UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X]☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended MarchDecember 31, 2021

or

[  ]☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________to __________________

Commission File Number: 000-52417

HQDA ELDERLY LIFE NETWORK CORP.
(Exact name of registrant as specified in its charter)

NEVADAnevada98-1225287

(State or other jurisdiction

of organization)

(IRS. employer

identification no.)

8780 Valley Blvd.372 Ziwei Road, Suite JPudong New District
Rosemead, California 91770Shanghai, P.R. China
(Address of principal executive offices)

(626) 877-8187+8615358018888
(Registrant’s telephone number, including area code)

None
(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None

Title of each classTrading Symbol(s)Name of each exchange on which registered

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] ☒ No [  ]☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] ☒ No [  ]☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer[  ]☐Accelerated filer[  ]☐
Non-accelerated filer[  ]☐ (Do not check if a smaller reporting company)Smaller reporting company[X]☒
Emerging growth company[X]☒

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [  ] ☐ No [X] ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareHQDAOTC Markets Group

The number of shares of Common Stock, $0.001 par value, of the registrant outstanding at May 14, 2021March 17, 2022 was 139,314,416.139,314,416.

 

 

 

 

HQDA ELDERLY LIFE NETWORK CORP.

FORM 10-Q

TABLE OF CONTENTS

PART 1. FINANCIAL INFORMATION31
ITEM 1 – CONSOLIDATED FINANCIAL STATEMENTS31
ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS1112
ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK1415
ITEM 4 – CONTROLS AND PROCEDURES1415
(a) Evaluation of Disclosure Controls and Procedures1415
(b) Internal control over financial reporting1415
PART II – OTHER INFORMATION1516
ITEM 1 – LEGAL PROCEEDINGS1516
ITEM 1A. RISK FACTORS1516
ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS1516
ITEM 3 – DEFAULTS UPON SENIOR SECURITIES1516
ITEM 4 – SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSMINE SAFETY DISCLOSURES1516
ITEM 5 – OTHER INFORMATION1516
ITEM 6 – EXHIBITS1617
SIGNATURE1718

i

PART 1. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

HQDA Elderly Life Network Corp.

Consolidated Balance Sheets

 March 31, June 30,  December 31, June 30, 
 2021  2020  2021 2021 
 (Unaudited)     (Unaudited)    
ASSETS             
Current assets:                
Cash $54,118  $119,955  $18,862  $28,080 
Accounts and other receivables  54,228   52,531   22,857   34,418 
Receivable - related parties  41,248   194,812   59,625   43,809 
Total current assets  101,344   106,307 
  149,594   367,298         
        
Deposits for assets purchase  20,352,559   19,662,519 
Deposits for assets purchased  20,731,964   20,597,809 
Properties and equipment, net  5,573,048   5,277,036   5,689,845   5,713,732 
Capitalized software, net  43,426   46,947 
Right -use-of asset  -   73,368 
Total assets $26,118,627  $25,353,800  $26,523,153  $26,491,216 
                
LIABILITIES                
Current liabilities:                
Accounts payable and accrued liabilities $80,960  $52,217  $140,673  $95,435 
Payable to related parties  3,814,279   3,869,479 
Unearned revenue  77,725   32,466   52,678   107,549 
Lease liability  -   64,488 
Litigation reserve  1,792,148   1,209,892   2,737,277   2,314,786 
Payable to related parties  3,836,471   3,537,325 
  5,787,304   4,831,900 
        
Customer deposits – long-term  81,781   7,068 
Customer deposits, noncurrent  223,548   122,695 
Total liabilities  5,869,085   4,838,968   6,968,455   6,574,432 
                
Commitments and contingencies – Note 8          -      
                
STOCKHOLDERS’ DEFICIT                
Preferred stock: authorized 10,000,000 shares of $0.001 par value; issued and outstanding, none  -   - 
Common stock: authorized 200,000,000 shares of $0.001 par value; 139,314,416 shares issued and outstanding,  139,314   139,314 
Preferred stock: authorized 10,000,000 shares of $0.001 par value; issued and outstanding, NaN  -   - 
Common stock: authorized 200,000,000 shares of $0.001 par value; 139,314,416 shares issued and outstanding,  139,314   139,314 
Additional paid-in capital  29,719,865   29,719,865   29,719,865   29,719,865 
Accumulated other comprehensive loss  (734,848)  (1,234,719)  (506,185)  (590,412)
Accumulated deficit  (8,874,789)  (8,109,628)  (9,798,296)  (9,351,983)
Total stockholders’ equity  20,249,542   20,514,832   19,554,698   19,916,784 
Total liabilities and stockholders’ equity $26,118,627  $25,353,800  $26,523,153  $26,491,216 

The accompanying notes are an integral part of these consolidated interim financial statements.

