Hartford Creative Group Inc.
10/29/2024 | Press release | Distributed by Public on 10/29/2024 14:09
Annual Report for Fiscal Year Ending July 31, 2024 (Form 10-K)
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, 2024
☐TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____
Commission file number 000-54439HARTFORD CREATIVE GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
Nevada
(State or other jurisdiction of incorporation or organization)
51-0675116
(I.R.S. Employer Identification Number)
8832 Glendon Way, Rosemead, California91770
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including area code: (626)321-1915
HARTFORD GREAT HEALTH CORP.
Former name, former address, and former fiscal year, if changed since last report
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☒ 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☒ No ☐
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). Yes☒ 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, 2024 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 $186,560.
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 ☒ | |
| Emerging growth company ☒ |
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
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 |
Securities registered pursuant to Section 12(g) of the Act: Common Stock, Par value $0.001
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 100,108,000shares of common stock outstanding as of October 29, 2024.
TABLE OF CONTENTS
| PART I | ||
| ITEM 1: | BUSINESS | 4 |
| ITEM 1A: | RISK FACTORS | 5 |
| ITEM 1B: | UNRESOLVED STAFF COMMENTS | 5 |
| ITEM 2: | PROPERTIES | 5 |
| ITEM 3: | LEGAL PROCEEDINGS | 5 |
| ITEM 4: | MINE SAFETY DISCLOSURES | 5 |
| PART II | ||
| ITEM 5: | MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND PURCHASES OF EQUITY SECURITIES | 6 |
| 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 | 11 |
| ITEM 8: | FINANCIAL STATEMENTS | 12 |
| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANS ON ACCOUNTING AND FINANCIAL DISCLOSURE | 25 |
| ITEM 9A. | CONTROLS AND PROCEDURES | 25 |
| ITEM 9B: | OTHER INFORMATION | 25 |
| PART III | ||
| ITEM 10: | DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE | 26 |
| ITEM 11: | EXECUTIVE COMPENSATION | 28 |
| ITEM 12: | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | 29 |
| ITEM 13: | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE | 29 |
| ITEM 14: | PRINCIPAL ACCOUNTING FEES AND SERVICES | 29 |
| PART IV | ||
| ITEM 15: | EXHIBITS | 30 |
| SIGNATURES | 31 |
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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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
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:
| 1. | The worldwide economic situation; |
| 2. | Any change in interest rates or inflation; |
| 3. | The willingness and ability of third parties to honor their contractual commitments; |
| 4. | 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; |
| 5. | The Company's capital costs, as they may be affected by delays or cost overruns; |
| 6. | The Company's costs of revenue; |
| 7. | Environmental and other regulations, as the same presently exist or may later be amended; |
| 8. | The Company's ability to identify, finance and integrate any future acquisitions; and |
| 9. | The volatility of the Company's stock price. |
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PART I
ITEM 1. BUSINESS.
General
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.
Overview
Through its wholly owned subsidiary - Hangzhou Hartford Comprehensive Health Management, Ltd ("HZHF) and HZHF's 60 percent owned subsidiary - Hangzhou Longjing Qiao Fu Vacation Hotel Co., Ltd. ("HZLJ"), and through Shanghai Hartford Health Management, Ltd. ("HFSH") and its 90 percent owned subsidiary - Shanghai Qiao Garden International Travel Agency ("Qiao Garden Int'l Travel"), the Company engages in hospitality industry in China. Qiao Garden Int'l Travel was disposed on December 31, 2020.
The Company started to engage in early childhood education industry at Hartford International Education Technology Co., Ltd ("HF Int'l Education"). On July 24, 2019 and March 23, 2020, HF Int'l Education established two 100% owned subsidiaries, Pudong Haojin Childhood Education Ltd. ("PDHJ") and Shanghai Hongkou HaiDeFuDe Childcare Co., Ltd.("HDFD"), respectively, to operate the early childhood education service under the brand name of "HaiDeFuDe" in Shanghai, China. On July 20, 2020, HF Int'l Education entered an agreement with two individuals to acquire the whole ownership of Shanghai Gelinke Childcare Education Center ("Gelinke"). Gelinke temporally ceased its operations by the end of August 2021. On August 31, 2021, PDHJ established one 96% owned subsidiary, Shanghai HDFD Zhongli Education Technology Co., Ltd. ("Zhongli"), two individual investors hold the remaining 4% ownership.
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 90 percent ownership of HF Int'l Education and its subsidiaries for $900 (RMB 5,850). On August 1, 2022, HFUS entered a contract with SH Oversea and another individual, to sell 100 percent ownership of HZHF and its subsidiaries for $1,000 (RMB 6,500). See Note 3 Acquisitions and Disposals.
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 10, 2024, HFSH changed its legal name from Shanghai Hartford Health Management, Ltd. to Shanghai Hartford ZY Culture Media Ltd. ("HFZY"). HFZY mainly 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, 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, on April 1, 2024, HFUS reacquired full ownership of HZHF at no cost 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.
Based on market research and discussions between the Board and third-party suppliers and experts, the Company developed a plan for a mini-drama business. The Company aims to attract significant attention and boost mini-drama revenue. Only preliminary activities relating to this objective have been undertaken and, therefore, there is no assurance that the business plan will be 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 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. There is no assurance that the Company will ever be profitable.
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Employees
As of October 23, 2024, we have 19 employees.
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
The Company has entered into a lease agreement for office space located in Shanghai measuring approximately 543 square feet (50.4 square meters) with Shanghai DuBian Assets Management Ltd., which is managed by its major shareholder's relatives. The lease is effective from February 18, 2024 to February 17, 2026, at a fixed monthly rent of USD638 (RMB 4,600).
The Company uses the offices of its major shareholder, located at 8832 Glendon Way, Rosemead, CA 91770, for its minimal office facility needs for no consideration.
