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EX-32.2 - EXHIBIT 32.2 - XIANGTIAN (USA) AIR POWER CO., LTD.exhibit32-2.htm
EX-32.1 - EXHIBIT 32.1 - XIANGTIAN (USA) AIR POWER CO., LTD.exhibit32-1.htm
EX-31.2 - EXHIBIT 31.2 - XIANGTIAN (USA) AIR POWER CO., LTD.exhibit31-2.htm
EX-31.1 - EXHIBIT 31.1 - XIANGTIAN (USA) AIR POWER CO., LTD.exhibit31-1.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2017

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number 333-161997

XIANGTIAN (USA) AIR POWER CO., LTD.
(Exact name of registrant as specified in its charter)

NEVADA 98-0632932
(State or other jurisdiction of (IRS Employer Identification No.)
Incorporation or organization)  

No. 6 Longda Road Yanjiao Development Zone
Sanhe City, Hebei Province, China 065201
(Address of principal executive offices)

001 240-252-1578
(Registrant’s telephone number)

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 [X]           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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post 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.

Large accelerated filer [  ] Accelerated filer [X]
Non-accelerated filer [  ] Smaller reporting company [  ]


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

Indicate the number of outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: The registrant had 591,042,000 shares of common stock, $0.001 par value outstanding on June 5, 2017. The registrant has no other class of common equity.

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TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION  
     
Item 1. Financial Statements  
  Consolidated Balance Sheets as of April 30, 2017 (Unaudited) and July 31, 2016 4
Consolidated Statement of Operations and Comprehensive Loss for the Three and Nine Months Ended April 30, 2017 and 2016 (Unaudited) 5
Consolidated Statements of Cash Flows for the Nine Months Ended April 30, 2017 and 2016) (Unaudited) 6
  Notes to Consolidated Financial Statements (Unaudited) 7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 21
Item 3. Quantitative and Qualitative Disclosures About Market Risk 28
Item 4. Controls and Procedures 29
     
PART II. OTHER INFORMATION  
     
Item 1. Legal Proceedings 29
Item 1A. Risk Factors 29
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 30
Item 3. Defaults Upon Senior Securities 30
Item 4. Mine Safety Disclosures 30
Item 5. Other Information 30
Item 6. Exhibits 30
  Signatures 31

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Xiangtian (USA) Air Power Co., Ltd.
Consolidated Balance Sheets
(Stated in US Dollars)

    April 30,     July 31,  
    2017     2016  
    (Unaudited)        
ASSETS            
Current assets            
Cash and cash equivalence $  191,279   $  1,226,220  
Accounts receivable   1,552,477     2,848,904  
Other receivables   15,877     491,290  
Advances to suppliers   3,539,296     4,594,299  
Due from related parties   72,569     -  
Due from director   145,138     -  
Inventory   3,291,950     2,080,853  
Costs in excess of billings   1,172,900     710,652  
Other current asset   507,539     126,395  
Total current assets $  10,489,025   $  12,078,613  
             
Non-current assets            
   Property, plant and equipment, net $  4,290,367   $  4,520,735  
   Deposit for property, plant and equipment   2,030,312     178,617  
Total non-current assets   6,320,679     4,699,352  
             
Total assets $  16,809,704   $  16,777,965  
             
LIABILITIES AND STOCKHOLDERS’ EQUITY            
             
LIABILITIES            
Current liabilities            
Accounts payable and accrued liabilities $  5,176,910   $  4,851,630  
Due to director   415,652     414,876  
Due to shareholder   84,180     -  
Due to related parties   2,333,015     1,716,734  
Advance from customers   117,126     620,814  
Deferred tax liabilities   16,437     107,609  
Other payables   293,281     234,791  
Income tax payable   415,633     329,177  
Net Advance billings   897,191     -  
Total current liabilities   9,749,425     8,275,631  
             
Total liabilities $  9,749,425   $  8,275,631  
           
Commitments and contingencies            
STOCKHOLDERS’ EQUITY            
Preferred stock: $0.001 par value, 100,000,000 shares authorized, none issued and outstanding   -     -  
Common stock: $0.001 par value, 1,000,000,000 shares authorized, 591,042,000 shares issued and outstanding   591,042     591,042  
Additional paid-in capital   9,718,175     9,713,675  
Subscription receivable   (310,000 )   (310,000 )
Accumulated deficit   (1,893,532 )   (812,935 )
Accumulated other comprehensive loss   (1,045,406 )   (679,448 )
Total stockholders’ equity   7,060,279     8,502,334  
Total liabilities and stockholders’ equity $  16,809,704   $  16,777,965  

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

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Xiangtian (USA) Air Power Co., Ltd.
Consolidated Statement of Operations and Comprehensive Loss
(Stated in US Dollars)
(Unaudited)

    For the     For the     For the     For the  
    Three     Three     Nine     Nine  
    Months     Months     Months     Months  
    Ended     Ended     Ended     Ended  
    April 30,     April 30,     April 30,     April 30,  
    2017     2016     2017     2016  
Revenue   3,276,810     8,940,206     4,329,466     9,009,326  
                         
Cost of sales $  2,765,087   $  7,957,023   $  3,670,799     8,020,566  
                         
Gross profit $  511,723   $  983,183   $  658,667     988,760  
                         
Operating expenses:                        
Selling expenses   5,337     6,668     23,527     16,015  
General and administrative expenses   544,865     401,734     1,712,892     1,027,521  
Total operating expenses   550,202     408,402     1,736,419     1,043,536  
                         
(Loss) gain from operations   (38,479 )   574,781     (1,077,752 )   (54,776 )
Other (expenses) income                        
Interest income   116     136     1,154     136  
Other expenses   -     -     (53 )   -  
Non-operating income (expense)   1,079     (767 )   7,496     135,296  
Exchange gain (loss)   -     8     -     (17,910 )
    Total other income (expenses), net   1,195     (623 )   8,597     117,522  
                         
                 Net (loss) income before taxes $  (37,284 )   574,158     (1,069,155 )   62,746  
                         
Income tax expenses   (71,372 )   (295,439 )   (11,442 )   (222,361 )
                         
                 Net (loss) income after taxes $  (108,656 )   278,719     (1,080,597 )   (159,615 )
                         
Foreign currency translation adjustment   (20,679 )   151,172     (365,958 )   (420,880 )
                         
Comprehensive (loss) income   (129,335 )   429,891     (1,446,555 )   (580,495 )
                         
Net (loss) income per common share – basic and diluted $  (0.00 ) $  0.00   $  (0.00 )   (0.00 )
                         
Weighted average number of common shares outstanding - basic and diluted   591,042,000     591,042,000     591,042,000     591,042,000  

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

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Xiangtian (USA) Air Power Co., Ltd.
Consolidated Statements of Cash Flows
(Stated in US Dollars)
(Unaudited)

    For the     For the  
    Nine Months     Nine Months  
    Ended     Ended  
    April 30,     April 30,  
    2017     2016  
Cash flows from operating activities:            
Net loss $  (1,080,597 ) $  (159,615 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:        
Depreciation   214,664     201,090  
Rent contributed by shareholders as paid-in capital   4,500     4,500  
Gain on termination of capital lease   -     (129,159 )
Changes in operating assets and liabilities:            
Accounts receivable   1,348,286     (1,445,208 )
Other receivables   311,056     (164,202 )
Prepayment   1,127,376     805,207  
Inventory   (1,788,872 )   2,233,930  
Due from related party   -     (117,041 )
Other current asset   (383,728 )   606,446  
Accounts payable and accrued liabilities   267,203     2,745,623  
Other payables and tax payables   139,164     341,447  
Advance billings on contracts   517,312     (5,668,290 )
Deferred tax liability   (93,601 )   (83,388 )
Net cash provided by (used in) operating activities   582,763     (828,660 )
             
Cash flows from investing activities:            
Purchase of property and equipment   (1,887,453 )   (98,250 )
Repayment of loan made to related parties   -     31,053  
Repayment of loan made to third parties   176,105     -  
Net cash used in investing activities   (1,711,348 )   (67,197 )
             
