ITEM
1. CONSOLIDATED FINANCIAL STATEMENTS
HQDA
Elderly Life Network Corp.
Consolidated
Balance Sheets
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)
The
accompanying notes are an integral part of these consolidated interim financial statements.
HQDA
Elderly Life Network Corp.
Consolidated
Statements of Cash Flows
(Unaudited)
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)
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 September 30, 2021 and for the three months ended have been prepared on a going
concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of
business. The Company reported a net loss of $91,640 and $343,554 for the three months ended September 30, 2021 and 2020, respectively.
As of September 30, 2021, it had a negative working capital deficiency of $ 6,393,111 while it had a negative working capital deficiency
of $6,345,430 at June 30, 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
Principles
of Consolidation
The
accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America (GAAP). The Company’s consolidated financial statements include the accounts of the Company and its wholly
owned subsidiary, Shanghai Hongfu Health Management Ltd. All inter-company balances have been eliminated upon consolidation. This disclosure
should be read in conjunction with our audited financial statements for the year ended June 30, 2021, including footnotes, contained
in our Annual Report on Form 10-K,
Use
of Estimates
The
preparation of financial statements in conformity with US GAAP requires the Company’s management to make estimates and assumptions
that affect the amounts of assets and liabilities, the identification and disclosure of impaired assets and contingent liabilities at
the date of the financial statements, and the reported amounts of expenses during the reporting period. Actual results could differ from
those estimates.
Foreign
currency translation
The
United States dollar (“USD”) is the Company’s reporting currency. The Company’s wholly owned subsidiary, Shanghai
Hongfu is located in Shanghai, China. The net sales generated, and the related expenses directly incurred from the operations are denominated
in local currency, Renminbi (“RMB”). The functional currency of the subsidiary is generally the same as the local currency.
Assets
and liabilities measured in RMB are translated into USD at the prevailing exchange rates in effect as of the financial statement date
and the related gains and losses, net of applicable deferred income taxes, are reflected in accumulated other comprehensive income (loss)
in its consolidated balance sheets. Income and expense accounts are translated at the average exchange rate for the period. The Company
has not, to the date of these consolidated financial statements, entered into derivative instruments to offset the impact of foreign
currency fluctuations.
Certain
amounts in prior periods have been reclassified to conform with current period presentation.
Revenue
recognition
On
July 1, 2018 the Company adopted Accounting Standards Update (“ASU”) 2014-09, Accounting Standards Codification Topic 606,
Revenue from Contracts with Customers (ASC 606), which is a comprehensive new revenue recognition model that requires revenue
to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected
to be received in exchange for those goods or services. The Company adopted ASC 606 using the modified retrospective method. The Company
evaluated its revenue streams to identify whether it would be subject to the provisions of ASC 606 and any differences in timing, measurement
or presentation of revenue recognition. The Company’s main source of revenue is generated from operating senior living residences
and business apartment service. For the senior living industry, the Company recognizes resident fees and services, other than move-in
fees, monthly as services are provided.
On
November 2020 and amended on February 2021, the Company contracted with Shanghai Jinhong Business Hotel Co., Ltd. (SHJH) for leasing
60 rooms as a whole for five years and auto renew for another five years if no party in default pursuant to the contract terms. SHJH
subleases the rooms to the single independent resident and operates as business apartments. On April 2021, the Company entered another
contract with SHJH to lease the auxiliary building including retail spaces along the street for ten years for the average yearly rent
of $191,441 (RMB 1,268,543). The Company recognize the rental income based on the lease terms using straight-line method under ASC 842.
Unearned
revenue
Unearned
revenue is recorded when payments are received in advance of performing our services obligations and is recognized over the service period.
Unearned revenue is primarily related to prepayments of monthly facility and service fees.
Recently
issued accounting pronouncements adopted
In
January 2017, the FASB issued ASU No. 2017-04, “Intangibles and Other (Topic 350): Simplifying the Test for Goodwill Impairment”,
which eliminates the requirement to calculate the implied fair value of goodwill, but rather requires an entity to record an impairment
charge based on the excess of a reporting unit’s carrying value over its fair value. This amendment is effective for annual or
interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company adopted ASU No. 2017-04 on July 1, 2020
and the adoption did not have an impact on the Company’s interim financial position and results of operations.
