UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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the quarterly period ended
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| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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HQDA ELDERLY LIFE NETWORK CORP.
FORM 10-Q
TABLE OF CONTENTS
| 2 |
PART 1. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
HQDA Elderly Life Network Corp.
Consolidated Balance Sheets
| September 30, | June 30, | |||||||
| 2021 | 2021 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts and other receivables | ||||||||
| Receivable - related parties | ||||||||
| Deposits for assets purchase | ||||||||
| Properties and equipment, net | ||||||||
| Right-use-of asset | $ | $ | ||||||
| Total assets | $ | $ | ||||||
| LIABILITIES | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Payable to related parties | ||||||||
| Unearned revenue | ||||||||
| Lease liability | ||||||||
| Litigation reserve | ||||||||
| Customer deposits – long-term | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies – Note 8 | ||||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Preferred stock: authorized shares of $ par value; issued and outstanding, | - | - | ||||||
| Common stock: authorized shares of $ par value; shares issued and outstanding, | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated interim financial statements.
| 3 |
HQDA Elderly Life Network Corp
Consolidated Statements of Comprehensive Income (loss)
(Unaudited)
| Three months ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Revenue | $ | $ | ||||||
| Operating costs: | ||||||||
| Cost of food and beverages | ||||||||
| Selling, general and administrative expenses | ||||||||
| Depreciation and amortization | ||||||||
| Total operating expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Litigation reserve | - | |||||||
| Interest Income | - | ( | ) | |||||
| Other expense, net | ( | ) | ||||||
| Net loss before income taxes | ||||||||
| Income tax expense | - | - | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Foreign currency translation, net tax | ( | ) | ||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | ||
| Earnings per share | ||||||||
| Basic and diluted loss per share | $ | ( | ) | $ | ( | ) | ||
| Weighted average common shares outstanding | ||||||||
The accompanying notes are an integral part of these consolidated interim financial statements.
| 4 |
HQDA Elderly Life Network Corp.
Consolidated Statements of Cash Flows
(Unaudited)
| Three months ended September 30 | ||||||||
| 2021 | 2020 | |||||||
| Cash flow from operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile loss to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Legal reserve | - | |||||||
| Changes in operating assets and liabilities： | ||||||||
| Decrease in receivables | ( | ) | ( | ) | ||||
| Increase in related party receivables | ||||||||
| Increase in accounts payable and accrued liabilities | ( | ) | ||||||
| Increase in contract liabilities | - | |||||||
| Decrease of customer deposits – long-term | ( | ) | - | |||||
| Operating lease liabilities | ( | ) | - | |||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| Cash flow from investing activities | ||||||||
| Deposits paid for assets purchase | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flow from financing activities | ||||||||
| Decrease in related party payable | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ( | ) | ( | ) | ||||
| Effect of exchange rate changes | ( | ) | ||||||
| Decrease in cash | ( | ) | ( | ) | ||||
| Cash, beginning | ||||||||
| Cash, ending | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated interim financial statements.
| 5 |
HQDA Elderly Life Network Corp.
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
| Number of | Additional | Accumulated Other | Total | |||||||||||||||||||||
| Shares | Capital | Paid-in | Accumulated | Comprehensive | Stockholders’ | |||||||||||||||||||
| Issued | Stock | Capital | Deficit | Loss | Equity | |||||||||||||||||||
| Balance at June 30, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||
| Foreign currency translation, net tax | ||||||||||||||||||||||||
| Balance at September 30, 2020 | $ | $ | ( | ) | ( | ) | ||||||||||||||||||
| Balance at June 30, 2021 | $ | ( | ) | ( | ) | |||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||
| Foreign currency translation, net tax | ( | ) | ( | ) | ||||||||||||||||||||
| Balance at September 30, 2021 | $ | ( | ) | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of these consolidated interim financial statements.
| 6 |
1. Nature and Continuance of Operations
HQDA Elderly Life Network Corp. (formerly Hartford Retirement Network Corp.) (the “Company”) was incorporated under the laws of the State of Nevada on January 21, 2004. In November 2017, the Company acquired Shanghai Hongfu Health Management Ltd, a company incorporated in the People’s Republic China (“PRC”). Following the acquisition, on April 23, 2018, the Company changed its name to HQDA Elderly Life Network Corp.
