ITEM
1. CONSOLIDATED FINANCIAL STATEMENTS
HQDA
Elderly Life Network Corp.
Consolidated
Balance Sheets
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March 31,
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June 30,
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2021
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2020
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(Unaudited)
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ASSETS
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Current assets:
|
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|
|
|
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Cash
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$
|
54,118
|
|
|
$
|
119,955
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|
Accounts and other receivables
|
|
|
54,228
|
|
|
|
52,531
|
|
Receivable - related parties
|
|
|
41,248
|
|
|
|
194,812
|
|
|
|
|
149,594
|
|
|
|
367,298
|
|
|
|
|
|
|
|
|
|
|
Deposits for assets purchase
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20,352,559
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|
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19,662,519
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|
Properties and equipment, net
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5,573,048
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|
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|
5,277,036
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|
Capitalized software, net
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|
|
43,426
|
|
|
|
46,947
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|
Total assets
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|
$
|
26,118,627
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|
|
$
|
25,353,800
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|
|
|
|
|
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LIABILITIES
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Current liabilities:
|
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|
|
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|
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Accounts payable and accrued liabilities
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$
|
80,960
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|
|
$
|
52,217
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|
Unearned revenue
|
|
|
77,725
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|
|
|
32,466
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|
Litigation reserve
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|
|
1,792,148
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|
|
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1,209,892
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|
Payable to related parties
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|
|
3,836,471
|
|
|
|
3,537,325
|
|
|
|
|
5,787,304
|
|
|
|
4,831,900
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|
|
|
|
|
|
|
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Customer deposits – long-term
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81,781
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|
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|
7,068
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Total liabilities
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5,869,085
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|
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4,838,968
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Commitments and contingencies – Note 8
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STOCKHOLDERS’ DEFICIT
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Preferred stock: authorized 10,000,000 shares of $0.001 par value; issued and outstanding, none
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-
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-
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Common stock: authorized 200,000,000 shares of $0.001 par value; 139,314,416 shares issued and outstanding,
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139,314
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|
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139,314
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|
Additional paid-in capital
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29,719,865
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|
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29,719,865
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Accumulated other comprehensive loss
|
|
|
(734,848
|
)
|
|
|
(1,234,719
|
)
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Accumulated deficit
|
|
|
(8,874,789
|
)
|
|
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(8,109,628
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)
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Total stockholders’ equity
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20,249,542
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20,514,832
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Total liabilities and stockholders’ equity
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$
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26,118,627
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$
|
25,353,800
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The
accompanying notes are an integral part of these consolidated interim financial statements.
HQDA
Elderly Life Network Corp.
Consolidated
Statements of Comprehensive Income (loss)
(Unaudited)
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Three months ended March 31,
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Nine months ended March 31,
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2021
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2020
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2021
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2020
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Revenue
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$
|
130,027
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$
|
38,432
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$
|
638,389
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$
|
376,283
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Operating costs:
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Cost of food and beverages
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27,298
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121,481
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126,706
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121,479
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Selling, general and administrative expenses
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212,637
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127,000
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614,465
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649,856
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Depreciation and amortization
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42,685
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38,276
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131,768
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112,247
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Total operating expenses
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282,620
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286,757
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872,939
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|
883,582
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Operating loss
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(152,593
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)
|
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(248,325
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)
|
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(234,550
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)
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(507,299
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)
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Other income (expense):
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|
|
|
|
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Litigation reserve
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(9,316
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)
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|
-
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(484,264
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)
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-
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Interest Income
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|
21
|
|
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|
118
|
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|
50
|
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|
118
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Other income (expense), net
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(48,052
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)
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|
724
|
|
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|
(46,397
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)
|
|
|
(872
|
)
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Net loss
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|
$
|
(209,940
|
)
|
|
$
|
(247,483
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)
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|
$
|
(765,161
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)
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$
|
(508,053
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)
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Foreign currency translation, net tax
|
|
|
(37,684
|
)
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|
(141,142
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)
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499,871
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(330,710
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)
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Comprehensive income (loss)
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$
|
(247,624
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)
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$
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(388,625
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)
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$
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(265,290
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)
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$
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(838,763
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)
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Earnings per share
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|
|
|
|
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Basic and diluted loss per share
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$
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(0.002
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)
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$
|
(0.002
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)
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$
|
(0.005
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)
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$
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(0.004
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)
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Weighted average common shares outstanding
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139,314,416
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139,314,416
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|
|
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139,314,416
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|
|
|
139,314,416
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|
The
accompanying notes are an integral part of these consolidated interim financial statements.
HQDA
Elderly Life Network Corp.
