The accompanying notes are an integral part
of these condensed unaudited financial statements.
The accompanying notes are an integral part
of these condensed unaudited financial statements.
The accompanying notes are an integral part
of these condensed unaudited financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
December 31, 2018
(UNAUDITED)
NOTE 1 – NATURE OF OPERATIONS,
BASIS OF PRESENTATION AND GOING CONCERN
Natural Health Farm Holdings Inc. (the
“Company”, “We”, “Its”, and “NHFH”) was incorporated under the laws of the State
of Nevada on July 10, 2014 (Inception date). The Company has developed web-based business and launched itself into the healthcare
industry. The Company has plans to provide through its subsidiaries, retail nutritional supplements, organic foods, personal care,
and other health care products. The Company currently provides nutritional consulting services by offering a web based naturopathic
learning management system that allows distributors, chiropractors and consumers to educate users products with the health-related
aspects of various illnesses, and how the Company’s learning systems could be used to improve their general wellbeing.
On November 30,
2016, the Company filed a certificate of amendment to its articles of incorporation with the Nevada Secretary of State to change
its name from Amber Group Inc. to Natural Health Farm Holdings Inc. The Company effectuated a 30:1 forward stock split of its common
stock and increased its authorized share capital to 500,000,000 (Five Hundred Million) shares. This amendment was unanimously
approved by the Company’s board of directors on November 29, 2016, and with the stockholders holding a majority of the Company’s
voting power.
On March 16, 2017,
Financial Industry Regulatory Authority (FINRA) approved the corporate name change to Natural Health Farm Holdings Inc., approved
the increase in the Company’s authorized shares of common stock to 500,000,000 shares, and approved 30:1 forward stock split
effective March 17, 2017, and provided us a trading symbol for our common stock as “NHEL”.
Basis of Presentation
The accompanying interim condensed financial
statements are unaudited, but in the opinion of management of the Company, contain all adjustments, which include normal recurring
adjustments necessary to present fairly the financial position at December 31, 2018, and the results of operations for three months
ended December 31, 2018, and cash flows for the three months ended December 31, 2018 and 2017. The balance sheet as of September
30, 2018 is derived from the Company’s audited financial statements.
Certain information and footnote disclosures
normally included in financial statements that have been prepared in accordance with generally accepted accounting principles in
the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of
the Securities and Exchange Commission, although management of the Company believes that the disclosures contained in these interim
condensed financial statements are adequate to make the information presented therein not misleading. For further information,
refer to the financial statements and the notes thereto contained in the Company’s September 30, 2018 Annual Report filed
with the Securities and Exchange Commission on Form 10-K on December 28, 2018.
Going Concern
The Company’s financial statements are prepared using U.S. GAAP applicable to a going concern, which
contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has generated
small revenues and has sustained cumulative operating losses since July 10, 2014 (Inception Date) to date and allow it to continue
as a going concern. The continuation of the Company as a going concern is dependent upon the continued financial support from its
shareholders and affiliates, the ability of the Company to obtain necessary financing to continue operations, and the attainment
of profitable operations. The Company has recorded a net profit of $46,142 from October 1, 2018 to December 31, 2018, provided
net cash flows in operating activities of $74,842, has a working capital deficit of $207,491, and has an accumulated deficit of
$1,199,536 as of December 31, 2018. The Company has had difficulty in obtaining working capital lines of credit from financial
institutions and trade credit from vendors. These factors, among others, raise a substantial doubt regarding the Company’s
ability to continue as a going concern. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
The accompanying financial statements do not include any adjustments to reflect the recoverability and classification of recorded
asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
The following summary of significant accounting
policies of the Company is presented to assist in the understanding of the Company’s financial statements. The financial
statements and notes are the representation of the Company’s management who is responsible for their integrity and objectivity.
These accounting policies conform to the U.S. GAAP in all material respects and have been consistently applied in preparing the
accompanying financial statements.
