Exhibit 99.1
Hangzhou Longjing Qiao Fu Vacation Hotel Co., Ltd.
FINANCIAL STATEMENTS
July 31, 2018 AND 2017
Hangzhou Longjing Qiao Fu Vacation Hotel Co., Ltd.
Contents
July 31, 2018 and 2017
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| | | |
| | Pages |
| Independent Auditor’s Report | 1 | |
| Financial Statements: | |
| Balance Sheets | 2 | |
| Statements of Operations | 3 | |
| Statements of Changes in Stockholders' Deficit | 4 | |
| Statements of Cash Flows | 5 | |
| Notes to Financial Statements | 6 - 11 | |
 | 3230 Fallow Field Drive Diamond Bar, CA 91765 Tel: +1 (909) 839-0188 Fax: +1 (909) 839-1128 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and shareholders of
Hangzhou Longjing Qiao Fu Vacation Hotel Co., Ltd.
Opinions on the Financial Statements
We have audited the accompanying balance sheets of Hangzhou Longjing Qiao Fu Vacation Hotel Co., Ltd. (the “Company”) as of July 31, 2018 and 2017, and the related statements of operations and comprehensive loss, changes in stockholders’ deficit and cash flows for the years in the periods ended July 31, 2018 and 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of July 31, 2018 and 2017, and the results of its operations and its cash flows for the years in the periods ended July 31, 2018 and 2017, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these 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 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 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 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 financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Simon & Edward, LLC
Los Angeles, California
October 29, 2019
We have served as the Company's auditor since 2019.
Hangzhou Longjing Qiao Fu Vacation Hotel Co., Ltd.
Balance Sheets
July 31, 2018 and 2017
| | | 2018 | | 2017 |
| ASSETS | | | | |
| Current Assets | | | | | | | | |
| Cash | | $ | 41,639 | | | $ | 23,291 | |
| Accounts and Other receivables | | | 6,120 | | | | 8,574 | |
| Related party receivables | | | 27,713 | | | | 44,322 | |
| Inventory | | | — | | | | 5,508 | |
| Total Current Assets | | | 75,472 | | | | 81,695 | |
| Noncurrent Assets | | | | | | | | |
| Property, plant and equipment - net | | | 257,819 | | | | 280,676 | |
| Other assets | | | 705,664 | | | | 739,425 | |
| Total Noncurrent Assets | | | 963,483 | | | | 1,020,101 | |
| TOTAL ASSETS | | $ | 1,038,955 | | | $ | 1,101,796 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | |
| Current Liabilities | | | | | | | | |
| Accounts payable | | $ | 4,095 | | | $ | 10,481 | |
| Related party payables | | | 2,733,579 | | | | 2,761,847 | |
| Other current payable | | | 26,097 | | | | 25,562 | |
| Total Current Liabilities | | | 2,763,771 | | | | 2,797,890 | |
| Other liabilities | | | 333,618 | | | | 332,665 | |
| TOTAL LIABILITIES | | | 3,097,389 | | | | 3,130,555 | |
| Stockholders' Equity | | | | | | | | |
| Capital contribution | | | 120,192 | | | | 120,192 | |
| Accumulated deficit | | | (2,263,055 | ) | | | (2,200,359 | ) |
| Accumulated other comprehensive Income | | | 84,429 | | | | 51,408 | |
| Total Stockholders' Deficit | | | (2,058,434 | ) | | | (2,028,759 | ) |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | | $ | 1,038,955 | | | $ | 1,101,796 | |
The accompanying notes are an integral part of these statements.
Hangzhou Longjing Qiao Fu Vacation Hotel Co., Ltd.
Statements of Operations
For the Years Ended July 31, 2018 and 2017
| | | 2018 | | 2017 |
| Revenues | | $ | 197,064 | | | $ | 121,859 | |
| Operating expenses | | | | | | | | |
| Cost of food & beverage | | | 52,387 | | | | 5,498 | |
| Depreciation and amortization | | | 45,206 | | | | 62,517 | |
| General and administrative | | | 120,170 | | | | 166,176 | |
| Selling expenses | | | 14,267 | | | | 11,191 | |
| Total Operating Expenses | | | 232,030 | | | | 245,382 | |
| Operating Loss | | | (34,966 | ) | | | (123,523 | ) |
| Other Income (Expense) | | | | | | | | |
| Interest (expense), net | | | (26,884 | ) | | | (24,949 | ) |
| Other (expense) | | | (846 | ) | | | (5 | ) |
| Other (Expense), net | | | (27,730 | ) | | | (24,954 | ) |
| Loss before income taxes | | | (62,696 | ) | | | (148,477 | ) |
| Income Tax Expense | | | — | | | | — | |
| Net Loss | | | (62,696 | ) | | | (148,477 | ) |
| Other Comprehensive income, net of income tax | | | | | | | | |
| Foreign currency translation adjustments | | | 33,021 | | | | 20,938 | |
| Total other comprehensive income | | | 33,021 | | | | 20,938 | |
| Less:Total other comprehensive loss attributable to noncontrolling interest | | | — | | | | — | |
| Total Other Comprehensive Loss Attributable to HZLJ | | | 33,021 | | | | 20,938 | |
| Total Comprehensive loss | | $ | (29,675 | ) | | $ | (127,539 | ) |
The accompanying notes are an integral part of these statements.
Hangzhou Longjing Qiao Fu Vacation Hotel Co., Ltd.
Statements of Changes in Stockholders' Deficit
For the Years Ended July 31, 2018 and 2017
| | | | | | | Accumulated | | Total |
| | | Capital | | Accumulated | | Other Comprehensive | | Stockholders' Equity |
| | | contribution | | (Deficit) | | Income | | (Deficit) |
| | | | | | | | | |
| Balance, July 31 , 2016 | | $ | 120,192 | | | $ | (2,051,882 | ) | | $ | 30,470 | | | $ | (1,901,220 | ) |
| Net (loss) | | | — | | | | (148,477 | ) | | | — | | | | (148,477 | ) |
| Foreign currency translation adjustment | | | — | | | | — | | | | 20,938 | | | | 20,938 | |
| Balance, July 31 , 2017 | | $ | 120,192 | | | $ | (2,200,359 | ) | | $ | 51,408 | | | $ | (2,028,759 | ) |
| Net (loss) | | | — | | | | (62,696 | ) | | | — | | | | (62,696 | ) |
| Foreign currency translation adjustment | | | — | | | | — | | | | 33,021 | | | | 33,021 | |
| Balance, July 31 , 2018 | | $ | 120,192 | | | $ | (2,263,055 | ) | | $ | 84,429 | | | $ | (2,058,434 | ) |
The accompanying notes are an integral part of these statements.
Hangzhou Longjing Qiao Fu Vacation Hotel Co., Ltd.
Statements of Cash Flows
For the Years Ended July 31, 2018 and 2017
| | | 2018 | | 2017 |
| Cash flows from operating activities: | | | | | | | | |
| Net (loss) including noncontrolling interests | | $ | (62,696 | ) | | $ | (148,477 | ) |
| Adjustments to reconcile net (loss) including noncontrolling interests to net cash used in operating activities: | | | | | | | | |
| Depreciation and amortization | | | 45,206 | | | | 62,517 | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Accounts and Other receivables | | | 2,441 | | | | (3,589 | ) |
| Related party receivable | | | 16,735 | | | | (8,698 | ) |
| Inventory | | | 5,693 | | | | 6,265 | |
| Other assets | | | 842 | | | | 8,668 | |
| Related party payable | | | 13,314 | | | | 41,930 | |
| Other current and noncurrent liabilities | | | (5,579 | ) | | | (29,121 | ) |
| Other liabilities | | | 26,172 | | | | 24,505 | |
| Net cash provided by (used in) operating activities | | | 42,128 | | | | (46,000 | ) |
| Cash flows from investing activities: | | | | | | | | |
| Purchases of property and equipment | | | (2,522 | ) | | | — | |
| Net cash (used in) investing activities | | | (2,522 | ) | | | — | |
| Cash flows from financing activities: | | | | | | | | |
| Principal payments on finance lease | | | (19,996 | ) | | | (18,329 | ) |
| Net cash (used in) financing activities | | | (19,996 | ) | | | (18,329 | ) |
| | | | | | | | | |
| Effect of exchange rate changes on cash | | | (1,262 | ) | | | (2,054 | ) |
| Net increase in cash and equivalents | | | 18,348 | | | | (66,383 | ) |
| Cash and cash equivalents at beginning of period | | | 23,291 | | | | 89,674 | |
| Cash and cash equivalents at end of period | | $ | 41,639 | | | $ | 23,291 | |
| | | | | | | | | |
| Supplemental Cash Flow Information | | | | | | | | |
| Interest paid | | $ | — | | | $ | — | |
| Income taxes paid | | $ | — | | | $ | — | |
The accompanying notes are an integral part of these statements.
Hangzhou Longjing Qiao Fu Vacation Hotel Co., Ltd.
Notes to Financial Statements
July 31, 2018 and 2017
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Nature of Operations
Hangzhou Longjing Qiao Fu Vacation Hotel Co., Ltd (“HZLJ” or the “Company”) was incorporated on September 5, 1997. HZLJ operates a 35-room hotel with an on-site restaurant in the resort area of Longjing Village, Hangzhou, China.
Basis of Presentation
HZLJ prepares its financial statements in accordance with generally accepted accounting standards and principles (U.S. GAAP) established by the Financial Accounting Standards Board (FASB). References to U.S. GAAP in these notes are to the FASB Accounting Standards Codification (ASC).
2. SIGNIFICANT 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 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 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.
Cash and Cash Equivalents
The majority of cash is maintained with a major financial institution in China. Generally, these deposits may be redeemed on demand and, therefore, bear minimal risk. The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Revenue Recognition
HZLJ generates revenue primarily from the room rentals, sale of food and beverage and other miscellaneous operating income. HZLJ recognizes service revenue when the following conditions are met: 1) services are provided; 2) evidence of an arrangement exists; 3) fees are fixed or determinable; and 4) collection is reasonably assured. Billings to customers for which services are not rendered are considered deferred revenue.
Accounts and Other Receivables
Accounts receivable are recorded at invoiced amounts. The Company records an allowance for doubtful accounts based on management's estimate of expected bad debts. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Additions to the allowance are charged to general and administrative expenses.
Property and equipment, net
Property and equipment, net, are stated at cost. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the assets. The estimated useful lives of property and equipment are as follows:
| | | Years |
| Leasehold improvements | | Lesser of lease term or estimated useful life |
| ROU assets | | Lease term |
| Furniture and fixtures | | 3-5 |
| Office equipment and vehicles | | 3-5 |
| Computer software | | 3-5 |
Expenditures for repairs and maintenance are charged to expense as incurred.
Other assets
Other assets consist of the deferred cost of obtaining the finance lease of the land use rights and hotel building. The deferred cost is amortized over the lease term, 41 years commenced on October 2010. See footnote 6 for Lease. The amortization is computed using the straight-line method over the lease term. Amortization expense for the years ended July 31, 2018 and 2017, were $ 23,072and $ 21,995, respectively.
Advertising
Advertising costs are expensed as incurred.
Fair Value Measurements
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, 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.
Income Taxes and Tax Status
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.
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.
Recent Accounting Pronouncements
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results operations.
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606),” including subsequently issued updates. This series of comprehensive guidance has replaced all existing revenue recognition guidance and became effective for us beginning August 31, 2018. There is a five-step approach outlined in the standard. Entities are permitted to apply the new standard under the full retrospective method, subject to certain practical expedients, or the modified retrospective method that requires the application of the guidance only to contracts that are uncompleted on the date of initial application. The Company does not believe the adoption of this ASU would have a material effect on the Company’s financial statements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) as updated. This new standard introduces a new lease model that requires the recognition of lease assets and lease liabilities on the balance sheet and the disclosure of key information about leasing arrangements. While this new standard retains most of the principles of the existing lessor model under U.S. GAAP, it aligns many of those principles with ASC 606: Revenue from Contracts with Customers. The new guidance will be effective beginning after December 31, 2019 and early adoption will be permitted for all entities. The Company determined to early adopt this guidance on its financial statements after July 31, 2016.