ITEM 3. LEGAL PROCEEDINGS
We were not subject to any other legal proceedings during the year ended July 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 4. MINE SAFETY DISCLOSURES
Not applicable to our Company.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY. RELATED STOCKHOLDER MATTERS AND PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock has been listed on the OTC Markets Group under the symbol "HFUS." There has been limited trading in our shares, meaning that the number of persons interested in purchasing our common shares at any given time has been relatively small or non-existent. We intend to apply to have our common stock listed on the Nasdaq Capital Market under the symbol "HFUS". There can be no assurance that our listing application will be approved. There is no assurance that an active trading market will ever develop or, if such a market does develop, that it will continue. The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for purposes relevant to the Company, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (i) that a broker or dealer approve a person's account for transactions in penny stocks and (ii) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the broker or dealer must (i) obtain financial information and investment experience and objectives of the person and (ii) make a reasonable determination that the transactions in penny stocks are suitable for that person and that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the Commission relating to the penny stock market, which, in highlight form, (i) sets forth the basis on which the broker or dealer made the suitability determination and (ii) that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading, and about commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
Because of these regulations, broker-dealers may encounter difficulties in their attempt to buy or sell shares of our common stock, which may affect the ability of our shareholders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our common stock in the market place. In addition, the liquidity for our common stock may be decreased, with a corresponding decrease in the price of our common stock. Our shares are likely to be subject to such penny stock rules for the foreseeable future.
On October 23, 2024, the closing price of our common stock reported on the OTC Markets was $1.22 per share. The following table sets forth, for each of the quarterly periods indicated, the high and low sales prices of our common stock, as reported on the OTC Markets.
| Fiscal 2024 | Low | High | ||||||
| First Quarter | $ | 0.88 | $ | 0.88 | ||||
| Second Quarter | $ | 0.88 | $ | 0.88 | ||||
| Third Quarter | $ | 0.43 | $ | 3.00 | ||||
| Fourth Quarter | $ | 0.60 | $ | 1.70 |
| Fiscal 2025 | Low | High | ||||||
| First Quarter | $ | 0.67 | $ | 1.36 |
Holders
As of October 23, 2024, a total of 100,108,000 shares of our common stock were outstanding and there were approximately 63 holders of record.
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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 affect 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 Legacy Stock Transfer, Inc., as the transfer agent for our common stock. The principal office of Legacy Stock Transfer is located at 16801 Addison Road, Suite 247, Addison, Texas 75001 and its telephone number is (972) 612-4120.
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
None
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 were 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, 2024, and the results of operations for the years ended July 31, 2024, and 2023. It should be read in conjunction with the audited financial statements and notes thereto contained in this report.
Overview of the Business
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, and since then we have been engaged in activities to formulate and implement our business plan as set forth below. 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 and 2023, 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.
Plan of Operation
As of July 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.
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"). Since 2019, HFSH had acquired and formed multiple subsidiaries and tried to develop the childhood education and childcare business. Impacted by Covid-19 pandemic and 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 its subsidiaries for $900 (RMB 5,850). On August 1, 2022, HFUS entered a contract with SH Oversea and another individual, to sell HZHF and its subsidiaries for $1,000 (RMB 6,500).
The Company's subsidiary, HFSH was working with herbal manufacturers to develop new herbal health supplement products for wholesale distribution in China. Due to deflation in China, demand of herbal health supplement was lower than expected. Therefore, HFSH decided to deviate from its prior business focus and to engage in social media advertising endeavors. 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.
Since January 2024, the Company has entered advertising service contracts with thirty customers and received approximately RMB 98.4 million (USD 13.6 million) as advanced payment from these customers. the Company also entered twenty supplier contracts for advertising placement and prepaid RMB 90.8 million (USD 12.6 million). During the year ended July 31, 2024, the Company recognized USD 1.3 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 between 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.
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Results of Operations - Year ended July 31, 2024 Compared to Year ended July 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 Years Ended July 31, | ||||||||||||
| 2024 | 2023 | Variance | ||||||||||
| Revenues | $ | 1,337,502 | $ | - | 100 | % | ||||||
| Revenue - Related Party | 62,443 | - | 100 | % | ||||||||
| Total Revenue | 1,399,945 | - | 100 | % | ||||||||
| Cost of revenue - Related Party | 55,505 | - | 100 | % | ||||||||
| Selling, general and administrative | 247,920 | 123,650 | 101 | % | ||||||||
| Operating loss | 1,096,520 | (123,650 | ) | -987 | % | |||||||
| Other income (expenses) | 6,971 | 521,353 | -99 | % | ||||||||
| Income before income taxes | 1,103,491 | 397,703 | 177 | % | ||||||||
| Income tax (benefit) expense | 10,617 | 800 | 1227 | % | ||||||||
| Net income | 1,092,874 | 396,903 | 175 | % |
Revenue: During the year ended July 31, 2024, we reported revenues of $1,399,945, in contrast to no revenue in the corresponding period of 2023. Of the total revenue recognized in 2024, $1,337,502 net revenue was mainly generated through advertising placement services, while $62,443 was derived from the design, creation, and placement of video advertisements for Shanghai DuBian Assets Management Ltd. ("SH Dubian"), which is managed by our major shareholder's relatives. As both early childhood education services and hospitality services have been sold on August 1, 2022, there was no revenue recognized for the year ended July 31, 2023.
Operating Cost and Expenses: Cost of revenue increased to $55,505 for the year ended July 31, 2024, in contrast to no cost of revenue in the corresponding period of 2023. The increase of Cost of revenue was mainly due to the increase of the revenue derived from the services provided to SH Dubian. During the year ended July 31, 2024, the selling, general and administrative expenses increased to $247,920 compared to $123,650 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 income, net amount of $6,971 for the year ended July 31, 2024, compared to Other income, net amount of $521,353 for the corresponding period of 2023. The primary source of other income was the $29,022 recovery from Mr. Song, following a Section 16 infraction as outlined in Note 4-Related Party Transactions to our Consolidated Financial Statements. This amount was partially offset by the interest expenses on loans from related parties. Other income for the year ended July 31, 2023, mainly resulted from the gain on disposal of subsidiaries offset by interest expenses.
