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<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>NOTE 1 - NATURE OF OPERATIONS</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<u>Merger with LuckSky (Hong Kong) Shares Limited</u>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<u>Acquisition of Sanhe City Lucksky Electrical Engineering Co., Ltd.</u>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<u>Reincorporation in Nevada</u>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
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<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Basis of Presentation</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Use of Estimates and Assumptions</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Interim Financial Statements</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Reclassification</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Principle of Consolidation</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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:</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times,serif;" width="100%">
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">July 31,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2017</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2016</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">(Unaudited)</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Total assets</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
16,523,294
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
16,566,891
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Total liabilities</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
9,051,307
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
7,944,737
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">For the nine</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">For the nine</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">months</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">months</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">Ended</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">ended</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2017</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2016</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom"> </td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="center" valign="bottom" width="12%">(Unaudited)</td>
<td align="center" valign="bottom" width="2%"> </td>
<td align="center" valign="bottom" width="1%"> </td>
<td align="center" valign="bottom" width="12%">(Unaudited)</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Net loss</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
842,907
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
223,651
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
</table>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Fair Value Measurements</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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:</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">[  ]      Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">[  ]      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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">[  ]      Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Cash and Cash Equivalents</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Advances to suppliers</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">Advances to suppliers consist of the prepayment for inventories, including PV panels, storage tanks and other accessory parts.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Inventory</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Property and equipment</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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:</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times,serif;" width="100%">
<tr valign="top">
<td align="left" nowrap="nowrap">Classification</td>
<td align="left" nowrap="nowrap" width="15%">Estimated useful life</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Machinery equipment</td>
<td align="left" bgcolor="#e6efff" nowrap="nowrap" width="15%">
5
-
10
years
</td>
</tr>
<tr valign="top">
<td align="left">Computer and office equipment</td>
<td align="left" nowrap="nowrap" width="15%">
3
years
</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Vehicle</td>
<td align="left" bgcolor="#e6efff" nowrap="nowrap" width="15%">
5
years
</td>
</tr>
<tr valign="top">
<td align="left">Property under capital lease</td>
<td align="left" nowrap="nowrap" width="15%">
20
years
</td>
</tr>
</table>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Revenue Recognition</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">Completed-Contract Method.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">Percentage-of Completion Method</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Warranty and Returns</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">No right of return exists on sales of equipment. Replacement part returns are estimable and accrued at the time a sale is recognized.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Value added taxes</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Income Taxes</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Comprehensive Loss</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Foreign Currency Translation</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Earnings (Loss) per Share</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Recent Accounting Pronouncements</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Basis of Presentation</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Use of Estimates and Assumptions</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Interim Financial Statements</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Reclassification</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Principle of Consolidation</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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:</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times,serif;" width="100%">
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">July 31,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2017</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2016</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">(Unaudited)</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Total assets</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
16,523,294
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
16,566,891
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Total liabilities</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
9,051,307
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
7,944,737
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">For the nine</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">For the nine</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">months</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">months</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">Ended</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">ended</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2017</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2016</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom"> </td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="center" valign="bottom" width="12%">(Unaudited)</td>
<td align="center" valign="bottom" width="2%"> </td>
<td align="center" valign="bottom" width="1%"> </td>
<td align="center" valign="bottom" width="12%">(Unaudited)</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Net loss</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
842,907
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
223,651
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
</table>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Fair Value Measurements</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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:</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">[  ]      Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">[  ]      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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">[  ]      Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Cash and Cash Equivalents</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Advances to suppliers</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">Advances to suppliers consist of the prepayment for inventories, including PV panels, storage tanks and other accessory parts.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Inventory</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Property and equipment</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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:</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times,serif;" width="100%">
<tr valign="top">
<td align="left" nowrap="nowrap">Classification</td>
<td align="left" nowrap="nowrap" width="15%">Estimated useful life</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Machinery equipment</td>
<td align="left" bgcolor="#e6efff" nowrap="nowrap" width="15%">
5
-
10
years
</td>
</tr>
<tr valign="top">
<td align="left">Computer and office equipment</td>