Consolidated
Statements of Cash Flows
(Unaudited)
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|
Nine months ended March 31
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2021
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|
2020
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|
Cash flow from operating activities
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|
|
|
|
|
|
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Net loss
|
|
$
|
(765,161
|
)
|
|
$
|
(508,053
|
)
|
Adjustments to reconcile loss to net cash provided by (used in) operating activities:
|
|
|
|
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|
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|
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Depreciation and amortization
|
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|
131,768
|
|
|
|
112,248
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|
Litigation reserve
|
|
|
484,263
|
|
|
|
-
|
|
Changes in operating assets and liabilities:
|
|
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|
|
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Decrease in receivables
|
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|
2,158
|
|
|
|
265,614
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Increase (decrease) in related party receivables
|
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|
37,446
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|
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|
(8,591
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)
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Increase (decrease) in accounts payable and accrued liabilities
|
|
|
27,049
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|
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|
(20,746
|
)
|
Increase in unearned revenues
|
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|
62,544
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|
|
|
-
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|
Increase of customer deposits – long-term
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|
53,163
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|
|
|
-
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|
Net cash provided by (used in) operating activities
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33,230
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|
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|
(159,528
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)
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Cash flow from investing activities
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|
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Deposits paid for assets purchase
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|
-
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|
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|
(1,859,407
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)
|
Purchase of equipment
|
|
|
(20,513
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)
|
|
|
-
|
|
Net cash used in investing activities
|
|
|
(20,513
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)
|
|
|
(1,859,407
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)
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|
|
|
|
|
|
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Cash flow from financing activities
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|
|
|
|
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(Decrease) increase in related party payable
|
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|
(80,942
|
)
|
|
|
1,664,259
|
|
Net cash (used in) provided by financing activities
|
|
|
(80,942
|
)
|
|
|
1,664,259
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes
|
|
|
2,388
|
|
|
|
31,424
|
|
Decrease in cash
|
|
|
(65,837
|
)
|
|
|
(323,252
|
)
|
Cash, beginning
|
|
|
119,955
|
|
|
|
350,734
|
|
Cash, ending
|
|
$
|
54,118
|
|
|
$
|
27,482
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Income taxes paid
|
|
$
|
-
|
|
|
$
|
800
|
|
The
accompanying notes are an integral part of these consolidated interim financial statements.
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, 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at June 30, 2020
|
|
|
139,314,416
|
|
|
$
|
139,314
|
|
|
$
|
29,719,865
|
|
|
$
|
(8,109,628
|
)
|
|
$
|
(1,234,719
|
)
|
|
$
|
20,514,832
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(765,161
|
)
|
|
|
-
|
|
|
|
(765,161
|
)
|
Foreign
currency translation, net tax
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
499,871
|
|
|
|
499,871
|
|
Balance
at March 31, 2020
|
|
|
139,314,416
|
|
|
$
|
139,314
|
|
|
$
|
29,719,865
|
|
|
$
|
(8,874,789
|
)
|
|
$
|
(734,848
|
)
|
|
$
|
20,249,542
|
|
The
accompanying notes are an integral part of these consolidated interim financial statements.
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 March 31, 2021 and for the nine 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 and $508,053 for the nine months ended March 31, 2021 and 2020, respectively. As of March
31, 2021, it had a negative working capital deficiency of $3,927,343 while it had a negative working capital deficiency of $4,464,602
at June 30, 2020.
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. 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.
Certain
amounts in prior periods have been reclassified to conform with current period presentation.
Revenue
recognition
The
Company adopted ASC 606 using the modified retrospective method on July 1, 2018. 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. The Company recognizes resident fees
and services, other than move-in fees, daily as services are provided. Under ASC 606, the pattern and timing of recognition of income
from assisted living facility is consistent with the prior accounting model.
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.
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 $41,248 and $194,812 at March 31, 2021 and June 30, 2020, respectively. Payable to related parties amounted
to $3,836,471 and $3,537,325 at March 31, 2021 and June 30, 2020, 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 nine months ended March 31, 2021, the Company recorded hotel management fee of $37,650 (RMB 0.25 million) and $112,952 (RMB
0.75 million), respectively. Payable due to ZHAWF Shanghai as of March 31, 2021 and June 30, 2020 were $205,284 and $102,268, respectively.
Other
During
the three and nine months ended March 31, 2021, the Company recorded management fees of $33,600 and $93,600 for the service provided
by Chief Financial Officer, respectively, and $45,880 and $101,772 for the three and nine months ended March 31, 2020, respectively.
As of March 31, 2021, the payable due to Chief Financial Officer was $63,833.
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 (RMB 233,000,0000 at exchange rate of 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:
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.
As
of March 31, 2021, the Company has paid a total of $26,308,419 (RMB 176 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 lawsuit against Shanghai Hongfu for the contract default and
no-payment on installments pursuant to the APA on May 1, 2020. See Note 8 for details about the lawsuit.
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. Asset B
has been transferred to Properties and equipment, net during the year ended June 30, 2019. The two acquisitions were accounted for assets
acquisitions.