Income tax expense: The income tax recognized for the fiscal year ended July 31, 2024, resulted from the income tax from the operating income in China and offset by the deferred tax effects of temporary differences as of July 31, 2024, see Note 10-Income Taxes to our Consolidated Financial Statements. The deferred tax assets are expected to reduce future income tax liabilities. The income tax for the fiscal year ended July 31, 2023 was the amount paid for state franchise income tax in California.
Net Income (Loss): We recorded a net income of $1,092,874 or $0.01 per share for the year ended July 31, 2024, compared to a net income of $396,903 or $0.00 per share for the year ended July 31, 2023, due to the factors discussed above.
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Liquidity and Capital Resources
As of July 31, 2024, we had a working capital deficit of $3,565,965 comprised of current assets of $3,472,709 and current liabilities of $7,038,674. This represents a decrease of $924,471 in the working capital deficit from the July 31, 2023 amount of $4,490,436. We had an accumulated deficit of $5,910,843 compared to $7,003,717 at the previous year end. To date, we have funded our operations through short-term debt and equity financing.
As of July 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 - Year ended July 31, 2024 Compared to Year ended July 31, 2023
Operating Activities
Cash provided by operating activities was $859,016 for the year ended July 31, 2024 as compared to $123,363 cash used in the operations for the year ended July 31, 2023. During the year ended July 31, 2024, we recorded net income of $1,092,874, a $1,315,786 increase of contract liabilities, a $1,327,509 increase of accounts payable, a $336,077 increase of other current payable, a $22,100 increase of related party payables, and offset by a $2,423,493 increase of advance to contract, a $573,790 increase of accounts receivable and $26,275 increase of prepaid and other current receivable.
During the year ended July 31, 2023, we recorded net income of $396,903, adjusted by subsidiary disposal gain of $539,230, related party payables increased by $17,789 as a result of interest accrued for related party notes payable and offset by other current payable decreased by $6,628.
Investing activities
The cash used in investing activities was $138,360 for the year ended July 31, 2024 as a result of a short term loan receivable with 3% interest rate, matured on July 24, 2025.
The cash used in investing activities was $4,938 for the year ended July 31, 2023, as a result of the disposal of the subsidiaries.
Financing activities
Cash used in financing activities was $415,600 for the year ended July 31, 2024 as compared to $115,568 cash provided by financing activities for the year ended July 31, 2023. The cash flows used in financing activities for the year ended July 31, 2024 were primarily due to the repayment of notes payable $70,000 and repayment of related party advancement of $553,278, and offset by the proceeds of notes payable $207,678. The notes payable was borrowed from two related parties with 5% annual interest rate. See Note 4 Related Party Transactions.
The cash flows provided by financing activities during the year ended July 31, 2023 was from the proceeds of notes payable and funding support from related parties. The notes payable was borrowed from one related party with 5% annual interest rate.
Off-Balance Sheet Arrangements
As of and subsequent to July 31, 2024, we have no off-balance sheet arrangements.
Contractual Commitments
As of July 31, 2024, except the commitments disclosed in Note 8, we have no other material contractual commitments.
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Accounting Policies and Pronouncements
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with GAAP. GAAP requires us to make estimates and assumptions that affect the reported amounts in our consolidated financial statements. Critical accounting estimates are those that management believes are the most important to the portrayal of our financial condition and results and require the most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and that have had, or are reasonably likely to have, a material impact on our financial condition or results of operations. Judgments and uncertainties may result in materially different amounts being reported under different conditions or using different assumptions. See "Part II, Item 8 - Financial Statements - Note 1 -Summary of Significant Accounting Policies" for a summary of our significant accounting policies.
The following summarizes our most significant critical accounting 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.
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 the customers and suppliers.
Recent Accounting Pronouncements.
See "Part II, Item 8 - Financial Statements - Note 1 -Summary of Significant Accounting Policies - Recent Accounting Pronouncements" for a full description of recent accounting pronouncements including the respective expected dates of adoption and expected effects on the Company's consolidated financial position, results of operations or liquidity.
Item 7A. Quantitative and Qualitative 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.
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ITEM 8. FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
Hartford Creative Group, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Hartford Creative Group, Inc. and subsidiaries (the "Company") as of July 31, 2024 and 2023, the related consolidated statements of income and comprehensive income, changes in stockholders' deficit and cash flows for each of the two years in the period ended July 31, 2024, and the related notes to the consolidated 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, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended July 31, 2024, 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 described in Note 2 to the consolidated financial statements, the Company has suffered recurring negative working capitals and accumulated deficits that raise substantial doubt about its ability to continue as a going concern. Management's evaluation of the events and conditions and management's plans regarding these matters are also described in Note 2. The consolidated 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 the Company's consolidated financial statements based on our audits. 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 audits 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 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.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue recognition - determination of principal versus agent
As described in Note 1 to the consolidated financial statements, the revenue is recognized on a gross or net basis based on whether the Company acts as a principal by controlling the service provided to the consumer, or whether it acts as an agent by arranging for third parties to provide the service to the consumer. During the year ended July 31, 2024, 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. Revenue is recognized at a point in time when the distribution of advertisements and charging of advertisement accounts are completed upon the completion confirmations provided by customers and suppliers, respectively. The Company is therefore acting as an agent.
We identified the determination of principal versus agent for revenue recognition related to the advertisement placement service as a critical audit matter. Specifically, subjective auditor judgment was required to evaluate whether the Company acted as either a principal or an agent with respect to whether the Company controls the promised service.
The primary procedures we performed to address this critical audit matter included:
| Ø | Obtained understanding of the service agreements between the Company and customers, the Company and media platforms or agent of the media platforms for advertisement placement services provided. |
| Ø | Performed walkthroughs of sales and purchase transactions to confirm the working flows of the key business cycles. |
| Ø | Obtained revenue recognition memo including analysis of principal versus agent along with the management's conclusion. |
| Ø | Assessed management's conclusion by analyzing whether the Company controls the promised service provided pursuant to the terms and conditions with media platforms and/or agent of media platforms, including but not limit to latitude in establishing price and taking risk of service cost. |
| Ø | Sent sales confirmations and interviewed customers on a sample basis to verify the service delivered and the parties who delivered the service. |
| Ø | Leveraged the testing result of substantive testing of revenue recognition to further evaluate the management's conclusion. |
/s/ Simon & Edward, LLP(PCAOB ID: 2485)
We have served as the Company's auditor since 2019.