Use of Estimates
The preparation of financial statements
in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the
valuation of accounts payable, accrued liabilities and payable to related party. The Company bases its estimates and assumptions
on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs
and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially
and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual
results, future results of operations will be affected.
Cash and Cash Equivalents
The Company considers all highly liquid
instruments with maturity of three months or less at the time of issuance to be cash equivalents. The Company had a cash balance
of $13,044 and $9,202 at December 31, 2018 and September 30, 2018, respectively.
Accounts Receivable
Accounts receivable represent income earned
from the sale of products for which the Company has not yet received payment. Accounts receivable are recorded at the invoiced
amount and adjusted for amounts management expects to collect from balances outstanding at period-end. The Company estimates the
allowance for doubtful accounts based on an analysis of specific accounts and an assessment of the customer’s ability to
pay, among other factors. At December 31, 2018 and September 30, 2018, no allowance for doubtful accounts was recorded.
Computer Software Costs
Computer software
costs include direct costs incurred for purchase of developed software products and payments made to independent software developers.
The Company accounts for computer software costs in accordance with the Financial Accounting Standards Board (the “FASB”)
guidance for the costs of computer software to be sold, leased, or otherwise marketed Accounting Standards Codification (the “ASC”)
(“ASC Subtopic 985-20”). Computer software costs are capitalized once the technological feasibility of a product is
established and such costs are determined to be recoverable. Technological feasibility of a product encompasses technical design
documentation and integration documentation, or the completed and tested product design and working model. Computer software costs
are capitalized once technological feasibility of a product is established and such costs are determined to be recoverable against
future revenues. Technological feasibility is evaluated on a project-by-project basis. Amounts related to computer software development
that are not capitalized are charged immediately to the appropriate expense account. Amounts that are considered ‘research
and development’ that are not capitalized are immediately charged to engineering, research, and development expense. Capitalized
costs for those products that are cancelled or abandoned are charged to product development expense in the period of cancellation.
Commencing upon
product release, capitalized computer software costs are amortized on the straight-line method over a thirty-six months period.
The Company evaluates the future recoverability of capitalized computer software costs on an annual basis.
Revenue Recognition
The Company generates revenue from licensing
and other software services from its web-based software to distributors and retailers of nutritional supplements in the healthcare
industry. The Company recognize licensing fees and other software services as revenue over the period of the contract at the time
that the computer software is delivered and accepted by the customer, the selling price is fixed, and collection is reasonably
assured, provided no significant obligations remain. The Company considers authoritative guidance on multiple deliverables in determining
whether each deliverable represents a separate unit of accounting.
Deferred revenues represent billings or
cash received in excess of revenue recognizable on service agreements that are not accounted for as revenues.
Concentration of Risk
Financial instruments that potentially
subject the Company to concentrations of credit risk consist principally of cash. The Company places its cash with high quality
banking institutions. The Company does not have the cash balances in excess of Federal Deposit Insurance Corporation limit at December
31, 2018 and September 30, 2018, respectively.
Income Taxes
The Company accounts for income taxes using
the asset and liability method in accordance with ASC 740, “
Income Taxes”
. The asset and liability method provides
that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between
the financial reporting and tax basis of assets and liabilities, and for operating loss and tax credit carry forwards. Deferred
tax assets and liabilities are measured using the currently enacted tax rates and laws. The Company records a valuation allowance
to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
The Company follows the provisions of ASC
740-10, “
Accounting for Uncertain Income Tax Positions
.” When tax returns are filed, it is highly certain that
some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about
the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance
of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all
available evidence, management believes it is more likely than not that the position will be sustained upon examination, including
the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions.
Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is
more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits
associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for
unrecognized tax benefits in the accompanying condensed balance sheets along with any associated interest and penalties that would
be payable to the taxing authorities upon examination.
