| UNITED STATES OF AMERICA |
| Bef or e the |
| SECURITIES AND EXCHANGE COMMISSION |
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| SECURITIES EXCHANGE ACT OF 1934 |
| Release No. 91723 / April 29, 2021 |
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| ACCOUNTING AND AUDITING ENFORCEMENT |
| Release No. 4219 / April 29, 2021 |
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| ADMINISTRATIVE PROCEEDING |
| File No. 3-20275 |
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| In the Matter of |
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| HQDA ELDERLY LIFE |
| NETWORK, CORP., |
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| Respondent. |
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| CORRECTED ORDER INSTITUTING |
| CEASE-AND-DESIST PROCEEDINGS |
| PURSUANT TO SECTION 21C OF THE |
| SECURITIES EXCHANGE ACT OF 1934, |
| MAKING FINDINGS, AND IMPOSING A |
| CEASE-AND-DESIST ORDER |
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| I. |
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| The Securities and Exchange Commission (“Commission”) deems it appropriate that cease- |
| and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities |
| Exchange Act of 1934 (“Exchange Act”), against HQDA Elderly Life Network, Inc. (“HQDA” or |
| “Respondent”). |
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| II. |
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| In anticipation of the institution of these proceedings, Respondent has submitted an Offer |
| of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the |
| purpose of these proceedings and any other proceedings brought by or on behalf of the |
| Commission, or to which the Commission is a party, and without admitting or denying the findings |
| herein, except as to the Commission’s jurisdiction over it and the subject matter of these |
| proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease- |
| and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making |
| Findings, and Imposing a Cease-and-Desist Order (“Order”), as set forth below. |
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| 2 |
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| III. |
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| On the basis of this Order and Respondent’s Offer, the Commission finds1 that: |
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| Summary |
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| 1. These proceedings arise out of the violation of Exchange Act Rule 12b-25, which |
| requires that issuers that fail to file timely a periodic report shall file a Form 12b-25 “Notification of |
| Late Filing,” commonly known as “Form NT,” which contains, among other things, reasonable |
| detail as to why the issuer’s periodic report could not be filed on time and an explanation of any |
| anticipated, significant changes in the issuer’s results of operations. |
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| 2. In November 2019 and again in February 2020, HQDA violated Rule 12b-25 by |
| filing a Form 12b-25 with the Commission in which HQDA failed to disclose why, in sufficient |
| detail under the circumstances presented, its Form 10-Q could not be timely filed. In both instances, |
| HQDA’s Form 12b-25 also failed to acknowledge anticipated, significant changes in HQDA’s |
| results of operations for the fiscal quarter covered by the Form 10-Q compared with HQDA’s |
| operating results in the same quarter of the prior fiscal year, and to provide an explanation of the |
| changes, as required under the rule. Also, in both instances, days after filing its Form 12b-25, |
| HQDA filed a Form 10-Q disclosing to investors and the market a restatement of the company’s |
| financial statements for a prior fiscal quarter. HQDA, however, had failed to include in its Form |
| 12b-25 any disclosure that the discovery, and ongoing correction, of errors in prior quarterly |
| financial statements were among the principal reasons that it was unable to file timely the subject |
| Forms 10-Q. |
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| Respondent |
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| 3. HQDA, a Nevada corporation based in Rosemead, California, focuses on senior |
| housing and retirement services and products in China. HQDA common stock is registered under |
| Section 12(g) of the Exchange Act and is quoted on the OTCQB Venture Market. |
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| Le gal Frame work and Facts |
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| 4. Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder require |
| issuers with a security registered pursuant to Section 12 of the Exchange Act to file with the |
| Commission annual reports on Form 10-K and quarterly reports on Form 10-Q. |
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| 5. Rule 12b-25 provides that if an issuer fails to file a Form 10-K or 10-Q within the |
| time period prescribed for such report, the issuer, no later than one business day after the due date |
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| 1 The findings herein are m ade pursuant to Respondent's Offer of Settlem ent and are not binding on any |
| other person or entity in this or any other proceeding. |
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| for such report, shall file a Form 12b-25 with the Commission, disclosing the issuer’s inability |