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 $63,589
and $43,809 at
September 30, 2021 and June 30, 2021, respectively. Payable to related parties amounted to $3,732,644 and
$ 3,869,479 at
September 30, 2021 and June 30, 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
September 1, 2018, the Company entered a three-year cooperation agreement with Zhonghuiai Wufu (Shanghai) Hotel Management Co., Ltd.,
(“ZHAWF Shanghai”), a related party, with respect to the daily operation and management of the senior hotel purchased on
April 2018. According to the agreement, the Company shall pay RMB one million per year to ZHAWF Shanghai for the service provided. The
Company amended the execution date of the cooperation agreement from September 1, 2018 to January 1, 2019 with three-year term. For the
three months ended September 30, 2021 and 2020, the Company recorded hotel management fee of $38,725 (RMB 0.25 million) and $ 24,920
(RMB 0.25 million), respectively. Payable due to ZHAWF Shanghai as of September 30 and June 30, 2021 was $26,793 and $102,268 and $144,638,
respectively .
Other
During
the three ended September 30, 2021, and 2020 the Company recorded management fees of $33,680 and $24,920 for the service provided by
Chief Financial Officer, respectively. As of September 30, 2021 and 2020, the payable due to Chief Financial Officer were $65,644 and
$20,000, respectively.
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 (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:
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
|
|
|
(1)
|
The
exchange rate of 0.1587 was used to translate the RMB amounts at purchase date.
|
As
of September 30, 2021, the Company has paid a total of $27,353,690
(RMB 176.3
million). 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 legal case against Shanghai Hongfu for the payment default pursuant to the APA on July 13, 2020. See Note 8 for more
details about the lawsuit and the final court ruling. During the three months ended September 30, 2021, the Company paid $23,273
toward the agreement and the remaining unpaid
balance was $8,797,244 (RMB56,700,000)
as of September 30, 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. Asset B has been
transferred to Properties and equipment, net during the year ended June 30, 2021. The two acquisitions were accounted for assets
acquisitions.
5. Properties and Equipment, net
Schedule
of Properties and Equipment, Net
|
|
|
September 30,
|
|
|
June 30,
|
|
|
|
|
2021
|
|
|
2021
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Land use rights and improvements
|
|
$
|
6,071,185
|
|
|
$
|
6,092,340
|
|
|
Furniture and office equipment
|
|
|
7,347
|
|
|
|
7,399
|
|
|
Capitalized software
|
|
|
42,253
|
|
|
|
42,253
|
|
|
Motors and vehicles
|
|
|
20,756
|
|
|
|
20,801
|
|
|
Minus: Accumulated depreciation and amortization
|
|
|
(489,300
|
)
|
|
|
(449,061
|
)
|
|
Properties and Equipment, net
|
|
$
|
5,652,241
|
|
|
$
|
5,713,732
|
|
For
the three ended September 30, 2021 and 2021, the depreciation and amortization expenses were $41,730 and $57,596, respectively.
6. Segment Information
The
Company operates in one
industry segment, being the senior housing and retirement services
through its wholly owned subsidiary in China. As of September 30 and June 30, 2021, the subsidiary had an amount of $15,686,163
and $15,743,371,
respectively, in total assets. There was no
revenue generated from inter-company transactions
for three months ended September 30, 2021 and 2020.
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.
Payments of $27,353,690
(RMB 176,300,000)
have been made through September 30, 2021. Due to the Seller of the
assets is involved in several lawsuits that have restrictions of assets transferring 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
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. 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 $10,842,150), including remaining RMB58 million installments, interest for delayed payment, default penalty, and etc.
The District Court ruled the first verdict (the “First Verdict”) on November 18, 2020 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. 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 to pay to the plaintiff a total of RMB 68,400,000.
As
of September 30 and June 2021, the Company reserved $2,306,749 and $2,314,786, respectively, in connection to the lawsuit pursuant to
the First Verdict. Four bank accounts owned by Shanghai Hongfu were froze with the cash balance of $2,595 and $638 as of September 30
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 $6,071,185 and
$6,092,340 as of September 30 and June 30, 2021.
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. 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 September 30 and June 30, 2021, $40,000 payable was outstanding toward the settlement.
8. Operating lease
Sichuan
HQDA Elderly Services Co., Ltd (“SHES”), the newly established subsidiary of Shanghai Hongfu, entered two operating leases
with third parties at Chengdu, China on March 2021. The two operating leases have a twenty-two months office space lease and a 1-year
apartment lease for employee residence. The Company also has an office lease located at Rosemead, California with monthly rent of $1,020
at month-to-month basis.
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% and the remaining lease term is 1.3 years.