Through its wholly-owned subsidiary, Shanghai Hongfu Health Management Ltd. (“Shanghai Hongfu”), the Company purchased senior living facilities and launched a senior living residences business, which hosts to mostly men and women over the age of 50. The Company intends to expand its business of owning, leasing and/or operating senior living residences that will provide seniors with a supportive, home life setting with care and services, including activities of daily living, life enrichment and health and wellness.
The
Company’s consolidated financial statements as of September 30, 2021 and for the three months ended have been prepared on a going
concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of
business. The Company reported a net loss of $
There is limited historical financial information about the Company upon which to base of an evaluation of our performance. We shifted its focus to senior housing and retirement services and products. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new resource exploration company, including limited capital resources, unanticipated problems relating to exploration and additional costs and expenses that may exceed current estimates. To become profitable, we will attempt to implement a plan of operation as detailed above.
Our cash reserves are not sufficient to meet our obligations for the next twelve-month period. As a result, we will need to seek additional capital in the near future. We anticipate that additional capital will be raised in the form of equity financing from the sale of our common stock. As well, our management is prepared to provide us with short-term loans.
We cannot provide investors with any assurance that we will be able to raise sufficient capital from the sale of our common stock or through a loan from our directors to meet our obligations over the next twelve months. We do not have any arrangements in place for any future equity financing. If we are unable to arrange additional financing, our business plan will fail and operations will cease.
2. Basis of Significant Accounting policies
Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The Company’s consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Shanghai Hongfu Health Management Ltd. All inter-company balances have been eliminated upon consolidation. This disclosure should be read in conjunction with our audited financial statements for the year ended June 30, 2021, including footnotes, contained in our Annual Report on Form 10-K,
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.
| 7 |
Foreign currency translation
The United States dollar (“USD”) is the Company’s reporting currency. The Company’s wholly owned subsidiary, Shanghai Hongfu is located in Shanghai, China. The net sales generated, and the related expenses directly incurred from the operations are denominated in local currency, Renminbi (“RMB”). The functional currency of the subsidiary is generally the same as the local currency.
Assets and liabilities measured in RMB are translated into USD at the prevailing exchange rates in effect as of the financial statement date and the related gains and losses, net of applicable deferred income taxes, are reflected in accumulated other comprehensive income (loss) in its consolidated balance sheets. Income and expense accounts are translated at the average exchange rate for the period. The Company has not, to the date of these consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
Certain amounts in prior periods have been reclassified to conform with current period presentation.
Revenue recognition
On July 1, 2018 the Company adopted Accounting Standards Update (“ASU”) 2014-09, Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606), which is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. The Company adopted ASC 606 using the modified retrospective method. The Company evaluated its revenue streams to identify whether it would be subject to the provisions of ASC 606 and any differences in timing, measurement or presentation of revenue recognition. The Company’s main source of revenue is generated from operating senior living residences and business apartment service. For the senior living industry, the Company recognizes resident fees and services, other than move-in fees, monthly as services are provided.
On
November 2020 and amended on February 2021, the Company contracted with Shanghai Jinhong Business Hotel Co., Ltd. (SHJH) for leasing
60 rooms as a whole for five years and auto renew for another five years if no party in default pursuant to the contract terms. SHJH
subleases the rooms to the single independent resident and operates as business apartments. On April 2021, the Company entered another
contract with SHJH to lease the auxiliary building including retail spaces along the street for ten years for the average yearly rent
of $
Unearned revenue
Unearned revenue is recorded when payments are received in advance of performing our services obligations and is recognized over the service period. Unearned revenue is primarily related to prepayments of monthly facility and service fees.
