The accompanying notes are an integral
part of these condensed consolidated unaudited financial statements.
The accompanying notes are an integral part
of these condensed consolidated unaudited financial statements.
The accompanying notes are an integral part
of these condensed consolidated unaudited financial statements.
The accompanying notes are an integral part
of these condensed consolidated unaudited financial statements.
The accompanying notes are an integral
part of these condensed consolidated unaudited financial statements.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
For the three months ended October
31, 2019 and 2018
(unaudited)
NOTE 1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
This summary of significant accounting
policies is presented to assist in understanding the Company's financial statements. The financial statements and notes
are the responsibility of the Company's management. These accounting policies conform to accounting principles generally
accepted in the United States of America ("US GAAP") and have been consistently applied in the preparation of the financial
statements.
Organization: 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 plans.
On December 28, 2018, the Company acquired
Hangzhou Hartford Comprehensive Health Management, Ltd (“HZHF”). On March 22, 2019, the Company acquired 60 percent
of Hangzhou Longjing Qiao Fu Vacation Hotel Co., Ltd. (“HZLJ”). On March 20, 2019, the Company acquired Shanghai Hartford
Comprehensive Health Management, Ltd. (“HFSH”) and its 90 percent owned subsidiary - Shanghai Qiao Garden International
Travel Agency (“Qiao Garden Int’l Travel”), and formed a joint venture entity, Hartford International Education
Technology Co., Ltd (“HF Int’l Education”) at the same month. On July 24, 2019, HF Int’l Education established
a 100% owned subsidiary, Pudong Haojin Childhood Education Ltd. (“PDHJ”).
Basis of Presentation: The accompanying
unaudited Condensed Consolidated Financial Statements were prepared in accordance with accounting principles generally accepted
in the United States (“GAAP”)
for interim financial information. Certain information and disclosures normally included in consolidated financial statements prepared
in accordance with GAAP have been condensed or omitted. Accordingly, these Condensed Consolidated Financial Statements should be
read in conjunction with our audited consolidated financial statements and the related notes included in our Annual Report filed
with the Securities and Exchange Commission ("SEC") on November 14, 2019. The year-end condensed balance sheet was derived
from our audited consolidated financial statements. Our unaudited interim Condensed Consolidated Financial Statements include,
in the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair statement of the
Condensed Consolidated Financial Statements. The operating results for the three months ended October 31,
2019 are not necessarily indicative of the results expected for the full year ending July 31, 2020.
Use of Estimates: The preparation
of financial statements in conformity with US GAAP requires the Company's management to make estimates and assumptions that affect
the amounts of assets and liabilities, the identification and disclosure of impaired assets and contingent liabilities at the date
of the financial statements, and the reported amounts of expenses during the reporting period. Actual results could differ from
those estimates.
Foreign Currency: The accounts
of the Company’s foreign subsidiaries are translated in accordance with FASB ASC 830. Foreign currency transaction gains
and losses are recognized in other expense, net, at the time they occur. Net foreign currency exchange gains or losses resulting
from the translation of assets and liabilities of foreign subsidiaries whose functional currency is not the U.S. dollar are recorded
as a part of accumulated other comprehensive loss in stockholders’ equity. The Company does not undertake hedging transactions
to cover its foreign currency exposure.
Comprehensive Income (loss): For
the three months ended October 31, 2019, the Company included its foreign currency translation gain or loss as part of its comprehensive
income (loss).
Fair value measurement: Fair value is
defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal
or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement
date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable
inputs. Accounting Standard Codification (“ASC”) 820, Fair Value Measurements and Disclosures (“ASC 820”),
describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last
unobservable, that may be used to measure fair value, which are the following:
Level 1 - Quoted prices in active
markets for identical assets or liabilities or funds.
Level 2 - Inputs other than Level
1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in
markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially
the full term of the assets or liabilities.
Level 3 - Unobservable inputs that
are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The Company’s financial instruments
consist of cash and cash equivalents, accounts receivable, current loan receivable, related party receivable, prepaid and other
current receivable, accounts payable, related party payable and other current payable. The carrying amounts of afore-mentioned
accounts approximate fair value because of their short-term nature.
Cash and Cash Equivalents:
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 RMB500,000 insured by the
People’s Bank of China Financial Stability Bureau (“FSD”). In the United States, the standard insurance amount
is $250,000 per depositor in 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 October
31, 2019, none 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.
Loans and Receivables: The Company
evaluates the collectability of its receivables based on a number of factors. In circumstances where the Company becomes aware
of a specific customer’s or borrower’s inability to meet its financial obligations to the Company, a specific reserve
for bad debts is estimated and recorded, which reduces the recognized receivable to the estimated amount the Company believes will
ultimately be collected. As of October 31, 2019, all balances are collectable based on management’s assessment.
Property and equipment, net: Property
and equipment, net, are stated at cost. Depreciation and amortization are computed using the straight-line method over the estimated
useful lives of the assets. The estimated useful lives of property and equipment are as follows:
|
Years
|
Leasehold improvements
|
Lesser of lease term or estimated useful life
|
ROU assets-Finance lease
|
Lease term
|
Furniture and fixtures
|
3-5
|
Office equipment and vehicles
|
3-5
|
Computer software
|
3-5
|
Expenditures for repairs and maintenance
are charged to expense as incurred.