<td align="left" nowrap="nowrap" width="15%">
3
years
</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Vehicle</td>
<td align="left" bgcolor="#e6efff" nowrap="nowrap" width="15%">
5
years
</td>
</tr>
<tr valign="top">
<td align="left">Property under capital lease</td>
<td align="left" nowrap="nowrap" width="15%">
20
years
</td>
</tr>
</table>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Revenue Recognition</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">Completed-Contract Method.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">Percentage-of Completion Method</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Warranty and Returns</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">No right of return exists on sales of equipment. Replacement part returns are estimable and accrued at the time a sale is recognized.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Value added taxes</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Income Taxes</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Comprehensive Loss</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Foreign Currency Translation</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Earnings (Loss) per Share</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Recent Accounting Pronouncements</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times,serif;" width="100%">
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">July 31,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2017</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2016</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">(Unaudited)</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Total assets</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
16,523,294
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
16,566,891
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Total liabilities</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
9,051,307
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
7,944,737
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">For the nine</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">For the nine</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">months</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">months</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">Ended</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">ended</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2017</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2016</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom"> </td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="center" valign="bottom" width="12%">(Unaudited)</td>
<td align="center" valign="bottom" width="2%"> </td>
<td align="center" valign="bottom" width="1%"> </td>
<td align="center" valign="bottom" width="12%">(Unaudited)</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Net loss</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
842,907
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
223,651
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
</table>
16523294
16566891
9051307
7944737
842907
223651
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times,serif;" width="100%">
<tr valign="top">
<td align="left" nowrap="nowrap">Classification</td>
<td align="left" nowrap="nowrap" width="15%">Estimated useful life</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Machinery equipment</td>
<td align="left" bgcolor="#e6efff" nowrap="nowrap" width="15%">
5
-
10
years
</td>
</tr>
<tr valign="top">
<td align="left">Computer and office equipment</td>
<td align="left" nowrap="nowrap" width="15%">
3
years
</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Vehicle</td>
<td align="left" bgcolor="#e6efff" nowrap="nowrap" width="15%">
5
years
</td>
</tr>
<tr valign="top">
<td align="left">Property under capital lease</td>
<td align="left" nowrap="nowrap" width="15%">
20
years
</td>
</tr>
</table>
P5Y
P10Y
P3Y
P5Y
P20Y
0.17
6.8900
6.6371
6.8141
6.4407
7.7779
7.7588
7.7599
7.7591
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>NOTE 3 - GOING CONCERN</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>NOTE 4 – ADVANCES TO SUPPLIERS</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">Advances to suppliers consist of the following:</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times,serif;" width="100%">
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">July 31,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2017</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2016</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">(Unaudited)</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Advances to suppliers</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
3,539,296
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
4,594,299
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
</table>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times,serif;" width="100%">
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">July 31,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2017</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2016</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">(Unaudited)</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Advances to suppliers</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
3,539,296
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
4,594,299
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
</table>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>NOTE 5 – INVENTORIES</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">Inventories consist of the following:</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times,serif;" width="100%">
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">July 31,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2017</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2016</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">(Unaudited)</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Raw materials</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
2,266,001
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
1,151,708
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Accessory parts</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
767,021
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
929,145
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Contracts work in progress</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
258,928
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Total</td>
<td align="left" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
3,291,950
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
2,080,853
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
</table>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times,serif;" width="100%">
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">July 31,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2017</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2016</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">(Unaudited)</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Raw materials</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
2,266,001
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
1,151,708
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Accessory parts</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
767,021
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
929,145
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Contracts work in progress</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
258,928
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Total</td>
<td align="left" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
3,291,950
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
2,080,853
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
</table>
2266001
1151708
767021
929145
258928
0
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>NOTE 6 - PROPERTY, PLANT AND EQUIPMENT</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">Property, plant and equipment consist of the following:</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times,serif;" width="100%">
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">July 31,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2017</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2016</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">(Unaudited)</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Machinery equipment</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
4,903,364
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
4,951,227
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Computer and office equipment</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
65,948
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
53,933
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Vehicle</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
66,793
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
69,339
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Total property, plant and equipment</td>
<td align="left" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
5,036,105
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
5,074,499
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Less: accumulated depreciation</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
