HFUS 10-Q/A
Hartford Creative Group, Inc. (HFUS)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Amendment No.1
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF |
1934 For the quarterly period ended:
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from ________ to ________ |
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification Number)
(Address of Principal Executive Offices) (Zip Code)
Registrant’s
telephone number including area code:
Former name, former address, and former fiscal year, if changed since last report
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by checkmark whether the registrant is a large 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 ☐ |
| Smaller
reporting company | |
| Emerging
growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ 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 | ||
| 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: shares of common stock outstanding as of January 16, 2025.
EXPLANATORY NOTE
| (a) | To update Note 9, “Subsequent Events to Condensed Consolidated Financial Statements (unaudited),” in Part I of Form 10-Q, by adding the disposal of the non-operating entity, SHDZ, as a subsequent event. |
Except as described above, this Amendment No. 1 does not amend, modify, or otherwise update any other information in the Original Filing and does not reflect other events occurring after the filing of the Original Filing.
Index
| 2 |
HARTFORD CREATIVE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| October 31, 2024 | July 31, 2024 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Advance to contractor | ||||||||
| Current loan receivable | ||||||||
| Related party receivable* | ||||||||
| Prepaid and Other current receivables | ||||||||
| Total Current Assets | ||||||||
| Non-current Assets | ||||||||
| Property and equipment, net | ||||||||
| ROU assets-operating lease | ||||||||
| Deferred tax assets | ||||||||
| Total Non-current Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Related party loan and payables* | ||||||||
| Contract liabilities | ||||||||
| Current operating Lease liabilities | ||||||||
| Other current payable | ||||||||
| Non-interest-bearing payable* | ||||||||
| Total Current Liabilities | ||||||||
| Lease liabilities, noncurrent | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ Equity (Deficit) | ||||||||
| Preferred stock - $ par value, shares authorized, shares issued and outstanding | ||||||||
| Common stock - $ par value, shares authorized, shares outstanding at both of October 31, 2024 and July 31, 2024. | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
| * |
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.
| 3 |
HARTFORD CREATIVE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
| Three months ended | ||||||||
| October 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenue | $ | $ | ||||||
| Operating cost and expenses: | ||||||||
| Cost of revenue | ||||||||
| Selling, general and administrative expenses | ||||||||
| Total operating cost and expenses | ||||||||
| Operating income (loss) | ( | ) | ||||||
| Other expense | ||||||||
| Interest expense, net | ( | ) | ( | ) | ||||
| Other expense, net | ( | ) | ||||||
| Other expense, net | ( | ) | ( | ) | ||||
| Income (loss) before income taxes | ( | ) | ||||||
| Income Tax Expense | ||||||||
| Net income (loss) | ( | ) | ||||||
| Net income per common share: | ||||||||
| Basic and diluted | $ | $ | ||||||
| Weighted average shares outstanding: | ||||||||
| Basic and diluted | ||||||||
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.
| 4 |
HARTFORD CREATIVE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
| Three months ended | ||||||||
| October 31, | ||||||||
| 2024 | 2023 | |||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Other Comprehensive (loss) income, net of income tax | ||||||||
| Foreign currency translation adjustments | ( | ) | ||||||
| Total Other Comprehensive (loss) Income | ( | ) | ||||||
| Total Comprehensive income | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.
| 5 |
HARTFORD CREATIVE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
| Accumulated | Total | |||||||||||||||||||||||
| Additional | Other | Stockholders’ | ||||||||||||||||||||||
| Common Stock | Paid - in | Accumulated | Comprehensive | Equity | ||||||||||||||||||||
| Shares | Amount | Capital | (Deficit) | Income (loss) | (Deficit) | |||||||||||||||||||
| Balance, July 31, 2024 | ( | ) | ( | ) | ||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, October 31, 2024 (unaudited) | ( | ) | ( | ) | ||||||||||||||||||||
| Accumulated | Total | |||||||||||||||||||||||
| Additional | Other | Stockholders’ | ||||||||||||||||||||||
| Common Stock | Paid - in | Accumulated | Comprehensive | Equity | ||||||||||||||||||||
| Shares | Amount | Capital | (Deficit) | income | (Deficit) | |||||||||||||||||||
| Balance, July 31, 2023 | ( | ) | ( | ) | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Foreign currency translation adjustment | - | |||||||||||||||||||||||
| Balance, October 31, 2023 (unaudited) | ( | ) | ( | ) | ||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.
