Notes
to the Condensed Financial Statements
September
30, 2017
(Unaudited)
NOTE
1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
The
Company was formed on June 21, 2007 as a Nevada corporation. The Company has a June 30 year-end. In June of 2015, the Company
experienced a change of control and reverted to shell company status on June 18, 2015, as disclosed on our Form 8-K filed on January
27, 2017. The Company has no current operations or revenue; therefore, as defined within the Securities Act Rule 405, and the
Exchange Act Rule 12b-2, it is other than an asset-backed issuer, with either no or nominal operations; either no or nominal assets,
assets consisting of cash and cash equivalents; or assets consisting of any amount of cash and cash equivalents and nominal other
assets. From the period of June 18, 2015 to the date of this filing, we have had no activities. We also failed to maintain our
Exchange Act filing obligations and thus began being quoted on OTC Pink Sheets during 2015 and throughout our fiscal year 2017.
The information below outlines the activities and events of the Company prior to becoming a shell company.
On
March 11, 2013, EZ Recycling, Inc., a Nevada corporation, was formed and incorporated to serve as a wholly owned subsidiary of
Highlight Networks, Inc. On June 5, 2015, Legacy International Holdings Group, LLC and Allied Crown Enterprises Limited entered
into a share purchase agreement (the "SPA") to purchase 98% of the outstanding capital stock of Highlight Networks,
Inc., from Infanto Holding Corp. and 100% of the debt of Highlight Networks, Inc. for an aggregate purchase price of $315,000.00.
EZ Recycling was spun off in conjunction with the SPA. The purchase represented 98% of the issued and outstanding capital stock
of Highlight Networks, Inc., or 57,000,000 shares of restricted common stock of the Company. The Company has a total of 58,167,600
shares issued and outstanding as of the date of this filing.
From
the date of its change of control in June 2015, the Company has conducted no business operations and has been in the developmental
stage. We intend to either retain an equity interest in any private company we engage in a business combination or we may receive
cash and/or a combination of cash and common stock from any private company we complete a business combination with. Our desire
is that the value of such consideration paid to us would be beneficial economically to our shareholders though there is no assurance
of that happening.
Nature
of Business
We currently are a shell company
with no operations. Upon execution of the SPA the Company experienced a change of control in June 2015, when our operating asset,
EZ Recycling, Inc. was removed and as a result we reverted to shell company status. The U.S. Securities and Exchange Commission
(the “SEC”) defines a "shell company" as “any development stage company within the meaning of Section
3 (a)(51) of the Exchange Act of 1934, as amended, (the “Exchange Act”) and that has no specific business plan or
purpose, or has indicated that its business plan is to merge with an unidentified company or companies.” Under Rule 12b-2
of the Exchange Act, the Company also qualifies as a “shell company,” because it has no or nominal assets (other than
cash) and no or nominal operations.
Our
president, Jose R. Mayorquin, will seek a suitable candidate for a merger transaction. If the target company chooses to enter
into business combination with Highlight Networks, Inc., a Form 8-K disclosure document will be prepared after such business combination.
A combination will normally take the form of a merger, stock-for-stock exchange or stock-for-assets exchange. In most instances
the target company will wish to structure the business combination to be within the definition of a tax-free reorganization under
Section 351 or Section 368 of the Internal Revenue Code of 1986, as amended.
The
Company’s principal executive offices are located at 2371 Fenton Street, Chula Vista, CA 91914.
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
Company’s unaudited condensed financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses during the reporting period. The accompanying unaudited
condensed financial statements reflect all adjustments, consisting of only normal recurring items, which, in the opinion of management,
are necessary for a fair statement of the results of operations for the periods shown and are not necessarily indicative of the
results to be expected for the full year ending June 30, 2017. These unaudited condensed financial statements should be read in
conjunction with the financial statements and related notes included in the Company’s Annual Report on Form 10-K for
the year ended June 30, 2017.
Management
further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system
of internal accounting control, and preventing and detecting fraud. Our system of internal accounting control is designed to assure,
among other items, that: (1) recorded transactions are valid; (2) valid transactions are recorded; and (3) transactions are recorded
in the proper period in a timely manner to produce financial statements that present fairly our financial condition, results of
operations, and cash flows for the respective periods being presented.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Recent
Accounting Pronouncements
The
Company has reviewed all recently issued accounting pronouncements and plans to adopt those that are applicable to it. The Company
does not expect the adoption of any other pronouncements to have an impact on its results of operations or financial position.
NOTE
3 – STOCKHOLDERS’ EQUITY
In
conjunction with the change of control on June 18, 2015, total related party debt of $261,269 was forgiven and credited to paid
in capital.
In
conjunction with the change of control on June 18, 2015, $300,000 of related party debt was converted into 55,000,000 shares of
common stock.
NOTE
4 - RELATED PARTY TRANSACTIONS
From
2013-2015, the Company incurred loans due to related parties, Friction & Heat LLC and Joseph C. Passalaqua. Joseph C. Passalaqua
is the sole managing member of Friction & Heat LLC and a former officer of Highlight Networks, Inc. The outstanding related
party debt was held in unsecured promissory notes, bearing interest at 10% per annum and matured between on demand and March 31,
2016. As of September 30, 2017, the Company had a total outstanding principal and accrued interest of $256,132 and $59,507, respectively.