Cash flows from financing activities:            
Advances from related parties   611,281     392,061  
Advances from director   1,799     1,327  
Loan made to director   (146,754 )   -  
Advances from shareholders   85,118     250,000  
Net cash provided by financing activities   551,444     643,388  
             
Effect of exchange rate change on cash   (457,800 )   (205,007 )
             
Net change in cash and cash equivalents   (1,034,941 )   (457,476 )
             
Cash and cash equivalents - beginning of period   1,226,220     502,029  
             
Cash and cash equivalents - end of period $  191,279   $  44,553  

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

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Xiangtian (USA) Air Power Co., Ltd.
Notes to Consolidated Financial Statements
(Unaudited)

NOTE 1 - NATURE OF OPERATIONS

Xiangtian (USA) Air Power Co., Ltd. (the “Company”) was incorporated in the State of Delaware on September 2, 2008 as Goa Sweet Tours Ltd. The Company was originally formed to provide personalized concierge tour packages to tourists who visit the State of Goa, India. On April 17, 2012, the Company entered into Share Purchase Agreements, by and among, Luck Sky International Investment Holdings Limited (“Luck Sky”), an entity owned and controlled by Zhou Deng Rong, and certain of our former stockholders who owned, in the aggregate, 7,200,000 shares of the Company’s common stock (90% of the then outstanding shares). Luck Sky purchased all 7,200,000 shares for an aggregate of $235,000. The sale was completed on May 15, 2012.

On May 25, 2012, the Company formed a corporation under the laws of the State of Delaware called Xiangtian (USA) Air Power Co., Ltd. ("Merger Sub") and on the same day, acquired one hundred shares of Merger Sub's common stock for cash. As such, Merger Sub became a wholly-owned subsidiary of the Company.

Effective as of May 29, 2012, Merger Sub was merged with and into the Company. As a result of the merger, the Company’s name was changed to “Xiangtian (USA) Air Power Co., Ltd.”. Prior to the merger, Merger Sub had no liabilities and nominal assets and, as a result of the merger, the separate existence of the Merger Sub ceased. The Company was the surviving corporation in the merger and, except for the name change provided for in the Agreement and Plan of Merger, there was no change in the directors, officers, capital structure or business of the Company.

Merger with LuckSky (Hong Kong) Shares Limited

On September 5, 2013, the Company entered into a business combination by means of merger of LuckSky (Hong Kong) Shares Limited (“HK Shares”), a Hong Kong corporation, for 250,000,000 shares of common stock of the Company. Prior to the merger, HK Shares had no liabilities and nominal assets. On September 23, 2013, the Company issued 250,000,000 shares of common stock to the shareholders of HK Shares. Effectively on September 24, 2013, the shareholders of HK Shares accepted the shares from the Company and surrendered its control of HK Shares to the Company in exchange of 250,000,000 shares of HK Shares to be issued to its shareholders. On October 16, 2013, HK Shares completed the issuance of its 250,000,000 shares accordingly. Management cancelled HK Shares in October 2014.

Acquisition of Sanhe City Lucksky Electrical Engineering Co., Ltd.

On July 25, 2014, Luck Sky (Shen Zhen) Aerodynamic Electricity Limited (“Luck Sky Shen Zhen”), a corporation incorporated under the laws of the People Republic of China (“PRC”), an indirect wholly-owned subsidiary; Sanhe City Lucksky Electrical Engineering Co., Ltd. (“Sanhe”), a corporation incorporated under the laws of the PRC; and Mr. Zhou Jian and Mr. Zhou Deng Rong, the owners of 97% and 3%, respectively, of Sanhe; entered into a series of agreements known as variable interest agreements (the “VIE Agreements”) pursuant to which Sanhe became Luck Sky Shen Zhen’s contractually controlled affiliate. The purpose and effect of the VIE Agreements is to provide Luck Sky Shen Zhen (our indirect wholly-owned subsidiary) with all of the management, control and net profits of Sanhe.

Simultaneously, the Company entered into a common stock purchase agreement with Zhou Jian and Zhou Deng Rong, the owners of 97% and 3%, respectively, of Sanhe, in consideration for the execution of the VIE Agreements and the acquisition of Sanhe. Pursuant to the Stock Purchase Agreement, the Company issued Zhou Jian and Zhou Deng Rong 264,850,740 and 8,191,260 shares, respectively, of our common stock, representing 51.4% of our issued and outstanding shares of common stock.

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Reincorporation in Nevada

We reincorporated in Nevada effective October 31, 2016 as a result of a merger of Xiangtian (USA) Air Power Co., Ltd., a Delaware corporation, with its wholly-owned subsidiary, Xiangtian (USA) Air Power Co., Ltd., a Nevada corporation.

NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America. This basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned, and expenses and losses are recognized when incurred. The Company’s consolidated financial statements are expressed in U.S. dollars.

Use of Estimates and Assumptions

The preparation of consolidated financial statements in conformity with generally accepted accounting principles 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 period. Actual results could differ from those estimates.

Interim Financial Statements

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) applicable to interim financial information and the requirements of Form 10-Q and Rule 8-03 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they do not include all of the information and disclosure required by accounting principles generally accepted in the United States of America for complete financial statements. Interim results are not necessarily indicative of results for a full year. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial position and the results of operations and cash flows for the interim periods have been included. These interim financial statements should be read in conjunction with the audited financial statements for the year ended July 31, 2016, as not all disclosures required by generally accepted accounting principles for annual financial statements are presented. The interim financial statements follow the same accounting policies and methods of computations as the audited financial statements for the year ended July 31, 2016.

These interim financial statements should be read in conjunction with the audited financial statements for the year ended July 31, 2016, as not all disclosures required by generally accepted accounting principles for annual financial statements are presented. The interim financial statements follow the same accounting policies and methods of computations as the audited financial statements for the year ended July 31, 2016.

Reclassification

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported net income or losses.

Principle of Consolidation

The consolidated financial statements include the accounts of the Company, its subsidiaries and VIE for which it is deemed the primary beneficiary. All significant inter-company accounts and transactions have been eliminated in consolidation.

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The Company evaluates the need to consolidate its VIE in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support.

The VIE agreement was not consummated until July 25, 2014, however, the purpose and design of the establishment of VIE, Sanhe, was to consolidate common control under the Company. ASC 810-10-25-38F states that a reporting entity’s involvement in the design of a VIE may indicate that the reporting entity had the opportunity and the incentive to establish arrangements that result in the reporting entity being the variable interest holder with the power to direct the activities that most significantly impact the VIE’s economic performance. As both the Company and the acquired VIE, Sanhe, are under the common control of Zhou Dengrong and Zhou Jian immediately before and after the acquisition, this transaction was accounted for as a merger under common control, using merger accounting as if the merger had been consummated at the beginning of the earliest period presented, and no gain or loss was recognized. All the assets and liabilities of the VIE, Sanhe, are recorded at carrying value. Hence, Sanhe was consolidated under the Company since its inception due to the purpose and design of its establishment.

The following financial statement amounts and balances of the VIE, which is established on August 6, 2014, were included in the accompanying consolidated financial statements as of April 30, 2017 and July 31, 2016 and for the nine months ended April 30, 2017 and 2016, respectively:

    April 30,     July 31,  
    2017     2016  
    (Unaudited)        
Total assets $  16,523,294   $  16,566,891  
Total liabilities   9,051,307     7,944,737  

    For the nine     For the nine  
    months     months  
    Ended     ended  
    April 30,     April 30,  
    2017     2016  
    (Unaudited)     (Unaudited)  
Net loss $  842,907   $  223,651  

Fair Value Measurements

The Company applies the provisions of ASC Subtopic 820-10, “Fair Value Measurements”, for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements. ASC 820 also establishes a framework for measuring fair value and expands disclosures about fair value measurements.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes three levels of inputs that may be used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

[  ]      Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

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[  ]      Level 2 inputs to the valuation methodology includes quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

[  ]      Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.

There were no assets or liabilities measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820 as of April 30, 2017 and July 31, 2016.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

Advances to suppliers

Advances to suppliers consist of the prepayment for inventories, including PV panels, storage tanks and other accessory parts.