| 6 |
HARTFORD CREATIVE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| Three Months ended | ||||||||
| October 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net | ||||||||
| Prepaid and Other current receivables | ||||||||
| Advance to contractor | ||||||||
| Related party receivables and payables | ||||||||
| Contract liabilities | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Other current payable | ||||||||
| Operating lease assets and liabilities | ( | ) | ||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Current loan receivable | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds of related party notes payable | ||||||||
| Repayment of related party notes payable | ( | ) | ||||||
| Repayment of non-interest-bearing payable | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes on cash | ( | ) | ||||||
| Net change in Cash, cash equivalents and restricted cash | ( | ) | ||||||
| Cash, cash equivalents and restricted cash at beginning of period | ||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | $ | ||||||
| Supplemental Cash Flow Information | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.
| 7 |
HARTFORD CREATIVE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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. This disclosure should be read in conjunction with our audited financial statements for the year ended July 31, 2024, including footnotes, contained in our Annual Report on Form 10-K.
Organization
Hartford Creative Group, Inc. (Formerly name Hartford Great Health Corp.) was originally incorporated in the State of Nevada on April 2, 2008 under the name PhotoAmigo, Inc. It changed its name to Hartford Great Health Corp. on August 22, 2018. On May 11, 2024, the Company further changed its name to Hartford Creative Group, Inc.
Through
its wholly owned subsidiary - Hangzhou Hartford Comprehensive Health Management, Ltd (“HZHF) and HZHF’s
The Company engaged in early childhood education industry at Hartford International Education Technology Co., Ltd (“HF Int’l Education”) and its subsidiaries setup or acquired.
Impacted
by the government regulation implemented in education industry and the restrictions posted by the Chinese government to control the pandemic
in China since 2021, to avoid further operation losses, on August 1, 2022, HFSH entered a contract with a related party, Shanghai Oversea
Chinese Culture Media Ltd. (“SH Oversea”), to sell
Beginning in January 2024, the Company embarked on the development of a new business within the Media and Marketing sector. As part of its rebranding strategy, on January 01, 2024, HFSH changed its legal name from Shanghai Hartford Health Management, Ltd. to Shanghai Hartford ZY Culture Media Ltd. (“HFZY”). HFZY mainly engages in social media advertising business on mainstream social media platforms such as Tik Tok, Toutiao, Kwai, RED, WeChat, and more. As an advertising partner of China’s major social media platforms, the Company relies on a high-quality and professional media strategy execution team and network to help customers use the massive media resources of different types of social media platforms and receive competitive prices due to large-scale media resource procurement to purchase media resources. It aims to become one of the total solution advertising providers for domestic social media industry in China and provide customers with vertical integration services from early-stage advertising video creativity, shooting, editing, to advertising operation and management on social media apps. Further expanding its business operations, HFUS reacquired full ownership of HZHF at no cost on April 1, 2024, and subsequently rebranded it as Hangzhou Hartford WP Culture Media Ltd. (“HZWP”). On April 11, 2024, HFUS continued its growth trajectory by establishing a new subsidiary named Shanghai DZ Culture Media Ltd. (“SHDZ”). On June 18, 2024, HFUS successfully completed the acquisition of ShangXing HuoMao Network Technology Ltd. (SXHM). The acquisition was executed at no cost, and there were no significant assets or liabilities exchanged during the transfer.
Basis of Presentation
The consolidated financial statements include the accounts of Hartford Creative Group, Inc., its wholly-owned subsidiaries and subsidiaries in which it has a controlling interest. The Company reports noncontrolling interests of the consolidated entities as a component of equity separate from the Company’s equity. All material inter-company transactions between and among the Company and its consolidated subsidiaries have been eliminated in the consolidation.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires the Company’s management to make estimates and assumptions that affect the amounts of assets and liabilities, the identification and disclosure of impaired assets and contingent liabilities at the date of the financial statements, and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Reclassification
Certain prior period amounts have been reclassified to conform to the current year presentation. These reclassifications had no impact on the Company’s net income, net cash flows, or stockholders’ equity.
| 8 |
Revenue Recognition
The Company follows the five steps approach for revenue recognition under Topic 606: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) we satisfy a performance obligation. Billings to customers for which services are not rendered are considered deferred revenue. The Company’s revenue is recognized when it satisfies a single performance obligation by transferring control of its products or providing services to a customer. The Company’s general payment terms are short-term in duration. The Company does not have significant financing components or payment terms.
