss | Interest | (Deficit) | ||||||||||||||||||||||
| Balance, July 31 , 2017 | 3,018,000 | $ | 3,018 | $ | 283,113 | $ | (307,281 | ) | $ | — | $ | — | $ | (21,150 | ) | |||||||||||||
| Net (loss) | — | — | — | (25,366 | ) | — | — | (25,366 | ) | |||||||||||||||||||
| Additional Paid in Capital | — | — | 47,128 | — | — | — | 47,128 | |||||||||||||||||||||
| Balance, July 31 , 2018 | 3,018,000 | $ | 3,018 | $ | 330,241 | $ | (332,647 | ) | $ | — | $ | — | $ | 612 | ||||||||||||||
| Net (loss) | — | — | — | (584,169 | ) | — | (75,825 | ) | (659,994 | ) | ||||||||||||||||||
| Issuance of common stock | 96,090,000 | 96,090 | 1,825,710 | — | — | — | 1,921,800 | |||||||||||||||||||||
| Return of capital | — | — | (1,430 | ) | — | — | — | (1,430 | ) | |||||||||||||||||||
| Contribution through acquisitions and new subsidiary | — | — | — | — | — | (5,316 | ) | (5,316 | ) | |||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | (6,392 | ) | — | (6,392 | ) | |||||||||||||||||||
| Balance, July 31, 2019 | 99,108,000 | $ | 99,108 | $ | 2,154,521 | $ | (916,816 | ) | (6,392 | ) | $ | (81,141 | ) | $ | 1,249,280 | |||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 20 |
HARTFORD GREAT HEALTH CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Years ended | ||||||||
| July 31, | ||||||||
| 2019 | 2018 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss including noncontrolling interests | $ | (659,994 | ) | $ | (25,366 | ) | ||
| Adjustments to reconcile net loss including noncontrolling interests to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 13,721 | 530 | ||||||
| (Gain) on disposal of property and equipment | (4,192 | ) | — | |||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid and Other current receivables | (230,669 | ) | — | |||||
| Related party receivables | 87,451 | — | ||||||
| Inventories | (24,760 | ) | — | |||||
| Other assets | 100,722 | — | ||||||
| Related party payables | (579,870 | ) | — | |||||
| Other current payable | 9,533 | (1,596 | ) | |||||
| Other liabilities | 28,196 | — | ||||||
| Net cash (used in) operating activities | (1,259,862 | ) | (26,432 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Cash proceeds from Acquisitions | 50,470 | — | ||||||
| Cash used in Acquisitions | (230,161 | ) | — | |||||
| Payments on loan receivable | (599,870 | ) | — | |||||
| Proceed of new loan | 300,000 | — | ||||||
| Purchases of property and equipment | (3,691 | ) | — | |||||
| Net cash (used in) investing activities | (483,252 | ) | — | |||||
| Cash flows from financing activities: | ||||||||
| Contribution from noncontrolling interest | 168,148 | — | ||||||
| Proceeds from issuance of common stocks | 1,921,800 | — | ||||||
| Return of Capital | (1,430 | ) | — | |||||
| Principal payments on finance lease | (19,739 | ) | — | |||||
| Capital contribution from stockholders | — | 25,948 | ||||||
| Net cash provided by financing activities | 2,068,779 | 25,948 | ||||||
| Effect of exchange rate changes on cash | (28,385 | ) | — | |||||
| Net increase in cash, cash equivalents and restricted cash | 297,280 | (484 | ) | |||||
| Cash, cash equivalents and restricted cash at beginning of period | 1,444 | 1,928 | ||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 298,724 | $ | 1,444 | ||||
| Supplemental Cash Flow Information | ||||||||
| Interest paid | $ | — | $ | — | ||||
| Income taxes paid | $ | — | $ | — | ||||
The accompanying notes are an integral part of these financial statements.
| 21 |
14
| Year | Year | |||||||
| ended | ended | |||||||
| July 31, 2018 | July 31, 2017 | |||||||
| Revenues | $ | - | $ | - | ||||
| Operating expenses: | ||||||||
| Website development | 3,385 | 2,193 | ||||||
| Legal and accounting fees | 13,542 | 11,138 | ||||||
| Investor relations | 7,746 | 4,868 | ||||||
| Other general and administrative | 400 | 483 | ||||||
| Depreciation Expense | 530 | 933 | ||||||
| Total operating expenses | 25,603 | 19,615 | ||||||
| Operating (loss) | (25,603 | ) | (19,615 | ) | ||||
| Other income(expense): | ||||||||
| Interest expense | 237 | (237 | ) | |||||
| Other income (expense) net | 237 | (237 | ) | |||||
| Net (loss) | $ | (25,366 | ) | $ | (19,852 | ) | ||
| Net (loss) per common share: | ||||||||
| Basic and Diluted | $ | (0.01 | ) | $ | (0.01 | ) | ||
| Weighted average shares outstanding: | ||||||||
| Basic and Diluted | 3,018,000 | 3,018,000 | ||||||
15
| Twelve Months | Twelve Months | |||||||
| ended | ended | |||||||
| July 31, 2018 | July 31, 2017 | |||||||
| Cash flows from operating activities: | ||||||||
| Net (loss) | $ | (25,366 | ) | $ | (19,852 | ) | ||
| Adjustments to reconcile net (loss) to net cash | ||||||||
| used by operating activities: | ||||||||
| Impairment | ||||||||
| Depreciation | 530 | 933 | ||||||
| Stock issued for service | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Increase/(decrease) in accounts payable | (1,359 | ) | (929 | ) | ||||
| Increase/(decrease) in accrued interest to stockholders | (237 | ) | 237 | |||||
| Increase/(decrease) in advances from officer | ||||||||
| Net cash (used in) operating activities | (26,432 | ) | (19,611 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Net cash (used in) investing activities | ||||||||
| Cash flows from financing activities: | ||||||||
| Capital contribution from stockholders | 25,948 | - | ||||||
| Loans from stockholders | - | 21,180 | ||||||
| Net cash provided by financing activities | 25,948 | 21,180 | ||||||
| Net increase (decrease) in cash and equivalents | (484 | ) | 1,569 | |||||
| Cash and equivalents at beginning of period | 1,928 | 359 | ||||||
| Cash and equivalents at end of period | $ | 1,444 | $ | 1,928 | ||||
| Supplemental Cash Flow Information | ||||||||
| Interest paid | $ | - | $ | - | ||||
| Income taxes paid | $ | - | $ | - | ||||
| Non-cash investing and financing activities: | $ | - | $ | - | ||||
| Additional | Total | |||||||||||||||||||
| Common Stock | Paid - in | Accumulated | Stockholders' | |||||||||||||||||
| Shares | Amount | Capital | (Deficit) | Equity (Deficit) | ||||||||||||||||
| Balance, July 31, 2016 | 3,018,000 | $ | 3,018 | $ | 283,113 | $ | (287,429 | ) | $ | (1,298 | ) | |||||||||
| Additional Paid in Capital | ||||||||||||||||||||
| Net (loss) for the year | - | - | (19,852 | ) | (19,852 | ) | ||||||||||||||
| Balance, July 31, 2017 | 3,018,000 | $ | 3,018 | $ | 283,113 | $ | (307,281 | ) | $ | (21,150 | ) | |||||||||
| Additional Paid in Capital | 47,128 | 47,128 | ||||||||||||||||||
| Net (loss) for the year | - | - | (25,366 | ) | (25,366 | ) | ||||||||||||||
| Balance, July 31, 2018 | 3,018,000 | $ | 3,018 | $ | 330,241 | $ | (332,647 | ) | $ | 612 | ||||||||||
For the Years Ended July 31, 20182019 and 2017
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist in understanding the Company's financial statements. The financial statements and notes are the responsibility of the Company's management. These accounting policies conform to accounting principles generally accepted in the United States of America ("US GAAP") and have been consistently applied in the preparation of the financial statements.
