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 December 31, 2021 and for the six 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 $354,673 and $446,313 for the three and six months ended December 31, 2021, respectively.
As of December 31, 2021, it had a negative working capital deficiency of $ 6,643,563 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. 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
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.
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 842.
Contract
A: On November 2020 and on April 2021 which amended on July 2021, the Company contracted with Shanghai Jinhong to lease a total 130 rooms
for five years and auto 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 December 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 is around $12,000.
Contract
E: On October 2021, the Company entered a contract with 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.
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 i7mpairment
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 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
Receivable
and Payable
Receivable
from related parties amounted $59,625 and $43,809 at December 31, 2021 and June 30, 2021, respectively. Payable to related parties amounted
to $ 3,814,279 and $ 3,869,479 at December 31, 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 and six months ended December 31, 2021, the Company recorded hotel management fee of $39,223 (RMB250,000) and $78,447 (RMB 0.5
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 December 31,
2021 and June 30, 2021 were $52,821 and $(144,638), respectively.
Other
During
the three and six months ended December 31, 2021, the Company recorded management fees of $32,440
and $66,120
for the service provided by our ex-CFO, respectively,
and $30,000
and $60,000
for the three and six months ended December 31,
2020, respectively. As of December 31, 2021 and 2020, the payable due to Chief Financial Officer were $93,387
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 233,000,000 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 December 31, 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 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. 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
| | |
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 | |
For
the six months ended December 31, 2021 and 2020, the depreciation and amortization expenses were $86,743 and $89,083, respectively, and
$45,013 and $41,134 for the three months ended December 31, 2021 and 2020, 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 December 31 and June 31, 2021, the subsidiary had an amount of $15,796,198 and $15,743,371, respectively, in total assets, excluding
inter-company balances, and it generated $425,485 and $508,362 for the six months ended December 31, 2021 and 2020, respectively, in
revenue. There was no revenue generated from inter-company transactions.
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 December 31, 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 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 (“Shanghai Qiaohong” and 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 December 31 and June 2021, the Company reserved $2,737,277 and $2,314,786, respectively, for the lawsuit pursuant to the First Verdict,
including penalty for payment in default and 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% 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 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.
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 December 31, and June 30, 2021, $12,500
and $25,000
payable were 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.
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.
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.), a Nevada corporation.
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 office is located at 372 Ziwei Road, Pudong New District Shanghai, P.R. China.
Our telephone number is +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.
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 December 31 | |
| | |
2021 | | |
2020 | | |
Changes | |
| | |
| | |
| | |
| |
| Revenue | |
$ | 281,169 | | |
$ | 352,922 | | |
$ | (71,753 | ) |
| | |
| | | |
| | | |
| | |
| Operating costs: | |
| | | |
| | | |
| | |
| Cost of food and beverages | |
| 35,085 | | |
| 52,554 | | |
| (17,469 | ) |
| Selling, general and administrative expenses | |
| 158,950 | | |
| 172,560 | | |
| (13,610 | ) |
| Depreciation and amortization | |
| 45,013 | | |
| 41,134 | | |
| 3,879 | |
| Total operating expenses | |
| 239,048 | | |
| 266,248 | | |
| (27,200 | ) |
| Operating income | |
$ | 42,121 | | |
$ | 86,674 | | |
$ | (44,553 | ) |
| | |
Six months ended December 31 | |
| | |
2021 | | |
2020 | | |
Changes | |
| | |
| | |
| | |
| |
| Revenue | |
$ | 425,485 | | |
$ | 508,362 | | |
$ | (82,877 | ) |
| | |
| | | |
| | | |
| | |
| Operating costs: | |
| | | |
| | | |
| | |
| Cost of food and beverages | |
| 62,405 | | |
| 99,409 | | |
| (37,004 | ) |
| Selling, general and administrative expenses | |
| 323,457 | | |
| 401,827 | | |
| (78,370 | ) |
| Depreciation and amortization | |
| 86,743 | | |
| 89,083 | | |
| (2,340 | ) |
| Total operating expenses | |
| 472,605 | | |
| 590,319 | | |
| (117,714 | ) |
| Operating loss | |
$ | (47,120 | ) | |
$ | (81,957 | ) | |
$ | 34,837 | |
Three
months ended December 31, 2021 compared to three months ended December 31, 2020
The
revenue for the three months ended December 31, 2021 decreased $71,753 compared with the same period ended December 31,2020. The decrease
was mainly 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
total operating income amounted $42,121 for the three months ended December 31, 2021 as compared to operating income $86,674 for the
three months ended December 31, 2020. The reason was mainly due to the revenue decreased along with the operating cost reduced for the
three months ended on December 31, 2021.
Six
months ended December 31, 2021 compared to six months ended December 31, 2020
The
revenue for the six months ended December 31, 2021 decreased $82,877 compared with the same period ended December 31,2020. The decrease
was mainly 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
total operating loss amounted $47,120 for the six months ended December 31, 2021 as compared to operating loss $81,957 for the
six months ended December 31, 2020, a decreasing of $34,837. The reason was mainly due to the decreasing of selling, general and
administrative expenses.
Liquidity
and Capital Resources
As
of December 31, 2021, we had cash on hand of $18,862 and liabilities of $6,968,455. 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 instalments. Payments of $227,353,690 (RMB 176,300,000) have been made
through December 31, 2021 and the remainder of $8,797,244 (RMB56,700,000) is going to pay based the schedule we entered with SHQHZY on
January 2022.
Off-balance
Sheet Arrangements
We
have no off-balance sheet arrangements that 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.