Inventory

Inventory is stated at the lower of cost or market. Cost is principally determined using the weighted average basis. Construction costs incurred on contracts are included in inventories which consist of raw materials, accessory parts, and contracts work in progress.

Property and equipment

Property and equipment are stated at cost less accumulated depreciation and impairment losses. Gains or losses on dispositions of property and equipment are included in operating income (loss). Major additions, renewals and betterments are capitalized, while maintenance and repairs are expensed as incurred.

Depreciation and amortization are provided over the estimated useful lives of the assets using the straight-line method from the time the assets are placed in service. Estimated useful lives are as follows, taking into account the assets' estimated residual value:

Classification Estimated useful life
Machinery equipment 5-10 years
Computer and office equipment 3 years
Vehicle 5 years
Property under capital lease 20 years

Revenue Recognition

Sales of power generation system in conjunction of system installation are recognized under accounting for construction-type contracts, based on the nature of the contract using the

Completed-Contract Method.

The reason for selecting completed-contract method is (a) The Company’s contract is duration is less than one year and financial position and results of operations would not vary materially from those resulting from use of the percentage-of completion method. (b) Reasonably dependable estimate cannot be made due to nature of contracts.

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Accordingly, revenue is recognized upon the completion of the construction, provided persuasive evidence of an arrangement exists, title and risk of loss has transferred, the fee is fixed and determinable, and collection is reasonably assured. We provide for any loss that we expect to incur on these contracts when that loss is probable.

Percentage-of Completion Method

For contracts with long duration and it is practical to make reasonable estimate, percentage-of completion method is used. Revenue is recognized based on the percentage of total income. The percentage is based on incurred costs to date bearing to estimate total cost after giving effect to estimates of cost to complete based on most recent information. We provide for any loss that we expect to incur on these contracts when that loss is probable.

Warranty and Returns

The Company generally provides limited warranties for work performed under its contracts. The warranty periods typically extend for a limited duration following substantial completion of the Company's work on a project. At the time a sale is recognized, we record estimated future warranty costs. Such estimated costs for warranties are included in the individual project cost estimates for purposes of accounting for long-term contracts. Generally, the estimated claim rates of warranty are based on actual warranty experience or Company’s best estimate.

No right of return exists on sales of equipment. Replacement part returns are estimable and accrued at the time a sale is recognized.

Value added taxes

The Company is subject to VAT at a rate of 17% on proceeds received from customers, and are entitled to a refund for VAT already paid or borne on the goods purchased by it that have generated the gross sales proceeds. The VAT balance is recorded in other payables on the balance sheets.

Income Taxes

The Company accounts for income taxes using an asset and liability approach which allows for the recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for 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. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.

Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The evaluation of a tax position is a two-step process. The first step is to determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigations based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the year incurred. No significant penalties or interest relating to income taxes have been incurred during the period from July 8, 2013 (inception) to December 31, 2013. US GAAP also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures and transition.

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Comprehensive Loss

The Company follows the provisions of the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) 220 “Reporting Comprehensive Income”, and establishes standards for the reporting and display of comprehensive income, its components and accumulated balances in a full set of general purpose financial statements.

Foreign Currency Translation

The Company’s functional currency is Chinese Renminbi (“RMB”) as substantially all of the Company’s PRC subsidiaries’ operations use this denomination. The consolidated financial statements are presented in U.S. dollars. Foreign denominated monetary assets and liabilities are translated into their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Non-monetary assets and liabilities are translated at the exchange rates prevailing at the transaction date. Revenues and expenses are translated at average rates of exchange during the year. Gains or losses resulting from foreign currency transactions are included in results of operations.

For the purpose of presenting these financial statements of subsidiaries in PRC, the Company’s assets and liabilities are expressed in US$ at the exchange rate on the balance sheet date, which is 6.8900 and 6.6371 as of April 30, 2017 and July 31, 2016, respectively; stockholder’s equity accounts are translated at historical rates, and income and expense items are translated at the weighted average exchange rate during the period, which is 6.8141 and 6.4407 for the nine months ended April 30, 2017 and April 30, 2016. The resulting translation adjustments are reported under accumulated other comprehensive income in the stockholder’s equity section of the balance sheets.

For the purpose of presenting these financial statements of subsidiaries in Hong Kong, PRC, the Company’s assets and liabilities are expressed in US$ at the exchange rate on the balance sheet date, which is 7.7779 and 7.7588 as of April 30, 2017 and July 31, 2016, respectively; stockholder’s equity accounts are translated at historical rates, and income and expense items are translated at the weighted average exchange rate during the period, which is 7.7599 and 7.7591 the nine months ended April 30, 2017 and April 30, 2016, respectively. The resulting translation adjustments are reported under accumulated other comprehensive income in the stockholder’s equity section of the balance sheets.

Earnings (Loss) per Share

Basic earnings per share are computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted earnings per share gives effect to all dilutive potential of shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options or warrants), and convertible debt or convertible preferred stock, using the if-converted method. Earnings per share excludes all potential dilutive shares of common stock if their effect is anti-dilutive. There were no potential dilutive securities at April 30, 2017 or April 30, 2016.

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 is effective for us in our first quarter of fiscal 2018 using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09 (full retrospective method); or (ii) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09 (modified retrospective method). We are currently assessing the impact to our consolidated financial statements, and have not yet selected a transition approach.

12


In August 2014, the Financial Accounting Standards Board issued ASU No. 2014-15, Presentation of Financial Statements— Going Concern (Subtopic 205-40). This standard is intended to define management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The amendments contained in this ASU apply to all companies and not-for-profit organizations. The amendments are effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early application is permitted. The Company is currently assessing this ASU’s impact on the Company’s consolidated results of operations and financial condition.

In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory, which modifies existing requirements regarding measuring inventory at the lower of cost or market. Under existing standards, the market amount requires consideration of replacement cost, net realizable value (NRV), and NRV less an approximately normal profit margin. The new ASU replaces market with NRV, defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This eliminates the need to determine and consider replacement cost or NRV less an approximately normal profit margin when measuring inventory. The amendments are effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early application is permitted. The Company is currently assessing this ASU’s impacts on the Company’s consolidated results of operations and financial condition.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): The amendments in this Update apply to all entities, including both business entities and not-for-profit entities that are required to present a statement of cash flows under Topic 230. The amendments in this Update provide guidance on the following eight specific cash flow issues. The amendments are an improvement to GAAP because they provide guidance for each of the eight issues, thereby reducing the current and potential future diversity in practice described above. ASU 2016-15 is effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company is still evaluating the effect that this guidance will have on the Company’s consolidated financial statements and related disclosures.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): “Restricted Cash”(“ASU 2016-18”). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This update is effective in fiscal years, including interim periods, beginning after December 15, 2017 and early adoption is permitted. The adoption of this guidance will result in the inclusion of the restricted cash balances within the overall cash balance and removal of the changes in restricted cash activity, which are currently recognized in Other financing activities, on the Statements of Consolidated Cash Flows. Furthermore, an additional reconciliation will be required to reconcile Cash and cash equivalents and restricted cash reported within the Consolidated Balance Sheets to sum to the total shown in the Statements of Consolidated Cash Flows. The Company anticipates adopting this new guidance effective January 1, 2018. The Company is currently evaluating this guidance and the impact it will have on the Consolidated Financial Statements and disclosures.

The Company believes that there were no other accounting standards recently issued that had or are expected to have a material impact on our financial position or results of operations.

NOTE 3 - GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has incurred losses since its inception resulting in an accumulated deficit of $1,893,532 as of April 30, 2017 and further losses are anticipated in the development of its business raising substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due. These consolidated 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.