Organization:Hartford Great Health Corp. (the "Company" or "Hartford Great Health Corp.") was organized under the laws oforiginally incorporated in the State of Nevada on April 2, 2008.2008 under the name PhotoAmigo, Inc. It changed its name to Hartford Great Health Corp. on August 22, 2018 and since then we have been engaged in activities to formulate and implement our business plan as set forth below.
As of July 31, 2019, the company has issued a total of 99,108,000 shares of common stock. On December 11, 2018, 96,090,000 shares of common stock were issued at the price of $0.02 per share to raise $1,921,800 capital in cash.
On December 28, 2018, the Company acquired Hangzhou Hartford Comprehensive Health Management, Ltd (“HZHF”). On March 22, 2019, the Company acquired 60 percent of Hangzhou Longjing Qiao Fu Vacation Hotel Co., Ltd. (“HZLJ”). On March 20, 2019, the Company acquired Shanghai Hartford Comprehensive Health Management, Ltd. (“HFSH”) and its 90 percent owned subsidiary - Shanghai Qiao Garden International Travel Agency (“Qiao Garden Int’l Travel”), and formed a joint venture entity, Hartford International Education Technology Co., Ltd (“HF Int’l Education”) at the same month.
Basis of Presentation: The consolidated financial statements include the accounts of Hartford Great Health Corp, its wholly-owned subsidiaries, and subsidiaries in which it has a controlling interest. In addition, the Company also consolidate a joint venture for which the Company is deemed to have a controlling financial interest. The Company has not yet realized revenuesreports noncontrolling interests in consolidated entities as a component of equity separate from its planned operations. Its plan was to develop photographic sharingthe Company’s equity. All material inter-company transactions between and networking through its website PhotoAmigo.com. The Company has chosen July 31 as its fiscal year-end. Under the current plan of operation,among the Company intendsand its consolidated subsidiaries have been eliminated in consolidation. The Company’s net income excludes income attributable to sell approximately 97 million shares of HFUS common stock, value at $0.02 cents per share, in China, raising $1.94 million in capital. Upon completion of subsidiary companies established in China, the Company will launch Hangzhou and Shanghai marketing plans to promote the sales of US health products as well as artificial intelligence products related to health and wellness industry. The company intends to raise 6 million US dollars by June 2019, and the funds will be used to invest and acquire 45% ownership of the Hartford Hotel to launch second phase construction of the hotel.
Use of Estimates
Foreign Currency: The accounts of the Company’s foreign subsidiaries are translated in accordance with FASB ASC 830. Foreign currency transaction gains and losses are recognized in other expense, net, at the time they occur. Net foreign currency exchange gains or losses resulting from the translation of assets and liabilities of foreign subsidiaries whose functional currency is not the U.S. dollar are recorded as a part of accumulated other comprehensive loss in stockholders’ equity. The Company does not undertake hedging transactions to cover its foreign currency exposure.
Comprehensive Income (loss):For the year ended July 31, 2019, the Company included its foreign currency translation gain or loss as part of its comprehensive income (loss).
Fair value measurement: Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Accounting Standard Codification (“ASC”) 820, Fair Value Measurements and Disclosures (“ASC 820”), describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:
Level 1 - Quoted prices in active markets for identical assets or liabilities or funds.
Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, current loan receivable, related party receivable, prepaid and other current receivable, accounts payable, related party payable and other current payable. The carrying amounts of afore-mentioned accounts approximate fair value because of their short-term nature.
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Cash and Cash Equivalents
The Company maintains cash with banks in the USA and the statements ofChina. Should any bank holding cash flows,become insolvent, or if the Company considersis otherwise unable to withdraw funds, the Company would lose the cash with that bank; however, the Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks on its cash in banks, depositsbank accounts. In China, a depositor has up to RMB500,000 insured by the People’s Bank of China Financial Stability Bureau (“FSD”). In the United States, the standard insurance amount is $250,000 per depositor in transit, and all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarilyare cash and cash equivalents and accounts receivable. As of temporary cash investments. On July 31, 2018,2019, $20,083 of the Company’s cash and cash equivalents held by financial institutions was uninsured. With respect to accounts receivable, the Company didgenerally does not require collateral and does not have an allowance for doubtful accounts.
Loans and Receivables: As of July 31, 2019, the Company has $362,102 prepaid and other receivable balance, $107,616 short term and $200,000 long term loan receivables from third parties, and $713,612 related party receivables (see Note 13 Related Party Transactions ). The Company evaluates the collectability of its receivables based on a concentrationnumber of credit risk since it had no temporary cash investments in bank accounts infactors. In circumstances where the Company becomes aware of a specific customer’s or borrower’s inability to meet its financial obligations to the Company, a specific reserve for bad debts is estimated and recorded, which reduces the recognized receivable to the estimated amount the Company believes will ultimately be collected. As of July 31, 2019, all balances are collectable.
Property and equipment, net:Property and equipment, net, are stated at cost. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the assets. The estimated useful lives of property and equipment are as follows:
| Years | |
| Leasehold improvements | Lesser of lease term or estimated useful life |
| ROU assets | Lease term |
| Furniture and fixtures | 3-5 |
| Office equipment and vehicles | 3-5 |
| Computer software | 3-5 |
Expenditures for repairs and maintenance are charged to expense as incurred.
Other assets:Other assets consist of the deferred cost of obtaining the finance lease of the land use rights and hotel building at HZLJ, which was acquired by the Company on March 22, 2019. The deferred cost is amortized over the lease term, 41 years commenced on October 2010. See Note 12 Finance Lease. The amortization is computed using the straight-line method over the lease term. As of July 31, 2019, the balance of $673,634 is subject to be amortized over the remaining lease term. Amortization expense for the year ended July 31, 2019, was $7,310.
Goodwill:Goodwill, which represents the excess of the FDIC insured amounts.
Business Combinations:If an acquired set of activities and assets is capable of being operated as a business consisting of inputs and processes from the viewpoint of a market participant, the assets acquired and liabilities assumed are a business. Business combinations are accounted for using the acquisition method of accounting, which requires an acquirer to recognize the assets acquired and the liabilities assumed at the acquisition date measured at their fair values as of that date. Fair value determinations are based on discounted cash flow analyses or other valuation techniques. In determining the fair value of the assets acquired and liabilities assumed in a material acquisition, the Company may utilize appraisals from third party valuation firms to determine fair values of some portion or all of the deferred tax asset will not be realized, the balance of deferred tax assets is reduced by a valuation allowance.
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Noncontrolling interest: The Company adopted ASC 810, Noncontrolling Interests in Consolidated Financial Statements—an Amendment of Accounting Research Bulletin No. 51, as of January 1, 2009. ASC 810 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is reasonably assured. Certain insignificant amounts collected duringdeconsolidated. ASC 810 also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the development, testing,interest of the parent and implementation phases are recorded as a recoverythe interests of development expense.
Advertising costs
Income Taxes:The Company accounts for income taxes using the asset and accordingly, has not recognized any stock-based compensation expense. Hartford Great Health Corp. plans to account for stock-based compensationliability method in accordance with ASC 740, Accounting for Income Taxes. The asset and liability method provides that deferred tax assets and liabilities are recognized for the fair value recognition provisionsexpected future tax consequences of US GAAP. Stock based compensationtemporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be measured atin effect when the grant date baseddifferences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
Reclassifications: Certain amounts on the prior- year statement of operation and statement of cash flows were reclassified to conform to current-year presentation, with no effect on ending stockholders’ equity, net income and cash flows.
Revenue Recognition: The Company is still under restructuring and synergizing its core business upon the estimated fair valuecompletion of multiple acquisitions, limited operations occurred during the awardyear ended July 31, 2019 and 2018. The revenue in 2019 was solely generated from HZLJ. HZLJ generates revenue primarily from the expense will be recognized overroom rentals, sale of food and beverage and other miscellaneous operating income. HZLJ recognizes service revenue when the required employee service period. The fair valuefollowing conditions are met: 1) services are provided; 2) evidence of restricted stock grants will be estimatedan arrangement exists; 3) fees are fixed or determinable; and 4) collection is reasonably assured. Billings to customers for which services are not rendered are considered deferred revenue. As a result, the adoption of ASC 606 has no material impacts on the grant dateCompany’s financial positions. The Company’s revenue is recognized when it satisfies a single performance obligation by transferring control of its products or services to a customer. Control is generally transferred when the Company’s products are either shipped or delivered based uponon the fair valueterms contained within the underlying contracts or agreements. The Company’s general payment terms are short-term in duration. The Company does not have significant financing components or payment terms. The Company did not have any material unsatisfied performance obligations and contract liabilities as of the common stock.
