Hartford Great Health Corp. - Annual Report: 2020 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.

FORM 10-K

Commission file number 000-54439

Hartford Great Health Corp.

(Exact name of registrant as specified in its charter)

(626) 321-1915

(Registrant’s telephone number, including area code)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [  ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes [X] No [  ]

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

January 31, 2020, the last business day of the Registrant’s most recently completed second fiscal quarter, the aggregate market value of the voting common stock held by non-affiliates of the Registrant (without admitting that any person whose shares are not included in such calculation is an affiliate) was $10,556,280.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: Common Stock, Par value $0.001

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 99,108,000 shares of common stock outstanding as of November 10, 2020.

TABLE OF CONTENTS

ADDITIONAL INFORMATION

Descriptions of agreements or other documents contained in this report are intended as summaries and are not necessarily complete. Please refer to the agreements or other documents filed or incorporated herein by reference as exhibits. Please see the exhibit index at the end of this report for a complete list of those exhibits.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of management and information currently available to management. The use of words such as “believes”, “expects”, “anticipates”, “intends”, “plans”, “estimates”, “should”, “likely” or similar expressions, indicates a forward-looking statement.

The identification in this report of factors that may affect future performance and the accuracy of forward-looking statements is meant to be illustrative and by no means exhaustive. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty.

Factors that could cause actual results to differ materially from those expressed or implied by forward-looking statements include, but are not limited to:

PART I

ITEM 1. BUSINESS.

General

Hartford Great Health Corp. (“the Company”, “Hartford” “we”, “us” or our”) was incorporated in the State of Nevada on April 2, 2008 (“Inception) under the name PhotoAmigo, Inc. It changed its name to Hartford Great Health Corp. on August 20, 2018 and since then we have been engaged in activities to formulate and implement our business plan as set forth below.

Overview

Up until August 2018, we provided social networking and photo sharing from the website PhotoAmigo.com. We also maintained the domain names PhotoAmigo.net, fotoamigo.com and fotoamigo.net. These domain names all redirect incoming traffic to our main website, PhotoAmigo.com.

In August 2018, the Company changed its future plans of operations. 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”). On March 23, 2020, HF Int’l Education established Shanghai Hongkou HaiDeFuDe Childcare Co., Ltd.(“HDFD”) and was approved the business license to conduct childcare operations in Shanghai, China.

The following business plan is based on research and discussions between the board and third party suppliers and experts. Only preliminary activities relating to the following objectives have been undertaken and therefore, there is no assurance that any of the proposed activities set forth below will be started by the Company or if started will be successful.

Strategy

The initial plan in focuses on the development of the Sino-U.S. health industry in the following four areas:

A. Membership based program:

The company will develop an international membership-based program (International Anti-Aging Program) for middle to high-income Chinese members. Enrollment into the program will allow members to travel to the United States on a yearly basis for state-of-the-art stem cell treatments including stem cell extraction, storage, and injection from a collaborative of American biomedical stem cell experts. Members will receive stem cell treatments in the United States with a larger goal of enhancing immunity, youthfulness, and longevity. The initial estimated number of annual members is approximately 1800-2000 members.

B. Artificial Intelligence and Medical Equipment Sales:

The company will broker sales of cutting-edge artificial intelligence equipment (particularly robotics) to the United States to enhance the overall standard of personal health and the healthcare experience in the U.S. The company will also sell general health and wellness equipment to individual consumers in the United States with the overall goal of improving the personal healthcare experience of customers in the United States.

C. Mobile Lifestyle Management Platform:

The company will create an internet-based health consultation platform for Chinese and Chinese-American individuals. This online platform is designed to connect customers with health and wellness information curated by experts in the health consultation and wellness management fields. The online platform will keep customers informed about new wellness-related technologies and advances available to them through the company as well as about general health and wellness lifestyle advice catered towards Chinese-American audiences.

D. Integrated management of metabolic diseases:

The company plans to target three high-risk populations, individuals with: 1) hyperglycemia, 2) hypertension, and 3) hyperlipidemia. These three conditions are incredibly common amongst both Chinese and American populations; thus, the company plans to introduce an integrated approach to management and overall reduction of these three conditions using a unique combination of Western style supplements and over-the-counter products as well as traditional Chinese Meridian Acupoint Massage.

The Company has also expanded its strategy into the hospitality industry, focusing on hotels, restaurants, and travel arrangements. The Company plans to integrate hospitality with health management through its membership-based program by arranging travel accommodations for Chinese citizen members to the United States to obtain stem cell beauty treatments.

The initial plan in early 2019 that focused on the development of the Sino-U.S. health industry in the areas of International Anti-Aging membership based program; Artificial Intelligence and Medical Equipment Sales; Mobile Lifestyle Management Platform; and Integrated management of metabolic diseases have been put on hold due to economic uncertainties caused by the increasing tension between the US and China international relation.

Near the end of 2019, the Company has found another opportunity to expand its market reach in the Chinese childhood education industry. The Company plans to formulate a proprietary early childhood education center management model beginning with the opening of several early childhood education centers in the greater Shanghai area with the goal of demonstrating the management model in action in order to attract interest from potential franchisees. Currently, there are three early child education and development center in operation despite the economic slowdown during the pandemic. In the short future, the company will mainly focus on childhood educational development industry.