13


The Company expects to finance operations primarily through cash flow from revenue and capital contributions from principal shareholders. In the event that we require additional funding to finance the growth of the Company’s current and expected future operations as well as to achieve our strategic objectives, our principal shareholders have indicated the intent and ability to provide additional equity financing.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s continuation as a going concern is dependent on our ability to meet obligations as they become due and to obtain additional equity or alternative financing required to fund operations until sufficient sources of recurring revenues can be generated. There can be no assurance that the Company will be successful in its plans described above or in attracting equity or alternative financing on acceptable terms, or if at all. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 4 – ADVANCES TO SUPPLIERS

Advances to suppliers consist of the following:

    April 30,     July 31,  
    2017     2016  
    (Unaudited)        
Advances to suppliers $  3,539,296   $  4,594,299  

NOTE 5 – INVENTORIES

Inventories consist of the following:

    April 30,     July 31,  
    2017     2016  
    (Unaudited)        
Raw materials $  2,266,001   $  1,151,708  
Accessory parts   767,021     929,145  
Contracts work in progress   258,928     -  
Total $  3,291,950   $  2,080,853  

NOTE 6 - PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

    April 30,     July 31,  
    2017     2016  
    (Unaudited)        
Machinery equipment $  4,903,364   $  4,951,227  
Computer and office equipment   65,948     53,933  
Vehicle   66,793     69,339  
Total property, plant and equipment   5,036,105     5,074,499  
Less: accumulated depreciation   (745,738 )   (553,764 )
Total $  4,290,367   $  4,520,735  

14


Total depreciation expenses for the nine months ended April 30, 2017 and 2016 were $214,664 and $201,090, respectively. Depreciation relating to Contract work in progress for the nine months ended April 30, 2017 and 2016 were $15,685 and $182,565, respectively, and depreciation relating to general and administrative expenses for the nine months ended April 30, 2017 and 2016 were $198,979 and $18,525, respectively.

NOTE 7 – BILLINGS IN EXCESS OF COSTS

Billings in excess of costs consist of the following:

    April 30,     July 31,  
    2017     2016  
    (Unaudited)        
Costs incurred on uncompleted contracts $  1,444,069   $  853,787  
             
Billings to date   (1,168,360 )   (143,135 )
             
  $  275,709   $  710,652  
             
Included in the accompanying balance sheets as follows:            
Costs in excess of billings on uncompleted contracts $  1,172,900   $  710,652  
Billings on uncompleted contracts in excess of costs   (897,191 )   -  
             
  $  275,709   $  710,652  

NOTE 8 - RELATED PARTY TRANSACTIONS

On July 25, 2014, Luck Sky Shen Zhen obtained an exclusive, worldwide, royalty free license from Zhou Deng Rong and Zhou Jian (his son) and a second exclusive, worldwide royalty free license from LuckSky Group to an aggregate of 48 Chinese patents and related know how and trade secrets, including the technology underlying 13 patent applications (the “Technology”). The Technology represents all of the patents, patent applications and related know how and trade secrets owned by the licensors with respect to PV installations and the air energy storage power generation technology as applied to commercial and residential buildings, but not wind towers. On July 25, 2014, Luck Sky Shen Zhen granted Sanhe an exclusive sublicense with respect to the use of the Technology for commercial and residential buildings, but not for other uses, including wind towers, vehicles and trains, which sublicense also provides for a royalty payment to Luck Sky Shen Zhen equal of five percent of Sanhe’s revenues.

Construction Project

On April 25, 2014, Sanhe entered into a construction project agreement with Xianning Lucksky Aerodynamic Electricity Ltd (“Xianning Lucksky”). As of July 31, 2016, the project was completed and $8,705,527 of revenue and $7,752,526 of cost of sales were recognized.

On July 26, 2016, Sanhe entered into a construction project agreement of 3MW PV panel installations with Xianning Lucksky. As of July 31, 2016, the project was not started. As of April 30, 2017, the project was completed and $2,822,199 of revenue and $2,366,177 of cost of sales were recognized.

On July 26, 2016, Sanhe entered into a construction project agreement of 4MW PV panel installations with Xianning Lucksky. As of April 30, 2017, the accumulated cost on the construction project was $169,572 and the accumulated billing was $1,066,763.

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On July 7, July 28 and August 5, 2016, Sanhe entered into three construction project agreements for 93KW, 365KW and 75KW PV panel installations with Sanhe Liguang Kelitai Equipment Ltd (“Sanhe Keilitai”)., Sanhe Keilitai is majority (95%) owned by Zhou Jian, our Chairman of the Board. As of April 30, 2017, the accumulated costs on the construction projects were $32,656, $68,974 and $67,126 and the accumulated billings were $18,109, $68,974 and $14,514 respectively.

Sanhe has been working on a construction project for Xianning Lucksky, which agreed to reimburse Sanhe for the cost of the project. As of April 30, 2017, the project was completed and $90,310 of revenue and $80,617 of cost of sales were recognized.

Due from related parties

On January 19, 2017, Luck Sky Shen Zhen entered into a loan agreement with Sanhe Keilitai with an amount of $72,569 at 0.45% interest rate per month. The due date is July 19, 2017. The interest income for the nine months ended April 30, 2017 was $1,112.

Due from director

On January 19, 2017, Luck Sky Shen Zhen entered into two loan agreements with Zhou Jian with a total amount of $145,138. The due date is July 19, 2017 and non-interest bearing.

Due to related parties

Sanhe leases its principal office, factory and dormitory from LuckSky Group in Sanhe City, Hebei Province. LuckSky Group is owned by Zhou Deng Rong, our former CEO and Zhou Jian, our General Manager and Chairman of the Board. The space in the office, factory and dormitory being leased are 1296, 5160 and 1200 square meters, respectively. The office and factory space are leased for a rent of $102,855 (RMB 697,248) per year and the dormitory is leased for a rent of $19,118 (RMB 129,600) per year. The leases expire in April 30, 2024 and are subject to renewal with a prior two-month written notice. LuckSky Group is in the process of obtaining the land use approval and ownership certificate of the leased building. As of April 30, 2017 and July 31, 2016, the lease payables to LuckSky Group were $360,021 and $280,304, respectively.

Until August 1, 2015, Sanhe leased a second factory and office in Sanhe City from Sanhe Dong Yi Glass Machine Company Limited, which is owned by Zhou Deng Rong. A portion of this facility was used by Sanhe to demonstrate its products but the facility was primarily intended as a backup to the first facility in Sanhe City and/or for expansion. The factory and office are 4,748.96 square meters. The rent paid by Sanhe for the factory and the office was RMB1, 306,500 per year. As of April 30, 2017 and July 31, 2016, the rental fee accrued but unpaid under the leases from LuckSky Group and Sanhe Dong Yi were $237,028 and $246,060, respectively. On August 1, 2015, the two parties terminated the finance leasing. As the Company no longer needs the factory and office, the assets were returned to the lessor effective August 1, 2015.

On July 27, 2016, Xianning Xiangtian Air Energy Electric Co., Ltd. (“Xianning Xiangtian”), the wholly-owned subsidiary of the Company, entered into a rental agreement with Xianning Lucksky. The space in the factory being leased is 4628 square meters. The factory space is leased for a rent of $81,924 (RMB 555,360) per year. The lease expires on July 31, 2018 and is subject to renewal with a prior one-month written notice.

On January 26, 2017, Xianning Lucksky lent $21,771 to Xianning Xiangtian. The Company used the funds for its operations. These advances are due on demand, unsecured and non-interest bearing.

From November 2016, Xianning Lucksky prepaid $18,902 expenses for Xianning Xiangtian. From time to time, Mr. Zhou Deng Rong prepaid some expenses for the Company. As of April 30, 2017 and July 31, 2016, amounts due to related parties were as follows:

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    April 30,     July 31,  
    2017     2016  
    (Unaudited)        
Rental fees:            
LuckSky Group   360,021     280,304  
Sanhe Dong Yi (Capital lease payable)   237,028     246,060  
Xianning Lucksky   60,453     -  
             
Prepaid expenses on behalf of the company:            
Zhou Deng Rong   1,634,840     1,190,370  
Xianning Lucksky   18,902     -  
             
Borrowings:            
Xianning Lucksky $  21,771   $  -  
             
Total $  2,333,015   $  1,716,734  

Due to Directors

From time to time, the Company receives advances from its directors. As of April 30, 2017 and July 31, 2016, the Company received $415,652 and $414,876, respectively. The Company used the funds for its operations. These advances are due on demand, unsecured and non-interest bearing.

