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Heavenstone Corp – ‘10-K’ for 6/30/17

On:  Monday, 11/25/19, at 2:32pm ET   ·   For:  6/30/17   ·   Accession #:  1104659-19-66998   ·   File #:  333-201314

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

11/25/19  Heavenstone Corp                  10-K        6/30/17   56:3.5M                                   Toppan Merrill/FA

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K 

Commission File No. 333-201314

HEAVENSTONE CORP.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (626) 581-3335

Securities Registered under Section 12(b) of the Exchange Act: None

Securities Registered under Section 12(g) of the Exchange Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ¨ No x

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ¨ No x

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The aggregate market value of the voting stock held by non-affiliates computed based on the closing price of such stock as of June 30, 2017, was approximately: N/A.

As of November 22, 2019, 71,159,423 shares of the common stock of the registrant were issued and outstanding.

Documents Incorporated by Reference: None.

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this Annual Report on Form 10-K are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “can have,” “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. For example, all statements we make relating to our estimated and projected costs, expenditures, cash flows, growth rates and financial results, our plans and objectives for future operations, growth or initiatives, strategies or the expected outcome or impact of pending or threatened litigation are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected.

Forward-looking statements herein that relate to our company’s current business status will be subject to the following risks and uncertainties:

We derive many of our forward-looking statements from our forecasts, which are based on many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are disclosed under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report on Form 10-K. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements, as well as other cautionary statements that are made from time to time in our other filings with the SEC and public communications. You should evaluate all forward-looking statements made in this Annual Report on Form 10-K in the context of these risks and uncertainties.

We caution you that the important factors referenced above may not contain all of the factors that are important to you, as an investor. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this Annual Report on Form 10-K are made only as of the date hereof. We undertake no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

PART I

ITEM 1. BUSINESS

General

Our company is a development-stage company that was incorporated under the laws of the State of Nevada on June 13, 2014.

We maintain our principal offices at 17800 Castleton Street, Suite 300, City of Industry, California 91748; our telephone number is (626) 581-3335; our web site is www.hstone.us. No information found on our website is part of this Annual Report on Form 10-K.

Refocus of Business Plan

Our company was organized with the intention of (a) becoming a real estate development and construction company centered in the Temecula, California, area, specializing in the construction and sale of luxury vineyard estate homes, each of which will contain a small vineyard capable of producing small commercial quantities of wine and (b) constructing and operating a five-star hotel, spa and winery to be known as “Sorrento Resort, Vineyard and Winery”, also located in the Temecula area.

In January 2017, however, our Board of Directors determined to refocus our plan of business, in an effort to position our company to better generate ongoing revenues from our future operations. As a result of this action, we now concentrate more emphasis on engaging in the hospitality industry, which we call our Hospitality Segment. However, we continue to participate in the real estate development and home building industries as an adjunct to our Hospitality Segment. These efforts are now referred to as our Real Estate Development Segment.

Currently, we own several parcels of real property located in Temecula, California, and in an area designated as “Temecula Valley Wine Country” by Riverside County. Temecula Valley Wine Country Community Plan: Temecula Valley Wine Country Design Guidelines provide the following summary description and purpose of the Temecula Valley Wine Country:

“The Temecula Valley Wine Country Policy Area is a unique community of Riverside County that offers boutique wine country embedded within rural and equestrian character of the southwestern Riverside County. Approximately fifty wineries and other smaller wine operations, produce award-winning premium quality wines, made possible by a unique microclimate and well-drained decomposed granite soils of this region. In addition, this area offers rural lifestyle, horseback riding trails, stables and other equestrian amenities within the Valle de los Caballos community. It is with much pride in their ranches and horses that some of the equestrian facilities hold national and international competition events. The Temecula Valley Wine Country Policy Area Design Guidelines are intended to encourage rural type of developments surrounded by large vineyards and equestrian facilities that enhance the winemaking, equestrian and rural residential atmosphere of the policy area.”

The Temecula Valley Wine Country Policy Area Design Guidelines set forth regulations relating to the site design and planning, architecture and related matters. Included in the Design Guidelines is a requirement that not less than 50% of developed acreage be planted with grapevines.

It is our current plan to construct our vineyard estate homes for the purpose of our Hospitality Segment’s holding them out for rent on a nightly or weekly basis. To market these rental opportunities, we intend to employ the resources offered by third-party internet reservations systems, including Airbnb. Nevertheless, sales of these properties would be made by us, should the opportunity arise.

In order for us to begin full-scale operations, we will be required to obtain approximately $50 million in additional capital, of which there is no assurance.

Since our July 14, 2014, inception, we have generated no revenues and, through June 30, 2017, our accumulated deficit was $610,888. We do not expect to begin to derive revenues from our operations prior to the fourth quarter of 2020, at the earliest.

Our Competitive Strengths and Weaknesses

We believe our company has the following competitive strengths:

We believe our company has the following competitive weaknesses:

Our Properties in Temecula, California

Since our inception, we have purchased the properties described below, all of which are located in Temecula, California, within area established by Riverside County as the “Temecula Valley Wine Country”.

Camino Del Vino Property. Comprised of 50 acres, we purchased this property in 2014 for $1,500,000, with the original intent of subdividing the property into five separate ten-acre parcels on which to build five luxury vineyard homes. However, due to recent changes in zoning rules, we were able to obtain permission to subdivide the property into eight separate parcels on which to build eight luxury vineyard homes. It is our current plan to construct these vineyard estate homes for the purpose of our Hospitality Segment’s holding them out for rent on a nightly or weekly basis. To market these rental opportunities, we intend to employ the resources offered by third-party internet reservations systems, including Airbnb. Nevertheless, sales of these properties would be made by us, should the opportunity arise. We have graded this property and have planted grapes on approximately half of the property.

Meadow Ridge Property. With the intent of building a winery and resort to be known as “Sorrento Resort, Vineyard and Winery”, we purchased this 10-acre property in 2015 or $495,000. It is also our intent to purchase an adjacent 15-acre parcel, although we have not entered into an agreement to do so. We anticipate starting the design phase of this resort in the near future. To date, we have made no improvements to this property.

Los Amantes Road Properties. In 2014, we purchased two adjacent five-acre properties (10 acres total) located on Los Amantes Road in Temecula, with the intent of building a luxury vineyard home on each property. It is our current plan to construct these vineyard estate homes for the purpose of our Hospitality Segment’s holding them out for rent on a nightly or weekly basis. To market these rental opportunities, we intend to employ the resources offered by third-party internet reservations systems, including Airbnb. Nevertheless, sales of these properties would be made by us, should the opportunity arise. We have graded both properties and planted approximately two-and-a-half acres of grapes on each. Further improvements have been made to each property, including entitlements, fencing and fine grading for foundations. We started construction of a luxury vineyard home on the first of these properties in March 2019. To date, we have spent approximately $1,600,000 on improvements to these properties.

Monte Verde Road Property. We purchased this 40-acre property for $1,300,000, with the intent of subdividing the property into eight separate parcels on which to build eight luxury vineyard homes. It is our current plan to construct these vineyard estate homes for the purpose of our Hospitality Segment’s holding them out for rent on a nightly or weekly basis. To market these rental opportunities, we intend to employ the resources offered by third-party internet reservations systems, including Airbnb. Nevertheless, sales of these properties would be made by us, should the opportunity arise. To date, we have made no improvements to this property.

Los Nogales Road Property. In November 2017, we purchased this 5-acre property for $265,000, with the intent of building a single luxury vineyard home thereon. It is our current plan to construct this vineyard estate home for the purpose of our Hospitality Segment’s holding it out for rent on a nightly or weekly basis. To market this rental opportunity, we intend to employ the resources offered by third-party internet reservations systems, including Airbnb. Nevertheless, the sale of this property would be made by us, should the opportunity arise. To date, we have made no improvements to this property.

Hospitality Segment

General. Our Hospitality Segment does not currently have any operations. It is our intention to operate vineyard estate homes constructed by our Real Estate Development Segment as rental properties. We intend to hold these properties out for rent on a nightly or weekly basis. To market these rental opportunities, we intend to employ the resources offered by third-party internet reservations systems, including Airbnb. Once its operations begin, there is no assurance that our Hospitality Segment will operate profitably.