19
Recent Accounting Pronouncements
In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” ASU No. 2018-13 removes certain disclosure requirements related to the fair value hierarchy, modifies existing disclosure requirements related to measurement uncertainty and adds new disclosure requirements. ASU No. 2018-13 disclosure requirements include disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU No. 2018-13 is effective for the Company within those fiscal years beginning on December 15, 2019, with early adoption permitted. Certain disclosures in the new guidance will need to be applied on a retrospective basis and others on a prospective basis. The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believeexpect that the future adoption of any such pronouncements may be expected to causeASU No. 2018-13 will have a material impact on its financial condition orposition, results of operations and liquidity.
In February 2018, the results operations.
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In January 2017, the standard. Entities are permittedFASB issued ASU No. 2017-04, “Intangibles and Other (Topic 350): Simplifying the Test for Goodwill Impairment”, which eliminates the requirement to applycalculate the new standard under the full retrospective method, subjectimplied fair value of goodwill, but rather requires an entity to certain practical expedients, or the modified retrospective method that requires the application of the guidance only to contracts that are uncompletedrecord an impairment charge based on the dateexcess of initial application.a reporting unit’s carrying value over its fair value. This amendment is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company has not yet determinedis currently evaluating the impact of the adoption of this guidanceASU No. 2017-04 on its consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The accounting standard changes the methodology for measuring credit losses on financial instruments and the timing when such losses are recorded. ASU No. 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company is currently evaluating the impact this standard will have on its financial position, results of operations and liquidity.
In February 2016, the FASB issued ASU No. 2016-02,, Leases “Leases (Topic 842)as updated.”. This new standard introduces a new lease model that requires the recognition ofupdate is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and the disclosure ofdisclosing key information about leasing arrangements. While this new standard retains most of the principles of the existing lessor model under U.S. GAAP, it aligns many of those principles with ASC 606: Revenue from Contracts with Customers. The new guidance will beThis update is effective for annual and interim reporting periods beginning after December 31, 2018. Early adoption15, 2018, including interim periods within those fiscal years. In July 2018, the FASB further amended ASU No. 2016-02 and the Company will be permitted for all entities.elect the transition provision permitting it to record existing operating leases on the Consolidated Balance Sheet without adjusting comparative periods. The Company hasintends to elect the package of practical expedients allowing it to not yet determinedreassess prior conclusions related to expired or existing contracts that are or that contain leases, lease classification and the accounting for initial direct costs. These practical expedients must be elected as a package and applied consistently. Operating leases with a term of 12 months or less will not be recorded on the Consolidated Balance Sheet. The Company is currently evaluating the impact of the adoption of this guidancestandard will have on its consolidated financial statements.
NOTE 2. GOING CONCERN
The accompanying financial statements were prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of obligations in the normal course of business. However, Hartford Great Health Corp.'s operations has incurred losses since inception, resulting in an accumulated deficit of $332,647$916,816 as of July 31, 2018.2019. The Company’s operation provided consecutive negative cash flow, $1,259,862 and $26,432 for the years ended July 31, 2019 and 2018, respectively. These conditions raise substantial doubt about the ability of Hartford Great Health Corp. to continue as a going concern.
In view of these matters, continuation as a going concern is dependent upon several factors, including the availability of debt or equity funding upon terms and conditions acceptable to Hartford Great Health Corp., and ultimately achieving profitable operations. Management believes that Hartford Great Health Corp.'s business plan provides it with an opportunity to continue as a going concern. However, management cannot provide assurance that Hartford Great Health Corp. will meet its objectives and be able to continue in operation.
The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of Hartford Great Health Corp. to continue as a going concern.
NOTE 3. STOCKHOLDERS' EQUITY
Preferred Stock
The Company hasis authorized to issue 5,000,000 shares of preferred stock with a par value of $0.001. These$0.001 per share. No shares may beof preferred stock have been issued or outstanding since Inception (April 2, 2008).
Common Stock
The Company is authorized to issue 300,000,000 shares of common stock with a par value of $0.001 per share. 96,090,000 and 0 shares of common stock were issued during the years ended July 31, 2019 and 2018, respectively. The 96,090,000 shares were issued at $0.02 per share totaling $1,921,800 cash received. The total common stocks of 99,108,000 and 3,018,000 shares were issued and outstanding at the year ended July 31, 2019 and 2018, respectively.
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NOTE 4. ACQUISITIONS AND JOINT VENTURES
Acquisition of HZHF
On December 28, 2018, the Company acquired HZHF from a unrelated individual, an entity located at Hangzhou, China. The operation results of HZHF are included in seriesthe Company’s consolidated financial statements commencing on the acquisition date. The Company has recorded an allocation of the purchase price to the Company’s identifiable assets acquired based on their fair value at the acquisition date. No business inputs, process and workforce have been acquired through the transaction. The Company accounted the transaction in accordance with such rightstheAsset Acquisitions guidance, a subsection of FASB ASC 805, Business Combinations. The related transaction costs were immaterial.
The calculation of purchase price and preferencespurchase price allocation is as may be determinedfollowing:
| Identifiable Assets Acquired | ||||
| Cash and cash equivalents | 154 | |||
| Other current assets | 37,964 | |||
| Property and equipment, net | 4,038 | |||
| Deferred Start-up cost, noncurrent | 99,463 | |||
| Total Consideration | 141,619 | |||
Right after the transaction was consummated, the Company fully expensed the deferred start-up cost in accordance with US GAAP.
Acquisition of HZLJ
On March 22, 2019, HZHF acquired 60 percent ownership interest of HZLJ from Shanghai Qiao Garden Property Management Group, Ltd (“Qiao Garden Group”), an affiliate on which the Company’s management has significant influence. The acquisition expands the Company's capabilities in the travel and health management sectors as the hotel is located within walking distance of local tea farms and a protected nature preserve.
The results of operations of the acquired subsidiary are included in the Company’s consolidated financial statements commencing on the acquisition date. The Company has recorded an allocation of the purchase price to the Company’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair value at the acquisition date. The Company accounted the acquisition transaction in accordance with FASB ASC 805, Business Combinations, under acquisition accounting method. The Company classifies the 40 percent ownership interest held by Shanghai Qiaohong Real Estate Co., Ltd., a related party as "Noncontrolling interest" on the consolidated balance sheet. The related transaction costs were immaterial and included in General and administrative expenses in the accompanying consolidated statements of operations. The calculation of purchase price and purchase price allocation is as follows:
| Assets Acquired and Liabilities Assumed | ||||
| Cash and cash equivalents | $ | 15,383 | ||
| Accounts and Other receivables | 13,224 | |||
| Related party receivable | 22,861 | |||
| Property and Equipment, net | 247,940 | |||
| Other assets | 699,066 | |||
| Goodwill | 466,847 | |||
| Accounts payable | (2,671 | ) | ||
| Related party payable | (1,232,512 | ) | ||
| Other account payable | (28,772 | ) | ||
| Other liabilities | (336,051 | ) | ||
| Noncontrolling interest | 240,613 | |||
| Total consideration * | $ | 105,928 | ||
*$16,537 payable due from HZLJ waived by HFHZ plus $89,891 (RMB600,000) cash payment totaled $105,928 consideration for the acquisition.