Goodwill: Goodwill, which represents
the excess of the purchase price over the fair value of identifiable net assets acquired, is not amortized, in accordance with
Accounting Standards Codification (ASC) 350, Intangibles—Goodwill and Other. ASC 350 requires that goodwill be tested for
impairment at the reporting unit level on an annual basis and between annual tests, if an event occurs or circumstances change
that would more likely than not reduce the fair value of a reporting unit below its carrying value. These events or circumstances
could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale
or disposition of a significant portion of a reporting unit. The Company’s goodwill was generated from new acquisitions during
the year ended July 31, 2019. As of October 31, 2019, management determined that there was no impairment of goodwill.
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.
Noncontrolling interest: The Company
adopted ASC 810, Noncontrolling Interests in Consolidated Financial Statements—an Amendment of Accounting Research Bulletin
No. 51, as of January 1, 2009. ASC 810 establishes accounting and reporting standards for ownership interests in subsidiaries
held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling
interest, changes in a parent’s ownership interest and the valuation of retained noncontrolling equity investments when a
subsidiary is deconsolidated. ASC 810 also establishes reporting requirements that provide sufficient disclosures that clearly
identify and distinguish between the interest of the parent and the interests of the noncontrolling owner.
Advertising costs: Advertising
costs are expensed as incurred. During the three months ended October 31, 2019, amount of $5,964 advertising expense was incurred.
No advertising costs incurred during the three months ended October 31, 2018.
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 provide 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 subsidiary does not receive any preferential tax treatment from local government.
The Company has been in loss position
for years and zero balances of tax provisions, deferred tax assets and liabilities as of the reporting periods ended. The tax reforms
have no significant impacts on the Company.
Revenue Recognition: The
Company is still under restructuring and synergizing its core business upon the completion of multiple acquisitions, limited operations
occurred during the three months ended October 31, 2019 and 2018. The revenue during the three months ended October 31 2019 was
mainly generated from HZLJ and HF Int’l Education. HZLJ generates revenue primarily from the room rentals, sale of food and
beverage and other miscellaneous operating income. HF Int’l Education generates revenue from childhood education services.
Revenue is recognized when control of promised goods or services is transferred to our customers in an amount of consideration
to which we expect to be entitled to in exchange for those goods or services. We follow 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. ASC 606 has no material impacts on the Company’s financial positions. The
Company’s revenue is recognized when it satisfies a single performance obligation by transferring control of its products
or 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 did not have any material unsatisfied performance obligations
and contract liabilities for the three months ended October 31, 2019 or 2018.
Income (Loss) Per Share: Basic
earnings per share include no dilution and are computed by dividing net income (or loss) by the weighted- average number of shares
outstanding during the period. Diluted earnings per share reflect the potential dilution of securities that could share in the
earnings of the Company, assuming the issuance of an equivalent number of common shares pursuant to options, warrants, or convertible
debt arrangements. Diluted earnings per share are not shown for periods in which the Company incurs a loss because it would be
anti-dilutive. Similarly, potential common stock equivalents are not included in the calculation if the effect would be anti-dilutive.
No potentially dilutive debt or equity securities were issued or outstanding during the three months ended October 31, 2019 or
2018.
Recent Accounting Pronouncements:
Recently issued accounting pronouncements
not yet adopted
In August 2018, the FASB issued ASU No.
2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair
Value Measurement.” ASU No. 2018-13 removes certain disclosure requirements related to the fair value hierarchy, modifies
existing disclosure requirements related to measurement uncertainty and adds new disclosure requirements. ASU No. 2018-13 disclosure
requirements include disclosing the changes in unrealized gains and losses for the period included in other comprehensive income
for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant
unobservable inputs used to develop Level 3 fair value measurements. ASU No. 2018-13 is effective for the Company within those
fiscal years beginning on December 15, 2019, with early adoption permitted. Certain disclosures in the new guidance will need to
be applied on a retrospective basis and others on a prospective basis. The Company does not expect that the adoption of ASU No.
2018-13 will have a material impact on its financial position, results of operations and liquidity.
In January 2017, the FASB issued
ASU No. 2017-04, “Intangibles and Other (Topic 350): Simplifying the Test for Goodwill Impairment”, which eliminates
the requirement to calculate the implied fair value of goodwill, but rather requires an entity to record an impairment charge based
on the excess of a reporting unit’s carrying value over its fair value. This amendment is effective for annual or interim
goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company is currently
evaluating the impact of ASU No. 2017-04 on its financial position and results of operations.
In June 2016, the FASB issued ASU No.
2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”.
The accounting standard changes the methodology for measuring credit losses on financial instruments and the timing when such losses
are recorded. ASU No. 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15,
2019. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2018.
The Company is currently evaluating the impact this standard will have on its financial position, results of operations and liquidity.
Recently adopted accounting pronouncements
In February 2018, the FASB issued ASU
No. 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220)”, which amends the previous guidance to
allow for certain tax effects “stranded” in accumulated other comprehensive income, which are impacted by the Tax Cuts
and Jobs Act (the “Tax Reform Act”) , to be reclassified from accumulated other comprehensive income into retained
earnings. This amendment pertains only to those items impacted by the new tax law and will not apply to any future tax effects
stranded in accumulated other comprehensive income. This standard is effective for fiscal years beginning after December 15, 2018
and allows for early adoption. The adoption of ASU No. 2018-02 didn’t have an impact on the Company’s financial position,
results of operations and liquidity.