Earnings (Loss) Per Common Share
The Company computes net earnings (loss)
per share in accordance with ASC 260, “
Earnings per Share”
. ASC 260 requires presentation of both basic and
diluted net earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing earnings
(loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the
period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock
method and convertible note and preferred stock using the if-converted method. In computing diluted EPS, the average stock price
for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants.
Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. At December 31, 2018 and September 30, 2018,
there were options granted to certain employees and independent consultants that when vested convert into 450,000 shares of common
stock. At December 31, 2018 and September 30, 2018, there were no convertible notes, warrants available for conversion that if
exercised, may dilute future earnings per share.
Fair value of Financial Instruments
and Fair Value Measurements
ASC 820, “
Fair Value Measurements
and Disclosures”,
requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs
when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding
the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon
the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that
may be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities
for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities
for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar
assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume
or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can
be derived principally from, or corroborated by, observable market data. If the asset or liability has a specified (contractual)
term, the Level 2 input must be observable for substantially the full term of the asset or liability.
Level 3
Level 3 applies to assets or liabilities
for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value
of the assets or liabilities.
The Company’s financial instruments
consist principally of cash, accounts payable, accrued expenses and payable to an affiliate. Pursuant to ASC 820, “
Fair
Value Measurements and Disclosures”
and ASC 825, “
Financial Instruments”
, the fair value of our cash
equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical
assets. The Company believes that the recorded values of all the other financial instruments approximate their current fair values
because of their nature and respective maturity dates or durations.
The following table presents assets and
liabilities that were measured and recognized at fair value as of December 31, 2018 on a recurring basis:
Description
|
|
|
|
Level 1
|
|
|
|
Level 2
|
|
|
|
Level 3
|
|
None
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
The following table presents assets and
liabilities that were measured and recognized at fair value as of September 30, 2018 on a recurring basis:
Description
|
|
|
|
Level 1
|
|
|
|
Level 2
|
|
|
|
Level 3
|
|
None
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Recent Accounting Pronouncements
In June 2016, the FASB issued Accounting
Standards Update (“ASU”) 2016-13, “
Financial Instruments - Credit Losses
(Topic 326).” The new standard
amends guidance on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. This
ASU is effective for financial statements issued for fiscal years beginning after December 15, 2018, including interim periods
within those fiscal years. The Company is currently evaluating this guidance to determine the impact it may have on its financial
statements.
In 2015, the FASB issued ASU No. 2015-17,
“
Income Taxes”
(Topic 740):
Balance Sheet Classification of Deferred Taxes
, which requires all deferred
tax assets and liabilities to be classified as noncurrent in a classified balance sheet. Current US GAAP requires an entity to
separate deferred tax assets and liabilities into current and noncurrent amounts in a classified balance sheet. For public entities,
ASU 2015-17 is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods
within those annual periods. For all other entities, ASU 2015-17 is effective for annual reporting periods beginning after December
15, 2017, and interim periods within annual periods beginning after December 15, 2018, and may be applied either prospectively
or retrospectively, with early application permitted for financial statements that have not been previously issued. The Company
has not yet determined the effect of the adoption of this standard on the Company’s financial position and results of operations.
NOTE 3 – ADVANCES RECEIVABLE
On December 17, 2018, the Company advanced
$85,000 to a stockholder, non-interest bearing, unsecured, and due for repayment on January 20, 2019. The Company received a payment
of $35,000 from the stockholder on January 22, 2019 and the remaining balance of $50,000 remains delinquent. The Company expects
to collect in full, the past due balance of $50,000 from the stockholder by March 31, 2019.
NOTE 4 – COMPUTER SOFTWARE COSTS
The Company purchased web-based naturopathic
learning management system computer software, developed by a third party, to educate users with the health-related products for
various illnesses, and how the Company’s learning systems could be used to improve their general wellbeing. The amount capitalized
include direct costs incurred in developing the software purchased from the third party.