Goodwill is mainly attributable to synergies expected from the acquisition in hospitality industry and assembled workforce. Other assets and other liabilities are related to the deferred cost of obtaining the finance lease and the finance lease liabilities (see Note 12 Finance Lease). Related party payable consisted the unpaid portion of operating advances made to HZLJ by the affiliates which are under common control by the same management. Amount of $595,939 were due to Qiao Garden Group, which originally owned 60% of HZLJ. And amount of $596,348 were advanced from Shanghai DuBian Assets Management Ltd., which is controlled by the same management. These advances do not bear interest and are considered due on demand. Property and Equipment, net mainly consists of ROU assets, Furniture and fixtures and office equipment.
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Acquisition of HFSH
On March 20, 2019, the Company acquired HFSH and its 90 percent owned subsidiary - Shanghai Qiao Garden International Travel Agency (“Qiao Garden Intl Travel”). The original intent behind the acquisition was to use the travel agency to manage travel and lodging arrangements between China and the US for Chinese members of the anti-aging stem-cell treatment program. The results of operations of the acquired entities are included in the Company’s consolidated financial statements commencing on the acquisition date. The Company has recorded an allocation of the purchase price to the Company’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair value at the acquisition date. The Company accounted the acquisition transaction in accordance with FASB ASC 805, Business Combinations, under acquisition accounting method. The Company classifies the un-acquired 10 percent ownership interest as "Noncontrolling interest" on the consolidated balance sheet. The related transaction costs were immaterial and included in General and administrative expenses in the accompanying consolidated statements of operations. The calculation of purchase price and purchase price allocation is as follows:
| Assets Acquired and Liabilities Assumed | ||||
| Cash and cash equivalents | $ | 35,886 | ||
| Accounts and Other receivables | 92,120 | |||
| Property and Equipment, net | 6,511 | |||
| Related party receivable | 791,445 | |||
| Goodwill | 573,170 | |||
| Other current payable | (3,126 | ) | ||
| Related party payable | (1,073,380 | ) | ||
| Noncontrolling interest | (63,911 | ) | ||
| Total consideration* | $ | 358,715 | ||
*$223,477 payable due to HFHZ waived plus $135,238 (RMB907,737) cash payment totaled $358,715 consideration for the acquisition.
Goodwill is mainly attributable to synergies expected from the acquisition of travel agency license and assembled workforce. Amount of $677,463 related party receivable is due from Shanghai Qiaohong Real Estate Co., Ltd. (“SH Qiaohong”), owning 40 percent equity interest of HZLJ. HFSH loaned the amount to SH Qiaohong for two years on June 21, 2018, the related party loan bears annual interest of six percent. The balance will be paid back by June 30, 2020. Amount of $109,355 is due from one of the directors for business trips and business developing expenses and the amount is going to be reimbursed or paid back within three months. The remaining related party receivable are the operating advances made to multiple companies which are under common control by the same management. These advances do not bear interest and are considered due on demand. Related party payable consisted the unpaid portion of operating advances made to HFSH by the affiliates which are under common control by the same management. These advances do not bear interest and are considered due on demand. The majority advances, amount of $990,665 were from SH Qiaohong. HFSH used the amount for start-up expense and acquisition of 90 percent ownership of Qiao Garden Intl Travel acquisition.
Joint Venture – HF Int’l Education
Effective on March 22, 2019, HFSH entered into a joint venture agreement with SH Jingyu and one individual investor, to form a new entity Hartford International Education Technology Co., Ltd (“HF Int’l Education”) to provide childcare education services. The joint venture is owned 65% by HFSH, 20% by SH Jingyu and 15% by another individual investor. On July 11, 2019, a new agreement has been entered by HFSH, SH Jingyu, the individual investor and another new investor, Shanghai Hao Zhong Ji Educational Tech LLP (“SHHZJ”). Based on the new agreement, the joint venture is owned 58.5% by HFSH, 18% by SH Jingyu, 10% by SHHZJ and 13.5% by the individual investor. HFSH is responsible for the overall development and operation of HF Int’l Education. As a result, HFSH has the majority voting interest with primary beneficiary. The results of operations of HF Int’l Education are included in the Company’s consolidated financial statements commencing on the formation date. The Company classifies the 41.5% ownership interest held by other three parties as "Noncontrolling interest" on the consolidated balance sheet. The registered capital for HF Intl Education is 5 million RMB. As of July 31, 2019, amount of RMB 2.45 million or USD 355,882 capital were injected and the remaining of RMB 2.55 million or US $370,408 is to be contributed by the shareholders.
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Pro Forma Information
The following unaudited pro forma information has been prepared for illustrative purposes only, assumes that the acquisition occurred on August 1, 2017 and includes pro forma adjustments related to the noncontrolling interest allocation and the issuance of 96,090,000 common shares to finance the acquisitions. The unaudited pro forma results have been prepared based on estimates and assumptions, which we believe are reasonable; however, they are not necessarily indicative of the consolidated results of operations had the acquisition occurred on August 1, 2017, or of future results of operations. The unaudited pro forma results are as follows:
| Years ended July 31, | ||||||||
| 2019 | 2018 | |||||||
| Revenues | $ | 162,424 | $ | 197,064 | ||||
| Net Loss | (1,010,870 | ) | (123,548 | ) | ||||
| Less: Net Loss Attributable to | ||||||||
| Noncontrolling Interest | (95,380 | ) | (26,497 | ) | ||||
| Net Loss Attributable to | ||||||||
| Hartford Great Health Corp | $ | (915,490 | ) | $ | (97,051 | ) | ||
| Weighted average shares outstanding: | ||||||||
| Basic and diluted | 99,108,000 | 99,108,000 | ||||||
| Net loss per common share: | ||||||||
| Basic and Diluted | (0.01 | ) | (0.00 | ) | ||||
On January 27, 2019, HFSH entered an agreement with Shanghai Qiao Garden Property Management Group to acquire 85 percent ownership of Shanghai Senior Health Consulting Ltd. (“SH Senior”). On January 28, 2019, HFUS entered an agreement to acquire 100 percent equity interest of Shanghai Luo Sheng International Trade Ltd. (“SH Luosheng”). On February 24, 2019, HFSH entered an agreement to acquire 55 percent ownership of Shanghai Pasadena Ltd. (“SH Pasadena”). During May and June 2019, the Company entered an agreement and a supplemental agreement to acquire 60 percent equity interest of Shanghai Ren Lai Ren Wang Restaurant Co., Ltd. (“SH RLRW”). As of July 31, 2019, these acquisition agreements have not yet taken effective as no consideration has been paid toward those acquisitions. These agreements will be executed when the Company is financially ready to move forward, and the purchase price will be calculated based on the net assets of each entity on the execute date. There was no penalty levied or to be levied due to delayed execution or no-execution of those agreements.
NOTE 5. RESTRICTED CASH
The Company early adopted Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-18, Statement of Directors. SinceCash Flows (Topic 230): Restricted Cash, which requires that restricted cash be included with cash and cash equivalents when reconciling the beginning of year and end of year total amounts shown on the statements of cash flows. The provisions of ASU-2016-18 are effective for the years beginning after December 31, 2019, with early adoption permitted. The restricted cash is collateral required by the local government in China for Qiao Garden Int’l Travel, which with its parent company HFSH, was acquired by the Company on March 20, 2019, to effect its business certificate.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheets that sum to the total of the same such amounts shown in the statements of cash flows.
| July 31, 2019 | July 31, 2018 | |||||||
| Cash and cash equivalents | $ | 269,672 | $ | 1,444 | ||||
| Restricted cash, noncurrent | 29,052 | — | ||||||
| Total cash, cash equivalents and restricted cash shown in the statement of cash flows | $ | 298,724 | $ | 1,444 | ||||
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NOTE 6. LOAN RECEIVABLES, CURRENT AND NONCURRENT
The Company loaned another $99,870 to a third party, Longsheng Aquatic Products Co., Ltd. The loan bears annual interest rate of six percent. The term of loan started from February 14, 2019 and expires on May 13, 2019. On May 12, 2019, the loan has been extended for another year, expires on May 13, 2020. $2,780 of interest income was recognized during the year ended July 31, 2019.
