Phoenix Rising Companies - Quarter Report: 2017 October (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2017

or

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number 000-55319

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. x YES   o NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). x YES   o NO

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

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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) o YES   x NO

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of December 20, 2017, there were 74,976,241 shares of the issuer’s common stock, par value $0.0001 per share, outstanding.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company's January 31, 2017 Annual Report on Form 10-K filed with the SEC on May 16, 2017. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year ending January 31, 2018.

RESORT SAVERS, INC.

Index to Unaudited Condensed Consolidated Financial Statements

October 31, 2017

RESORT SAVERS, INC.

Condensed Consolidated Interim Balance Sheets

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

RESORT SAVERS, INC.

Condensed Consolidated Interim Statements of Operations and Comprehensive Income (Loss)

(Unaudited)

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

RESORT SAVERS, INC.

Condensed Consolidated Interim Statements of Cash Flows

(Unaudited)

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

RESORT SAVERS, INC.

Notes to the Condensed Consolidated Interim Financial Statements

October 31, 2017

(Unaudited)

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

Resort Savers, Inc. (“we,” “our,” “us,” “RSSV” or the “Company”) is a Nevada corporation incorporated on June 25, 2012. It is based in Shenzhen, the People’s Republic of China (the “PRC”). The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America, and the Company’s fiscal year end is January 31.

The Company makes investments and acquisitions into sound, transparent markets and industries throughout the world. The Company has invested in a company principally engaged in the development and production of beverages, investment in agricultural business and import and export of products in the food and beverage industry, and a company principally engaged in the trading of oil, gas and lubricant. In Europe and worldwide, the Company is seeking to acquire and invest in global tourist and development assets that can be tailored to Chinese and American investment traveler.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company prepares its financial statements in accordance with rules and regulations of the SEC and generally accepted accounting principles (“GAAP”) in the United States of America. The accompanying interim financial statements have been prepared in accordance with GAAP for interim financial information in accordance with Article 8 of Regulation S-X and presented in US dollars.

In the opinion of management, all adjustments consisting of normal recurring entries necessary for a fair statement of the periods presented for: (a) the financial position; (b) the result of operations; and (c) cash flows, have been made in order to make the financial statements presented not misleading. The results of operations for such interim periods are not necessarily indicative of operations for a full year. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K filed with the SEC on May 16, 2017.

Principles of Consolidation

At October 31, 2017, the principal subsidiaries of the Company were listed as follows:

__________

* These companies do not have any official English names. The English names used are for identification purpose only.

These consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany balances and transactions have been eliminated.

Foreign Currency Translation and Re-measurement

The Company translates its foreign operations to U.S. dollar in accordance with ASC 830, “Foreign Currency Matters”.

The Company and its subsidiaries' functional currency and reporting currency is U.S. dollar, except Amuli and Tieshan Oil’s functional currency which is Chinese Renminbi (“RMB”).

The Company's subsidiaries, whose records are not maintained in that company's functional currency, re-measure their records into their functional currency as follows:

Gains and losses from these re-measurements were not significant and have been included in the Company's results of operations.

The Company's subsidiaries, whose functional currency is not the U.S. dollar, translate their records into U.S. dollar as follows:

Adjustments arising from such translations are included in accumulated other comprehensive income in shareholders’ equity.

Concentrations of Credit Risk

The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents, and accounts receivable. The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company also reviews its accounts receivable on a timely manner. The Company’s management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.

Tieshan Oil

During the nine-month period ended October 31, 2017, one customer accounted for approximately 99% of revenues of Tieshan Oil. During the nine months ended July 31, 2016, one customer accounted for approximately 51% of revenues of Tieshan Oil.

As of October 31, 2017, two customers accounted for approximately 100% of accounts receivable. As of January 31, 2017, two customers accounted for approximately 87% of accounts receivable. There was no significant changes of such concentrations of credit risk between October 31, 2017 and January 31, 2017.

During the nine-month period ended October 31, 2017, one supplier accounted for approximately 93% of cost of revenue of Tieshan Oil.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted 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. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ from these good faith estimates and judgments.