In February 2016, the FASB issued ASU
No. 2016-02, “Leases (Topic 842)”. ASU No. 2016-02 requires the recognition of lease assets and lease liabilities on
the balance sheet for leases classified as operating leases under previous guidance. The accounting for finance leases (capital
leases) was substantially unchanged. The original guidance required application on a modified retrospective basis with adjustments
to the earliest comparative period presented. In August 2018, the FASB issued ASU No. 2018-11, “Targeted Improvements to
ASC 842,” which included an option to not restate comparative periods in transition and elect to use the effective date of
ASU No. 2016-02 as the date of initial application, which the Company elected. As a result, the consolidated balance sheet prior
to August 1, 2019 was not restated, and continues to be reported under previous guidance that did not require the recognition of
operating lease liabilities and corresponding lease assets on the consolidated balance sheet. The cumulative effect of the changes
made to our Condensed Consolidated Balance Sheet at August 1, 2019 for the adoption of the new lease standard was as follows:
|
|
Balance at
July 31, 2019
|
|
Adjustments
|
|
Balance at August 1, 2019
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid and Other current receivables
|
|
|
386,700
|
|
|
|
(21,083
|
)
|
|
|
365,617
|
|
Other assets
|
|
|
673,634
|
|
|
|
4,196,680
|
|
|
|
4,870,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current payable
|
|
|
175,856
|
|
|
|
704,861
|
|
|
|
880,717
|
|
Other liabilities
|
|
|
336,046
|
|
|
|
3,460,754
|
|
|
|
3,796,800
|
|
The adoption of ASU No. 2016-02 had an immaterial impact on
the Company’s condensed Consolidated Statement of Operation and condensed Consolidated Statement of Cash Flows for the three
months ended October 31, 2019. In addition, the Company elected the package of practical expedients permitted under the transition
guidance within the new standard, which allowed the Company to carry forward the historical lease classification, not reassess
prior conclusions related to expired or existing contracts that are or that contain leases, and not reassess the accounting for
initial direct costs. Operating leases with a term of 12 months or less will not be recorded on the Consolidated Balance Sheet.
Additional information and disclosures required by ASU No. 2016-02 are contained in Note 12 Leases.
NOTE 2. GOING CONCERN
The accompanying financial statements were
prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of obligations in the normal
course of business. However, Hartford Great Health Corp.'s operations has incurred losses since inception, resulting
in an accumulated deficit of $1,222,519 and $916,816 as of October 31, 2019 and July 31, 2019, respectively. The Company’s
operation provided consecutive negative cash flow, $63,297 and $3,246 for the three months ended October 31, 2019 and 2018, respectively.
These conditions raise substantial doubt about the ability of Hartford Great Health Corp. to continue as a going concern.
In view of these matters, continuation as a
going concern is dependent upon several factors, including the availability of debt or equity funding upon terms and conditions
acceptable to Hartford Great Health Corp., and ultimately achieving profitable operations. Management believes that
Hartford Great Health Corp.'s business plan provides it with an opportunity to continue as a going concern. However,
management cannot provide assurance that Hartford Great Health Corp. will meet its objectives and be able to continue in operation.
The financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification
of liabilities that may result from the possible inability of Hartford Great Health Corp. to continue as a going concern.
NOTE 3. STOCKHOLDERS' EQUITY
Preferred Stock
The Company is authorized to issue 5,000,000
shares of preferred stock with a par value of $0.001 per share. No shares of preferred stock have been issued or outstanding since
Inception (April 2, 2008).
Common Stock
The Company is authorized to issue 300,000,000
shares of common stock with a par value of $0.001 per share. On December 11, 2018, 96,090,000 shares of common stock were issued
at the price of $0.02 per share to raise $1,921,800 capital in cash. As of October 31, 2019 and July 31, 2019, the company has
issued a total of 99,108,000 shares of common stock.
NOTE 4. ACQUISITIONS AND JOINT
VENTURES
Acquisition of HZHF
On December 28, 2018, the Company acquired HZHF from an unrelated
individual, an entity located at Hangzhou, China. The operation results of HZHF are included in the Company’s consolidated
financial statements commencing on the acquisition date. The Company has recorded an allocation of the purchase price to the Company’s
identifiable assets acquired based on their fair value at the acquisition date. No business inputs, process and workforce have
been acquired through the transaction. The Company accounted the transaction in accordance with the Asset Acquisitions guidance,
a subsection of FASB ASC 805, Business Combinations. The related transaction costs were immaterial.
The calculation of purchase price and purchase price allocation
is as following:
|
|
Identifiable Assets Acquired
|
Cash and cash equivalents
|
|
|
154
|
|
Other current assets
|
|
|
37,964
|
|
Property and equipment, net
|
|
|
4,038
|
|
Deferred Start-up cost, noncurrent
|
|
|
99,463
|
|
Total Consideration
|
|
|
141,619
|
|
Right after the transaction was consummated, the Company fully expensed
the deferred start-up cost in accordance with US GAAP.
Acquisition of HZLJ
On March 22, 2019, HZHF acquired 60 percent ownership interest
of HZLJ from Shanghai Qiao Garden Property Management Group, Ltd (“Qiao Garden Group”), an affiliate on which the Company’s
management has significant influence. The acquisition expands the Company's capabilities in the travel and health management sectors
as the hotel is located within walking distance of local tea farms and a protected nature preserve.