The Company loaned $300,000 to a third party, Hong Kong Hong Tai Int’l Trade Limited. The loan bears annual interest rate of six percent. The term of loan is six months, started from December 28, 2018 and expires on June 27, 2019. The loan has been fully paid back on February 5, 2019. The Company loaned another $200,000 to Hong Kong Hong Tai Int’l Trade Limited. The loan bears annual interest rate of six percent. The term of loan started from March 4, 2019 and expires on September 3, 2019. Subsequently on August 30, 2019, the loan has been extended to September 3, 2020. $6,890 of interest income was recognized during the year ended July 31, 2019.
Loan receivables are not exposed to market risk due to the stable and fixed interest rates in accordance with the loan agreements. As of July 31, 2019, the estimated fair value of long term loan receivable, including the current portion was approximately $204,561.
NOTE 7. OTHER CURRENT RECEIVABLE
As of July 31, 2019, other current receivable, amount of $ 362,102, mainly consists of rental and property associate fee prepayments, deposits, and employee operating advances.
NOTE 8. PROPERTY AND EQUIPMENT, NET
Property and equipment, net consists of the following at July 31, 2019 and 2018:
| July 31, | July 31, | |||||||
| 2019 | 2018 | |||||||
| Leasehold improvements | $ | 23,366 | $ | — | ||||
| ROU assets (See Note 12) | 272,860 | — | ||||||
| Furniture and fixtures | 235,360 | — | ||||||
| Office equipment and vehicles | 68,859 | 2,792 | ||||||
| 600,445 | 2,792 | |||||||
| Less: accumulated depreciation and amortization | (346,861 | ) | (2,792 | ) | ||||
| $ | 253,584 | $ | — | |||||
Depreciation expense for the years ended July 31, 2019 and 2018, was $ 6,411 and $ 530, respectively.
NOTE 9. GOODWILL
The following is a roll-forward of goodwill for the year ended July 31, 2019:
| Hangzhou Longjing Qiao Fu Vacation Hotel | HFSH and Shanghai Qiao Garden Int'l Travel Agency | Total | ||||||||||||
| Balance at July 31, 2018 | $ | — | $ | — | $ | — | ||||||||
| Acquisitions | 466,847 | 573,170 | 1,040,017 | |||||||||||
| Balance at July 31, 2019 | $ | 466,847 | $ | 573,170 | $ | 1,040,017 | ||||||||
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NOTE 10. OTHER CURRENT PAYABLE
The following is a breakdown of the accounts and other payables as of July 31, 2019:
| Payable to Acquiree | 131,856 | |||
| Other payables | 44,000 | |||
| Total Other current payables | 175,856 |
Payable to acquiree is the unpaid consideration for the acquisitions described in Note 4 Acquisitions and Joint Venture.
NOTE 11. OTHER LIABILITIES
Other liabilities mainly consist of the lease liabilities. See Note 12 Finance Lease.
NOTE 12. FINANCE LEASE
The finance lease was obtained through HZLJ acquisition on March 22, 2019 (See Note 4 Acquisitions and Joint Venture). On October 1, 2010, HZLJ leased the land and hotel building for 41 years. At the inception of a contract, the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefit from the use of the asset throughout the term, and (3) whether the Company has the right to direct the use of the asset. The lease is classified as finance leases based on criteria in Accounting Standards Codification (“ASC”) 842. The finance lease is included in Property and Equipment and Other Liabilities in the balance sheet. Right-of-use (“ROU”) assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As the lease did not issued any preferred shares.
Finance lease right-of-use assets represent the Company's right to use an underlying asset for the lease term and outstanding common stock atlease liabilities represent the Company's obligation to make lease payments arising from the lease. As of July 31, 2018 is 3,018,000 common shares,
| July 31, | ||||
| 2019 | ||||
| Finance lease right-of-use assets, cost | $ | 272,860 | ||
| Less: accumulated amortization | (58,787 | ) | ||
| Finance lease right-of-use assets, net | $ | 214,073 | ||
| Finance lease liabilities – current | $ | (20,336 | ) | |
| Finance lease liabilities – noncurrent | (315,710 | ) | ||
| Total Lease Liabilities | $ | (336,046 | ) | |
The components of lease cost for the twelve monthsyear ended July 31, 2018 and 2017, stockholders contributed $25,948 and $21,180, respectively. These contributions were made2019:
| July 31, | ||||
| Finance leases: | 2019 | |||
| Amortization of ROU assets | $ | 6,655 | ||
| Interest on finance lease liabilities | 25,134 | |||
| Finance lease cost | $ | 31,789 | ||
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The following table reconciles the undiscounted future lease payments to fund the Company's ongoing operations and were converted to additional paidfinance leases recorded in capitalthe balance sheet at the end of 2018year ended July 31, 2019:
| July 31, | ||||||
| 2019 | ||||||
| 2020 | $ | 20,336 | ||||
| 2021 | 21,062 | |||||
| 2022 | 21,789 | |||||
| 2023 | 22,515 | |||||
| 2024 and thereafter | 968,871 | |||||
| Total lease payments | 1,054,573 | |||||
| Less interest | (718,527 | ) | ||||
| Total (included in Other Liabilities) | $ | 336,046 | ||||
The related cost to obtain this finance lease in the amount of $47,128.
| Period Ending | Estimated NOL carry-forward | NOL expires | Estimated tax benefit from NOL and other tax benefits (20%) | Valuation allowance | Change in valuation allowance | Net tax asset | ||||||||||||||||||
| July 31, 2017 | $ | 307,280 | 2037 | $ | 61,000 | $ | (61,000 | ) | $ | (4,000 | ) | $ | - | |||||||||||
| July 31, 2018 | $ | 332,647 | 2038 | $ | 66,000 | $ | (66,000 | ) | $ | (5,000 | ) | $ | - | |||||||||||
| 2018 | 2017 | |||||||
| Income tax benefit at statutory rate | (20 | %) | (20 | %) | ||||
| Deferred income tax valuation allowance | 20 | % | 20 | % | ||||
| Reported tax rate | 0 | % | 0 | % | ||||
| 2020 | $ | 21,789 | ||||
| 2021 | 21,789 | |||||
| 2022 | 21,789 | |||||
| 2023 | 21,789 | |||||
| 2024 and thereafter | 586,478 | |||||
| Total | $ | 673,634 |
NOTE 5.13. RELATED PARTY TRANSACTIONS
Equity Transactions
On October 2018, the Company refunded $1,430 of the additional paid in capital to the former CFO.
On December 11, 2018, the Company sold 96,090,000 shares of its common stock to various investors, including 54,040,000 shares sold to its Officers and Directors with proceeds of $1,080,800. The whole amount of proceeds has been collected.
During the twelve monthsyear ended July 31, 2018, the Company converted prior borrowings of $47,128 from four stockholders to additional paid in capital. The stockholders have not received any equity for these advances from stockholders which were previously expected to be repaid by the Company. Under the terms of the arrangement, simple interest accrued on these advances at 2% annually but this was forgiven. Principal and interest were due upon the sale of the company or upon demand. Stockholders have forgiven $237 of accrued interest for the twelve months ended July 31, 2018 related to these advances. At the year-end date of July 31, 2018 there were $-0- advances from the stockholders and consequently there was no accrued interest related to these advances.
During the twelve months ended July 31, 2018, stockholders contributed $25,948. These contributions were made to fund the Company's ongoing operations and have been credited to additional paid in capital.
Related Party Receivables
As of July 31, 2019, amount of $ 674,524 is receivable from Shanghai Qiaohong Real Estate Co., Ltd. (“SH Qiaohong”), owning 40 percent equity interest of Longjing. The balance was acquired through HFSH acquisition. HFSH loaned the amount to SH Qiaohong for two years on June 21, 2018, the related party loan bears annual interest of six percent. The balance will be paid back by June 30, 2020. $ 14,099 of interest income was recognized during the year ended July 31, 2019.
The remaining related party receivable of $ 39,088 as of July 31, 2019, represents the operating advances made to the affiliates which are under common control by the same management. These advances do not bear interest and are considered due on demand.