There can be no assurance following consummation of any of the business ventures will develop into a going concern or,

if the business is already operating, that it will continue to operate successfully. Many of the potential business opportunities available to the Company may involve new and untested products, processes or market strategies which may not ultimately prove successful.

The Company’s independent auditors have issued a report raising substantial doubt about the Company’s ability to continue as a going concern. At present, the Company has limited operations and the continuation of the Company as a going concern is dependent upon financial support from its stockholders, its ability to obtain necessary equity financing to continue operations and/or to successfully locate and negotiate with a business entity for the combination of that target company with the Company. There is no assurance that the Company will ever be profitable.

Competition

We believe there are only limited barriers to entry in our business. With regards to the education industry, the Company carefully selected to invest in a business with established expertise and knowledge of the early childhood education industry in China. The Company recognizes that there are numerous childcare centers throughout China; however, these centers lack standard curriculums for educating children and many fall into the designation of daycares rather than education centers. As such, the Company’s interests with regards to early childhood education mainly relate to creating a nationwide standardized curriculum to be implemented throughout all of China which is an idea that faces little competition as it has remained unexplored by other childcare businesses. To successfully compete in our industries, we will need to:

However, there can be no assurance that even if we do these things we will be able to compete effectively with the other companies in our industry. We believe that we have the required management expertise in sourcing properties with good development potential and affordable price. We are committed to work and communicate with our investors and sales consultants to identify their goals and needs which will make it easier to continually provide them with the best products and services.

Employees

At September 30, 2020, we had 78 employees.

ITEM 1A. RISK FACTORS

As a “smaller reporting company” as defined by Item 8 of Regulation S-K, the Company is not required to provide information required by this Item.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Hartford Great Health Corp. uses the offices of its Chief Executive Officer, at 8832 Glendon Way, Rosemead, CA 91770, for its minimal office facility needs for no consideration.

Each newly acquired or formed entity maintains its own leased office building and property. We lease space in Shanghai, Hangzhou, China under leases that expire at various times between 2020 and 2051 with various term extensions available.

We lease all of our facilities and do not own any real property.

ITEM 3. LEGAL PROCEEDINGS

On April 13, 2020, HFSH and HF International Education received Notices of Lease Termination from the sub-lessor. HFSH and HF International Education then filed a civil case against the sub-lessor for return the over-charged rent expense because of fictitious office size, approximately $483,000 (RMB3.3 million). The sublease agreement was terminated on June 1, 2020. HF International Education entered a new lease agreement with the original landlord on June 1, 2020. An initial trial is scheduled on November 12, 2020 by the court.

We were not subject to any other legal proceedings during the twelve months ended July 31, 2020 and 2019 and are not currently subject to any legal proceedings, and to the best of our knowledge, no such proceeding is threatened, the results of which would have a material impact on our results of operation or financial condition. Nor, to the best of our knowledge, are any of our officers or directors involved in any legal proceedings in which we are an adverse party.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable to our Company.

PART II

ITEM 5. MARKET FOR COMMON EQUITY. RELATED STOCKHOLDER MATTERS AND PURCHASES OF EQUITY SECURITIES

Market Information

There has only been limited trading for the Company’s Common Stock since it was quoted on OTC Markets. There is no assurance that an active trading market will ever develop or, if such a market does develop, that it will continue. The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for purposes relevant to the Company, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (i) that a broker or dealer approve a person’s account for transactions in penny stocks and (ii) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person’s account for transactions in penny stocks, the broker or dealer must (i) obtain financial information and investment experience and objectives of the person and (ii) make a reasonable determination that the transactions in penny stocks are suitable for that person and that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the Commission relating to the penny stock market, which, in highlight form, (i) sets forth the basis on which the broker or dealer made the suitability determination and (ii) that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading, and about commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

Because of these regulations, broker-dealers may encounter difficulties in their attempt to buy or sell shares of our common stock, which may affect the ability of our shareholders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our common stock in the market place. In addition, the liquidity for our common stock may be decreased, with a corresponding decrease in the price of our common stock. Our shares are likely to be subject to such penny stock rules for the foreseeable future.

On November 10, 2020, the closing price of our common stock reported on the OTC Markets was $1.25 per share. The following table sets forth, for each of the quarterly periods indicated, the high and low sales prices of our common stock, as reported on the OTC Markets.

Holders

As of November 10, 2020, a total of 99,108,000 shares of our common stock were outstanding and there were approximately 47 holders of record.

Penny Stock Rules

Due to the price of our common stock, as well as the fact that we are not listed on Nasdaq or a national securities exchange, our stock is characterized as “penny stocks” under applicable securities regulations. Our stock will therefore be subject to rules adopted by the Securities and Exchange Commission (“SEC”) regulating broker-dealer practices in connection with transactions in penny stocks. The broker or dealer proposing to effect a transaction in a penny stock must furnish his customer a document containing information prescribed by the SEC and obtain from the customer an executed acknowledgment of receipt of that document. The broker or dealer must also provide the customer with pricing information regarding the security prior to the transaction and with the written confirmation of the transaction. The broker or dealer must also disclose the aggregate amount of any compensation received or receivable by him in connection with such transaction prior to consummating the transaction and with the written confirmation of the trade. The broker or dealer must also send an account statement to each customer for which he has executed a transaction in a penny stock each month in which such security is held for the customer’s account. The existence of these rules may have an effect on the price of our stock, and the willingness of certain brokers to effect transactions in our stock.