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 nine months ended March 31, 2021 and 2020, the depreciation and amortization expenses were $131,768 and $112,247, respectively,
and $42,685 and $38,276 for the three months ended March 31, 2021 and 2020, respectively.
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.
The
Company operates in one industry segment, being the senior housing and retirement services through its wholly owned subsidiary
in China. As of March 31, 2021 and June 30, 2020, the subsidiary had an amount of $15,385,787 and $14,552,394, respectively,
in total assets, excluding inter-company balances, and it generated $130,027 and $38,432 for the three months ended March 31,
2021 and 2020, respectively, and $638,389 and $376,283 for the nine months ended March 31, 2021 and 2020, respectively,
in revenue. There was no revenue generated from inter-company transactions.
The
Company entered into the APA to acquire two properties in Shanghai totaling RMB 233,000,000. Payments of $26,306,419 (RMB 176,000,000)
have been made through March 31, 2021. Due to the Seller of the assets has involved in several lawsuits that have restrictions on assets
transferring (i.e. Property A) 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.
On
May 1, 2020, a lawsuit was filed 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 76,654,000 (approximately $11,721,154),
including remaining RMB58 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 on November 18, 2020, which was in favor of the Plaintiff’s claim - the
Company should pay RMB11,140,000 penalty along with the lawsuit fee RMB374,415 and the remaining RMB57,000,000 installments to consummate
the APA. The Company appealed the verdict by the end of 2020 and the lawsuit is processing by the High People’s Court so far.
As
of March 31, 2021, the remaining installments under APA was RMB57,000,000. And for the nine months ended March 31, 2021, the Company
has fully reserved $1,792,148 (approximate RMB11.5 million) amount for the penalty and lawsuit fee.
On
October 26, 2020, the Company acquired 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 per share, equivalent to 10% of the initial RMB16, 000,000 (approximately USD$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.
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. 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 March 31, 2021, $40,000 payable was outstanding toward the settlement.
None
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.
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.
Results
of Operations
|
|
Three months ended March 31
|
|
|
|
2021
|
|
|
2020
|
|
|
Changes
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
130,027
|
|
|
$
|
38,432
|
|
|
$
|
91,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of food and beverages
|
|
|
27,298
|
|
|
|
121,481
|
|
|
|
(94,183
|
)
|
General and administrative cost
|
|
|
212,637
|
|
|
|
127,000
|
|
|
|
85,637
|
|
Depreciation and amortization
|
|
|
42,685
|
|
|
|
38,276
|
|
|
|
4,409
|
|
|
|
|
282,620
|
|
|
|
286,757
|
|
|
|
(4,137
|
)
|
Operating loss
|
|
$
|
(152,593
|
)
|
|
$
|
(248,325
|
)
|
|
$
|
95,732
|
|
|
|
Nine months ended March 31
|
|
|
|
2021
|
|
|
2020
|
|
|
Changes
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
638,389
|
|
|
$
|
376,283
|
|
|
$
|
262,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of food and beverages
|
|
|
126,706
|
|
|
|
121,479
|
|
|
|
5,227
|
|
General and administrative cost
|
|
|
614,465
|
|
|
|
649,856
|
|
|
|
(35,391
|
)
|
Depreciation and amortization
|
|
|
131,768
|
|
|
|
112,247
|
|
|
|
19,521
|
|
|
|
|
872,939
|
|
|
|
883,582
|
|
|
|
(10,643
|
)
|
Operating loss
|
|
$
|
(234,550
|
)
|
|
$
|
(507,299
|
)
|
|
$
|
(272,749
|
)
|
Three
months ended March 31, 2021 compared to three months ended March 31, 2020
The
revenue for the three months ended March 31, 2021 increased by $91,595 compared with the same period ended March 31, 2020. The increase
is mainly due to the impact of COVID-19 small outbreak in Shanghai for three months ended March 31, 2020 while the impact was
relieved for the three months ended March 31, 2021.
The
decrease of operating loss amounted $95,732 for the three months ended March 31, 2021 as compared to the same period ended in 2020 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 while 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, for the
three months ended March 31, 2021and 2020, respectively.
Nine
ended March 31, 2021 compared to nine months ended March 31, 2020
The
revenue for the nine months ended March 31,2021 increased by $262,106 compared with the same period ended March 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
price of the unit room price while the operating cost remain constant for nine months ended March 31, 2021 and 2020.
Excluding
the non-cash expenses of depreciation and amortization, the operating loss would have been $102,782 and $395,052, for the nine months
ended March 31, 2021 and 2020, respectively.
Liquidity
and Capital Resources
On
March 31, 2021, we had cash on hand of $54,118 and liabilities of $5,869,085. 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, 2018 and to seek out additional
travel agents for similar contracts. We also intend to 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 $26,306,419 (RMB 176,000,000) have been made
through March 31, 2021 and the remainder of $8,675,799 (RMB57,000,000) remains outstanding.
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, we have no off-balance sheet arrangements that would require disclosure.
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.