Due to Shareholders

From time to time, the Company receives advances from its shareholder, Zhou Deng Rong. As of April 30, 2017 and July 31, 2016, the Company received $84,180 and $0, respectively. The Company used the funds for its operations. These advances are due on demand, unsecured and non-interest bearing.

NOTE 9 -GOVERNMENT CONTRIBUTION PLAN

The Company participates in a government-mandated multi-employer defined contribution plan pursuant to which certain retirement, medical and other welfare benefits are provided to employees. Chinese labor regulations require the Company to pay to the local labor bureau a monthly contribution at a stated contribution rate based on the monthly basic compensation of qualified employees. The relevant local labor bureau is responsible for meeting all retirement benefit obligations; the Company has no further commitments beyond its monthly contribution.

The outstanding amount was $127,279 and $92,134 as of April 30, 2017 and July 31, 2016, respectively.

NOTE 10 - STATUTORY RESERVE

Pursuant to the laws applicable to the PRC, PRC entities must make appropriations from after-tax profit to the non-distributable “statutory surplus reserve fund”. Subject to certain cumulative limits, the “statutory surplus reserve fund” requires annual appropriations of 10% of after-tax profit until the aggregated appropriations reach 50% of the registered capital (as determined under accounting principles generally accepted in the PRC ("PRC GAAP") at each year-end). For foreign invested enterprises and joint ventures in the PRC, annual appropriations should be made to the “reserve fund”. For foreign invested enterprises, the annual appropriation for the “reserve fund” cannot be less than 10% of after-tax profits until the aggregated appropriations reach 50% of the registered capital (as determined under PRC GAAP at each year-end). If the Company has accumulated loss from prior periods, the Company is able to use the current period net income after tax to offset against the accumulate loss.

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NOTE 11 - CAPITAL STOCK AND EQUITY TRANSACTIONS

Common Stock

The total number of common shares authorized that may be issued by the Company is 1,000,000,000 shares with a par value of $0.001 per share.

During the period ended July 31, 2009, the Company issued 5,000,000 shares of common stock for total cash proceeds of $25,000 to the Company’s sole director and officer. During the year ended July 31, 2010, the Company sold 3,000,000 shares of common stock for total cash proceeds of $30,000.

On September 23, 2013, the Company issued 250,000,000 shares of common stock to the shareholders of HK Shares, in exchange of 250,000,000 shares of HK Shares.

On September 23, 2013, the Company issued a total of 67,000,000 shares of restricted common stock at $0.001 per share, such that 60,000,000 shares were issued to Mr. Roy Thomas Phillips, who was then a consultant to the Company and later served as the acting CFO of the Company beginning July 29, 2014, and 7,000,000 shares were issued to two other non-related parties. The shares were issued in contemplation of a secondary offering. The Company takes the position that these shares should be cancelled since no secondary offering was consummated. The Company is taking steps to have these shares canceled. The Company valued the 67,000,000 shares of common stock issued at $67,000 as there was no market for the Company’s common stock and it has limited or no trading; and these shares are s thought to be of minimal value to the Company at the time of issuance, therefore the par value is thought to match the assumed book value of the Company’s common stock which is at $0.001 per share. On July 24, 2015, 7,000,000 shares issued to two other non-related parties were cancelled.

On July 25, 2014, we entered into the Stock Purchase Agreement in connection with the acquisition of Sanhe with Zhou Jian and Zhou Deng Rong, the owners of 97% and 3%, respectively, of Sanhe. We agreed to issue to Zhou Jian and Zhou Deng Rong 264,850,740 and 8,191,260 shares, respectively, of our common stock, representing 51.4% of our issued and outstanding shares of common stock.

Preferred Stock

The total number of preferred shares authorized that may be issued by the Company is 100,000,000 shares with a par value of $0.001 per share. The preferred shares may be issued in one or more series, from time to time, with each series to have such designation, relative rights, preference or limitations, as adopted by the Company’s Board of Directors. No preferred shares have been issued.

NOTE 12 - INCOME TAXES

United States

Deferred income taxes 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. The cumulative tax effect at the expected rate of 34% of significant items comprising the net deferred tax amount is at April 30, 2017 and July 31, 2016 as follows:

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    April 30,     July 31, 2016  
    2017        
    (Unaudited)        
Deferred tax assets:            
Net operating losses $  377,676   $  228,278  
             
Total deferred tax assets   377,676     228,278  
Less: valuation allowance   (377,676 )   (228,278 )
             
Deferred tax assets, net $  -   $  -  

As of April 30, 2017, for U.S. federal income tax reporting purposes, the Company has approximately $1,110,812 of unused net operating losses (“NOLs”) available for carry forward to future years. The benefit from the carry forward of such NOLs will begin expiring during the year ended July 31, 2029. Because United States tax laws limit the time during which NOL carry forwards may be applied against future taxable income, the Company may be unable to take full advantage of its NOLs for federal income tax purposes should the Company generate taxable income. Further, the benefit from utilization of NOL carry forwards could be subject to limitations due to material ownership changes that could occur in the Company as it continues to raise additional capital. Based on such limitations, the Company has significant NOLs for which realization of tax benefits is uncertain.

Hong Kong

The Company’s subsidiaries established in HKSAR are subject to Hong Kong Profits Tax. However, these subsidiaries did not earn any income derived in Hong Kong from its date of incorporation to April 30, 2017, and therefore were not subject to Hong Kong Profits Tax.

PRC

The Company’s subsidiaries established in PRC are subject to income tax rate of 25%.

1)

Luck Sky Shen Zhen

For the nine months ended April 30, 2017 and 2016, Luck Sky Shen Zhen had $141,353 and $370,215 in net profit, $47,118 and $92,553 income tax was accrued accordingly.

2)

Sanhe

For the nine months ended April 30, 2017, Sanhe and Xianning Xiantian had $842,907 in net loss. Deferred income taxes 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. The cumulative tax effect at the expected rate of 25% of significant items comprising the net deferred tax amount is at April 30, 2017 and July 31, 2016 as follows:

    April 30,     July 31, 2016  
    2017        
    (Unaudited)        
Deferred tax assets:   -     -  
Net operating losses $  -    $ -  
             
Total deferred tax assets            
Less: valuation allowance   -     -  
             
Deferred tax assets, net $  -   $  -  
Deferred tax liabilities:            
Timing differences of revenue recognition $  16,437   $  107,609  
             
Total deferred tax liabilities   16,437     107,609  

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Significant components of income tax expense for the nine months ended April 30, 2017 and 2016

    For the Nine     For the Nine  
    months     months  
    Ended     ended  
    April 30,     April 30,  
    2017     2016  
    (Unaudited)     (Unaudited)  
Current tax expense $  99,636   $  302,482  
Deferred tax expense   (88,194 )   (80,121 )
Tax expense (benefit) $  11,442   $  222,361  

Reconciliation of Effective Income Tax Rate

    For the Nine     For the Nine  
    months     months  
    ended     ended  
    April 30,     April 30,  
    2017     2016  
    (Unaudited)     (Unaudited)  
Statutory U.S. tax rate   34.00%     34.00%  
PRC Statutory Tax Rate   25.00%     25.00%  
HK Statutory Tax Rate   15.00%     15.00%  
Permanent Difference   (8.12% )   178.91%  
Less: Valuation Allowance   (75.20% )   101.47%  
Deferred Tax   8.25%     -  
Tax expense (benefit)   (1.07% )   354.38%  

NOTE 13. COMMITMENTS, CONTINGENCIES, RISKS AND UNCERTAINTIES

Capital Commitments

The capital commitments are mainly related to the future payments to suppliers. As of April 30, 2017 and July 31, 2016, the Company has a capital commitment of $15,764,399 and $9,247,569, respectively. The increase of capital commitments was caused by the increase of principal projects from 13 to 25. Funds will be generated from the customers in line with the projects' construction progress, and will be used to pay for our capital commitments.

Operation Commitments

The total future minimum lease payments under the non-cancellable operating lease with respect to the office and the dormitory as of April 30, 2017 are payable as follows:

Year ending July 31, 2017   50,153  
Year ending July 31, 2018   200,611  
Year ending July 31, 2019   120,007  
Year ending July 31, 2020   120,007  
After 2020   450,026  
Total $  940,804  

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Rental expense of the Company for the nine months ended April 30, 2017 and 2016 were $152,134 and $96,284, respectively.

Credit risk

Cash deposits with banks are held in financial institutions in China, which are not federally insured deposit protection. Accordingly, the Company has a concentration of credit risk related to these uninsured bank deposits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant credit risk in this area.

Contingencies

On September 23, 2013, the Company issued 60,000,000 shares of restricted common stock at $0.001 per share to Mr. Roy Thomas Phillips, who was then a consultant to the Company and later served as the acting CFO of the Company beginning July 29, 2014, and two other non-related parties, obtained a total of 7,000,000 shares of restricted common stock. The shares were issued in contemplation of a secondary offering. The Company takes the position that these shares should be cancelled since no secondary offering was consummated. The Company is taking steps to have these shares canceled. The Company valued the 67,000,000 shares of common stock issued at $67,000 as there was no market for the Company’s common stock and it has limited or no trading; and there is thought to be minimal value in the Company at the time of issuance, therefore the par value is thought to match the assumed market price of the Company’s common stock which is at $0.001 per share. The issuance of these securities could result in further dilution to the Company’s stockholders which effects the earnings (loss) per share amount of the Company. The Company might incur additional expenses to have these shares canceled. On July 24, 2015, 7,000,000 shares issued to two other non-related parties were canceled. For the year ended July 31, 2015, the dilutive effect of not canceling the 60,000,000 shares is incorporated in the consolidated financial statements as the Company recorded such shares as issued and outstanding. The loss per share remained $0.00 with the dilutive effect of not canceling such shares. If the shares are not voluntarily returned for cancellation, the Company will need to commence litigation in Delaware to obtain a judgment to cancel the shares for lack of consideration. At this time, the Company is unable to estimate the cost such litigation if it takes place.

ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Overview

Xiangtian (USA) Air Power Co., Ltd. was originally incorporated as Goa Sweet Tours Ltd. in the State of Delaware on September 2, 2008. We were originally formed to provide personalized concierge tour packages to tourists who visit the State of Goa, India.

On April 17, 2012, Goa Sweet Tours, Ltd. entered into Share Purchase Agreements (the “Purchase Agreements”), with Luck Sky International Investment Holdings Limited, an entity owned and controlled by Zhou Deng Rong, and certain of our former stockholders who owned, in the aggregate, 7,200,000 shares of our common stock (90% of the then outstanding shares). Luck Sky International Investment Holdings Limited purchased such shares for an aggregate consideration of $235,000. The sale of such shares closed on May 15, 2012.

On May 25, 2012, Goa Sweet Tours, Ltd. formed a corporation under the laws of the State of Delaware called Xiangtian (USA) Air Power Co., Ltd. ("Merger Sub") for the purpose of changing its name. On the same day, we acquired one hundred percent of the total outstanding shares of Merger Sub's common stock for cash. As such, Merger Sub became our wholly-owned subsidiary.

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Effective as of May 29, 2012, Merger Sub was merged with and into the Company. As a result of the merger, the Company’s corporate name was changed to “Xiangtian (USA) Air Power Co., Ltd.” Prior to the merger, Merger Sub had no liabilities and nominal assets and, as a result of the merger, the separate existence of the Merger Sub ceased. The Company was the surviving corporation in the merger and, except for the name change provided for in the Agreement and Plan of Merger, there was no change in the directors, officers, capital structure or business of the Company.

On September 24, 2013, the Company acquired all of the shares of common stock of Lucksky (Hong Kong) Shares Limited, a Hong Kong corporation, for 250,000,000 shares of common stock of the Company, and agreed to acquire 100% of the shares of Sanhe City LuckSky Electrical Engineering Limited (“Sanhe”) common stock for the Company’s common stock. As of the acquisition merger, Lucksky (Hong Kong) Shares Limited and Sanhe had no liabilities and nominal assets. Effective as of September 24, 2013, Lucksky (Hong Kong) Shares Limited was merged with and into the Company and the Company was the surviving entity. The Company acquired Sanhe in July 2014.

On May 30, 2014, the Company entered into the Stock Purchase Agreement with Zhou Jian, the sole shareholder of Luck Sky (Hong Kong) Aerodynamic Electricity Limited (LuckSky Aerodynamic”). Effective May 30, 2014 the Company purchased 100% of the issued and outstanding shares of common stock of Luck Sky Aerodynamic , and the Company paid Zhou Jian a purchase price in the amount of HKD $10,000.00 (approximately USD$1,289.98) in cash (the “Acquisition”). Neither Luck Sky Shen Zhen nor Luck Sky Aerodynamic had any operating business and nominal or liabilities and nominal assets as of the date of the Acquisition. As a result of the Acquisition, Luck Sky Aerodynamic became our wholly owned subsidiary and Luck Sky Shen Zhen became our indirect subsidiary through Luck Sky Aerodynamic.

LuckSky Group was established in 2000 by Zhou Deng Rong after he obtained a series of patents and developed the air compression and related technology. Sanhe was established in July 2013 and was under common control with LuckSky Group. Since inception, Sanhe served as a distributor of products of the LuckSky Group and its subsidiaries.

During the three months ended June 30, 2014, LuckSky Group provided Sanhe with additional working capital and transferred to Sanhe its assets and liabilities related to the compressed air energy storage power generation technology and PV panel installations, but retained its other assets. On April 1, 2014, LuckSky Group loaned Sanhe RMB3, 000,000. The equipment, including machinery, was sold to Sanhe for RMB7, 681,000, its book value, Xiangtian Kelitai, Yanjiao Branch, a division of LuckSky Group on May 26, 2014. On April 30, 2014, the inventory was sold to Sanhe by Xiangtian Kelitai, Yanjiao Branch, and a division of LuckSky Group for RMB 130,918.80, its historical value. On May 19, 2014, Sanhe entered into an office equipment transfer (purchase) agreement with Xiangtian Kelitai, Yanjiao Branch, a division of LuckSky Group for a purchase price of RMB162, 900. Sanhe entered into leases with LuckSky Group for a portion of the factory, office space and dormitory located in Sanhe City and a lease with Dong Yi Glass Machine Company Limited, which is owned by Deng Zhou Rong, our former CEO, for a second factory and office space. In addition, 48 employees transferred from LuckSky Group to Sanhe, including all personnel related to the projects under construction and development and administrative and finance personnel.

Acquisition of Sanhe

On July 25, 2014, Sanhe and Luck Sky Shen Zhen and Sanhe’s shareholders entered into a series of agreements known as variable interest agreements (the “VIE Agreements”) pursuant to which Sanhe became LuckSky Shen Zhen’s contractually controlled affiliate. The VIE Agreements include the Framework Agreement on Business Cooperation, the Exclusive Management Consulting and Training and Technical Services Agreement, the Exclusive Option Agreement, the Equity Pledge Agreement, the Know-How Sub-License Agreement and the Power-of-Attorney. The purpose and effect of the VIE Agreements is to provide LuckSky Shen Zhen (our indirect wholly-owned subsidiary) with all of the management and control of Sanhe and all of its net income. While LuckSky Shen Zhen does not actually own at present any of the equity and shares in Sanhe, the purpose and effect of the VIE Agreements is to instill in Luck Sky Shen Zhen total management and voting control of Sanhe for all material purposes. The use of VIE agreements is a common structure used to acquire PRC corporations, particularly in certain industries in which foreign investment is restricted or forbidden by the PRC government.

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Reincorporation in Nevada

We reincorporated in Nevada effective October 31, 2016 as a result of a merger of Xiangtian (USA) Air Power Co., Ltd., a Delaware corporation, with its wholly-owned subsidiary, Xiangtian (USA) Air Power Co., Ltd., a Nevada corporation.

Results of Operations

The following discussion should be read in conjunction with the unaudited condensed consolidated Financial Statement of the Company for the three-month and nine-month period ended April 30, 2017 and 2016 and related notes thereto.

Three-month period ended April 30, 2017 compared to three-month period ended April 30, 2016

Revenue

We have recognized $3,276,810 and $8,940,206 in revenue for the three months ended April 30, 2017 and 2016. The project of 3MW PV panel installations in Hubei and a couple of small projects were completed in this period. The project in Xianning, Hubei Province and another three projects were completed during the three-month period ended April 30, 2016. The decrease was because projects with bigger capacity were completed during the comparison period.

Cost of Sales

We have recognized $2,765,087 and $7,957,023 cost of revenue for the three months ended April 30, 2017 and 2016. The costs were in line with the revenue.

Gross Profit

Gross profit was $511,723 for the three months ended April 30, 2017, compared to $983,183 for the three months ended April 30, 2016.

Operating Expenses

For the three months ended April 30, 2017, we have incurred total operating expenses in the amount of $550,202, which mainly comprised selling expenses of $5,337, professional expenses of $175,223, salary expenses of $227,819, rental fees of $50,642, depreciation expenses of $59,621 and general and administrative expenses totaling $31,560. For the three-month period ended April 30, 2016, we incurred total operating expenses in the amount of $408,402, which mainly comprised of selling expenses of $6,668, professional expenses of $190,364, salary expenses of $162,186, rental fees of $33,241 and general and administrative expenses totaling $15,943. The increase in operating expenses by $141,800, or 34.7%, was primarily due to the increase amounts of salary and depreciation expenses for a larger scale of operations in Sanhe and its subsidiary Xianning Xiangtian.

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Nine-month period ended April 30, 2017 compared to nine-month period ended April 30, 2016

Revenue

We have recognized $4,329,466 and $9,009,326 in revenue for the nine months ended April 30, 2017 and 2016. The project of 3MW PV panel installations in Hubei and a couple of small projects were completed in this period. The project in Xianning, Hubei Province and another three projects were completed during the three-month period ended April 30, 2016. The decrease was because projects with bigger capacity were completed during the comparison period.

Cost of Sales

We have recognized $3,670,799 and $8,020,566 cost of revenue for the nine months ended April 30, 2017 and 2016. The increase in cost of sales is due to increase in sales.

Gross Profit

Gross profit was $658,667 for the nine months ended April 30, 2017, compared to $988,760 for the nine months ended April 30, 2016.

Operating Expenses

For the nine months ended April 30, 2017, we incurred total operating expenses in the amount of $1,736,419, which mainly comprised selling expenses of $23,527, professional expenses of $434,580, salary expenses of $643,777, rental fees of $116,796, depreciation expenses of $198,869 and general and administrative expenses totaling $318,870. For the nine-month period ended April 30, 2016, we incurred total operating expenses in the amount of $1,043,536, which mainly comprised of selling expenses of $16,015, professional expenses of $371,230, salary expenses of $350,313, rental fees of $100,784, depreciation expenses of $18,409 and general and administrative expenses totaling $186,785. The increase in operating expenses by $692,883, or 66.4%, was primarily due to the increase amounts of salary and depreciation expenses for a larger scale of operations in Sanhe and its subsidiary Xianning Xiangtian.

Liquidity and Capital Resources

As of April 30, 2017, we had a cash balance of $191,279. During the nine months ended April 30, 2017, net cash provided by operating activities totaled $582,763. Net cash used in investing activities totaled $1,711,348. Net cash provided by financing activities during the period totaled $551,444. The resulting change in cash for the period was a decrease of $1,034,941, which was primarily due to cash outflow to purchase inventory and fixed assets, albeit we had a cash inflow from related parties and customers.

As of April 30, 2016, we had a cash balance of $44,553. During the nine-month period ended April 30, 2016, net cash used in operating activities totaled $828,660. Net cash used in investing activities totaled $67,197. Net cash provided by financing activities during the period totaled $643,388. The change in the use of net cash for the period was a decrease of $457,476, which was primarily due to a decline in cash outflow of prepayment and purchasing inventory coupled with a decline in cash inflow of the amounts due from customers, accounts receivable.

As of April 30, 2017, we had current liabilities of $9,749,425, which was mainly comprised of accounts payable and accrued liabilities of $5,176,910, amount due to directors of $415,652, amount due to shareholders of $84,180, amount due to related parties of $2,333,015, advance from customers of $117,126, deferred tax liabilities of $16,437, other payables of $293,281, income tax payable of $415,633 and net advance billings of $897,191.

As of July 31, 2016, we had current liabilities of $8,275,631, which was mainly comprised of accounts payable and accrued liabilities of $4,851,630, amount due to directors of $414,876, amount due to related parties of $1,716,734, advance from customers of $620,814, deferred tax liabilities of $107,609, other payables of $234,791 and income tax payable of $329,177.

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As of April 30, 2017 and July 31, 2016, the total advance from customers were as below:

    April 30,     July 31,  
    2017     2016  
    (Unaudited)        
Projects under construction:            
Costs incurred on uncompleted contracts   1,444,069     853,787  
Billings to date (1)   (1,168,360 )   (143,135 )
    275,709     710,652  
Included in the accompanying balance sheets as follows:            
Costs in excess of billings on uncompleted contracts   1,172,900     710,652  
Billings on uncompleted contracts in excess of costs   (897,191 )   -  
    275,709     710,652  
Projects not started, included in the accompanying balance sheets as follows:            
Advance from customers (2)   (117,126 )   (620,814 )
             
Total advance received from customer (1)+(2)   (1,285,486 )   (763,949 )

We had net assets of $7,060,279 and $8,502,334 as of April 30, 2017 and July 31, 2016, respectively.

As of April 30, 2017, we had 25 project contracts. Eleven were completed; eight of them are in process, four of them are being canceled and two are about to start. Three projects in Shandong province commenced operations in 2015, one project in Fujian province commenced operation in February 2016, the two projects in Hubei and Zhejiang commenced operations in March 2016 and one in Hubei commenced in April 2016. The project in Heilongjiang commenced operations in February 2017. Three projects in Hubei commenced operations in March and April 2017. One project in Shanxi province, one project in Sichuan province and two projects in Shandong were cancelled. The other project in Hubei are expected to be completed in June 2017. The six projects in Hebei are expected to be completed in the third quarter of 2017. The processing project in Shandong is expected to be completed in June 2017. We are dependent on these projects for all our projected revenue until we obtain additional customers and any material delay or reduction in the projected cash receipts will adversely affect our operations. While we expect to generate revenue on the completion of our projects to meet the liquidity and capital resources of our operations, delayed receipts or increased costs may cause going concern issues, particularly in light of our limited available cash..

We expect to finance operations from progress billings from ongoing projects and through non-interest bearing loans from the Company’s directors. We estimate that our cash and cash equivalents and projected cash receipts from operations are sufficient to fund operations for the next nine months. However, additional funds may be required given our continued losses from operations. Additional funding may come from equity financing from the sale of our common stock or from borrowings, but there can be no assurance that such financing will be available on acceptable terms. If we are successful in completing an equity financing, existing shareholders will experience dilution of their interest in our company. We have no current commitments for additional financing.

The Company has incurred losses since its inception resulting in an accumulated deficit of $1,893,532 as of April 30, 2017 and further losses are anticipated in the development of its business raising substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due. Our future financial results are also uncertain due to a number of factors, some of which are outside our control. These risk factors include, but are not limited to:

  our ability to raise additional funding;
     
  the results of our proposed operations.

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Going Concern Consideration

Our operations and financial results are subject to numerous various risks and uncertainties that could adversely affect our business, financial condition and results of operations.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements including arrangements that would affect our liquidity, capital resources, market risk support and credit risk support or other benefits.

Critical Accounting Policies and Estimates

Use of Estimates and Assumptions

The preparation of consolidated financial statements in conformity with generally accepted accounting principles 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 period. Actual results could differ from those estimates.