Financial Instruments

The Company follows ASC 820, "Fair Value Measurements and Disclosures", which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

The three levels of the fair value hierarchy are described below:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

Property, plant and equipment

Property, plant and equipment are recorded at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the term of the related lease or the estimated useful life of the asset. The useful lives are as follows:

Machinery 5 ~ 10 years 

Maintenance and repairs are charged to operations as incurred. Expenditures which substantially increase the useful lives of the related assets are capitalized. When properties are disposed of, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is reported in the period the transaction takes place.

Goodwill

The Company tests goodwill for impairment on an annual basis, or more frequently if circumstances, such as material deterioration in performance or a significant number of store closures, indicate reporting unit carrying values may exceed their fair values. When evaluating goodwill for impairment, the Company may first perform a qualitative assessment to determine if the fair value of the reporting unit is more likely than not greater than its carrying amount. If the Company does not perform a qualitative assessment or if the fair value of the reporting unit is not more likely than not greater than its carrying amount, the Company calculates the implied estimated fair value of the reporting unit. If the carrying amount of goodwill exceeds the implied estimated fair value, an impairment charge to current operations is recorded to reduce the carrying value to the implied estimated fair value. During the nine months ended October 31, 2017, no impairment is considered to be required for goodwill.

Accounting for the impairment of long-lived assets

The long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. It is reasonably possible that these assets could become impaired as a result of technology or other industry changes. Determination of recoverability of assets to be held and used is by comparing the carrying amount of an asset to future net undiscounted cash flows to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. During the nine months ended October 31, 2017 and the year ended January 31, 2017, the Company did not impair any long-lived assets.

Revenue Recognition

The Company will recognize revenue from the sale of products and services in accordance with ASC 605, “Revenue Recognition.” Revenue will be recognized only when all of the following criteria are met: persuasive evidence for an agreement exists, delivery has occurred or services have been provided, the price or fee is fixed or determinable, and collection is reasonably assured.

Net Loss Per Share of Common Stock

The Company has adopted ASC Topic 260, “Earnings per Share,” (“EPS”) which requires presentation of basic EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation. In the accompanying financial statements, basic earnings (loss) per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.

The Company has no potentially dilutive securities, such as options or warrants, currently issued and outstanding.

Commitments and Contingencies

The Company follows ASC 450-20, “Loss Contingencies,” to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. There were no commitments or contingencies as of October 31, 2017 and January 31, 2017.

Recent Accounting Pronouncements

Management has considered all recent accounting pronouncements issued since the last audit of our financial statements. The Company's management believes that these recent pronouncements will not have a material effect on the Company's financial statements.

NOTE 3 – GOING CONCERN

The Company's financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet had sufficient revenues to cover its operating cost, and requires additional capital to commence its operating plan. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. These factors raise substantial doubt about its ability to continue as a going concern.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan to obtain such resources for the Company include: sales of equity instruments; traditional financing, such as loans; and obtaining capital from management and significant stockholders sufficient to meet its minimal operating expenses. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.

There is no assurance that the Company will be able to obtain sufficient additional funds when needed or that such funds, if available, will be obtainable on terms satisfactory to the Company. In addition, profitability will ultimately depend upon the level of revenues received from business operations. However, there is no assurance that the Company will attain profitability. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 4 – ACCOUNTS RECEIVABLES

The Company has performed an analysis on all of its accounts receivable and determined that all amounts are collectible by the Company. As such, all accounts receivable are reflected as a current asset and no allowance for bad debt has been recorded as of October 31, 2017. No bad debts were written off for the nine months ended October 31, 2017 and 2016. The Company’s accounts receivable consists of only trade receivables. As at October 31, 2017 and January 31, 2017, the Company had accounts receivable of $9,594,749 and $43,054,811, respectively.

Aging analysis of accounts receivable is as follows:

NOTE 5 – EQUIPMENT

During the nine months ended October 31, 2017 and 2016, the Company recorded depreciation of $37,110 and $69,799, respectively.