On October 2018, the Company borrowed $30,000 from a potential investor to fund the Company's ongoing activities. It was an indefinite short-term loan with no interest bearing. The potential investor has not received any equity for this loan and this loan was paid back by the Company in the following quarter.
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Related Party Payables
As of July 31, 2109, amount of $ 526,963 is payable to SH Qiaohong. The balance was part of the liability assumed by the company through HFSH acquisition. The original owner of HFSH used the amount from SH Qiaohong for start-up expense and 90 percent of Qiao Garden Intl Travel acquisition. This payable balance does not bear interest and is considered due on demand.
As of July 31, 2109, amount of $ 602,821 is payable to Shanghai Qiao Garden Property Management Group (“Qiao Garden Group”). The balance was part of the liability assumed by the company through HZLJ acquisition. Qiao Garden Group originally owned HZLJ’s 60% share. Qiao Garden Group paid RMB 4 million in 2010 on behalf of HZLJ for lease rights acquisition. This payable balance does not bear interest and is considered due on demand.
The remaining related party payable of $ 197,775 as of July 31, 2019, represents the unpaid portion of operating advances made to the Company by following affiliates which are under common control by the same management. These advances do not bear interest and are considered due on demand.
| Shanghai Senior Investment Ltd. | 106,866 | |||
| Shanghai Oversea Chinese Culture Media Ltd. | 50,808 | |||
| Various affiliates | 40,101 | |||
| 197,775 |
As of July 31, 2019, the Company has $ 585,146 long term payable to Shanghai DuBian Assets Management Ltd., which is owned by the Company’s CEO’s relative. The payable balance was assumed from the acquisition transaction. On April 30, 2019, both parties entered a long-term agreement to convert the payable to long term debt, which expires on April 30, 2021, bearing with approximately 2.5 percent of annual interest. $ 3,739 of interest expense was recognized during the year ended July 31, 2019. The unpaid principle and interest will be due on the maturity date. This loan payable are not exposed to market risk due to the stable and fixed interest rates in accordance with the loan agreements. As of July 31, 2019, the estimated fair value of long term loan payable was approximately $584,674.
Other Related Party Transaction
Office space is provided to Hartford Great Health Corp. at no additional cost by the sole executive officer. No provision for these costs has been included in these financial statements as the amounts are not material.
NOTE 14. COMMITMENTS
During the twelve monthsyear ended July 31, 2019, the Company acquired multiple entities and formed a joint venture entity, each entity maintains its own leased office building and property. As of July 31, 2019, future minimum rent payments under these lease agreements are as follows:
| Minimum | ||||||
| Lease | ||||||
| Obligations | ||||||
| Years ending July 31: | ||||||
| 2020 | 926,260 | |||||
| 2021 | 953,990 | |||||
| 2022 | 883,552 | |||||
| 2023 | 448,908 | |||||
| 2024 | 377,208 | |||||
| Thereafter | 917,848 | |||||
| 4,507,766 | ||||||
Rental expense under all operating leases totaled $ 301,277 for the year ended July 31, 2019, respectively. Rent expense totaled $0 for the year ended July 31, 2018.
The Company has entered into an agreement with the Company’s legal consultant. The monthly retainer of $2,500 for the legal consultant’s service.
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NOTE 15. INCOME TAXES
For the years ended July 31, 2019 and 2018, we recorded income tax expense of $0, respectively due to the loss position in the years since inception.
Hartford Great Health Corp.'s deferred tax assets, valuation allowance, and change in valuation allowance are as follows:
| Period Ending | Net NOL carry-forward | NOL expires | Estimated tax benefit from NOL and other tax benefits | Valuation allowance | Change in valuation allowance | Net deferred tax asset | ||||||
| July 31, 2018 | $ | 332,647 | 2038 | $ | 66,000 | $ | (66,000) | $ | (5,000) | $ | - | |
| July 31, 2019 | $ | 916,816 | 2039 | $ | 275,045 | $ | (275,045) | $ | (209,045) | $ | - | |
Income taxes at the statutory rate are reconciled to reported income tax expense (benefit) as follows:
| 2019 | 2018 | |||||||
| Income tax benefit at statutory rate | (27.5 | )% | (20.0 | )% | ||||
| Foreign tax difference | (2.5 | )% | — | |||||
| Deferred income tax valuation allowance | 30.0 | % | 20.0 | % | ||||
| Income tax expense/(benefit) rate | — | % | — | % | ||||
At this time, the Company is unable to determine if it will be able to benefit from its deferred tax asset. There are limitations on the utilization of net operating loss carry-forwards, including a requirement that losses be offset against future taxable income, if any. In addition, there are limitations imposed by certain transactions which are deemed to be ownership changes. Accordingly, a valuation allowance has been established for the entire deferred tax asset. Other temporary differences and estimated permanent differences are considered immaterial. Open tax years subject to examination by the IRS range from August 1, 2015 to the present. The Company has no uncertain tax positions.
On December 22, 2017, stockholders contributed $25,948the President of the United States signed into law the Tax Reform Act. The Tax Reform Act permanently reduces the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. In addition, the 2017 Tax Act also creates a new requirement that certain income (i.e., Global Intangible Low-Taxed Income (“GILTI”)) earned by controlled foreign corporations (“CFCs”) must be included in the gross income of the CFCs’ U.S. shareholder income.
The tax law in PRC applies an income tax rate of 25% to all enterprises. The Company’s subsidiary does not receive any preferential tax treatment from local government.
The Company has been in loss position for years since inception and $21,180, respectively. These contributions were made to fundzero balances of tax provisions, deferred tax assets and liabilities as of the Company's ongoing operationsreporting periods ended. The tax reforms have no significant impacts on the Company.
NOTE 16. SEGMENT INFORMATION
The Company currently operates in one industry segment, being the hospitality housing and have been credited to additional paidtravel agency services through its subsidiaries in capital. China. As of July 31, 2019, the subsidiary had an amount of $2,547,989 in total assets, excluding inter-company balances, and it generated $56,174 in revenue. There was no revenue generated from inter-company transactions.
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NOTE 6.17. SUBSEQUENT EVENTS
In accordance with ASC 855, "Subsequent Events", the Company has evaluated events subsequent to July 31, 2018events through the date of available issuance of these unaudited financial statements and has noted the following subsequent events to be disclosed.
On September 30, 2019, HF Int’l Education entered a long term debt agreement with a related party party, SH Qiao Hong. The debt agreement provides a line of credit not to exceed RMB 9.0 million and expires on November 14, 2018.September 30, 2021, bearing with approximately 3.0 percent of annual interest. The three major events were a change of management, a change of majority shareholders,unpaid principle and a name change.
On September 30, 2019, HF Int’l Education entered another long term debt agreement with a related party party, Shanghai Oversea Chinese Culture Media Ltd. The debt agreement provides a line of credit not to exceed RMB 5.0 million and expires on September 30, 2021, bearing with approximately 3.0 percent of annual interest. The unpaid principle and interest will be due on the maturity date.
The purpose of the loans is to invest in Hartford International Education Technology (Shanghai) Co., Ltd. (HF Int’l Education).
HF Int’l Education have its first early childhood education center in PuDong, Shanghai. The soft opening began on September 20, 2019, and the official grand opening is on October 28, 2019. Up until October 17, 2019, student pre-enrollments have generated approximately RMB280,000 in revenue.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
An evaluation was performed under the supervision of our management, including our Chief Executive Officer and Chief Financial Officer (principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Annual Report. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that, as of July 31, 2018, our disclosure controls and procedures were not effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms due to material weaknesses in our internal controls described below.
Management's Annual Report on Internal Control Over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Exchange Act Rule 13a-15(f). Our internal control system is intended to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published financial statements and that we have controls and procedures designed to ensure that the information required to be disclosed by us in our reports that we will be required to file under the Exchange Act is accumulated and communicated to our management as appropriate to allow timely and informed decisions regarding financial disclosure.
