UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2016

[ ]

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

FOR THE TRANSITION PERIOD FROM ________ TO ________

Commission File No. 333-201314

HEAVENSTONE CORP.

(Exact name of registrant as specified in its charter)

Nevada

47-1445393

(State or Other Jurisdiction of Incorporation or Organization)

(IRS Employer Identification No.)

17800 Castleton Street, Suite 300, City of Industry, California 91748

(Address of Principal Executive Offices, Including Zip Code)

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

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

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [X]

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

Large accelerated filer [ ]

Non-accelerated filer [ ]

Accelerated filer [ ]

Smaller reporting company [X]

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

As of February 21, 2017, 71,159,423 shares of the common stock of the registrant were issued and outstanding.

Documents Incorporated by Reference: None.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

INDEX TO FINANCIAL STATEMENTS
	Page
Balance Sheets as of December 31, 2016 (unaudited), and June 30, 2016 (audited)		3
Statements of Operations (unaudited) for the Three and Six Months Ended December 31, 2016 and 2015		4
Statements of Cash Flows (unaudited) for the Six Months Ended December 31, 2016 and 2015		5
Notes to Unaudited Financial Statements		7

HEAVENSTONE CORP.

BALANCE SHEET

December 31, 2016, and June 30, 2016

	As of 12/31/16 (unaudited)			As of 6/30/2016 (audited)
ASSETS
Current assets
Cash and cash equivalents	$	360		$	52,592
Prepaid and other current assets		107,845			156,340
Total current assets		108,205			208,932
Fixed assets
Land and land development cost		4,403,151			3,888,846
Office furniture and equipment		14,047			14,047
Accumulated depreciation		(5,853	)		(4,448	)
Total fixed assets		4,411,345			3,898,445
Total assets	$	4,519,550		$	4,107,377
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accrual - bank overdraft	$	4,270		$	---
Accounts payable		41,480			155,538
Interest payable		269,901			185,509
Short-term notes payable		---			38,846
Short-term related party debt		2,100,000			2,100,000
Total current liabilities		2,415,651			2,479,893
Non-current liabilities
Long-term related party debt		1,169,975			629,975
Long-term notes payable		1,050,000			1,050,000
Total non-current liabilities		2,219,975			1,679,975
Total liabilities		4,635,626			4,159,868
Stockholders' deficit
Preferred stock, $.0001 par value: 50,000,000 shares authorized; zero and zero shares issued and outstanding at December 31, 2016, and June 30, 2016, respectively		---			---
Common stock, $.0001 par value: 200,000,000 shares authorized; 71,159,423 shares and 71,159,423 shares issued and outstanding at December 31, 2016, and June 30, 2016, respectively		7,116			7,116
Additional paid-in capital		394,386			394,386
Accumulated deficit		(517,578	)		(453,993	)
Total stockholders' deficit		(116,076	)		(52,491	)
Total liabilities and stockholders' deficit	$	4,519,550		$	4,107,377

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

HEAVENSTONE CORP.

STATEMENT OF OPERATIONS

For the Three and Six Months Ended December 31, 2016 and 2015

	Three Months Ended						Six Months Ended
	12/31/16 (unaudited)			12/31/15 (unaudited)			12/31/16 (unaudited)			12/31/15 (unaudited)
Operating expenses	$	52,857		$	11,057		$	46,799		$	43,298
Operating loss		(52,857	)		(11,057	)		(46,799	)		(43,298	)
Interest expense		(8,712	)		(35,626	)		(16,786	)		(71,251	)
Net loss	$	(61,569	)	$	(46,683	)	$	(63,585	)	$	(114,549	)
Loss per share:
Basic and diluted	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)
Weighted average number of shares outstanding:
Basic and diluted		71,159,423			71,159,423			71,159,423			71,159,423

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

HEAVENSTONE CORP. STATEMENTS OF CASH FLOWS
	For the Six Months Ended December 31, 2016 and 2015

	Six Months Ended 12/31/16 (unaudited)			Six Months Ended 12/31/15 (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(63,585	)	$	(114,549	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation expense		1,405			1,405
Changes in operating assets and liabilities:
Prepaid and other current assets		48,495			---
Other assets		---			(5,504	)
Accounts payable		(109,788	)		(52,887	)
Accrued expenses		---			52,500
Interest payable		(3,588	)		---
Net cash used in operating activities		(127,061	)		(119,035	)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for land development costs		(426,325	)		(132,056	)
Net cash used in investing activities		(426,325	)		(132,056	)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on loans from related parties		540,000			---
Repayments on loans to third parties		(38,846	)		---
Net cash provided by financing activities		501,154			---
NET DECREASE IN CASH		(52,232	)		(251,091	)
Cash, beginning of period		52,592			271,101
Cash, end of period	$	360		$	20,010

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

HEAVENSTONE CORP. STATEMENTS OF CASH FLOWS (cont.)
	For the Six Months Ended December 31, 2016 and 2015

	Six Months Ended 12/31/16 (unaudited)		Six Months Ended 12/31/15 (unaudited)
Non-cash investing activities
Land development costs incurred on credit	$	---	$	13,828
Capitalized interest to land development cost	$	87,980	$	---
Supplemental disclosure of cash flow information
Cash paid for income taxes	$	---	$	---
Cash paid for interest	$	19,697	$	18,751

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

	HEAVENSTONE CORP. NOTES TO FINANCIAL STATEMENTS
		December 31, 2016 (unaudited)

NOTE 1. BASIS OF PRESENTATION

The accompanying unaudited interim financial statements of Heavenstone Corp. ("Heavenstone" or the "Company"), have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (the "SEC"), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended June 30, 2016, filed with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the Financial Statements which substantially duplicate the disclosure contained in the audited financial statements for fiscal 2016 as reported in the Company's Annual Report on Form 10-K have been omitted.

NOTE 2. GOING CONCERN

These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. For the six months ended December 31, 2016, the Company had an accumulated deficit of $517,578 and revenue of $0. The continuation of the Company as a going concern is dependent upon the company's continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. These factors raise substantial doubt regarding the Company's ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company intends to fund operations through equity and debt financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the year ending June 30, 2017.