During the year ended June 30, 2017, the company had a total outstanding principal and accrued interest of $256,132 and accrued
interest of $53,121, respectively. In conjunction with the change of control in June 2015, all principal and accrued interest
were exchanged for common stock and a new promissory note with a face value of $256,132 (the "Promissory Note"). The
new Promissory Note, transferred by the SPA in the June 2015 change of control transaction from Friction & Heat LLC to Allied
Crown Enterprise Limited ("Allied"), a Hong Kong entity, was executed on June 5, 2015, is unsecured, due on demand and
accrues interest at 10% per annum. The remaining related party debt balance of $201,548 was part of the $300,000 related party
debt that was converted into 55,000,000 shares of common stock. As of September 30, 2017, there was $256,132 and $59,507 of principal
and interest, respectively, due on the note to Allied.
From
2013-2015, the Company incurred liabilities for unpaid rent at $8,000 monthly to Remix Ventures, LLC, according to a signed rental
agreement. Joseph C. Passalaqua is the sole managing member of Remix Ventures, LLC and a former officer of Highlight Networks,
Inc. As of the June 2015 change of control date, the amount due for rent was $216,000. In conjunction with the change of control
in June 2015, the balance due of $216,000 was forgiven and was part of the $261,269 credited to paid-in capital in 2015.
From
2013-2015, the Company incurred liabilities for the reimbursement of property taxes that were paid by Remix Ventures, LLC according
to a signed rental agreement. Joseph C. Passalaqua is the sole managing member of Remix Ventures, LLC and a former officer of
Highlight Networks, Inc. As of the June 2015 change of control date, the amount due in property tax reimbursement to Remix Ventures
LLC was $72,282. In conjunction with the change of control in June 2015, the balance due of $72,282 was a portion of the total
related party debt of $300,000 that was converted into 55,000,000 shares of common stock.
In
2015, the Company incurred liabilities for bookkeeping, internal accounting, office assistant services and secretarial services
that were rendered by Lyboldt-Daly, Inc. As of January 1, 2015, Highlight Networks ceased all payroll activities and does not
have employees, therefore reimbursement is owed to Lyboldt-Daly, Inc. for use of their employees in rendering these outside services.
Joseph C. Passalaqua is the President of Lyboldt-Daly, Inc. and a former officer of Highlight Networks, Inc. As of the June 2015
control date, the amount due for outside services to Lyboldt-Daly, Inc. was $26,170. The balance due was forgiven and was part
of the $300,000 total related party debt converted into 55,000,000 shares of common stock.
In
conjunction with the change of control in June, 2015, other related party accounts payable totaling $45,269 were forgiven and
credited to paid in capital.
NOTE
5 - GOING CONCERN
The
accompanying financial statements have been prepared on the basis of accounting principles applicable to a “going concern,”
which assume that Highlight Networks, Inc. (hereto referred to as the “Company”) will continue in operation for at
least one year and will be able to realize its assets and discharge its liabilities in the normal course of operations.
Several
conditions and events raise substantial doubt as to the Company’s ability to continue as a “going concern.”
The Company has an accumulated deficit of $8,981,362, a working capital deficit and has had limited revenues. The Company requires
additional financing in order to finance its business activities on an ongoing basis. The Company’s future capital requirements
will depend on numerous factors including, but not limited to, continued progress in the pursuit of business opportunities. The
Company is actively pursuing alternative financing and has had discussions with various third parties, although no firm commitments
have been obtained. In the interim, shareholders of the Company have committed to meeting its minimal operating expenses. Management
believes that actions presently being taken to revise the Company’s operating and financial requirements provide them with
the opportunity to continue as a “going concern.”
These
financial statements do not reflect adjustments that would be necessary if the Company were unable to continue as a “going
concern.” While management believes that the actions already taken or planned, will mitigate the adverse conditions and
events which raise doubt about the validity of the “going concern” assumption used in preparing these financial statements,
there can be no assurance that these actions will be successful. If the Company were unable to continue as a “going concern,”
then substantial adjustments would be necessary to the carrying values of assets, the reported amounts of its liabilities, the
reported revenues and expenses, and the balance sheet classifications used.
NOTE
6 – DECONSOLIDATION
Prior
to the Company’s change of control referred to in Note 1, the results of operations of the Company’s subsidiary, EZ
Recycling, was included in the statement of operations, after giving effect to any necessary eliminating entries for intercompany
transactions. Upon the June 2015 change of control, the subsidiary was spun-off and consolidation ceased. Accordingly, at September
30, 2017 the books of the Company were only comprised of one entity, Highlight Networks, Inc.
NOTE
7 – SUBSEQUENT EVENTS
Management
has evaluated subsequent events pursuant to the requirements of ASC Topic 855, from the balance sheet date through the date the
financial statements were issued, and determined that no subsequent events occurred that would require adjustment to or disclosure
in the financial statements.