The accompanying notes are an integral part of these unaudited condensed financial statements.
The accompanying notes are an integral part of these unaudited condensed financial statements.
The accompanying notes are an integral part of these unaudited condensed financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2018
(UNAUDITED)
NOTE 1 – NATURE OF OPERATIONS, BASIS OF PRESENTATION AND GOING CONCERN
Natural Health Farm Holdings Inc. (the “Company”, “We”, “Its”, and “NHFH”) was incorporated under the laws of the State of Nevada on July 10, 2014 (Inception date). The Company has developed web-based business and launched itself into the healthcare industry. The Company has plans to provide through its subsidiaries, retail nutritional supplements, organic foods, personal care, and other health care products. The Company currently provides nutritional consulting services by offering a web based naturopathic learning management system that allows distributors, chiropractors and consumers to educate users products with the health-related aspects of various illnesses, and how the Company’s learning systems could be used to improve their general wellbeing.
On November 30, 2016, the Company filed a certificate of amendment to its articles of incorporation with the Nevada Secretary of State to change its name from Amber Group Inc. to Natural Health Farm Holdings Inc. and effectuated a 30:1 forward stock split of its common stock and increased its authorized share capital to 500,000,000 (Five Hundred Million). This amendment was unanimously approved by the Company’s board of directors on November 29, 2016, and with the stockholders holding a majority of the Company’s voting power.
On March 16, 2017, Financial Industry Regulatory Authority (FINRA) approved the corporate name change to Natural Health Farm Holdings Inc., approved the increase in the Company’s authorized shares of common stock to 500,000,000 shares, and approved 30:1 forward stock split effective March 17, 2017. The new trading symbol for our common stock is “NHEL”.
Basis of Presentation
The accompanying interim condensed financial statements are unaudited, but in the opinion of management of the Company, contain all adjustments, which include normal recurring adjustments necessary to present fairly the financial position at March 31, 2018, and the results of operations for three months and six months ended March 31, 2018, and cash flows for the six months ended March 31, 2018 and 2017. The balance sheet as of September 30, 2017 is derived from the Company’s audited financial statements.
Certain information and footnote disclosures normally included in financial statements that have been prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although management of the Company believes that the disclosures contained in these interim condensed financial statements are adequate to make the information presented therein not misleading. For further information, refer to the financial statements and the notes thereto contained in the Company’s September 30, 2017 Annual Report filed with the Securities and Exchange Commission on Form 10-K on December 28, 2017.
Going Concern
The Company’s financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has generated small revenues and has sustained cumulative operating losses since July 10, 2014 (Inception Date) to date and allow it to continue as a going concern. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders and affiliates, the ability of the Company to obtain necessary financing to continue operations, and the attainment of profitable operations. The Company recorded a net loss of $60,105 from October 1, 2017 to March 31, 2018, provided net cash flows in operating activities of $102,081, has a working capital deficit of $122,461, and has an accumulated deficit of $178,571 as of March 31, 2018. The Company has had difficulty in obtaining working capital lines of credit from financial institutions and trade credit from vendors. These factors, among others, raise a substantial doubt regarding the Company’s ability to continue as a going concern. If the Company is unable to obtain adequate capital, it could be forced to cease operations. The accompanying financial statements do not include any adjustments to reflect the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following summary of significant accounting policies of the Company is presented to assist in the understanding of the Company’s financial statements. The financial statements and notes are the representation of the Company’s management who is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) in all material respects and have been consistently applied in preparing the accompanying financial statements.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the valuation of accounts payable, accrued liabilities and payable to related party. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. The Company had a cash balance of $117,038 at March 31, 2018 and $0 at September 30, 2017, respectively.
Computer Software Costs
Computer software costs include direct costs incurred for purchase of developed software products and payments made to independent software developers. The Company accounts for computer software costs in accordance with the FASB guidance for the costs of computer software to be sold, leased, or otherwise marketed (“ASC Subtopic 985-20”). Computer software costs are capitalized once the technological feasibility of a product is established and such costs are determined to be recoverable. Technological feasibility of a product encompasses technical design documentation and integration documentation, or the completed and tested product design and working model. Computer software costs are capitalized once technological feasibility of a product is established and such costs are determined to be recoverable against future revenues. Technological feasibility is evaluated on a project-by-project basis. Amounts related to computer software development that are not capitalized are charged immediately to the appropriate expense account. Amounts that are considered ‘research and development’ that are not capitalized are immediately charged to engineering, research, and development expense. Capitalized costs for those products that are cancelled or abandoned are charged to product development expense in the period of cancellation.