(745,738
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
(553,764
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Total</td>
<td align="left" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
4,290,367
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
4,520,735
</td>
<td align="left" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="2%"> </td>
</tr>
</table>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times,serif;" width="100%">
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">July 31,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2017</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2016</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">(Unaudited)</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Machinery equipment</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
4,903,364
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
4,951,227
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Computer and office equipment</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
65,948
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
53,933
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Vehicle</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
66,793
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
69,339
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Total property, plant and equipment</td>
<td align="left" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
5,036,105
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
5,074,499
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Less: accumulated depreciation</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
(745,738
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
(553,764
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Total</td>
<td align="left" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
4,290,367
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
4,520,735
</td>
<td align="left" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="2%"> </td>
</tr>
</table>
4903364
4951227
65948
53933
66793
69339
5036105
5074499
745738
553764
15685
182565
198979
18525
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>NOTE 7 – BILLINGS IN EXCESS OF COSTS</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">Billings in excess of costs consist of the following:</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times,serif;" width="100%">
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">July 31,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2017</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2016</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">(Unaudited)</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Costs incurred on uncompleted contracts</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
1,444,069
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
853,787
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td valign="bottom"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Billings to date</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
(1,168,360
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
(143,135
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
</tr>
<tr>
<td valign="bottom"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
275,709
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
710,652
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td valign="bottom"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Included in the accompanying balance sheets as follows:</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Costs in excess of billings on uncompleted contracts</td>
<td align="left" valign="bottom" width="1%">$</td>
<td align="right" valign="bottom" width="12%">
1,172,900
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" valign="bottom" width="1%">$</td>
<td align="right" valign="bottom" width="12%">
710,652
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Billings on uncompleted contracts in excess of costs</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
(897,191
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td valign="bottom"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
275,709
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
710,652
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
</table>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times,serif;" width="100%">
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">July 31,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2017</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2016</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">(Unaudited)</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Costs incurred on uncompleted contracts</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
1,444,069
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
853,787
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td valign="bottom"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Billings to date</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
(1,168,360
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
(143,135
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
</tr>
<tr>
<td valign="bottom"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
275,709
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
710,652
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td valign="bottom"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Included in the accompanying balance sheets as follows:</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Costs in excess of billings on uncompleted contracts</td>
<td align="left" valign="bottom" width="1%">$</td>
<td align="right" valign="bottom" width="12%">
1,172,900
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" valign="bottom" width="1%">$</td>
<td align="right" valign="bottom" width="12%">
710,652
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Billings on uncompleted contracts in excess of costs</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
(897,191
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td valign="bottom"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
275,709
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
710,652
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
</table>
1444069
853787
1168360
143135
275709
710652
897191
0
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>NOTE 8 - RELATED PARTY TRANSACTIONS</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<u>Construction Project</u>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<u>Due from related parties</u>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<u>Due from director</u>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<u>Due to related parties</u>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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
(RMB697,248) per year and the dormitory is leased for a rent of $19,118
(RMB129,600) 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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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
(RMB555,360) per year. The lease expires on July 31, 2018 and is subject to renewal with a prior one-month written notice.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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:
</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times,serif;" width="100%">
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">July 31,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2017</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2016</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">(Unaudited)</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Rental fees:</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="left" valign="bottom" width="12%"> </td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="left" valign="bottom" width="12%"> </td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">LuckSky Group</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
360,021
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
280,304
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Sanhe Dong Yi (Capital lease payable)</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
237,028
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
246,060
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Xianning Lucksky</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
60,453
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td valign="bottom"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Prepaid expenses on behalf of the company:</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Zhou Deng Rong</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
1,634,840
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
1,190,370
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Xianning Lucksky</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
18,902
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td valign="bottom"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Borrowings:</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Xianning Lucksky</td>
<td align="left" valign="bottom" width="1%">$</td>
<td align="right" valign="bottom" width="12%">
21,771
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" valign="bottom" width="1%">$</td>
<td align="right" valign="bottom" width="12%">
 
