10-Q 1 b21219010q.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended December 31, 2018

 

OR

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______________ to ______________

 

Commission File No. 000-1621697

 

NATURAL HEALTH FARM HOLDINGS INC.

(Exact name of small business issuer as specified in its charter)

 

NEVADA       98-1032170
(State or other jurisdiction of
incorporation or organization)		       (I.R.S. Employer
Identification No.)

 

20 North Orange Avenue, Suite 1100

Orlando, Florida 32801

(Address of principal executive offices)

 

(407) 476-8976

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☒
Emerging growth company ☒    

 

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 Act). Yes ☐ No ☒

 

The number of shares of Common Stock, $0.001 par value, of the registrant outstanding at February 14, 2019 was 161,859,500.  

 

 

 

   

 

 

TABLE OF CONTENTS

 

    Page No.
PART I.  
     
Item 1. Financial Statements. 1
     
  Condensed Balance Sheets as of December 31, 2018 (Unaudited) and September 30, 2018 1
     
  Condensed Statements of Operations for the Three Months ended December 31, 2018 and 2017 (Unaudited) 2
     
  Condensed Statements of Cash Flows for the Three Months ended December 31, 2018 and 2017 (Unaudited) 3
     
  Notes to Unaudited Condensed Financial Statements 4
     
  Item 2. Management’s Discussion and Analysis or Plan of Operation 10
     
  Item 3. Quantitative and Qualitative Disclosures About Market Risks. 12
     
  Item 4. Controls and Procedures 12
     
PART II.  
     
  Item 1. Legal Proceedings. 13
     
  Item 1A. Risk Factors. 13
     
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 13
     
  Item 3. Defaults Upon Senior Securities. 13
     
  Item 4. Mine Safety Disclosures. 13
     
  Item 5. Other Information. 13
     
  Item 6. Exhibits. 13
     
SIGNATURES 13
     
EXHIBIT INDEX 14

 

   

 

 

FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q (“Form 10-Q”) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new products or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties.

 

Forward-looking statements may include the words “may,” “could,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “desire,” “goal,” “should,” “objective,” “seek,” “plan,” “strive” or “anticipate,” as well as variations of such words or similar expressions, or the negatives of these words. These forward-looking statements present our estimates and assumptions only as of the date of this Form 10-Q. Except for our ongoing obligation to disclose material information as required by the federal securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement. We caution readers not to place undue reliance on any such forward-looking statements. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes will likely vary materially from those indicated.

 

   

 

 

PART I.

Item 1. Financial Statements.

NATURAL HEALTH FARM HOLDINGS INC.

CONDENSED BALANCE SHEETS

   

   December 31, 2018   September 30, 2018 
ASSETS  (Unaudited)     
Current Assets        
         
  Cash and cash equivalents  $13,044   $9,202 
           
  Accounts receivable   -    18,800 
           
  Advances receivable   85,000    - 
           
Total Current Assets   98,044    28,002 
           
Computer Software, net   27,293    30,781 
           
Total Assets  $125,337   $58,783 
           
LIABILITIES AND STOCKHOLDERS' DEFICIT          
           
Current Liabilities          
           
  Accounts payable  $52,081   $17,226 
           
  Accrued expense   5,832    22,525 
           
  Deferred revenue - related party   50,758    57,341 
           
  Deferred revenue - third party   43,527    48,694 
           
  Payable to affiliate   98,837    98,837 
           
  Note payable   40,000    40,000 
           
  Advance from director   14,500    500 
           
Total Current Liabilities   305,535    285,123 
           
Total Liabilities   305,535    285,123 
           
Commitments and Contingencies (Note 9)          
           
Stockholders' Deficit          

Common Stock, $0.001 par value, 500,000,000 shares

authorized, 161,859,500 shares and 161,555,000 shares

issued and outstanding at December 31, 2018 and

September 30, 2018, respectively

   161,860    161,555 
           
Additional Paid in Capital   2,075,478    857,783 
           
Stock subscriptions receivable   (1,218,000)   - 
           
Accumulated deficit   (1,199,536)   (1,245,678)
           
Total Stockholders' Deficit   (180,198)   (226,340)
           
Total Liabilities and Stockholders' Deficit  $125,337   $58,783 

 

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

 

  1 

 

 

NATURAL HEALTH FARM HOLDINGS INC.