Transfer Agent

We have appointed Corporate Stock Transfer, Inc. (“CST”), currently operating under the name, EQ by Equiniti, as the transfer agent for our common stock. The principal office of CST is located at 3200 Cherry Creek Drive South, Suite 430, Denver, CO 80209 and its telephone number is (303) 282-4800.

Dividend Policy

We have never declared or paid dividends on our common stock. Payment of future dividends, if any, will be at the discretion of our Board of Directors after taking into account various factors, including the terms of any credit arrangements, our financial condition, operating results, current and anticipated cash needs and plans for expansion. At the present time, we intend to retain any earning in our business, and therefore do not anticipate paying dividends in the foreseeable future.

Recent Sales of Unregistered Securities; Use of Proceeds from Unregistered Securities

On December 11, 2018, the Company sold 96,090,000 shares of its common stock (the “Shares”) to 15 individuals. The selling price was $0.02 per share for an aggregate of $1,921,800. All 15 investors executed subscription agreements and all proceeds have been collected. Twelve of the 15 investors are Chinese citizens and purchased the shares in China. Due to the strict monitoring of China’s foreign exchange investment policy, funds are not able to be transferred directly to HFUS. As a result, amount of $657,000 were collected in RMB from the Chinese investors. The Shares were sold in a private placement pursuant to an exemption from registration in accordance with Section 4(2) and/or Regulation S under the Securities Act of 1933, as amended. The Shares are all restricted shares and accordingly all stock certificates evidencing the Shares have been affixed with the appropriate legend restricting sales and transfers. The proceeds from the sales of securities have been used in operating activities and acquisition of new entities.

On July 3, 2020, the Company signed a subscription agreement to one of the existing investors selling 1,000,000 shares of common stock (the “Shares”) priced at $0.02 per share.

ITEM 6. SELECTED FINANCIAL DATA

As a “smaller reporting company” as defined by Item 8 of Regulation S-K, the Company is not required to provide information required by this Item.

ITEM 7. MANAGEMENTS’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion and analysis were prepared to supplement information contained in the accompanying financial statements and is intended to explain certain items regarding the financial condition as of July 31, 2020, and the results of operations for the years ended July 31, 2020, and 2019. It should be read in conjunction with the audited financial statements and notes thereto contained in this report.

Overview of the Business

Hartford Great Health Corp. was originally incorporated in the State of Nevada on April 2, 2008 under the name PhotoAmigo, Inc. It changed its name to Hartford Great Health Corp. on August 22, 2018 and since then we have been engaged in activities to formulate and implement our business plan as set forth below.

Ability to continue as a “going concern”.

The independent registered public accounting firms’ reports on our financial statements as of July 31, 2020 and 2019, includes a “going concern” explanatory paragraph that describes substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to the factors prompting the explanatory paragraph are discussed in the financial statements, including footnotes thereto.

Plan of Operation

As of July 31, 2020, the company has issued a total of 99,108,000 shares of common stock. On December 11th, 2018, 96,090,000 shares of common stock were issued at the price of $0.02 per share to raise an additional $1,921,800 in capital.

On 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”) with 90 percent of 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”).

The subsidiary of HFUS in Shanghai (HFSH) plans to borrow operating funds from two related party entities, SH Qiao Hong and SH Oversea Chinese Culture Media Ltd. The purpose of the loans is to invest in Hartford International Education Technology (Shanghai) Co., Ltd. (HF Int’l Education). Upon signing of supplemental agreement, HFUS currently holds 58.5% ownership of HF Int’l Education and maintains control over HF Int’l Education. On October 28, 2019, HF Int’l Education’s subsidiary, Pudong Haojin Childhood Education Ltd. (“PDHJ”) had its childhood education center opened.

HF Int’l Education has developed an enhanced model of childcare franchise management program and registered a new brand name, “HaiDeFuDe”. HF Int’l Education has recruited a team of knowledgeable childcare teachers to develop series of independent textbooks designed to targeted age of young children and register for the copyrights for these textbooks in September of 2020. Recently, HF Int’l Education has begun marketing and promoting the enhanced model of franchise operation and management packaged program, under “HaiDeFuDe” brand, to an initial of 50 franchisees throughout different regions of China. To achieve that, HF Int’l Education has incorporate existing market resources throughout other major cities and provinces in China. The promotion of HF Int’l Education franchise operation and management model is expected to attract other childcare education centers to join the “HaiDeFuDe” brand, and HF Int’l Education expects to generate revenue from franchise and management fees. We expect to generate approximately RMB2 million in revenue by the end of 2020 and reach approximately RMB15 million in revenue from 25 franchisees by the end of 2021.

Liquidity and Capital Resources

As of July 31, 2020, we had negative working capital of $3,359,623 comprised of current assets of $963,499 and current liabilities of $4,323,122. This represents a decrease of $3,157,388 in the working capital balance from the July 31, 2019 amount of $(202,235). During the year-ended July 31, 2020, our working capital deficit increased primarily because we recognized $739,352 current operating lease liabilities by adopting ASU No. 2016-02, and additional advances from related parties for business operating.