NOTE 6 – GOODWILL

On January 29, 2016, the Company recognized goodwill of $1,979,787 on the acquisition of Tieshan Oil. The Company tests goodwill for impairment on an annual basis, or more frequently if circumstances, such as material deterioration in performance, indicate reporting unit carrying values may exceed their fair values. No impairment is considered to be required for goodwill during the nine months ended October 31, 2017.

NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

The Company’s accounts payable and accrued liabilities consist of the followings:

NOTE 8 – SHORT-TERM LOAN

There are no provisions in the Company’s bank borrowings that would accelerate repayment of debt as a result of a change in credit ratings or a material adverse change in the Company’s business.

During the year ended January 31, 2017, the Company borrowed a loan from a money provider. The amount is denominated in Renminbi of RMB7,200,000. The interest rate is 0.5% per month. The loan is secured by 48.83% shares of Tieshan Oil held by Yeung Po Kam. The Loan was due on October 7, 2017 and is currently in default.

During the nine months ended October 31, 2017 and 2016, the Company repaid loan of $322,520 and $0 and incurred interest of $63,318 and $100,425, respectively. As of October 31, 2017 and January 31, 2017, the Company had a short-term loan balance of $753,500 and $1,046,160, respectively.

NOTE 9 – STOCKHOLDERS’ EQUITY

The capitalization of the Company consists of the following classes of capital stock:

Preferred Stock

The Company has authorized 15,000,000 shares of preferred stock with a par value of $0.0001 per share. The Board of Directors are authorized to divide the authorized shares of Preferred Stock into one or more series, each of which shall be so designated as to distinguish the shares thereof from the shares of all other series and classes. No shares of preferred stock have been issued.

Common Stock

The Company has authorized 1,000,000,000 shares of common stock with a par value of $0.0001 per share. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.

During the nine-month period ended October 31, 2017, no shares were issued by the Company.

As at October 31, 2017 and January 31, 2017, the Company had 74,976,241 common shares issued and outstanding.

The Company has no stock option plan, warrants or other dilutive securities.

Additional Paid-In Capital

During the nine months ended October 31, 2017, related parties contributed additional paid-in capital in the amount of $86,566, to fund operating expenses.

NOTE 10 – RELATED PARTY TRANSACTIONS

Accounts receivable and prepaid

As of October 31, 2017 and January 31, 2017, the Company had amount due from related parties of $0 and $26,747,696, respectively. As of October 31, 2017, and January 31, 2017, it consists of a trade receivable past due within 1 month of $0 and $14,091,462 from a related company and a trade receivable past due within 1 year of $0 and $12,656,234 from another related company, respectively. All the related companies were customers of the Company and were under common control with the Company.

As of October 31, 2017 and January 31, 2017, the Company had prepaid expense of $5,517,186 and $0, respectively. The related party company is the vendor of the Company and is under common control with the Company.

Accounts payable, other liabilities and loans

At October 31, 2017 and January 31, 2017, the Company had accounts payable and accrued liabilities of $8,608,480 and $63,270,068 to four related companies under common control with the Company, respectively.

In support of the Company’s efforts and cash requirements, it may rely on advances from related parties until such time that the Company can support its operations or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by shareholders or directors. Amounts represent advances or amounts paid in satisfaction of liabilities. The advances were considered temporary in nature and were not formalized by a promissory note.

At October 31, 2017, the Company owed $12,695 to a director of the Company, $5,203 to a director of Xin Rui HK, $9,114 to directors of Huaxin, $216,456 to directors of Amuli and $48,288 to shareholders of Amuli, for vendor payments made by those directors.

At January 31, 2017, the Company owed $12,695 to a director of the Company, $5,203 to a director of Xin Rui HK, $8,352 to directors of Huaxin, $208,406 to directors of Amuli and $46,558 to shareholders of Amuli, for vendor payments made by those directors.

The amounts and terms of the above transactions may not necessarily be indicative of the amounts and terms that would have been incurred had comparable transactions been entered into with independent third parties.

As of October 31, 2017 and January 31, 2017, due to related parties consist of the follows;

NOTE 11 – COMMITMENTS AND CONTINGENCIES

The Company has no commitments or contingencies as of October 31, 2017 and January 31, 2017.