Sorrento Resort, Vineyard & Winery. It is intended that, once built on our Meadow Ridge Property, our Hospitality Segment would operate the Sorrento Resort, a planned 60,000 square-foot facility, which is to include a five-star hotel with 50 large suites with sweeping panoramic views of the Temecula Valley, a spa, retail sales space, restaurants and a state-of-the-art hospitality facility. It is planned that the hospitality center is to be situated above the underground barrel cellar and tunnel that connects with the facility’s winery. Underground parking is to be built underneath the hospitality center. Just beyond the hospitality center, we intend to create a landscaped park setting, including terraced lawns for private outdoor events. We believe that the hospitality center and surrounding areas will make the resort an attractive recreational and social destination for tourists and local residents.

Competition. The segments of the hospitality industry in which our Hospitality Segment will compete are subject to intense competition. Our principal competitors will be other operators of luxury, full-service and focused-service hotels and timeshare properties, including other major hospitality chains with well-established and recognized brands. We also will compete against smaller hotel chains, independent and local hotel owners and operators and independent timeshare operators. If our Hospitality Segment is unable to compete successfully, our revenues or profits would be impaired.

Seasonality. The hospitality industry is seasonal in nature. The periods during which our Hospitality Segment’s properties can be expected to experience higher revenues will vary from property to property, depending principally upon location and the customer base served. We generally expect our Hospitality Segment’s revenues to be lower in the first quarter of each year than in each of the three subsequent quarters, with the fourth quarter generally being the highest. In addition, the hospitality industry is cyclical and demand generally follows the general economy on a lagged basis. The seasonality and cyclicality of this industry may contribute to fluctuations in our results of operations and financial condition.

Real Estate Development Segment

General. Following the refocus of our business plan, we view our Real Estate Development Segment as an adjunct to our Hospitality Segment. Nevertheless, our Real Estate Development Segment remains an important part of our business plan. Our Real Estate Development Segment is responsible for constructing the rental properties to be operated by our Hospitality Segment.

Properties. Our Real Estate Development Segment is responsible for construction efforts on our properties, as follows:

Camino Del Vino Property. This 50-acre property is to be subdivided into eight separate parcels on which eight vineyard estate homes will be built. We have graded this property and have planted grapes on approximately half of the property.

Meadow Ridge Property. On this 10-acre property, we intent to build a winery and resort to be known as “Sorrento Resort, Vineyard and Winery”. It is also our intent to purchase an adjacent 15-acre parcel, although we have not entered into an agreement to do so. We anticipate starting the design phase of this resort in the near future.

Los Amantes Road Properties. On each of these two adjacent five-acre properties (10 acres total), we intend to build a vineyard estate home. We have graded both properties and planted approximately two-and-a-half acres of grapes on each. Further improvements have been made to each property, including entitlements, fencing and fine grading for foundations. We started construction of a luxury vineyard home on the first of these properties in March 2019.

Monte Verde Road Property. This 40-acre property is to be subdivided into eight separate parcels on which to build eight vineyard estate homes. To date, we have made no improvements to this property.

Los Nogales Road Property. On this 5-acre property, we intend to build a single luxury vineyard home. To date, we have made no improvements to this property.

We anticipate that each of the vineyard estate homes will contain approximately 10,000 square feet of living area. In addition, each of our vineyard estate homes will contain a small vineyard, covering approximately half of each property, capable of producing small commercial quantities of wine.

Key Alliances. Since our inception, our management has initiated contact with numerous large construction companies, design companies and suppliers of building supplies. As a result of these efforts, our management has identified the service and supplies providers who are believed to be in a position to best perform these needed functions on behalf of our company.

Our Real Estate Development Segment has retained a construction company, Koll Custom Homes, to lead the development and construction of our vineyard estate homes, including the facilitation of civil designs and background investigation of our properties for the purpose of obtaining subdivision final approval plans for use in bidding and budgeting purposes. The identified design company would lead the vineyard estate home design activities. The identified supplier of building supplies would be the primary source of building supplies for our construction operations.

Land Acquisition and Development. Our long-term objective is to develop and, through our Hospitality Segment, to control a portfolio of properties. To this end, we will acquire land only after completing due diligence and, in certain cases, feasibility studies. With respect to each of our current properties, we conducted the due diligence deemed necessary by our management. Included in such due diligence efforts were informal feasibility studies with respect to each property to the effect that such properties would be beneficial to our Real Estate Development Segment.

In determining whether a formal feasibility study is necessary with respect to a prospective land acquisition target, our management considers its familiarity with the geographical area in which the property is located. For example, because the properties we currently own are located in close proximity to the area where our management lives and works, they determined that only an informal feasibility was necessary, given their familiarity with the local economy and its development patterns. It is expected that, as we seek to acquire properties outside our management’s area of familiarity, we will engage consultants to perform formal feasibility studies with respect to such properties. We believe that this strategy for conducting feasibility studies does not present a risk to the development of our properties, current and future, if any.

Our direct land acquisition activities are expected to include only the purchase of unimproved land from third parties. It is probable that our purchases will be of unentitled or unzoned land.

Once we have acquired a property, we will obtain governmental and other approvals necessary to begin the development process. Following this process, the land will be graded, roads, utilities, amenities and other infrastructures installed and individual estate homes constructed.

Materials Costs. Substantially all materials used in construction are available from a number of sources, but may fluctuate in price due to various factors. It is possible that we will experience shortages of certain materials. If shortages occur in the future, such shortages could result in longer construction times and higher costs than those experienced in the past. Such circumstances could have an adverse effect on our company’s future results of operations and/or financial condition.

Competition. The home construction industry is fragmented and highly competitive. Home constructors compete not only for home buyers, but also for desirable properties, financing, raw materials and skilled labor. Our Real Estate Development Segment will compete against local, regional and national home constructors. We will also compete with existing home sales, foreclosures and rental properties. The competitive conditions in the home construction industry could negatively affect our sales volumes and selling prices. Competition can also affect our ability to acquire suitable land, raw materials and skilled labor at acceptable prices or terms, or cause delays in the construction of our homes.

As our company grows, we will compete with other companies across all industries to attract and retain highly skilled and experienced employees, managers and executives. Competition for the services of these individuals will likely increase if business conditions improve in the home construction industry or in the general economy. If we are unable to attract and retain key employees, managers or executives, the business of our Real Estate Development Segment could be adversely affected.

Governmental Regulation and Environmental Matters. The home construction industry is subject to extensive and complex regulations. We will be required to comply with many federal, state and local laws and regulations, including zoning, density and development requirements, building, environmental, advertising, labor and real estate sales rules and regulations. These regulations and requirements will affect substantially all aspects of our land development and home design, construction and sales processes. Our homes will be inspected by local authorities where required. These regulations often provide broad discretion to the administering governmental authorities. In addition, our future developments may be subject to various assessments for schools, parks, streets, utilities and other public improvements.

Our home construction operations will also be subject to an extensive variety of local, state and federal statutes, ordinances, rules and regulations concerning protection of health, safety and the environment. The particular environmental laws for each site vary greatly according to location, environmental condition and the present and former uses of the site and adjoining properties.

Seasonality. Due to the style of the subdivisions and homes we will build, we do not expect that our sales will be materially affected by the seasonality commonly experienced by home constructors.

Water-Related Issues and Natural Disasters

Water-Related Issues. Due to the ongoing severe drought in California, it is possible that mandatory water usage limitations will be implemented. In addition, it is possible that new, far-reaching limitations on the use of ground water on a landowner’s own property could be imposed by the State of California or by one or more local governments. To the extent that any such water usage limitations are imposed, our business and financial condition may be adversely affected.

Natural Disasters. Because our real estate development and home construction activities are expected to be located primarily in Southern California, we will be faced with the risks of potential large earthquakes and flooding, among other natural disasters. To the extent that any such natural disaster occurs, our business and financial condition may be adversely affected.

Insurance

We intend to carry adequate insurance to cover any claims made against us. However, these claims could prove to be costly to defend and resolve in the legal system. There is no assurance that our future insurance policies will be adequate to protect us from adverse financial situations.

Intellectual Property

We regard our current and future trademarks, service marks and business know-how as having significant value. Our policy is to establish, enforce and protect our intellectual property rights using the intellectual property laws, as necessary.

Employees

We currently have no employees; our two officers serve without compensation. Our business development, corporate administration, business operations and financial reporting functions are overseen directly by our President. Our Chief Financial Officer oversees record keeping. We intend to hire a small number of employees, at such times as our business conditions warrant. We have used, and, in the future, expect to use, the services of certain outside consultants and advisors as needed, on a consulting basis.

