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
JUNE 30, 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. The Company effectuated a 30:1 forward stock split of its common
stock and increased its authorized share capital to 500,000,000 (Five Hundred Million) shares. 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, and provided us a trading symbol for our common stock as “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 June 30, 2018, and the results of operations for three months
and nine months ended June 30, 2018, and cash flows for the nine months ended June 30, 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 has recorded a net
loss of $778,990 from October 1, 2017 to June 30, 2018, provided net cash flows in operating activities of $26,848, has a working
capital deficit of $221,377, and has an accumulated deficit of $897,456 as of June 30, 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 $46,992 at June 30, 2018 and $0 at September 30, 2017, respectively.
Prepaid Expenses
Prepaid expenses represent payments made
by the Company in advance for which the services have not been received. The Company recorded $4,600 and $0 in prepaid expense
at June 30, 2018 and 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
The Company generates revenue from licensing
and other software services from its web-based software to distributors and retailers of nutritional supplements in the healthcare
industry. The Company 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. The Company considers 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 June
30, 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 June 30, 2018 and September 30, 2017, there
were options granted to certain employees and independent consultants that when vested convert into 450,000 shares of common stock.
At June 30, 2018 and September 30, 2017, there were no convertible notes, 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 June 30, 2018 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 – PREPAID EXPENSE
The Company recorded prepaid expense of
$4,600 and $0 at June 30, 2018 and September 30, 2017. Prepaid expense consisted of $4,000 relating to legal fees and $600 for
stock transfer agent fees, paid in advance as of June 30, 2018. No prepayments of expenses were made as of September 30, 2017.
NOTE 4 – 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 June 30, 2018 and September 30, 2017:
|
|
Balance at
September 30, 2017
|
|
|
Additions
|
|
|
Amortization
|
|
|
Balance at
June 30, 2018
|
|
Computer Software Costs, net
|
|
$
|
-
|
|
|
$
|
41,850
|
|
|
$
|
(7,582
|
)
|
|
$
|
34,268
|
|
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 June 30, 2018 and 2017, and $7,582 and $0 for the nine months ended June 30,
2018 and 2017, respectively.
The estimated future amortization expense
of computer software costs as of June 30, 2018 is as follows:
Year ending September 30,
|
|
|
Amount
|
|
2018
|
|
|
$
|
3,488
|
|
2019
|
|
|
|
13,950
|
|
2020
|
|
|
|
13,950
|
|
2021
|
|
|
|
2,880
|
|
Total
|
|
|
$
|
34,268
|
|
NOTE 5 – ACCOUNTS PAYABLE
Accounts payable at June 30, 2018 and September
30, 2017 totaled $11,627 and $0, respectively. Accounts payable consisted of $11,627 and $0 in legal and consulting fees payable
as of June 30, 2018 and September 30, 2017, respectively.
NOTE 6 – PAYABLE TO AFFILIATES
The Company has received an advance of $500 from a director
for its working capital needs as of June 30, 2018 (see NOTE 7).
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
June 30, 2018
|
|
|
Balance
September 30,2017
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Payable to affiliate
|
|
$
|
98,837
|
|
|
$
|
78,067
|
|
Total
|
|
$
|
98,837
|
|
|
$
|
78,067
|
|
NOTE 7 – RELATED PARTY TRANSACTIONS
The Company received an advance of $500
and $0 from a director for its working capital needs as of June 30, 2018 and September 30, 2017, respectively. Funds advanced to
the Company by the director are non-interest bearing, unsecured and due on demand (NOTE 6).
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 6).
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 $2,417 and $5,886 as revenues earned
for the three months and nine months ended June 30, 2018, and $23,114 as deferred revenues at June 30, 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 $4,167 and $9,190 as revenues earned for the three months and nine months ended June 30, 2018 and $40,810 as deferred
revenues at June 30, 2018.
On May 30, 2018, the Company granted stock
options to three officers/directors to purchase 250,000 shares of common stock at exercise price of $1.50 per share over a five
(5) years term.