From time to time the Company may become a party to litigation matters involving claims against the Company. Management believes that it is adequately insured for its operations and there are no current matters that would have a material effect on the Company’s financial position or results of operations.

NOTE 12 – SEGMENTED INFORMATION

At October 31, 2017 and January 31, 2017, the Company operates in two industry segments, health beverage and oil and gas, and one geographic segment, China, where majority current assets and equipment are located.

Segment assets and liabilities at October 31, 2017 and January 31, 2017 were as follows:

Segment revenue and net loss for nine months ended October 31, 2017 and 2016 were as follows:

Segment revenue and net loss for three months ended October 31, 2017 and 2016 were as follows:

NOTE 13 – SUBSEQUENT EVENTS

Management has evaluated subsequent events through the date these financial statements were available to be issued. Based on our evaluation no material events have occurred that require disclosure.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “pursue,” “expect,” “anticipate,” “predict,” “project,” “goals,” “strategy,” “future,” “likely,” “forecast,” “potential,” “continue,” negatives thereof or similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding future acquisition or merger targets, business strategies, macro-economic and sector-specific trends, future cash flows, financing plans, plans and objectives of management and any other statements which are not statements of historical facts.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual future results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, legal and regulatory changes in the jurisdictions in which we operate, volatility or decline in our stock price, potential fluctuation of our quarterly results, rapid adverse changes in markets, decline in demand for our goods and services, insufficient revenues to cover our operating costs and such other factors as discussed throughout this Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report on Form 10-Q.

Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Overview

The Company was incorporated in the State of Nevada on June 25, 2012. At formation, the Company was authorized to issue 100,000,000 shares of common stock, par value $0.0001 per share, and 15,000,000 shares of preferred stock, par value $0.0001 per share. Our fiscal year end is January 31. Resort Savers has limited cash on hand. We have sustained losses since inception and have relied solely upon the sale of our securities for funding. Resort Savers has never declared bankruptcy, been in receivership, or been involved in any kind of legal proceeding.

On August 1, 2014, a change of control of the Company occurred, whereby a controlling interest in the Company was sold by Michelle LaCour, our former President, Chief Executive Officer, Chief Financial Officer, Treasurer and director and a former 5% stockholder, and James LaCour, our former Secretary and director and a former 5% stockholder, to the following: (1) Zhou Gui Bin (236,733 shares at a purchase price of $0.20 per share); (2) Zhou Wei (236,733 shares at a purchase price of $0.20 per share); and (3) Zong Xin (1,636,734 shares at a purchase price of $0.20 per share).

On September 25, 2014 the Company effected a forward stock split of 10 shares of common stock for each share held, or an additional nine shares were issued for each common share held. All share and per share information has been retroactively restated for financial presentation of prior periods.

Worx America, Inc.

Worx America, Inc. (“Worx”) designs automated solutions for industrial, environmental and energy industries to improve efficiency and systems output. The Worx automated robotic tank cleaning system reduces tank cleaning time, reduces or eliminates the need for personnel to enter tanks, and may reduce the volume of solvents used to clean a tank. Actual results vary from tank to tank and may involve variables including the product in the tank, physical condition of the tank such as corrosion, or amount of sludge accumulated. Worx is currently refining its product line to improve speed and efficiency. Our investment in Worx has facilitated this development. We hope that our investment into what we believe is an important technology will give us early access to the technology, establish relationships in the industry, and allow us to assist Worx with the launch of its commercial products in China and other parts of Asia.

Shenzhen Amuli Industrial Development Co. Ltd.

On October 1, 2015, the Company’s wholly-owned Seychelles-registered subsidiary, Xing Rui, by and through a newly formed PRC corporation subsidiary Huaxin, completed a purchase of sixty percent (60%) of the shares of the PRC corporation Amuli, for 3,033,926 shares of the Company’s common stock. The purchase price was valued at $2,400,000.

