10-Q: HI-GREAT Reports Increased Losses, Internal Control Issues

HI-GREAT Group Holding Company reported an increased net loss and significant internal control deficiencies for the quarter ended September 30, 2025, while continuing as a development stage enterprise.

Summary

• HI-GREAT Group Holding Company is a development stage enterprise focused on a global licensing agreement for the KRAS gene, organic longevity health supplements, and planned expansion into the cosmetic sector.
• The company reported a net loss of $44,268 for the nine months ended September 30, 2025, an increase from the $43,006 net loss in the prior year period.
• Sales decreased to $34,518 for the nine months ended September 30, 2025, from $55,700 in the same period of 2024.
• Gross profit also declined to $13,854 for the nine months ended September 30, 2025, compared to $27,675 in the prior year.
• Operating activities used $3,107 in cash for the nine months ended September 30, 2025, a deterioration from the $2,519 cash generated in the prior year period.
• The company's accumulated deficit grew to $937,062 as of September 30, 2025, from $892,794 at December 31, 2024.
• Total liabilities increased to $277,282 as of September 30, 2025, from $250,160 at December 31, 2024.
• Disclosure controls and procedures were deemed not effective due to a lack of an audit committee and insufficient segregation of duties.
• The company continues to be dependent on debt and equity financing to fund its operations and has not yet established an ongoing source of revenues sufficient to cover operating costs, raising going concern doubts.

Sentiment

Score: 2

Explanation: The company is in a challenging financial position with increasing net losses, declining sales and gross profit, negative operating cash flow, and a significant accumulated deficit. The identified material weaknesses in internal controls and the going concern warning further contribute to a highly negative sentiment, despite some cash increase from financing activities.

Positives

• Cash balance increased to $7,986 as of September 30, 2025, from $2,140 at December 31, 2024.
• Professional fees decreased to $32,015 for the nine months ended September 30, 2025, from $42,600 in the prior year, attributed to lower brokerage and accounting fees.
• Financing activities generated $2,062 in cash for the nine months ended September 30, 2025, compared to using $20,393 in the prior year, primarily due to the issuance of common stock.

Negatives

• Net loss increased to $44,268 for the nine months ended September 30, 2025, from $43,006 in the same period of 2024.
• Sales decreased by 38% to $34,518 for the nine months ended September 30, 2025, from $55,700 in the prior year.
• Gross profit decreased by 50% to $13,854 for the nine months ended September 30, 2025, from $27,675 in the prior year.
• Operating activities shifted from generating $2,519 in cash in 2024 to using $3,107 in 2025.
• Accumulated deficit increased to $937,062 as of September 30, 2025.
• Total current assets decreased to $72,286 as of September 30, 2025, from $80,040 at December 31, 2024.
• Total liabilities increased to $277,282 as of September 30, 2025, from $250,160 at December 31, 2024.
• Stockholders' deficit worsened to $(204,996) as of September 30, 2025, from $(163,229) at December 31, 2024.
• General and administrative expenses increased to $19,654 for the nine months ended September 30, 2025, from $8,301 in the prior year, due to higher filing fees.

Risks

• The company has not yet established an ongoing source of revenues sufficient to cover its operating costs and is dependent on debt and equity financing, raising substantial doubt about its ability to continue as a going concern.
• Disclosure controls and procedures were not effective due to a lack of an audit committee and insufficient segregation of duties, indicating material weaknesses in internal controls.
• The extent of the impact of COVID-19 on the company's efforts to enter into business combinations remains uncertain, although day-to-day operations have seen minimal impact.
• There is no assurance that the company will be able to raise additional equity capital or successfully develop and commercialize its products.

Future Outlook

The company's principal business objective is to maximize shareholder returns through dividends, sustainable long-term growth in cash flows from product distribution, potential long-term appreciation from property sales, other sustainable agricultural business opportunities, and distribution of plant-based finished consumer products, including expansion into the cosmetics sector. Management is making efforts to raise additional funding until a registration statement for an equity funding facility is in effect.