Available Information

Heavenstone Corp. files or furnishes annual, quarterly and current reports, proxy statements and other documents with the SEC under the Securities Exchange Act of 1934 (the “Exchange Act”). The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers, including us, that file electronically with the SEC. The public can obtain any documents that we file with the SEC at http://www.sec.gov.

We also make available, free of charge through our internet website (www.hstone.us), our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

ITEM 1A. RISK FACTORS

Not applicable to a smaller reporting company.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

A description of our real property holdings is included in Item 1. Business.

We lease a small office in City of Industry, California, that is adequate for our current operations. We own office equipment necessary to conduct our current business.

ITEM 3. LEGAL PROCEEDINGS

We are not currently involved in any legal proceedings.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

No market for trading our common stock currently exists. We are preparing our application to FINRA for the assignment of a trading symbol for our common stock. We cannot assure you that a trading market for the common stock will ever commence.

You should note that our common stock is likely to experience significant fluctuations in its price and trading volume. We cannot predict the future trading patterns of our common stock.

Holders

On October 16, 2019, the number of record holders of our common stock, excluding nominees and brokers, was 56 holding 71,159,423 shares.

Dividends

We have never paid cash dividends on our common stock. We intend to re-invest any future earnings into our company for the foreseeable future.

Securities Authorized for Issuance Under Equity Compensation Plans

Recent Issuances of Unregistered Securities

During the year ended June 30, 2017, we issued no unregistered securities that were not previously reported.

Subsequent to June 30, 2017, we have issued unregistered securities not previously reported, as follows:

1. (a) Securities Sold. In July 2017, a $140,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to Qin Wen; (c) Consideration. Such promissory note was issued for $140,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

2. (a) Securities Sold. In September 2017, a $100,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to Qin Wen; (c) Consideration. Such promissory note was issued for $100,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

3. (a) Securities Sold. In August 2017, a $300,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to Union Home Loan, Inc.; (c) Consideration. Such promissory note was issued for $300,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

4. (a) Securities Sold. In November 2017, a $250,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to EF2T, Inc.; (c) Consideration. Such promissory note was issued for $250,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

5. (a) Securities Sold. In November 2017, a $261,728 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to EF2T, Inc.; (c) Consideration. Such promissory note was issued for $261,728 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

6. (a) Securities Sold. In December 2017, a $300,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to EF2T, Inc.; (c) Consideration. Such promissory note was issued for $300,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

7. (a) Securities Sold. In January 2018, a $100,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to Astonia Group Ltd.; (c) Consideration. Such promissory note was issued for $100,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

8. (a) Securities Sold. In January 2018, a $20,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to EF2T, Inc.; (c) Consideration. Such promissory note was issued for $20,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

9. (a) Securities Sold. In February 2018, a $20,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to EF2T, Inc.; (c) Consideration. Such promissory note was issued for $20,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

10. (a) Securities Sold. In February 2018, a $270,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to EF2T, Inc.; (c) Consideration. Such promissory note was issued for $270,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

11. (a) Securities Sold. In March 2018, a $30,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to EF2T, Inc.; (c) Consideration. Such promissory note was issued for $30,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

12. (a) Securities Sold. In March 2018, a $80,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to EF2T, Inc.; (c) Consideration. Such promissory note was issued for $80,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

13. (a) Securities Sold. In March 2018, a $30,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to EF2T, Inc.; (c) Consideration. Such promissory note was issued for $30,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

14. (a) Securities Sold. In April 2018, a $20,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to EF2T, Inc.; (c) Consideration. Such promissory note was issued for $20,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

15. (a) Securities Sold. In April 2018, a $20,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to EF2T, Inc.; (c) Consideration. Such promissory note was issued for $20,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

16. (a) Securities Sold. In May 2018, a $150,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to EF2T, Inc.; (c) Consideration. Such promissory note was issued for $150,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

17. (a) Securities Sold. In June 2018, a $50,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to EF2T, Inc.; (c) Consideration. Such promissory note was issued for $50,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

18. (a) Securities Sold. In June 2018, a $10,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to EF2T, Inc.; (c) Consideration. Such promissory note was issued for $10,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

19. (a) Securities Sold. In July 2018, a $150,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to EF2T, Inc.; (c) Consideration. Such promissory note was issued for $150,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

20. (a) Securities Sold. In September 2018, a $100,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to EF2T, Inc.; (c) Consideration. Such promissory note was issued for $100,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

21. (a) Securities Sold. In October 2018, a $50,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to EF2T, Inc.; (c) Consideration. Such promissory note was issued for $50,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

22. (a) Securities Sold. In November 2018, a $10,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to EF2T, Inc.; (c) Consideration. Such promissory note was issued for $10,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

23. (a) Securities Sold. In November 2018, a $5,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to EF2T, Inc.; (c) Consideration. Such promissory note was issued for $5,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

24. (a) Securities Sold. In December 2018, a $20,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to EF2T, Inc.; (c) Consideration. Such promissory note was issued for $20,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

25. (a) Securities Sold. In December 2018, a $30,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to Qin Jie; (c) Consideration. Such promissory note was issued for $30,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

26. (a) Securities Sold. In December 2018, a $28,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to Astonia Group Ltd.; (c) Consideration. Such promissory note was issued for $28,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

27. (a) Securities Sold. In February 2019, a $20,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to EF2T, Inc.; (c) Consideration. Such promissory note was issued for $20,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

28. (a) Securities Sold. In February 2019, a $6,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to Astonia Group Ltd.; (c) Consideration. Such promissory note was issued for $6,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

29. (a) Securities Sold. In February 2019, a $120,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to Astonia Group Ltd.; (c) Consideration. Such promissory note was issued for $120,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

30. (a) Securities Sold. In March 2019, a $10,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to EF2T, Inc.; (c) Consideration. Such promissory note was issued for $10,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

31. (a) Securities Sold. In April 2019, a $18,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to EF2T, Inc.; (c) Consideration. Such promissory note was issued for $18,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

32. (a) Securities Sold. In April 2019, a $25,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to EF2T, Inc.; (c) Consideration. Such promissory note was issued for $25,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

33. (a) Securities Sold. In April 2019, a $50,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to EF2T, Inc.; (c) Consideration. Such promissory note was issued for $50,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

34. (a) Securities Sold. In May 2019, a $20,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to EF2T, Inc.; (c) Consideration. Such promissory note was issued for $20,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

35. (a) Securities Sold. In June 2019, a $60,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to Astonia Group Ltd.; (c) Consideration. Such promissory note was issued for $60,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Jumpstart Our Business Startups Act of 2012

As a company with less than $1 billion in revenue during our last fiscal year, we qualify as an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act). As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:

We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1 billion in annual revenue, we have more than $700 million in market value of our stock held by non-affiliates, or we issue more than $1 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these reduced burdens. We have taken advantage of these reduced reporting burdens herein, and the information that we provide may be different than what you might get from other public companies in which you hold stock.

Cautionary Statement

The following discussion and analysis should be read in conjunction with our audited financial statements for the years ended June 30, 2017 and 2016, included elsewhere in this Annual Report on Form 10-K. The results shown herein are not necessarily indicative of the results to be expected for any future periods.

This discussion contains forward-looking statements. These forward-looking statements are based on our management’s current expectations with respect to future events, financial performance and operating results, which statements are subject to risks and uncertainties, including, but not limited to, those discussed below and elsewhere in this prospectus. The risks and uncertainties discussed herein could cause our actual results to differ from the results contemplated by these forward-looking statements.

Basis of Presentation – “True” Inception Date

While our company was incorporated in the State of Nevada in June 2104, we undertook no activities until July 14, 2014. Due to our having less than one year of actual operations, we determined, for financial statement purposes, our “true” inception date to be July 14, 2014, the date of first activities. The following discussion, as well as the accompanying financial statements, is presented in accordance with such determination.

Background and Recent Developments

From inception through December 2016, the Company’s focus was to become a large real estate development and construction company centered in the Temecula, California area, specializing in luxury vineyard estate homes, as well as to construct and operate a five-star hotel, spa and winery also in the Temecula area.

In January 2017, the Company’s Board of Directors determined to refocus the Company’s plan of business, in an effort to position the Company to better generate ongoing revenues from its future operations. As a result of this action, the Company now concentrates more emphasis on engaging in the hospitality industry, which the Company refers to as the Hospitality Segment. However, the Company continues to participate in the real estate development and home building industries as an adjunct to its Hospitality Segment. The Company refers to this part of its business as the Real Estate Development Segment. See Item 1. Business.