1

 

HQDA Elderly Life Network Corp.Corp

Consolidated Statements of Comprehensive Income (loss)

(Unaudited)

         
 Three months ended March 31,  Nine months ended March 31,  

Three months ended

December 31,

 

Six months ended

December 31,

 
 2021  2020  2021  2020  2021 2020 2021 2020 
                  
Revenue $130,027  $38,432  $638,389  $376,283  $281,169  $352,922  $425,485  $508,362 
                                
Operating costs:                                
Cost of food and beverages  27,298   121,481   126,706   121,479   35,085   52,554   62,405   99,409 
Selling, general and administrative expenses  212,637   127,000   614,465   649,856   158,950   172,560   323,457   401,827 
Depreciation and amortization  42,685   38,276   131,768   112,247   45,013   41,134   86,743   89,083 
Total operating expenses  282,620   286,757   872,939   883,582   239,048   266,248   472,605   590,319 
Operating loss  (152,593)  (248,325)  (234,550)  (507,299)
Operating income (loss)  42,121   86,674   (47,120)  (81,957)
                                
Other income (expense):                                
Litigation reserve  (9,316)  -   (484,264)  - 
Litigation reserve expense  (395,375)  (298,898)  (395,375)  (474,948)
Interest Income  21   118   50   118   16   18   16   29 
Other income (expense), net  (48,052)  724   (46,397)  (872)  (1,435)  539   (3,834)  1,655 
Total other expense, net  (396,794)  (298,341)  (399,193)  (473,264)
                
Net loss $(209,940) $(247,483) $(765,161) $(508,053) $(354,673) $(211,667) $(446,313) $(555,221)
                
Foreign currency translation, net tax  (37,684)  (141,142)  499,871   (330,710)  116,619   397,389   84,227   537,555 
Comprehensive income (loss) $(247,624) $(388,625) $(265,290) $(838,763) $(238,054) $185,722  $(362,086) $(17,666)
                
Earnings per share                                
Basic and diluted loss per share $(0.002) $(0.002) $(0.005) $(0.004) $(0.00) $(0.002) $(0.00) $(0.004)
Weighted average common shares outstanding  139,314,416   139,314,416   139,314,416   139,314,416   139,314,416   139,314,416   139,314,416   139,314,416 

The accompanying notes are an integral part of these consolidated interim financial statements.

2

 

HQDA Elderly Life Network Corp.

Consolidated Statements of Cash Flows

(Unaudited)

     
 Nine months ended March 31  Six months ended December 31 
 2021  2020  2021 2020 
Cash flow from operating activities                
Net loss $(765,161) $(508,053) $(446,313) $(555,221)
Adjustments to reconcile loss to net cash provided by (used in) operating activities:        
Adjustments to reconcile loss to net cash provided by operating activities:        
Depreciation and amortization  131,768   112,248   86,743   89,083 
Litigation reserve  484,263   - 
Legal reserve  395,375   474,948 
Amortization of Right-of-use assets  8,949     
Bad debt expense  20,179     
Changes in operating assets and liabilities：                
Decrease in receivables  2,158   265,614 
Increase (decrease) in related party receivables  37,446   (8,591)
Increase (decrease) in accounts payable and accrued liabilities  27,049   (20,746)
Increase in unearned revenues  62,544   - 
Increase (decrease) in receivables  2,854   (30,920)
(Decrease) increase in related party receivables  (43,886)  68,356 
(Decrease) increase in accounts payable and accrued liabilities  (18,850)  45,272 
Decrease (increase) in unearned revenues  (55,878)  6,829 
Increase of customer deposits – long-term  53,163   -   99,150   53,174 
Net cash provided by (used in) operating activities  33,230   (159,528)
Net cash provided by provided by operating activities  48,323   151,521 
                
Cash flow from investing activities                
Deposits paid for assets purchase  -   (1,859,407)  (23,534)  - 
Purchase of equipment  (20,513)  -   -   (359)
Net cash used in investing activities  (20,513)  (1,859,407)  (23,534)  (359)
                
Cash flow from financing activities                
(Decrease) increase in related party payable  (80,942)  1,664,259 
Net cash (used in) provided by financing activities  (80,942)  1,664,259 
Decrease in related party payable  (33,340)  (120,592)
Net cash used in financing activities  (33,340)  (120,592)
                
Effect of exchange rate changes  2,388   31,424   (667)  (525)
Decrease in cash  (65,837)  (323,252)  (9,218)  30,045
Cash, beginning  119,955   350,734   28,080   119,955 
Cash, ending $54,118  $27,482  $18,862  $150,000 
        
Supplemental disclosures of cash flow        
Interest paid $-  $- 
Income taxes paid $-  $800 

The accompanying notes are an integral part of these consolidated interim financial statements.

3

HQDA Elderly Life Network Corp.

