HFUS 10-K & 10-Q changes, risk factors and insider trading

TheAfter Company’syears subsidiary,of HFSH was working with herbal manufacturers to develop new herbal health supplement products for wholesale distributionexperience in China.education Dueand tohospitality, deflationthe Company shifted its focus in China,January demand of herbal health supplement was lower than expected. Therefore, HFSH decided to deviate from its prior business focus and2024 to engage in social media advertising endeavors.advertising. On January 10, 2024, HFSH changed its legal name from Shanghai Hartford Health Management, Ltd. to Hartford ZY Culture Media (Shanghai) Co., Ltd., hereon refer to as “HFZY”. On June 18, 2024, the Company successfully completed the acquisition of ShangXing HuoMao Network Technology Ltd. (SXHM). HFZY and SXHM started to deliver media and advertisement services. On May 12, 2025, HFZY established a subsidiary, Nanjing HaoYiPeng Information Technology Ltd (“NJHY”), based in Nanjing, China. NJHY aims to expand and strengthen the Company’s social media advertising business. The pent-up demand from social media influencers’ marketing needs on social media apps lead the Company to seize the opportunity in providing advertisement services. theThe Company begins to engage in social media advertising business on mainstream social media platforms such as Tik Tok, Toutiao, Kwai, RED, WeChat, Baidu and more. As an advertising partner of China’s major social media platforms, it aims to provide customers with vertical integration services from early-stage advertising video creativity, photograph shooting, editing, to advertising operation and management on social media apps. The Company will also gradually launch overseas TikTok advertising campaign, providing social media advertising solutions for domestic Chinese customers to engage in international markets in the United States.

SinceDuring January 2024, the Company has entered advertising service contracts with thirty customers and received approximately RMB 98.4 million (USD 13.6 million) as advanced payment from these customers. the Company also entered twenty supplier contracts for advertising placement and prepaid RMB 90.8 million (USD 12.6 million). During the year ended July 31, 2024,2025, the Company recognized USDrevenue 1.3of $2.0 million net revenue from the advertisement placement services. The Company provides service to place advertisements. The advertisements are published on the targeted media platforms as determined by the customers. Revenue is recognized at a point in time when the placement of advertisements is completed. As disclosed in Note 1 under category “Revenue Recognition”, the Company is not the principal in executing these transactions. The Company reports the amount received from the customers and the amounts paid to the media platforms or upside agent related to these transactions on a net basis. The Company expects the number of customers to grow and the advertising service revenue will significantly increase in the next few months due to the vast demand in social media advertising services.

Based on market research and discussions between the Board and third-party suppliers and experts, the Company has further developed a plan of mini-drama business. The Company is strategically positioned to capture considerable market interest and enhance revenue streams from our innovative mini-drama business. WhileOnly initialpreliminary stepsactivities towardrelating to this ambitious goalobjective have been initiated,undertaken and, ittherefore, there is importantno to noteassurance that the commencement and future success of the business plan will be successful. In July 2025, the Company completed its first mini-drama venturetransaction, aregenerating not$36,000 yetin guaranteed.revenue.

Revenue: During the year ended July 31, 2024,2025, we reported net revenues of $1,399,945,$2,035,211, inan contrastincrease of about 45% compared to nothe revenue in the corresponding period of 2023.2024. Of thethis totaltotal, revenueover recognized in 2024, $1,337,502 net revenue98.2% was mainly generated throughfrom advertising placement services, while $62,443 was derived from the design, creation, and placement of video advertisements for Shanghai DuBian Assets Management Ltd. (“SH Dubian”), which isgrew managedby about 43% year-over-year, driven by our majorexpansion shareholder’sin relatives.the Asadvertising bothagency earlybusiness. childhoodThe educationremaining services1.8%, and hospitalityor services have been sold on August 1, 2022, there$36,000, was noattributable revenueto recognizedour first formini-drama transaction, which involved acquiring multiple mini-dramas overseas and selling them to a customer in the yearUnited ended July 31, 2023.States.