NOTE 3. LAND AND LAND DEVELOPMENT COSTS

Land and land development costs are carried at cost. Land development costs capitalized include costs associated with the development of the purchased land, including inspection fees and engineering fees. For the six months ended December 31, 2016, the Company had incurred $426,325 in land development costs. Also, the Company capitalized the interest costs of $87,980 incurred for the real estate projects under ASC 835-20, during the six months ended December 31, 2016.

NOTE 4. RELATED-PARTY TRANSACTIONS

Loans from Officer's Family

During the six months ended December 31, 2016, the Company obtained two separate loans from the family of one of its officers, as follows:

July 2016 – $170,000. The Company obtained this loan pursuant to a loan agreement and delivered a promissory note, face amount $170,000, in consideration of such loan. Unpaid principal on such loan bears interest at 5% per annum, with principal and accrued interest due in July 2018. The proceeds from this loan were used by the Company for operating expenses.

August 2016 – $100,000. The Company obtained this loan pursuant to a loan agreement and delivered a promissory note, face amount $100,000, in consideration of such loan. Unpaid principal on such loan bears interest at 5% per annum, with principal and accrued interest due in August 2018. The proceeds from this loan were used by the Company for operating expenses.

Loan from Related Party

During the six months ended December 31, 2016, the Company obtained a single loan from a related party, as follows:

September 2016 – $270,000. The Company obtained this loan pursuant to a loan agreement and delivered a promissory note, face amount $270,000, in consideration of such loan. Unpaid principal on such loan bears interest at 5% per annum, with principal and accrued interest due in September 2018. The proceeds from this loan were applied by the Company to operating expenses.

As of December 31 and June 30, 2016, the total outstanding short-term related party debt was $2,100,000.

As of December 31 and June 30, 2016, the total outstanding long-term related party debt was $1,169,975 and $629,975, respectively.

The above notes were in default as of December 31, 2016. However, the holders of all such notes have agreed orally to extend the due dates of such notes to December 31, 2017.

NOTE 5. NOTES PAYABLE

In February 2016, the Company delivered a promissory note, face amount $76,587, in payment of certain insurance premiums associated with an officers' and directors' insurance policy obtained by the Company. Unpaid principal on such loan bears interest at 6.95% per annum. Repayment of this promissory note is to be made in ten equal monthly payments of $7,904.80, beginning in March 2016.

During the six months ended December 31, 2016, the Company repaid a total of $38,846 in principal. The outstanding principal as of December 31 and June 30, 2016, are $-0- and $38,846, respectively.

As of December 31 and June 30, 2016, the total outstanding long-term notes payable was $1,050,000.

NOTE 6. SUBSEQUENT EVENTS

Real Estate Development Project

In January 2017, the Company and a third party formed Temecula QK Holdings, LLC, a California limited liability company ("TQKH"), for the purpose of acquiring and developing approximately 40 acres of land located in Temecula, California. The Company owns 75% of TQKH. In connection with the TQKH's purchase of such land, TQKH issued a $750,000 face amount promissory note to the third-party seller of the land. The principal balance is due in March 2019. The unpaid principal balance of such promissory note bears interest at 4.5% per annum, with interest-only payments due monthly until the due date. This promissory note is secured by a deed of trust in favor of the selling party.

Loan from Related Party

Subsequent to December 31, 2016, the Company obtained a single loan from a related party, as follows:

January 2017 – $100,000. The Company obtained this loan pursuant to a loan agreement and delivered a promissory note, face amount $100,000, in consideration of such loan. Unpaid principal on such loan bears interest at 5% per annum, with principal and accrued interest due in January 2019. The proceeds from this loan were applied by the Company to operating expenses.

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

Jumpstart Our Business Startups Act of 2012

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

•

Only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced "Management's Discussion and Analysis of Financial Condition and Results of Operations" disclosure.

•

Reduced disclosure about our executive compensation arrangements.

•

Not having to obtain non-binding advisory votes on executive compensation or golden parachute arrangements.

•

Exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.

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

Cautionary Statement

The following discussion and analysis should be read in conjunction with our financial statements for the six months ended December 31, 2016 (unaudited) and 2015 (unaudited), included elsewhere in this Quarterly Report on Form 10-Q. The results shown herein are not necessarily indicative of the results to be expected for any future periods.

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

Basis of Presentation – "True" Inception Date

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

Background and Recent Developments

We are a development-stage company that was incorporated under the laws of the State of Nevada on June 13, 2014. At that time, we intended to become a large real estate development and construction company with operations, primarily, in the luxury vineyard estate home construction industry and, secondarily, and the hospitality industry.

However, in January 2017, our Board of Directors determined to refocus our plan of business, in an effort to better position our company to generate ongoing revenues from our future operations. As a result of this action, we now concentrate more emphasis on engaging in the hospitality industry, which we call our Hospitality Segment. Nevertheless, we continue to participate in the real estate development and home building industries as an adjunct to our Hospitality Segment. These efforts are now referred to as our Real Estate Development Segment. See Item 5. Other Information under Part II – Other Information.

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

Real Estate Development Progress

Since our inception, we have acquired at total of approximately 110 acres of unimproved real estate located in Temecula, California, on which we intend to construct a total of 18 vineyard estate rental properties. Out of such 110 acres, on two five-acre parcels, we have begun construction efforts with respect to two vineyard estate rental properties. We are nearing completion of the permitting process with respect to each of such homes and have, as required by local ordinances, planted grapevines on approximately 50% of each 5 acre parcel.

Further, we have purchased approximately 25 acres also located in Temecula, on which we intend to build and operate our planned Sorrento Resort, Vineyard & Winery.

We continue to lack the capital with which to develop fully the properties described, and there is no assurance that we will ever possess such capital.

Principal Factors Affecting Our Financial Performance

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

• our ability to obtain capital with which to build our rental properties;

• our ability to attract guests to our rental properties and resort property, once built; and

• our ability to contain our costs and maintain our low overhead.

Expected Financial Performance

Based on our current business plan, we expect to incur operating losses through at least the fourth quarter of 2017. However, because we do not yet possess capital to commence operations, we cannot predict whether we will have any revenues in our Hospitality Segment or our Real Estate Development Segment prior to the end of such period.

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

Results of Operations

Until we begin full scale business operations, we expect the level of our quarterly expenses to be approximately $50,000.

For the Three Months Ended December 31, 2016 and 2015, we generated no revenues. We do not expect to generate any revenues until the fourth quarter of 2017, at the earliest.