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

 Number of   Additional    Accumulated Other  Total  Number of     Additional    Accumulated Other Total 
 Shares Capital Paid-in Accumulated Comprehensive Stockholders’  Shares Capital Paid-in Accumulated Comprehensive Stockholders’ 
 Issued Stock Capital Deficit Loss Equity 
Balance at June 30, 2019 139,314,416 $139,314 $29,719,865 $(3,352,803) $(1,138,433) $25,367,943 
Net loss - - - (508,053) - (508,053)
Foreign currency translation, net tax  -  -  -  -  (330,710)  (330,710)
Balance at March 31, 2020  139,314,416 $139,314 $29,719,865 $(3,860,856) $(1,469,143) $24,529,180 
              Issued Stock Capital Deficit Loss Equity 
Balance at June 30, 2020 139,314,416 $139,314 $29,719,865 $(8,109,628) $(1,234,719) $20,514,832   139,314,416  $139,314  $29,719,865  $(8,109,628) $(1,234,719) $20,514,832 
Net loss - - - (765,161) - (765,161)  -   -   -   (555,221)  -   (555,221)
Foreign currency translation, net tax  -  -  -  -  499,871  499,871   -   -   -   -   537,555   537,555 
Balance at March 31, 2020  139,314,416 $139,314 $29,719,865 $(8,874,789) $(734,848) $20,249,542 
Balance at December 31, 2020  139,314,416  $139,314  $29,719,865   (8,664,849)  (697,164) $20,497,166 
                        
Balance at June 30, 2021  139,314,416   139,314  $29,719,865   (9,351,983)  (590,412)  19,916,784 
Net loss  -   -   -   (446,313)  -   (446,313)
Foreign currency translation, net tax  -   -   -   -   84,227   84,227 
Balance at December 31, 2020  139,314,416   139,314  $29,719,865   (9,798,296)  (506,185)  19,554,698 

The accompanying notes are an integral part of these consolidated interim financial statements.

1.Nature and Continuance of Operations4

 

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 MarchDecember 31, 2021 and for the ninesix 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 $765,161$354,673 and $508,053$446,313 for the ninethree and six months ended MarchDecember 31, 2021, and 2020, respectively. As of MarchDecember 31, 2021, it had a negative working capital deficiency of $3,927,343$ 6,643,563 while it had a negative working capital deficiency of $4,464,602$6,345,430 at June 30, 2020.2021.

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

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. The Company’s fiscal year end is June 30.

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 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.

6

 

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 on July 1, 2018.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. Theresidences and business apartment service. For the senior living industry, the Company recognizes resident fees and services, other than move-in fees, dailymonthly as services are provided. Under

Shanghai Hongfu entered a series leasing contracts with Shanghai Jinhong Business Hotel Co., Ltd. (“Shanghai Jinhong”) since November 2020, who subleases senior rooms, auxiliary building, property facilities and office spaces of the properties located at Zhangjiang, Shanghai from Shanghai Hongfu for five to fifteen years. The Company recognize the rental income based on the lease terms using straight-line method under ASC 606,842.

Contract A: On November 2020 and on April 2021 which amended on July 2021, the patternCompany contracted with Shanghai Jinhong to lease a total 130 rooms for five years and timingauto renew for another five years if no party in default pursuant to the contract terms. Shanghai Jinhong subleases the rooms to the single independent resident and operates as business apartments. The initial room rental fee was around $6,200 annum for the first three years and $6,400 for the remaining terms. As of recognitionDecember 31, 2021, Shanghai Hongfu has delivered 60,30 and 30 rooms to Shanghai Jinhong pursuant to the lease contracts on February, September and November 2021, respectively.

Contract B: On April 2021 and amended on July 2021, the Company entered a contract with Shanghai Jinhong to lease the auxiliary building including retail spaces along the street for ten years for the average yearly rent of $158,910 (approximately RMB 1 million).

Contract C: On July 2021, supplementary agreement of contract A entered, that Shanghai Jinhong will reconstruct the parking lot in order to increase the packing space to 40 and above. Both parties agree that 70% and 30% of the revenue generated from parking lot shared by Shanghai Hongfu and Shanghai Jinhong, respectively. As of December 31, 2021, the renovation project for parking lots has not yet completed.

Contract D: On July 2021, the Company entered a contract with Shanghai Jinhong to lease the facility area, including a room, gym, office, conference room & facilities for 15 years with eight-month-free rent holiday. The average annum rental income from assisted living facility is consistentaround $12,000.

Contract E: On October 2021, the Company entered a contract with the prior accounting model.Shanghai Jinhong to lease an 500 meters square area, which can be used as office, conferences &dorms for 15 years with eight-month rent holiday. The average annual rental income is around $37,600.

7

Recently issued accounting pronouncements adopted

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02 (Topic 842) “Leases.” Topic 842 supersedes the lease recognition requirements in Accounting Standards Codification (“ASC”) Topic 840 “Leases.” Under Topic 842, lessees are required to recognize a right-of-use asset and a lease liability for substantially all leases. Leases will continue to be classified as either finance or operating. Topic 842 is effective for annual reporting periods and interim periods within those years beginning after December 15, 2018 with early adoptions permitted. The Company adopted the new standard July 1, 2019. As part of the adoption of ASU 2016-02, the Company made an accounting policy election that will not recognizing leases with an initial term of 12 months or less on the consolidated balance sheet. The Company only has one month-to-month office lease since July 1, 2019. The adoption of this new accounting standard did not have an effect on the Company’s consolidated financial statements.