Rowland Heights, California
October 29, 2024
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HARTFORD CREATIVE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
| July 31, 2024 | July 31, 2023 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 310,763 | $ | 5,793 | ||||
| Accounts receivable | 573,530 | - | ||||||
| Advance to contractors | 2,422,392 | - | ||||||
| Prepaid and other current receivables | 165,060 | 280 | ||||||
| Related party receivable | 964 | 964 | ||||||
| Total Current Assets | 3,472,709 | 7,037 | ||||||
| Non-current Assets | ||||||||
| Property and equipment, net | 587 | 730 | ||||||
| ROU assets-operating lease | 10,771 | - | ||||||
| Deferred tax assets | 204,901 | - | ||||||
| Total Non-current Assets | 216,259 | 730 | ||||||
| TOTAL ASSETS | $ | 3,688,968 | $ | 7,767 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | 1,326,907 | $ | - | ||||
| Related party loan and payables | 3,931,768 | 4,367,194 | ||||||
| Contract liabilities | 1,315,189 | - | ||||||
| Current operating Lease liabilities | 3,491 | - | ||||||
| Other current payable | 461,319 | 130,279 | ||||||
| Total Current Liabilities | 7,038,674 | 4,497,473 | ||||||
| Lease liabilities, noncurrent | 3,768 | - | ||||||
| TOTAL LIABILITIES | 7,042,442 | 4,497,473 | ||||||
| Commitments and contingencies | - | - | ||||||
| Stockholders' Equity (Deficit) | ||||||||
| Preferred stock - $0.001par value, 5,000,000shares authorized, noshares issued and outstanding | - | - | ||||||
| Common stock - $0.001par value, 300,000,000shares authorized, 100,108,000shares outstanding at both of July 31, 2024 and July 31, 2023. | 100,108 | 100,108 | ||||||
| Additional paid-in capital | 2,173,521 | 2,173,521 | ||||||
| Accumulated deficit | (5,910,843 | ) | (7,003,717 | ) | ||||
| Accumulated other comprehensive income | 283,740 | 240,382 | ||||||
| Total Stockholders' Deficit | (3,353,474 | ) | (4,489,706 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 3,688,968 | $ | 7,767 |
The accompanying notes are an integral part of these consolidated financial statements.
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HARTFORD CREATIVE GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
| Years ended July 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenue | $ | 1,337,502 | $ | - | ||||
| Revenue - Related Party | 62,443 | - | ||||||
| Total Revenue | 1,399,945 | - | ||||||
| Operating cost and expenses: | ||||||||
| Cost of revenue - Related Party | 55,505 | - | ||||||
| Selling, general and administrative expenses | 247,920 | 123,650 | ||||||
| Total operating cost and expenses | 303,425 | 123,650 | ||||||
| Operating income (loss) | 1,096,520 | (123,650 | ) | |||||
| Other Income | ||||||||
| Interest expense, net | (22,031 | ) | (17,789 | ) | ||||
| Gain on disposal of subsidiary | - | 539,230 | ||||||
| Other income (expense), net | 29,002 | (88 | ) | |||||
| Other income, net | 6,971 | 521,353 | ||||||
| Income before income taxes | 1,103,491 | 397,703 | ||||||
| Income Tax Expense | 10,617 | 800 | ||||||
| Net income | 1,092,874 | 396,903 | ||||||
| Net income per common share: | ||||||||
| Basic and diluted | $ | 0.01 | $ | 0.00 | ||||
| Weighted average shares outstanding: | ||||||||
| Basic and diluted | 100,108,000 | 100,108,000 |
The accompanying notes are an integral part of these consolidated financial statements.
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HARTFORD CREATIVE GROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| Years ended July 31, | ||||||||
| 2024 | 2023 | |||||||
| Net income | $ | 1,092,874 | $ | 396,903 | ||||
| Other Comprehensive income, net of income tax | ||||||||
| Foreign currency translation adjustments | 43,358 | 238,454 | ||||||
| Less: total other comprehensive (loss) income attributable to noncontrolling interest | - | (18,670 | ) | |||||
| Total Other Comprehensive Income Attributable to Hartford Creative Group, Inc. | 43,358 | 257,124 | ||||||
| Total Comprehensive income | $ | 1,136,232 | $ | 654,027 |
The accompanying notes are an integral part of these consolidated financial statements.