Commencing upon product release, capitalized computer software costs are amortized on the straight-line method over a thirty-six months period. The Company evaluates the future recoverability of capitalized computer software costs on an annual basis.
Revenue Recognition and Concentrations
We generate revenue from licensing and other software services from our web-based software to distributors and retailers of nutritional supplements in the healthcare industry. We recognize licensing fees and other software services as revenue over the period of the contract at the time that the computer software is delivered and accepted by the customer, the selling price is fixed, and collection is reasonably assured, provided no significant obligations remain. We consider authoritative guidance on multiple deliverables in determining whether each deliverable represents a separate unit of accounting.
Deferred revenues represent billings or cash received in excess of revenue recognizable on service agreements that are not accounted for as revenues.
Concentration of Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company places its cash with high quality banking institutions. The Company does not have the cash balances in excess of Federal Deposit Insurance Corporation limit at March 31, 2018 and September 30, 2017, respectively.
Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “
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 basis 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. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
The Company follows the provisions of ASC 740-10, “
Accounting for Uncertain Income Tax Positions
.” When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying condensed balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.
Earnings (Loss) Per Common Share
The Company computes net earnings (loss) per share in accordance with ASC 260, “
Earnings per Share”
. ASC 260 requires presentation of both basic and diluted net earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible note and preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. At March 31, 2018 and September 30, 2017, there were no convertible notes, options or warrants available for conversion that if exercised, may dilute future earnings per share.
Fair value of Financial Instruments and Fair Value Measurements
ASC 820, “
Fair Value Measurements and Disclosures”,
requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company’s financial instruments consist principally of cash, accounts payable, accrued expenses and payable to an affiliate. Pursuant to ASC 820, “
Fair Value Measurements and Disclosures”
and ASC 825, “
Financial Instruments”
, the fair value of our cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The Company believes that the recorded values of all the other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
The following table presents assets and liabilities that were measured and recognized at fair value as of December 31, 2017 on a recurring basis:
Description
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
None
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
The following table presents assets and liabilities that were measured and recognized at fair value as of September 30, 2017 on a recurring basis:
Description
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
None
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Recent Accounting Pronouncements
In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, “
Financial Instruments - Credit Losses
(Topic 326).” The new standard amends guidance on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating this guidance to determine the impact it may have on its financial statements.
In 2015, the FASB issued ASU No. 2015-17, “
Income Taxes”
(Topic 740):
Balance Sheet Classification of Deferred Taxes
, which requires all deferred tax assets and liabilities to be classified as noncurrent in a classified balance sheet. Current US GAAP requires an entity to separate deferred tax assets and liabilities into current and noncurrent amounts in a classified balance sheet. For public entities, ASU 2015-17 is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For all other entities, ASU 2015-17 is effective for annual reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018, and may be applied either prospectively or retrospectively, with early application permitted for financial statements that have not been previously issued. The Company has not yet determined the effect of the adoption of this standard on the Company’s financial position and results of operations.
NOTE 3 – COMPUTER SOFTWARE COSTS
The Company purchased web-based naturopathic learning management system computer software, developed by a third party, to educate users with the health-related products for various illnesses, and how the Company’s learning systems could be used to improve their general wellbeing. The amount capitalized include direct costs incurred in developing the software purchased from the third party.
The following table presents details of our computer software costs as of March 31, 2018 and September 30, 2017:
|
Balance at
September 30, 2017
|
|
Additions
|
|
Amortization
|
|
Balance at
March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
Computer Software Costs, net
|
|
$
|
-
|
|
|
$
|
41,850
|
|
|
$
|
(4,094
|
)
|
|
$
|
37,756
|
|
Computer software costs are being amortized on a straight-line basis over their estimated life of three years.
Amortization expense for computer software costs was $3,488 and $0 for the three months ended March 31, 2018 and 2017, and $4,094 and $0 for the six months ended March 31, 2018 and 2017, respectively.