The Company is developing business plan and aim to provide customers with vertical integration services from early-stage advertising video creativity, shooting, editing, to advertising operation and management on social media apps. Most of the advertising revenue will be generated by placing ad products on Tik Tok, Toutiao, Kwai, RED, WeChat, and other third-party affiliated websites and mobile applications. Currently, the Company provides traffic acquisition service to place the advertisements produced by the advertisers. The advertisements are published on the targeted media platforms as determined by the customers. Besides, the Company provides advertisements account charging service to customers upon the request from customers. Revenue is recognized at a point in time when the distribution of advertisements and charging of advertisement accounts are completed upon the completion confirmation from customers and suppliers.
During
the three months ended October 31, 2024, the Company has provided advertising placement services to 15 customers and received approximately
RMB
In the comparable period in prior year, impacted by the Covid-19 pandemic and Chinese regulation on education industry, both early childhood education services and hospitality services have been sold on August 1, 2022, and the advertising revenue has not started until January 2024. Thus, there was no revenue recognized for the three months ended October 31, 2023.
Segment Reporting
The Company uses the management approach in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions, allocating resources and assessing performance as the source for determining the Company’s reportable segments. During the reporting periods, the Chief Executive Officer has been identified as the chief operating decision maker. The Company’s chief operating decision maker regularly reviews consolidated assets and consolidated operating results prepared under U.S. GAAP for the enterprise as a whole when making decisions about allocating resources and assessing performance of the Company. Consequently, management has determined that the Company only has one operating segment as defined under ASC 280-10-50.
Recent Accounting Pronouncements.
Recently not yet adopted accounting pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures. The new guidance requires enhanced disclosures about income tax expenses. The Company is required to adopt this guidance in the first quarter of the fiscal year 2026. Early adoption is permitted on a prospective basis. We are currently evaluating the impact of this ASU on our annual income tax disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. The new guidance requires enhanced disclosures about significant segment expenses. The Company is required to adopt this guidance for its annual reporting in fiscal year 2025 and for interim period reporting beginning the first quarter of fiscal year 2026 on a retrospective basis. Early adoption is permitted. We are currently evaluating the impact of this ASU on our segment disclosures.
The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial position, statements of operations and cash flows.
| 9 |
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. As of October 31, 2024, The Company had a working capital deficit of $
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 the Company, and ultimately achieving profitable operations. Management believes that the Company’s business plan provides it with an opportunity to continue as a going concern. However, management cannot provide assurance that the Company 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 the Company to continue as a going concern.
NOTE 3. CURRENT LOAN RECEIVABLE
During
July and August 2024, the Company loaned $
NOTE 4. RELATED PARTY BALANCEAND NON-INTEREST-BEARING PAYABLE
Related Party Balance and Non-Interest-Bearing Payable
HFUS
had $
As
of October 31, 2024 and July 31, 2024, amounts of $
HFSH
had payable balances to Shanghai Oversea Chinese Culture Media Ltd. (“SH Oversea”), in the amounts of $
The Company’s related party relationship with SH Qiaohong and SH Oversea, previously due to shared management with HFSH, ended as of August 15, 2024. Consequently, outstanding balances with these parties are no longer classified as related party receivables or payables but are now recognized as “Non-interest-bearing payable”. For comparative purposes, the related balance as of July 31, 2024, has also been reclassified accordingly.