We believe that our funding requirements for the next twelve months will be in excess of $1,900,000. We are currently seeking for further funding through related parties’ loan and finance.

On December 11, 2018, the Company sold 96,090,000 shares of its common stock (the “Shares”) to 15 individuals. The selling price was $0.02 per share for an aggregate of $1,921,800. All 15 investors executed subscription agreements. As of April 30, 2019, all proceeds have collected. Twelve of the 15 investors are Chinese citizens and purchased the shares in China. Due to the strict monitoring of China’s foreign exchange investment policy, funds are not able to be transferred directly to HFUS. As a result, amount of $657,000 were collected in RMB from the Chinese investors. The Shares were sold in a private placement pursuant to an exemption from registration in accordance with Section 4(2) and/or Regulation S under the Securities Act of 1933, as amended. The Shares are all restricted shares and accordingly all stock certificates evidencing the Shares have been affixed with the appropriate legend restricting sales and transfers.

On July 3, 2020, the Company signed a subscription agreement to one of the current investor, selling 1,000,000 shares of common stock (the “Shares”) priced at $0.02 per share. The transfer agent is currently processing stock issuance.

We will seek additional financing in the form of debt or equity. There is no assurance that we will be able to obtain any needed financing on favorable terms, or at all, or that we will find qualified purchasers for the sale of our stock. Any sales of our securities would dilute the ownership of our existing investors.

Cash Flows – Year Ended July 31, 2020 Compared to Year Ended July 31, 2019

Operating Activities

During the year ended July 31, 2020, $446,792 used in operating activities compared to $1,259,862 used in the operations during the year ended July 31, 2019.

During the year ended July 31, 2020, we recorded losses including noncontrolling interests of $3,655,069, incurred non-cash depreciation of $69,941, Loss on disposal of property and equipment of $6,659, impairment loss of $1,628,306 (see note 9 Other assets and note 10 Goodwill ), prepaid and other current receivables decreased by $10,041, other assets increased by $145,728, other current payables increased by $439,497, and related party payables, net increased by $1,020,190, operating lease assets and liabilities increased by $154,418 as a result from the adoption of new lease guidance ASU No. 2016-02. The increase of related party payables was resulted from the operating advances from related parties. See Note 13 Related Party Transactions.

During the year ended July 31, 2019, we recorded losses including noncontrolling interests of $659,994, incurred non-cash depreciation of $13,721, prepaid and other current receivable increased by $230,669, inventory increased by $24,760, other assets decreased by $75,962, other current payable increased by $9,533, related party payable, net decreased by $492,419, and other liabilities increased by $28,196. The increase of prepaid and other current receivable was mainly resulted from the property rental and property associate fee prepayments, deposits, and employee operating advances occurred in these new subsidiaries. The decrease of other assets was mainly resulted from the accelerated amortization of deferred start-up cost which was acquired through HZHF asset acquisition, and the amortization of deferred cost of finance lease which was acquired through HZLJ acquisition. The decrease of related party payable was resulted from the payment made to SH Qiaohong, the amount borrowed from SH Qiaohong by the original owner of SHHF was used for start-up expense and 90 percent of Qiao Garden Intl Travel acquisition and the liability was assumed by the company through SHHF acquisition. The increase of other liabilities was mainly due to the increase of the finance lease liabilities under HZLJ.

Investing activities

Cash provided by investing activities was $52,270 for the year ended July 31, 2020 as compared to $483,252 cash used for the corresponding period in 2019.

During the year ended July 31, 2020, $323,078 loan receivable and interest have been paid back from third party borrowers. HF Int’l Education’s subsidiary, Pudong Haojin Childhood Education Ltd. (“PDHJ”) was grand opened to provide childcare education services. Property and equipment, amount of $270,808, have been added to this new entity.

During the year ended July 31, 2019, we acquired multiple entities in Shanghai and Hangzhou, China, total consideration for $606,262, cash paid for $230,161, noncash payable waived for $235,553 and the unpaid balance for $140,548 which is included in other current payable as of July 31, 2019. The cash proceeds from the acquisitions of $50,470 (see note 4 “Acquisitions and Joint Ventures”). During the year ended July 31, 2019, we loaned $599,870 to two third parties with annual interest rate of six percent, $300,000 of the loaned amount has been paid back (see note 6 “Loan Receivable”).

Financing activities

Cash provided by financing activities was $164,560 for the year ended July 31, 2020 as compared to $2,068,779 for the year ended July 31, 2019. The cash flows provided by financing activities for the year ended July 31, 2020 was primarily attributable to $ 184,438 contribution received from noncontrolling interest shareholders to the joint venture entity - HF Int’l Education (see note 4 “Acquisitions and Joint Ventures”), offset by $19,878 finance lease principal payment.

The cash flows provided by financing activities for the year ended July 31, 2019 was primarily attributable to sales of stock shares with proceeds of $1,921,800 received and $168,148 contribution received from noncontrolling interest owners to form the joint venture entity HF Int’l Education (see note 4 “Acquisitions and Joint Ventures”). During the year ended July 31, 2019, the company refunded to the former CFO for $1,430 and paid $19,739 finance lease principal amount.