Recently issued accounting pronouncements adopted
In January 2017, the FASB issued ASU No. 2017-04, “Intangibles and Other (Topic 350): Simplifying the Test for Goodwill Impairment”, which eliminates the requirement to calculate the implied fair value of goodwill, but rather requires an entity to record an impairment charge based on the excess of a reporting unit’s carrying value over its fair value. This amendment is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company adopted ASU No. 2017-04 on July 1, 2020 and the adoption did not have an impact on the Company’s interim financial position and results of operations.
| 8 |
Recently Issued Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses”. The standard, including subsequently issued amendments (ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10 and ASU 2019-11), requires a financial asset measured at amortized cost basis, such as accounts receivable and certain other financial assets, to be presented at the net amount expected to be collected based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. In November 2019, the FASB issued ASU No. 2019-10 to postpone the effective date of ASU No. 2016-13 for public business entities eligible to be smaller reporting companies defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is evaluating the impact of this guidance on its consolidated financial statements.
3. Related party Transactions
Receivable and Payable
Receivable
from related parties amounted $
Related party transactions
On
September 1, 2018, the Company entered a three-year cooperation agreement with Zhonghuiai Wufu (Shanghai) Hotel Management Co., Ltd.,
(“ZHAWF Shanghai”), a related party, with respect to the daily operation and management of the senior hotel purchased on
April 2018. According to the agreement, the Company shall pay RMB one million per year to ZHAWF Shanghai for the service provided. The
Company amended the execution date of the cooperation agreement from September 1, 2018 to January 1, 2019 with three-year term. For the
three months ended September 30, 2021 and 2020, the Company recorded hotel management fee of $
Other
During
the three ended September 30, 2021, and 2020 the Company recorded management fees of $
4. Asset Acquisition
On
April 2, 2018, the Company entered into an Asset Purchase Agreement (the “APA”) whereby the Company will purchase land use
rights, buildings, construction rights and other property rights located in Shanghai from a third party for a total purchase price of
$
| Description | Location | Amount (1) | Amount | |||||||
| (in dollars) | (in RMB) | |||||||||
| Building and building improvements and land use rights | ||||||||||
| Land use rights | ||||||||||
| (1) |
| 9 |
As
of September 30, 2021, the Company has paid a total of $
Further, the Company consummated the share purchase agreement to acquire the entity – Shanghai Qiaoyuan Information Technology Co., Ltd (“SH QYIT”) on November 2018 who holds the land use rights of Property B located on Shanghai Chongming. Asset B has been transferred to Properties and equipment, net during the year ended June 30, 2021. The two acquisitions were accounted for assets acquisitions.
5. Properties and Equipment, net
| September 30, | June 30, | |||||||
| 2021 | 2021 | |||||||
| (Unaudited) | ||||||||
| Land use rights and improvements | $ | $ | ||||||
| Furniture and office equipment | ||||||||
| Capitalized software | ||||||||
| Motors and vehicles | ||||||||
| Minus: Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Properties and Equipment, net | $ | $ | ||||||
For
the three ended September 30, 2021 and 2021, the depreciation and amortization expenses were $
6. Segment Information
The
Company operates in
7. Contingencies and commitments
Lawsuit related to the assets purchase agreements
The
Company entered into the APA to acquire two properties in Shanghai totaling RMB
On
May 1, 2020, a lawsuit was filed at a district court in Shanghai, China, against the Company and Shanghai Hongfu, by Shanghai Qiao Hong
Real Estate, Ltd (i.e. the Seller) and its subsidiaries (the “Plaintiff”) for breach of contract and non-payment of installments
pursuant to the APA entered into between the Company and the Plaintiff on April 2, 2018. The Plaintiff is alleging damages of RMB
| 10 |
As
of September 30 and June 2021, the Company reserved $
Subsequently,
the Company received a 2nd court executive order from the District Court who froze the
Settlement of a Violation of Exchange Act
On
March 11, 2021, the Company settled a violation of Exchange Act Rule 12b-25 with Securities and Exchange Commission (SEC) for a fine
of $
8. Operating lease
Sichuan
HQDA Elderly Services Co., Ltd (“SHES”), the newly established subsidiary of Shanghai Hongfu, entered two operating leases
with third parties at Chengdu, China on March 2021. The two operating leases have a twenty-two months office space lease and a 1-year
apartment lease for employee residence. The Company also has an office lease located at Rosemead, California with monthly rent of $
According
to ASC 842, the Company records the office lease on the balance sheet as Right-of-use assets and Operating lease liabilities and choose
the simplified method record the apartment lease. The incremental borrowing rate is
As of September 30, 2021, future minimum annual lease payment under operating lease was as follows:
| Years ending June 30, | Operating lease | |||
| 2022 | $ | |||
| 2023 | ||||
| Total | ||||
| Less interest | ( | ) | ||
| Present value of lease liabilities | $ | |||
9. Subsequent Event
None.