For the Three Months Ended December 31, 2016 and 2015, we incurred a net loss of $(61,569) (unaudited) and $(46,683) (unaudited), respectively.

For the Six Months Ended December 31, 2016 and 2015, we generated no revenues. We do not expect to generate any revenues until the fourth quarter of 2017, at the earliest.

For the Six Months Ended December 31, 2016 and 2015, we incurred a net loss of $(63,585) (unaudited) and $(114,549) (unaudited), respectively. Had we not experienced a reimbursement of approximately $48,000 in consulting and related fees, our net loss for the Six Months Ended December 31, 2016, would have been approximately $111,000.

Plan of Operations

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

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

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

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

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

We expect to have obtained all of the necessary permits and approvals by mid-2017, at which time we will commence construction of these two vineyard estate rental properties. However, due to the nature of this process, we cannot assure you that we will be able to accomplish these objectives by such date.

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

Liquidity

For the Six Months Ended December 31, 2016. At December 31, 2016, we had a working capital deficit of $2,307,446 and cash of $360. Currently, we possess approximately $50,000 in cash.

Loans from Related Parties and Third Parties. During the Current Six Month Period, we obtained the following loans from related parties and from third parties, as follows, as follows:

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

As of December 31, 2016, the total outstanding principal balance on the foregoing loans was $540,000, with another $9,320 in accrued and unpaid interest.

Other Financing. In connection our purchase of 50 acres of land in Temecula, California, in 2014, we issued a $750,000 face amount promissory note to the third-party seller of the land. The unpaid principal balance of such promissory note bears interest at 5% per annum, with payments of $3,125 due monthly until the entire principal balance has been paid. This promissory note is secured by a deed of trust in favor of the selling party.

Working Capital. At December 31, 2016, we had a working capital deficit of $2,307,446 and cash of $360, compared to our working capital deficit of $2,270,961 and cash of $52,592, at June 30, 2016.

We are currently pursuing approximately $24 million in additional funding with which to build our vineyard estate rental properties and our Sorrento Resort property. We are actively pursuing this funding, with a current focus on potential foreign sources located throughout the world. While we would prefer to obtain funds through private sales of our equity securities, it is possible that funds would be obtained through loans or a combination of loans and sales of equity securities.

As of the date of this Quarterly Report on Form 10-Q, however, we have not obtained any commitments from any person that would have our company obtaining needed capital. There is no assurance that we will ever obtain capital in amounts as would allow us to pursue our full plan of business.

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

To sustain our current operations, we obtained loans in the total amount of $540,000, during the Current Six Month Period. These loans accrue interest at 5% per annum, with principal and accrued interest due in July 2018 (as to $170,000), August 2018 (as to $100,000) and September 2018 (as to $270,000). Subsequent to December 31, 2016, we obtained a $100,000 loan, which accrues interest at 5% per annum, with principal and accrued interest due in January 2019.

Cash Flows.

Operating Activities. During the Current Six Month Period, we used $127,061 in our operating activities. During the Prior Six Month Period, we used $119,035 in our operating activities. We expect that, until we commence full-scale operations, operations will use between $50,000 and $100,000 of cash during future three-month periods.

Investing Activities. During the Current Six Month Period, we used $426,325 in our investing activities, which was for land development costs. During the Prior Six Month Period, we used $132,056 in our investing activities for land development costs.

Financing Activities. During the Current Six Month Period, our financing activities provided $501,154 in cash, all of which was proceeds of loans from related parties and repayments of loans to third parties. During the Prior Six Month Period, our financing activities provided no cash.

Contractual Obligations

Monthly Payment Obligations. We have entered into two significant long-term obligations that require us to make monthly cash payments.

In connection our purchase of 50 acres of land in Temecula, California, we issued a $750,000 face amount promissory note to the third-party seller of the land. The unpaid principal balance of such promissory note bears interest at 5% per annum, with payments of $3,125 due monthly until the entire principal balance has been paid. This promissory note is secured by a deed of trust in favor of the selling party.

In connection our purchase, through a 75%-owned subsidiary, of 40 acres of land in Temecula, California, we issued a $750,000 face amount promissory note to the third-party seller of the land. The unpaid principal balance of such promissory note bears interest at 4.5% per annum, with interest-only payments due monthly until March 2019, when the entire principal balance is due. This promissory note is secured by a deed of trust in favor of the selling party.

Balloon Payment Obligations. In 2014, we obtained three separate loans from our majority shareholder, which notes are in default as of December 31, 2016, as follows:

•

In October 2014, we obtained a loan in the amount of $850,000 pursuant to a loan agreement and delivered a promissory note, face amount $850,000, in consideration of such loan. Unpaid principal on such loan bears interest at 5% per annum, with principal and accrued interest due in October 2016, all of which remains unpaid. The proceeds from this loan were used by us to purchase approximately 50 acres of land in Temecula, California. This loan remains unpaid.

•

In October 2014, we obtained a loan in the amount of $650,000 pursuant to a loan agreement and delivered a promissory note, face amount $650,000, in consideration of such loan. Unpaid principal on such loan bears interest at 5% per annum, with principal and accrued interest due in October 2016, all of which remains unpaid. The proceeds from this loan were used by us to purchase approximately 10 acres of land in Temecula, California. This loan remains unpaid.

•

In December 2014, we obtained a loan in the amount of $600,000 pursuant to a loan agreement and delivered a promissory note, face amount $600,000, in consideration of such loan. Unpaid principal on such loan bears interest at 5% per annum, with principal and accrued interest due in December 2016. The proceeds from this loan were used by the Company to purchase approximately 10 acres of land in Temecula, California. This loan remains unpaid.

Loans During Current Six Month Period. During the six months ended December 31, 2016, we obtained the following loans from related parties and from third parties, as follows:

•

In July 2016, we obtained a loan in the amount of $170,000 pursuant to a loan agreement and delivered a promissory note, face amount $170,000, in consideration of such loan. Unpaid principal on such loan bears interest at 5% per annum, with principal and accrued interest due in July 2018. The proceeds from this loan were used by us for operating expenses.

•

In August 2016, we obtained a loan in the amount of $100,000 pursuant to a loan agreement and delivered a promissory note, face amount $100,000, in consideration of such loan. Unpaid principal on such loan bears interest at 5% per annum, with principal and accrued interest due in August 2018. The proceeds from this loan were used by us for operating expenses.