The results of operations of the acquired subsidiary are included
in the Company’s consolidated financial statements commencing on the acquisition date. The Company has recorded an allocation
of the purchase price to the Company’s tangible and identifiable intangible assets acquired and liabilities assumed based
on their fair value at the acquisition date. The Company accounted the acquisition transaction in accordance with FASB ASC 805,
Business Combinations, under acquisition accounting method. The Company classifies the 40 percent ownership interest held by Shanghai
Qiaohong Real Estate Co., Ltd., a related party, as "Noncontrolling interest" on the Consolidated Balance Sheet. The
related transaction costs were immaterial and included in General and administrative expenses in the accompanying Consolidated
Statements of Operations. The calculation of purchase price and purchase price allocation is as follows:
|
|
Assets Acquired and
Liabilities Assumed
|
Cash and cash equivalents
|
|
$
|
15,383
|
|
Accounts and Other receivables
|
|
|
13,224
|
|
Related party receivable
|
|
|
22,861
|
|
Property and Equipment, net
|
|
|
247,940
|
|
Other assets
|
|
|
699,066
|
|
Goodwill
|
|
|
466,847
|
|
Accounts payable
|
|
|
(2,671
|
)
|
Related party payable
|
|
|
(1,232,512
|
)
|
Other account payable
|
|
|
(28,772
|
)
|
Other liabilities
|
|
|
(336,051
|
)
|
Noncontrolling interest
|
|
|
240,613
|
|
Total consideration *
|
|
$
|
105,928
|
|
*$16,537 payable due from HZLJ waived by HFHZ
plus $89,891 (RMB600,000) cash payment totaled $105,928 consideration for the acquisition.
Goodwill is mainly attributable to synergies
expected from the acquisition in hospitality industry and assembled workforce. Other assets and other liabilities are related to
the deferred cost of obtaining the finance lease and the finance lease liabilities (see Note 12 Finance Lease). Related party payable
consisted the unpaid portion of operating advances made to HZLJ by the affiliates which are under common control by the same management.
Amount of $595,939 were due to Qiao Garden Group, which originally owned 60% of HZLJ. And amount of $596,348 were advanced from
Shanghai DuBian Assets Management Ltd., which is controlled by the same management. These advances do not bear interest and are
considered due on demand. Property and Equipment, net mainly consists of ROU assets, Furniture and fixtures and office equipment.
Acquisition of HFSH
On March 20, 2019, the Company acquired
HFSH and its 90 percent owned subsidiary - Shanghai Qiao Garden International Travel Agency (“Qiao Garden Intl Travel”)
from an unrelated individual. The original intent behind the acquisition was to use the travel agency to manage travel and lodging
arrangements between China and the US for Chinese members of the anti-aging stem-cell treatment program. The results of operations
of the acquired entities are included in the Company’s consolidated financial statements commencing on the acquisition date.
The Company has recorded an allocation of the purchase price to the Company’s tangible and identifiable intangible assets
acquired and liabilities assumed based on their fair value at the acquisition date. The Company accounted the acquisition transaction
in accordance with FASB ASC 805, Business Combinations, under acquisition accounting method. The Company classifies the un-acquired
10 percent ownership interest as "Noncontrolling interest" on the consolidated balance sheet. The related transaction
costs were immaterial and included in General and administrative expenses in the accompanying consolidated statements of operations.
The calculation of purchase price and purchase price allocation is as follows:
|
|
Assets Acquired and
Liabilities Assumed
|
Cash and cash equivalents
|
|
$
|
35,886
|
|
Accounts and Other receivables
|
|
|
92,120
|
|
Property and Equipment, net
|
|
|
6,511
|
|
Related party receivable
|
|
|
791,445
|
|
Goodwill
|
|
|
573,170
|
|
Other current payable
|
|
|
(3,126
|
)
|
Related party payable
|
|
|
(1,073,380
|
)
|
Noncontrolling interest
|
|
|
(63,911
|
)
|
Total consideration*
|
|
$
|
358,715
|
|
*$223,477 payable due to HFHZ waived plus $135,238
(RMB907,737) cash payment totaled $358,715 consideration for the acquisition.
Goodwill is mainly attributable to synergies
expected from the acquisition of travel agency license and assembled workforce. Amount of $677,463 related party receivable is
due from Shanghai Qiaohong Real Estate Co., Ltd. (“SH Qiaohong”), owning 40 percent equity interest of HZLJ. HFSH loaned
the amount to SH Qiaohong for two years on June 21, 2018, the related party loan bears annual interest of six percent. The balance
will be paid back by June 30, 2020. Amount of $109,355 is due from one of the directors for business trips and business developing
expenses and the amount is going to be reimbursed or paid back within three months. The remaining related party receivable are
the operating advances made to multiple companies which are under common control by the same management. These advances do not
bear interest and are considered due on demand. Related party payable consisted the unpaid portion of operating advances made to
HFSH by the affiliates which are under common control by the same management. These advances do not bear interest and are considered
due on demand. The majority advances, amount of $990,665 were from SH Qiaohong. HFSH used the amount for start-up expense and acquisition
of 90 percent ownership of Qiao Garden Intl Travel acquisition.
Joint Venture – HF Int’l
Education
Effective on March 22, 2019, HFSH entered
into a joint venture agreement with SH Jingyu and one individual investor, to form a new entity Hartford International Education
Technology Co., Ltd (“HF Int’l Education”) to provide childcare education services. The joint venture is owned
65% by HFSH, 20% by SH Jingyu and 15% by another individual investor. On July 11, 2019, a new agreement has been entered by HFSH,
SH Jingyu, the individual investor and another new investor, Shanghai Hao Zhong Ji Educational Tech LLP (“SHHZJ”).
Based on the new agreement, the joint venture is owned 58.5% by HFSH, 18% by SH Jingyu, 10% by SHHZJ and 13.5% by the individual
investor. HFSH is responsible for the overall development and operation of HF Int’l Education. As a result, HFSH has the
majority voting interest with primary beneficiary. The results of operations of HF Int’l Education are included in the Company’s
consolidated financial statements commencing on the formation date. The Company classifies the 41.5% ownership interest held by
other three parties as "Noncontrolling interest" on the consolidated balance sheet. The registered capital for HF Intl
Education is RMB 5 million. As of October 31, 2019, amount of RMB 2.6 million or USD 369,386 capital were injected and the remaining
of RMB 2.4 million or USD 340,972 is to be contributed by the shareholders. On July 24, 2019, HF Int’l Education established
a wholly owned subsidiary, Pudong Haojin Childhood Education Ltd. (“PDHJ”) to provide childcare education services.