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HARTFORD CREATIVE GROUP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
| Accumulated | Total | |||||||||||||||||||||||||||
| Additional | Other | Stockholders' | ||||||||||||||||||||||||||
| Common Stock | Paid - in | Accumulated | Comprehensive | Noncontrolling | Equity | |||||||||||||||||||||||
| Shares | Amount | Capital | (Deficit) | loss | Interest | (Deficit) | ||||||||||||||||||||||
| Balance, July 31, 2022 | 100,108,000 | 100,108 | 2,173,521 | (7,400,620 | ) | (16,742 | ) | (1,288,916 | ) | (6,432,649 | ) | |||||||||||||||||
| Net income | - | - | - | 396,903 | - | - | 396,903 | |||||||||||||||||||||
| Disposal of subsidiaries | - | - | - | - | - | 1,307,586 | 1,307,586 | |||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | 257,124 | (18,670 | ) | 238,454 | ||||||||||||||||||||
| Balance, July 31, 2023 | 100,108,000 | 100,108 | 2,173,521 | (7,003,717 | ) | 240,382 | - | (4,489,706 | ) | |||||||||||||||||||
| Net income | - | - | - | 1,092,874 | - | - | 1,092,874 | |||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | 43,358 | - | 43,358 | |||||||||||||||||||||
| Balance, July 31, 2024 | 100,108,000 | 100,108 | 2,173,521 | (5,910,843 | ) | 283,740 | - | (3,353,474 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
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HARTFORD CREATIVE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Years endedJuly 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 1,092,874 | $ | 396,903 | ||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
| Depreciation | 136 | 6,976 | ||||||
| Disposal gain of subsidiaries | - | (539,230 | ) | |||||
| Deferred tax assets | (204,901 | ) | - | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (573,790 | ) | - | |||||
| Prepaid and other current receivables | (26,275 | ) | 827 | |||||
| Advance to contractors | (2,423,493 | ) | - | |||||
| Related party receivables and payables | 22,100 | 17,789 | ||||||
| Contract liabilities | 1,315,786 | - | ||||||
| Accounts payable | 1,327,509 | - | ||||||
| Other current payable | 336,077 | (6,628 | ) | |||||
| Operating lease assets and liabilities | (7,007 | ) | - | |||||
| Net cash provided by (used in) operating activities | 859,016 | (123,363 | ) | |||||
| Cash flows from investing activities: | ||||||||
| Disposal of subsidiaries | - | (4,938 | ) | |||||
| Cash proceeds from acquisitions | 211 | |||||||
| Current loan receivable | (138,571 | ) | - | |||||
| Net cash used in investing activities | (138,360 | ) | (4,938 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds of related party notes payable | 207,678 | 94,000 | ||||||
| Repayment of related party notes payable | (70,000 | ) | - | |||||
| Advances from related parties | - | 21,568 | ||||||
| Repayment of related party advances | (553,278 | ) | - | |||||
| Net cash (used in) provided by financing activities | (415,600 | ) | 115,568 | |||||
| Effect of exchange rate changes on cash | (86 | ) | (1,639 | ) | ||||
| Net change in Cash and cash equivalents | 304,970 | (14,372 | ) | |||||
| Cash and cash equivalents at beginning of period | 5,793 | 20,165 | ||||||
| Cash and cash equivalents at end of period | $ | 310,763 | $ | 5,793 | ||||
| Supplemental Cash Flow Information | ||||||||
| Interest paid | $ | - | $ | - | ||||
| Income taxes paid | $ | 2,806 | $ | 800 |
* As of July 31, 2022, Cash and cash equivalents consisted of $15,227held by continuing operations and $4,938held for sales which was included as current assets held for sale on balance sheet.
The accompanying notes are an integral part of these consolidated financial statements.
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HARTFORD CREATIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist in understanding the Company's consolidated financial statements. The consolidated 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 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 60percent owned subsidiary - Hangzhou Longjing Qiao Fu Vacation Hotel Co., Ltd. ("HZLJ"), and through Shanghai Hartford Health Management, Ltd. ("HFSH") and its 90percent owned subsidiary - Shanghai Qiao Garden International Travel Agency ("Qiao Garden Int'l Travel"), the Company engages in hospitality industry in China. Qiao Garden Int'l Travel was disposed on December 31, 2020.
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 90percent ownership of HF Int'l Education and its subsidiaries for $900(RMB 5,850). On August 1, 2022, HFUS entered a contract with SH Oversea and another individual, to sell 100percent ownership of HZHF and its subsidiaries for $1,000(RMB 6,500). See Note 3 Acquisitions and Disposals.
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 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, 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 consolidated 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.
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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 expenses, 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: For the years ended July 31, 2024 and 2023, the Company included its foreign currency translation gain or loss as part of its comprehensive income.
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, 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: The Company maintains cash with banks in the USA and China. Should any bank holding cash become insolvent, or if the Company is 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 bank accounts. In China, a depositor has up to RMB500,000insured by the People's Bank of China Financial Stability Bureau ("FSD"). In the United States, the standard insurance amount is USD250,000per depositor in a bank insured by the Federal Deposit Insurance Corporation ("FDIC"). Financial instruments that potentially subject the Company to significant concentrations of credit risk are cash and cash equivalents and accounts receivable. As of July 31, 2024 and 2023, respectively, USD205,185and $Nilamount of the Company's cash and cash equivalents held by financial institutions was uninsured. With respect to accounts receivable, the Company generally does not require collateral and does not have an allowance for doubtful accounts.
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 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.
Income Taxes: The Company accounts for 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 assets and liabilities are recognized for the expected future tax consequences of temporary 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 in effect when the differences 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.
On December 22, 2017, the 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 subsidiaries do not receive any preferential tax treatment from local government.
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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 advertisements of 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 advertisements produced by advertisers and provides advertisements account charging service to customers. The advertisements are published on the targeted media platforms as determined by the customers. Revenue is recognized at a point in time when the distribution of advertisements and charging of advertisement accounts are completed upon the completion confirmations by customers and suppliers, respectively.
During the year ended July 31, 2024, the Company has entered advertising service contracts with about 30 customers and received approximately RMB 98.4million (USD 13.6million) as advanced payment from these customers. the Company also entered about 20 supplier contracts for advertising placement and prepaid RMB 90.8million (USD 12.6million). During the year ended July 31, 2024, the Company recognized USD 1.3million placement revenue from providing advertisement placement services. The Company provides traffic acquisition service to place advertisements for our customers. The advertisements are published on the targeted media platforms as determined by the customers. The Company is not the principal in this arrangement as the Company does not control the specified service (i.e., the traffic) before that service is delivered to the customer, because (i) it is the targeted media platform, rather than the Company, who is primarily responsible for providing the media publishing service; (ii) the media platforms are identified and determined by the customers, rather than the Company, and the Company does not commit to acquire the traffic before transferring to the customers. Therefore, 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 suppliers related to these transactions as placement revenue on a net basis.
Generally, the Company pays suppliers upfront for media resources and collects prepayments from customers. Under certain status, credit terms of up to 90 days may be granted. As of July 31, 2024, the Company had $573,530outstanding receivables due from two customers.
During the year ended July 31, 2024, the Company also generated $62,443revenue from designing, making, and placing video advertising for our related party customers, primarily Shanghai DuBian Assets Management Ltd. ( "SH Dubian"), which is managed by our major shareholder's relatives.