•

In September 2016, we obtained a loan in the amount of $270,000 pursuant to a loan agreement and delivered a promissory note, face amount $270,000, in consideration of such loan. Unpaid principal on such loan bears interest at 5% per annum, with principal and accrued interest due in September 2018. The proceeds from this loan were used by us for operating expenses.

Loan Subsequent to December 31, 2016. Subsequent to December 31, 2016, we have obtained a single loan from a related party, as follows:

•

In January 2017, we obtained a loan in the amount of $100,000 pursuant to a loan agreement and delivered a promissory note, face amount $100,000, in consideration of such loan. Unpaid principal on such loan bears interest at 5% per annum, with principal and accrued interest due in January 2019. The proceeds from this loan were used by us for operating expenses.

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

Critical Accounting Policies

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

Uncertainties and Trends

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

• our ability to obtain capital with which to build our rental properties;

• our ability to attract guests to our rental properties and resort property, once built; and

• our ability to contain our costs and maintain our low overhead.

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

Inflation

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

Off-Balance Sheet Arrangements

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

Capital Expenditures

During the Current Six Month Period, our capital expenditures were $426,325, all of which was for land development costs.

During the Prior Six Month Period, our capital expenditures were $132,056, all of which was for land development costs.

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures.

Our management, after evaluating the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, has concluded that, as of the end of the fiscal quarter covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were not effective to provide reasonable assurances that information required to be disclosed in the reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and such information is accumulated and communicated to management, including the Principal Executive Officer and Principal Financial Officer as appropriate, to allow timely decisions regarding disclosures.

There was no change in our internal control over financial reporting during the quarter ended December 31, 2016, that has materially affected, or is reasonably likely to materially affect, our company's internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

None.

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

During the three months ended December 31, 2016, we did not issue unregistered securities that have not been reported previously.

Subsequent to December 31, 2016, we issued unregistered securities, as follows:

1. (a) Securities Sold. In January 2017, a $100,000 principal amount promissory note was issued; (b) Underwriter or Other Purchasers. Such promissory note was issued to EF2T, Inc.; (c) Consideration. Such promissory note was issued for $100,000 in cash; and (d) Exemption from Registration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(a)(2) thereof, as a transaction not involving a public offering. This purchaser was an accredited investor.

Item 3. Defaults upon Senior Securities.

None.

Item 4. Mine Safety Disclosure.

Not applicable.

Item 5. Other Information.

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

New Operating Strategy vis-à-vis Current Properties. Currently, we own several parcels of real property located in Temecula, California, and in an area designated as "Temecula Valley Wine Country" by Riverside County.

Temecula Valley Wine Country Community Plan: Temecula Valley Wine Country Design Guidelines provide the following summary description and purpose of the Temecula Valley Wine Country:

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

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

It is our current plan to construct our vineyard estate homes for the purpose of our Hospitality Segment's holding them out for rent on a nightly or weekly basis. To market these rental opportunities, we intend to employ the resources offered by third-party internet reservations systems, including Airbnb. Nevertheless, sales of these properties would be made by us, should the opportunity arise. No prediction in this can be made, however.

Risk Factors. With our determination to become a hospitality-focused company, potential purchasers of our common stock should be aware that there are certain risks associated relating to the hospitality industry, in general, and our company's planned operations therein, in particular. These hospitality-related risks are included in the following risk factors that relate to our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business, results of operations or financial condition. Certain statements herein are forward-looking statements.

Risks Related to Our Business – In General

Our lack of operating history makes it difficult to predict our future operating results. We were incorporated in June 2014. Because we have a limited operating history, it is difficult to forecast our future operating results. Additionally, once established, our operations will continue to be subject to risks inherent in the establishment of a new business, including, among other factors, efficiently deploying our capital, developing and implementing our marketing campaigns and strategies and developing awareness of our Hospitality Segment's vineyard estate rental properties and Sorrento Resort property, if and when they are built. As with any investment in a company with a limited operating history, ownership of our common stock involves a high degree of risk and is not recommended if an investor cannot reasonably bear the risk of a total loss of his investment.

We may be unable to obtain sufficient capital to pursue our growth strategy. Currently, we do not have sufficient financial resources to implement our complete business plan. Specifically, we lack the capital to begin construction of our first model luxury vineyard estate home or to construct our planned resort property. There is no assurance that we will be able to generate revenues or attract capital investment sufficient to sustain our operations, nor can we assure you that we will be able to obtain additional sources of financing at all.

We currently depend on our President; the loss of this officer could disrupt our operations and adversely affect the development of our business. Our success in establishing our business plan will depend on the continued service and on the performance of our President, Jack Jie Qin, and, as we grow, other executive officers and key employees. We have not entered into an employment agreement with Mr. Qin. It is likely that we will do so in the near future, though no terms of employment have been finalized. The loss of services of our key personnel for any reason could seriously impair our ability to execute our business plan, which could have a materially adverse effect on our business and future results of operations. We have not purchased any key-man life insurance.

Our officers lack experience in the real estate development, home construction and hospitality industries. While our officers possess extensive business experience, none of these persons has experience within the real estate development, home construction and hospitality industries. Given their lack of experience in these industries, there is no assurance that our officers will be successful in implementing our plan of business.

Our management serves us on a part-time basis and conflicts may arise. Jack Jie Qin and William E. Sluss perform employee-like services for us on a part-time basis. Mr. Qin has committed to working up to 10 hours per week and Mr. Sluss has committed to working up to 10 hours per week for the benefit of our company. Except for a stock bonus paid to Mr. Sluss, neither of Messrs. Qin and Sluss have not been compensated for their services to date and have agreed to work for no cash remuneration, until such time as we generate sufficient revenues for the payment of salaries to our management. We have not entered into employment agreements with either of Messrs. Qin and Sluss; we expect to enter into employment agreements with Messrs. Qin and Sluss at an as-yet-to-be- determined time in the future. Messrs. Qin and Sluss have other work-related responsibilities outside of our company. While each will seek to devote sufficient time to allow us to operate on a basis that is beneficial to our shareholders, this goal may not be accomplished and our operating results may be negatively impacted by the unavailability of these key personnel.