Pro Forma Information
The following unaudited pro forma information
has been prepared for illustrative purposes only, assumes that the acquisition occurred on August 1, 2017 and includes pro forma
adjustments related to the noncontrolling interest allocation and the issuance of 96,090,000 common shares to finance the acquisitions.
The unaudited pro forma results have been prepared based on estimates and assumptions, which we believe are reasonable; however,
they are not necessarily indicative of the consolidated results of operations had the acquisition occurred on August 1, 2017, or
of future results of operations. The unaudited pro forma results are as follows:
|
|
Three months ended October 31,
|
|
|
2019
|
|
2018
|
Service Revenues
|
|
$
|
64,516
|
|
|
$
|
29,709
|
|
Net Loss
|
|
|
(389,222
|
)
|
|
|
(201,280
|
)
|
Less: Net Loss Attributable to
|
|
|
|
|
|
|
|
|
Noncontrolling Interest
|
|
|
(83,519
|
)
|
|
|
(7,637
|
)
|
Net Loss Attributable to
|
|
|
|
|
|
|
|
|
Hartford Great Health Corp
|
|
$
|
(305,703
|
)
|
|
$
|
(193,643
|
)
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
99,108,000
|
|
|
|
99,108,000
|
|
Net loss per common share:
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
|
(0.00
|
)
|
|
|
(0.00
|
)
|
On January 27, 2019, HFSH entered an agreement
with Shanghai Qiao Garden Property Management Group to acquire 85 percent ownership of Shanghai Senior Health Consulting Ltd. (“SH
Senior”). On January 28, 2019, HFUS entered an agreement to acquire 100 percent equity interest of Shanghai Luo Sheng International
Trade Ltd. (“SH Luosheng”). On February 24, 2019, HFSH entered an agreement to acquire 55 percent ownership of Shanghai
Pasadena Ltd. (“SH Pasadena”). During May and June 2019, the Company entered an agreement and a supplemental agreement
to acquire 60 percent equity interest of Shanghai Ren Lai Ren Wang Restaurant Co., Ltd. (“SH RLRW”). As of October
31, 2019, these acquisition agreements have not yet taken effect as no consideration has been paid toward those acquisitions. These
agreements will be executed when the Company is financially ready to move forward, and the purchase price will be calculated based
on the net assets of each entity on the execute date. There was no penalty levied or to be levied due to delayed execution or no-execution
of those agreements.
NOTE 5. RESTRICTED CASH
The Company early adopted Financial Accounting
Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash,
which requires that restricted cash be included with cash and cash equivalents when reconciling the beginning of year and end of
year total amounts shown on the statements of cash flows. The provisions of ASU-2016-18 are effective for the years beginning after
December 31, 2019, with early adoption permitted. The restricted cash is collateral required by the local government in China for
Qiao Garden Int’l Travel, acquired with its parent company HFSH on March 20, 2019, to maintain its business certificate.
The following table provides a reconciliation
of cash, cash equivalents and restricted cash reported within the balance sheets that sum to the total of the same such amounts
shown in the statements of cash flows.
|
|
October 31, 2019 (unaudited)
|
|
October 31, 2018 (unaudited)
|
Cash and cash equivalents
|
|
$
|
116,240
|
|
|
$
|
26,768
|
|
Restricted cash, noncurrent
|
|
|
28,414
|
|
|
|
—
|
|
Total cash, cash equivalents and restricted cash shown in the statement of cash flows
|
|
$
|
144,654
|
|
|
$
|
26,768
|
|
NOTE 6. LOAN RECEIVABLES, CURRENT AND NONCURRENT
The Company loaned $99,870 to a third
party, Longsheng Aquatic Products Co., Ltd. The loan bears annual interest rate of six percent. The term of loan started from February
14, 2019 and extended for one more year to May 13, 2020 on May 12, 2019. $1,531 of interest income was recognized during the three
months ended October 31, 2019. Total interest receivable of $4,311 and $2,780 were accrued as of October 31, 2019 and July 31,
2019, respectively.
The Company loaned $300,000 to a third
party, Hong Kong Hong Tai Int’l Trade Limited. The loan bears annual interest rate of six percent. The term of loan is six
months till June 27, 2019. On February 5, 2019, the loan has been fully paid back with $1,923 interest charges.
The Company loaned another $200,000 to
Hong Kong Hong Tai Int’l Trade Limited. The loan bears annual interest rate of six percent. The term of loan started from
March 4, 2019 and extended to September 3, 2020 on August 30, 2019. $3,067 of interest income was recognized during the three months
ended October 31, 2019. Total interest receivable of $8,033 and $4,967 were accrued as of October 31, 2019 and July 31, 2019, respectively.
Loan receivables are not exposed to market
risk due to the stable and fixed interest rates in accordance with the loan agreements. The estimated fair value of long-term loan
receivable was approximately $0 and $204,561 as of October 31, 2019 and July 31, 2019, respectively.