It is the Company’s plan to construct vineyard estate homes for the purpose of its Hospitality Segment’s holding them out for rent on a nightly or weekly basis. Nevertheless, sales of these properties would be made by the Company, should the opportunity arise.

Until such time as the results of our operations require us to do so, this discussion will not present separate segment information.

Principal Factors Affecting Our Financial Performance

We expect that our operating results will be primarily affected by the following factors:

Expected Financial Performance

Based on our current business plan, we expect to incur operating losses through at least the fourth quarter of 2020. However, because we do not yet possess capital to commence operations, we cannot predict whether we will have any revenues in our Hospitality Segment or our Real Estate Development Segment prior to the end of such period.

We must obtain approximately $4 million in order to complete construction of the first two of our vineyard estate rental properties and approximately $20 million in order to begin construction and full-scale operations of our planned Sorrento Resort property. There is no assurance that we will be successful in obtaining this needed funding.

Results of Operations

For the Year Ended June 30, 2017 (“Fiscal 2017”). For Fiscal 2017, we generated no revenues and we do not expect to generate any revenues until at least the fourth quarter of 2020, at the earliest. For Fiscal 2017, we incurred a net loss of $156,895. Included in the $156,895 in expenses for Fiscal 2017 are legal and professional expenses of $2,938.

For the Year Ended June 30, 2016 (“Fiscal 2016”). For Fiscal 2016, we generated no revenues and incurred a net loss of $162,536. Included in the $162,536 in expenses for Fiscal 2016 are legal and professional expenses of $69,640.

Plan of Operations

General. We require significant funding to achieve our objectives. Sources of funding are expected to be from sources of equity or debt financing, as well as from sales of our estate homes. As with any start-up company that offers unproven products, there is no assurance that our company will be successful with any level of additional funding.

Our plan of business now focuses primarily on our becoming a hospitality-focused company. In conjunction with these efforts, we intend to develop and build vineyard estate properties and one or more resort properties.

Hospitality Segment. Our Hospitality Segment will operate the rental properties that are built and/or acquired by us. In addition, we have purchased 25 acres of undeveloped real estate located in Temecula, California, on which we intend to construct and operate our planned Sorrento Resort, Vineyard and Winery. To complete the construction of the resort facility, we must obtain approximately $20 million in funding. There is no assurance that we will be able to secure such funding.

Real Estate Development Segment. Since our inception, we have acquired approximately 110 acres of unimproved real estate located in Temecula, California. We intend to construct vineyard estate rental properties on these acquired tracts.

Since acquiring these properties, we have taken substantially all actions necessary for obtaining needed permits and approvals for the subdivision planning and construction of two vineyard estate rental properties and have obtained all of the necessary permits and approvals. In March 2019, we started construction of one of these two vineyard estate rental properties.

We anticipate a long-term development of vineyard estate rental properties on the 110 acres we currently own. However, we must first obtain approximately $4 million for the completion of the first two of our vineyard estate rental properties. There is no assurance that we will be able to obtain such needed capital. Any inability to so obtain needed capital would negatively impact our ability to be successful in establishing these rental properties.

Liquidity

For the Year Ended June 30, 2017. At June 30, 2017, we had a working capital deficit of $3,728,417 and cash of $360, which represents a deterioration in our financial condition from June 30, 2016, when our working capital deficit was $2,270,961 and our cash was $52,592. Currently, we possess approximately $13,000 in cash.

Loans from a Related Party and from an Officer’s Family. During Fiscal 2017, we obtained the following loans from a related party and from an officer’s family, as follows:

______________________________

^@ In each loan agreement supporting the subject loan transaction, the underlying loan, when made, was collateralized with future income and receivables. On October 22, 2019, the lender released all collateral, pursuant to a novation agreement.

* In each loan transaction, we issued a promissory note in a face amount equal to the stated “Loan Amount,” the funds from which were used by us for operating expenses and land development expenses.

# Since September 2019, this loan has been the subject of a default waiver agreement, pursuant to which it is not due prior to December 31, 2019.This loan was in default from its due date until September 2019.

+ This loan was made by one of our officers on open account and was payable on demand; this loan was repaid during the year ended June 30, 2018.

Without these loans, we would have been unable to continue our operations.

As of June 30, 2017, the total outstanding principal balance on the foregoing loans was $1,334,965, with another $372,609 in accrued and unpaid interest.

Loans from a Related Party and from an Officer’s Family Subsequent to June 30, 2017. Subsequent to Fiscal 2017, we have obtained the following loans from a related party and from an officer’s family, as follows, as follows:

______________________________

^@ In each loan agreement supporting the subject loan transaction, the underlying loan, when made, was collateralized with future income and receivables. On October 22, 2019, the lender released all collateral, pursuant to a novation agreement.

* In each loan transaction, we issued a promissory note in a face amount equal to the stated “Loan Amount,” the funds from which were used by us for operating expenses and land development expenses.

# Since September 2019, this loan has been the subject of a default waiver agreement, pursuant to which it is not due prior to December 31, 2019.This loan was in default from its due date until September 2019.

Without these loans, we would have been unable to continue our operations.

For the Year Ended June 30, 2016. During Fiscal 2016, we obtained loans from our majority shareholder, a related party and from an officer’s family, as follows:

______________________________

^@ In each loan agreement supporting the subject loan transaction, the underlying loan, when made, was collateralized with future income and receivables. On October 22, 2019, the lender released all collateral, pursuant to a novation agreement.

* In each loan transaction, we issued a promissory note in a face amount equal to the stated “Loan Amount,” the funds from which were used by us for operating expenses and land development expenses.

# Since September 2019, this loan has been the subject of a default waiver agreement, pursuant to which it is not due prior to December 31, 2019.This loan was in default from its due date until September 2019.

Without these loans, we would have been unable to continue our operations.

As of June 30, 2017, the total outstanding principal balance on the foregoing loans was $929,975, with another $57,157 in accrued and unpaid interest.

In addition, in February 2016, we delivered a promissory note, face amount $76,587, in payment of certain insurance premiums associated with an officers’ and directors’ insurance policy obtained by us. Unpaid principal on such loan bears interest at 6.95% per annum. Repayment of this promissory note was made in ten equal monthly payments of $7,905, ending in December 2016.

As of June 30, 2017, the total outstanding principal balance on loans from the Company's majority shareholder was $2,250,000, with another $289,576 in accrued and unpaid interest.

Other Financing. In connection our purchase of 50 acres of land in Temecula, California, we issued a $750,000 face amount promissory note to the third-party seller of the land. The unpaid principal balance of such promissory note bears interest at 4.5% per annum, with interest-only payments of $2,813 due monthly until the entire principal balance has been paid. This promissory note is secured by a deed of trust in favor of the selling party and is due in March 2020, as extended.

Working Capital. At June 30, 2017, we had a working capital deficit of $3,728,417 and cash of $360, compared to our working capital deficit of $2,270,961 and cash of $52,592, at June 30, 2016.

We are currently pursuing approximately $50 million in additional funding. We are actively pursuing this funding. While we would prefer to obtain funds through private sales of our equity securities, it is possible that funds would be obtained through loans or a combination of loans and sales of equity securities. As of the date of this Annual Report on Form 10-K, however, we have not obtained any commitments from any person that would have our company obtaining needed capital. There is no assurance that we will ever obtain capital in amounts as would allow us to pursue our full plan of business.

Profits from sales, if any, of our vineyard estate rental properties will serve as another source of capital with which to further our business development. There is no assurance that any such sales would occur.

Cash Flows.

Operating Activities. During Fiscal 2017 and Fiscal 2016, we used $47,706 and $311,516 in our operating activities, respectively. We expect that, in the future, operations will use increasing amounts of cash. However, we are unable to predict the amounts of any such expenses.

Investing Activities. During Fiscal 2017 and Fiscal 2016, we used $1,300,645 and $799,127 in our investing activities, respectively, all of which was for the purchase of land and land development costs. We expect that, in the future, our investing activities will use increasing amounts of cash. However, we are unable to predict the level of such usage.

Financing Activities. During Fiscal 2017 and Fiscal 2016, our financing activities provided $1,296,119 and $892,134 in cash, respectively, all of which was proceeds of loans from third parties and related parties. We anticipate that, for the foreseeable future, we will rely on loans from third parties and related parties for cash needed to support our operating activities, including our land development activities.