Our officers do not have employment agreements with us and could cease working for us at any time, thereby causing us to cease our operations. Our officers do not have employment agreements with us. In the absence of employment agreements with a restrictive covenant on their part, these persons could leave us at any time and commence working for a competing company. Accordingly, the continued services of our officers cannot be assured. If any of our officers were to cease working for us, we might be forced to cease operations.

If we are unable to manage future expansion effectively, our business may be adversely impacted. In the future, we may experience rapid growth in our business, which could place a significant strain on our operations, in general, and our internal controls and other managerial, operating and financial resources, in particular. If we do not manage future expansion effectively, our business will be harmed. There is, of course, no assurance that we will enjoy rapid development in our business.

Our business plan is not based on independent market studies, so we cannot assure you that our strategy will be successful. We have not commissioned any independent market studies concerning any facet of the real estate development industry, the construction industry or the hospitality industry. Rather, our plans for implementing our business strategy and achieving profitability are based on the experience, judgment and assumptions of our management and upon other available information concerning each of these industries. If our management's assumptions prove to be incorrect, we will not be successful in our efforts.

We will need to attract additional management personnel. We believe our current officers will be able to satisfy our senior management needs for the initial phase of our business plan. Thereafter, we will be required to hire additional executive officers and other staff members with experience in various aspects of our Hospitality Segment's planned operations and our Real Estate Develoment Segment's planned operations. Our inability to hire or retain experienced personnel would severely limit our ability to develop successfully our operations.

Governmental regulations and environmental matters could increase the cost and limit the availability of our real estate development projects, adversely affecting our business or financial results. Because we are involved in real estate development, our company is subject to extensive and complex regulations that affect land development and home construction, including zoning, density restrictions, building design and building standards. These regulations often provide broad discretion to the administering governmental authorities as to the conditions we must meet prior to development or construction being approved, if approved at all. We are subject to determinations by these authorities as to the adequacy of water or sewage facilities, roads or other local services. New housing developments may also be subject to various assessments for schools, parks, streets and other public improvements. In addition, in many markets, government authorities have implemented no growth or growth control initiatives. Any of these can limit, delay or increase the costs of development or construction.

We will also be subject to a significant number and variety of local, state and federal laws and regulations concerning protection of health, safety, labor standards and the environment. The impact of environmental laws varies depending upon the prior uses of the building site or adjoining properties and may be greater in areas with less supply where undeveloped land or desirable alternatives are less available. These matters may result in delays, may cause us to incur substantial compliance, remediation, mitigation and other costs, and can prohibit or severely restrict development and construction activity in environmentally sensitive regions or areas. Government agencies also routinely initiate audits, reviews or investigations of business practices to ensure compliance with these laws and regulations, which can cause us to incur costs or create other disruptions in our business that can be significant.

We will also be subject to other local, state and federal laws and regulations, including laws involving matters that are not within our control. If we fail to comply with all applicable laws, we can suffer damage to our company's reputation and may be exposed to possible liability.

Natural disasters may have a significant impact on our business. Because our hospitality and real estate development operations are expected, initially, to be located primarily in Southern California, we will be faced with the risks of potential large earthquakes and flooding, among other natural disasters. To the extent that any such natural disaster occurs, our business and financial condition may be adversely affected.

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

Our business and financial results could be adversely affected by significant inflation. Inflation can adversely affect us by increasing costs of land, materials and labor. In addition, significant inflation is often accompanied by higher interest rates, which have a negative impact on housing demand. In a highly inflationary environment, we may be precluded from raising prices enough to keep up with the rate of inflation, which could reduce our profit margins. Moreover, with inflation, the costs of capital increase and the purchasing power of our cash resources can decline. Current or future efforts by the government to stimulate the economy may increase the risk of significant inflation and its adverse impact on our business or financial results.

Potential future acquisitions could be difficult to locate and integrate, divert the attention of key personnel, disrupt our business, dilute shareholder value and adversely affect our financial results. As part of our business strategy, we intend to consider acquisitions of hospitality and related businesses and construction and related businesses, as such acquisition opportunities become available to us. However, we may not find suitable acquisition opportunities. Acquisitions involve numerous risks, any of which could harm our business, including:

•

difficulties in integrating the operations, technologies, products, existing contracts, accounting processes and personnel of the target company and realizing the anticipated synergies of the combined businesses;

• difficulties in supporting customers of the target company or assets;

• diversion of financial and management resources from our then-existing operations;

•

the price we pay or other resources that we devote to an opportunity may exceed the value we realize, or the value we could have realized, if we had allocated the purchase price or other resources to another opportunity;

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potential loss of key employees, customers and strategic alliances from either our current business or the business of the target company;

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assumption of unanticipated problems or latent liabilities, such as problems with the quality of the products or services of the target company; and

•

inability to generate sufficient revenue to offset acquisition costs.

Acquisitions also frequently result in the recording of goodwill and other intangible assets which are subject to potential impairments in the future that could harm our financial results. In addition, if we finance acquisitions by issuing convertible debt or equity securities, our existing shareholders' ownership may be diluted. As a result, if we fail properly to evaluate acquisitions, we may not achieve the anticipated benefits of any such acquisitions, and we may incur costs in excess of those that we anticipate. The failure to evaluate and execute successfully acquisitions or otherwise adequately address these risks could materially harm our business and financial results and, in turn, the market price for our common stock.

Risks Related to Our Business - Hospitality Segment

Our Hospitality Segment can be expected to be subject to the business, financial and operating risks common to the resort hotel business, any of which could reduce our revenues and limit opportunities for growth. Business, financial and operating risks common to the hotel business, such as our Hospitality Segment, include:

• significant competition from hospitality providers in all parts of the world;

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the costs and administrative burdens associated with complying with applicable laws and regulations;

• changes in desirability of our chosen geographic region location;

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decreases in the demand for five-star hotel rooms or due to general economic conditions;

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statements, actions or interventions by governmental officials related to travel, meetings or other aspects of hotel business and operations;

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the impact of internet intermediaries and other new industry entrants on pricing and the value of our brand and our increasing reliance on technology;

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health, safety and environmental laws, rules and regulations and other governmental and regulatory action; and

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changes in operating costs including, but not limited to, energy, water, labor costs (including the impact of labor shortages and unionization), food costs, workers' compensation and health-care related costs, insurance and unanticipated costs, such as acts of nature and their consequences.