Operating Cost and Expenses: Cost of revenue increased to $55,505$112,618 for the year ended July 31, 2024,2025, in contrastcompared to no$55,505 costduring of revenue in the corresponding period of 2023.2024, The increase of Cost of revenue was mainlyprimarily due to thecertain increase of the revenue derived from theoutsourced services provided related to SHadvertising Dubian.placement. During the year ended July 31, 2024, the2025, selling, general and administrative expenses increased to $247,920$697,416 compared to $123,650$247,920 during the comparable period of 2023.2024. TheThis increase was primarily due to theinvestments increasein ofscaling professionalour expensesoperations, asincluding aexpanding resultour ofinfrastructure, theand expansionincreased marketing spend to support of business operation.growth and revenue expansion.

Income tax expense: The income tax recognized for the fiscal year ended July 31, 2025 and 2024, resulted from the income tax from the operating operating income in China and offset by the deferred tax effects of temporary differences as of July 31, 2024,differences, see Note 1011—Income Taxes to our Consolidated Financial Statements. The deferred tax assets are expected to reduce future income tax liabilities. The income tax for the fiscal year ended July 31, 2023 was the amount paid for state franchise income tax in California.

Net Income (Loss): We recorded a net income of $1,099,110 or 0.04 per share for the year ended July 31, 2025, compared to a net income of $1,092,874 or $0.01$0.04 per share for the year ended July 31, 2024, compared to a net income of $396,903 or $0.00 per share for the year ended July 31, 2023, due to the factors discussed above.

As of July 31, 2024,2025, we had a working capital deficit of $3,565,965$105,739 comprised of current assets of $3,472,709$6,508,395 and current liabilities of $6,614,134. $7,038,674. This represents a decrease of $924,471$3,460,226 in the working capital deficit from the July 31, 20232024 amount of $4,490,436.$3,565,965. The improvement was primarily due to the forgiveness of $2.5 million in related party payables and the positive operating results for fiscal year end of 2025. We had an accumulated deficit of $5,910,843$4,811,733 compared to $7,003,717$5,910,843 at the previous year end. To date, we have funded our operations through through short-term debt and equity financing.

As of July 31, 2024,2025, the Company has issued a total of 100,108,00025,027,004 shares (reflecting the 1 for 4 Reverse Stock Split) of common stock. On December 11, 2018, 96,090,00024,022,500 shares of common stock were issued at the price of $0.02$0.08 per share to raise an additional $1,921,800 in capital. On November 24, 2020, the Company issued additional 1,000,000250,000 shares of common stock to a significant shareholder of the Company at $0.02$0.08 per share.

We are currently engaging consultants to evaluate and facilitatein the potentialprocess of uplisting of the Company’s stock from the OTC market to the Nasdaq exchange. IfAssuming all conditions alignare favorably,met in theour Companyfavor, intendswe plan to secureraise financingcapital through either debt or equity.equity financing. The funds raisedproceeds from this financing will be allocatedused to cover the expensescosts associatedrelated withto the uplisting process.procedure.

During the year ended July 31, 2023,2025, we recorded net income of $396,903,$1,099,110, adjustednoncash byadjustments subsidiaryfor a deferred tax asset of $195,588 and a disposal gain of $539,230,$21,362, relatedan partyincrease payables increasedin bycontract $17,789liabilities asof $3,514,536, a resultdecrease in accounts receivable of interest accrued for related party notes payable$529,532, and offsetan byincrease in other current payable decreasedof $154,320. These were offset by an increase in advance to contractors of $3,834,924 and a decrease in accounts $6,628.payable of $1,285,101.

The cash used in investing activities was $138,360 for the year ended July 31, 2024 as a result of a short term related party loan receivable with 3% interest rate, matured on July 24, 2025.

CashThe used in financing activities was $415,600 for the year ended July 31, 2024 as compared to $115,568 cash provided by financing activities for the year ended July 31, 2023. The cash flows used in financing activities for the year ended July 31, 2024 were primarily due to the repayment of notes payable $70,000 and repayment of related party advancement of $553,278, and offset by the proceeds of notes payable $207,678. The notes payable was borrowed from two related parties with 5% annual interest rate. See Note 45 Related Party Transactions.