In the years before August 1, 2022, the Company's main operations were focusing on early childhood education and hospitality services. 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. Thus, there was no revenue recognized for the year ended July 31, 2023. See Note 3 Acquisitions and Disposals.
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.
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NOTE 2. GOING CONCERN
The accompanying consolidated 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 July 31, 2024, The Company had a working capital deficit of $3,565,965and an accumulated deficit of $5,910,843. These conditions raise substantial doubt about the ability of Hartford Creative Group, Inc. 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 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. ACQUISITIONS AND DISPOSALS
In January 2019, HFSH entered agreements to acquire 100percent equity interest of Shanghai Luo Sheng International Trade Ltd. ("SH Luosheng"). On August 1, 2022, HFSH decided to withdraw from the agreement entered in January 2019 to acquire 100percent equity interest of Shanghai Luo Sheng International Trade Ltd. ("SH Luosheng"). There was no penalty levied or to be levied due to delayed execution or inexecution.
Impacted by the government regulation newly implemented in education industry and the restrictions posted by the Chinese government to control the pandemic in China since 2021, the Company's business hasn't been developed as planned and occurred significant loss from the early child education practice. To avoid further operation losses, subsequently on August 1, 2022, HFSH entered a contract with a related party, Shanghai Oversea Chinese Culture Media Ltd. ("SH Oversea"), to sell 90percent ownership of HF Int'l Education and its subsidiaries for $900(RMB 5,850). On August 1, 2022, HFUS entered a contract with SH Oversea and another individual, to sell 100percent ownership of HZHF and its subsidiaries for $1,000(RMB 6,500).
| Net assets (liabilities) disposed of: | ||||
| Cash and cash equivalents | $ | 4,938 | ||
| Prepaid and Other current receivables | 45,532 | |||
| Related party receivable | 428,519 | |||
| Inventory | 305,124 | |||
| Property and equipment - Net | 582,707 | |||
| ROU assets-Operating lease | 2,836,698 | |||
| Other assets | 296,218 | |||
| Related party loan and payables | (1,321,549 | ) | ||
| Contract liabilities | (547,906 | ) | ||
| Lease liabilities, current and noncurrent | (3,715,688 | ) | ||
| Other current payable | (401,782 | ) | ||
| Other liabilities | (357,796 | ) | ||
| Noncontrolling interest | 1,307,586 | |||
| Net assets (liabilities) of the subsidiaries, excluding noncontrolling interest | (537,399 | ) | ||
| Consideration | 1,831 | |||
| Gain on disposal of the subsidiaries | $ | (539,230 | ) |
On April 1, 2024, as part of its strategy to broaden its advertising business, the Company regained full ownership of HZHF without incurring any costs. Following this reacquisition, it was rebranded to 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). These transactions were executed at no cost and did not involve the transfer of any substantial opening balances.
| 21 |
NOTE 4. RELATED PARTY TRANSACTIONS
Related Party Receivables
HFUS had $964related party receivable as of both July 31, 2024 and July 31, 2023, due from SH Oversea in relation to the disposal consideration.
Related Party Payables and loans
As of July 31, 2024 and July 31, 2023, amounts of $460,189and $586,236, respectively, are payable to SH Qiaohong. The balances were mainly funding support from SH Qiaohong for operation. The funding support bears no interest and due on demand.
HFSH had payable balances to Shanghai Oversea Chinese Culture Media Ltd. ("SH Oversea"), an entity previously were managed by the same management team, in the amounts of $2,822,936and $3,291,324as of July 31, 2024 and July 31, 2023, respectively. The payable is funding support from SH Oversea for operation, bears no interest and due on demand.
HFUS borrowed in the form of a short-term loan at 5% per annum from a related party, Hartford Hotel Investment Inc., an entity managed by the same management team. $19,470and $17,789of interest expenses were recorded during the year ended July 31, 2024 and July 31, 2023, respectively. As of July 31, 2024 and July 31, 2023, the unpaid principal and interest amount of $402,971and $417,501, respectively, will be due on demand.
Since February 2024, HFUS borrowed in the form of a short-term loan at an annual rate of 5% from its principal shareholder, Mr. Liangyue Song, a total of $200,700. On April 22, 2024, an amount of $29,022from the principal was used to offset the profits Mr. Song allegedly earned in violation of Section 16(b) of the Securities Exchange Act. This action was based on the requirement that any profits from such a violation be returned to the Company. During the period ending July 31, 2024, interest expense amounting to $2,631was recorded. As of July 31, 2024, the outstanding balance of principal and interest, totaling $174,309, is payable upon demand.
The Company also had related party payable of $71,363and $72,133as of July 31, 2024 and July 31, 2023, respectively, represents the unpaid portion of operating advances from its main shareholder, Mr. Song. These advances do not bear interest and are considered due on demand.
Other Related Party Transactions
During the year ended July 31, 2024, the Company generated $62,443revenue from designing, making, and placing video advertising for its related parties, respectively, primarily SH Dubian, which is managed by the Company's major shareholder's relatives. For the year ended July 31, 2024, the Company incurred $55,505, respectively, in costs related to revenue generation, primarily stemming from services provided by another related party, HF Int'l Education, a subsidiary of SH Oversea.
The Company has entered into a lease agreement for office space located in Shanghai measuring approximately 543square feet (50.4square meters) with SH Dubian. The lease duration extends from February 18, 2024, to February 17, 2026, at a fixed monthly rent of USD 638(RMB 4,600).
Office space at Rosemead, CA is provided to Hartford Creative Group, Inc. at no cost by the major shareholder. No provision for these costs has been included in these financial statements as the amounts are not material.
NOTE 5. ADVANCE TO CONTRACTORS AND CONTRACT LIABILITIES
Upon engaging 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 July 31, 2024, the Company's balance sheets reflect $2,422,392in prepayments to contractors, categorized as "Advance to contractor" and $1,315,189in customer advance payments, recorded under "Contract Liabilities". As of July 31, 2023, the Company had not engaged in the advertisement placement services, resulting in zero outstanding balances.