The hospitality industry is subject to seasonal and cyclical volatility, which may contribute to fluctuations in our Hospitality Segment's results of operations and financial condition. The hospitality industry is seasonal in nature. We generally expect our Hospitality Segment's revenues to be lower in the first quarter of each year than in each of the three subsequent quarters, with the fourth quarter generally being the highest. In addition, the hospitality industry is cyclical and demand generally follows the general economy on a lagged basis. The seasonality and cyclicality of the hospitality industry may contribute to fluctuations in our Hospitality Segment's results of operations and financial condition.

Because our Hospitality Segment will operate in a highly competitive industry, our revenues or profits could be harmed if we are unable to compete effectively. The segment of the hospitality industry in which we expect to operate is subject to intense competition. Our principal competitors will be other operators of luxury, full-service and focused-service hotels, including major hospitality chains with well-established and recognized brands. If we are unable to compete successfully, our Hospitality Segment's revenues or profits would be impaired.

Our Hospitality Segment will face competition for individual guests, group reservations and conference business. We will compete for these customers based primarily on brand name recognition and reputation, as well as location, room rates, property size and availability of rooms and conference space, quality of accommodations, customer satisfaction and amenities. Our competitors may have greater financial and marketing resources, which could allow them to improve their properties and expand and improve their marketing efforts in ways that could affect our ability to compete for guests effectively.

The revenues of our Hospitality Segment will be highly dependent on the travel industry and declines in, or disruptions to, the travel industry such as those caused by economic slowdown, terrorism, political strife, pandemics or threats of pandemics, acts of God and war may adversely affect us. Declines in or disruptions to the travel industry may adversely impact us. Risks affecting the travel industry include: economic slowdown and recession; economic factors such as increased costs of living and reduced discretionary income adversely impacting consumers' and businesses' decisions to use and consume travel services and products; terrorist incidents and threats and associated heightened travel security measures; political and geographical strife; acts of God such as earthquakes, hurricanes, fires, floods, volcanoes and other natural disasters; war; concerns with or threats of pandemics or contagious diseases or health epidemics; environmental disasters such as the Gulf of Mexico oil spill; increased pricing, financial instability and capacity constraints of air carriers; airline job actions and strikes; and increases in gasoline and other fuel prices.

Third-party internet reservation systems may adversely impact us. Consumers increasingly use third-party internet travel intermediaries to search for and book their hotel, resort and other travel accommodations. As the use of these third-party internet reservation channels increases, consumers may rely upon these third-party internet systems to the detriment of our then-operating properties, which may impact consumer preferences for lodging choices outside of our properties and adversely impact our bookings and rates.

Our Hospitality Segment will be exposed to risks and costs associated with protecting the integrity and security of our guests' personal data and other sensitive information. Our Hospitality Segment will be subject to various risks and costs associated with the collection, handling, storage and transmission of sensitive information, including those related to compliance with U.S. and foreign data collection and privacy laws and other contractual obligations, as well as those associated with the compromise of our systems collecting such information. Our Hospitality Segment will collect internal and customer data, including credit card numbers and other personally identifiable information, for a variety of important business purposes, including managing our workforce, providing requested products and services and maintaining guest preferences, to enhance customer service and for marketing and promotion purposes. We could be exposed to fines, penalties, restrictions, litigation, reputational harm or other expenses, or other adverse effects on our business, due to failure to protect our guests' personal data and other sensitive information or failure to maintain compliance with applicable data collection and privacy laws or with credit card industry standards or other applicable data security standards.

In addition, states and the federal government have recently enacted additional laws and regulations to protect consumers against identity theft. These laws and similar laws in other jurisdictions have increased the costs of doing business, and failure on our part to implement appropriate safeguards or to detect and provide prompt notice of unauthorized access as required by some of these laws could subject us to potential claims for damages and other remedies. If we were required to pay any significant amounts in satisfaction of claims under these laws, or if we were forced to cease our business operations for any length of time as a result of our inability to comply fully with any such law, our business, operating results and financial condition could be adversely affected.

Risks Related to Our Business - Real Estate Development Segment

The construction industry experienced a significant downturn in recent years. Although the general U.S. economy has shown improvement recently, a subsequent deterioration in industry conditions could adversely affect our business or financial results. The United States experienced one of the most severe downturns in its history, from 2006 through 2011. Overall construction has improved since 2011. However, it is possible that the current economic conditions could have a negative effect on our business and financial results.

The home construction industry is cyclical and affected by changes in economic, real estate or other conditions that could adversely affect our business or financial results. The home construction industry is cyclical and is significantly affected by changes in general economic and real estate conditions, such as employment levels, interest rates, consumer confidence and housing demand. Adverse changes in these conditions or deterioration in the broader economy could have a negative impact on our business and financial results. Weather conditions and natural disasters, including earthquakes, wildfires, droughts and floods, could harm our home construction business. These events have the potential to cause a delay in our development work, home construction and home closings, adversely affect the cost or availability of materials or labor or damage homes under construction.

Supply shortages and other risks related to materials and skilled labor could increase costs and delay deliveries. The construction industry has, from time to time, experienced significant difficulties that can affect the cost or timing of construction, including shortages of qualified subcontractors, reliance on local subcontractors, manufacturers and distributors who may be inadequately capitalized, shortages of materials and volatile increases in the cost of materials, particularly increases in the price of lumber, drywall and cement, which are significant components of construction costs. These factors may cause us to take longer or incur more costs to build our properties and adversely affect our profitability. If the level of construction increases significantly in future periods, the risk of shortages in needed labor and materials available to our Ranch Segment could increase.

The risks associated with our Real Estate Development Segment's land and lot inventory could adversely affect our Real Estate Development Segment's business or financial results. Inventory risks will be substantial for our Real Estate Development Segment's home construction business. There are risks inherent in controlling, owning and developing land. If demand for our luxury vineyard estate homes declines, we may not be able to build and sell homes profitably. Also, the values of our owned undeveloped land and building lots may fluctuate significantly due to changes in market conditions. These risks could cause our Real Estate Development Segment's financial performance to be adversely affected.