Amuli is in development to become a large producer of the health beverage drink Kvass. Amuli has purchased equipment and is currently expanding its production facilities that we hope will generate sales and profits in 2017.

Following the Amuli acquisition, on October 9, 2015, we amended our certificate of incorporation to increase the maximum number of shares of common stock that the Company shall be authorized to have outstanding at any time to 1,000,000,000 shares.

Beijing Yandong Tieshan Oil Products Co., Ltd.

On January 29, 2016, the Company entered into an Exchange Agreement (the “Exchange Agreement”) with Mr. Yang Baojin, a citizen of the PRC, and Huaxin, which is a wholly owned subsidiary of Xing Rui, which in turn is a wholly owned subsidiary of the Company. Mr. Baojin is the president and majority owner of Tieshan Oil. Pursuant to the Exchange Agreement, the Company issued 6,000,000 shares of its common stock to Mr. Baojin, who delivered to Huaxin an ownership interest in Tieshan Oil such that Huaxin now owns 51% of all ownership interests in Tieshan Oil.

Tieshan Oil is principally engaged in the trading of oil, gas and lubricant products within the PRC. Apart from the transactions pursuant to the Exchange Agreement, neither the Company nor Huaxin has a material relationship with either Mr. Baojin or Tieshan Oil.

Under the Exchange Agreement, Mr. Baojin agreed to guarantee, for five years, that Tieshan Oil will have an annual net income of 10 million Chinese Yuan (“CNY” and also referred to as “Renminbi” or “RMB”). To the extent that in any year the actual net income of Tieshan Oil is less than RMB 10 million, then Mr. Baojin is contractually obligated to pay Huaxin a cash payment equal to 51% of the shortfall.

The Exchange Agreement was approved by a written consent of the Board of Directors of the Company on January 29, 2016 and the closing of the transactions under the Exchange Agreement occurred concurrently with the execution and delivery of the Exchange Agreement. As a result of the closing of the transactions under the Exchange Agreement, Huaxin now owns a majority of the ownership interest of Tieshan Oil. The total value of the exchange, based on the value of the Company’s common stock as of the close of trading on January 28, 2016, was $3,435,000.

Results of Operations

Our operations for the three and nine months ended October 31, 2017 are outlined below:

Three months ended October 31, 2017 compared to three months ended October 31, 2016.

For the three month periods ended October 31, 2017 and October 31, 2016, we had revenue of $8,496,477 and $15,712,231, respectively. Expenses for the three month period ended October 31, 2017 totaled $8,533,740 resulting in a net loss of $37,263 as compared to a net loss of $25,041 for the three months ended October 31, 2016. The increase in net loss for the three month period ended October 31, 2017 is a result of a decrease in revenue and gross profit.

Nine months ended October 31, 2017 compared to nine months ended October 31, 2016.

For the nine month periods ended October 31, 2017 and October 31, 2016, we had revenue of $29,123,821 and $62,824,020, respectively. Expenses for the nine month period ended October 31, 2017 totaled $29,313,728 resulting in a net loss of $189,907 as compared to a net loss of $2,107,941 for the nine months ended October 31, 2016. The decrease in net loss for the nine month period ended October 31, 2017 is a result of an impairment loss of investment of $1,970,308 in 2016.

Liquidity and Capital Resources

The following table provides selected financial data about our company as of October 31, 2017 and January 31, 2017, respectively.

Working Capital

Cash Flows

On October 31, 2017, our Company’s cash balance was $135,053 and total assets were $17,397,602. On January 31, 2017, our Company’s cash balance was $52,593 and total assets were $71,967,890. The change in total assets was primarily due to a reduction in accounts receivable and amount due from related parties of $33,460,062 and 21,230,510, respectively.

On October 31, 2017, our Company had total liabilities of $11,045,238, compared with total liabilities of $65,667,635 as at January 31, 2017. The reduction in liabilities was primarily due to the repayment of amounts owing to related parties of $54,632,775.

On October 31, 2017, our Company had working capital of $4,305,287 compared with working capital of $4,218,637 as at January 31, 2017. The increase in working capital was primarily attributed to a decrease in due to related parties offset by a decrease in accounts receivable and amount due from related parties.