Equity and Capital Resources

We have incurred losses since inception of our business and, as of July 31, 2020, we had an accumulated deficit of $3,568,185 compared to $916,816 at the previous year end. To date, we have funded our operations through short-term debt and equity financing.

We expect our expenses might increase during the foreseeable future as a result of increased operational expenses and the development of our business. As our Chinese subsidiaries start operations and marketing plans, the three childcare education centers have begun to generate certain revenues. However, the generated revenue is not expected to be sufficient to cover our marketing needs until second quarter of 2021. Consequently, we are dependent on the proceeds from future debt or equity investments to sustain our operations and implement our business plan. If we are unable to raise sufficient capital, we will be required to delay or forego some portion of our business plan, which would have a material adverse effect on our anticipated results from operations and financial condition. There is no assurance that we will be able to obtain necessary amounts of additional capital or that our estimates of our capital requirements will prove to be accurate.

Future Capital Expenditures

On January and February 27, 2019, HFSH entered an agreements 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”). As of July 31, 2020, these acquisition agreements have not yet taken effective 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.

Off-Balance Sheet Arrangements

As of and subsequent to July 31, 2020, we have no off-balance sheet arrangements.

Contractual Commitments

As of July 31, 2020, we have RMB 2 million book purchase commitments and the office building and property leases which are included footnote 12 Leases. (see note 15. Commitments and contingencies)

Results of Operations- Year Ended July 31, 2020 Compared to Year Ended July 31, 2019

Revenue and Cost of revenue: We recognized $98,307 and $56,174 revenue in the year ended July 31, 2020 or 2019. Cost of revenue increased to $86,243 for the year ended July 31, 2020, compared to $11,445 during the comparable period of 2019.The revenue during the year ended July 31, 2020 was mainly generated from two industry segments: hospitality housing in HZLJ and childhood education care services in HF Int’l Education. During the year ended July 31, 2019, revenue was mainly generated from the hospitality housing in HZLJ.

Operating Expenses: Operating expenses increased to $3,511,021 for the year ended July 31, 2020, compared to $727,247 during the comparable period of 2019. During the year ended July 31, 2020, impairment loss increased by $1,628,306 (see Note 9 Other assets and Note 10 Goodwill), selling, general and administrative expenses increased by $1,099,248, and depreciation and amortization expenses increased by $56,220. The increase of operating expenses was mainly resulted from the expenses incurred in the new subsidiaries in China for business development, including lease cost. The company’s major business plans were halted as a result of COVID-10 pandemic. Management determined that $1,006,343 goodwill and $621,963 deferred cost of finance lease which were generated from acquisitions were fully impaired as of July 31, 2020.

Other Income (Expense): Other expense increased to $155,312 for the year ended July 31, 2020, compared to $22,524 of other income for the corresponding period of 2019. The increase of other expense was mainly resulted from $141,984 donation made to Shanghai JiaoTong University Oversea Early Childcare Organization.

Net Loss Attributable to Noncontrolling Interest: For the year ended July 31, 2020, we recorded a net loss attributable to Noncontrolling interest of $1,003,700 compared to $75,825 for the corresponding period of 2019. The loss was allocated based on the ownership percentage of Noncontrolling interest, which was mainly acquired through the new acquisitions of HZLJ during the year ended July 31, 2019.

Net Loss Attributable to Hartford Great Health Corp: We recorded a net loss of $2,651,369 or $ (0.03) per share for the year ended July 31, 2020, compared to a net loss of $584,169 or $ (0.01) per share for the year ended July 31, 2019, an increase in losses of $2,067,200 due to the factors discussed above.

CRITICAL ACCOUNTING POLICIES

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 year ended July 31, 2020, 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 USD250,000 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 July 31, 2020, 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 July 31, 2020, 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:

Expenditures for repairs and maintenance are charged to expense as incurred.

Goodwill and Long-lived Assets: 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 has the option to assess goodwill for possible impairment by performing a qualitative analysis to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. A quantitative assessment is performed if the qualitative assessment results in a more-likely-than-not determination or if a qualitative assessment is not performed. The quantitative assessment considers whether the carrying amount of a reporting unit exceeds its fair value, in which case an impairment charge is recorded to the extent that the reporting unit’s carrying value exceeds its fair value. The Company’s goodwill was generated from the acquisitions during the year ended July 31, 2019. We currently have two reporting units - Hospitality and Early Childhood Education. Given the impact of COVID-19 pandemic and the unfavorable operation results, an interim goodwill impairment assessment was performed as of January 31, 2020. Based on the assessment result, management determined that the goodwill was fully impaired as of January 31, 2020.

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 year ended July 31, 2020, $12,582 advertising expenses were incurred. No advertising costs incurred during the year ended July 31, 2019.