| to file the report timely and the reasons therefore in reasonable detail.2 Form 12b-25 requires the |
| issuer to affirm, among other things, that the subject periodic report will be filed within fifteen |
| calendar days, for a Form 10-K, or within five calendar days, for a Form 10-Q, of the report’s |
| prescribed due date, and requires that the report actually be filed within such period. Form 12b-25 |
| also requires the issuer to confirm whether or not it anticipates that any significant change in |
| results of operations from the corresponding period for the prior fiscal year will be reflected by the |
| earnings statements to be included in the subject periodic report. If such change is anticipated, the |
| issuer must attach a narrative and quantitative explanation of the anticipated change and, if |
| appropriate, state the reasons why a reasonable estimate of the results cannot be made. |
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| 6. On November 13, 2019, HQDA filed with the Commission a Form 12b-25 |
| disclosing that HQDA could not file timely its Form 10-Q for its fiscal quarter, ended September |
| 30, 2019, because it “was unable to compile the necessary financial information required to prepare |
| a complete filing. Thus, the Company would be unable to file the periodic report in a timely |
| manner without unreasonable effort or expense.” |
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| 7. Furthermore, in its Form 12b-25, HQDA affirmed that it would file the subject |
| Form 10-Q within the five-calendar-day extension period and indicated that it did not anticipate |
| that any significant change in results of operations from the corresponding period for the prior |
| fiscal year would be reflected in the subject Form 10-Q. |
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| 8. On November 19, 2019, HQDA filed with the Commission a Form 10-Q for its |
| fiscal year (“FY”) 2020 first quarter, ended September 30, 2019, disclosing the following |
| restatement: “On September 4, 2018, the Company completed an issuance of 41,731,867 shares at |
| $0.15 per share for total proceeds of $6,259,780 to a Chinese company by a private placement. |
| Following the completion of the transaction, … the Company recorded $27,125,714 of stock-based |
| compensation…. However, since the private placement agreement was signed in April 2018 when |
| the share price value was $0.15 and could not be closed until September 2018 when the share price |
| was $0.80, this should not be a stock-based compensation. The Company also recorded $68,613 in |
| expenses for payments made to a vendor for development of the Company’s website for the three |
| months ended September 30, 2018. This should have been classified as prepaid asset and not an |
| expense. The Company determined that it would be appropriate to correct those errors.” |
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| 9. HQDA’s inability to meet the filing deadline for its first-quarter FY2020 Form |
| 10-Q was due, in large part, to the discovery, and ongoing correction, of errors in its first-quarter |
| FY2019 financial statements. In its Form 12b-25, however, HQDA failed to disclose this |
| information and failed to provide the detailed narratives and quantitative explanation specifically |
| called for by the form. The company anticipated that its first-quarter FY2020 financial results, |
| when reported, would differ significantly from its first-quarter FY2019 financial results, including |
| a 310% increase in revenue and a 97% decrease in loss versus the newly-restated first-quarter |
| FY2018 results. |
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| 2 Form 12b-25 specifies a “narrative” disclosure. (See Form 12b-25, Part III.) |
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| 10. On February 14, 2020, HQDA filed with the Commission a second Form 12b-25, |
| disclosing that HQDA could not file timely its Form 10-Q for its fiscal quarter, ended September |
| 30, 2019, because, using language identical to that used in the first Form 12b-25, HQDA “was |
| unable to compile the necessary financial information required to prepare a complete filing. Thus, |
| the Company would be unable to file the periodic report in a timely manner without unreasonable |
| effort or expense.” |
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| 11. Furthermore, in the second Form 12b-25, HQDA again affirmed that it would file |
| the subject Form 10-Q within the five-calendar-day extension period and indicated that it did not |
| anticipate that any significant change in results of operations from the corresponding period for the |
| prior fiscal year would be reflected in the subject Form 10-Q. |
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| 12. On February 19, 2020, HQDA filed with the Commission a Form 10-Q for its |
| FY2020 second quarter, ended December 31, 2019, disclosing the following restatement: “For |
| three and six months ended December 31, 2018, the Company did not record the loss generated |
| from foreign currency transactions in the amounts of $460,133. The Company determined that they |
| would be appropriate to correct those errors.” |
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| 13. HQDA’s inability to meet the filing deadline for its second-quarter FY2020 Form |
| 10-Q was due, in large part, to the discovery, and ongoing correction, of errors in its second- |
| quarter FY2019 financial statements. In its Form 12b-25, however, HQDA failed to disclose this |