NOTE 7. PROPERTY AND EQUIPMENT, NET
Property and equipment, net consists
of the following at October 31, 2019 and July 31, 2019:
|
|
October 31, 2019
|
|
July 31, 2019
|
|
|
(unaudited)
|
|
|
Leasehold improvements
|
|
$
|
22,854
|
|
|
$
|
23,366
|
|
Finance lease assets
|
|
|
266,875
|
|
|
|
272,860
|
|
Furniture and fixtures
|
|
|
230,196
|
|
|
|
235,360
|
|
Office equipment and vehicles
|
|
|
73,174
|
|
|
|
68,859
|
|
Construction in progress
|
|
|
69,027
|
|
|
|
—
|
|
|
|
|
662,126
|
|
|
|
600,445
|
|
Less: accumulated depreciation and amortization
|
|
|
(343,550
|
)
|
|
|
(346,861
|
)
|
|
|
$
|
318,576
|
|
|
$
|
253,584
|
|
Depreciation expense for the three months
ended October 31, 2019 and 2018 was $4,265 and $0, respectively.
NOTE 8. OTHER ASSETS
Other assets consist of the following at October 31,
2019 and July 31, 2019:
|
|
October 31, 2019
(unaudited)
|
|
July 31, 2019
|
Operating lease assets
|
|
$
|
3,936,201
|
|
|
$
|
—
|
|
Deferred cost of finance lease
|
|
|
653,530
|
|
|
|
673,634
|
|
|
|
$
|
4,589,731
|
|
|
$
|
673,634
|
|
ROU assets - operating leases was resulted
from the adoption of ASU No. 2016-02. Additional information and disclosures are contained in Note 12 Leases
The cost of obtaining the finance lease
of the land use rights and hotel building at HZLJ, which was acquired by the Company on March 22, 2019, in the amount of $879,800
(RMB 6 million) was recognized as Other Assets and subject for amortization over the lease term, 41 years commenced on October
2010. The amortization is computed using the straight-line method over the lease term. Amortization expense of deferred cost of
finance lease for the three months ended October 31, 2019 and 2018 was $5,287 and $0, respectively.
The future amortization schedule for the other
assets related to the cost of obtaining the finance lease as of October 31, 2019 is as following:
|
2020 (excluding the three months ended October 31, 2019)
|
|
|
$
|
15,983
|
|
|
2021
|
|
|
|
21,311
|
|
|
2022
|
|
|
|
21,311
|
|
|
2023
|
|
|
|
21,311
|
|
|
2024
|
|
|
|
21,311
|
|
|
2025 and thereafter
|
|
|
|
552,303
|
|
|
Total
|
|
|
$
|
653,530
|
|
NOTE 9. GOODWILL
Our goodwill balance is solely attributable
to acquisitions during 2019. There have been no impairment charges recorded against goodwill. The following is a roll-forward of
goodwill for the year ended July 31, 2019 and for the three months ended October 31, 2019:
|
|
Hangzhou
Longjing Qiao Fu Vacation Hotel
|
|
HFSH
and Shanghai Qiao Garden Int'l Travel Agency
|
|
Total
|
Balance at July 31,
2018
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Acquisitions
|
|
|
466,847
|
|
|
|
573,170
|
|
|
|
1,040,017
|
|
Impairment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Balance
at July 31, 2019
|
|
$
|
466,847
|
|
|
$
|
573,170
|
|
|
$
|
1,040,017
|
|
Acquisitions
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Impairment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Foreign
Exchange
|
|
|
(21,661
|
)
|
|
|
(26,597
|
)
|
|
|
(48,258
|
)
|
Balance
at October 31, 2019 (unaudited)
|
|
$
|
445,186
|
|
|
$
|
546,573
|
|
|
$
|
991,759
|
|
NOTE 10. OTHER CURRENT PAYABLE
The following is a breakdown of the accounts and other payables
as of October 31, 2019 and July 31, 2019:
|
|
October 31, 2019
(unaudited)
|
|
July 31, 2019
|
Payable to Acquirees
|
|
$
|
128,964
|
|
|
$
|
131,856
|
|
Lease Liabilities, current
|
|
|
767,297
|
|
|
|
—
|
|
Other payables
|
|
|
74,913
|
|
|
|
44,000
|
|
|
|
$
|
971,174
|
|
|
$
|
175,856
|
|
Payable to acquiree is the unpaid consideration for the acquisitions
described in Note 4 Acquisitions and Joint Venture.
Lease liability is the current portion
of operating lease liabilities resulting from ASU No. 2016-02 adoption. See Note 12 Leases.
NOTE 11. OTHER LIABILITIES
Other liabilities mainly consist below
lease liabilities. See Note 12 Leases.
|
|
October 31, 2019
(unaudited)
|
|
July 31, 2019
|
Finance Lease liability
|
|
$
|
294,427
|
|
|
$
|
336,046
|
|
Operating lease liabilities
|
|
|
3,198,228
|
|
|
|
—
|
|
|
|
$
|
3,492,655
|
|
|
$
|
336,046
|
|
NOTE 12. LEASES
At the inception of a contract, the Company
assesses whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves
the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefit from
the use of the asset throughout the term, and (3) whether the Company has the right to direct the use of the asset. Leases are
classified as either finance leases or operating leases based on criteria in Accounting Standards Codification (“ASC”)
842.
Operating leases are included in Other
Assets, Other current liabilities and Other Liabilities, finance leases are included in Property and Equipment and Other Liabilities
in the condensed Consolidated Balance Sheet.
Right-of-use (“ROU”) assets
and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.
As the lease did not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available
at the lease commencement date in China market. ROU assets also include any lease payments made and exclude lease incentives. Lease
terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.
Lease expense for operating leases,
consisting of lease payments, is recognized on a straight-line basis over the lease term. Lease expense for finance leases consists
of the amortization of the ROU asset on a straight-line basis over the asset’s estimated useful life and interest expense
is calculated using the amortized cost basis.