Contractual Obligations

Monthly Payment Obligations. In connection our purchase of 50 acres of land in Temecula, California, we issued a $750,000 face amount promissory note to the third-party seller of the land. The principal balance is due in November 2019. The unpaid principal balance of such promissory note bears interest at 4.5% per annum, with interest-only payments of $2,813 due monthly until the entire principal balance has been paid. This promissory note is secured by a deed of trust in favor of the selling party.

In connection with our purchase of 40 acres of land in Temecula, California, in January 2017, the Company issued a $750,000 face amount promissory note to the third-party seller of the land. The principal balance was due in March 2019. The unpaid principal balance of such promissory note bears interest at 4.5% per annum, with interest-only payments of $2,813 due monthly until the entire principal balance has been paid. This promissory note is secured by a deed of trust in favor of the selling party. The Company is in default under this promissory note.

In August 2017, we obtained a loan from a third party in the amount of $300,000 pursuant to a loan agreement and delivered a promissory note, face amount $300,000, in consideration of such loan. Unpaid principal on such loan bears interest at 11.49% per annum, with interest only payments of $2,872 due monthly, with principal and any accrued interest due in August 2020. The proceeds from this loan were used by us for operating expenses and land development expenses. This loan is secured by a deed of trust.

Balloon Payment Obligations. In 2014, we obtained loans from our majority shareholder, as follows:

______________________________

^@ In each loan agreement supporting the subject loan transaction, the underlying loan, when made, was collateralized with future income and receivables. On October 22, 2019, the lender released all collateral, pursuant to a novation agreement.

* In each loan transaction, we issued a promissory note in a face amount equal to the stated “Loan Amount,” the funds from which were used by us for operating expenses.

** We repaid $100,000 of principal of such loan in September 2017.

# Since September 2019, this loan has been the subject of a default waiver agreement, pursuant to which it is not due prior to December 31, 2019.This loan was in default from its due date until September 2019.

Critical Accounting Policies

Our critical accounting policies, including the assumptions and judgments underlying them, are disclosed in the notes to our financial statements included in this prospectus. We have consistently applied these policies in all material respects. We do not believe that our operations to date have involved uncertainty of accounting treatment, subjective judgment or estimates, to any significant degree.

Uncertainties and Trends

We do not currently possess sufficient cash to commence full-scale business operations. In the future, our operations and revenues will be dependent upon the following factors, among others:

There is no assurance that our company will be able to accomplish our objectives. Our failure to do so would likely cause purchasers of our common stock to lose their entire investments in our company.

Inflation

Inflation can be expected to have an impact on our operating costs. A prolonged period of inflation could cause interest rates, wages and other costs to increase which would adversely affect our results of operations. In the current economic and political climate, no predictions can be made with respect to the future effects of inflation on our business.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that would have any current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Capital Expenditures

During Fiscal 2017, our capital expenditures were $1,300,645, all of which was for the purchase of land and land development costs. During Fiscal 2016, our capital expenditures were $799,127 all which was for the purchase of land and land development costs.

Should we be successful in obtaining the funding needed for us to commence full-scale operations, it can be expected that we would make significant capital expenditures. However, due to the uncertainty associated with our obtaining capital, we cannot predict the exact amount or timing of these potential capital expenditures.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The required financial statements appear at the end of this Annual Report on Form 10-K, beginning on page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining “disclosure controls and procedures” (as defined in the Exchange Act) for our company. Based on our management’s evaluation of our disclosure controls and procedures as of June 30, 2017, our management has concluded that our disclosure controls and procedures were not effective to ensure that the information required to be disclosed by our company under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the Exchange Act and accumulated and communicated to our management, including our Principal Executive Officer and Acting Principal Financial Officer, to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for our company. Our control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our chief financial officer and chief executive officer assessed the effectiveness of our internal control over financial reporting as of June 30, 2017. In making this assessment, they used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO-2013) in Internal Control Over Financial Reporting – Guidance for Smaller Public Companies.

As of June 30, 2017, our chief financial officer and chief executive officer identified the following material weaknesses in our internal control over financial reporting:

Segregation of Duties. Our company did not currently have sufficient accounting personnel to support standalone external financial reporting under public company or SEC requirements. Specifically, our company did not effectively segregate certain accounting duties due to the small size of its accounting staff, and maintain a sufficient number of adequately trained personnel necessary to anticipate and identify risks critical to financial reporting and the closing process.

Limited Multiple Levels of review in the Financial Close Process. Our company's financial statement close process did not include sufficiently robust procedures and controls to ensure that the financial statements were prepared accurately and on a timely basis. Specifically, our company did not have multiple levels of review in its financial close process.

A recognized material weakness would be a significant deficiency (within the meaning of Public Company Accounting Oversight Board Auditing Standard No. 5), or combination of significant deficiencies, that would result in there being more than a remote likelihood that a material misstatement of the annual or interim financial statements would not be prevented or detected on a timely basis by employees in the normal course of their assigned functions.

This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Our management’s report was not subject to attestation by our independent registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting

During the last quarter of our fiscal year ended June 30, 2017, there were no changes in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

Not applicable.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Officers

The following table sets forth the officers and directors of Heavenstone Corp.

Our board of directors appoints our executive officers. Our directors serve until the earlier occurrence of the election of his or her successor at the next meeting of stockholders, death, resignation or removal by the board of directors. Officers serve at the discretion of our board of directors. There exist no family relationships between our officers and directors. Information regarding the backgrounds of each of the officers and directors is set forth below.

Jack Jie Qin. Since July 2016, Mr. Qin has served as a director of our company and as our President and CEO. Since November 2007, Mr. Qin has served as President, Chief Executive Officer and Chairman of the Board of Directors of EFT Holdings, Inc., a City of Industry, California-based, publicly-traded e-business company (symbol: EFTB) whose common stock is registered pursuant to Section 12(g) of the Securities Exchange Act of 1934. Since January 2004, Mr. Qin has served as President of EFT BioTech, Inc. From July 1998 to December 2002, Mr. Qin served as the President of eFastTeam International, Inc. located in Los Angeles, California. From June 1992 to December 1997, he served as the president of LA Import & Export Company located in Los Angeles, California. In May 1991, Mr. Qin earned an MBA from Emporia State University in Kansas. In May 1982, Mr. Qin graduated from Jiangxi Engineering Institute, located in Nanchang, China, with a major in Mechanical Engineering.

William E. Sluss. Since October 2014, Mr. Sluss has served as Chief Financial Officer of our company, and as a director since March 2016. From August 2010 to the present, Mr. Sluss has been, and currently is, employed by of EFT Holdings, Inc. (symbol: EFTB), first as corporate controller and, since October 2012, as chief financial and accounting officer. From 2008 to 2010, Mr. Sluss served as chief financial officer of AccuForce Staffing Services, LLC, a Kingsport, Tennessee-based staffing company. Mr. Sluss earned a Bachelor of Science Degree in Accounting from the University of Virginia’s College at Wise in 1990 and is a Certified Public Accountant in the State of Virginia. Mr. Sluss has committed to working up to 10 hours per week for the benefit of our company.

Visman Chow. Since July 2016, Mr. Chow has served as a director of our company. Since July 2009, Mr. Chow has served as member of the Board of Directors EFT Holdings, Inc. (symbol: EFTB). From 1993 to 2012, Mr. Chow served as the chief lending officer and a director of Universal Bank. Between 1989 and 1993 Mr. Chow was the president of Unieast Financial Corporation. From 1979 to 1989, Mr. Chow was with Union Bank, where he managed a commercial real estate portfolio of approximately $50 million.

Board of Directors

During the fiscal year ended June 30, 2017, our full board of directors met on two occasions and took action by written consent in lieu of a meeting on three occasions.

Audit Committee

There currently does not exist an audit committee of our board of directors. However, our current board intends to form such a committee in the future and will appoint an independent director to serve on such committee who qualifies as an audit committee financial expert. This person shall be independent (as that term is used in Item 7(d)(3)(iv) of Schedule 14A under the Exchange Act).

Independence of Board of Directors

None of our directors is “independent”, within the meaning of definitions established by the SEC or any self-regulatory organization. We are not currently subject to any law, rule or regulation requiring that all or any portion of our Board of Directors include “independent” directors.

Compensation of Directors

None of our current directors is paid for his services as a director.