Our management assessed the effectiveness of our internal control over financial reporting as of July 31, 2018.2019. Based on this assessment, management believes that as of July 31, 2018,2019, our internal control over financial reporting was not effective based on those criteria.
Management's assessment identified several material weaknesses in our internal control over financial reporting. These material weaknesses include the following:
·
·
Lack ofInherent Limitations Over Internal Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Our control systems are designed to provide such reasonable assurance of achieving their objectives. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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23
We have made no change in our internal control over financial reporting during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Attestation Report of the Registered Public Accounting Firm.
This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management's report in this annual report on Form 10-K.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
The following individual presently serves as our sole officerofficers and director:
| Board | |||||||||
| Name and | Position | ||||||||
| Municipality of Residence | Age | Positions With the Company | Held Since | ||||||
Xin Dong Los Angeles, CA | 34 | President, Chief Executive Officer and Director | 2018 | ||||||
Sheng-Yih Chang Los Angeles, CA | 46 | Chief Financial Officer, Secretary and Director | 2018 | ||||||
Xueying Song Los Angeles, CA | 34 | Director | 2018 | ||||||
| Board | ||||||||
| Name and | Position | |||||||
| Municipality of Residence | Age | Positions With the Company | Held Since | |||||
Lianyue Song Los Angeles, CA | 60 | President, Chief Executive Officer and Director | 2019 | |||||
Sheng-Yih Chang Los Angeles, CA | 48 | Chief Financial Officer, Secretary and Director | 2018 | |||||
Yuan Lu Shanghai, CHINA | 33 | Director | 2019 | |||||
Xueying Song Los Angeles, CA | 35 | Director | 2019 | |||||
Xin Dong Los Angeles, CA | 35 | Director | 2018 | |||||
Each of the directors will serve until the next annual meeting of stockholders of the Company and until such director’s successor is elected and qualified or until such director’s earlier death, resignation or removal. The following is information concerning the business backgrounds of each member of the board of directors:
Lianyue Song.Mr. Dong,Lianyue Song was born in Jiangsu, China. Since 1976, from an ordinary small business owner to today's business leader, Qiao Garden Group founder, Chairman and President, for the past 35 years. Mr. ChangSong graduated from Renmin University of China, major in Journalism Professional Photography, and won the "Ten Outstanding Chinese Photographer" title in 1987. In 1989, he was resigned from Naval Air Force as a Lieutenant Commander and started his business and worked very hard to build this "Qiao Garden Business Empire". Over 20 years, Mr. Song:
| 36 |
Sheng Yih Chang. Mr. Chang has served as the General Manager at Hartford Hotel, a commercial hotel in Rosemead California since March 2018. Mr. Chang served as a Product Manager at Jowett Group, a textile manufacturing company in the USA, from November 2015 through September 2017, as an Operational Manager and General Manager at A-Concepts Designs, a houseware supplier company in the USA, from January 2004 through October 2015, as a General Manager at Long Arch International, a carving crafts supplier in the USA, from December 2000 through December 2003, as a Sales Manager at EZ Wholesale, a general merchandise wholesaler in the USA, from July 1998 through November 2000, and as a technician at Richcom Computer Corporation, a computer service provider in China, from July 1996 through November 1997. Mr. Chang studied electrical engineering at the University of British Columbia and holds a Bachelor of Science in Electrical Engineering from California State University, Northridge.
24
Xueying Song. Mr. Xueying Song has served as the Vice President of Hangzhou Haofu Health Management Company, a medical device provider and health product manufacturer in China, since 2017. Mr. Song served as the Vice President of Financing Operations at China Fang Group Investment Company, an investment company focus on real estate development in China, from 2016 through 2017, as the Deputy Chief Executive Officer of China Fang Group Assets Corporation, an assets management company in China, from 2013 through 2016, as a Vice President at Suwu Futures Group Corporation, a company that focus on futures investment and management in China, from 2010 through 2013, as the Deputy Manager of the Asset Management Department at Hongye Futures Group Corporation, a futures investment and management company in China, from 2008 through 2010, as a Regional Director at Huatai Securities Co., Ltd., a security company in China, from 2006 through 2008, and as a Business Manager at Xintai Securities, a security company in China, from 2001 through 2006. Mr. Song holds a Bachelor of Science and Management Degree in Civil Engineering from Southeast University in China and a Law Degree from Nanjing University of Science and Technology.
Yuan Lu. Ms. Lu graduated in 2008 with a Bachelor's Degree from Anhui University of Technology in China majoring in International Trade and Economics. In 2013, Ms. Lu earned a Master's Degree in International Language Arts from Shanghai University of Finance and Economics in China. From 2008-2009, Ms. Lu was an Assistant Teacher at New Channel International Educated Group, Ltd. From 2009-2010, Ms. Lu was a Customs Broker and Procurement Buyer at Shanghai Pan-Resources Imp&Exp Co., Ltd. From 2010 through the present, Ms. Lu has served as the Assistant CEO at Shanghai Overseas Chinese Culture Media Co., Ltd.
Xin Dong. Mr. Dong has served as the Executive Director and General Manager of Shanghai Huitong Health Management Company, a senior care and traditional health management company, in China since September 2017. From July 2016 through August 2017, Mr. Dong acted as the Vice President and General Manager of Shanghai Huicai Financial Information Service Co., Ltd., a financial service and small loan company, in China. Mr. Dong has also served as the General Manager of Shenzhen Maoli International Trading Co., Ltd., an international trading company in Shenzhen, China, from April 2012 through June 2016, and as a Project Manager and Market Representative at Nanjing Hongyuan Electronic Technology Company, an electronics manufacturing company, from July 2007 through March 2012. Mr. Dong holds a Masters in International Finance and Trade from Shanghai Jiaotong University and a degree in Computer Science from Jiangsu University.
Term of office
All officers and directors listed above will remain in office until the next annual meeting of our stockholders, and until their successors have been duly elected and qualified or until removed from office in accordance with our bylaws. There are no agreements with respect to the election of Directors. We have not compensated our Directors for service on our Board of Directors, any committee thereof, or reimbursed for expenses incurred for attendance at meetings of our Board of Directors and/or any committee of our Board of Directors. Officers are appointed annually by our Board of Directors and each Executive Officer serves at the discretion of our Board of Directors. We do not have any standing committees. Our Board of Directors may in the future determine to pay Directors’ fees and reimburse Directors for expenses related to their activities.
None of our Officers and/or Directors have filed any bankruptcy petition, been convicted of or been the subject of any criminal proceedings or the subject of any order, judgment or decree involving the violation of any state or federal securities laws within the past five (5) years.
Director Independence
The Board consists of threefive members, none of whom meet the independence requirements of the Nasdaq Stock Market as currently in effect.
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Committees and Terms
The Board of Directors (the “Board”) has not established any committees. The Company will notify its shareholders for an annual shareholder meeting and that they may present proposals for inclusion in the Company’s proxy statement to be mailed in connection with any such annual meeting; such proposals must be received by the Company at least 90 days prior to the meeting. No other specific policy has been adopted in regard to the inclusion of shareholder nominations to the Board of Directors.
Code of Ethics
To date, we have not adopted a Code of Ethics applicable to our principal executive officer and principal financial officer because the Company has no meaningful operations.operations within the United States of America. The Company does not believe that a formal written code of ethics is necessary at this time. We expect that the Company will adopt a code of ethics if and when the Company successfully completes a business combination that results in the acquisition of an on-going business and thereby commences operations.
ITEM 11. EXECUTIVE COMPENSATION
Beginning January 1, 2019, a monthly payroll salary of $3,000 has been offered to Sheng-Yih Chang, the Company’s CFO. No other officer or director has received annual compensation since the inception of the Company.compensation. There has been no compensation awarded to, earned by, or paid to the named executive officer or director.director other than the CFO’s wage. There is no current compensation to the executive officers planned for the next three years.year. Such compensations will be brought to discussion in next board meeting.
Employment Agreements
The Company has not entered into employment agreements with any of its employees or officers as of July 31, 2018.