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

   For the Three Months Ended December 31, 
   2018   2017 
   (Unaudited)   (Unaudited) 
Revenues - related parties  $6,583   $1,999 
           
Revenues - non-related parties   115,167    - 
           
Total Revenues   121,750    1,999 
           
Cost of Goods Sold   28,488    607 
           
Gross Profit   93,262    1,392 
           
Operating Expenses:          
           
  Consulting fees   26,627    8,003 
           
  Legal and filing fees   12,995    2,905 
           
  Professional fees   -    7,562 
           
  Other general and administrative   6,691    - 
           
Total Operating Expenses   46,313    18,470 
           
Income (Loss) from Operations   46,949    (17,078)
           
Other Income (Expense)          
           
  Interest expense   (807)   - 
           
Total Other Income (expense)   (807)   - 
           
Income (Loss) Before Provision For Income Tax   46,142    (17,078)
           
Provision for Income Tax   -    - 
           
Net Income (Loss)  $46,142   $(17,078)
           
Basic and Dilutive Net Income (Loss) Per Share  $0.00   $(0.00)
           

Weighted Average Number of Shares Outstanding - Basic and

Diluted

   161,647,674    150,150,000 

 

 

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

 

  2 

 

 

NATURAL HEALTH FARM HOLDINGS INC.

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

    

   For the Three Months Ended December 31, 
   2018   2017 
   (Unaudited)   (Unaudited) 
Cash Flows from Operating Activities:          
Net Profit (Loss)  $46,142   $(17,078)
Adjustment to reconcile net profit (loss) loss to net cash provided
by (used in) operating activities		          
Amortization of computer software costs   3,488    607 
Changes in operating assets and liabilities          
Decrease in accounts receivable   18,800    - 
Increase in accounts payable   34,855    7,462 
Increase in accrued expenses   (16,693)   1,930 
           
Increase in deferred revenue - related parties   (6,583)   77,001 
Increase in deferred revenue - third party   (5,167)   - 
Net Cash Flows Provided by Operating Activities   74,842    69,922 
Cash Flows from Investing Activities          
Purchase of computer software   -    (21,850)
Net Cash Flows Used in Investing Activities        (21,850)
Cash Flows from Financing Activities          
Cash proceeds from affiliate   -    20,770 
Cash advance from director   14,000    500 
Cash advanced to a shareholder as a loan   (85,000)   - 
Net Cash Flows (Used in) Provided by Financing Activities   (71,000)   21,270 
           
Net Increase in Cash and Cash Equivalents   3,842    69,342 
Cash and Cash Equivalents, Beginning of the Period   9,202    - 
Cash and Cash Equivalents, End of the Period  $13,044   $69,342 
Supplemental Disclosures of Cash Flow Information:          
  Cash paid for Income Taxes  $-   $- 
  Cash paid for Interest  $-   $- 
Supplemental disclosures of non-cash investing and financing
activities:		          
  Issuance of common stock for acquisitions  $1,218,000   $- 

 

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

 

  3 

 

 

NATURAL HEALTH FARM HOLDINGS INC.

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.

 

  4 

 

 

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.

 

  5 

 

 

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.

 

  6 

 

 

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 

 

  7 

 

 

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 

  

  8 

 

 

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.

 

  9 

 

 

Item 2.Management’s Discussion and Analysis or Plan of Operation

 

This Quarterly Report Form 10-Q contains forward-looking statements. Our actual results could differ materially from those set forth as a result of general economic conditions and changes in the assumptions used in making such forward-looking statements. The following discussion and analysis of our financial condition and results of operations should be read together with the unaudited condensed financial statements and accompanying notes and the other financial information appearing elsewhere in this report. The analysis set forth below is provided pursuant to applicable Securities and Exchange Commission regulations and is not intended to serve as a basis for projections of future events.

 

Natural Health Farm Holdings Inc., incorporated in the State of Nevada on July 10, 2014 (inception date), has developed 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. We are currently providing nutritional consulting services by offering a web based naturopathic learning management system that allows distributors, chiropractors and consumers to educate users with the health products related to various illnesses, and how our educational platform could be used to improve their general wellbeing.