| 11 |
ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The terms “HQDA”, “Company”, “we”, “our”, and “us” refer to HQDA Elderly Life Network Corp. (formerly Hartford Retirement Network Corp.) unless the context suggests otherwise.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes “forward-looking statements” as defined by the Securities and Exchange Commission, or SEC. We make these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this Form 10-Q that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. These forward-looking statements are based on assumptions which we believe are reasonable based on current expectations and projections about future events and industry conditions and trends affecting our business. However, whether actual results and developments will conform to our expectations and predictions is subject to a number of risks and uncertainties that, among other things, could cause actual results to differ materially from those contained in the forward-looking statements, including without limitation the Risk Factors set forth in our Annual Report on Form 10-K for the year ended June 30, 2018 including the following:
| ● | our failure to obtain additional financing; | |
| ● | our inability to continue as a going concern; | |
| ● | the unique difficulties and uncertainties inherent in the business; | |
| ● | local and multi-national economic and political conditions, and | |
| ● | our common stock. |
General
HQDA Elderly Life Network Corp. (formerly Hartford Retirement Network Corp.) (“HQDA” or the “Company”) was incorporated in the State of Nevada on January 21, 2004. Our principal offices are located at Suite J, 8780 Valley Blvd., Rosemead, California 91770. Our telephone number is (626) 877-8187.
The Company has not had any bankruptcy, receivership or similar proceeding since incorporation.
Our business plan is owning, leasing and/or operating senior living residences that provide seniors with a supportive, home life setting with care and services, including activities of daily living, life enrichment and health and wellness in certain cities in China. We also plan to operate a network carrier, providing scheduled air transportation to passengers, travel destination services to leisure travelers.
The Senior Living Industry
Through our newly acquired and wholly-owned subsidiary, Shanghai Hongfu Health Management Ltd., we purchased senior living facilities in April 2018, launched a senior living residences business, which, hosts to mostly men and women over the age of 50. We intend to expand the business of owning, leasing and/or operating senior living residences that will provide seniors with supportive, home life setting with care and services, including activities of daily living, life enrichment and health and wellness in China.
The senior living industry encompasses a broad spectrum of senior living service and care options, which include independent living, assisted living and skilled nursing care. Our primary focus will be on the independent living services. Independent living is designed to meet the needs of seniors who choose to live in an environment surrounded by their peers where they receive services such as housekeeping, meals and activities, but are not reliant on assistance with activities of daily living (for example, bathing, eating and dressing), although we may offer these services through contracts with third parties.
Our operating philosophy is to provide services and care which meet the individual needs of its residents, and to enhance their physical and mental well-being, thereby allowing them to live longer and to “age in place.” These facilities will offer, on a 24-hour basis, personal, supportive and home health care services appropriate for their residents in a home-like setting, which allow residents to maintain their independence and quality of life. We predict that the average of the residents at our facilities will be between 55 and 70.
Our primary focus will be in China, where we intend to grow and become a leader in senior living facilities. We also will seek to develop or acquire facilities and manage or cooperate with existing facilities as well. We believe that by concentrating or “clustering” our facilities in target areas with desirable demographics, can increase the efficiency of our management resources and achieve broad economies of scale.
| 12 |
The long-term care industry encompasses a wide continuum of services and residential arrangements for elderly senior citizens. Skilled nursing facilities provide the highest level of care and are designed for elderly senior citizens who need chronic nursing and medical attention and are not able to live on their own. Further, skilled nursing facilities tend to be one of the most expensive alternatives while providing elderly senior citizens with limited independence and a diminished quality of life. On the other end of the continuum is home-based care, which typically is provided in an individual’s private residence. While this alternative allows the elderly individual to “age in place” in his or her home and, in certain instances, can provide most of the services available at a skilled nursing facility, it does not foster any sense of community or the ability to participate in group activities.