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 impairmenti7mpairment 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.

Recently Issued Accounting Pronouncements Not Yet Adopted

 

In June 2016, the FASB issued ASU 2016-13,20163-13, “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

3.Related party Transactions

Receivable and Payable

Receivable from related parties amounted $41,248$59,625 and $194,812$43,809 at MarchDecember 31, 2021 and June 30, 2020,2021, respectively. Payable to related parties amounted to $3,836,471$ 3,814,279 and $3,537,325$ 3,869,479 at MarchDecember 31, 2021 and June 30, 2020,2021, respectively. The related party amounts are mainly operation advances and funding to support the Company’s daily operations. The payable balances bear no interest and due on demand.

Related party transactions

On July 2018, the Company entered a $172,600 (RMB1,185,000) service agreement with one entity that is under the common control of the Company’s CEO to develop the Company’s website and a BBC shopping APP. The Company capitalized the development cost of the website and APP in the amount of $146,710 based on the completion percentage method. During the year ended June 30, 2020, the APP development was halt and no further progress was made while the website was completed. The Company decided and mutually agreed to terminate the remaining APP development effective on June 30, 2020 due to the strategic direction and macro-economic condition. The unperformed obligation under the service agreement for both parties were canceled semiseriously pursuant to the termination agreement. $43,150 payable to the related party was waived and recognized as other income accordingly as of June 30, 2020.

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 and ninesix months ended MarchDecember 31, 2021, the Company recorded hotel management fee of $37,650$39,223 (RMB 0.25 million)250,000) and $112,952$78,447 (RMB 0.750.5 million), respectively. During the six months ended December 31, 2021, ZHAWF Shanghai also collects some fund on behalf of Shanghai Hongfu due to the restriction of the Company’s bank accounts. Receivable due from and Payable due to ZHAWF Shanghai as of MarchDecember 31, 2021 and June 30, 20202021 were $205,284$52,821 and $102,268,$(144,638), respectively.

Other

During the three and ninesix months ended MarchDecember 31, 2021, the Company recorded management fees of $33,600 $32,440 and $93,600 $66,120 for the service provided by Chief Financial Officer,our ex-CFO, respectively, and $45,880 $30,000 and $101,772 $60,000 for the three and ninesix months ended MarchDecember 31, 2020, respectively. As of MarchDecember 31, 2021 and 2020, the payable due to Chief Financial Officer was $63,833.were $93,387 and $20,000, respectively.

8

 

4.Asset Acquisition

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 $36,991,173$36,991,173 (RMB 233,000,0000233,000,000 at exchange rate of 0.1587)0.1587), which was its approximate fair value as estimated by a third-party appraisal firm. A summary of fair value of the asset as following:

Summary of Fair Value of Asset 

Description Location Amount (1)  Amount 
     (in dollars)   (in RMB) 
Building and building improvements and land use rights Shanghai Pudong New Area Zhangjiang Ziwei Rd No. 372 and No. 376.  30,778,879   193,870,000 
Land use rights Shanghai Chongming District San Shuang Gong Lu No. 4797.  6,212,294   39,130,000 
     36,991,173   233,000,000 

 

Description Location Amount (1)  Amount 
    (in dollars)  (in RMB) 
Building and building improvements and land use rights Shanghai Pudong New Area Zhangjiang Ziwei Rd No. 372 and No. 376.  30,778,879   193,870,000 
Land use rights Shanghai Chongming District San Shuang Gong Lu No. 4797.  6,212,294   39,130,000 
     36,991,173   233,000,000 
(1)The exchange rate of 0.1587 was used to translate the RMB amounts at purchase date.

(1) The exchange rate of 0.1587 was used to translate the RMB amounts at purchase date.

As of MarchDecember 31, 2021, the Company has paid a total of $26,308,419$27,353,690 (RMB 176176.3 million) toward the APA.. On September 1, 2018, the Company obtained the full management and operation rights of the senior hotel property and other assets (Property A) located at Shanghai Pudong New Area pursuant to the Operation Rights Transferring Agreement entered on August 31, 2018 with the seller. Although the Company has the rights to operate the senior living services of Asset A purchased under this agreement, and is currently generating revenues, the Company has not received a deed because the seller is involved in several lawsuits that have restrictions on assets transferring sentenced Shanghai local district courts. The Company has decided not to make any further payments until the asset is legally free of the restrictions. The Seller filed a lawsuitlegal case against Shanghai Hongfu for the contractpayment default and no-payment on installments pursuant to the APA on May 1,July 13, 2020. See Note 8 for more details about the lawsuit.lawsuit and the final court ruling. During the six months ended December 31, 2021, the Company paid $23,273 (RMB150,000) toward the agreement and the remaining unpaid balance was $8,797,244 (RMB56,700,000) as of December 31, 2021.