The estimated future amortization expense of computer software costs as of March 31, 2018 is as follows:
Year ending September 30,
|
|
Amount
|
|
2018
|
|
$
|
6,975
|
|
2019
|
|
|
13,950
|
|
2020
|
|
|
13,950
|
|
2021
|
|
|
2,881
|
|
Total
|
|
$
|
37,756
|
|
NOTE 4 – ACCOUNTS PAYABLE
Accounts payable at March 31, 2018 and September 30, 2017 totaled $6,627 and $0, respectively. Accounts payable consisted of $6,627 and $0 in legal and consulting fees payable as of March 31, 2018 and September 30, 2017, respectively.
NOTE 5 – PAYABLE TO AFFILIATES
The Company has received an advance of $500 from a director for its working capital needs as of March 31, 2018 (see NOTE 6).
The Company has received advances from an affiliate for its working capital needs from an entity in which its Chief Executive Officer is also a director in such entity (NOTE 6). The advance received is non-interest bearing, unsecured and payable on demand is summarized as follows.
|
Balance
March 31, 2018
|
|
Balance
September 30,
2017
|
|
|
(Unaudited)
|
|
|
|
Payable to affiliate
|
|
$
|
98,837
|
|
|
$
|
78,067
|
|
Total
|
|
$
|
98,837
|
|
|
$
|
78,067
|
|
NOTE 6 – RELATED PARTY TRANSACTIONS
The Company received an advance of $500 and $0 from a director for its working capital needs as of March 31, 2018 and September 30, 2017, respectively. Funds advanced to the Company by the director are non-interest bearing, unsecured and due on demand (NOTE 5).
The Company has received advances for its working capital needs from an affiliate in which the Company’s Chief Executive Officer holds the position of director in such entity (see NOTE 5).
On November 20, 2017, the Company sold ten (10) naturopathic learning management system and modules for $29,000 to an entity solely owned by a director of the Company. The Company received the payment in full of $29,000 on December 21, 2017. The Company recorded $2,384 and $3,469 as revenues earned for the three months and six months ended March 31, 2018, and $25,531 as deferred revenues at March 31, 2018.
On December 11, 2017, the Company sold twenty (20) naturopathic learning management systems and modules for $50,000 to an entity in which the Company Chief Executive Officer holds the position of director in such entity. The Company received the payment of $50,000 on December 28, 2017. The Company recorded $4,110 and $5,023 as revenues earned for the three months and six months ended March 31, 2018 and $44,977 as deferred revenues at March 31, 2018.
NOTE 7 – COMMITMENTS AND CONTINGENCIES
Litigation Costs and Contingencies
From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business. Other than as set forth below, management is currently not aware of any such legal proceedings or claims that could have, individually or in the aggregate, a material adverse effect on our business, financial condition, or operating results.
In the normal course of business, the Company incurs costs to hire and retain external legal counsel to advise it on regulatory, litigation and other matters. The Company expenses these costs as the related services are received. If a loss is considered probable and the amount can be reasonable estimated, the Company recognizes an expense for the estimated loss.
NOTE 8: STOCKHOLDERS’ DEFICIT
The Company’s capitalization at March 31, 2018 was 500,000,000 authorized common shares with a par value of $0.001 per share.
Common Stock
On November 30, 2016, the Company increased the authorized share capital from 75,000,000 shares of common stock to 500,000,000 shares of common stock. In addition, the Company effectuated a 30:1 forward stock split of the common stock on such date.
On February 1, 2018, the Company entered into consulting agreements with two contractors for providing business advisory and consulting services. The Company issued 1,000,000 shares of common stock valued at $20,000 as the fair market value of the stock.
On March 1, 2018, the Company entered into a Share Exchange Agreement (the “Agreement”) with its shareholders whereby, the shareholders agreed to exchange, sell, convey, transfer and assign to the Company their shareholdings, free and clear of all liens, pledges, encumbrances, changes, restrictions or known claims of any kind, nature or description plus pay to the Company an aggregate purchase price of $50 (the “Purchase Price”), and the Company agreed to accept from its shareholders the old shares plus the Purchase Price in exchange for the transfer of old shares the new shares. As of March 31, 2018, the Company received cash proceeds of $35,537 from its shareholders to exchange the old shares for new shares, and recorded it as contributed capital in the accompanying financial statements.
As a result of all common stock issuances, the Company had 151,150,000 shares and 150,150,000 shares of common stock issued and outstanding as of March 31, 2018 and September 30, 2017, respectively.
NOTE 9 – SUBSEQUENT EVENTS
Management has evaluated subsequent events through May 11, 2018, the date the financial statements were available to be issued, noting no items that would impact the accounting for events or transactions in the current period or require additional disclosure.