NOTE 6. OTHER CURRENT LIABILITIES
Other current payable consist as follows:
| July 31, 2024 | July 31, 2023 | |||||||
| Taxes payable | $ | 275,193 | $ | - | ||||
| Accrued payroll | 16,930 | 3,193 | ||||||
| Other payables | 169,196 | 127,086 | ||||||
| $ | 461,319 | $ | 130,279 |
NOTE 7. CONCENTRATION RISK
For the year ended July 31, 2024, three customers accounted for 56% of the Company's total gross billing. As of July 31, 2024, the Company had $573,530outstanding receivables due from two customers. Prepayments received from two customers, which are recorded as contract liabilities, comprised 73% of total contract liabilities as of July 31, 2024.
For the year ended July 31, 2024, two contractors accounted for 53% of the Company's total services acquisition. As of July 31, 2024, the Company had $1,326,907outstanding payables to two contractors. Advances made to two contractors amounted to 70% of the Company's total advanced payments as of July 31, 2024.
In the corresponding periods of the prior year, the Company did not participate in advertisement placement services, and no significant customer or vendor concentration risks were identified.
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NOTE 8. COMMITMENTS AND CONTINGENCIES
There have been no material contractual obligations and commitments as of July 31, 2024.
NOTE 9. SEGMENT INFORMATION
Accounting Standards Codification ("ASC") 280, "Segment Reporting," requires public companies to report financial and descriptive information about their reportable operating segments. We identify our operating segments based on how our chief operating decision maker internally evaluates separate financial information, business activities and management responsibility.
The Company used to operate in two reportable segments: hospitality (hotel and travel agency) and early childhood education industry in China in the past years. Due to the disposal of operating subsidiaries on August 1, 2022, we currently have onereportable segment for advertisement placement services.
NOTE 10. INCOME TAXES
The Company's consolidated financial statements recognize the current and deferred income tax consequences that result from the Company's activities during the current and preceding periods. The Company files consolidated federal, state, and foreign income tax filings. The Company recognizes current and deferred income taxes as a consolidated "C" corporation for periods ending.
The Company's income before income taxes are subject to taxes in the following jurisdictions for the following periods:
| July 31, 2024 | July 31, 2023 | |||||||
| Pre-tax (loss) income from U.S. operations | $ | (130,909 | ) | $ | 469,953 | |||
| Pre-tax (loss) income from foreign operations | 1,234,400 | (72,250 | ) | |||||
| Total Pre-tax income | $ | 1,103,491 | $ | 397,703 |
The provision for income taxes consisted of the following:
| July 31, 2024 | July 31, 2023 | |||||||
| Current: | ||||||||
| Federal | $ | - | $ | - | ||||
| State and local | 800 | 800 | ||||||
| Foreign | 214,718 | - | ||||||
| Total current | 215,518 | 800 | ||||||
| Deferred: | ||||||||
| Federal | (174,639 | ) | - | |||||
| State and local | (30,262 | ) | - | |||||
| Foreign | - | - | ||||||
| Total deferred | (204,901 | ) | - | |||||
| Total income tax expense | $ | 10,617 | $ | 800 |
Income taxes at the statutory rate are reconciled to reported income tax expense as follows:
| 2024 | 2023 | |||||||
| Federal income tax rate | 21.00 | % | 21.00 | % | ||||
| State income tax rate | 8.80 | % | 8.80 | % | ||||
| Foreign tax | 19.46 | % | -4.80 | % | ||||
| GILTI | (16.39 | )% | - | |||||
| Usage of DTA | (29.73 | )% | - | |||||
| Other | (2.18 | )% | 0.00 | % | ||||
| Valuation allowance | 0.00 | % | -25 | % | ||||
| Effective Income tax expense (benefit) rate | 0.96 | % | 0.00 | % |
| 23 |
The tax effects of temporary differences that give rise to significant portions of deferred tax assets as of July 31, 2024, are as follows:
| July 31, 2024 | ||||
| GILTI Income | 180,826 | |||
| PY state taxes | 168 | |||
| State tax effect | (6,355 | ) | ||
| NOL | 30,262 | |||
| Total | 204,901 | |||
| Valuation allowance | - | |||
| Total Deferred Tax Assets | 204,901 |
NOTE 11. 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.
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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, 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 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, 2024. Based on this assessment, management believes that as of July 31, 2024, 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:
| ● | The Company did not implement sufficient working procedures and maintain proper accounting supporting for the new business operation model at the operational subsidiary level |
Inherent 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.
Changes in Internal Control Over Financial Reporting.
We have made no change in our internal control over financial reporting during the last fiscal year 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.| 25 |
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
The following individual presently serves as our officers and directors as of October 23, 2024:
| Board | ||||||
| Name and | Position | |||||
| Municipality of Residence | Age | Positions With the Company | Held Since | |||
| President, Chief Executive Officer | ||||||
| Sheng-Yih Chang Los Angeles, CA | 52 | and Director | 2018 | |||
| Lili Dai Los Angeles, CA | 48 | Interim Chief Financial Officer | NA | |||
| Yuan Lu Shanghai, China | 37 | Director | 2019 | |||
| Xin Dong Los Angeles, CA | 39 | Director | 2018 | |||
| Guo Jurong Shanghai, China | 61 | Director | 2024 | |||
| Shen Yiqian Shanghai, China | 67 | Director | 2024 |
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:
Sheng Yih Chang. Mr. Chang has served as the Chief Financial Officer of the Company since June 2018, and 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 California, 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.
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Lili Dai, Ms. Dai possesses a diverse background encompassing accounting, auditing, financial reporting, and management. Since December 2023, she has served as the principal of Green-Keen Consulting LLC. Prior to that, she served as Interim VP Controller at Inno Holdings Inc. From September 2021 to August 2023, she held the position of Director of Technical Accounting and Reporting at Tattooed Chef LLC, where she oversaw technical accounting matters and external financial reporting. From January 2018 to September 2021, Ms. Dai served as the Director of Accounting and Financial Reporting at Markwins Beauty Brands, responsible for managing global operational accounting and reporting functions. Earlier in her career, from October 2015 to December 2017, she worked as a Senior Technical Corporate Accountant at a multi-billion-dollar company, Monster Energy Drink. Ms. Dai's tenure at PwC Los Angeles, from January 2012 to October 2015, involved supervising audit engagements for various large companies across diverse industries. She began her professional journey as an auditor at Frazer LLP, a regional CPA firm in California, from April 2008 to December 2011. Ms. Dai holds a Master of Science in Accountancy from California State University Fullerton and is an active Certified Public Accountant.