Limitation of Liability and Indemnification

Our Articles of Incorporation, as amended, provide that we shall indemnify our directors and officers to the fullest extent permitted by Nevada law and that none of our directors will be personally liable to our company or our shareholders for monetary damages for breach of fiduciary duty as a director, except for liability:

These provisions require us to indemnify our directors and officers unless restricted by Nevada law and eliminate our rights and those of our shareholders to recover monetary damages from a director for breach of his fiduciary duty of care as a director except in the situations described above. The limitations summarized above, however, do not affect our ability or that of our shareholders to seek non-monetary remedies, such as an injunction or rescission, against a director for breach of his fiduciary duty.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth certain compensation information for: (i) each person who served as the chief executive officer of Heavenstone Corp. at any time since our inception, regardless of compensation level, and (ii) each of our other executive officers, other than the chief executive officer, serving as an executive officer at any time since our inception. The foregoing persons are collectively referred to herein as the “named executive officers”. Compensation information is shown for the years ended June 30, 2017 and 2016.

Summary Compensation Table

Employment Contracts and Termination of Employment and Change-in-Control Agreements

We have not entered into an employment contract with any of our officers. However, if and when we obtain adequate funding, it is expected that we will enter into employment contracts with such persons, though no terms have been established.

We have no compensatory plan or arrangement that results or will result from the resignation, retirement or any other termination of an executive officer’s employment or from a change in control or a change in an executive officer’s responsibilities following a change in control.

Outstanding Option Awards at Year End

The following table provides certain information regarding unexercised options to purchase common stock, stock options that have not vested and equity-incentive plan awards outstanding at June 30, 2017, for each named executive officer.

Director Compensation

Since our inception, no director has been compensated for his or her services as a director of our company.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth, as of the date hereof, information regarding beneficial ownership of our capital stock by (a) each person, or group of affiliated persons, known by us to be the beneficial owner of more than five percent (5%) of any class of our voting securities; (b) each of our directors; (c) each of the named executive officers; and (d) all directors and executive officers as a group. Beneficial ownership is determined in accordance with the rules of the SEC, based on voting or investment power with respect to the securities. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock underlying warrants and other convertible securities held by that person are deemed to be outstanding if the warrants or other convertible securities are exercisable within 60 days of the date hereof. Specifically, in the table below, it is assumed that all outstanding convertible notes and warrants will be converted and exercised, respectively, within 60 days from the date of this Annual Report. As a result, the percentage of outstanding shares of any person as shown in the following table does not necessarily reflect a person’s actual voting power at any particular date. Except as indicated in the footnotes below, we believe, based on information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. Unless otherwise indicated, the address for each of the shareholders in the table below is c/o Heavenstone Corp., 17800 Castleton Street, Suite 300, City of Industry, California 91748.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Stock Purchase Agreement

In June 2014, pursuant to a stock purchase agreement, our largest shareholder, Astonia Group Ltd., purchased 70,000,000 shares of our common stock for $70,000 in cash, or $.001 per share.

Stock Bonuses

In September 2014, we issued a total of 250,000 shares of common stock valued at $.001 per share, or $250 in the aggregate, as bonuses to certain of our officers, to wit: a former director and our former President and CEO, Liu Xin, was issued 100,000 shares, our current Chief Financial Officer, William E. Sluss, was issued 50,000 shares and a former director and our former President and CEO, Kong (Frank) Fan Xi, was issued 100,000 shares.

Loans from Majority Shareholder

Since our inception in 2014, we have obtained loans from our majority shareholder, as follows:

^@ In each loan agreement supporting the subject loan transaction, the underlying loan, when made, was collateralized with future income and receivables. On October 22, 2019, the lender released all collateral, pursuant to a novation agreement.

* In each loan transaction, we issued a promissory note in a face amount equal to the stated “Loan Amount,” the funds from which were used by us for operating expenses and land development expenses.

** We repaid $100,000 of principal of such loan in September 2017.

*** This loan was made personally by the owner of our majority shareholder.

# Since September 2019, this loan has been the subject of a default waiver agreement, pursuant to which it is not due prior to December 31, 2019.This loan was in default from its due date until September 2019.

Loans from Officers

In August 2014, an officer loaned $100 to our company. This loan was made on open bank account, was due on demand and did not bear interest. The $100 loan from an officer was repaid during the year ended June 30, 2016.

Our President, Jack Jie Qin, has made loans to our company, as follows:

* In each loan transaction, the funds obtained were used by us for operating expenses and land development expenses.

+ This loan was made on open account and was payable on demand; this loan was repaid during the year ended June 30, 2018.

Loans from Related Party

Since our inception in 2014, we have obtained loans from a related party, EF2T, Inc., as follows:

^@ In each loan agreement supporting the subject loan transaction, the underlying loan, when made, was collateralized with future income and receivables. On October 22, 2019, the lender released all collateral, pursuant to a novation agreement.

* In each loan transaction, we issued a promissory note in a face amount equal to the stated “Loan Amount,” the funds from which were used by us for operating expenses and land development expenses.

# Since September 2019, this loan has been the subject of a default waiver agreement, pursuant to which it is not due prior to December 31, 2019.This loan was in default from its due date until September 2019.

Loans from Officer’s Family

Since our inception in 2014, we have obtained loans from the family of one of our officers, as follows:

^@ In each loan agreement supporting the subject loan transaction, the underlying loan, when made, was collateralized with future income and receivables. On October 22, 2019, the lender released all collateral, pursuant to a novation agreement.

* In each loan transaction, we issued a promissory note in a face amount equal to the stated “Loan Amount,” the funds from which were used by us for operating expenses.

# Since September 2019, this loan has been the subject of a default waiver agreement, pursuant to which it is not due prior to December 31, 2019.This loan was in default from its due date until September 2019.

Guaranty of Director

In connection with our purchase of approximately 50 acres located in Temecula, California, one of our former directors, Liu Xin, personally guaranteed our company's performance under a $750,000 promissory note issued to the selling party. Ms. Liu was paid no compensation by us for such personal guaranty. Recently, our President and CEO, Jack Qin, replaced Ms. Liu as the guarantor of such promissory note. Mr. Qin was paid no compensation by us for such personal guaranty.

Director and Officer Indemnification

Our amended and restated certificate of incorporation contains provisions limiting liability of directors. In addition, we have entered into agreements to indemnify our directors and officers to the fullest extent permitted under Nevada law. See Item 10. Directors, Executive Officers and Corporate Governance.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table sets forth fees billed to us by our auditors during the fiscal years ended June 30, 2017 and 2016, for: (i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements, (ii) services by our auditors that are reasonably related to the performance of the audit or review of our financial statements and that are not reported as Audit Fees, (iii) services rendered in connection with tax compliance, tax advice and tax planning and (iv) all other fees for services rendered.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this Report:

Other schedules and exhibits are omitted because the required information either is not applicable or is shown in the financial statements or the notes thereto.

* filed herewith.

** furnished herewith.

XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be signed on November 25, 2019, on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed on November 25, 2019, by the following persons on behalf of the Registrant, in the capacities indicated:

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Heavenstone Corp. and its subsidiary (collectively, the “Company”) as of June 30, 2017 and 2016, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2017 and 2016, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Going Concern Matter

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

HEAVENSTONE CORP.
CONSOLIDATED BALANCE SHEETS

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

HEAVENSTONE CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS

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

HEAVENSTONE CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

For the Years Ended June 30, 2017 and 2016

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

HEAVENSTONE CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

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

HEAVENSTONE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2017

NOTE 1. THE COMPANY

Heavenstone Corp. (the “Company”) was incorporated on June 13, 2014, in the State of Nevada and established a fiscal year end of June 30.

Plan of Business

Through December 2016, the Company’s focus was to become a large real estate development and construction company centered in the Temecula, California area. Beginning in January 2017, the Company began to concentrate more on engaging in the hospitality industry. However, the Company continues to participate in the real estate development and home building industries.

NOTE 2. GOING CONCERN

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. During the year ended June 30, 2017, the Company has an accumulated deficit, a working capital deficit and no revenues. The continuation of the Company as a going concern is dependent upon the company's continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company intends to fund operations through equity and debt financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the year ending June 30, 2018.

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Reclassification

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported financial results.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned or controlled operating subsidiaries. All inter-company accounts and transactions have been eliminated.

Use of Estimates

The preparation of the financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates during the years ended June 30, 2017 and 2016, include depreciation, the valuation of deferred tax assets and the value of stock-based compensation.

Fiscal Year End

The Company elected June 30 as its fiscal year ending date.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and short-term highly liquid investments purchased with original maturities of three months or less. There were no cash equivalents at June 30, 2017 and 2016.

