UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DCWashington, D.C. 20549

FORM 10-Q

(Mark One)

☒[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 19341934.

For the quarterly period ended December 31, 20172018

OR

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

For the transition period from ________ to _________________

Commission File Number:000-55869

SOUTHWESTERN WATER EXPLORATION CO.FUQUAN FINANCIAL COMPANY

(Exact name of registrant as specified in its charter)

303-395-3855(949) 629-2534

(Registrant’s telephone number, including area code)

(Former Name, former address and former fiscal year, if changed since last report)

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

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

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

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

AsThe outstanding number of February 2, 2018, there were 122,164,114 shares of common stock $0.001 par value per share, outstanding.as of January 30, 2019 was: 2,900,164,114.

Documents incorporated by reference: None

FUQUAN FINANCIAL COMPANY

FORM 10-Q

TABLE OF CONTENTS

PartPART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FUQUAN FINANCIAL COMPANY

BALANCE SHEETS

(Unaudited)

This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10Q containsOperations” in Item 2 of Part I of this report, include forward-looking statements that may be affected by matters outside our control that could cause materially different results.

Some of the informationstatements. Information in this Form 10Qreport contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933. These statements express, or are based on, our expectations about future events. Forward-looking statements give our current expectations or forecasts of future events. Forward-looking statements generally can“forward looking statements” which may be identified by the use of forward-looking terminology, such as "may"“may”, "will"“shall”, "expect"“will”, "intend"“could”, "project"“expect”, "estimate"“estimate”, "anticipate"“anticipate”, "believe"“predict”, “probable”, “possible”, “should”, “continue”, “believes”, “estimates”, “projects”, “targets”, or "continue"similar terms, variations of those terms or the negative thereofof those terms. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or similar terminology. They include statements regarding our:warranty is to be inferred from those forward-looking statements. Statements in this report concerning the following, without limitation, are forward looking statements:

Although we believe the expectations and forecasts reflected in these and other forward-looking statements are reasonable, we can give no assurance they will prove to have been correct. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Factors that could cause actual results to differ materially from expected results include:

All references to “Fuquan”, “we”, “our,” “us” and the “Company” in this Item 2 refer to Fuquan Financial Company.

AnyThe discussion in this section contains forward-looking statements. These statements relate to future events or our future financial performance. We have attempted to identify forward-looking statements by terminology such as “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “would” or “will” or the negative of the factors listed abovethese terms or other comparable terminology, but their absence does not mean that a statement is not forward-looking. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, contained in this Form 10Qwhich could cause our actual results to differ from those projected in any forward-looking statements we make. You should understand that it is not possible to predict or identify all risks and uncertainties and you should not consider the risks and uncertainties identified by us to be a complete set of all potential risks or uncertainties that could materially affect us. You should not place undue reliance on the forward-looking statements we make herein because some or all of them may turn out to be wrong. We undertake no obligation to update any of the forward-looking statements contained herein to reflect future events and developments, except as required by law.

The following discussion of the results of operations for the three and nine months ended December 31, 2018 and 2017, respectively, should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from the results implied by these or any other forward-looking statements made by us or on our behalf. We cannot assure you that our future results will meet our expectations. When you considerthose anticipated in these forward-looking statements youbecause of a number of factors. An investment in our common stock involves a high degree of risk. Readers of this Quarterly Report on Form 10-Q should keepcarefully consider the risks set forth in the Risk Factors and Business sections of our Annual Report on Form 10-K for the year ended March 31, 2018, filed with the SEC on January 25, 2018. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements.

mind these risk factors and

The assumptions used for purposes of the other cautionary statements in this Form 10Q. Our forward-looking statements speak onlyspecified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the date made.assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements.

PLAN OF OPERATIONPlan of Operation

Our plan of operationsoperation is to raise debt and/or equity to meet our ongoing operating expenses and attempt to merge with another entity with experienced management and opportunities for growth in return for shares of our common stock to create value for our shareholders. There can be no assurance that we will successfully complete this series of transactions. In particular, there is no assurance that any such business will be located or that any stockholder will realize any return on their shares after such a transaction. Any merger or acquisition completed by us can be expected to have a significant dilutive effect on the percentage of shares held by our current stockholders.