-
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td bgcolor="#e6efff" valign="bottom"> </td>
<td bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="12%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="12%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Total</td>
<td align="left" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
2,333,015
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
1,716,734
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
</table>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<u>Due to Directors</u>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<u>Due to Shareholders</u>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times,serif;" width="100%">
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">July 31,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2017</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2016</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">(Unaudited)</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Rental fees:</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="left" valign="bottom" width="12%"> </td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="left" valign="bottom" width="12%"> </td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">LuckSky Group</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
360,021
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
280,304
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Sanhe Dong Yi (Capital lease payable)</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
237,028
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
246,060
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Xianning Lucksky</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
60,453
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td valign="bottom"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Prepaid expenses on behalf of the company:</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Zhou Deng Rong</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
1,634,840
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
1,190,370
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Xianning Lucksky</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
18,902
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td valign="bottom"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Borrowings:</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Xianning Lucksky</td>
<td align="left" valign="bottom" width="1%">$</td>
<td align="right" valign="bottom" width="12%">
21,771
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" valign="bottom" width="1%">$</td>
<td align="right" valign="bottom" width="12%">
 
-
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td bgcolor="#e6efff" valign="bottom"> </td>
<td bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="12%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="12%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Total</td>
<td align="left" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
2,333,015
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
1,716,734
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
</table>
360021
280304
237028
246060
60453
0
1634840
1190370
18902
0
21771
0
2333015
1716734
8705527
7752526
2822199
2366177
169572
1066763
0.95
32656
68974
67126
18109
68974
14514
90310
80617
72569
0.0045
1112
145138
102855
697248
19118
129600
306500
237028
246060
81924
555360
415652
414876
84180
0
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>NOTE 9 -GOVERNMENT CONTRIBUTION PLAN</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
The outstanding amount was $127,279
and $92,134
as of April 30, 2017 and July 31, 2016, respectively.
</p>
127279
92134
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>NOTE 10 - STATUTORY RESERVE</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
0.10
0.50
0.10
0.50
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>NOTE 11 - CAPITAL STOCK AND EQUITY TRANSACTIONS</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Common Stock</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>Preferred Stock</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
5000000
25000
3000000
30000
250000000
67000000
0.001
60000000
7000000
67000
7000000
0.97
0.03
264850740
8191260
0.514
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>NOTE 12 - INCOME TAXES</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<i>United States</i>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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:
</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times,serif;" width="100%">
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">July 31, 2016</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2017</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">(Unaudited)</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Deferred tax assets:</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="left" valign="bottom" width="12%"> </td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="left" valign="bottom" width="12%"> </td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Net operating losses</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
377,676
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
228,278
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td valign="bottom"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Total deferred tax assets</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
377,676
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
228,278
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Less: valuation allowance</td>
<td align="left" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" width="1%"> </td>
<td align="right" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" width="12%">
(377,676
</td>
<td align="left" valign="bottom" width="2%">)</td>
<td align="left" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" width="1%"> </td>
<td align="right" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" width="12%">
(228,278
</td>
<td align="left" valign="bottom" width="2%">)</td>
</tr>
<tr>
<td bgcolor="#e6efff" valign="bottom"> </td>
<td bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="12%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="12%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Deferred tax assets, net</td>
<td align="left" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
 