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 District.Chongming. Asset B has been transferred to Properties and equipment, net during the year ended June 30, 2019.2021. The two acquisitions were accounted for assets acquisitions.

5. Properties and Equipment, net

Schedule of Properties and Equipment, Net

  December 31,  June 30, 
  2021  2021 
Land use rights and land use rights improvements $6,160,168  $6,092,340 
Furniture and office equipment  7,454   7,399 
Capitalized software  42,253   42,253 
Motors and vehicles  21,060   20,801 
Minus: Accumulated depreciation and amortization  (541,090)  (449,061)
Properties and Equipment, net $5,689,845  $5,713,732 

 

On April 16, 2019 the Company entered into a Business Project Investment Agreement (the “Acquisition Agreement”) with Palau Asia Pacific International Aviation and Travel Agency (“Palau Asia-Pacific”) consisting of Palau Asia Pacific Air Management Limited, Global Tourism Management Limited and Global (Guangzhou) Tourism Service Co., Ltd. (collectively the “Project Company”) pursuant to which it will acquire 51% of the issued and outstanding capital stock of Project Company for $8,000,000, representing 49% of the Project .The Company paid $3,000,000 deposit on April 2019 toward the Acquisition Agreement entered and decided to rescind the investment given the ongoing COVID-19 pandemic. The Company entered a rescission agreement (the “Rescission Agreement”) with Palau Asia-Pacific on September 8, 2020. According to the Rescission Agreement, the Company shall return the 51% stock ownership back to Palau Asia-Pacific, who shall deliver to us $285,514 and $733,200 Hong Kong Dollar back, equivalent to $94,605 cash, thus both parties shall release each other from further liabilities under the Acquisition Agreement. As of June 30, 2020, the Company recorded $2,619,881 impairment loss toward $3,000,000 deposit paid pursuant to the Rescission Agreement. $380,119 total residual amount was received by the end of June 30, 2020.

5.Properties and Equipment, net

  March 31,  June 30, 
  2021  2020 
Land use rights and land use rights improvements $5,955,860  $5,531,446 
Furniture and office equipment  6,818   6,130 
Capitalized software  43,426   46,947 
Motors and vehicles  20,513   - 
Minus: Accumulated depreciation and amortization  (410,143)  (260,540)
Properties and Equipment, net $5,616,474  $5,323,983 

For the ninesix months ended MarchDecember 31, 2021 and 2020, the depreciation and amortization expenses were $131,768$86,743 and $112,247,$89,083, respectively, and $42,685$45,013 and $38,276$41,134 for the three months ended MarchDecember 31, 2021 and 2020, respectively.

9

 

6.Capital Stock

As of March 31, 2021 and June 30, 2020, the total issued and outstanding capital stocks was 139,314,416 common shares with a par value of $0.001 per common share. No additional stock issued for three and nine months ended March 31, 2021 and 2020.6.Segment Information

7.Segment Information

The Company operates in one1 industry segment, being the senior housing and retirement services through its wholly owned subsidiary in China. As of MarchDecember 31 2021 and June 30, 2020,31, 2021, the subsidiary had an amount of $15,385,787$15,796,198 and $14,552,394,$15,743,371, respectively, in total assets, excluding inter-company balances, and it generated $130,027$425,485 and $38,432$508,362 for the threesix months ended March 31, 2021 and 2020, respectively, and $638,389 and $376,283 for the nine months ended MarchDecember 31, 2021 and 2020, respectively, in revenue. There was no revenue generated from inter-company transactions.

8.Commitments

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 233,000,000.233,000,000. Payments of $26,306,419$27,353,690 (RMB 176,000,000)176,300,000) have been made through MarchDecember 31, 2021. Due to the Seller of the assets hasis involved in several lawsuits that have restrictions onof assets transferring (i.e. Property A)assets under this purchase agreement sentenced by Shanghai local district courts, the Company has decided not to make remaining payments until the asset is free of the restrictions on May 1, 2020.in June 2019.

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.(“Shanghai Qiaohong” and the seller)“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 76,654,000 (approximately $11,721,154)$10,842,150), including remaining RMB58RMB58 million installments, interest for delayed payment, default penalty, and etc. The lawsuit was filed in a District Court in Shanghai, China. The Company intends to vigorously defend this action. The court had initial opening on August 8, 2020, and the District Court in Shanghai ruled the first verdict (the “First Verdict”) on November 18, 2020 which was in favor of the Plaintiff’s claim - the Company should pay RMB11,140,000RMB11,140,000 penalty along with the lawsuit fee RMB374,415RMB374,415 and the remaining RMB57,000,000RMB57,000,000 installments to consummate the APA. On May 27, 2021, Shanghai No. 2 Intermediate Court entered a verdict of the second trial raised in the January 16, 2020 which supported the first verdict in November 18, 2020. The Court ordered the Company appealedto pay to the verdict by the endplaintiff a total of 2020 and the lawsuit is processing by the High People’s Court so far.RMB 68,400,000.