The Company is developing business plan and aim to provide customers with vertical integration services from early-stage advertising video creativity, shooting, editing, to advertising operation and management on social media apps. Most of the advertising revenue will be generated by placing ad products on Tik Tok, Toutiao, Kwai, RED, WeChat, Baidu and other third-party affiliated websites and mobile applications. Currently, the Company provides traffic acquisition service to place the advertisements produced by the advertisers. The advertisements are published on the targeted media platforms as determined by the customers. Besides, the Company provides advertisements account charging service to customers upon the request from customers. Revenue is recognized at a point in time when the distribution of advertisements and charging of advertisement accounts are completed upon the completion confirmation from the customers and suppliers.

This discussion updates our business plan for the three- and six-nine- month period ending JanuaryApril 31,30, 2026. It also analyzes our financial condition on JanuaryApril 31,30, 2026 and compares it to our financial condition at July 31, 2025. This discussion and analysis should be read in conjunction with our audited financial statements for the year ended July 31, 2025, including footnotes, contained in our Annual Report on Form 10-K, and with the unaudited financial statements for the period ended JanuaryApril 31,30, 2026, including footnotes, which are included in this quarterly report.

During the three and sixnine months ended JanuaryApril 31,30, 2026, the Company recognized USD 0.11.1 million and USD 0.51.5 million net revenue, respectively from the advertisement placement services. The Company provides service to place advertisements. The advertisements are published on the targeted media platforms as determined by the customers. Revenue is recognized at a point in time when the placement of advertisements is completed. As disclosed in Note 1 under category “Revenue Recognition”, the Company is not the principal in executing these transactions. The Company actsreports asthe anamount received from the customers and the amounts paid to the media platforms or upside agent inrelated to these transactions and reports placement revenue on a net basis.

Results of Operations – Three months ended JanuaryApril 31,30, 2026 Compared to Three months ended JanuaryApril 31,30, 2025

Revenue: Net revenue from advertising placement services totaled USD 0.121.05 million for the three months ended JanuaryApril 31,30, 2026, compared to USD 0.380.35 million in the same period of 2025. ThisThe decreaseincrease was primarily drivenattributable byto the Company’s strategic initiativeefforts to optimize its customer portfolio and renegotiate contract commercial terms with key customers to improve service margins. Beginning in the latter part of calendar year of 2025, the Company initiated negotiations with a majority of its customer basecustomers to achieverevise highercontract margins;terms asand improve margins. As a result, certain advertising placement activities were temporarily paused reduced or postponed.postponed Managementduring anticipatesthe theseprior two quarters. During the current quarter, substantially all major contract negotiations willwere conclude shortly,completed, and the Company’s advertising placement operations areresumed normal expected tobusiness beactivities. fully restored withinDuring the next two months. Partially offsetting this decline,period, the Company generatedfocused USDon 0.07expanding millionrelationships with major higher-quality customers, which contributed to the growth in revenue fromrevenue. minidramaIn transactionsApril during2026, the threeCompany monthsentered endedinto Januaryannual 31,framework 2026,agreements comparedwith toseveral nilmajor incustomers with an aggregate gross contract value of approximately RMB 500 million. Management believes these agreements will further strengthen the prior-yearCompany’s period.advertising service pipeline and customer base.

Operating Cost and Expenses: For the three months ended JanuaryApril 31,30, 2026, the Company recorded cost of revenue of USD 3,093,712, compared to nil in the same period of 2025. ThisCost costof wasrevenue primarily attributableconsisted of amortization expense related to licensed mini-drama content assets uploaded to the acquisitionCompany’s ofnew minidramasmini-drama fromapplication, anwhich overseaswas filmingin supplier. Selling,the general,testing and launch stage during the period and was subsequently launched on Google Play and made available on the Apple App Store in the United States. Selling, general and administrative (SG&A) expenses decreasedincreased to USDapproximately 0.17$0.21 million for the three months ended JanuaryApril 31,30, 2026, fromcompared to USDapproximately 0.20$0.17 million infor the prior-yearcorresponding period.period Thisin decrease2025. The increase was primarily driven by thehigher absenceaudit offees aand increased one-time,directors’ USDand 0.02officers’ million(D&O) promotional expenseinsurance that occurred in 2025.premiums.