Related Party loans
HFUS
borrowed in the form of a short-term loan at
Since
February 2024, HFUS borrowed in form of a short-term loan at an annual rate of
The
Company also had related party payable of $
Other Related Party Transactions
The
Company has leased approximately
The Company’s office space in Rosemead, CA, is provided rent-free by a related party, a former primary shareholder and relative of a current major shareholder. The value of this benefit is immaterial and has not been recognized in these financial statements.
| 10 |
NOTE 5. ADVANCE TO CONTRACTOR AND CONTRACT LIABILITIES
In
the advertisement placement services, the Company makes prepayments to the downstream agents or the media platforms (“contractor”)
and receives advance payments from the customers. As of October 31, 2024 and July 31, 2024, the Company’s balance sheets reflect
$
NOTE 6. OTHER CURRENT LIABILITIES
Other current payable consist as follows:
| October 31, 2024 | July 31, 2024 | |||||||
| Taxes payable | $ | $ | ||||||
| Payable to service providers | ||||||||
| Accrued payroll | ||||||||
| Payable to former owners | ||||||||
| Other payables | ||||||||
| Other Current Liabilities | $ | $ | ||||||
NOTE 7. CONCENTRATION RISK
For
the three months ended October 31, 2024, four customers accounted for
For
the three months ended October 31, 2024, two contractors accounted for
In the corresponding three-month period of the prior year, the Company did not participate in advertisement placement services, and no significant customer or vendor concentration risks were identified.
NOTE 8. COMMITMENTS AND CONTINGENCIES
There has been no material contractual obligations and commitments as of October 31, 2024.
NOTE 9. SUBSEQUENT EVENTS
In accordance with ASC 855, “Subsequent Events”, the Company has evaluated subsequent events through the date of issuance of these unaudited financial statements and no material subsequent events were noted except the events as disclosed below:
Given
the prolonged inactivity of both HZWP and SHDZ, the Company entered into agreements, on December 9, 2024, and January 1, 2025,
respectively, to transfer
| 11 |
Forward-Looking Statements
This Form 10-Q contains or incorporates by reference “forward-looking statements,” as that term is used in federal securities laws, about our financial condition, results of operations and business. These statements include, among others:
| - | statements concerning the benefits that we expect will result from our business activities and results of business development that we contemplate or have completed, such as increased revenues; and statements of our expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts. These statements may be made expressly in this document or may be incorporated by reference to other documents that we will file with the SEC. You can find many of these statements by looking for words such as “believes,” “expects,” “anticipates,” “estimates” or similar expressions used in this report or incorporated by reference in this report. |
These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause our actual results to be materially different from any future results expressed or implied in those statements. Because the statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied. We caution you not to put undue reliance on these statements, which speak only as of the date of this report. Further, the information contained in this document or incorporated herein by reference is a statement of our present intention and is based on present facts and assumptions, and may change at any time and without notice, based on changes in such facts or assumptions.
Item 2. Management’s Discussion and Analysis or Plan of Operation Overview
This discussion updates our business plan for the three-month period ending October 31, 2024. It also analyzes our financial condition on October 31, 2024 and compares it to our financial condition at July 31, 2024. This discussion and analysis should be read in conjunction with our audited financial statements for the year ended July 31, 2024, including footnotes, contained in our Annual Report on Form 10-K, and with the unaudited financial statements for the interim period ended October 31, 2024, including footnotes, which are included in this quarterly report.
Overview of the Business
Hartford Creative Group, Inc. (Former name Hartford Great Health Corp.) was originally incorporated in the State of Nevada on April 2, 2008 under the name PhotoAmigo, Inc. It changed its name to Hartford Great Health Corp. on August 22, 2018. On May 11, 2024, the Company further changed its name to Hartford Creative Group, Inc.
Ability to continue as a “going concern”.
The independent registered public accounting firms’ reports on our financial statements as of July 31, 2024, includes a “going concern” explanatory paragraph that describes substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding the factors prompting the explanatory paragraph are discussed in the financial statements, including footnotes thereto.
| 12 |
Plan of Operation
After years of experience in education and hospitality, the Company shifted its focus in January 2024 to social media advertising. On January 10, 2024, HFSH changed its legal name from Shanghai Hartford Health Management, Ltd. to Hartford ZY Culture Media (Shanghai) Co., Ltd., hereon refer to as “HFZY”. On June 18, 2024, the Company successfully completed the acquisition of ShangXing HuoMao Network Technology Ltd. (SXHM). HFZY and SXHM started to deliver media and advertisement services. The pent-up demand from social media influencers’ marketing needs on social media apps lead the Company to seize the opportunity in providing advertisement services. the Company begins to engage in social media advertising business on mainstream social media platforms such as Tik Tok, Toutiao, Kwai, RED, WeChat, and more. As an advertising partner of China’s major social media platforms, it aims to provide customers with vertical integration services from early-stage advertising video creativity, photograph shooting, editing, to advertising operation and management on social media apps. The Company will also gradually launch overseas TikTok advertising campaign, providing social media advertising solutions for domestic Chinese customers to engage in international markets in the United States.
