Executive Summary / Key Takeaways

• Strategic Pivot to Digital Media: Hartford Creative Group, Inc. (HFUS) has undergone a significant transformation, divesting from its historical hospitality and education ventures to focus on the high-growth social media advertising and nascent mini-drama sectors in China, a strategic shift that began in January 2024.
• Strong Revenue Growth in Advertising: The company reported net revenues of $2.04 million for the fiscal year ended July 31, 2025, a 45% increase year-over-year, primarily driven by a 43% growth in its social media advertising placement services, which constitute over 98% of total revenue.
• Technological Edge in Platform Integration: HFUS differentiates itself through a professional media strategy execution team and network, enabling large-scale media resource procurement and offering vertical integration services from creative development to advertising operations across major Chinese social media platforms.
• Going Concern and Capital Needs: Despite positive operating results and a reduced working capital deficit, the company faces substantial doubt about its ability to continue as a going concern, necessitating over $2.00 million in additional funding for the next twelve months, with plans for a Nasdaq uplisting to facilitate capital raising.
• Operational and Geopolitical Risks: Key risks include an identified significant deficiency in internal control over financial reporting related to rebate arrangements, the unproven nature of the mini-drama business, and broader geopolitical uncertainties impacting US-China relations.

A New Chapter: Hartford Creative Group's Digital Ascent

Hartford Creative Group, Inc. (HFUS) is charting a new course, having strategically pivoted from its legacy businesses in hospitality and early childhood education to embrace the burgeoning opportunities within China's digital media and marketing landscape. This transformation, which gained significant momentum in January 2024, sees HFUS now primarily engaged in social media advertising and exploring the nascent mini-drama content market. The company, through subsidiaries like Shanghai Hartford ZY Culture Media Ltd. (HFZY) and Nanjing HaoYiPeng Information Technology Ltd (NJHY), positions itself as a comprehensive advertising partner for major Chinese social media platforms, including TikTok, Toutiao, Kwai, RED, and WeChat (TCEHY).

The core of HFUS's current business model lies in providing traffic acquisition and advertisement account charging services. The company aims to offer vertical integration services, spanning early-stage advertising video creativity, shooting, editing, and comprehensive advertising operation and management on social media applications. This strategic focus is a direct response to the "pent-up demand from social media influencers marketing needs on social media apps," which the company is actively seeking to capitalize on. Furthermore, HFUS has initiated plans to expand its reach by launching overseas TikTok advertising campaigns, aiming to connect domestic Chinese customers with international markets, particularly in the United States.

Technological Differentiators and Strategic Execution

While HFUS does not disclose a singular, proprietary "core technology" in the traditional sense, its operational model and service offerings highlight a distinct technological and strategic differentiation in the competitive Chinese social media advertising market. The company's strength lies in its "high-quality and professional media strategy execution team and network". This infrastructure enables HFUS to effectively leverage "massive media resources of different types of social media platforms" and secure "competitive prices due to large-scale media resource procurement". This capability suggests a sophisticated approach to platform integration, data-driven campaign management, and optimized media buying, providing a tangible cost and efficiency advantage over smaller, less integrated players.

The "vertical integration services" offered by HFUS, from "early-stage advertising video creativity, shooting, editing, to advertising operation and management on social media apps," represent a comprehensive, end-to-end solution for clients. This integrated approach allows for greater control over campaign quality, consistency, and performance, potentially leading to higher client satisfaction and retention. The company's R&D initiatives, though not detailed with specific programs or quantifiable targets, are implicitly focused on enhancing these integrated services and expanding its platform capabilities, as evidenced by the establishment of Nanjing HaoYiPeng Information Technology Ltd (NJHY) in May 2025 to "expand and strengthen the Company's social media advertising business". For investors, this technological and operational integration translates into a competitive moat built on efficiency, comprehensive service offerings, and potentially superior campaign outcomes, which can drive higher average selling prices (ASPs) and better margins in a highly competitive market.

Competitive Landscape and Market Positioning

In the dynamic social media advertising industry in China, HFUS competes against a diverse array of players, ranging from large, established advertising holding companies and independent agencies to smaller, specialized media buyers. While precise market share figures are not publicly detailed, HFUS aims to become "one of the total solution advertising providers for domestic social media industry in China". Its competitive advantage stems from its ability to offer competitive pricing through large-scale media resource procurement and its "vertical integration services". This positions HFUS as a value-added partner, capable of delivering comprehensive campaigns across multiple platforms.