Assisted living facilities generally are designed to fill the gap in the middle of this continuum. Assisted living facilities have been described by the Assisted Living Federation of America (“ALFA”) as providing a special combination of housing and personal, supportive and home health care services designed to respond to the individual needs of those who need, or desire help with their activities of daily living, including personal care and household management. Services in an assisted living facility are generally available 24 hours a day to meet the scheduled and unscheduled needs of residents, thereby promoting maximum dignity and independence.
The assisted living industry is highly fragmented in China. At present, the industry is characterized by participants who operate only a limited number of facilities and who frequently can offer only basic assistance with a limited number of activities of daily living. We intend to be characterized by the following: (i) the ability to offer premium accommodations and a comprehensive bundle of standard services for a single inclusive monthly fee; (ii) sophisticated, professional management structures and highly trained employees; (iii) a cost-efficient, user-specific prototype facility; and (iv) experience in providing home health care services.
Our facilities will provide services and care which are designed to meet the individual needs of its residents, enhance their physical and mental well-being and promote a supportive, independent and home-like setting. Most of our facilities will be primarily designed as premium facilities at which residents receive a comprehensive, bundled package of standard services for a single monthly fee.
We will strive to combine in our facilities the best aspects of independent living with the protection and safety of assisted living, with trained staff members who provide 24-hour care and monitoring of every resident. The senior living facilities will be designed and decorated to have a home-like atmosphere. Residents will be encouraged to furnish their rooms with personal items they have collected during their lifetime. Our senior living facilities differ from skilled nursing facilities in that our senior living facilities will not provide the more extensive, and costly, nursing and medical care found in nursing homes.
| 13 |
Results of Operations
| Three months ended September 30 | ||||||||||||
| 2021 | 2020 | Changes | ||||||||||
| Revenue | $ | 144,316 | $ | 155,440 | $ | (11,124 | ) | |||||
| Operating costs: | ||||||||||||
| Cost of food and beverages | 27,320 | 46,855 | (19,535 | ) | ||||||||
| General and administrative cost | 164,507 | 228,966 | (64,459 | ) | ||||||||
| Depreciation and amortization | 41,730 | 47,949 | (6,219 | ) | ||||||||
| Operating loss | $ | (89,241 | ) | $ | (168,631 | ) | $ | 79,390 | ||||
Three months ended September 30, 2021 compared to three months ended September 30, 2020
The revenue for the three months ended September 30, 2021 remain constant with a slight decrease compared with the same period ended September 30, 2020, The decrease of revenue share the same movement with the decrease of cost of food and beverages. The decrease was due to the Company adjusted partial of the business model, (i.e. subleases the rooms to the single independent resident and operates as business apartments). The business is still growing during the transition period.
The decrease of operating loss amounted $79,930 for the three months ended September 30, 2021 as compared to the same period ended in 2020 was mainly due to the decrease on selling, general and administrative costs of 64,459 mainly due to the closure of hotel cafeteria and outsourced receptionist and part of room cleaning service to the subcontractor.
Excluding the non-cash expenses of depreciation and amortization, the operating loss would have been $47,511 and $120,682, for the three months ended September 30, 2021 and 2020, respectively.
Liquidity and Capital Resources
On September 30, 2021, we had cash on hand of $10,174 and liabilities of $6,612,741. We will require additional funding in order to cover all anticipated administration costs and to proceed with the unpaid balance of APA agreement as well as the interest and penalty. We intend to continue to explore the new business model, such as continue develop the Travel-and-living Business line, and provide management services to retirement homes, commercial properties and apartment buildings in China, which will result in higher administrative costs in the future.