During the three months ended October 31, 2024, the Company recognized USD 0.5 million net revenue from the advertisement placement services. The Company provides service to place advertisements. The advertisements are published on the targeted media platforms as determined by the customers. Revenue is recognized at a point in time when the placement of advertisements is completed. As disclosed in Note 1 under category “Revenue Recognition”, the Company is not the principal in executing these transactions. The Company reports the amount received from the customers and the amounts paid to the media platforms or upside agent related to these transactions on a net basis. The Company expects the number of customers to grow and the advertising service revenue will significantly increase in the next few months due to the vast demand in social media advertising services.
Based on market research and discussions among the Board and third-party suppliers and experts, the Company has further developed a plan of mini-drama business. The Company is strategically positioned to capture considerable market interest and enhance revenue streams from our innovative mini-drama business. While initial steps toward this ambitious goal have been initiated, it is important to note that the commencement and future success of the mini-drama venture are not yet guaranteed.
| 13 |
Results of Operations – Three months ended October 31, 2024 Compared to Three months ended October 31, 2023.
The following table presents certain consolidated statement-of-operations information and presentation of that data as a percentage of change from year to year.
| For the Three Months ended October 31, | ||||||||||||
| 2024 | 2023 | Variance | ||||||||||
| Revenues | $ | 467,462 | $ | - | 100 | % | ||||||
| Operating cost and expenses: | ||||||||||||
| Cost of revenue | 109,822 | - | 100 | % | ||||||||
| Selling, general and administrative | 165,568 | 20,192 | 720 | % | ||||||||
| Total operating cost and expenses | 275,390 | 20,192 | 1264 | % | ||||||||
| Operating income (loss) | 192,072 | (20,192 | ) | -1051 | % | |||||||
| Other income (expenses) | (1,842 | ) | (5,264 | ) | -65 | % | ||||||
| Income (loss) before income taxes | 190,230 | (25,456 | ) | -847 | % | |||||||
| Income tax expense | 62,961 | - | 100 | % | ||||||||
| Net income (loss) | 127,269 | (25,456 | ) | -600 | % | |||||||
Revenue: During the three months ended October 31, 2024, we generated $467,462 in revenue primarily from advertising placement services, which we launched in January 2024. No revenue was recognized in the same period of 2023 as we had divested our early childhood education and hospitality services in August 2022
Operating Cost and Expenses: Cost of revenue increased to $109,822 in the three months ended October 31, 2024, primarily due to expenses related to designing and channel services. No costs were incurred in the same period of 2023. During the three months ended October 31, 2024, the selling, general and administrative expenses increased to $165,568 compared to $20,192 during the comparable period of 2023. The increase was due to the increase of professional expenses as a result of the expansion of business operation.
Other Income (Expense): Other expense, net amount of $1,842 for the three months ended October 31, 2024, compared to Other expense, net amount of $5,264 for the corresponding period of 2023. Other expenses for the three months ended October 31, 2024, primarily consisted of net interest expense, resulting from interest payments on loans from related parties, offset by interest income from current loan receivables. In the same period of 2023, other expenses were primarily due to interest expense.
Income tax expense: The income tax recognized for the three months ended October 31, 2024, resulted from the income tax from the operating income in China.
Net Income (Loss): We recorded a net income of $127,269 or $0.00 per share for the three months ended October 31, 2024, compared to a net loss of $25,456 or $0.00 per share for the same period of 2023, due to the factors discussed above.
| 14 |
Liquidity and Capital Resources
As of October 31, 2024, we had a working capital deficit of $3,482,524 comprised of current assets of $1,723,082 and current liabilities of $5,205,606. This represents a decrease of $83,441 in the working capital deficit from the July 31, 2024 amount of $3,565,965 . We had an accumulated deficit of $5,783,574 compared to $5,910,843 at the previous year end. To date, we have funded our operations through short-term debt and equity financing.