The following table presents details of
our computer software costs as of December 31, 2018 and September 30, 2018:
|
|
Balance at
September 30, 2018
|
|
|
Additions
|
|
|
Amortization
|
|
|
Balance at
December 31, 2018
|
|
Computer Software Costs, net
|
|
$
|
30,781
|
|
|
$
|
-
|
|
|
$
|
(3,488
|
)
|
|
$
|
27,293
|
|
Computer software costs are being amortized
on a straight-line basis over their estimated life of three years. Amortization expense for computer software costs was $3,488
and $607 for the three months ended December 31, 2018 and 2017, respectively.
The estimated future amortization expense
of computer software costs as of December 31, 2018 is as follows:
Year ending September 30,
|
|
Amount
|
|
2019
|
|
$
|
10,463
|
|
2020
|
|
|
13,950
|
|
2021
|
|
|
2,880
|
|
Total
|
|
$
|
27,293
|
|
NOTE 5 – ACCOUNTS PAYABLE
Accounts payable at December 31, 2018 and September 30, 2018 totaled $52,081 and $17,226 respectively.
Accounts payable at December 31, 2018 consisted of $28,600 payable to a vendor for the cost of the software developed for sale
to a customer, $23,481 in legal, accounting and consulting fees payable. Accounts payable at September 30, 2018 totaled $17,226
consisting of $12,603 in consulting fees, $2,025 in legal fees, $2,390 in stock transfer agent fees, and $208 of filing fees.
NOTE 6 – PAYABLE TO AFFILIATES
The Company has received an advance of
$14,500 and $500 from a director for its working capital needs as of December 31, 2018 and September 30, 2018, respectively (NOTE
7).
The Company has received advances for its
working capital needs from an affiliate in which its Chief Executive Officer is also a director in such entity (NOTE 7). The advance
received is non-interest bearing, unsecured and payable on demand is summarized as follows.
|
|
Balance
December 31, 2018
|
|
|
Balance
September 30,2018
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Payable to affiliate
|
|
$
|
98,837
|
|
|
$
|
98,837
|
|
Total
|
|
$
|
98,837
|
|
|
$
|
98,837
|
|
NOTE 7 – RELATED PARTY TRANSACTIONS
The Company received an advance of $14,500
and $500 from a director for its working capital needs as of December 31, 2018 and September 30, 2018, respectively. Funds advanced
to the Company by the director are non-interest bearing, unsecured and due on demand (NOTE 6).
The Company has received advances of $98,837
as of December 31, 2018 and September 30, 2018, respectively, for its working capital needs from an affiliate in which the Company’s
Chief Executive Officer holds the position of director in such entity (NOTE 6).
On November 20, 2017, the Company sold
ten (10) naturopathic learning management system and modules for $29,000 to an entity solely owned by a director of the Company.
The Company received the payment in full of $29,000 on December 21, 2017. The Company recorded $2,417 as revenues earned for each
of the three months ended December 31, 2018 and 2017, and $18,281 and $20,697 as deferred revenues at December 31, 2018 and September
30, 2018, respectively.
On December 11, 2017, the Company sold
twenty (20) naturopathic learning management systems and modules for $50,000 to an entity in which the Company Chief Executive
Officer holds the position of director in such entity. The Company received the payment of $50,000 on December 28, 2017. The Company
recorded $4,167 as revenues earned for each of the three months ended December 31, 2018 and 2017, and $32,477 and $36,644 as deferred
revenues at December 31, 2018 and September 30, 2018, respectively.