Rental expenses for the three months ended September 30, 2021 and 2020 were $11,947 and $nil respectively. Total cash flows paid toward
operation lease was $15,310 and $3,060 for the three months ended September 30, 2021 and 2020, respectively. As of September 30 and June
30, 2021, the Company had Right-of-use assets and operating lease liabilities in the amounts of $62,014 and $73,368, respectively.
As
of September 30, 2021, future minimum annual lease payment under operating lease was as follows:
Schedule
of Future Minimum Annual Lease Payment Under Operating Lease
|
Years ending June 30,
|
|
Operating lease
|
|
|
2022
|
|
$
|
33,602
|
|
|
2023
|
|
|
22,401
|
|
|
Total
|
|
|
56,003
|
|
|
Less interest
|
|
|
(2,073
|
)
|
|
Present value of lease liabilities
|
|
$
|
53,930
|
|
9. Subsequent Event
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 September 30
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Changes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
144,316
|
|
|
$
|
155,440
|
|
|
$
|
(11,124
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of food and beverages
|
|
|
27,320
|
|
|
|
46,855
|
|
|
|
(19,535
|
)
|
|
General and administrative cost
|
|
|
164,507
|
|
|
|
228,966
|
|
|
|
(64,459
|
)
|
|
Depreciation and amortization
|
|
|
41,730
|
|
|
|
47,949
|
|
|
|
(6,219
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
$
|
(89,241
|
)
|
|
$
|
(168,631
|
)
|
|
$
|
79,390
|
|
Three
months ended September 30, 2021 compared to three months ended September 30, 2020
The
revenue for the three months ended September 30, 2021 remain constant with a slight decrease compared with the same period ended September
30, 2020, The decrease of revenue share the same movement with the decrease of cost of food and beverages. The decrease was due to the
Company adjusted partial of the business model, (i.e. subleases the rooms to the single independent resident and operates as business
apartments). The business is still growing during the transition period.
The
decrease of operating loss amounted $79,930 for the three months ended September 30, 2021 as compared to the same period ended in 2020
was mainly due to the decrease on selling, general and administrative costs of 64,459 mainly due to the closure of hotel cafeteria and
outsourced receptionist and part of room cleaning service to the subcontractor.
Excluding
the non-cash expenses of depreciation and amortization, the operating loss would have been $47,511 and $120,682, for the three months
ended September 30, 2021 and 2020, respectively.
Liquidity
and Capital Resources
On
September 30, 2021, we had cash on hand of $10,174 and liabilities of $6,612,741. We will require additional funding in order to cover
all anticipated administration costs and to proceed with the unpaid balance of APA agreement as well as the interest and penalty. We
intend to continue to explore the new business model, such as continue develop the Travel-and-living Business line, and provide management
services to retirement homes, commercial properties and apartment buildings in China, which will result in higher administrative costs
in the future.
Capital
Expenditures
On
April 2, 2018, we entered into an Asset Purchase Agreement (the “APA”) whereby we purchased land, buildings, and right to
use, construction use rights and other property rights located in Shanghai from a third party. Properties are split into two groups:
|
|
●
|
Property
A: land use rights and adhesive substance use rights, right to own, and right to operate of the land located in Shanghai Pudong New
Area Zhangjiang Ziwei Rd No. 372 and No. 376.
|
|
|
|
|
|
|
●
|
Property
B: land use right, adhesive substance under construction use rights, right to own, and right to operate of the land located in Shanghai
Chongming District San Shuang Gong Lu No. 4797.
|
We
have agreed to pay the purchase price totaling RMB 233,000,000 in installments. Payments of $27,353,690 (RMB 176,300,000) have been made
by the end of September 30, 2021.
Although
we have the rights to operate the senior living facilities purchased under this agreement, we have not yet received a deed for Property
A because the seller is involved in several lawsuits that have already resulted in a decision to restrict transfer of this asset by a
Shanghai court. Therefore, remaining amount of $8,797,244 (RMB 56,700,000) is outstanding. The lawsuit in related to the unpaid installment
of APA was verdict by Shanghai No. 2 Intermediate Court at Shanghai City, China on May 2021, the ownership of Shanghai Qiaoyuan Information
Technology Co., Ltd (“SH QYIT”), who holds the land use rights of Property B was frozen per court auction. See Note 7 for
more details about the result of lawsuit.
Employees
At
present, we have 18 employees, other than our current officers and directors, who devote their time as required to our business operations.
Off-balance
Sheet Arrangements
September
30, 2021, we have no off-balance sheet arrangements that would require disclosure.
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.