25
Except for the monthly wage paid to the CFO, the Company has not to date paid any other compensation to any officer or director nor is any compensation ownedowed to any officer or director as of date hereto. The Company intends to begin to pay annual salaries to all its officers and will pay an annual stipend to its directors when, and if, it completes a primary public offering for the sale of securities and/or the Company reaches profitability, experiences positive cash flow and/or obtains additional funding. At such time, the Company anticipates offering cash and non-cash compensation to officers and directors. In addition, although not presently offered, the Company anticipates that its officers and directors will be provided with a group health, vision and dental insurance program at subsidizes rates, or at the sole expense of the Company, as may be determined on a case-by-case basis by the Company in its sole discretion.
Stock Option Plan
We do not have a stock option plan and we have not issued any warrants, options or other rights to acquire our securities. However, we may adopt an incentive and non-statutory stock option plan in the future.
Employee Pension, Profit Sharing or other Retirement Plans
We do not have a defined benefit, pension plan, profit sharing or other retirement plan, although we may adopt one or more of such plans in the future.
Section 16(a) Beneficial Ownership Reporting Compliance
We are not registered under the Securities Exchange Act of 1934, as amended, and are not subject to the reporting requirements of Section 16(a).
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
As of November 14, 2018,2019, there are a total of 3,018,00099,108,000 shares of our common stock outstanding, our only class of voting securities currently outstanding. The following table describes the ownership of our voting securities by: (i) each of our officers and directors; (ii) all of our officers and directors as a group; and (iii) each shareholder known to us to own beneficially more than 5% of our common stock. All ownership is direct, unless otherwise stated.
| Name and Address of | Shares Beneficially Owned | Percentage | ||||||
| Beneficial Owner | Number | (%) | ||||||
Xin Dong, CEO/President/Director 8832 Glendon Way Rosemead, CA 91770 | 2,400,000 | 79.5 | % | |||||
| Sheng-Yih Chang, CFO/Secretary/Director | 200,000 | 6.6 | % | |||||
8832 Glendon Way Rosemead, CA 91770 | ||||||||
| Xueying Song, Director | 200,000 | 6.6 | % | |||||
8832 Glendon Way Rosemead, CA 91770 | ||||||||
| Total Officers and Directors (3) | 2,800,000 | 92.7 | % | |||||
| Name of Beneficial Owner | Address of Beneficial Owner | Shares Beneficially Owned Number | Percentage (%) | |||||||
| YUAN LU | RM 3806 218 WUSONG RD,HONGKOU DISTRICT SHANGHAI,CHINA | 32,440,000 | 32.7 | % | ||||||
| LIANYUE SONG | 8832 GLENDON WAY,ROSEMEAD,CA 91770 | 20,000,000 | 20.2 | % | ||||||
| XIN DONG | 8832 GLENDON WAY,ROSEMEAD,CA 91770 | 2,400,000 | 2.4 | % | ||||||
| XUEYING SONG | 8832 GLENDON WAY,ROSEMEAD,CA 91770 | 1,000,000 | 1.0 | % | ||||||
| SHENG-YIH CHANG | 8832 GLENDON WAY,ROSEMEAD,CA 91770 | 1,000,000 | 1.0 | % | ||||||
| Total Officers and Directors (5) | 56,840,000 | 57.4 | % | |||||||
Each shareholder known to us to own beneficially more than 5% of our common stock:
| Name of Beneficial Owner | Address of Beneficial Owner | Shares Beneficially Owned Number | Percentage (%) | |||||||
| DANFENG GU | RM 218 WUSONG ROAD, HONGKOU DISTRICT, SHANGHAI, CHINA | 18,400,000.00 | 18.6 | % | ||||||
| GESHENG LU | 1F QIAO GARDEN 73, WUHUA RD HONGKOU DISTRICT, SHANGHAI, CHINA | 4,950,000.00 | 5.0 | % | ||||||
| HONG WANG | 729 CARRIAGE HOUSE DR., ARCADIA, CA 91006 | 10,000,000.00 | 10.1 | % | ||||||
Changes in Control
Effective June 11, 2018January 1, 2019 Xin Dong resigned from his position as President/CEO and Lianyue Song became the President/CEO/Director, Sheng-Yih Chang became the Secretary/CFO/Director, and Xueying song became the Director of Hartford Great Health Corp. replacing Robert Heckes.Yuan Lu became a Director of Hartford Great Health Corp.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
On October 2018, the Company borrowed $30,000 from a potential investor to fund the Company's ongoing activities. It was an indefinite short-term loan with no interest bearing. The potential investor has not received any equity for this loan and this loan is paid back by the Company in the following quarter.
On October 2018, the Company refunded $1,430 of the additional paid in capital to the former CFO.
On December 11, 2018, the Company sold 96,090,000 shares of its common stock to various investors, including 54,040,000 shares sold to its Officers and Directors with proceeds of $1,080,800. The whole amount of proceeds has been collected.
During the twelve months ended July 31, 2018, the Company converted $47,128 from four stockholders from advances from stockholders to additional paid in capital. The stockholders have not received any equity for these advances from stockholders which are expected to be repaid by the Company. Under the terms of the arrangement, simple interest accrues on these advances at 2% annually. Principal and interest are due upon the sale of the company or upon demand.demand. The stockholders have forgiven $237 of accrued interest for the twelve months ended July 31, 2018 related to these advances.
During the twelve months ended July 31, 2018, stockholders contributed $25,948 .These contributions were made to fund the Company's ongoing operations and have been credited to additional paid in capital.
Office space is provided to Hartford Great Health Corp. at no additional cost by the sole executive officer. No provision for these costs has been included in these financial statements as the amounts are not material.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table sets forth fees billed by our principal accounting firms of Simon & Edward, LLP and Haynie & Company and Pritchett, Siler, and Hardy P.C. in the last two years ended July 31, 2018:
| 2018 | 2017 | |||||||
| Audit Fees | $ | 9,900 | $ | 9,000 | ||||
| Audit Related Fees | 3,642 | 2,138 | ||||||
| Tax Fees | 0 | 0 | ||||||
| All Other Fees | 0 | 0 | ||||||
| Total Fees | $ | 13,542 | $ | 11,138 | ||||
| 2019 | 2018 | |||||||
| Audit Fees | $ | 18,000 | $ | 9,900 | ||||
| Audit Related Fees | 44,000 | 3,642 | ||||||
| Tax Fees | — | — | ||||||
| All other fees | — | — | ||||||
| Total Fees | $ | 62,000 | $ | 13,542 | ||||
It is the policy of our Board of Directors to engage the principal accounting firm selected to conduct the financial audit for our company and to confirm, prior to such engagement, that such principal accounting firm is independent of our company. All services of the principal accounting firm reflected above were approved by the Board of Directors.
PART IV
ITEM 15. EXHIBITS,
The following documents are filed as part of this Annual Report:
| 1. | Consolidated Financial Statements |
Our consolidated financial statements are listed under Part II, Item 8, of this Annual Report.
| 2. | Financial Statement Schedules |
All financial statement schedules have been omitted because they are not required or are not applicable, or the required information is shown in our Consolidated Financial Statements or the notes thereto.
| 3. | Exhibits |
The following exhibits are filed with or incorporated by referenced in this report:
101 Interactive Data Files
Item 16—Form 10-K Summary
None.
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27 SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| HARTFORD GREAT HEALTH CORP. | ||
| Date: November 14, | By: | /s/ |
Lianyue Song Chief Executive Officer | ||
Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Name | Title | Date | ||
| /s/ | Chief Executive Officer, President, Dir. | November 14, | ||
| (Principal Executive Officer) | ||||
| /s/ Sheng-Yih Chang | Chief Financial Officer | November 14, | ||
| Sheng-Yih Chang | (Principal Accounting Officer) | |||
| /s/ Xueying Song | Director | November 14, | ||
| Xueying Song |
| /s/ Yuan Lu | Director | November 14, 2019 | ||
| Yuan Lu | ||||
| /s/ Xin Dong | Director | November 14, 2019 |
Xin Dong
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