Income Taxes: The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, Accounting for Income Taxes. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

On December 22, 2017, the President of the United States signed into law the Tax Reform Act. The Tax Reform Act permanently reduces the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. In addition, the 2017 Tax Act also creates a new requirement that certain income (i.e., Global Intangible Low-Taxed Income (“GILTI”)) earned by controlled foreign corporations (“CFCs”) must be included in the gross income of the CFCs’ U.S. shareholder income. The tax law in PRC applies an income tax rate of 25% to all enterprises. The Company’s 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 adopted ASC Topic 606 Revenue from Contracts with Customers (“Topic 606) on August 1, 2019, applying the modified retrospective method to all contracts that were not completed as of August 1, 2019. The Company is building up its core business upon the completion of multiple acquisitions on March 2019 and impact of COVID-19 pandemic, limited operations occurred during the years ended July 31, 2020 and 2019. The revenue during the year ended July 31, 2020 was mainly generated from HZLJ and HF Int’l Education.

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 as of July 31, 2020.

Unearned revenue: Unearned revenue represents revenues collected but not earned as of July 31, 2020. This is primarily composed of tuition collected in advance from childhood education services.

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 year ended July 31, 2020 or 2019.

Recent Accounting Pronouncements.

Recently issued accounting pronouncements not yet adopted

In December 2019, the FASB issued Accounting Standards Update (“ASU”) 2019-12, “Simplifying the Accounting for Income Taxes”, as part of its simplification initiative to reduce the cost and complexity in accounting for income taxes. ASU 2019-12 removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also amends other aspects of the guidance to help simplify and promote consistent application of GAAP. The guidance is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. 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 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 June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses”. The standard, including subsequently issued amendments (ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10 and ASU 2019-11), requires a financial asset measured at amortized cost basis, such as accounts receivable and certain other financial assets, to be presented at the net amount expected to be collected based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. In November 2019, the FASB issued ASU No. 2019-10 to postpone the effective date of ASU No. 2016-13 for public business entities eligible to be smaller reporting companies defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is evaluating the impact of this guidance on its consolidated financial statements.

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 did not have an impact on the Company’s 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 early adopted ASU No. 2017-04 when we tested goodwill impairment as of January 31, 2020. Management determined the goodwill was fully impaired as of January 31, 2020.

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:

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 year ended July 31, 2020. 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.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

As a “smaller reporting Company” as defined by Item 8 of Regulation S-K, the Company is not required to provide information required by this Item.

ITEM 8. FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

To the Board of Directors and shareholders of

Hartford Great Health Corp.

Rosemead, California

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Hartford Great Health Corp. and subsidiaries (the “Company”) as of July 31, 2020 and 2019, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity (deficit) and cash flows for the two years in the period ended July 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of July 31, 2020 and 2019, and the results of its operations and its cash flows for the two years in the period ended July 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Adoption of New Accounting Standards

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases and revenue from contracts with customers at August 1, 2019 and 2018, respectively, and changed the manner in which it accounts for goodwill impairment at January 1, 2020.

Going Concern Uncertainty

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations, accumulated deficit and generated negative cash flows from operating activities that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Simon & Edward, LLP

Diamond bar, California

November 10, 2020

We have served as the Company’s auditor since 2019.

HARTFORD GREAT HEALTH CORP.

CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these financial statements.

HARTFORD GREAT HEALTH CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these financial statements.

HARTFORD GREAT HEALTH CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.

HARTFORD GREAT HEALTH CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

for the years ended July 31, 2020 and 2019

The accompanying notes are an integral part of these financial statements.

HARTFORD GREAT HEALTH CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these financial statements.

HARTFORD GREAT HEALTH CORP.

Notes to Financial Statements

For the Years Ended July 31, 2020 and 2019

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 and March 23, 2020, HF Int’l Education established a 100% owned subsidiary, Pudong Haojin Childhood Education Ltd. (“PDHJ”) and Shanghai Hongkou HaiDeFuDe Childcare Co., Ltd.(“HDFD”), respectively, which was approved to conduct childcare operations in Shanghai, China.

Basis of Presentation

The consolidated financial statements include the accounts of Hartford Great Health Corp, its wholly-owned subsidiaries and subsidiaries in which it has a controlling interest. The Company reports noncontrolling interests of the consolidated entities as a component of equity separate from the Company’s equity. All material inter-company transactions between and among the Company and its consolidated subsidiaries have been eliminated in the consolidation. The Company’s net income (loss) excludes income (loss) attributable to the noncontrolling interests.

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 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 year ended July 31, 2020 and 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, current loan receivables, related party receivables, prepaid and other current receivables, related party payables and other current liabilities. 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 United States 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 USD250,000 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 July 31, 2020 and 2019, nil and $20,083 of the Company’s cash and cash equivalents held by financial institutions were uninsured, respectively. 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 July 31, 2020 and 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:

Expenditures for repairs and maintenance are charged to expense as incurred.

Goodwill and Long-lived Assets

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 has the option to assess goodwill for possible impairment by performing a qualitative analysis to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. A quantitative assessment is performed if the qualitative assessment results in a more-likely-than-not determination or if a qualitative assessment is not performed. The quantitative assessment considers whether the carrying amount of a reporting unit exceeds its fair value, in which case an impairment charge is recorded to the extent that the reporting unit’s carrying value exceeds its fair value. The Company’s goodwill was generated from the business acquisitions during the year ended July 31, 2019. We currently have two reporting units - Hospitality and Early Childhood Education. Given the impact of COVID-19 pandemic and the unfavorable operation results, goodwill impairment assessment was performed at interim time and annually. Based on the assessment results, management determined that $1,006,343 goodwill and $621,963 deferred lease cost were fully impaired as of July 31, 2020.