Cash Flow from Operating Activities

During the nine months ended October 31, 2017, our Company used $516,673 in operating activities, compared to $2,932,539 provided by operating activities during the nine months ended October 31, 2016. The cash used in operating activities for the nine months ended October 31, 2017, was attributed to a decrease in changes in operations assets and liabilities.

Cash Flow from Investing Activities

During the nine months ended October 31, 2017 and 2016, we did not use any cash for investing activities.

Cash Flow from Financing Activities

During the nine months ended October 31, 2017, our Company used $235,954 in financing activities compared to $2,989,577 used in financing activities during the nine months ended October 31, 2016. The cash flow for financing activities for the nine months ended October 31, 2017, was a result of $322,520 for a repayment of short-term loan and $86,566 in proceed from loans from related parties.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, and capital expenditures or capital resources that are material to stockholders.

Application of Critical Accounting Policies

We have identified the policies below as critical to our business operations and the understanding of our results of operations. The impact on our business operations and any associated risks related to these policies are discussed throughout Part 1, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations when such policies affect our reported or expected financial results.

In the ordinary course of business, we have made a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our financial statements in conformity with GAAP. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. The results form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ significantly from those estimates under different assumptions and conditions. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require our most difficult, subjective, and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

The material estimates for our company are that of the income tax valuation allowance recorded for deferred tax assets and revenue recognition.

Basis of Accounting and Going Concern

Our unaudited condensed consolidated financial statements have been prepared on the accrual basis of accounting in conformity with GAAP. In addition, the accompanying unaudited condensed consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. We generated accumulated losses of approximately $4,959,717 through October 31, 2017 and have insufficient working capital and cash flows to support operations. These factors raise substantial doubt about our ability to continue as a going concern. The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from this uncertainty.

Revenue and Expense Recognition

We recognize revenue when (1) persuasive evidence of an arrangement exists, (2) services have been rendered, (3) the fee is fixed or readily determinable, and (4) collectability is reasonably assured. We recognize revenue in accordance with ASC 605, “Revenue Recognition.” Determination of criteria (iii) and (iv) are based on management’s judgments regarding the fixed nature of the selling prices of the services delivered and the collectability of those amounts.

Any amount receivable or received, but unrecognized for revenue recognition purpose is recorded as deferred revenues.

Sales taxes collected from clients and remitted to governmental authorities where applicable are accounted for on a net basis and therefore are excluded from revenues in the statements of operations.

Goodwill

The Company tests goodwill for impairment on an annual basis, or more frequently if circumstances, such as material deterioration in performance or a significant number of store closures, indicate reporting unit carrying values may exceed their fair values. When evaluating goodwill for impairment, the Company may first perform a qualitative assessment to determine if the fair value of the reporting unit is more likely than not greater than its carrying amount. If the Company does not perform a qualitative assessment or if the fair value of the reporting unit is not more likely than not greater than its carrying amount, the Company calculates the implied estimated fair value of the reporting unit. If the carrying amount of goodwill exceeds the implied estimated fair value, an impairment charge to current operations is recorded to reduce the carrying value to the implied estimated fair value. During the nine months ended October 31, 2017, no impairment is considered to be required for goodwill.

Recent Accounting Pronouncements

For discussion of recently issued accounting pronouncements, please see Note 2 to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a “smaller reporting company,” we are not required to provide the information required by this Item.

Item 4. Controls and Procedures

Management’s Report on Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our president (our principal executive officer and principal financial officer) to allow for timely decisions regarding required disclosure.

As of the end of the quarter covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of our president (our principal executive officer, principal financial officer and principle accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president (our principal executive officer and principal financial officer) concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this Quarterly Report on Form 10-Q.

Changes in Internal Controls

There have been no changes in our internal controls over financial reporting that occurred during the quarter ended October 31, 2017, that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

Item 1A. Risk Factors

As a “smaller reporting company,” we are not required to provide the information required by this Item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

Item 6. Exhibits

_________

* Filed herewith.

** Deemed furnished and not filed.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.