At this time, we have no cash on hand or committed resources of debt or equity to fund these losses and will reliant, potentially, on advances from our principal shareholder or our directors and officers. There can be no guarantee that we will be able to obtain sufficient funding these sources.

RESULTS OF OPERATIONS FOR THE THREE-MONTH PERIODTHREE MONTHS ENDED DECEMBER 31, 20172018 COMPARED TO THE THREE-MONTH PERIODTHREE MONTHS ENDED DECEMBER 31, 20162017

Revenue

We recognized no revenue during the three-month periodsthree months ended December 31, 20172018 and 2016.2017. We currently have no business from which to generate revenues.

Cost of Revenue

We recognized no cost of revenue during the three-month periodsthree months ended December 31, 20172018 and 2016.2017.

Gross Profit / (Loss)

We recognized no gross profit / (loss) during the three-month periodsthree months ended December 31, 20172018 and 2016.2017.

General and Administrative Expenses

During the three-month periodthree months ended December 31, 2017,2018, we incurred $7,831$59,986 in general and administrative expenses compared to $15,300 in the three-month period ended December 31, 2016, a decrease of $7,469. The decrease was due largely from the fact that$7,531 during the three-month period ended December 31, 2016, we accrued $15,000 in accrued directors and officer’s fees. Following the resignation of our former sole director and officer, Mr. Cutler, in February 2017, no director’s or officer’s fees were accrued during the three-month periodthree months ended December 31, 2017. The general and administrative expenses incurred during the three-month period ended December 31, 2017 were relatedincrease was due largely to audit and review fees, accounting fees, Edgar filing fees, and tax return preparation.

fees, share transfer fees and other general office expenses. The balance of general and administrative expenses incurred during the three months ended September 30, 2016 related to share transfer agent fees.$59,986 management fee.

Operating Loss

During three-month periodthe three months ended December 31, 2017,2018, we incurred an operating loss of $7,831$59,986 compared to an operating loss of $15,300$7,531 for the three-month periodthree months ended December 31, 2016, a decrease2017, an increase of $7,469$52,455 due to the factors discussed above.

Interest and Other Income / (Expenses) Net

During the three-month periodsthree months ended December 31, 20172018 and 20162017, we recognized no$40,587 and $0 interest or other income / (expense).expense, respectively.

During the three months ended December 31, 2018 and 2017, we recognized $3,571 and $0 change in fair value of derivative liabilities, respectively.

Loss before Income Tax

During three-month periodthe three months ended December 31, 2017,2018, we incurred a loss before taxes of $7,831$97,002 compared to a loss before taxes of $15,300$7,531 for the three-month periodthree months ended December 31, 2016, a decrease2017, an increase of $7,469$89,471 due to the factors discussed above.

Provision for Income Tax

No provision for income taxes was recorded in either of the three-month periods ended December 31,2017 or 2016, as we have incurred taxable losses in both periods.

Net Loss

During three-month period ended December 31, 2017, we incurred a net loss of $7,831 compared to a net loss of $15,300 the three-month period ended December 31, 2016, a decrease of $7,469 due to the factors discussed above.

RESULTS OF OPERATIONS FOR THE NINE MONTH PERIOD ENDED DECEMBER 31, 2017 COMPARED TO THE NINE MONTH PERIOD ENDED DECEMBER 31, 2016

Revenue

We recognized no revenue during the nine-month periods ended December 31, 2017 and 2016. We currently have no business from which to generate revenues.

Cost of Revenue

We recognized no cost of revenue during the nine-month periods ended December 31, 2017 and 2016.

Gross Profit / (Loss)

We recognized no gross profit / (loss) during the nine-month periods ended December 31, 2017 and 2016.

General and Administrative Expenses

During the nine-month period ended December 31, 2017, we incurred $16,606 in general and administrative expenses compared to $45,900 in the nine-month period ended December 31, 2016, a decrease of $29,294. The decrease was due largely from the fact that during the nine-month period ended December 31, 2016, we accrued $45,000 in accrued directors and officer’s fees. Following the resignation of our former sole director and officer, Mr. Cutler, in February 2017, no director’s or officer’s fees were accrued during the nine-month period ended December 31, 2017. The general and administrative expenses incurred during the nine-month period ended December 31, 2017 related to audit and review fees, accounting fees, edgar filing fees, tax return preparation fess, share transfer fees and other general office expenses. The balance of general and administrative expenses incurred during the nine months period ended December 31, 2016 related to share transfer agent fees.