-
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
 
-
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
</table>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<i>Hong Kong</i>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<i>PRC</i>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
The Company’s subsidiaries established in PRC are subject to income tax rate of
25%.
</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times,serif;" width="100%">
<tr>
<td valign="top" width="5%">1)</td>
<td>
<p align="justify" style="font-family: times,serif; font-size: 10pt;margin:inherit;">Luck Sky Shen Zhen</p>
</td>
</tr>
</table>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times,serif;" width="100%">
<tr>
<td valign="top" width="5%">2)</td>
<td>
<p align="justify" style="font-family: times,serif; font-size: 10pt;margin:inherit;">Sanhe</p>
</td>
</tr>
</table>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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:
</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times,serif;" width="100%">
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">July 31, 2016</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2017</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">(Unaudited)</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Deferred tax assets:</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Net operating losses</td>
<td align="left" valign="bottom" width="1%">$</td>
<td align="right" valign="bottom" width="12%">
 
-
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" valign="bottom" width="1%">$</td>
<td align="right" valign="bottom" width="12%">
-
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td bgcolor="#e6efff" valign="bottom"> </td>
<td bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="12%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="12%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Total deferred tax assets</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="left" valign="bottom" width="12%"> </td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="left" valign="bottom" width="12%"> </td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Less: valuation allowance</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td valign="bottom"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Deferred tax assets, net</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
 
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
 
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Deferred tax liabilities:</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="left" valign="bottom" width="12%"> </td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="left" valign="bottom" width="12%"> </td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Timing differences of revenue recognition</td>
<td align="left" bgcolor="#e6efff" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" width="12%">
16,437
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" width="12%">
107,609
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td valign="bottom"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Total deferred tax liabilities</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
16,437
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
107,609
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
</table>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">Significant components of income tax expense for the nine months ended April 30, 2017 and 2016</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times,serif;" width="100%">
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">For the Nine</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">For the Nine</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">months</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">months</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">Ended</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">ended</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2017</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2016</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">(Unaudited)</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">(Unaudited)</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Current tax expense</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
99,636
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
302,482
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Deferred tax expense</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
(88,194
</td>
<td align="left" valign="bottom" width="2%">)</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
(80,121
</td>
<td align="left" valign="bottom" width="2%">)</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Tax expense (benefit)</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
11,442
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
222,361
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
</table>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">Reconciliation of Effective Income Tax Rate</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times,serif;" width="100%">
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">For the Nine</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">For the Nine</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">months</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">months</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">ended</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">ended</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2017</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2016</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">(Unaudited)</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">(Unaudited)</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Statutory U.S. tax rate</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
34.00%
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
34.00%
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">PRC Statutory Tax Rate</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
25.00%
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
25.00%
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">HK Statutory Tax Rate</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
15.00%
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
15.00%
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Permanent Difference</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
(
8.12%
</td>
<td align="left" valign="bottom" width="2%">)</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
178.91%
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Less: Valuation Allowance</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
(
75.20%
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
101.47%
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Deferred Tax</td>
<td align="left" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" width="1%"> </td>
<td align="right" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" width="12%">
8.25%
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" width="1%"> </td>
<td align="right" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" width="12%">
-
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Tax expense (benefit)</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
(
1.07%
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
354.38%
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
</table>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times,serif;" width="100%">
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">July 31, 2016</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2017</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">(Unaudited)</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Deferred tax assets:</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="left" valign="bottom" width="12%"> </td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="left" valign="bottom" width="12%"> </td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Net operating losses</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
377,676
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
228,278
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td valign="bottom"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Total deferred tax assets</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
377,676
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
228,278
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Less: valuation allowance</td>
<td align="left" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" width="1%"> </td>
<td align="right" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" width="12%">
(377,676
</td>
<td align="left" valign="bottom" width="2%">)</td>
<td align="left" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" width="1%"> </td>
<td align="right" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" width="12%">
(228,278
</td>
<td align="left" valign="bottom" width="2%">)</td>
</tr>
<tr>
<td bgcolor="#e6efff" valign="bottom"> </td>
<td bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="12%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="12%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Deferred tax assets, net</td>
<td align="left" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
 
-
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
 
-
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
</table>
377676
228278
377676
228278
377676
228278
0
0
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times,serif;" width="100%">
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">July 31, 2016</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2017</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">(Unaudited)</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Deferred tax assets:</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Net operating losses</td>
<td align="left" valign="bottom" width="1%">$</td>
<td align="right" valign="bottom" width="12%">
 