NOTE 8 – NOTE PAYABLE
Note payable consist of:
|
|
December 31, 2018
|
|
|
September 30, 2018
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Note payable - GHS Investments, Inc.
|
|
$
|
40,000
|
|
|
$
|
40,000
|
|
Total
|
|
|
40,000
|
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
|
Current portion
|
|
$
|
40,000
|
|
|
$
|
40,000
|
|
On June 5, 2018,
the Company entered into an Equity Financing Agreement and Registration Rights Agreement with GHS Investments Inc. (“GHS”)
pursuant to which GHS agreed to purchase up to $20,000,000 in shares of Company common stock. The obligations of GHS to purchase
the shares of Company common stock are subject to the conditions set forth in the Equity Financing Agreement, including, without
limitation, the condition that a registration statement on Form S-1 registering the shares of Company common stock to be sold to
GHS be filed with the Securities and Exchange Commission and become effective. The Registration Rights Agreement provides that
the Company shall use commercially reasonable efforts to file the registration statement within 30 days after the date of the Registration
Rights Agreement and have the registration statement become effective within 90 days after it is filed. In connection with the
Equity Financing Agreement, the Company executed a promissory note in the principal amount of $40,000 (the “Note”)
as payment of the commitment fee for the Equity Financing Agreement. The Note bears interest at the rate of 8% and must be repaid
on or before March 5, 2019. The Company has recorded the interest expense of $807 on the principal balance of $40,000 for the three
months ended as of December 31, 2018. Accrued interest on the Note amounted to $1,832 and $1,026 at December 31, 2018 and September
30, 2018, respectively.
NOTE 9 – COMMITMENTS AND CONTINGENCIES
Litigation Costs and Contingencies
From time to time, the Company may become
involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent
uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business. Other than as
set forth below, management is currently not aware of any such legal proceedings or claims that could have, individually or in
the aggregate, a material adverse effect on our business, financial condition, or operating results.
In the normal course of business, the Company
incurs costs to hire and retain external legal counsel to advise it on regulatory, litigation and other matters. The Company expenses
these costs as the related services are received. If a loss is considered probable and the amount can be reasonable estimated,
the Company recognizes an expense for the estimated loss.
NOTE 10: STOCKHOLDERS’ DEFICIT
The Company’s capitalization at December
31, 2018 was 500,000,000 authorized common shares with a par value of $0.001 per share.
Common Stock
On December 3, 2018, the Company agreed to purchase 51% of
the issued and outstanding capital stock of Prema Life Pty Ltd and 60% of the issued and outstanding capital stock of GGLG Properties
PTY Ltd, collectively in exchange for 304,500 shares of the Company’s common stock valued at $1,218,000 based on the fair
value of the common stock on the closing date. On December 28, 2018, the parties mutually agreed to extend the closing of the
purchase transaction on January 1, 2019. The Company issued 304,500 shares of its common stock on December 3, 2018 in good faith
for consummating the purchase. The Company has recorded the fair value of the common stock issued as stock subscriptions receivable
at December 31, 2018.
As a result of all common stock issuances,
the Company had 161,859,500 shares and 161,555,000 shares of common stock issued and outstanding at December 31, 2018 and September
30, 2018, respectively.
Stock Option Plan
On May 30, 2018, the Board of Directors
authorized and approved the 2018 Non-Qualified Stock Option Plan (the “2018 Plan) and reserved 10,000,000 shares of the Company’s
common stock intended to be issued to selected officers, directors, consultants and key employees provided that bona fide services
shall be rendered by such consultants or advisors and such services must not be in connection with the offer or sale of securities
in a capital-raising transaction and do not promote or maintain a market for the Company’s securities. The Company filed
a Registration Statement with the SEC on May 31, 2018 disclosing formation of 2018 Plan.
On May 30, 2018, the Board granted stock
options under the 2018 Plan to two directors, an officer and an employee, and three independent consultants to purchase up to 450,000
shares of common stock with a five-year term. The stock options vested immediately upon the issuance date. The exercise price of
the stock options to purchase common stock was at $1.50 per share, and the option to purchase common stock expires on May 30, 2023.
At December 31, 2018 and September 30, 2018, the Company recorded 450,000 stock options pursuant to 2018 Plan to purchase shares
of common stock.
NOTE 11 – SUBSEQUENT EVENTS
Management has evaluated subsequent events
through February 14, 2019, the date the financial statements were available to be issued, noting no new transactions that would
require additional disclosure.