Reclassifications

Certain amounts on the prior-year consolidated balance sheet and consolidated statement of operations were reclassified to conform to current-year presentation, with no effect on ending stockholders’ equity.

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 year ended July 31, 2020, $12,582 advertising expenses were incurred. No advertising costs incurred during the year ended July 31, 2019.

Income Taxes

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, Accounting for Income Taxes. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

On December 22, 2017, the President of the United States signed into law the Tax Reform Act. The Tax Reform Act permanently reduces the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. In addition, the 2017 Tax Act also creates a new requirement that certain income (i.e., Global Intangible Low-Taxed Income (“GILTI”)) earned by controlled foreign corporations (“CFCs”) must be included in the gross income of the CFCs’ U.S. shareholder income. The tax law in PRC applies an income tax rate of 25% to all enterprises. The Company’s 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’s income statements.

Revenue Recognition

The Company adopted ASC Topic 606 Revenue from Contracts with Customers (“Topic 606) on August 1, 2018, applying the modified retrospective method to all contracts that were not completed as of August 1, 2018. The Company is building up its core business upon the completion of multiple acquisitions on March 2019 and impact of COVID-19 pandemic, limited operations occurred during the years ended July 31, 2020 and 2019. The revenue during the year ended July 31, 2020 was mainly generated from HZLJ and HF Int’l Education.

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 as of July 31, 2020.

Unearned revenue

Unearned revenue represents revenues collected but not earned as of July 31, 2020. This is primarily composed of tuition collected in advance from early childhood education services.

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 year ended July 31, 2020 or 2019.

Recent Accounting Pronouncements.

Recently issued accounting pronouncements not yet adopted

In December 2019, the FASB issued Accounting Standards Update (“ASU”) 2019-12, “Simplifying the Accounting for Income Taxes”, as part of its simplification initiative to reduce the cost and complexity in accounting for income taxes. ASU 2019-12 removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also amends other aspects of the guidance to help simplify and promote consistent application of GAAP. The guidance is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. 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 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 June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses”. The standard, including subsequently issued amendments (ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10 and ASU 2019-11), requires a financial asset measured at amortized cost basis, such as accounts receivable and certain other financial assets, to be presented at the net amount expected to be collected based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. In November 2019, the FASB issued ASU No. 2019-10 to postpone the effective date of ASU No. 2016-13 for public business entities eligible to be smaller reporting companies defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is evaluating the impact of this guidance on its consolidated financial statements.

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 did not have an impact on the Company’s 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 early adopted ASU No. 2017-04 on January 31, 2020. Management determined the goodwill was fully impaired as of January 31, 2020.

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:

The adoption of ASU No. 2016-02 had an immaterial impact on the Company’s Consolidated Statement of Operation and Consolidated Statement of Cash Flows for the year ended July 31, 2020. 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. has incurred losses since inception, resulting in an accumulated deficit of $3,568,185 as of July 31, 2020. 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 July 31, 2020 and 2019, the company had a total of 99,108,000 shares of common stock issued and outstanding.

On July 3, 2020, an existing investor has signed a subscription agreement with the Company for 1,000,000 shares of common stock (the “Shares”) priced at $0.02 per share. As of the reporting date, $20,000 subscription was received and the shares are pending for issuance.

NOTE 4. ACQUISITIONS AND JOINT VENTURES

Acquisition of HZHF

On December 28, 2018, the Company acquired Hangzhou Hartford Comprehensive Health Management, Ltd (“HZHF”), 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:

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 Hangzhou Longjing Qiao Fu Vacation Hotel Co., Ltd. (“HZLJ”) from Shanghai Qiao Garden Property Management Group, Ltd. 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. The Company classifies the 40 percent ownership interest held by Shanghai Qiaohong Real Estate Co., Ltd. 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:

*$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 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 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”). 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:

*$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. 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.

Pro Forma Information

The following unaudited pro forma information has been prepared for illustrative purposes only, assumes that the acquisition occurred on August 1, 2018 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, 2018, or of future results of operations. The unaudited pro forma results are as follows:

Joint Venture – HF Int’l Education

On March 22, 2019, HFSH entered into a joint venture agreement (the “JV agreement”) with Shanghai Jingyu Education Tech Ltd. (“SH Jingyu”) and one individual investor, to form a new entity - HF Int’l Education to provide childcare education services. The joint venture was initially 65.0% owned by HFSH and a totaling 35.0% owned by two noncontrolling shareholders. The JV agreement was not executed due to no sufficient capital investments injected by the two noncontrolling shareholders. During the year ended on July 31, 2020, HFSH’s ownership has been slightly decreased to 61.0% from 65.0% because of equity transactions between noncontrolling shareholders. On June 19, 2020, a board resolution was approved to increase registered capital to RMB10 million from RMB5 million, and three out of four noncontrolling shareholders gave up the subscription rights. As a result, HFSH holds 75.5% of HF Int’l Education and totaling 24.5% equity held by noncontrolling shareholders. The new equity structure became effective upon the approval of the local government on September 10, 2020.