Home construction is subject to home warranty and construction defect claims in the ordinary course of business that can be significant. Our Real Estate Development Segment will be subject to home warranty and construction defect claims arising in the ordinary course of our home construction business. Our Real Estate Development Segment expects to rely on subcontractors to perform the actual construction of our homes and, in many cases, to select and obtain construction materials. While we will provide detailed specifications and monitoring of the construction process, our subcontractors could use improper construction processes or defective materials in the construction of our homes. Should such issues arise, we intend to repair them in accordance with our warranty obligations, which could cause us to expend significant resources. We will be subject to construction defect claims and, although we intend to carry adequate insurance to cover any such claims, these claims could prove to be costly to defend and resolve in the legal system. Warranty and construction defect matters could also result in negative publicity for our company, which could damage our reputation and adversely affect our ability to sell homes.

Construction costs can fluctuate and impact our margins. The home construction industry has, from time to time, experienced significant difficulties, including shortages of qualified tradespeople; reliance on local subcontractors who may be inadequately capitalized; shortages of materials; and volatile increases in the cost of materials, particularly increases in the prices of lumber, drywall and cement, which are significant components of home construction costs. Our Real Estate Development Segment may not be able to recapture increased costs by raising prices because of either market conditions or because we will fix our prices at the time luxury vineyard estate home sales contracts are signed.

Our Real Estate Development Segment may be required to obtain performance bonds, the unavailability of which could adversely affect our results of operations and cash flows. We expect that our Real Estate Development Segment will be required to provide surety bonds to secure our performance or obligations under construction contracts, development agreements and other arrangements. Our ability to obtain surety bonds primarily depends upon our credit rating, financial condition, past performance and other factors, including the capacity of the surety market and the underwriting practices of surety bond issuers. The ability to obtain surety bonds also can be impacted by the willingness of insurance companies to issue performance bonds for construction and development activities. If we are unable to obtain surety bonds when required, the results of our Real Estate Development Segment's operations and cash flows could be adversely affected.

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

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

Risks Related to Our Financial Condition

Our lack of operating history makes it difficult to predict our future operating results. We were incorporated on June 13, 2014. For the period from our inception date for financial reporting purposes, July 14, 2014, through December 31, 2016, we had no revenues and incurred a net loss of $(517,578) (unaudited).

Because we have a limited operating history, it is difficult to forecast our future operating results. Additionally, our operations will continue to be subject to risks inherent in the establishment of a new business, including, among other factors, efficiently deploying our capital, developing and implementing our marketing campaigns and strategies and developing awareness and acceptance of our company's offerings. Our ability to generate future revenues will be dependent on a number of factors, including overall demand for our various rental properties and market competition. As with any investment in a company with a limited operating history, ownership of our common stock involves a high degree of risk and is not recommended if an investor cannot reasonably bear the risk of a total loss of his investment.

If we do not obtain additional funding for our operations, the value of our common stock could be adversely affected. As of December 31, 2016, we had cash of $360. Currently, we possess approximately $78,000 in cash. We are in need of operating capital and there is no assurance that we will be able to obtain such capital. In the absence of the receipt of additional funding, we may be required to scale back current operations or cease operations completely. Additionally, we do not have sufficient financial resources to implement our full-scale business plan.

In addition, if we are not successful in earning revenues once we have started our business activities, we may require additional financing to sustain business operations. Currently, we do not have any arrangements for financing and can provide no assurance to investors that we will be able to obtain financing when required. Obtaining additional financing would be subject to a number of factors, including our ability to attract purchasers of our estate homes. These factors may have an effect on the timing, amount, terms or conditions of additional financing and make such additional financing unavailable to us.

No assurance can be given that we will obtain access to capital markets in the future or that financing, adequate to satisfy the cash requirements of implementing our business strategies, will be available on acceptable terms. Our inability to gain access to capital markets or obtain acceptable financing could have a material adverse effect upon our results of operations and financial condition.

We could lose ownership of our largest property, if we fail to repay certain indebtedness. In connection with our purchase of approximately 50 acres of land in Temecula, California, we issued a $750,000 face amount promissory note to the third-party seller of the land. The principal balance is due in November 2019. This promissory note is secured by a deed of trust in favor of the selling party. Should we fail to repay the $750,000 in accordance with its terms, it is possible that the beneficiary of the deed of trust could foreclose on such property. In such a circumstance, our financial position and operating results would be negatively affected.

We may not be able to repay certain loans on time. In connection with our recent purchases of three separate parcels of real property, we borrowed, in three separate transactions, a total of $2,100,000 from our majority shareholder. The principal and accrued interest on all three of these loans is due and payable in December 2016. Currently, we do not possess sufficient funds to repay these loans and there is no assurance that we will ever obtain sufficient funds to repay these loans on time. In such circumstance, our financial condition could become impaired, to the detriment of our business operations and operating results.

Risks Concerning Our Common Stock

There is no market for our common stock. No market for trading our common stock currently exists. However, we intend to establish a trading market for our common stock, though no such market is expected to develop until the first quarter of 2017, at the earliest. We cannot assure you that a trading market for our common stock will ever commence.

Concentration of ownership of our Common Stock may prevent new investors from influencing significant corporate decisions. Currently, our majority shareholder will own approximately 98% of our outstanding common stock. This shareholder will be able to control our management and our affairs. This shareholder will be able to control matters requiring the approval by our shareholders, including the election of directors, any merger, consolidation or sale of all or substantially all of our assets, and any other significant corporate transaction. This concentration of ownership may also delay or prevent a future change of control of our company at a premium price, if this shareholder opposes it.

Purchasers of our common stock will suffer dilution in the net tangible book value of the common stock they purchase. Purchasers of our common stock can expect to suffer immediate dilution, due to the lower book value per share of our common stock compared to their respective purchase prices per share.

Our board of directors is authorized to issue shares of preferred stock, which may have rights and preferences detrimental to the rights of the holders of our common stock. Our company is authorized to issue up to 50,000,000 shares of preferred stock, $.0001 par value. As of the date of this Annual Report on Form 10-K, we have not issued any shares of preferred stock. Our preferred stock may bear such rights and preferences, including dividend and liquidation preferences, as our board of directors may fix and determine from time to time. Any such preferences may operate to the detriment of the rights of the holders of our common stock.

We do not intend to pay dividends on our common stock. We intend to retain earnings, if any, to provide funds for the implementation of our business strategy. We do not intend to declare or pay any dividends in the foreseeable future. Therefore, there can be no assurance that holders of our common stock will receive any cash, stock or other dividends on their shares of our common stock, until we have funds which our board of directors determines can be allocated to dividends.