NOTE 8 – EQUITY FINANCING AGREEMENT
AND NOTE PAYABLE
Note payable consist of:
|
|
June 30, 2018
|
|
|
September 30, 2017
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Note payable - GHS Investments, Inc.
|
|
$
|
40,000
|
|
|
$
|
-
|
|
Total
|
|
|
40,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Current portion
|
|
$
|
40,000
|
|
|
$
|
-
|
|
On June 5, 2018,
the Company entered into an Equity Financing Agreement and Registration Rights Agreement with GHS Investments Inc. (“GHS”)
pursuant to which GHS agreed to purchase up to $20,000,000 in shares of Company common stock. The obligations of GHS to purchase
the shares of Company common stock are subject to the conditions set forth in the Equity Financing Agreement, including, without
limitation, the condition that a registration statement on Form S-1 registering the shares of Company common stock to be sold to
GHS be filed with the Securities and Exchange Commission and become effective. The Registration Rights Agreement provides that
the Company shall use commercially reasonable efforts to file the registration statement within 30 days after the date of the Registration
Rights Agreement and have the registration statement become effective within 90 days after it is filed. In connection with the
Equity Financing Agreement, the Company executed a promissory note in the principal amount of $40,000 (the “Note”)
as payment of the commitment fee for the Equity Financing Agreement. The Note bears interest at the rate of 8% and must be repaid
on or before March 5, 2019. The Company has recorded the commitment fee as an expense in the accompanying statements of operations
for the nine months ended June 30, 2018. The Company has accrued the interest expense of $219 on the principal balance of $40,000
for the period from June 5, 2018 to June 30, 2018.
NOTE 9 – 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 10: STOCKHOLDERS’ DEFICIT
The Company’s capitalization at June
30, 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 June 30, 2018, the Company received cash proceeds of $40,464 from its shareholders
to exchange the old shares for new shares and recorded it as contributed capital in the accompanying financial statements.
On May 16, 2018, the Company issued 50,000
shares of its common stock for a cash consideration of $50 pursuant to an agreement dated February 15, 2018. In addition, on the
same date, the Company issued 105,000 shares of common stock for a cash consideration of $210 pursuant to an agreement dated March
1, 2018. The common shares issued were valued at the fair value on the date of execution of the agreement to issue such shares.
On May 16, 2018, the Company issued 10,050,000 shares of common stock for a cash consideration of $10,050
pursuant to an agreement dated March 1, 2018. The common shares were valued at $10,050 being their fair value on the date of execution
of the agreement. The Company recorded $10,050 as subscriptions receivable as of June 30, 2018 since the Company did not receive
the cash proceeds for stock subscriptions.
On June 21, 2018, the Company issued 50,000
shares of common stock to a consultant pursuant to an agreement, for providing consulting and business advisory services to the
Company. The common shares were valued at $85,000 being their fair value on the date of execution of the agreement to issue such
shares.
As a result of all common stock issuances,
the Company had 161,405,000 shares and 150,150,000 shares of common stock issued and outstanding at June 30, 2018 and September
30, 2017, respectively.
Stock Option Plan
On May 30, 2018, the Board of Directors
authorized and approved the 2018 Non-Qualified Stock Option Plan (the “2018 Plan) and reserved 10,000,000 shares of the Company’s
common stock intended to be issued to selected officers, directors, consultants and key employees provided that bona fide services
shall be rendered by such consultants or advisors and such services must not be in connection with the offer or sale of securities
in a capital-raising transaction and do not promote or maintain a market for the Company’s securities. The Company filed
a Registration Statement with the SEC on May 31, 2018 disclosing formation of 2018 Plan.
On May 30, 2018, the Board granted stock
options under the 2018 Plan to two directors, an officer and an employee, and three independent consultants to purchase up to 450,000
shares of common stock with a five-year term. The stock options vested immediately upon the issuance date. The exercise price of
the stock options to purchase common stock was at $1.50 per share, and the quoted market price of the Company stock on the grant
date was $1.70. The option to purchase common stock expires on May 30, 2023. The fair value of options granted was $526,295, calculated
using Black-Scholes option pricing model using the assumptions of risk free discount rate of 2.79%, volatility of 106%, 2.5 year-term
for employees and directors and 5 year-term for non-employees, and dividend yield of 0%. The Company has recorded stock compensation
expense of $526,295 for the three months and nine months ended June 30, 2018.
NOTE 11 – SUBSEQUENT EVENTS
Management has evaluated subsequent events
through August 14, 2018, the date the financial statements were available to be issued, noting no new transactions that would require
additional disclosure.