 

From inception, through the date of this quarterly report, we reported revenues and incurred expenses and accumulated operating losses, as part of our development activities. We recorded a net profit of $46,142 for the three months ended December 31, 2018, working capital deficiency of $207,491, and an accumulated deficit of $1,199,536 at December 31, 2018.

   

We anticipate that we will need substantial working capital over the next 12 months to continue as a going concern and to expand our operations to distribute, sell and market naturopathic learning management system together with online learning courses. Our independent auditors have expressed substantial doubt as to the ability of the Company to continue as a going concern. Unless we are able to generate sufficient cash flows from operations and/or obtain additional financing, there is a substantial doubt as to the ability of the Company to continue as a going concern. We intend to make an equity offering of our common stock for the acquisition and operation expenses. If we cannot raise the required cash, we will issue additional shares of our common stock in lieu of cash.

 

Results of Operations

 

Our results of operations for the three months ended December 31, 2018 and 2017 included the operations of the Company. We reported a net profit of $46,142 and a loss of $17,078 applicable to the Company’s common stockholders for the three months ended December 31, 2018 and 2017, respectively.

 

Revenue and Cost of Goods Sold

 

For the three months ended December 31, 2018 and 2017, we recorded total revenues of $121,750 ($6,583 from related parties and $115,167 from third parties) and $1,999 from related party, respectively. Revenues recorded were from licensing fees and other software related revenues relating to web-based naturopathic learning management system and training provided to four customers. Cost of goods sold recorded represents the amortization cost of the web-based software purchased from a third party and cost incurred in developing software for licensing to the customers for the three months ended December 31, 2018 and 2017, respectively. Cost of goods sold recorded was $28,488 and $607, for the three months ended December 31, 2018 and 2017, respectively.

 

Operating Expenses

 

Operating expenses for the three months ended December 31, 2018 and 2017 were $46,313 and $18,470, respectively. Operating expenses for the three months ended December 31, 2018 consisted of the Company recording consulting fees of $26,627 payable to consultants and business advisors for services, $12,995 in legal and filing fees, $4,750 in audit fees and $1,941 in other general and administrative expenses. Operating expenses for the three months ended December 31, 2017 totaled $18,470, consisting of $15,565 in fees paid to professional consultants and business advisors for services and $2,905 in legal, filing fees and audit fees. 

 

Liquidity and Capital Resources

 

Cash and cash equivalents were $13,044 at December 31, 2018 as compared to $9,202 at September 30, 2018. As reported in the accompanying financial statements, we recorded a net profit of $46,142 for the three months ended December 31, 2018. Our working capital deficit and accumulated deficit at December 31, 2018 was $207,491 and $1,199,536, respectively. These factors and our ability to raise additional capital to accomplish our objectives, raises doubt about our ability to continue as a going concern. We expect our expenses will continue to increase during the foreseeable future as a result of increased operational expenses and the development of our current business operations. We anticipate generating only minimal revenues over the next twelve months. 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 capital or that our estimates of our capital requirements will prove to be accurate.

 

  10 

 

 

 

We presently do not have any significant credit available, bank financing or other external sources of liquidity. Due to our accumulated operating losses, our operations have not been a source of liquidity. We will need to acquire other profitable entities or obtain additional capital in order to expand operations and become profitable. In order to obtain capital, we may need to sell additional shares of our common stock or borrow funds from private lenders. There can be no assurance that we will be successful in obtaining additional funding.

 

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities may result in dilution to existing stockholders. If additional funds are raised through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of common stock and the terms of such debt could impose restrictions on our operations. Regardless of whether our cash assets prove to be inadequate to meet our operational needs, we may seek to compensate providers of services by issuance of stock in lieu of cash, which may also result in dilution to existing shareholders. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing.

 

No assurance can be given that sources of financing will be available to us and/or that demand for our equity/debt instruments will be sufficient to meet our capital needs, or that financing will be available on terms favorable to us. If funding is insufficient at any time in the future, we may not be able to take advantage of business opportunities or respond to competitive pressures or may be required to reduce the scope of our planned service development and marketing efforts, any of which could have a negative impact on our business and operating results. 