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.
Guo Jurong. Mr. Guo is a seasoned academic and business executive with a distinguished career. As the Dean of the United Business School (UBI) China and Chairman of the Advisory Committee at Detong Capital, he brings a wealth of experience to his leadership roles. His expertise extends to serving as an Independent Director on multiple publicly listed companies.
Prior to his current positions, Mr. Guo has served as the Assistant Dean of Antai College of Economics and Management, Shanghai Jiao Tong University, and the Director of EMBA Program, the Executive Dean of China Enterprise Development Research Institute, the Secretary General of the Academic Committee of the Research Institute of the Ministry of Commerce of the People's Republic of China, the Professor and President of Qingdao Institute of Technology and the Founding President of Shanghai Medical University.
Shen Yiqian, Ms. Shen is a financial executive with over four decades of experience, holds a degree in accounting from Shanghai University of Finance and Economics.. Throughout her career, Ms. Shen has held key financial leadership positions at leading companies in various industries. Her expertise includes serving as a Financial Director at Shanghai Jingyuan Real Estate Development Co., Ltd., Beijing Aodewei (Shanghai) Consulting Co., Ltd., and Shanghai Sirui Construction Technology Co., Ltd. Prior to these roles, she held positions in accounting and finance at Shanghai No. 19 Cotton Textile Factory and Watanabe Group (Shanghai) International Business Co., Ltd. Ms. Shen's early career in logistics management at the Shanghai Haifeng Farm Brigade provided her with a solid foundation in operations and management.
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 five members, of which Yuan Lu, Xin Dong, Guo Jurong and Shen Yiqian meet the independence requirements of the Nasdaq Stock Market as currently in effect.
| 27 |
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
Our Board plans to adopt a written code of business conduct and ethics ("Code of Ethics") that applies to our directors, officers, and employees, including our principal executive officer, principal financial officer, and principal accounting officer or controller, or persons performing similar functions. We intend to post on our website a current copy of the Code of Ethics and all disclosures required by law regarding any amendments to, or waivers from, any provision of the Code of Ethics.
ITEM 11. EXECUTIVE COMPENSATION
Except the monthly compensation of $13,300 paid to Green-Keen Consulting LLC for the interim CFO service starting April 1, 2024, no other officer or director has received annual compensation since the beginning of the fiscal year, August 1, 2023.
Employment Agreements
As of July 31, 2024, all employees and officers in China have entered into employment agreements with the Company's subsidiaries. However, the Company has not entered into employment agreements with any of its executive officers except the Interim CFO contract in the US as of July 31, 2024.
Anticipated Officer and Director Remuneration
During the year ended July 31, 2024, except the monthly compensation for the interim CFO, the Company has not paid any compensation owed to any other officer or director. 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).
| 28 |
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
As of October 23, 2024, there are a total of 100,108,000 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 Beneficial Owner(1) | Title |
Beneficially owned |
Percent of Class | |||||||
| Officers and Directors | ||||||||||
| Sheng-Yih Chang | Chief Executive Officer and Director | 1,600,000 | 1.6 | % | ||||||
| Lili Dai | Interim Chief Financial Officer | 500,000 | 0.5 | % | ||||||
| Rose Hong Wang(2) | Former Chief Executive Officer and Director | 3,664,000 | 3.7 | % | ||||||
| Yuan Lu(3) | Independent Director Nominee | 4,910,000 | 4.9 | % | ||||||
| Xin Dong | Independent Director Nominee | 4,910,000 | 4.9 | % | ||||||
| Jurong Guo | Independent Director Nominee | - | - | |||||||
| Yiqian Shen | Independent Director Nominee | - | - | |||||||
| Officers and Directors as a Group | 15,584,000 | 15.6 | % | |||||||
| 5% Stockholders | ||||||||||
| Lianyue Song | 68,184,880 | 68.1 | % |
(1) Unless otherwise indicated the business address for each of the individuals is 8832 Glendon Way, Rosemead, CA 91770.
(2) The address is 729 Carriage House Drive, Arcadia, CA 91006.
(3) The address is RM 3806 218 Wusong Rd, Hongkou District, Shanghai, China.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
US office space is provided to Hartford Creative Group, Inc. at no additional cost by the major shareholder. 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 in the last two years ended July 31, 2024:
| 2024 | 2023 | |||||||
| Audit Fees | $ | 27,500 | $ | 10,500 | ||||
| Audit Related Fees | 6,000 | 7,500 | ||||||
| All other fees | 10,000 | - | ||||||
| Total Fees | $ | 43,500 | $ | 18,000 |
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.
| 29 |
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES
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:
21.1* Subsidiaries of the Company
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* 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)
* Filed herewith
| 30 |
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 CREATIVE GROUP, INC. | |||
| Date: | October 29, 2024 | By: | /s/ Sheng-Yih Chang |
| Sheng-Yih Chang | |||
| 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/ Sheng-Yih Chang | Chief Executive Officer, President, Dir. | October 29, 2024 | ||
| Sheng-Yih Chang | (Principal Executive Officer) | |||
| /s/ Lili Dai | Interim Chief Financial Officer | October 29, 2024 | ||
| Lili Dai | (Principal Accounting Officer) | |||
| /s/ Yuan Lu | Director | October 29, 2024 | ||
| Yuan Lu | ||||
| /s/ Xin Dong | Director | October 29, 2024 | ||
| Xin Dong | ||||
| /s/ Jurong Guo | Director | October 29, 2024 | ||
| Jurong Guo | ||||
| /s/ Yiqian Shen | Director | October 29, 2024 | ||
| Yiqian Shen |
| 31 |