As of MarchDecember 31 2021, the remaining installments under APA was RMB57,000,000. And for the nine months ended March 31,and June 2021, the Company has fully reserved $1,792,148 (approximate RMB11.5 million) amount$2,737,277 and $2,314,786, respectively, for the lawsuit pursuant to the First Verdict, including penalty for payment in default and lawsuit fee.interest expenses till December 31,2021. Four bank accounts owned by Shanghai Hongfu have been frozen with the cash balance of $2,767 and $638 as of December 31, 2021 and June 30, 2021, respectively.

Subsequently, the Company received a 2nd court executive order from the District Court who froze the 100% ownership of SH QYIT due to non-performance on the court executive order issued pursuant to the First Verdict. SH QYIT owns the land use right in the net amount of $6,160,168 and $6,092,340 as of December 31 and June 30, 2021, respectively.

Lianyuangang Acquisition

 

On October 26, 2020, the Company acquired 10%10% of the issued and outstanding shares (the “Shares”) of Lianyungang Yiheyuan Elderly Services Co., Ltd., a corporation registered in Jiangsu Province, PRC (“LYES”) pursuant to a Securities Purchase Agreement (the “Agreement”). In accordance with the Agreement, HQDA is purchasing the Shares in exchange for 234,845 shares of HQDA’s common stock valued at $1.00$1.00 per share, equivalent to 10% of the initial RMB16, 000,000RMB16,000,000 (approximately USD$2,348,450)2,348,450) registered capital of LYES. LYES operates a unique elderly services business in its local hot spring resort. As of March 31, 2021, the transaction has not yet consummated.

 

As of June 30, 2021, due to the Covid-19 epidemic in China and other reasons from LYES, both parties verbally agreed to stop moving forward the acquisition transaction with no harm to any party of this cooperation. The official termination agreement is expecting to complete by the end of June 2022, and the 234,845 shares of HQDA’s common stock are in the process of cancellation.

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 $50,000. $50,000. In accordance with the settlement, the Company is obligated to pay the $50,000 fine as follows: $10,000 within 14 days of the entry of the Order, $15,000 within 180 days of the entry of the order, $12,500 within 270 days of the entry of the Order and $12,500 days of the entry of the Order. As of MarchDecember 31, and June 30, 2021, $40,000 $12,500 and $25,000 payable waswere outstanding toward the settlement. During the six months ended December 31,2021, $15,000 has been paid toward the settlement, and subsequently $12,500 has been paid on January 28, 2022 as well.

10

 

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 month term for the office space lease and a 1-year apartment lease for employee residence.

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 5.75%. Rental expenses for the three and six months ended December 31, 2020 were $6,120 and $3,060 respectively. Total cash flows paid toward operation lease were $11,326 and $6,120 for the six months ended December 31, 2021 and 2021, respectively. As of June 30, 2021, the Company had Right-of-use assets and operating lease liabilities in the amounts of $73,368 and $64,488, respectively.

On October 15, 2021, SHES entered an early termination agreement with the count party of the lease agreement, who is the sublessor of the office space and currently having some arguments with the landlord. Pursuant to the early termination agreement, the lease payment obligation for SHES was terminated on September 3, 2021 and the sublessor will return SHES’s security deposit and unusual lease payment of September 2021 by November 19, 2021. As result of the early termination agreement, $8,174 and $11,511 rent expenses were recorded for the three and six months ended December 31, 2021, respectively.

The Company also has an office lease located at Rosemead, California with monthly rent of $1,020 at month-to-month basis. The Company cancelled the office lease on October 2021.

9.Subsequent event

On January 12, 2022, pursuant to the 2nd court executive order, an agreement was entered between Shanghai Hongfu and Shanghai Qiaohong, the Plaintiff, pursuant to which, Shanghai Hongfu will take the land use rights owned by SH QYIT to the judicial auction. The proceeds of the auction or the second judicial auction price will be applied to the remaining purchase amount owned by the Company to the Plaintiff, depending on whether the auction is successfully completed. Shanghai Hongfu also agreed to pay the Plaintiff in four installments totaling RMB 3.6 million or about USD$567,000 in 2022, which will be generated from the rental income of the Property A to offset partial arrears to the Plaintiff. Based on the above commitment, the Plaintiff agreed to file the legal request to the Pudong District Court, China to unfreeze the bank accounts owned by Shanghai Hongfu, and lift restrictions on its legal representative. As of March 17, 2022, the above legal requests have been granted by the Pudong District Court, China.

9.Subsequent Event11

 

None

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are “forward-looking statements”, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing.

Forward-looking statements may include the words “may,” “could,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Except for our ongoing obligation to disclose material information as required by the federal securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement.

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. Some of the key factors impacting these risks and uncertainties include, but are not limited to:

●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.

Unless expressly indicated or the context requires otherwise, 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., a Nevada corporation.