Compared to larger, more diversified advertising groups, HFUS's focused approach on social media in China allows for greater agility and specialization. However, it may face challenges in matching the extensive client networks and deep financial resources of global advertising giants. Its strategy to "gradually launch overseas TikTok advertising campaign" indicates an ambition to expand its competitive arena, leveraging its expertise in Chinese platforms to serve domestic clients seeking international reach. The company's customer concentration, with three customers accounting for 62% of total gross billing in fiscal year 2025, highlights both strong client relationships and a potential vulnerability if any major client relationships were to be disrupted.

Financial Performance and Liquidity: A Turnaround in Progress

Hartford Creative Group's recent financial performance reflects the early successes of its strategic pivot. For the fiscal year ended July 31, 2025, the company reported net revenues of $2.04 million, a substantial 45% increase from the previous year's $1.40 million. This growth was predominantly fueled by its advertising placement services, which saw a 43% year-over-year increase, contributing over 98.20% of the total revenue. The nascent mini-drama business also contributed $36,000 in revenue from its first transaction in July 2025, representing 1.80% of total revenue.

Profitability metrics show a positive trend. Gross Profit Margin for the trailing twelve months (TTM) stands at 95.46%, Operating Profit Margin at 68.36%, and Net Profit Margin at 59.76%. The company recorded a net income of $1.10 million, or $0.04 per share, for the year ended July 31, 2025, consistent with the $1.09 million, or $0.04 per share, in the prior year. This stability in net income, despite significant operational scaling, underscores the effectiveness of the new business model.

However, the company's liquidity and capital resources present a more complex picture. While the working capital deficit improved significantly to $105,739 as of July 31, 2025, from $3.57 million in the prior year, largely due to the forgiveness of $2.50 million in related party payables, the company still operates with a deficit.

Cash used in operating activities was $13,094 for the year ended July 31, 2025, a notable shift from $859,016 cash provided by operations in the previous year. This indicates increased investment in working capital to support the growing advertising business. HFUS anticipates funding requirements exceeding $2.00 million for the next twelve months and is actively seeking additional financing through related party loans and equity.

Outlook, Guidance, and Strategic Initiatives

HFUS is actively pursuing an uplisting of its common stock from the OTC market to the Nasdaq exchange. This strategic move is aimed at enhancing the company's visibility, liquidity, and access to a broader investor base. Management explicitly states, "Assuming all conditions are met in our favor, we plan to raise capital through either debt or equity financing. The proceeds from this financing will be used to cover the costs related to the uplisting procedure". This indicates a clear path to addressing its capital needs and supporting future growth initiatives.

The company also holds an optimistic outlook for its mini-drama business, aiming to "attract significant attention and boost mini-drama revenue". While this segment is in its preliminary stages, its potential to diversify revenue streams beyond advertising is a key strategic initiative. The company's ability to execute on its Nasdaq uplisting and successfully scale its mini-drama venture will be critical determinants of its future trajectory.

Risks and Challenges

Despite the promising strategic pivot, HFUS faces several significant risks. The independent auditors have raised "substantial doubt about the Company's ability to continue as a going concern". This hinges on securing additional financial support from stockholders and obtaining necessary equity financing. The company's reliance on related party financing, while providing crucial support, also introduces potential governance and conflict-of-interest considerations.

Furthermore, management identified a "significant deficiency" in internal control over financial reporting as of July 31, 2025, specifically concerning the documentation of rebate arrangements. This operational weakness could lead to "inconsistencies, errors, or disputes in recognizing and recording such arrangements". The mini-drama business, while strategically important, is still in "preliminary activities," and "there is no assurance that the business plan will be successful". Broader macroeconomic factors, including the worldwide economic situation, interest rate changes, inflation, and the volatility of the company's stock price, also pose risks. Geopolitical tensions, particularly in US-China relations, are being monitored by the Board for potential impacts on political disruption, supply chains, and foreign exchange.

Conclusion

Hartford Creative Group, Inc. is in the midst of a profound transformation, successfully pivoting its core operations towards the high-growth social media advertising market in China. The company's strategic focus on vertical integration services and its ability to leverage extensive media resources provide a compelling competitive edge in this dynamic sector. Recent financial results demonstrate strong revenue growth in its new core business, signaling early validation of its strategic shift.

However, the investment thesis for HFUS is tempered by significant challenges, most notably the "going concern" warning and the imperative to secure substantial additional capital. The planned Nasdaq uplisting represents a critical strategic initiative to address these funding needs and enhance market visibility. While the nascent mini-drama business offers diversification potential, its success remains unproven. Investors should closely monitor the company's progress on its uplisting, its ability to strengthen internal controls, and the continued execution of its growth strategy in the competitive digital media landscape, where technological agility and efficient platform integration will be paramount for long-term value creation.