Property and Equipment

Property is carried at cost. Depreciation is computed on the straight-line method over the estimated useful lives of the assets, which is five years. During the years ended June 30, 2017 and 2016, the Company purchased $-0- and $-0-, respectively, of office furniture and equipment in cash. Depreciation expense was $2,809 and $2,809 for the years ended June 30, 2017 and 2016, respectively.

Long-Lived Assets

All long-lived assets held and used by the Company, including finite-lived intangible assets, are reviewed to determine whether any events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. In accordance with ASC 360-10-35 “Impairment or Disposal of Long-lived Assets”, the Company bases its evaluation on such impairment indicators as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements, as well as other external market conditions or factors that may be present. If such impairment indicators are present or other factors exist that indicate that the carrying amount of the asset may not be recoverable the Company determines whether impairment has occurred through the use of an undiscounted cash flows analysis of the asset. If impairment has occurred, the Company recognizes a loss for the difference between the carrying amount and the estimated value of the asset. During the years ended June 30, 2017 and 2016, no impairment is considered necessary on long-lived assets.

Stock-based Compensation

Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.

Pursuant to ASC Topic 505-50, for share-based payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the service period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain.

Loss per Share

Basic and diluted net loss per common share are computed based on the weighted-average common shares and common share equivalents outstanding during the period. At June 30, 2017 and 2016, there were no outstanding common share equivalents.

Income Taxes

Deferred income tax assets and liabilities arise from temporary differences associated with differences between the financial statements and tax basis of assets and liabilities, as measured by the enacted tax rates, which are expected to be in effect when these differences reverse. Deferred tax assets and liabilities are classified as current or non-current, depending upon the classification of the asset or liabilities to which they relate. Deferred tax assets and liabilities not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The Company follows the provisions of FASB ASC 740-10 “Uncertainty in Income Taxes”. Certain recognition thresholds must be met before a tax position is recognized in the financial statements. An entity may only recognize or continue to recognize tax positions that meet a "more-likely-than-not" threshold. As of June 30, 2017 and 2016, the Company does not believe it has any uncertain tax positions that would require either recognition or disclosure in the accompanying financial statements.

Recent Accounting Pronouncements

The Company has evaluated all the recently issued accounting pronouncements through the filing date of these financial statements and does not believe that any of these pronouncements will have a material impact on the Company's financial position and results of operations.

NOTE 4. CONCENTRATION - MAJOR VENDOR

The Company has one major vendor, a non-controlling shareholder that is considered a related party, that accounted for $1,571,976, or approximately 20%, of land and land development costs, all of which was capitalized. Also, at June 30, 2017, the Company had an account payable with this same vendor in the amount of $57,146. See Note 8. Related-Party Transactions.

NOTE 5. LAND AND LAND DEVELOPMENT COSTS

Land and land development costs are carried at cost. Land development costs capitalized include costs associated with the development of the purchased land, including inspection fees and engineering fees.

During the year ended June 30, 2016, the Company had $912,785 in land development costs, of which $799,127 was paid in cash, with the remaining $113,658 incurred on credit. In addition, the Company capitalized the interest costs of $137,201 incurred for real estate projects under ASC-835-20.

During the year ended June 30, 2017, the Company incurred $2,466,709 in land and land development costs, of which $1,300,645 was paid in cash, $114,340 was incurred on credit, $750,000 was settled with a note payable and $116,162 was assumed by non-controlling interest (see Note 6. Real Estate Development Project). In addition, the Company capitalized the interest costs of $185,562 incurred for the real estate projects under ASC-835-20.

NOTE 6. REAL ESTATE DEVELOPMENT PROJECT

In January 2017, the Company and a third party formed Temecula QK Holdings, LLC, a California limited liability company (“TQKH”), for the purpose of acquiring and developing approximately 40 acres of land located in Temecula, California, for $1,318,383. The Company owns 80% of TQKH. In connection with TQKH’s purchase of such land, TQKH issued a $750,000 face amount promissory note to the third-party seller of the land. The principal balance is due in March 2019. The unpaid principal balance of such promissory note bears interest at 4.5% per annum, with interest-only payments due monthly until the due date. This promissory note is secured by a deed of trust in favor of the selling party. For the year ended June 30, 2017, TQKH received $116,162 from its non-controlling shareholder for the land acquisition costs.

NOTE 7. INCOME TAXES

The Company maintains deferred tax assets that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. These deferred tax assets consist of net operating loss carryforward. The net deferred tax asset has been fully offset by a valuation allowance because of the Company's history of losses.

The Company’s approximate net deferred tax asset as of June 30, 2017 and 2016, is as follows:

The Company provided a valuation allowance equal to the deferred income tax assets for the years ended June 30, 2017 and 2016, because it was not known whether future taxable income will be sufficient to utilize the loss carryforward. The potential tax benefit arising from the loss carryforward of $604,997 will expire in 2035.

Additionally, the future utilization of the net operating loss carryforward to offset future taxable income may be subject to an annual limitation as a result of ownership changes that could occur in the future. If necessary, the deferred tax assets will be reduced by any carryforward that expire prior to utilization as a result of such limitations, with a corresponding reduction of the valuation allowance.

The U.S. Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017, and introduced significant changes to U.S. income tax law. Effective in 2018, the Tax Act reduces the U.S. corporate statutory tax rate from 35% to 21%. The Company’s federal tax returns for the 2015, 2016 and 2017 fiscal years remain open to IRS inspection.

As of June 30, 2017, the Company had a net operating loss of approximately $156,895.

NOTE 8. RELATED-PARTY TRANSACTIONS

Reimbursement of Certain Expenses by Officer

During the year ended June 30, 2016, the Company made expenditures in the amount of $47,485 that related to the establishment of a business center in which its former EB-5 Visa-focused business plan was to be effectuated. During the year ended June 30, 2017, the Company’s President reimbursed the Company the entire $47,485 amount of its expenditures.

Loans from Officers

In August 2014, an officer loaned $100 to the Company. This loan was made on open bank account, was due on demand and did not bear interest. The $100 loan from an officer was repaid during the year ended June 30, 2016.

During the year ended June 30, 2107, the Company’s President, Jack Jie Qin, made loans to the Company, as follows:

 ______________________________

* In each loan transaction, the funds obtained were used by the Company for operating expenses and land development expenses.

+ This loan was made on open account and was payable on demand; this loan was repaid during the year ended June 30, 2018.

Loans from Majority Shareholder

During the years ended June 30, 2016 and 2015, the Company obtained loans from its majority shareholder, as follows:

Year Ended June 30, 2016

_______________________________

^@ In each loan agreement supporting the subject loan transaction, the underlying loan, when made, was collateralized with future income and receivables. On October 22, 2019, the lender released all collateral, pursuant to a novation agreement.

* In each loan transaction, the Company issued a promissory note in a face amount equal to the stated “Loan Amount,” the funds from which were used by the Company for operating expenses and land development expenses.

# Since September 2019, this loan has been the subject of a default waiver agreement, pursuant to which it is not due prior to December 31, 2019.This loan was in default from its due date until September 2019.

Year Ended June 30, 2015

______________________________

^@ In each loan agreement supporting the subject loan transaction, the underlying loan, when made, was collateralized with future income and receivables. On October 22, 2019, the lender released all collateral, pursuant to a novation agreement.

* In each loan transaction, the Company issued a promissory note in a face amount equal to the stated “Loan Amount,” the funds from which were used by the Company for operating expenses and land development expenses.

** The Company repaid $100,000 of principal of such loan in September 2017.

# Since September 2019, this loan has been the subject of a default waiver agreement, pursuant to which it is not due prior to December 31, 2019.This loan was in default from its due date until September 2019.

Loans from Related Party

During the years ended June 30, 2017 and 2016, the Company obtained loans from a related party, as follows:

Year Ended June 30, 2017

______________________________

^@ In each loan agreement supporting the subject loan transaction, the underlying loan, when made, was collateralized with future income and receivables. On October 22, 2019, the lender released all collateral, pursuant to a novation agreement.

* In this loan transaction, the Company issued a promissory note in a face amount equal to the stated “Loan Amount,” the funds from which were used by the Company for operating expenses and land development expenses.

# Since September 2019, this loan has been the subject of a default waiver agreement, pursuant to which it is not due prior to December 31, 2019.This loan was in default from its due date until September 2019.