As of October 31, 2019, the Company
has multiple operating leases for office spaces and a finance lease of land and hotel building. Our operating leases have remaining
lease terms ranging from two years to seven years, with various term extensions available. Our finance lease has remaining lease
term of thirty-two years. The Company has elected not to recognize ROU assets and lease liabilities for short-term operating leases
that have a term of twelve months or less.
The finance lease was obtained
through HZLJ acquisition on March 22, 2019 (See Note 4 Acquisitions and Joint Venture). On October 1, 2010, HZLJ leased the land
and hotel building for 41 years. Finance lease right-of-use assets represent the Company's right to use an underlying asset for
the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease.
Lease-related assets and liabilities
at October 31, 2019 and July 31, 2019 were as follows:
|
|
October 31,
|
|
July 31,
|
|
|
2019
(unaudited)
|
|
2019
|
Assets
|
|
|
|
|
|
|
|
|
Finance lease ROU assets, cost
|
|
$
|
266,875
|
|
|
$
|
272,860
|
|
Less: accumulated amortization
|
|
|
(59,125
|
)
|
|
|
(58,787
|
)
|
Finance lease ROU assets, net
|
|
|
207,750
|
|
|
|
214,073
|
|
Other assets - operating lease ROU assets
|
|
|
3,936,201
|
|
|
|
—
|
|
Total Lease assets
|
|
$
|
4,143,951
|
|
|
$
|
214,073
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Other current payable - operating leases
|
|
$
|
767,297
|
|
|
$
|
—
|
|
Other current payable - finance leases
|
|
|
20,600
|
|
|
|
20,336
|
|
Other liabilities - operating leases
|
|
|
3,198,228
|
|
|
|
—
|
|
Other liabilities - finance lease
|
|
|
294,427
|
|
|
|
315,710
|
|
Total Lease liabilities
|
|
$
|
4,280,552
|
|
|
$
|
336,046
|
|
The components of lease cost for the
three months ended October 31, 2019 was as follows:
|
|
Three months ended
|
|
|
October 31, 2019
|
Operating lease cost
|
|
$
|
203,570
|
|
Finance leases:
|
|
|
|
|
Amortization of ROU assets
|
|
|
1,627
|
|
Interest on finance lease liabilities
|
|
|
6,242
|
|
Finance lease cost
|
|
|
7,869
|
|
Total lease cost
|
|
$
|
211,439
|
|
Supplemental cash flow information for leases
for the three months ended October 31, 2019 was as follows:
Cash paid for amounts included
in the measurement of lease liabilities:
Operating cash flows from operating leases
|
|
$
|
122,782
|
|
Financing cash flows from finance leases
|
|
|
19,739
|
|
The weighted-average remaining lease term and
weighted-average discount rate for operating and finance leases at October 31, 2019 was as follows:
|
|
Operating Leases
|
|
Finance Leases
|
Weighted-average remaining lease term (years)
|
|
|
4.2
|
|
|
|
32
|
|
Weighted-average discount rate
|
|
|
8
|
%
|
|
|
8
|
%
|
The following table reconciles the undiscounted
future minimum lease payments for operating and finance leases executed at October 31, 2019:
|
|
Operating Leases
|
|
Finance Lease
|
2020 (excluding the three-month ended October 31, 2019)
|
|
$
|
774,228
|
|
|
$
|
—
|
|
2021
|
|
|
1,125,530
|
|
|
|
20,600
|
|
2022
|
|
|
975,909
|
|
|
|
21,311
|
|
2023
|
|
|
653,957
|
|
|
|
22,021
|
|
2024
|
|
|
573,855
|
|
|
|
22,731
|
|
2025 and thereafter
|
|
|
704,371
|
|
|
|
924,888
|
|
Total future lease payments
|
|
$
|
4,807,850
|
|
|
$
|
1,011,551
|
|
Less interest
|
|
|
(842,325
|
)
|
|
|
(696,524
|
)
|
Present value of future lease payments
|
|
$
|
3,965,525
|
|
|
$
|
315,027
|
|
Lease liabilities, current
|
|
|
(767,297
|
)
|
|
|
(20,600
|
)
|
Other liabilities
|
|
$
|
3,198,228
|
|
|
$
|
294,427
|
|
NOTE 13. RELATED PARTY TRANSACTIONS
Equity Transactions
On October 2018, the Company refunded
$1,429 of the additional paid in capital to the former CFO.
On December 11, 2018, the Company sold
96,090,000 shares of its common stock to various investors, including 54,040,000 shares sold to its Officers and Directors with
proceeds of $1,080,800. The whole amount of proceeds has been collected.
Related Party Receivables
As of October 31, 2019 and July 31, 2019, amount of $669,204
and $674,524, respectively, is due from Shanghai Qiaohong Real Estate Co., Ltd. (“SH Qiaohong”), the noncontrolling
interest of Longjing. The balance was acquired through HFSH acquisition. HFSH loaned the amount to SH Qiaohong for two years on
June 21, 2018 bearing annual interest of six percent. The balance will be paid back by June 30, 2020. $9,404 of interest income
was recognized during the three months ended October 31, 2019.
The remaining related party receivable of $47,136 and $39,088
as of October 31, 2019 and July 31, 2019, respectively, represents the operating advances made to the affiliates which are managed
by the same management team. These advances do not bear interest and are considered due on demand.
On October 2018, the Company borrowed $30,000 from a
potential investor to fund the Company's ongoing activities. It was an indefinite short-term loan with no interest bearing. The
loan was paid back by the Company in the following quarter.
Related Party Payables
As of October 31, 2019 and July 31, 2019,
amount of $525,334 and $526,963, respectively, is payable to SH Qiaohong. The balance was part of the liability assumed through
HFSH acquisition. This payable balance does not bear interest and due on demand.