Management Comments

• "We are a development stage enterprise that was originally incorporated, on September 30, 2010, under the laws of the State of Nevada."
• "Hi-Great Group Company has been refocusing our efforts on an exclusive global licensing agreement pertaining to the KRAS gene."
• "We will also uphold our commitment to marketing, selling, and distributing SellaCare, Inc.'s organic longevity health supplement under our existing worldwide exclusive license agreement."
• "Furthermore, we plan to diversify into the thriving cosmetic sector as a strategic component of our sustainable revenue approach, all while retaining our presence in the other six industry sectors."
• "Management of the Company is making efforts to raise additional funding until a registration statement relating to an equity funding facility is in effect."
• "Our disclosure controls and procedures were not effective for the quarterly period ended September 30, 2025, due to lack of an audit committee and lack of segregation of duties."

Industry Context

HI-GREAT Group Holding Company operates as a development stage enterprise, which is common for companies exploring new business ventures, particularly in specialized areas like cancer research (KRAS gene licensing) and health supplements/cosmetics. Its reliance on related-party transactions and the early stage of revenue generation are typical for such companies but also highlight inherent risks. The shift from CBD oils to KRAS gene research and cosmetics indicates an evolving strategic focus, potentially seeking higher-value or less regulated markets. The company's financial performance, characterized by increasing losses and negative operating cash flow, is not uncommon for development-stage entities that require significant investment before achieving profitability.

Comparison to Industry Standards

• As a development stage enterprise with insignificant revenues since inception, direct comparison to established industry standards or specific comparable companies/projects is not readily feasible based solely on the provided filing.
• The company's accumulated deficit of over $937,000 and ongoing net losses are typical for early-stage companies investing in product development and market entry, but also indicate a significant burn rate relative to its current revenue generation.
• The identified material weaknesses in internal controls (lack of audit committee, lack of segregation of duties) fall below best practices for corporate governance, even for smaller reporting companies, and could pose risks to financial reporting integrity compared to more mature industry peers.

Management Changes

Corporate Governance

Related Party Transactions

• The company has a licensing agreement with SellaCare, Inc. (controlled by the company's majority shareholder, Esther Yang) requiring payment of 25% of gross revenues or $1,000, whichever is greater, with $171,037 accrued as of September 30, 2025.
• The company sells herbal supplements purchased directly from SellaCare, Inc. using the SellaCare brand.
• The company has a land lease agreement with Sella Property, LLC (an entity controlled by the company's majority shareholder, Esther Yang) for $30,000 in annual installments.
• A loan payable of $740 to a related party was outstanding as of September 30, 2025.

Stakeholder Impact

• Shareholders face significant dilution risk from potential future equity raises and continued losses eroding shareholder value, as evidenced by the increasing accumulated deficit and stockholders' deficit.
• Creditors face increased risk due to the company's going concern warning and dependence on external financing.
• Employees (management) are involved in the related-party transactions and internal control deficiencies, which could impact their accountability and the company's operational integrity.
• Customers of SellaCare branded products may be indirectly impacted by the company's financial stability, though direct impact is not specified.

Next Steps

• Management will continue efforts to raise additional funding until a registration statement for an equity funding facility is in effect.
• The company plans to continue marketing, selling, and distributing SellaCare, Inc.'s organic longevity health supplement.
• The company intends to diversify into the cosmetic sector as a strategic component of its sustainable revenue approach.
• The company will continue to pursue its exclusive global licensing agreement pertaining to the KRAS gene.

Key Dates

Recommendation

The company exhibits severe financial distress, marked by increasing net losses, declining sales and gross profit, and negative cash flow from operations. The accumulated deficit is substantial, and the company explicitly states a going concern risk, indicating an inability to meet obligations without further financing. Furthermore, material weaknesses in internal controls, including a lack of an audit committee and segregation of duties, raise significant concerns about financial reporting reliability and corporate governance. While there's a strategic pivot towards KRAS gene research and cosmetics, the current financial performance and operational risks outweigh any potential future upside, making it a high-risk investment with a strong likelihood of further value erosion.

Keywords

KRAS gene, cancer research, herbal supplements, longevity health, cosmetics sector, development stage, SEC filing, Form 10-Q, financial results, going concern, internal controls, related party transactions