As of October 31, 2024, the Company has issued a total of 100,108,000 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 an additional $1,921,800 in capital. On November 24, 2020, the Company issued additional 1,000,000 shares of common stock to a significant shareholder of the Company at $0.02 per share.
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. If we are unable to raise sufficient capital, we will be required to delay or forego some of our business plan, which would have a material adverse effect on our anticipated results from operations and financial condition. Any sales of our securities would dilute the ownership of our existing investors.
Future Capital Expenditures
We believe that our funding requirements for the next twelve months will be in excess of $2,000,000. We are currently seeking further funding through related parties’ loan and finance.
We are currently engaging consultants to evaluate and facilitate the potential uplisting of the Company’s stock from the OTC market to the Nasdaq exchange. If all conditions align favorably, the Company intends to secure financing through either debt or equity. The funds raised will be allocated to cover the expenses associated with the uplisting process.
Cash Flows – Three months ended October 31, 2024 Compared to Three months ended October 31, 2023
Operating Activities
Cash provided by operating activities was $348,049 for the three months ended October 31, 2024 as compared to $20,113 cash used in the operations for the same period in 2023. During the three months ended October 31, 2024, we recorded net income of $127,269 , a $1,631,243 decrease of advance to contract, a $583,009 decrease of accounts receivable and $582 decrease of prepaid and other current receivable, offset by a $1,179,176 decrease of accounts payable and a $831,501decrease of contract liabilities.
During the three months ended October 31, 2023, we recorded net loss of $25,456 offset by a $5,264 increase of related party payables.
Investing activities
The cash used in investing activities was $675,826 for the three months ended October 31, 2024 as a result of short term loan receivables with 3% interest rate, matured in July and August, 2025. Nil of investing activities occurred during the three months ended October 31, 2023
Financing activities
Cash provided by financing activities was $64,949 for the three months ended October 31, 2024, primarily due to the proceeds of notes payable of $126,700 and offset by the repayment of notes payable $35,000 and repayment of non-interest-bearing payable of $26,751. In the same period of 2023, cash provided by financing activities was $28,000, primarily from proceeds of notes payable and funding support from related parties. The notes payable was borrowed from related parties with 5% annual interest rate. See Note 4 Related Party Transactions.
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Off-Balance Sheet Arrangements
As of and subsequent to October 31, 2024, we have no off-balance sheet arrangements.
Contractual Commitments
As of October 31, 2024, we don’t have material contractual commitments.
Critical Accounting Policies
There have been no other changes in our critical accounting policies since our most recent audit dated July 31, 2024.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.
Item 4. 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 Interim 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 Quarterly Report. Based on that evaluation, our management, including our Chief Executive Officer and Interim Chief Financial Officer, concluded that, as of October 31, 2024, 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 Report on Internal Control over Financial Reporting
Management’s assessment identified several material weaknesses in our internal control over financial reporting. These material weaknesses include the following:
| ● | Lack of proper authorization and approval procedures on significant business transactions. |
| ● | Lack of competence accounting personnel at entity level and proper segregation of duties implemented. |
Changes in Internal Control
During the three months ended October 31, 2024, there has been no change in internal control within the Company.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings .
We were not subject to any other legal proceedings during the three months ended October 31, 2024, 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 1A. Risk Factors.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Mine Safety Disclosures
Not applicable to our Company.
Item 5. Other Information
Not applicable to our Company.
Item 6. Exhibits.
The following exhibits are filed with or incorporated by referenced in this report:
Exhibit Index
| Exhibit No. | Description | |
| 3.1 | Certificate of Amendment to Articles of Incorporation filed with the Nevada Secretary of State on May 11, 2024 | |
| 31.1* | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Sheng-Yih Chang. | |
| 31.2* | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Lili Dai | |
| 32.1* | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Sheng-Yih Chang and Lili Dai | |
| 101 | Interactive Data Files | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| HARTFORD CREATIVE GROUP, INC. | ||
| Date: January 16, 2025 | By: | /s/ Sheng-Yih Chang |
| Sheng-Yih Chang | ||
| Chief Executive Officer | ||
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