Notes
to the Condensed Financial Statements
December
31, 2017
(Unaudited)
NOTE
1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Highlight
Networks, Inc. (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 the 2015 Change of Control as more fully described below 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
nor any assets. For the period from June 18, 2015 to the date of this filing, we have had no operating activities. We also failed
to maintain our Exchange Act filing obligations timely 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
the Company. On June 5, 2015, Legacy International Holdings Group, LLC and Allied Crown Enterprises Limited (“Allied”)
entered into a share purchase agreement (the "SPA") to purchase 57,000,000 shares of restricted common stock of the
Company, or 98% of the outstanding capital stock of the Company at the time of the transaction, from Infanto Holding Corp. and
100% of the debt of Highlight Networks, Inc. for an aggregate purchase price of $315,000 (the transaction, “2015 Change
of Control”). EZ Recycling, Inc. was spun off in conjunction with the First Change of Control.. The Company has a total
of 58,167,600 shares issued and outstanding as of the date of this filing.
The
Company intends to either retain an equity interest in any private company it engages in a business combination or the Company
may receive cash and/or a combination of cash and common stock from any private company it completes a business combination with.
The Company’s desire is that the value of such consideration paid to it would be beneficial economically to its shareholders
though there is no assurance of that happening.
Management
of the Company will seek a suitable candidate for a merger transaction. If the target company chooses to enter into business combination
with the Company, 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 20F, Longhai Fortune Center, 42 Ziwei Road, Shima Town, Zhangzhou City, Fujian Province, China.
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
Company’s unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles
in the United States of America (“U.S. GAAP”). 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, 2018. 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.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted accounting principles in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of liabilities and expenses during the
reporting period. Actual results could differ from those estimates. The Company currently does not have significant
estimates and assumptions.
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 - RELATED PARTY TRANSACTIONS
From 2013
to 2015, the Company incurred loans due to related parties, Friction & Heat LLC and Joseph C. Passalaqua. Joseph C. Passalaqua
was the sole managing member of Friction & Heat LLC and a former officer of the Company. 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. In
conjunction with the 2015 Change of Control, 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 2015
Change of Control transaction from Friction & Heat LLC to Allied, was executed on June 5, 2015, was unsecured, due on demand
and accrued interest at 10% per annum. As of December 31, 2017, the Company had a total outstanding principle and accrued interest
of $256,132 and $65,963, respectively, due to Allied. As of June 30, 2017, the Company had a total outstanding principal and accrued
interest of $256,132 and $53,121, respectively, due to Allied.
NOTE
4 - 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 $9,006,168, 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
5 – DECONSOLIDATION
Prior
to the Company’s 2015 Cchange of Ccontrol 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 Cchange of Ccontrol, the subsidiary was spun -off and consolidation ceased. Accordingly, at December
31, 2017, the books of the Company were only comprised of one entity, Highlight Networks, Inc.
NOTE
6 – 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 other than the following event, no subsequent events occurred that would
require adjustment to or disclosure in the financial statements:
On January
29, 2018, pursuant to a stock purchase agreement (the “Agreement”), the Company majority shareholder, Jose R. Mayorquin
sold 57,000,000 shares of common stock of the Company to Xiamen Lutong International Travel Agency Co., Ltd. (“Xiamen Lutong”).
Xiamen Lutong subsequently transferred the 98% ownership to Longhai Yougoubao Network Technology Co. Ltd. (“Longhai”).
Xiamen and Longhai are companies commonly controlled by the Company’s new director, Qiyi Zheng. After the transaction, Longhai
holds 98% of the voting securities of the Company, based on 58,167,600 shares outstanding as of the date hereof. The transaction
has resulted in a change in control of the Company and Longhai became a majority shareholder and related party of the Company
(2018 Change of Control”). In connection with the 2018 Change of Control, Allied, the company controlled by Jose R. Mayorquin,
assigned its promissory note with the principal amount of $256,132.39 issued by the Company to Longhai.