Other (expenseExpense) incomeIncome: Other expenses for the 2026 period were immaterial and primarily consisted of net interest expense on loans from related parties. In contrast, other income for the 2025three periodmonths wasended largelyApril driven30, by2025, aprimarily $21,362consisted gainof interest income from related party loan receivables net with interest expense on theloans disposalfrom ofrelated HZHF and SHDZ, along with $20,884 in local government grants.parties.

Income tax expense: The income tax recognized for the three months ended JanuaryApril 31,30, 2026 and 2025, resulted from the income tax from the operating income in China.

Net Income (Loss): We recorded a net income of USD 6,9570.56 million or USD 0.000.02 per share for the three months ended JanuaryApril 31,30, 2026, compared to a net income of USD 0.140.09 million or USD 0.010.00 per share for the same period of 2025, due to the factors discussed above.

Results of Operations – SixNine months ended JanuaryApril 31,30, 2026 Compared to SixNine months ended JanuaryApril 31,30, 2025

Operating Cost and Expenses: For the sixnine months ended JanuaryApril 31,30, 2026, the Company recorded cost of revenue of $3,093, compared to USD 0.11 million in the same period of 2025. The current period cost of revenue was primarily attributable to the acquisition of minidramas minidramas from an overseas supplier,supplier as well as the amortization expense of licensed mini-drama content assets uploaded to the Company’s new mini-drama application, which was in the testing and launch stage during the period and was subsequently launched on Google Play and made available on the Apple App Store in the United States, whereas the prior-year cost was largely driven by one-time service associated with the advertising placement. Selling, general, and administrative expenses were USD 0.39 0.60 million for the sixnine months ended JanuaryApril 31,30, 2026, compared to USD 0.370.54 million in the same period of 2025. This slightslightly increase was primarily driven by higher audit fees and increased directors’ and officers’ (D&O) insurance premiums, partially offset by the absence of a one-time USD 0.02 million promotional expense incurred during the prior-year period.

Other (expenseExpense) incomeIncome: Other expenses for the 2026 period were immaterial and primarily consisted of net interest expense on loans from related parties.

In contrast, other income for the 2025 period was largely driven by gains from subsidiary disposals, government grants, and interest income from currentrelated party loan receivables net with interest expense on loans from related parties.

Income tax expense: The income tax recognized for the sixnine months ended JanuaryApril 31,30, 2026 and 2025, resulted from the income tax from the the operating income in China.

Net Income (Loss): We recorded a net income attributable to Hartford Creative Group, Inc. of USD 0.060.61 million or USD 0.000.02 per share for the sixnine months ended JanuaryApril 31,30, 2026, compared to a net income of USD 0.270.36 million or USD 0.01 per share for the same period of 2025, due to the factors discussed above.

As of JanuaryApril 31,30, 2026, the Companywe had a working capital deficit of $43,536$522,279 comprised of current assets of $3,193,284$3,763,613 and current liabilities of $3,241,334 $3,236,820.. This representsrepresented aan decreaseimprovement of $62,203approximately in$628,018 compared to the working capital deficit fromof theapproximately July$105,739 31, 2025 amountas of $105,739.July 31, The2025. As of April 30, 2026, the Company had an accumulated deficit of $4,754,102approximately $4,196,998, compared to approximately $4,811,733 as atof theJuly previous31, year2025. end. To date,Historically, the Company havehas funded its operations primarily through cash generated from operations, short-term borrowingborrowings from related partiesparties, and equity financing.

As of JanuaryApril 31,30, 2026, the Company has issued a total of 25,027,004 shares (reflecting the 1 for 4 Reverse Stock Split) of common stock. On December 11, 2018, 24,022,500 shares of common stock were issued at the price of $0.08 per share to raise an additional $1,921,800 in capital. On November 24, 2020, the Company issued additional 250,000 shares of common stock to a significant shareholder of the Company at $0.08 per share.

TheWe Company maywill seek additional financing in the form of debt or equity to support its growth and working capital needs.equity. There is no assurance that we will be able to obtain any needed financing on favorable terms, or at all, or that we will find qualified purchasers for the sale of our stock. If we are unable to raise sufficient capital, we will be required to delay or forego some of our business plan, which would have a material adverse effect on our anticipated results from operations and financial condition. Any future issuancesales of equity our securities would dilute the ownership of our existing stockholders.investors.

Management currently expects that the Company’s funding requirements for the next twelve months will exceed $2.0 million. The Company is currently pursuing anthe uplisting of its common stock from the OTC market to the Nasdaq Capital Market. If the uplisting is successfully completed completed and market conditions permit, the Company may seek to raise additional capital through debt or equity financing,financings. and theAny proceeds from such financings mayare expected to be used to support the Company’s working capital needs,requirements, growthapplication initiatives,development costs, content licensing costs, marketing and user acquisition expenses associated with the launch and promotion of the Company’s mini-drama application, expenses associated with the uplisting process.process, and other general corporate purposes.

Cash Flows – SixNine months ended JanuaryApril 31,30, 2026 Compared to SixNine months ended JanuaryApril 31,30, 2025

CashNet cash used in operating activities was $173,992$338,964 for the sixnine months ended JanuaryApril 31,30, 2026 as compared to $232,456$124,676 net cash provided by the operations for the same period in 2025. During the sixnine months ended JanuaryApril 31,30, 2026, wenet recordedcash used in operating activities was primarily attributable to a decrease in contract liabilities of $4,131,742, an increase in accounts receivable of $218,959 , and a decrease in accounts payable of $45,146, partially offset by net income of $57,631,$614,735, a $3,608,604 decrease of advancein advances to contractors, a $54,208 decreasecontractors of accounts$3,417,020 receivable,, and offsetan increase by a $3,556,839 decrease of contract liabilities, a $287,078 decrease ofin other current payablepayables (mainlyof tax payable) and a $41,617 decrease in accounts payable.$22,914.

During the sixnine months ended JanuaryApril 31,30, 2025, wenet recordedcash provided by operating activities was primarily attributable to net income of $271,284, adjusted forapproximately $362,241, a gaindecrease onin disposaladvances to contractors of subsidiaries$1,504,496, a decrease in accounts receivable of $21,362,$214,932, an increase in related aparty $1,561,253 decreasepayables of advance to contract, a $449,264 decrease of accounts receivable, a $15,995 increase of related party payables and a $13,445 decrease of prepaid$16,302, and other current receivable,partially offset by a $1,214,039decrease in contract liabilities of $1,061,531 and a decrease ofin accounts payable, a $770,664 decreasepayable of contract liabilities, a $72,542 decrease of other current payable.$898,895.

NoNet investing activities occurred during the six months ended January 31, 2026. Cashcash used in investing activities duringfor the comparablenine period inmonths ended April 30, 2025 was $529,298,$527,047, primarily dueattributable to the shortissuance termof related party short-term loan receivables bearing interest at 3% interestper rate,annum, which matured in July and August,August 2025.

Net cash provided by financing activities was $264,136$449,556 for the sixnine months ended JanuaryApril 31,30, 2026, compared to net cash usedprovided inby financing activities of $28,746$139,255 infor the same period ofin 2025. InFor the nine months ended April 30, 2026, net cash provided by financing activities was primarily attributableconsisted toof $214,000 $325,000 in proceeds from related-party notes payable (bearing ainterest at 5% annualper interest rate)annum and $154,420$228,840 in non-interest-bearing advances received from related parties. These cash inflows were partially offset by $54,284 in payments forof deferred offering expensescosts and $50,000 in repayments of related-party notes payable. (Refer to Note 3, ‘Related Party Transactions,’ for further details).

InFor the prior-yearnine period,months ended April 30, 2025, net cash usedprovided inby financing activities primarily consisted of $28,746$341,434 wasin primarilyadvances drivenfrom byrelated parties, including advances from a relative of a current major shareholder, and $201,200 in proceeds from related-party related party notes payablepayable. These (bearingcash a 5% annual interest rate), whichinflows were partially offset by $60,000 in repayments of related-party notes payable,payable $121,404 inof $195,000, repayments of non-interest-bearing payables,related-party payables of $108,411, and $48,542 in payments forof deferred offering costs of $99,968.

As of and subsequent to JanuaryApril 31,30, 2026, we have no off-balance sheet arrangements.

As of JanuaryApril 31,30, 2026, we don’t have material contractual commitments.