Fair Value Measurements

The Company applies the provisions of ASC Subtopic 820-10, “Fair Value Measurements”, for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements. ASC 820 also establishes a framework for measuring fair value and expands disclosures about fair value measurements.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes three levels of inputs that may be used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

[  ]      Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

[  ]      Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

[  ]      Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.

There were no assets or liabilities measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820 as of April 30, 2017 and July 31, 2016.

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Billings in Excess of Costs

Billings in excess of costs is comprised of cash collected from customers and billings to customers on contracts in advance of work performed, including advance payments negotiated as a contract condition. Generally, unearned project-related costs will be earned over the next twelve months.

Revenue Recognition

Sales of power generation system in conjunction of system installation are recognized under accounting for construction-type contracts, using the completed contract method. Accordingly, revenue is recognized upon the completion of the construction, provided persuasive evidence of an arrangement exists, title and risk of loss has transferred, the fee is fixed and determinable, and collection is reasonably assured. We provide for any loss that we expect to incur on these contracts when that loss is probable.

Warranty and Returns

The Company generally provides limited warranties for work performed under its contracts. The warranty periods typically extend for a limited duration following substantial completion of the Company's work on a project. At the time a sale is recognized, we record estimated future warranty costs. Such estimated costs for warranties are included in the individual project cost estimates for purposes of accounting for long-term contracts. The warranty cost is estimated based on our experience with the type of work and any known risks relative to the project and was not material during the periods ended April 30, 2017 and July 31, 2016.

No right of return exists on sales of equipment. Replacement part returns are estimable and accrued at the time a sale is recognized.

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 is effective for us in our first quarter of fiscal 2018 using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09 (full retrospective method); or (ii) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09 (modified retrospective method). We are currently assessing the impact to our consolidated financial statements, and have not yet selected a transition approach.

In August 2014, the Financial Accounting Standards Board issued ASU No. 2014-15, Presentation of Financial Statements— Going Concern (Subtopic 205-40). This standard is intended to define management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The amendments contained in this ASU apply to all companies and not-for-profit organizations. The amendments are effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early application is permitted. The Company is currently assessing this ASU’s impact on the Company’s consolidated results of operations and financial condition.

In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory, which modifies existing requirements regarding measuring inventory at the lower of cost or market. Under existing standards, the market amount requires consideration of replacement cost, net realizable value (NRV), and NRV less an approximately normal profit margin. The new ASU replaces market with NRV, defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This eliminates the need to determine and consider replacement cost or NRV less an approximately normal profit margin when measuring inventory. The amendments are effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early application is permitted. The Company is currently assessing this ASU’s impacts on the Company’s consolidated results of operations and financial condition.

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In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): The amendments in this Update apply to all entities, including both business entities and not-for-profit entities that are required to present a statement of cash flows under Topic 230. The amendments in this Update provide guidance on the following eight specific cash flow issues. The amendments are an improvement to GAAP because they provide guidance for each of the eight issues, thereby reducing the current and potential future diversity in practice described above. ASU 2016-15 is effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company is still evaluating the effect that this guidance will have on the Company’s consolidated financial statements and related disclosures.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): “Restricted Cash” (“ASU 2016-18”). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This update is effective in fiscal years, including interim periods, beginning after December 15, 2017 and early adoption is permitted. The adoption of this guidance will result in the inclusion of the restricted cash balances within the overall cash balance and removal of the changes in restricted cash activity, which are currently recognized in Other financing activities, on the Statements of Consolidated Cash Flows. Furthermore, an additional reconciliation will be required to reconcile Cash and cash equivalents and restricted cash reported within the Consolidated Balance Sheets to sum to the total shown in the Statements of Consolidated Cash Flows. The Company anticipates adopting this new guidance effective January 1, 2018. The Company is currently evaluating this guidance and the impact it will have on the Consolidated Financial Statements and disclosures.

The Company believes that there were no other accounting standards recently issued that had or are expected to have a material impact on our financial position or results of operations.

ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Exchange Risk

While our reporting currency is the US dollar, almost all of our consolidated revenues and consolidated costs and expenses are denominated in RMB. All of our assets are denominated in RMB except for some cash and cash equivalents and accounts receivables. As a result, we are exposed to foreign exchange risk as our revenues and results of operations may be affected by fluctuations in the exchange rate between US dollar and RMB. The RMB has recently depreciated against the US dollar and if the RMB depreciates further against the US dollar, the value of our RMB revenues, earnings and assets as expressed in our US dollar financial statements will decline. We have not entered into any hedging transactions in an effort to reduce our exposure to foreign exchange risk.

Inflation

Inflationary factors such as increases in the costs of our products and overhead costs may adversely affect our operating results. Inflation in China has recently increased substantially. The inflation rate in China was reported at approximately 1.8% percent for 2016 and 1.4% for 2015(see http://www.statista.com/statistics/270338/inflation-rate-in-china/). These factors have led to the adoption by the Chinese government, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. Price inflation can affect our ability to maintain current levels of gross margin and selling and distribution, general and administrative expenses as a percentage of net revenues if we are unable to pass along raw material price increases to customers. Accordingly, inflation in China may weaken our competitiveness domestically or in international markets.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures” (defined in SEC Rule 13a-15(e)) refers to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within required time periods. The Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q (the “Evaluation Date”). Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, because of material weaknesses, our disclosure controls and procedures as of April 30, 2017, were not effective.

The material weaknesses we noticed include a (i) lack of accounting personnel with appropriate knowledge of accounting principles generally accepted in the United States (U.S. GAAP), (ii) lack of a comprehensive accounting policies and procedures manual in accordance with U.S. GAAP, and (iii) lack of risk assessment process.

In order to improve the efficiency of our internal control over financial reporting, we have taken and are implementing the following measures:

- We plan to establish a desired level of corporate governance with regard to identifying and measuring the risk of material misstatements. We have engaged a consultant to assist in providing an internal control system and will engage a second consultant to implement the system.

- We will establish a key monitoring mechanism such as independent directors and an audit committee to oversee and monitor the Company’s risk management, business strategies and financial reporting procedure.

- We plan to strengthen our financial team by employing more qualified accountant(s) to enhance the quality of our financial reporting function.

Changes in internal controls.

The term “internal control over financial reporting” (defined in SEC Rule 13a-15(f)) refers to the process of a company that is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated any changes in the Company’s internal control over financial reporting that occurred during the quarter ended April 30, 2017, and they have concluded that there was no change to the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

The Company currently is not a party to any legal proceedings and, to the Company’s knowledge; no such proceedings are threatened or contemplated.

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in our annual report on Form 10-K for the year ended July 31, 2016. Additional risks and uncertainties which are not presently known to us, which we currently deem immaterial or which are similar to those faced by other companies in our industry or business in general, may also materially and adversely affect any of our business, financial position or future results.

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

None

Item 3. Default Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Item 6. Exhibits

Exhibit Description
No.  
   
31.1 Certification of Chief Executive Officer pursuant to 13a-14 and 15d-14 of the Exchange Act. (Filed herewith)
   
31.2 Certification of Chief Financial Officer pursuant to 13a-14 and 15d-14 of the Exchange Act. (Filed herewith)
   
32.1 Certificate pursuant to 18 U.S.C. ss. 1350 for Zhou Deng Hua, Chief Executive Officer. (Filed herewith)
   
32.2 Certificate pursuant to 18 U.S.C. ss. 1350 for Paul Kam Shing Chiu, Chief Financial Officer. (Filed herewith)

XBRL Exhibit

101.INS† XBRL Instance Document.
101.SCH† XBRL Taxonomy Extension Schema Document.
101.CAL† XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF† XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB† XBRL Taxonomy Extension Label Linkbase Document.
101.PRE† XBRL Taxonomy Extension Presentation Linkbase Document.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

XIANGTIAN (USA) AIR POWER CO., LTD.
 
By: /s/ Zhou Deng Hua
     Chief Executive Officer
     (Principal Executive Officer)
 
     Date: June 9, 2017
 
 
By: /s/ Paul Kam Shing Chiu
     Chief Financial Officer
     (Principal Financial Officer)
 
     Date: June 9, 2017

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