FORWARD-LOOKING STATEMENTSGeneral

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 areoffice is located at Suite J, 8780 Valley Blvd., Rosemead, California 91770.372 Ziwei Road, Pudong New District Shanghai, P.R. China. Our telephone number is (626) 877-8187.+86 15358018888.

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 March 31  Three months ended December 31 
 2021  2020  Changes  2021 2020 Changes 
              
Revenue $130,027  $38,432  $91,595  $281,169  $352,922  $(71,753)
                        
Operating costs:                        
Cost of food and beverages  27,298   121,481   (94,183)  35,085   52,554   (17,469)
General and administrative cost  212,637   127,000   85,637 
Selling, general and administrative expenses  158,950   172,560   (13,610)
Depreciation and amortization  42,685   38,276   4,409   45,013   41,134   3,879 
  282,620   286,757   (4,137)
Operating loss $(152,593) $(248,325) $95,732 
Total operating expenses  239,048   266,248   (27,200)
Operating income $42,121  $86,674  $(44,553)

 Nine months ended March 31  Six months ended December 31 
 2021  2020  Changes  2021 2020 Changes 
              
Revenue $638,389  $376,283  $262,106  $425,485  $508,362  $(82,877)
                        
Operating costs:                        
Cost of food and beverages  126,706   121,479   5,227   62,405   99,409   (37,004)
General and administrative cost  614,465   649,856   (35,391)
Selling, general and administrative expenses  323,457   401,827   (78,370)
Depreciation and amortization  131,768   112,247   19,521   86,743   89,083   (2,340)
  872,939   883,582   (10,643)
Total operating expenses  472,605   590,319   (117,714)
Operating loss $(234,550) $(507,299) $(272,749) $(47,120) $(81,957) $34,837 

Three months ended MarchDecember 31, 2021 compared to three months ended MarchDecember 31, 2020

The revenue for the three months ended MarchDecember 31, 2021 increased by $91,595decreased $71,753 compared with the same period ended March 31, 2020.December 31,2020. The increase isdecrease was mainly due to the impactCompany adjusted partial of COVID-19 small outbreak in Shanghai for three months ended March 31, 2020 while the impact was relievedbusiness 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 total operating income amounted $42,121 for the three months ended MarchDecember 31, 2021.

The decrease of as compared to operating loss amounted $95,732income $86,674 for the three months ended MarchDecember 31, 2021 as compared to the same period ended in 20202020. The reason was mainly due to the increase of revenue of $91,595, as both the impact of COVID-19 relieved and the Company raised the price of the unit room price whiledecreased along with the operating cost remain constant for three months ended March 31, 2021 and 2020.

Excluding the non-cash expenses of depreciation and amortization, the operating loss would have been $109,909 and $210,049,reduced for the three months ended Marchon December 31, 2021and 2020, respectively.2021.

NineSix months ended MarchDecember 31, 2021 compared to ninesix months ended MarchDecember 31, 2020

The revenue for the ninesix months ended March 31,2021 increased by $262,106December 31, 2021 decreased $82,877 compared with the same period ended MarchDecember 31,2020. The increase is mainly due to the impact of COVID-19 small outbreak in Shanghai in the first quarter of 2020, and the unit price of each hotel rooms increased, which drives the revenue increased for nine months ended March 31, 2021.

The decrease of operating loss amounted $262,106 for the nine months ended March 31,2021 as compared to the same period ended in 2020 was mainly due to the increase of revenue of 262,102, as both the impact of COVID-19 relieved and the Company raised the priceadjusted partial of the unit room price whilebusiness model, (i.e. subleases the rooms to the single independent resident and operates as business apartments).

The total operating cost remain constantloss amounted $47,120 for ninethe six months ended MarchDecember 31, 2021 and 2020.

Excluding the non-cash expenses of depreciation and amortization, theas compared to operating loss would have been $102,782 and $395,052,$81,957 for the ninesix months ended MarchDecember 31, 20212020, a decreasing of $34,837. The reason was mainly due to the decreasing of selling, general and 2020, respectively.administrative expenses.

Liquidity and Capital Resources

On MarchAs of December 31, 2021, we had cash on hand of $54,118$18,862 and liabilities of $5,869,085.$6,968,455. We will require additional funding in order to cover all anticipated administration costs and to proceed with the Asset Purchase Agreement executed on April 2, 2018unpaid balance of APA agreement as well as the interest and to seek out additional travel agents for similar contracts.penalty. We also 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.instalments. Payments of $26,306,419$227,353,690 (RMB 176,000,000)176,300,000) have been made through MarchDecember 31, 2021 and the remainder of $8,675,799 (RMB57,000,000) remains outstanding.$8,797,244 (RMB56,700,000) is going to pay based the schedule we entered with SHQHZY on January 2022.

14

 

Employees

At present, we have 14 employees, other than our current officers and directors, who devote their time as required to our business operations.

Off-balance Sheet Arrangements

As of March 31, 2021, weWe have no off-balance sheet arrangements that would require disclosure.have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

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 doAs a “smaller reporting company” we are 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.required to provide this information under this item pursuant to Regulation S-K.