Capital Expenditures
On April 2, 2018, we entered into an Asset Purchase Agreement (the “APA”) whereby we purchased land, buildings, and right to use, construction use rights and other property rights located in Shanghai from a third party. Properties are split into two groups:
| ● | Property A: land use rights and adhesive substance use rights, right to own, and right to operate of the land located in Shanghai Pudong New Area Zhangjiang Ziwei Rd No. 372 and No. 376. | |
| ● | Property B: land use right, adhesive substance under construction use rights, right to own, and right to operate of the land located in Shanghai Chongming District San Shuang Gong Lu No. 4797. |
We have agreed to pay the purchase price totaling RMB 233,000,000 in installments. Payments of $27,353,690 (RMB 176,300,000) have been made by the end of September 30, 2021.
Although we have the rights to operate the senior living facilities purchased under this agreement, we have not yet received a deed for Property A because the seller is involved in several lawsuits that have already resulted in a decision to restrict transfer of this asset by a Shanghai court. Therefore, remaining amount of $8,797,244 (RMB 56,700,000) is outstanding. The lawsuit in related to the unpaid installment of APA was verdict by Shanghai No. 2 Intermediate Court at Shanghai City, China on May 2021, the ownership of Shanghai Qiaoyuan Information Technology Co., Ltd (“SH QYIT”), who holds the land use rights of Property B was frozen per court auction. See Note 7 for more details about the result of lawsuit.
Employees
At present, we have 18 employees, other than our current officers and directors, who devote their time as required to our business operations.
Off-balance Sheet Arrangements
September 30, 2021, we have no off-balance sheet arrangements that would require disclosure.
| 14 |
Critical Accounting Policies
Our interim financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. Preparing financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the balance sheet dates, and the recognition of revenues and expenses for the reporting periods. These estimates and assumptions are affected by management’s application of accounting policies.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not issue or invest in financial instruments or their derivatives for trading or speculative purposes. The Company cannot guarantee that the current exchange rate will remain stable, therefore there is a possibility that the Company could post the same amount of income for two comparable periods and because of the fluctuating exchange rate post higher or lower income depending on exchange rate converted into US$ at the end of the financial year. The exchange rate could fluctuate depending on changes in political and economic environments without notice.
ITEM 4 – CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Based on our management’s evaluation (with the participation of our President and Chief Financial Officer), our President and Chief Financial Officer have concluded that as of the end of the period covered by this report, our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange of 1934 (the “Exchange Act”)) are not effective to provide reasonable assurance that the information required to be disclosed in this quarterly report on Form 10-Q is recorded, processed, summarized and reported within the time period specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.
(b) Internal control over financial reporting
Management’s annual report on internal control over financial reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is intended to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our internal control over financial reporting should include those policies and procedures that: pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with applicable GAAP, and that receipts and expenditures are being made only in accordance with authorizations of management and the Board of Directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Changes in internal control over financial reporting
Based upon their evaluation of our controls, Ms. Ziyun Xu, our Chief Executive Officer, and Mr. Jimmy Zhou, our Chief Financial Officer, has concluded that, there were no significant changes in our internal control over financial reporting or in other factors during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Attestation report of the registered public accounting firm
This quarterly report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management’s report in this report.
There were no changes in our internal controls that occurred during the quarter covered by this report that have materially affected or are reasonably likely to materially affect our internal controls.
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PART II – OTHER INFORMATION
ITEM 1 – LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceeding. Our management is not aware of any threatened litigation, claims or assessments as of the date hereof.
ITEM 1A. RISK FACTORS
Not Applicable
ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3 – DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 – SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 – OTHER INFORMATION
None
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ITEM 6 – EXHIBITS
The following exhibits are furnished as required by Item 601 of Regulation S-B.
| * | Included in our original SB-2 Registration Statement filed on December 9, 2004. |
| ** | Included in our SB-2 Amended Registration Statement filed on October 19, 2005. |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| HQDA Elderly Life Network Corp. | |||
| November 12, 2021 | BY: | /s/ Ziyun Xu | |
| Date | Ziyun Xu, Chief Executive Officer | ||
| November 12, 2021 | BY: | /s/ Jimmy Zhou | |
| Date | Jimmy Zhou, Chief Financial Officer | ||
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