Operating Loss

During the nine-monththree months ended December 31, 2017, we incurred an operating loss of $16,606 compared to an operating loss of $45,900 in the nine-month period ended December 31, 2016, a decrease of $29,294, due to the factors discussed above.

Interest and Other Income / (Expenses) Net

During the nine-month periods ended December 31, 2017 and 2016 we recognized no interest2018 or other income / (expense).

Loss before Income Tax

During the nine-month months ended December 31, 2017, we incurred a loss before taxes of $16,606 compared to a loss before taxes of $45,900 in the nine-month period ended December 31, 2016, a decrease of $29,294, due to the factors discussed above.

Provision for Income Tax

No provision for income taxes was recorded in either the nine-month periods ended December 31, 2017 or 2016, as we have incurred taxable losses in both periods.

Net Loss

During the nine-monththree months ended December 31, 2017,2018, we incurred a net loss of $16,606$97,002 compared to a net loss of $45,900 in$7,531 for the nine-month periodthree months ended December 31, 2016, a decrease2017, an increase of $29,294,$89,471 due to the factors discussed above.

CASH FLOW FOR THE NINE MONTH PERIODMONTHS ENDED DECEMBER 31, 20172018 COMPARED TO THE NINE MONTH PERIODMONTHS ENDED DECEMBER 31, 20162017

At December 31, 2017,2018, we did not have any cash or cash equivalents, no assets, no operating business or other source of income, and outstanding liabilities of $613,203 and a stockholders’ deficit of $313,883

$613,203. Consequently, we are now dependent on raising additional equity and/or debt to meet our ongoing operating expenses. There is no assurance that we will be able to raise the necessary equity and/or debt that we will need to fund our ongoing operating expenses.

It is our current intention to seek to raise debt and/or equity financing to meet ongoing operating expenses and attempt to merge with another entity with experienced management and opportunities for growth in return for shares of our common stock to create value for our shareholders. There is no assurance that this series of events will be satisfactorily completed.

Future losses are likely to occur as, until we are able to merge with another entity with experienced management and opportunities for growth in return for shares of our common stock to create value for our shareholders as we have no sources of income to meet our operating expenses. As a result of these, among other factors, we received from our registered independent public accountants in their report for the financial statements for the yearsyear ended March 31, 2017 and 2016,2018, an explanatory paragraph stating that there is substantial doubt about our ability to continue as a going concern.

We are now focused raising debt and/or equity financing to meet ongoing operating expenses and attempting to merge with another entity with experienced management and opportunities for growth in return for shares of our common stock to create value for our shareholders. There is no assurance that this series of events will be satisfactorily completed.

Operating Activities

During the nine-monthnine months ended December 31, 2018, we incurred a net loss of $354,884 which included $65,714 non-cash officer compensation in the form of a stock grant and non-cash management fees of $259,358, amortization of debt discount of $58,736 and change in fair value of derivative liabilities of ($38,332) and accrued interest of $9,408. The net cash used in operating activities during the period was $0. By comparison, during the nine months ended December 31, 2017, we incurred a net loss of $16,606 which, without the needand received $16,606 advance of a shareholder loan payable, for adjustment for non-cash items, represented the net cash of $0 used in operating activities during the period. By comparison, during the nine-month period ended December 31,

2016, we incurred a net loss of $45,900 which, without the need for adjustment for non-cash items, represented the net cash used in operating activities during the period

Investing Activities

We neither generated nor used funds in investing activities during the nine month periodsmonths ended December 31, 20172018 and 2016.2017.

Financing Activities

During

We had no financing activities during the nine-month periodnine months ended December 31, 2018 and 2017 we received $16,606 by way of loan advance from our controlling shareholder. By comparison during the nine-month period ended December 31, 2016, we received $45,900 by way of loan advance from our controlling shareholder. 

We are dependent upon the receipt of capital investment or other financing to fund our ongoing operations and to execute our business plan of seeking a combination with a private operating company. In addition, we are dependent upon our controlling shareholder to provide continued funding and capital resources. If continued funding and capital resources are unavailable at reasonable terms, we may not be able to implement our plan of operations.