-
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" valign="bottom" width="1%">$</td>
<td align="right" valign="bottom" width="12%">
-
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td bgcolor="#e6efff" valign="bottom"> </td>
<td bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="12%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="12%"> </td>
<td bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Total deferred tax assets</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="left" valign="bottom" width="12%"> </td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="left" valign="bottom" width="12%"> </td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Less: valuation allowance</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td valign="bottom"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Deferred tax assets, net</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
 
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
 
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Deferred tax liabilities:</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="left" valign="bottom" width="12%"> </td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="left" valign="bottom" width="12%"> </td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Timing differences of revenue recognition</td>
<td align="left" bgcolor="#e6efff" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" width="12%">
16,437
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" width="12%">
107,609
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td valign="bottom"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Total deferred tax liabilities</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
16,437
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
107,609
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
</table>
0
0
0
0
0
0
0
16437
107609
16437
107609
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times,serif;" width="100%">
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">For the Nine</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">For the Nine</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">months</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">months</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">Ended</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">ended</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2017</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2016</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">(Unaudited)</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">(Unaudited)</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Current tax expense</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
99,636
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
302,482
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Deferred tax expense</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
(88,194
</td>
<td align="left" valign="bottom" width="2%">)</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
(80,121
</td>
<td align="left" valign="bottom" width="2%">)</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Tax expense (benefit)</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
11,442
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
222,361
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
</table>
99636
302482
-88194
-80121
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times,serif;" width="100%">
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">For the Nine</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">For the Nine</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">months</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">months</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">ended</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">ended</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2017</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">2016</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="center" nowrap="nowrap" valign="bottom"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">(Unaudited)</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="1%"> </td>
<td align="center" nowrap="nowrap" valign="bottom" width="12%">(Unaudited)</td>
<td align="center" nowrap="nowrap" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Statutory U.S. tax rate</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
34.00%
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
34.00%
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">PRC Statutory Tax Rate</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
25.00%
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
25.00%
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">HK Statutory Tax Rate</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
15.00%
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
15.00%
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Permanent Difference</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
(
8.12%
</td>
<td align="left" valign="bottom" width="2%">)</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
178.91%
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Less: Valuation Allowance</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
(
75.20%
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
101.47%
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Deferred Tax</td>
<td align="left" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" width="1%"> </td>
<td align="right" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" width="12%">
8.25%
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" width="1%"> </td>
<td align="right" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" width="12%">
-
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Tax expense (benefit)</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
(
1.07%
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
354.38%
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
</table>
0.3400
0.3400
0.2500
0.2500
0.1500
0.1500
-0.0812
1.7891
-0.7520
1.0147
0.0825
0.00
-0.0107
3.5438
1110812
141353
370215
47118
92553
842907
0.25
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<b>NOTE 13. COMMITMENTS, CONTINGENCIES, RISKS AND UNCERTAINTIES</b>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<u>Capital Commitments</u>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<u>Operation Commitments</u>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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:</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times,serif;" width="100%">
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Year ending July 31, 2017</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
50,153
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Year ending July 31, 2018</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
200,611
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Year ending July 31, 2019</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
120,007
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Year ending July 31, 2020</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
120,007
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">After 2020</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
450,026
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Total</td>
<td align="left" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
940,804
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
</table>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
Rental expense of the Company for the nine months ended April 30, 2017 and 2016 were $152,134
and $96,284, respectively.
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<u>Credit risk</u>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">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.</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
<u>Contingencies</u>
</p>
<p align="justify" style="font-family: times,serif; font-size: 10pt;">
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.
</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times,serif;" width="100%">
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Year ending July 31, 2017</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
50,153
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Year ending July 31, 2018</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
200,611
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">Year ending July 31, 2019</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
120,007
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Year ending July 31, 2020</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
120,007
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff" valign="bottom">After 2020</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
450,026
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" valign="bottom">Total</td>
<td align="left" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
940,804
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
</table>
50153
200611
120007
120007
450026
940804
15764399
9247569
152134
96284
60000000
0.001
7000000
67000000
67000
0.001
7000000
0.00