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, thereThere were no significant changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or in other factorsRule 15d-15 under the Exchange Act that occurred during our last fiscalthe quarter ended December 31, 2021 that havehas materially affected, or areis reasonably likely to materially affect, our internal control over financial reporting.

15

 

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.

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 except below:

On May 1, 2020, a lawsuit was filed against the Company and its wholly-owned subsidiary, Shanghai Hongfu (collectively the “Company”), 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 iswas alleging damages of RMB 76,654,000 (approximately $10,842,150), including remaining RMB58 million installments, interest for delayed payment, default penalty, and etc. The lawsuit was filed in a District Court in Shanghai, China.

On November 18, 2020, there was a first verdict by the District Court in Shanghai, which was in favor of the Plaintiff’s claim, the Company should pay the penalty RMB11,140,000 along with the lawsuit fee RMB374,415 and the rest of RMB57,000,000 for the completion of the APA.

On May 27, 2021, Shanghai No. 2 Intermediate Court entered a verdict of the second trial raised in the January 16, 2020 which supported the first verdict in November 18, 2020. The Court ordered the Company appealedto pay to the plaintiff a total of RMB 68,400,000. Subsequently, the Company received a 2nd court executive order from the District Court who froze the 100% ownership of SH QYIT due to non-performance on the court executive order issued pursuant to the First Verdict. SH QYIT owns the land use right in the net amount of $6,160,168 and $6,092,340 as of December 31 and June 30, 2021, respectively.

On January 12, 2022, pursuant to the 2nd court executive order, an agreement was entered between Shanghai Hongfu and Shanghai Qiaohong, the Plaintiff, pursuant to which, Shanghai Hongfu will take the land use rights owned by SH QYIT to the judicial auction. The proceeds of the auction or the second judicial auction price will be applied to the remaining purchase amount owned by the end of 2020 and the lawsuit is processing in the High People’s Court so far.

Securities and Exchange Commission Settlement

Pursuant to an Order dated April 29, 2021, (the “Order”) the Securities and Exchange Commission (SEC) approved an offer to settle the administrative proceedings against the Company pursuant to Section 21C of the Securities Exchange Act of 1934 (“Exchange Act”). These proceedings arose out of the violation of the Exchange Act Rule 12b-25.

On two occasions, specifically, November 2019 and February 2020, the Company violated Rule 12b-25 by filing a Form 12b-25 with the Commission by failing to disclose in sufficient detail why its Form 10-Qs could not be timely filed

Pursuant to the administrative proceeding instituted byPlaintiff, depending on whether the SEC, the Company settled for a fine of $50,000 andauction is successfully completed. Shanghai Hongfu also agreed to cease and desist from any future violations of Sections 13(a) of the Exchange Act and Rule 12b-25 thereunder. In accordance with the settlement, the Company is obligated to pay the $50,000 fine as follows: $10,000 within 14 daysPlaintiff in four installments totaling RMB 3.6 million or about USD$567,000 in 2022, which will be generated from the rental income of the entryProperty A to offset partial arrears to the Plaintiff. Based on the above commitment, the Plaintiff agreed to file the legal request to the Pudong District Court, China to unfreeze the bank accounts owned by Shanghai Hongfu, and lift restrictions on its legal representative. As of March 17, 2022, the Order, $15,000 within 180 days ofabove legal requests have been granted by the entry of the order, $12,500 within 270 days of the entry of the Order and $12,500 days of the entry of the Order.Pudong District Court, China.

ITEM 1A. RISK FACTORS

Not ApplicableAs a “smaller reporting company”, we are not required to provide this information under this item pursuant to Regulation S-K.

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.None

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4 – SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSMINE SAFETY DISCLOSURES

NoneNot applicable.

ITEM 5 – OTHER INFORMATION

None

16

 

None

ITEM 6 – EXHIBITS

The following exhibits are furnished as required by Item 601 of Regulation S-B.

Exhibit No.Exhibit Title
3(i)31.1*Articles of Incorporation*
3(ii)Bylaws *
31.aCertificate of CEO as Required by Rule 13a-14(a)/15d-14
31.b31.2*Certificate of CFO as Required by Rule 13a-14(a)/15d-14
32.a32.1*Certificate of CEO and CFO as Required by Rule 13a-14(b) and Rule 15d-14(b) (17 CFR 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code

*101.INSIncluded in our original SB-2 Registration Statement filed on December 9, 2004.Inline XBRL Instance Document
**Included in our SB-2 Amended Registration Statement filed on October 19, 2005.
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURE

* Filed herewith.

17

 

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.
 
May 17, 2021March 22, 2022 BY:/s/ Ziyun XuMeichen Chen
Date Ziyun Xu,Meichen Chen, Interim Chief Executive Officer
 
May 17, 2021March 22, 2022 BY:/s/ Jimmy ZhouMeichen Chen
Date Jimmy Zhou,Meichen Chen, Chief Financial Officer

1718