COMPARISON OF THE NINE MONTHS ENDED DECEMBER 31, 2017 AND 2016

During the nine months ended December 31, 2018 and December 31, 2017, respectively, the Company did not have any operations and therefore there were no revenues. Expenses during the nine months ended December 31, 2018 December 31, 2017 were limited to the Company maintaining its good standing and becoming current in its filing obligations with the SEC.

Off-Balance Sheet Arrangements

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required byregarding this Item.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management conducted an evaluation, with the participation of our Chief Executive Officer, who is our principal executive officer and our principal financial and accounting officer, of the effectiveness of our disclosure controls and procedures (as definedinRules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Form 10Q.10-Q. Based on that evaluation,weconcluded that because of the material weakness and significant deficiencies in our internal control over financial reporting described below, our disclosure controls and procedures were not sufficient as of December 31, 2017.

2018.

Changes inManagement’s Report of Internal ControlsControl over Financial Reporting

There have been no changesin ourThe Company is responsible for establishing and maintaining adequate internal control over financial reporting duringin accordance with the quarter endedRule 13a-15 of the Securities Exchange Act of 1934. The Company’s officer, its president, conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 20172018 based on the criteria establish in Internal Control Integrated Framework issued by the 2013 Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2018, based on those criteria. A control system can provide only reasonably, not absolute, assurance that the objectives of the control system are met and no evaluation of controls can provide absolute assurance that all control issues have been detected.

Material Weaknesses:

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The material weaknesses identified are:

Remediation Plan for Material Weaknesses in Internal Control over Financial Reporting

Management of the Company is committed to improving its internal controls and will (i) continue to use third party specialists to address shortfalls in staffing and to assist the Company with accounting and finance responsibilities; (ii) increase the frequency of independent reconciliations of significant accounts which will mitigate the lack of segregation of duties until there are sufficient personnel; and, (iii) may consider appointing outside directors and audit committee members in the future.

Management has discussed the material weaknesses noted above with our independent registered public accounting firm. Due to the nature of these material weaknesses, it is reasonably possible that misstatements which could be material to the annual or interim financial statements could occur that would not be prevented or detected during our financial close and reporting process.

This Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this report.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal controls over financial reporting during its current fiscal quarter that have materially affected, or are reasonably likely to materially affect, ourits internal control over financial reporting.

PART II

OTHER INFORMATION

OTHER INFORMATION

Item 1. Legal Proceedings.From time to time, we may be involved in routine legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our business. The ultimate amount of liability, if any, for any claims of any type (either alone or in the aggregate) may materially and adversely affect our financial condition, results of operations and liquidity. In addition, the ultimate outcome of any litigation is uncertain. Any outcome (including any for the actions described above), whether favorable or unfavorable, may materially and adversely affect us due to legal costs and expenses, diversion of management attention and other factors. We expense legal costs in the period incurred. We cannot assure you that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against us in the future, and these matters could relate to prior, current or future transactions or events.

ThereWe are presently nonot currently a party to any other material pending legal proceedings to which the Company, any executive officer, any owner of record or beneficially of more than five percentproceedings. We are not aware of any class of voting securities ispending or threatened litigation against us that in our view would have a partymaterial adverse effect on our business, financial condition, liquidity, or as to which any of its property is subject,operating results. However, legal claims are inherently uncertain, and no such proceedings are known towe cannot assure you that we will not be adversely affected in the Company to be threatened or contemplated against it.future by legal proceedings.

Item 1A. Risk Factors.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

Item 2. Unregistered SaleOn or around April 20, 2018, the Company issued 2,778,000,000 shares of Equityits common stock to Houyu Huang as compensation for services rendered as president and director of the Company. The issuance was exempt under Section 4(a)(2) of the Securities and Use of Proceeds.Act.

There were no sales of unregistered equity securities during the three and nine-month periods ended December 31, 2017 and 2016.

Item 3. Defaults Upon Senior Securities.None.

There were no senior securities issued and outstanding during the three and nine-month periods ended December 31, 2017 and 2016.

Item 4. Mine Safety Disclosures.

Not applicable to our Company.applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

SIGNATURES

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