As a public company, we will incur audit fees and legal fees in connection with the preparation of our required financial reporting under the Exchange Act, which costs could reduce or eliminate our ability to earn a profit. As a public company, we are required to file periodic reports with the SEC. In order to comply with these requirements, our independent registered public accounting firm will be required to review our financial statements on a quarterly basis and audit our financial statements on an annual basis. Moreover, our legal counsel will be required to review and assist in the preparation of such reports. While the fees charged by these professionals for their services cannot be accurately predicted at this time, it can be expected that these fees will have a significant impact on our ability to earn a profit. We may be exposed to potential risks resulting from new requirements under Section 404 of the Sarbanes-Oxley Act of 2002. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information and the trading price of our common stock, if a market ever develops, could drop significantly.

The elimination of monetary liability of our directors, officers and employees under Nevada law and the existence of indemnification rights in favor of our directors, officers and employees may result in substantial expenditures by our company and may discourage lawsuits against our directors, officers and employees. Our bylaws contain a specific provision that eliminates the liability of directors for monetary damages to our company and our shareholders. Further, we intend to give such indemnification to our directors and officers to the extent provided by Nevada law. We may also have contractual indemnification obligations under employment agreements with our executive officers. The foregoing indemnification obligations could result in our incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup. These provisions and resultant costs may also discourage our company from bringing a lawsuit against directors and officers for breaches of their fiduciary duties and may similarly discourage the filing of derivative litigation by our shareholders against our directors and officers, even though such actions, if successful, might otherwise benefit our company and our shareholders.

We have been advised that, in the opinion of the SEC, indemnification for liabilities arising under federal securities laws is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against these types of liabilities, other than the payment by us of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding, is asserted by a director, officer or controlling person in connection with the securities being registered, we will (unless, in the opinion of our counsel, the matter has been settled by controlling precedent) submit to a court of appropriate jurisdiction, the question whether indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The legal process relating to this matter, if it were to occur, is likely to be very costly and may result in our receiving negative publicity, either of which factors are likely to materially reduce the market for, and price of, our common stock, if such a market ever develops.

The market price for our common stock can be expected to remain volatile. If any when we establish a trading market for our common stock, our common stock is unlikely to be followed by any market analysts and it can be expected that there may be few institutions that will act as market makers for our common stock. This circumstance could adversely affect the liquidity and trading price of our common stock. Prices for our common stock may be influenced by many factors, including the depth and liquidity of the market for shares of our common stock, developments affecting our business, including the impact of the factors referred to herein, investor perception and general economic and market conditions.

In addition, the securities markets have, from time to time, experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price. Sales of substantial amounts of our common stock in the public market or the perception that these sales could occur, could adversely affect the price of our common stock and could impair our ability to raise capital through the sale of additional shares. As of December 31, 2016, and as of the date of this Quarterly Report on Form 10-Q, we had 71,159,423 shares of common stock outstanding. 909,423 of these shares of common stock have been registered for resale pursuant to a registration statement on Form S-1 (Commission File No. 333-201314) and are freely tradable. Restricted or control shares may not be sold in the public market, unless the sale is registered under the Securities Act or an exemption from registration is available. If a large number of shares are sold on the open market, the price of our common stock could decline.

In the future, we may also issue securities if we need to raise capital in connection with a capital raise or acquisition. The amount of shares of our common stock issued in connection with a capital raise or acquisition could constitute a material portion of our then outstanding shares of common stock.

FINRA sales practice requirements may limit a shareholder's ability to buy and sell our common stock. FINRA has adopted rules that relate to the application of the SEC's "penny stock" rules in trading our securities and require that a broker-dealer have reasonable grounds for believing that the investment is suitable for that customer, prior to recommending the investment. Prior to recommending speculative, low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information.

Under interpretations of these rules, FINRA believes that there is a high probability that speculative, low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may have the effect of reducing the level of trading activity and liquidity of our common stock. Further, many brokers-dealers charge higher transactional fees for penny stock transactions. As a result, fewer broker-dealers may be willing to make a market in our common stock, thereby reducing a shareholder's ability to resell shares of our common stock.

Our common stock is subject to the "penny stock" restrictions which may cause a lack of liquidity. SEC Rule 15g-9 establishes the definition of a "penny stock", for purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to a limited number of exceptions. Our common stock will be considered a "penny stock" for the immediately foreseeable future. This classification may severely and adversely affect the market liquidity for our common stock. For any transaction involving a penny stock, unless exempt, the penny stock rules require that a broker-dealer approve a person's account for transactions in penny stocks and the broker-dealer receive from the investor a written agreement to the transaction setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person's account for transactions in penny stocks, the broker-dealer must obtain financial information and investment experience and objectives of the person and make a reasonable determination that the transactions in penny stocks are suitable for that person and that the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker-dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, which, in highlight form, sets forth the basis on which the broker-dealer made the suitability determination and that the broker-dealer received a signed, written agreement from the investor prior to the transaction.

Disclosure also must be made about the risks of investing in penny stocks in both public offerings and in secondary trading and commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

Because of these regulations, broker-dealers may not wish to engage in the above-referenced necessary paperwork and disclosures and/or may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of selling shareholders or other holders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our common stock. In addition, the liquidity for our common stock may decrease, with a corresponding decrease in the price of our common stock. Our common stock, in all probability, will be subject to such penny stock rules for the foreseeable future and our shareholders may find it difficult to sell their common stock.

Item 6. Exhibits.

Exhibit No.

Description

31.1 *

Certification of periodic financial report by the Chief Executive Officer of Heavenstone Corp. pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 *

Certification of periodic financial report by the Chief Financial Officer of Heavenstone Corp. pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 *

Certification of periodic financial report pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by the Chief Executive Officer of Heavenstone Corp.

32.2 *

Certification of periodic financial report pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by the Chief Financial Officer of Heavenstone Corp.

101.INS **

XBRL Instance Document.

101.SCH **

XBRL Schema Document.

101.CAL **

XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF **

XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB **

XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE **

XBRL Taxonomy Extension Presentation Linkbase Document.

_____________________

* filed herewith.

** furnished herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report on Form 10-Q to be signed on February 21, 2017, on its behalf by the undersigned, thereunto duly authorized.

HEAVENSTONE CORP.

By: /s/ William E.Sluss

William E. Sluss

Chief Financial Officer

(Principal Financial Officer)

HEAVENSTONE CORP 10-Q