In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this Update affect any entity that is required to apply the provisions of Topic 220, Income Statement – Reporting Comprehensive Income, and has items of other comprehensive income for which the related tax effects are presented in other comprehensive income as required by GAAP. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted, including adoption in any interim period, for public business entities for reporting periods for which financial statements have not yet been issued. The amendments in this Update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company does not believe the adoption of this ASU would have a material effect on the Company’s financial statements.
In June 2016, the FASB issued ASU No. 2016-13, (Topic 326), Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments which amends the current accounting guidance and requires the use of the new forward-looking “expected loss” model, rather than the “incurred loss” model, which requires all expected losses to be determined based on historical experience, current conditions and reasonable and supportable forecasts. This guidance amends the accounting for credit losses for most financial assets and certain other instruments including trade and other receivables, held-to-maturity debt securities, loans and other instruments. ASU 2016-13 is effective for all other entities for annual periods beginning after December 15, 2021, and interim periods within those annual periods. Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods therein. The Company is evaluating the impact of the adoption of ASU 2016-13 on its financial position and results of operations.
3. RELATED PARTY TRANSACTIONS
Relater party receivables represents the operating advances made to the affiliates which are under common control by the same management. These advances do not bear interest and are considered due on demand.
| | | Balance as of July 31, |
| | | 2018 | | 2017 |
| Qiao Garden Happy Senior Internet Hi-tech Ltd. | | | 19,487 | | | | 35,973 | |
| Shanghai Qiao Garden International Travel Agency | | | 3,266 | | | | 3,315 | |
| Hainan Qiao Garden Home Hotel Apartment Management Ltd. | | | 3,685 | | | | 3,740 | |
| Qiao Garden Happy Senior Investment Ltd. | | | 1,275 | | | | 1,294 | |
| Total advances to affiliates | | | 27,713 | | | | 44,322 | |
Relater party payable due to affiliates, represented the unpaid portion of operating advances made to the Company 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 were from Shanghai Qiao Garden Property Management Group, which owns 60% of the Company.
| | | Balance as of July 31, |
| | | 2018 | | 2017 |
| Payable to various | | | 51,147 | | | | 56,659 | |
| Shanghai Qiao Garden Property Management Group | | | 2,104,351 | | | | 2,136,027 | |
| Shanghai DuBian Business International Ltd. | | | 8,797 | | | | 8,930 | |
| Shanghai DuBian Assets Management Ltd. | | | 569,284 | | | | 398,105 | |
| Shanghai Qiao Garden Home Hotel Management Ltd. | | | — | | | | 162,126 | |
| | | | 2,733,579 | | | | 2,761,847 | |
During the years ended July 31, 2018 and 2017, room services rendered to related parties were $4,900 and $4,339, respectively.
4. PROPERTY AND EQUIPMENT, NET
Property and equipment, net consists of the following at July 31, 2018 and 2017:
| | | Balance as of July 31, |
| | | 2018 | | 2017 |
| Leasehold improvements | | $ | 23,585 | | | $ | 23,940 | |
| ROU assets | | | 275,417 | | | | 279,563 | |
| Furniture and fixtures | | | 234,735 | | | | 236,751 | |
| Office equipment and vehicles | | | 109,529 | | | | 110,256 | |
| | | | 643,266 | | | | 650,510 | |
| Less: accumulated depreciation and amortization | | | (385,447 | ) | | | (369,834 | ) |
| | | $ | 257,819 | | | $ | 280,676 | |
Depreciation expense for the years ended July 31, 2018 and 2017, were $22,134 and $40,522, respectively.
5. Other Liabilities
Other liabilities mainly consist of the lease liabilities. See footnote 6 for Lease and payment term.
6. LEASE
On October 1, 2010, the Company’s parent company - Shanghai Qiao Garden Property Management Group entered a lease agreement on the land use rights and the hotel building located at Longjing Village, Hangzhou, Zhejiang province for a term of 41 years till September 30, 2051. 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. The lease is classified as finance leases based on criteria in Accounting Standards Codification (“ASC”) 842 upon early adoption. The finance lease is included in Property and Equipment and Other Liabilities in the 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. 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.
The related cost to obtain this finance lease in the amount of $879,800 (RMB 6 million) was recognized as Other Assets and subject for amortization over the lease term.
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. As of July 31, 2018 and 2017, finance lease right-of-use assets and lease liabilities were as follows:
| | | July 31, |
| �� | | 2018 | | 2017 |
| Finance lease right-of-use assets, net | | $ | 222,796 | | | $ | 232,969 | |
| Finance lease liabilities – current | | | (19,794 | ) | | | (19,347 | ) |
| Finance lease liabilities – noncurrent | | | (313,824 | ) | | | (313,318 | ) |
| | | | | | | | | |
The components of the finance lease cost recorded for the years ended July 31, 2018 and 2017:
| | | July 31, |
| Finance leases: | | 2018 | | 2017 |
| Amortization of ROU assets | | $ | 7,047 | | | $ | 6,718 | |
| Interest on finance lease liabilities | | | 26,172 | | | | 24,505 | |
| Finance lease cost | | $ | 33,219 | | | $ | 31,223 | |
The following table reconciles the undiscounted future lease payments to the finance leases recorded in the balance sheet at the year ended July 31, 2018:
| | | July 31, 2018 |
| | 2019 | | | $ | 19,794 | |
| | 2020 | | | | 20,527 | |
| | 2021 | | | | 21,260 | |
| | 2022 | | | | 21,993 | |
| | 2023 | | | | 22,726 | |
| | Thereafter | | | | 977,947 | |
| | Total lease payments | | | | 1,084,247 | |
| | Less interest | | | | (750,629 | ) |
| | Total (included in Other Liabilities) | | | $ | 333,618 | |
The future amortization schedule for the other assets related to the cost of obtaining the lease as of July 31, 2018 is as following:
| | 2019 | | | $ | 21,993 | |
| | 2020 | | | | 21,993 | |
| | 2021 | | | | 21,993 | |
| | 2022 | | | | 21,993 | |
| | 2023 and thereafter | | | | 613,966 | |
| | Total | | | $ | 701,938 | |
7. CONTINUING OPERATIONS
The Company incurred net losses from operations in the years since inception, and has a total stockholders’ deficit of approximately $2.2 million as of July 31, 2018. These deficits were funded primarily by the operating advances from its parent company, Shanghai Qiao Garden Property Management Group (Qiao Garden Group). Qiao Garden Group owns 60 percent of HZLJ and will continue to provide operating advances to HZLJ until 2019, when HZLJ projects to achieve cash flow breakeven.
If ongoing revenues are below expectations, management intends to take the necessary actions to reduce operating expenses. Management believes that HZLJ’s existing operating cash balance coupled with its access to operating advances from Qiao Garden Group will be sufficient to meet HZLJ’s working capital and anticipated capital expenditures, which alleviates doubt regarding its ability to continue as a going concern.
8. SUBSEQUENT EVENTS
Subsequent to July 31, 2018, HZLJ entered into an Agreement (the Purchase Agreement) with Hangzhou Hartford Comprehensive Health Management, Ltd. (“HZHF”), a wholly-owned subsidiary of Hartford Great Health Corp. (“HFUS”) (the Buyer). Pursuant to the Purchase Agreement, the Buyer purchased 60% ownership of HZLJ and assumed control over the hotel’s operation commencing on April 1, 2019. Total consideration was $105,928 for the assets acquired and certain liabilities assumed.