| information and failed to provide the detailed narratives and quantitative explanation specifically |
| called for by the form. The company anticipated that its second-quarter FY2020 financial results, |
| when reported, would differ significantly from its second-quarter FY2019 financial results, |
| including a 224% increase in revenue and an 87% decrease in loss versus the newly-restated |
| second-quarter FY2018 results. |
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| Violations |
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| 14. As a result of the conduct described above, HQDA violated Section 13(a) of the |
| Exchange Act and Rule 12b-25 thereunder. |
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| IV. |
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| In view of the foregoing, the Commission deems it appropriate to impose the sanctions |
| agreed to in Respondent HQDA’s Offer. |
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| Accordingly, it is hereby ORDERED that: |
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| A. Pursuant to Section 21C of the Exchange Act, Respondent HQDA cease and desist |
| from committing or causing any violations and any future violations of Section 13(a) of the |
| Exchange Act and Rule 12b-25 thereunder. |
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| B. Respondent shall, within 14 days of the entry of this Order, pay a civil money |
| penalty in the amount of $50,000 to the Securities and Exchange Commission for transfer to the |
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| general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). Payment |
| shall be made in the following four installments: (1) $10,000 within 14 days of entry of this order; |
| (2) $15,000 within 180 days of entry of this order; (3) $12,500 within 270 days of entry of this |
| order; and (4) $12,500 within 360 days of entry of this order. Payments shall be applied first to |
| post order interest, which accrues pursuant to 31 U.S.C. 3717. Prior to making the final payment |
| set forth herein, Respondent shall contact the staff of the Commission for the amount due. If |
| Respondent fails to make any payment by the date agreed and/or in the amount agreed according to |
| the schedule set forth above, all outstanding payments under this Order, including post-order |
| interest, minus any payments made, shall become due and payable immediately at the discretion of |
| the staff of the Commission without further application to the Commission. |
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| Payment must be made in one of the following ways: |
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| (1) Respondent may transmit payment electronically to the Commission, which |
| will provide detailed ACH transfer/Fedwire instructions upon request; |
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| (2) Respondent may make direct payment from a bank account via Pay.gov |
| through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or |
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| (3) Respondent may pay by certified check, bank cashier’s check, or United |
| States postal money order, made payable to the Securities and Exchange |
| Commission and hand-delivered or mailed to: |
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| Enterprise Services Center |
| Accounts Receivable Branch |
| HQ Bldg., Room 181, AMZ-341 |
| 6500 South MacArthur Boulevard |
| Oklahoma City, OK 73169 |
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| Payments by check or money order must be accompanied by a cover letter identifying |
| HQDA as a Respondent in these proceedings, and the file number of these proceedings; a copy of |
| the cover letter and check or money order must be sent to Anita B. Bandy, Associate Director, |
| Division of Enforcement, Securities and Exchange Commission, 100 F St., NE, Washington, DC |
| 20549. |
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| C. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be |
| treated as penalties paid to the government for all purposes, including all tax purposes. To |
| preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor |
| Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any |
| award of compensatory damages by the amount of any part of Respondent’s payment of a civil |
| penalty in this action (“Penalty Offset”). If the court in any Related Investor Action grants such a |
| Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a final order granting |
| the Penalty Offset, notify the Commission's counsel in this action and pay the amount of the |
| Penalty Offset to the Securities and Exchange Commission. Such a payment shall not be deemed |
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| an additional civil penalty and shall not be deemed to change the amount of the civil penalty |
| imposed in this proceeding. For purposes of this paragraph, a “Related Investor Action” means a |
| private damages action brought against Respondent by or on behalf of one or more investors based |
| on substantially the same facts as alleged in the Order instituted by the Commission in this |
| proceeding. |
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| By the Commission. |
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| Vanessa A. Countryman |
| Secretary |
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