Year Ended June 30, 2016

______________________________

^@ In each loan agreement supporting the subject loan transaction, the underlying loan, when made, was collateralized with future income and receivables. On October 22, 2019, the lender released all collateral, pursuant to a novation agreement.

* In this loan transaction, the Company issued a promissory note in a face amount equal to the stated “Loan Amount,” the funds from which were used by the Company for operating expenses and land development expenses.

# Since September 2019, this loan has been the subject of a default waiver agreement, pursuant to which it is not due prior to December 31, 2019.This loan was in default from its due date until September 2019.

Loans from Officer’s Family

During the years ended June 30, 2017 and 2016, the Company obtained loans from the family of one of its officers, as follows:

Year Ended June 30, 2017

______________________________

^@ In each loan agreement supporting the subject loan transaction, the underlying loan, when made, was collateralized with future income and receivables. On October 22, 2019, the lender released all collateral, pursuant to a novation agreement.

* In this loan transaction, the Company issued a promissory note in a face amount equal to the stated “Loan Amount,” the funds from which were used by the Company for operating expenses and land development expenses.

# Since September 2019, this loan has been the subject of a default waiver agreement, pursuant to which it is not due prior to December 31, 2019.This loan was in default from its due date until September 2019.

Year Ended June 30, 2016

______________________________

^@ In each loan agreement supporting the subject loan transaction, the underlying loan, when made, was collateralized with future income and receivables. On October 22, 2019, the lender released all collateral, pursuant to a novation agreement.

* In this loan transaction, the Company issued a promissory note in a face amount equal to the stated “Loan Amount,” the funds from which were used by the Company for operating expenses and land development expenses.

# Since September 2019, this loan has been the subject of a default waiver agreement, pursuant to which it is not due prior to December 31, 2019.This loan was in default from its due date until September 2019.

As of June 30, 2017 and 2016, the total outstanding short term related party debt was $3,029,975 and $2,100,000, respectively.

As of June 30, 2017 and 2016, the total outstanding long term related party debt was $1,229,965 and $629,975, respectively.

Guaranty of Director

In connection with the Company’s purchase of approximately 50 acres located in Temecula, California, one of its former directors, Liu Xin, personally guaranteed the Company's performance under a $750,000 promissory note issued to the selling party. Ms. Liu was paid no compensation by us for such personal guaranty. Recently, the Company’s President and CEO, Jack Qin, replaced Ms. Liu as the guarantor of such promissory note. Mr. Qin was paid no compensation by the Company for such personal guaranty.

Transactions Involving Non-Controlling Shareholder

In January 2017, the Company and a third party, a non-controlling shareholder of the Company, formed Temecula QK Holdings, LLC, a California limited liability company (“TQKH”), for the purpose of acquiring and developing approximately 40 acres of land located in Temecula, California, for $1,318,383. The Company owns 80% and the Company’s non-controlling shareholder owns 20% of TQKH. Due to this non-controlling shareholder’s 20% ownership of TQKH, such non-controlling shareholder is considered a related party.

In connection with TQKH’s purchase of such land, TQKH issued a $750,000 face amount promissory note to the third-party seller of the land. The principal balance was due in March 2019 and is currently in default. The unpaid principal balance of such promissory note bears interest at 4.5% per annum, with interest-only payments due monthly until the due date. This promissory note is secured by a deed of trust in favor of the selling party. For the year ended June 30, 2017, TQKH received $116,162 from its non-controlling shareholder for the land acquisition costs.

This non-controlling shareholder is the Company’s one major vendor that accounted for $1,571,976, or approximately 20%, of land development costs, all of which was capitalized. Also, at June 30, 2017, the Company had an account payable with this same vendor in the amount of $57,146. See Note 4. Major Vendor.

NOTE 9. NOTES PAYABLE

During the year ended June 30, 2107, in connection with the Company’s purchase of 40 acres of land in Temecula, California, in January 2017, the Company issued a $750,000 face amount promissory note to the third-party seller of the land. The principal balance was due in March 2019. The unpaid principal balance of such promissory note bears interest at 4.5% per annum, with interest-only payments of $2,813 due monthly until the entire principal balance has been paid. This promissory note is secured by a deed of trust in favor of the selling party. The Company is in default under this promissory note.

During the year ended June 30, 2016, the Company delivered a promissory note, face amount $76,587, in payment of certain insurance premiums associated with an officers’ and directors’ insurance policy obtained by the Company. Unpaid principal on such loan bears interest at 6.95% per annum. Repayment of this promissory note is to be made in ten equal monthly payments of $7,905, beginning in March 2016.

In connection with the Company’s purchase of 50 acres of land in Temecula, California, in November 2014, the Company issued a $750,000 face amount promissory note to the third-party seller of the land. The principal balance is due in November 2019. The unpaid principal balance of such promissory note bears interest at 4.5% per annum, with interest-only payments of $2,813 due monthly until the entire principal balance has been paid. This promissory note is secured by a deed of trust in favor of the selling party.

As of June 30, 2017 and 2016, the total outstanding short-term notes payable was $-0- and 38,846, respectively.

As of June 30, 2017 and 2016, the total outstanding long-term notes payable was $1,500,000 and $1,050,000, respectively.

NOTE 10. CAPITAL STOCK

Articles of Amendment to Articles of Incorporation

In October 2014, the Articles of Incorporation of the Company were amended to increase the number of authorized shares of Company common stock to 200,000,000 and to add 50,000,000 shares of $.0001 par value preferred stock to the Company’s authorized capital stock.

NOTE 11. SUBSEQUENT EVENTS

Loans from Majority Shareholder

Since June 30, 2017, the Company has obtained loans from its majority shareholder, as follows:

_____________________________

^@ In each loan agreement supporting the subject loan transaction, the underlying loan, when made, was collateralized with future income and receivables. On October 22, 2019, the lender released all collateral, pursuant to a novation agreement.

* In this loan transaction, the Company issued a promissory note in a face amount equal to the stated “Loan Amount,” the funds from which were used by the Company for operating expenses and land development expenses.

Loans from Officer’s Family

Since June 30, 2017, the Company has obtained loans from the family of one of its officers, as follows:

_____________________________

^@ In each loan agreement supporting the subject loan transaction, the underlying loan, when made, was collateralized with future income and receivables. On October 22, 2019, the lender released all collateral, pursuant to a novation agreement.

* In each of these loan transactions, the Company issued a promissory note in a face amount equal to the stated “Loan Amount,” the funds from which were used by the Company for operating expenses and land development expenses.

# Since September 2019, this loan has been the subject of a default waiver agreement, pursuant to which it is not due prior to December 31, 2019.This loan was in default from its due date until September 2019.

Loans from Related Party

Since June 30, 2017, the Company has obtained loans from a related party, as follows:

____________________________

^@ In each loan agreement supporting the subject loan transaction, the underlying loan, when made, was collateralized with future income and receivables. On October 22, 2019, the lender released all collateral, pursuant to a novation agreement.

* In each of these loan transactions, the Company issued a promissory note in a face amount equal to the stated “Loan Amount,” the funds from which were used by the Company for operating expenses and land development expenses.

# This loan is secured by the Company’s future income and receivables.

Loan from Third Party

In August 2017, the Company obtained a loan from a third party in the amount of $300,000 pursuant to a loan agreement and delivered a promissory note, face amount $300,000, in consideration of such loan. Unpaid principal on such loan bears interest at 11.49% per annum, with interest only payments of $2,872 due monthly, with principal and any accrued interest due in August 2020. The proceeds from this loan were used by the Company for operating expenses and land development expenses. The loan is secure by a deed of trust.

Repayment of Loans to Officer

In August 2017, the Company repaid two separate loans made by its President, which loans were obtained in May 2017 ($81,000), and June 2017 ($24,000), an aggregate of $105,000. These loans were made on open account and did not bear interest.

Land Purchase Agreement

In November 2017, the Company purchased approximately five acres of unimproved real estate located in Temecula, California, for $265,000 in cash. The Company intends to develop this parcel, at such time as adequate funds are available.

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Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-K’ Filing		Date		Other Filings
		12/31/19
Filed on:		11/25/19
		11/22/19
		11/21/19
		10/22/19
		10/16/19
		6/30/18
		12/22/17
For Period end:		6/30/17		NT 10-K
		6/30/16		10-K,  NT 10-K
		6/30/15
		7/14/14
		6/13/14
				List all Filings

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Filing Submission 0001104659-19-066998   –   Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

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