 

Operating Activities

 

Net cash flows provided by operating activities for the three months ended December 31, 2018 was $74,842 which resulted primarily from our net profit of $46,142, amortization of computer software costs of $3,488, and a net change in operating assets of $25,212. Net cash flows provided by operating activities for the three months ended December 31, 2017 was $69,922 resulted due to the net loss of $17,078, amortization of computer software costs of $607, and a net change in operating liabilities of $86,393.

  

Investing Activities:

 

Net cash flows used in investing activities for the three months ended December 31, 2018 was primarily due to the purchase of web-based computer software of $25,000. Net cash flows used in investing activities for the three months ended December 31, 2017 was due to purchase of computer software of $21,850.

 

Financing Activities

 

Net cash flows used in financing activities for the three months ended December 31, 2018 was $71,000, consisting of $14,000 in cash proceeds received from a director for our working capital needs, $85,000 cash advanced to a stockholder as a short-term loan. Net cash flows provided by financing activities for the three months ended December 31, 2017 was $21,270 primarily due to $20,770 in cash proceeds received from an affiliate for our working capital needs, and a cash advance of $500 received from a director to open our bank account.

 

As a result of the above activities, we experienced a net increase in cash of $3,842 for the three months ended December 31, 2018, and a net increase of $69,342 for the three months ended December 31, 2017, respectively. We expect that working capital will continue to be funded through a combination of our existing sales and further issuance of securities or obtaining financing. Our ability to continue as a going concern is still dependent on our success in obtaining additional financing from investors or from sale of our common shares.

 

Critical Accounting Policies and Significant Judgments and Estimates

 

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements which we have prepared in accordance with U.S. generally accepted accounting principles. In preparing our financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We have identified the following accounting policies that we believe require application of management’s most subjective judgments, often requiring the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Our actual results could differ from these estimates and such differences could be material.

 

While our significant accounting policies are described in more details in Note 2 of our annual financial statements included in our Annual Report filed with the SEC on December 28, 2018, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our financial statements.

 

  11 

 

 

JOBS Act Accounting Election

 

We are an “emerging growth company,” as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards, and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

 

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.

 

Off-Balance Sheet Arrangements

 

We have not engaged in any off-balance sheet arrangements as defined in Item 303(c) of the SEC’s Regulation S-B. We did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special-purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

 

Recent Accounting Pronouncements

 

We have implemented all new accounting pronouncements that are in effect and that may impact our financial statements and do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position or results of operations.

 

Item 3.Quantitative and Qualitative Disclosures About Market Risks.

 

Not Applicable.

 

Item 4.Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

We carried out an evaluation of the effectiveness of disclosure controls and procedures as of the end of the period covered by this report under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures as of December 31, 2018 were not effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The term “disclosure controls and procedures,” as defined under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures. Notwithstanding the identified material weaknesses, management believes the financial statements included in this quarterly report on Form 10-Q fairly represent in all material respects our financial condition, results of operations and cash flows at and for the periods presented in accordance with U.S. GAAP.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the three months ended December 31, 2018, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

  12 

 

 

PART II.

 

Item 1.Legal Proceedings.

 

We are not a party to any legal proceedings.

 

Item 1A.Risk Factors.

 

Not Applicable

 

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.

 

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. On December 28, 2018, the parties mutually agreed to extend the closing date 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.

 

All of the securities set forth above were issued pursuant to exemptions from registration under Section 4(2) and/or Reg. S of the Securities Act of 1933, as amended, as transactions by an issuer not involving any public offering. No general advertising or solicitation was used. All issued securities were affixed with appropriate legends restricting sales and transfers.

 

Item 3.Defaults Upon Senior Securities.

 

None

 

Item 4.Mine Safety Disclosures.

 

None

 

Item 5.Other Information.

 

None

 

Item 6.Exhibits.

 

(a) Exhibits.

 

Exhibit   Item
     
31.1   Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
     
31.2   Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
     
32.1   Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

  Natural Health Farm Holdings Inc.
   
Date: February 14, 2019 /s/ Tee Chuen Meng
 

Tee Chuen Meng, President

(Principal Executive Officer and Principal Accounting Officer)

 

  13 

 

 

EXHIBIT INDEX

 

Exhibit   Item
     
31.1   Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
     
31.2   Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
     
32.1   Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

14