As of October 31, 2019 and July 31, 2019,
amount of $589,598 and $602,821, respectively, is payable to Shanghai Qiao Garden Property Management Group (“Qiao Garden
Group”), an entity managed by the same management team. The balance was part of the liability assumed through HZLJ acquisition.
This payable balance does not bear interest and is considered due on demand.
The remaining related party payable of
$456,740 and $197,775 as of October 31, 2019 and July 31, 2019, respectively, represents the unpaid portion of operating advances
made to the Company by following affiliates which are managed by the same management team. These advances do not bear interest
and are considered due on demand.
|
|
October 31, 2019
(Unaudited)
|
|
July 31, 2019
|
Shanghai Senior Investment Ltd.
|
|
$
|
58,102
|
|
|
$
|
106,866
|
|
Shanghai Oversea Chinese Culture Media Ltd.
|
|
|
359,062
|
|
|
|
50,808
|
|
Various affiliates
|
|
|
39,576
|
|
|
|
40,101
|
|
Total
|
|
$
|
456,740
|
|
|
$
|
197,775
|
|
As of October 31, 2019 and July 31, 2019,
the Company has $575,943 and $585,146, respectively, long-term payable to Shanghai DuBian Assets Management Ltd., which is owned
by the Company’s CEO’s relative. The payable balance was assumed from the acquisition transaction. On April 30, 2019,
both parties entered a long-term agreement to convert the payable to long term debt, which expires on April 30, 2021, bearing approximately
2.5 percent of annual interest. $3,606 of interest expense was recognized during the three months ended October 31, 2019. The unpaid
principle and interest will be due on the maturity date. This loan payable is not exposed to market risk due to the stable and
fixed interest rates in accordance with the loan agreements. As of October 31, 2019 and July 31, 2019, the estimated fair value
of long term loan payable was approximately $581,085 and $584,674, respectively.
Other Related Party Transaction
Office space is provided to Hartford
Great Health Corp. at no additional cost by the sole executive officer. No provision for these costs has been included
in these financial statements as the amounts are not material.
On September 30, 2019, HF Int’l
Education entered a long-term debt agreement with a related party, SH Qiao Hong. The debt agreement provides a line of credit up
to RMB9.0 million and expires on September 30, 2021, bearing approximately 3.0 percent of annual interest. The unpaid principle
and interest will be due on the maturity date.
On September 30, 2019, HF Int’l
Education entered another long-term debt agreement with a related party, Shanghai Oversea Chinese Culture Media Ltd. The debt agreement
provides a line of credit up to RMB 5.0 million and expires on September 30, 2021, bearing approximately 3.0 percent of annual
interest. The unpaid principle and interest will be due on the maturity date.
As of October 31, 2019, no balance has
been borrowed from these two related parties by HF Int’l Education.
NOTE 14. COMMITMENTS
There has been no material contractual obligations and other
commitments except the lease commitments disclosed in Note 12 Leases.
NOTE 15. SEGMENT INFORMATION
The Company currently operates in two industry segments: hospitality,
travel agency and childhood education care industry in China. No operation at travel agency industry for the three months ended
October 31, 2019 because of business restructuring. Segment information on assets as of October 31, 2019 and revenue generated
during the three months ended October 31, 2019, as follows:
|
|
Hospitality
|
|
Education
|
|
Corporate and unallocated
|
|
Total
|
Revenue
|
|
$
|
26,857
|
|
|
$
|
37,659
|
|
|
$
|
—
|
|
|
$
|
64,516
|
|
Operating loss
|
|
|
(167,896
|
)
|
|
|
(159,616
|
)
|
|
|
(66,474
|
)
|
|
|
(393,986
|
)
|
Operating loss before tax
|
|
|
(167,730
|
)
|
|
|
(159,616
|
)
|
|
|
(61,876
|
)
|
|
|
(389,222
|
)
|
Net Loss Attributable to Hartford Great Health Corp
|
|
|
(125,622
|
)
|
|
|
(118,205
|
)
|
|
|
(61,876
|
)
|
|
|
(305,703
|
)
|
Total assets (excluding Intercompany balances)
|
|
|
2,868,817
|
|
|
|
3,491,432
|
|
|
|
1,073,137
|
|
|
|
7,433,386
|
|
As of July 31, 2019, the company only operated in hospitality industry
in China. The subsidiary had an amount of $2,547,989 in total assets, excluding inter-company balances, and it generated $56,174
in revenue. There was no revenue generated from inter-company transactions.
NOTE 16. 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 has noted
no subsequent events to be disclosed.
Forward-Looking Statements
This Form 10-Q contains
or incorporates by reference "forward-looking statements," as that term is used in federal securities laws, about our
financial condition, results of operations and business. These statements include, among others:
-
|
statements concerning the benefits that we expect will result from our business activities and results of business development that we contemplate or have completed, such as increased revenues; and statements of our expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts. These statements may be made expressly in this document or may be incorporated by reference to other documents that we will file with the SEC. You can find many of these statements by looking for words such as "believes," "expects," "anticipates," "estimates" or similar expressions used in this report or incorporated by reference in this report.
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These forward-looking statements
are subject to numerous assumptions, risks and uncertainties that may cause our actual results to be materially different from
any future results expressed or implied in those statements. Because the statements are subject to risks and uncertainties,
actual results may differ materially from those expressed or implied. We caution you not to put undue reliance on these statements,
which speak only as of the date of this report. Further, the information contained in this document or incorporated herein by reference
is a statement of our present intention and is based on present facts and assumptions, and may change at any time and without notice,
based on changes in such facts or assumptions.