Operation result of HF Int’l Education are included in the Company’s consolidated financial statements commencing on the formation date. The Company classifies the ownership interest held by other four parties as “Noncontrolling interest” on the consolidated balance sheet. As of July 31, 2020, amount of RMB 10.0 million or $1.4 million of capital were fully injected.

On July 24, 2019 and March 23, 2020, HF Int’l Education established two wholly owned subsidiaries, Pudong Haojin Childhood Education Ltd. (“PDHJ”) and Shanghai Hongkou HaiDeFuDe Childcare Co., Ltd. (“HDFD”), respectively, to provide childcare education services.

Others

On January and February, 2019, HFSH entered agreements to acquire 85 percent ownership of Shanghai Senior Health Consulting Ltd. (“SH Senior”), 100 percent equity interest of Shanghai Luo Sheng International Trade Ltd. (“SH Luosheng”), and 55 percent ownership of Shanghai Pasadena Ltd. (“SH Pasadena”). As of July 31, 2020, these acquisition agreements have not yet taken effective 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 execute dates. There was no penalty levied or to be levied due to delayed execution or inexecution.

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”). The acquisition agreement has not yet taken effective as no consideration has been paid towards the acquisition. On June 12, 2020, the company withdraw the acquisition by transferring the agreement to an individual with zero price.

On July 20, 2020, HF Int’l Education entered an agreement with two individuals to acquire the whole ownership of Shanghai Gelinke Childcare Education Center. The purchase price is set at zero. According to the acquisition agreement, HF Int’l Education agreed to assume approximately RMB 1 million liabilities and RMB 171,000 assets. The acquisition is expecting to consummate by November 30, 2020.

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 restricted cash is collateral required by the local government in China for the travel license Qiao Garden Int’l Travel holds.

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.

NOTE 6. LOAN RECEIVABLE

The Company loaned $99,870 to a third party, Longsheng Aquatic Products Co., Ltd. The loan bears 6% annum interest rate with three-month term started on February 14, 2019. On May 12, 2019, the loan had been extended for another year, expires on May 13, 2020. $5,260 and $2,780 of interest income were recognized during the years ended July 31, 2020 and 2019, respectively. The loaned amount and interest have been fully paid back on June 11, 2020.

The Company loaned $300,000 to a third party, Hong Kong Hong Tai Int’l Trade Limited (“HK HongTai”). The loan bears annual interest rate of six percent. The term of loan is six months with expiration date on June 27, 2019. The loan has been fully paid back on February 5, 2019.

The Company loaned another $200,000 to HK HongTai on March 4, 2019. The loan bears annual interest rate of six percent with six months term expiring on September 3, 2019. Subsequently on August 30, 2019, the loan has been extended to September 3, 2020. $10,202 and $6,890 of interest income were recognized during the years ended July 31, 2020 and 2019, respectively. The loan principal and interest accrued have been fully paid back on June 11, 2020.

NOTE 7. OTHER CURRENT RECEIVABLES

Other current receivable, amounts of $173,819 and $210,280 as of July 31, 2020 and 2019, respectively, mainly consist of purchase advance, prepaid rent, employee operating advances and others.

NOTE 8. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following at July 31, 2020 and 2019:

Depreciation expense for the years ended July 31, 2020 and 2019, was $48,643 and $6,411, respectively.

NOTE 9. OTHER ASSETS

Other assets consist of the following at July 31, 2020 and 2019:

The cost of obtaining the finance lease of the land use rights and hotel building at HZLJ, in the amount of $879,800 (RMB 6 million) was recognized as Other Assets and subject for amortization over the remaining lease term, 41 years commenced on October 2010. The amortization is computed using the straight-line method over the remaining lease term. Amortization expense of deferred cost of finance lease for the year ended July 31, 2020 and 2019 were $21,298 and $7,310, respectively. Given the impact of COVID-19 pandemic and the unfavorable operation results, management determined that the deferred cost of finance lease was fully impaired as of July 31, 2020 and $621,963 impairment cost was recorded for the year ended July 31, 2020.

NOTE 10. GOODWILL

Our goodwill was contributed by the acquisitions during 2019. Under the circumstance of the COVID-19 pandemic and slowly economic recoveries at the cities of Shanghai and Hangzhou, the Company’s business plans have been halted for an indefinite period of time. Based on the interim assessment of goodwill impairment testing performed, management determined that goodwill was fully impaired as of January 31, 2020. The following is a roll-forward of goodwill for the years ended July 31, 2020 and 2019:

NOTE 11. OTHER CURRENT PAYABLES

The following is a breakdown of the accounts and other payables as of July 31, 2020 and 2019:

Payable to acquiree is the unpaid consideration for the acquisitions described in Note 4 Acquisitions and Joint Venture.

Rental payable is accrued for unpaid rent during a process of lease related litigation, see Note 12 Leases.

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 ROU assets-Operating lease, Current Operating Lease liabilities and Operating lease 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 July 31, 2020, 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 six 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 July 31, 2020 and 2019 were as follows:

The components of lease cost for the year ended July 31, 2020 was as follows:

Supplemental cash flow information for leases for the year ended July 31, 2020 was as follows:

The weighted-average remaining lease term and weighted-average discount rate for operating and finance leases at July 31, 2020 was as follows:

The following table reconciles the undiscounted future minimum lease payments for operating and finance leases executed at July 31, 2020: